Wednesday, June 05, 2019

The Daily, Part 1, 6-5-19

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6/5/2019 Investment House Daily
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Investment House Daily Subscribers:


Targets hit: None issued
Entry alerts: PTCT; TWLO
Trailing stops: AXSM
Stop alerts: None issued

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The REPORT SCHEDULE is as follows:

Market Summary Video, Plays and Play Videos, and Play Table with play annotations will issue Wednesday, Weekend.

Monday a Market Summary video, new plays, play table annotations.

Tuesday and Thursday reports will contain the market summary, chart links to view the index charts, and updated play table.

Access to all current videos will remain assessable each day using the play links in the reports.

If any market circumstances arise where we see additional plays we want to prepare for the next session, we will of course issue those plays regardless of the day of the week.



- Stocks continue higher for a second session as the Tuesday momentum continues.
- Weak ADP and the new belief the Fed is ready to cut if problems arise helps fuel the upside.
- The Fed can rescue the indices but it needs bad data to do it.
- Internals on this second day of upside are pathetic: another session of weaker volume, breadth flat at best.
- Still some great patterns upside, but the indices still look like relief bouncers.

Stocks continued the move higher with futures up early, building on the Tuesday second strongest day of 2019. ADP jobs rattled the early optimism as it missed and missed big (27K vs 170K exp vs 271K prior). The market swallowed that, reset, and moved back up to the open. After the higher open, stocks were sold into 10:30ET. Found a bid once more and rallied the rest of the session, closing out near the early morning highs.

SP500 2.288, 0.82%
NASDAQ 48.36, 0.64%
DJ30 207.39, 0.82%
SP400 0.32%
RUTX -0.12%
SOX -0.75%
NASDAQ 100 0.76%

VOLUME: NYSE -8%, NASDAQ -12%. Second session of declining volume as the big money is holding back on the bounce. That tends to limit the longevity of these oversold moves.

ADVANCE/DECLINE: NYSE was just a hair above flat; NASDAQ -1.4:1. Not the kind of breadth bull moves need.

So, another day upside is great news for the bulls. But, it is not dispositive at all.

SP500, NASDAQ and DJ30 all moved through the next resistance. Kudos. Volume was lower, however, and each of these indices showed doji after gapping higher. Breadth faded from strong levels Tuesday to out and out downside Wednesday.

This has VERY much the look of a relief bounce bear flag after the indices broke important support on volume. At 2826, SP500 is not far enough above the 2800 level to really mean anything, particularly with lower volume.

Sound negative? No, just addressing reality. Great to see a bounce, a good start if you can build on it. This pattern is problematic at best - standing alone.

What could help it? The Fed. The lowdown on the Powell and Evans comments from Tuesday is that they are dovish. A former Fed governor was on CNBC this morning saying that the Fed was signaling it was going to cut rates. With the Fed behind it, the market can do anything. Indeed, last week the chance of a June rate cut was 10% according to the FFF contract. Today that was up to 33%.

Thus, if the Fed steps in the market jumps. It always does.

For now, the charts are not that promising upside. So, we are going to update the QID and DXD plays from Tuesday, just to be ready if the bounce runs out of gas.

At the same time, man, there are some good looking moves from many different sectors. TWLO, SNAP, SLAB (some took today off). CL, PEP, V - some we just exited recently are showing new moves. We picked up some TWLO and PTCT, perhaps should have moved into MTCH; if the latter continues upside, we will be looking at that tomorrow.

This is what makes this market trying at times. Breakouts are sold, then rebound. Overall, however, the market indices have a mostly bearish pattern. They broke down through support, negative sentiment running high. They then bounced hard on lighter trade Tuesday, up a bit more on more lighter volume Wednesday. The question on everyone's mind is whether this move can continue or if it is done. Breakouts are still getting sold, but then bids return.

The next big test after Wednesday is how the indices trade off today's doji. Big roaring rebound off very sharp selling. Now doji at resistance. Again, updating the entry points on the downside plays in the event this bearish looking bounce stalls and falls.

In sum . . . prognosis is still not upside friendly longer term. The indices are forming bear flags off the sharp selling, moving up on lower volume. Yes, yes, the Fed can change all of that with a friendly rate cut. FFF contracts are not strong enough yet to indicate that is more likely than not near term. Therefore, you prep for some more downside with this less than bullish (and indeed bearish) technical setup even with some areas moving higher and nicely so. We put some money to work on those upside as they rally near term, but if they stall, then we have to opt for defense over upside offense, moving the offensive moves to downside plays.

