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4/24/2018 Investment House Alerts
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Alerts Subscribers:
MARKET ALERTS:
Targets hit: None issued
Entry alerts: None issued
Trailing stops: ARWR; NFLX
Stop alerts: AMZN; BKNG; CRM; FCX; GRUB; LRCX; PAGS; PENN; RH; WDAY
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The REPORTS SCHEDULE is as follows:
WEDNESDAY and the WEEKEND reports contain NEW PLAYS, Market Summary Video, Play Videos, and Play Table with play annotations.
MONDAY report will contain a Market Summary Video, new plays, annotated play table.
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.
MARKET SUMMARY
- A decent bounce on solid earnings is used to reverse downside.
- Large cap indices forfeit the double bottom bounce attempt. Small caps down but mostly ignore the troubles.
- Maybe the small caps help lead some rotation to other areas, but note that machinery looked to be up and coming until CAT opted for hari kari.
- Earnings, as expected, are not bad, but they are not enough in the face of geopolitics, domestic politics, bonds.
- Even with the selloff, all that happened Tuesday was the failure of the double bottom bounce. No new trends up or down.
- Oversold bounce building, but now the indices are back in a longer term basing pattern or will selloff.
- Market action mandates seeking smaller gains until a trend is established.
The list of earnings beats is impressive. CAT, VZ, KO, UTX, PHM, GOOG, HOG, LLY, ZION, etc. The moves were not. Indeed, the rebound move was buried. CAT beat handily and gapped nicely higher. In the 11:00ET conference call, however, management referred to Q1 as CAT's 'high water mark' and expects 'resource industry' margins to drop from first quarter levels. In other words, CAT suggested, as Melvin (Jack Nicholson) queried the support group in 'As Good as it Gets,' 'what if this is as good as it gets?'
CAT went from +7 points (+4.5%) to -9.55 points (6.2%), a 16.66 point swing from high to close. CAT managed to snatch defeat from the jaws of victory, managing to tank the prospects of a group that was shaping up to be a market leadership group (CMI and TEX looked very good as well).
The rest of the market caught CAT scratch fever and turned early gains into significant losses. Leadership groups sporting good patterns systematically gave up those good patterns. Not across the board, but there was enough disruption to undermine any continued second leg of the rebound rally, particularly in the large cap indices as they tumbled lower, again moving near the February low and the 200 day SMA.
SP500 -35.73, -1.34%
NASDAQ -121.25, -1.70%
DJ30 -424.56, -1.74%
SP400 -0.74%
RUTX -0.57%
SOX -0.82%
NASDAQ 100 -2.10%
VOLUME: NYSE +18%, NASDAQ +22%. Both NYSE and NASDAQ trade moved up to average on selling, showing of course that stocks were being sold.
ADVANCE/DECLINE: NYSE -1.8:1, NASDAQ -1.7:1. Breadth shows it was mostly a large cap event as the RUTX held up quite well, the SP400 decently.
To view, click on the following links:
http://investmenthouse1.com/ihmedia/f/charts/sp500.jpg
http://investmenthouse1.com/ihmedia/f/charts/NASDAQ.jpg
http://investmenthouse1.com/ihmedia/f/charts/DJ30.jpg
http://investmenthouse1.com/ihmedia/f/charts/RUTX.jpg
http://investmenthouse1.com/ihmedia/f/charts/SP400.jpg
http://investmenthouse1.com/ihmedia/f/charts/SOX.jpg
SP500/DJ30: Both of these large cap indices drove lower toward the 200 day SMA with DJ30 flirting at the February closing lows. SP500 is holding easily above those, but fell close to the 200 day SMA on the low. The bounce off the double bottom is gone. Perhaps they continue working on a different base now, one over the 200 day SMA. Possible, remains to be seen. Not counting on it, but watching for what sets up next. Sadly, a new trend has not yet emerged. All that happened was the double bottom rebound failed.
SP400: The midcaps undercut the 50 day EMA but did rebound some. At best SP400 is problematic, showing a gap higher that reversed below the 50 day MA's on rising volume.
RUTX: RUTX is good enough, showing a doji that tapped the 50 day MA's on the low, rebounded to hold a decent enough 4-session pullback. This is the reason breadth was not massively downside even with 1.3% to 2% losses on the large cap indices.
SOX: SOX undercut the 200 day SMA, managing to rebound toward the close and almost hold that level. Perhaps SOX can hold and bounce. Perhaps; it is down 5 sessions, including a big gap lower Thursday. A bit oversold for sure, at an important support level after breaking lower in a head and shoulders pattern with that Thursday gap lower.
Indeed, perhaps the large cap indices can fade a bit more and set up new patterns and rally from there. The 200 day SMA is not far for SP500 and DJ30, and SOX is there.
