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InvestmentHouse - It Can All End Monday (Weekend Newsletter)

http://www.investmenthouse.com/frblog.php

- Another surge higher generates even more calls re a market top.
- January is impressive as money pours into the market, ramping up the angle
of rise. Will the money continue?
- So, you think you know a top when you see one?
- It can all end Monday, but the leadership has yet to show that kind of
movement.
- A truly impressive run makes you wonder about more upside, but we see more
stocks ready to move upside.

Another week upside, another solid finish to a week, this one more than
solid in the melt higher. After indecision Thursday, futures started
higher, stocks started higher, and stocks continued higher through the close
with a classic last 2 hour melt higher. New highs on all the large cap
indices, while RUTX, SP400, and SOX put in respectable showings after tests,
particularly SOX after its sharp Thursday drop.

SP500 33.62, 1.18%
NASDAQ 95.61, 1.28%
DJ30 223.92, 0.85%
SP400 0.40%
RUTX 0.40%
SOX 3.26%
NASDAQ 100 1.54%

VOLUME: NYSE -8%, NASDAQ flat. NYSE trade dropped below average after
moving back above average Wednesday and Thursday. NASDAQ trade was flat,
holding at above average levels. Some distribution on the week on both
indices, but they avoided adding another one Friday. Two distribution
sessions in the past 9 is watch-worthy but not enough in themselves to stall
the rally.

ADVANCE/DECLINE: NYSE 1.2:1, NASDAQ 1.5:1. Ah, another large cap session.
NASDAQ 100 +1.54% led by AMZN, NVDA with emphasis from INTC (+10.55%).

Looking at the brokerage accounts, this is getting rather insane. From our
actively traded: +32%, +68%, +73% -- and this is year to date, not quarter
over quarter (from Q4). From Q4 those numbers are 208%, 405%, 215%. Year
over year is where it gets shocking, with gains over 1000% showing up. That
begs the question, why do I still prepare these newsletters, videos, trades,
alerts, etc.?

Because I love it. I love helping people make their dreams reality, to gain
what I call the true measure of success: doing what you want to do when you
want to do it. If you can do that, you have it all. Yes, sometimes I get
pulled away for the kids' track meets, a basketball game, football playoffs,
or have to attend a church meeting, or am in another time zone and could not
lay off visiting just one more winery. I still have my computer with me,
still logging alerts, still making the trades because I live by this and I
owe it to those who want to get to that point of doing what they want when
they want.

As an aside, I receive many requests to manage other people's money. I
cannot do it. Not because I could not, but because I could not do it and
generate the returns I do now. I take smaller amounts of money from my
overall hoard and start new accounts. I then work those accounts
aggressively, racking up the gains discussed above. At a certain point, I
'retire' that money to different investment vehicles, start another smaller
account and do it again. That way I can buy 10, 20, 30, 50 contracts of
options without much trouble.

If I am trying to do that with $100M, there would be no way to move in and
out quickly without moving the market. That is the problem with funds: they
don't use my tactic because they cannot because they are not a complete
management service for client money. They are not set up that way. In the
1980's and 1990's, many a great fund quickly grew into a bloated behemoth
and ceased performing.

Therefore, I feel the highest and best use in helping people reach that 'do
what you want' goal is to educate you and let you know the trades we are
moving into here. I have help of course, but most all decisions are mine.
The praise and the blame fall on me. I sometimes stay in a trade too long
up and down, thinking I know what is going to happen. That is a constant
fight any trader has. You can mostly get away with it if the trend is in
your favor, but the key of course is recognizing when the trend is starting
to turn.


And that leads to the next area. The question, however, is not brokerage
accounts. They are up insanely for years now, particularly 2016 through
present. SP500 +44% since the election, and as you can see, that is just
'sitting doing nothing' money, i.e. just plunking it in an index fund. The
real question is what is next.

Why? Because recognizing and positioning for major market turns is one of
the foundations to making, holding what you made, and then making more. In
other words, recognizing major market shifts is an integral key to wealth
building. It does no good to amass big returns upside or downside and then
have a sizeable portion given back -- that defeats getting to your goal of
doing what you want when you want.

That is why buy and hold is of course dead, but that is EXACTLY what you
hear advocated on the financial stations, for the most part, daily. You
cannot time the market, etc. Sure you will mistime moves; every trader does
so. I used to be way too early on trades. I would see it setting up, for
instance a trend reversal. I would jump in on the first move and then get
chopped up in the subsequent battle of the buyers and sellers as they fought
it out until one side cried uncle. Of course the preferred way is to let
the big break happen, then counterpunch after the test. Then the trend gets
more or less set, or at least you have a really high probability of making
good money on the trade even if it is not a new trend.

Calling tops and bottoms is hard and that is often why we take partial
profits after great gains. Typically you get a pullback; you can see it in
your brokerage accounts: they surge higher to a higher high and then they
fade in a normal test. We look at capturing a rally or selling leg, taking
some gains, and letting part of the position work if the trend is strong.
Then we can augment or add to that position when it sets up again and we are
back at it. That way you have locked in some gain in the event the move
DOES NOT come back, and if it does, you are back in and taking advantage of
the full move. Make sense? You are not calling a top or bottom, you are
ready to move in when stocks show the 'buy me' or 'sell me' signal, and then
you MANAGE your position and your MONEY around those signals. That way we
have 3 plays on AMZN for instance, but we have also banked great money on
AMZN already during the move and STILL make excellent to superb returns as
it continues working.