Late breaking news is that the initial talks between Mexico and the US resulted in no deal. But, the President and most of his team are overseas so this was not unexpected. This was considered the opening of discussions not the decision day. Thus, while the futures just dipped on this news, there is a lot more talking to be done. In any event, Fitch decided to downgrade Mexico's credit to BBB.

Have a great evening!


To view, click on the following links:


Stats: +207.39 points (+0.82%) to close at 25539.57

Stats: +48.36 points (+0.64%) to close at 7575.48
Volume: 2.19B (-11.69%)

Up Volume: 1.02B (-1.14B)
Down Volume: 1.16B (+862.83M)

A/D and Hi/Lo: Decliners led 1.34 to 1
Previous Session: Advancers led 3.24 to 1

New Highs: 93 (+37)
New Lows: 119 (+42)

Stats: +22.88 points (+0.82%) to close at 2826.15
NYSE Volume: 819.013M (-7.87%)

Up Volume: 356.31M (-426.935M)
Down Volume: 443.468M (+343.66M)

A/D and Hi/Lo: Advancers led 1.02 to 1
Previous Session: Advancers led 4.4 to 1

New Highs: 175 (+53)
New Lows: 61 (+41)


VIX: 16.09; -0.88
VXN: 20.87; -0.62
VXO: 17.62; -0.99

Put/Call Ratio (CBOE): 0.99; +0.03

Bulls and Bears:

Bulls faded farther, falling below 50 with a pretty solid 6 point drop over 3 weeks. Bears fell yet again. Bears lower on selling, VIX not spiking on selling. Appears there are more issues to resolve that this range trading action at the head and shoulders neckline has not been able to rectify.

Bulls surprisingly resilient, falling but not much. Bears actually rose. Still no extremes though bulls were close to the 60's that has marked tops. Apparently this was close enough for stock market work.

It did its work in the late 2018 selling with a crossover of the bulls and bears, and when that occurs you expect a recovery. That has been the case. Now with the indices bumping resistance you look for extremes, but bulls are not hitting that 60ish level that has prompted selling/corrections in this long rally from 2009.

Indicator level: Shading to yellow for this week even as bulls backed off. Not in the 60's, but not much fear from the selling.

Bulls: 49.0 versus 49.5 versus

Bears: 17.3 versus 17.2

Theory: When everyone is bullish and has put all their capital to work, where does the ammunition to drive the market come from? There is always new money to start a new year. After that is used will more money be coming? That is the question.



Threat level: Red-ish. 3 month/10 year spread inverts a third time. 5 year, and 2 year are below the 3 month treasury. Third 10 year/3 month inversion this year. The positive: the 2 year/10 year is not inverted.

The 3 month yield versus the 10 year: Spread fell 1BP to -22BP. -26BP was the high water mark on this particular move.

The 2 year versus the 10 year: Spread climbs 3BP to 27BP. Still healing itself.

10 year: 2.124% versus 2.126%. Hung steady on Wednesday for a change.

3 month: 2.342% versus 2.357%
2 year: 1.847% versus 1.883%

Historical: the last sub-2% rate was in November 2016 (1.867%). Last trade over 3% was November 2018. 2.6% for quite some time, then yields started higher, first run from November to January, then mid-March.

The Dollar: There are two schools of thought. First, those who believe a strong dollar is in the interest of the US. Reagan (though not all of his advisors) and Clinton were strong dollar Presidents. Second, there are those who believe a strong dollar prevents the US from selling US goods abroad. The Bushes (1 and 2) and Obama were in this category. The thing is, the US is always its economic strength peak when its consumers are consuming, and that is when there is a strong economy and a strong dollar: they consume both US and foreign goods. History shows this again and again, and thus it is worth watching the dollar as a gauge of how the US economy is performing.

EUR/USD: 1.12269 versus 1.12523

Historical: Back into the 6-month range formed after the euro sold off from the early 2018 peaks after a week below it.

USD/JPY: 108.289 versus 108.15

Historical: Last below 109 in June 2018 then tumbled to 107 in early January 2019. 114.51 is the recent high from October 2018.

Oil: 51.68, -1.80

Gold: 1333.60, +4.90. Surged to the February high at 1350, then a big retracement and a big tombstone doji. Up too much, too fast and time to test.

End part 1
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