Perhaps, but after the rebound attempt was thrashed, they have to show it. The market tried a bounce from the double bottoms at the 78% and 61% Fibonacci retracement (SP500 and DJ30), it worked for a bit, but it did not make it up to the prior highs. There was not enough positive to overcome the negatives looking down the road.
Earnings are simply not enough, thus far, in the face of the ongoing geopolitical issues, domestic politics, trade issues, and bond curves threatening inversion, to continue driving stocks higher. NFLX was strong and the stock enjoyed a bounce -- a one-day bounce. LRCX earnings were even better, but it was thrown lower. GOOG pounded results, but the specter of regulation of its data gathering business (and that is what GOOG really is -- along with FB and even AMZN) is a bigger fear than the excitement over the past quarter's earnings.
Prospects
Rotation? Will rotation rescue the upside? It will take some of that. Software stocks are still quite decent in their patterns. Oil took a hit but the patterns remain fine -- a bigger build in inventories took back some of the recent gains. Drugs/biotechs/healthcare remains decent as well. Retail still holds out possibilities.
Possibilities. Many fine patterns simply could not make the breaks higher and many rolled over. The market could not make good on the good setups, and that shows that when the time came, the buyers were unwilling to step up. More than that, this time there were sellers in the hunt as stocks sold on volume versus sliding lower on a lack of bids and trade. Yes, possibilities remain, but many possibly good patterns were flipped as well.
Chips are perhaps beaten down enough to bounce, particularly with SOX at the 200 day SMA. That could provide some relief to part of the market, but relief is likely all it is.
Continue looking at patterns. You HAVE to keep watching for stocks that defy the downside and continue setting up. As soon as you give up that is when moves are made. As noted earlier, however, the indices have not established any new trends. They are still slogging around in the now 3 month selling event (the more optimistic can call it a basing event).
It likely continues longer. As noted recently in the reports, if the double bottom bounce effort fell short, or even if it made it to near the prior highs, a longer basing event would take place -- assuming the market did not roll over and head significantly lower. With the 200 day MA's at hand you watch to see how they hold and whether the basing activity continues.
You can make good money in a defined range, playing bounces off support to higher in the range. We were doing that until Tuesday when a test of the second leg higher failed. Thus, a lower high in the range versus a nice, steady recovery to the top -- obviously the range is not that defined yet.
Okay, so we watch how SP500, DJ30, SOX, and NASDAQ react to the 200 day SMA and if there are any bounce plays that can make money on a short bounce. Long term is problematic at this juncture given the geopolitical, domestic politics, bonds, and other issues. Playing bounces, playing failed bounces. You have to be willing to make less on a trade and be content with that.
You do that until a break is made, either upside or a breakdown from the current range. You want to see a trend established up or down and then really get after it. Until then you play for singles versus the long ball (it is baseball season). Unless there is a breakdown, I feel that the likely action remains a choppy market into early summer, hopefully with a more defined range that makes hitting some singles easier. If there is a breakdown in the indices and a trend lower is established, then you load up the downside and play hard because it happens fast.
WEDNESDAY
A classic gap higher and reversal Tuesday, and everyone is concerned. We exited more plays when we saw the move higher starting to fizzle and reverse on the day. A pretty good rout ensued, but it was not a blowout.
The indices are 4 to 5 sessions lower, approaching the 200 day SMA for the large caps. Sure they can put in a relief move after that kind of thrashing. To put it another way, they will NEED to put in a bounce before too long or the current 3-4 month ranges after the January high disintegrate lower.
Thus, even though we exited several plays Tuesday when the reversal was showing up we still recognize several of the groups discussed before (software, retail, oil, drugs/healthcare) held their patterns. Perhaps they help lead a bounce. If so, singles, right?
If the reversals Tuesday do not bring about a bounce and continue breaking down, you look for downside plays. After 4-5 days downside, however, another push lower could ignite a rebound to test the break. The rebound that tests and fails is what you REALLY want to play downside.
Right now the only thing the market clearly did was give up the bounce off the double bottoms by DJ30 and SP500. That leaves the market still in a choppy base, and that means we play less plays while the market tries to reestablish the uptrend or gives it up for a new downtrend. After a week of pullback to some support levels, we will see if we can get a few upside bounce plays to form up, playing one leg only at a time until the market shows it has decided on a trend.
Have a great evening!
