Thursday, June 06, 2019

The Daily, Part 1 of 3, 6-6-19

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


Targets hit: HIIQ
Entry alerts: MCD; PEP
Trailing stops: None issued
Stop alerts: ARQL

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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.


- Fed speakers second Powell, reports Mexico tariffs may be delayed help stocks to another gain in the rebound.
- Internals still rather pathetic on the upside, making the next move worrisome.
- Jobs report Friday is likely the next decision point for the move.
- Still upside areas working but turning defensive again as the growth rebound looks iffy.

The market rebound stretched to another session, three on most indices, four on DJ30. A bevy of Fed speakers all more or less seconded Powell's prior comments on being ready to act if the economy slows, and that again gave investors some confidence. It is somewhat discouraging that the New York Fed president, when asked about the bond yield curve, stated that he did not view the curve as an 'oracle' to ask if there would be a recession. Of course not, because as history has shown, all Fed members are smarter than markets. That is why they have been wrong time after time after time after time.

But, I digress. The Fed-speak was good enough for the markets, and late session reports that the White House might push back the Mexico tariffs added to the upside fuel. The stories were reassuring enough to continue the rebound buying for another session, buying into the Friday May jobs report release.

SP500 17.34, 0.61%
NASDAQ 40.07, 0.53%
DJ30 181.09, 0.71%
SP400 0.36%
RUTX -0.22%
SOX 1.34%
NASDAQ 100 0.76%

VOLUME: NYSE -4%, NASDAQ -3%. More lower volume on the upside. Alas.

ADVANCE/DECLINE: NYSE 1.4:1, NASDAQ -1.3:1. Pathetic breadth again on the upside.


To view, click on the following links:

The stock indices outside of RUTX all advanced though the focus was on large caps whether NASDAQ or NYSE.

SP500 managed to close over the 50 day EMA in its efforts to break up the head and shoulders top that is the second top in a larger double top. The move upside is what the bulls had to do in response to keep the rally alive. The next key level is the 50 day SMA another 25 points higher.

NASDAQ continued higher as well and is running right into key resistance at the neckline of the head and shoulders top. It is basically there at the close and now we see how NASDAQ reacts. This looks very much like a bear flag rebound that is about at the limit of the bounce. At least it will show whether that is true or not rather quickly.

DJ30 continued upside for a fourth session, rallying to the 50 day EMA, or just below it, at the close. DJ30 is over the neckline if its head and shoulders, and that shows some upside strength. How it handles the 50 day EMA and then the 50 day SMA tells the story. It is trying to break up that H&S, doing what it has to do. Do we think it will? No. Does that matter to the market? No. So, we play stocks such as PEP, DE, CL (even though they are not necessarily DJ30 stocks) as they continue higher, making great moves out of solid patterns.

SOX posted a modest gain, closing just below the 20 day EMA after it tried that level Wednesday and faded to a loss. Not powerful action, but not bad, as it gives SOX a chance to catch its breath after the initial move off the lows at the 200 day SMA and then push ahead. With many big name chips posting gains - some strong such as AMD - SOX looks as if it can push higher.

SP400 continued higher as well, but it now faces the 200 day SMA, closing just below that resistance. Still a less than reassuring move higher as SP400 midcaps just follow along.

RUTX was lower but for a second session showed a nice doji with tail tapping the 10 day EMA on the low and bouncing. RUTX looks as if it is setting up by itself for a better bounce. That could prove very good for the stock market.


FAANG: Hard to say much good here. AAPL scored a decent gain but the pattern is so-so. AMZN has set up a bear flag. NFXL soldiers on in its range. Just no excitement.

Personal products: PG, CL, CLX, EL are examples of powering higher.

Chips: Big names solid enough. AMD super. AMAT, TXN, XLNX decent enough. SWKS may bounce here (strong volume for two sessions) so we need to be ready to take the rest of the downside off the table.

Software: Very interesting. MSFT recovered. NOW looks good. WDAY trying to recover. TWLO jumped again. HUBS looks like it could fall. COUP rubbing it in our face as it jumped off the 50 day EMA and is still moving up. Still some very solid stocks in this group.

Drugs/Biotech/Healthcare: Disappointing as they all faded to test (PTCT, ARNA) while ARQL sold harder and we closed it. At least we were able to bank some solid gain on HIIQ before it reversed its upside surge. Most just testing but some money moved elsewhere today.

Social: SNAP snapped off another good upside move. MTCH took a day off after a solid Tuesday and Wednesday. TWTR is still trying to recover from the Monday drop with FB. FB bounced modestly off its selling but went nowhere today.


Jobs report Friday with the indices sitting on a 3-4 session rebound off some seriously nasty selling. With the indices sporting a lower volume rebound, this is another test point for the stock market in its attempt to recover. ADP was horrid; the government report is likely not going to be that bad - the administration won't allow it.

Okay, the Fed is seen as a bit more dovish with a sack full of speakers today seconding Powell. That story has pretty much been milked dry. What else will drive stocks from here? Jobs? Is a good report good or is it considered bad? Powell said he would act if the data deteriorated. Thus, good would not seem good to a market convinced the Fed needs to act and will act. A former Fed official said it would cut so it must cut, right? Hmmm.

We will see how things break after this bounce and after the jobs report. We have some downside plays ready to go. We have some upside plays in play and others ready. They are winnowing themselves out to a select group of upside leaders. For Friday we have some more downside and another upside or two, and perhaps a surprise name as well.

Have a great evening!


Stats: +181.09 points (+0.71%) to close at 25720.66

Stats: +40.07 points (+0.53%) to close at 7615.55
Volume: 2.129B (-2.77%)

Up Volume: 1.19B (+170M)
Down Volume: 977.68M (-182.32M)

A/D and Hi/Lo: Decliners led 1.26 to 1
Previous Session: Decliners led 1.34 to 1

New Highs: 81 (-12)
New Lows: 142 (+23)

Stats: +17.34 points (+0.61%) to close at 2843.49
NYSE Volume: 789.772M (-3.57%)

Up Volume: 490.08M (+133.77M)
Down Volume: 290.287M (-153.181M)

A/D and Hi/Lo: Advancers led 1.37 to 1
Previous Session: Advancers led 1.02 to 1

New Highs: 194 (+19)
New Lows: 102 (+41)


VIX: 15.93; -0.16
VXN: 20.32; -0.55
VXO: 16.99; -0.63

Put/Call Ratio (CBOE): 0.85; -0.14

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 4BP to -18BP. -26BP was the high water mark on this particular move.

The 2 year versus the 10 year: Spread fell 1BP to 26BP. Still healing itself.

10 year: 2.13% versus 2.124%

3 month: 2.316% versus 2.342%
2 year: 1.875% versus 1.847%

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: 1.12776 versus 1.12269. Euro surged off the 50 day MA toward the 200 day MA.

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: 108.372 versus 108.289. Modest gain again, still unable to break back up through the 10 day EMA. Very much the look of a bear flag.

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.

End part 1
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