MARKET STATS
DJ30
Stats: -424.56 points (-1.74%) to close at 24024.13
Nasdaq
Stats: -121.25 points (-1.70%) to close at 7007.35
Volume: 2.06B (+21.89%)
Up Volume: 732.65M (+44.06M)
Down Volume: 1.31B (+334.56M)
A/D and Hi/Lo: Decliners led 1.71 to 1
Previous Session: Decliners led 1.39 to 1
New Highs: 69 (+1)
New Lows: 110 (+12)
S&P
Stats: -35.73 points (-1.34%) to close at 2634.56
NYSE Volume: 859.737M (+17.82%)
A/D and Hi/Lo: Decliners led 1.81 to 1
Previous Session: Decliners led 1.19 to 1
New Highs: 74 (+11)
New Lows: 114 (+6)
SENTIMENT INDICATORS
VIX: 18.02; +1.68
VXN: 23.62; +1.50
VXO: 18.38; +2.17
Put/Call Ratio (CBOE): 1.04; +0.11
Bulls and Bears:
Bulls rose ever so slightly while bears continued to rise. Finally seeing more movement upside in bears. That is the more significant of the two because bears have been so low for so long.
Bulls: 43.6 versus 42.2
Bears: 19.8 versus 18.6
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.
Bulls: 43.6 versus 42.2
42.2 versus 49.5 versus 55.5 versus 54.9 versus 48.6 versus 48.1 versus 48.5 versus 41.9 versus 54.4 versus 66.00 versus 64.7 versus 66.7 versus 64.4 versus 61.9 versus 64.1 versus 64.2 versus 62.3 versus 61.5 versus 63.5 versus 64.4 versus 63.5 versus 62.3 versus 60.6 versus 60.4 versus 57.5 versus 54.3 versus 50.5 versus 47.1 versus 49.5 versus 49.5 versus 48.1 versus 50.5 versus 57.5 versus 60.0 versus 60.2 versus 57.8 versus 50.0 versus 52.5 versus 54.9 versus 51.5 versus 50.00 versus 55.8 versus 50.00 versus 51.9 versus 58.1 versus 58.7 versus 58.5 versus 54.7 versus 51.9 versus 56.3 versus 55.8 versus 49.5
Bears: 19.8 versus 18.6
18.6 versus 17.5 versus 16.8 versus 15.7 versus 15.5 versus 14.4 versus 14.6 versus 14.4 versus 15.5 versus 12.6 versus 12.8 versus 12.7 versus 13.5 versus 15.2 versus 15.1 versus 15.2 versus 15.1 versus 15.1 versus 15.4 versus 15.4 versus 14.4 versus 14.4 versus 15.1 versus 15.2 versus 15.1 versus 17.0 versus 17.1 versus 19.0 versus 20.2
OTHER MARKETS
Bonds: 3.00% versus 2.962%. Oh no, at 3.00%. How will the union survive such a dire predicament? Answer: as it always has, just a LOT, LOT, LOT more debt. Oh, THAT is the problem . . .
Historical: the last sub-2% rate was in November 2016 (1.867%). 2.962% versus 2.96% versus 2.914% versus 2.867% versus 2.83% versus 2.829 versus 2.825% versus 2.781% versus 2.801% versus 2.805% versus 2.775% versus 2.812% versus 2.806% versus 2.781% versus 2.739% versus 2.714% versus 2.781% versus 2.775% versus 2.854% versus 2.813% versus 2.814% versus 2.881% versus 2.90% versus 2.852%
EUR/USD: 1.22232 versus 1.22094
Historical: 1.22094 versus 1.22876 versus 1.23464 versus 1.23748 versus 1.23712 versus 1.238532 versus 1.23313 versus 1.23299 versus 1.23720 versus 1.2359 versus 1.2311 versus 1.22812 versus 1.2247 versus 1.2285 versus 1.22698 versus 1.23073 versus 1.23234 versus 1.2406 versus 1.24494 versus 1.2351 versus 1.23301 versus 1.23467 versus 1.22478 versus 1.2342 versus 1.2287 versus 1.2304 versus 1.23782 versus 1.2392 versus 1.23412 versus 1.2305 versus 1.2305 versus 1.24017 versus 1.2411 versus 1.2344 versus 1.23187 versus 1.22822 versus 1.21894
USD/JPY: 108.894 versus 108.728. Dollar continues its rise.
Historical: 108.728 versus 107.645 versus 107.404 versus 107.409 versus 107.027 versus 107.010 versus 107.362 versus 107.267 versus 106.882 versus 106.873 versus 107.09 versus 107.16 versus 106.939 versus 107.11 versus 106.816 versus 106.797 versus 105.901 versus 106.286 versus 106.81 versus 105.397 versus 105.473 versus 104.789 versus 104.829 versus 105.892 versus 106.478 versus 105.945 versus 105.946
Oil: 67.70, -0.94. Dropped on a larger than expected build.
Gold: 1333.00, +9.00. Buying gold after it broke the 50 day EMA -- sell! No, buy! Gold market is trying to figure it out as well.
End part 1
Jon Johnson, Chief Market Strategist
InvestmentHouse.com
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