This is incredibly relevant now because EVERYWHERE you look and hear there
are warnings about a market that is set to crash, end of run melt ups, blow
off tops, etc. This weekend Bank of America stated that one of its
indicators, one it says has a 100% accuracy rating, has triggered and calls
for a 12% stock decline with the following three months. BA says it is
fully back tested as well. Bully. A 12% decline would certainly not be out
of line with the kind of gains logged.

At the same time you have all-time record highs in bullishness (though bulls
did back off to 64.7 from 66.7 and bears 'surged' to 12.8 from a 30 year low
12.7). You have the sky falling and the tap never runs dry at the same
time. Sure sounds like the bulls and bears doing their usual dancing,
climbing a wall of worry. As many are scared of a top as are excited about
a continuing run.

In all of that misdirection, what is the right direction? Well, as I said,
calling tops is above my paygrade, and I have a very high market paygrade.
That said, there ARE a few more than the usual reasons to be wary. The
bullishness is very high. The runs seem to defy gravity and usual technical
indications, and that is a symptom of markets in some stage of a final
push -- nothing is ever truly different 'this time.' The length and lack of
interruption of the 2016 to present run is almost unprecedented. There are
'outside' factors, such as the dollar's decline, bond yields jumping (and
you have heard all of those theories of doom), impeachment, etc.

I fully anticipate a 10+% correction at some point. In all my years in the
market, however, despite having a pretty good sense of knowing a top was
about to happen, knowing the exact when is a loser's guess. Either you miss
out on a lot more upside or you fail to recognize when all leadership is
reversing as the money runs dry.

In the final analysis it is how much money is being pushed into the market.
Money has to continue believing the market will go higher and come into the
market to push it higher. That shows up in the stock charts, in the
continued ability to set up good patterns, to break higher, to hold the
breaks, test, and resume the moves. For now, that is exactly what stocks
are doing. There are few of the kind of reversals that red flag a major
market issue. That does not mean they don't show up next week, even Monday,
after such as finish to the week on Friday.

It is a matter, however, of having to accept the market that is presented
not the market that experts see lurking in the shadows, whether that is a
market set to crash or one set to surge another 10%. Bank of America,
again, says investor cash allocation is at 10%, a record low (according to
BofA) with equity exposure rising the fastest in 10 years, claiming everyone
is going 'all in.' Well, the question is how much MORE money is out there
being dragged in from all of those who pulled out of the market in the late
summer? That would seem to be important, just as the sun's heating and
cooling cycles are important to the earth's climate -- but are left out of
the climate models.

Again, it is looking at the market presented. I have my concerns about when
a correction that I feel is coming actually starts, but I cannot let those
fears keep me out of a market that keeps rising. I am not making a moral or
philosophical judgment about the market as it appears so many in the 'doom'
circles have done for years. I am looking at the market to play the
predominant trend to make as much as I can while that trend is in place and
is strong. Oh, I can philosophize with the best of them, but that has
virtually no -- no, it actually has zero -- bearing on making money in the
market. Watching the market, its leaders, up and coming stocks, and whether
there are breakdowns tells me more than any expert's bloviation.


THE MARKET

CHARTS

Some volatility crept into the indices the past 2.5 weeks with a couple of
higher volume selling sessions, but thus far that has not stopped the
advance. RUTX, SP400, and SOX did slow and failed to reach new highs to end
the week, but overall the indices are still trending higher, just showing
more of that volatility that is a key to watch this coming week.

NASDAQ: Starting with a weekly NASDAQ chart to emphasize the 2016 to
present run. 2013/2014 was similar, but this is different. Note the
acceleration over the past four weeks as money is forced at high rate into
stocks. That kind of move cannot last. Of course it cannot. It can,
however, continue on into the big earnings this coming week or beyond.
After a 2-day sidestep, NASDAQ broke higher again Friday. Big names that
tested during the week broke higher. NVDA for example. GOOG is testing
right now, FB as well. They can make a new break and add to the push. They
can. We will see if they continue their recent paths.

SOX: A pretty good barometer of the market as it often leads the overall
market. SOX gapped lower Wednesday, sold off Thursday but held the November
high. Friday it gapped back upside thanks to INTC's 10+% earnings gain. A
new high early week was coughed up on the midweek selling prompted by AAPL's
woes (and impact on its chip suppliers) and then TXN's earnings drag. Still
trending upside, however. The key is how it responds after Friday's
INTC-impacted move is absorbed.

DJ30: New high after new high, climbing up and indeed now off the 10 day
EMA. When it gets a bit out over its skis like this, it tends to edge back
toward the 10 day to continue the run after a pause. That is if the current
trend holds. Extended off the 50 day MA over the past 5 months, and now an
impressive 17.9% above the 200 day SMA. That is extreme for any index,
particularly the Dow.

RUTX: New high Monday, Tuesday and Wednesday, then reversed intraday
Wednesday. Well, it stalled is more appropriate. Held over the 10 day EMA
with a Thursday doji, bounced Friday, but the money was not flowing to
enough small caps to push to another high. Still a very good trend up the
10 day EMA after a new breakout in December from a 2 month consolidation.

SP400: Similar to RUTX, ran to new highs but also ran into a near term top
Wednesday at the open. Faded but held the 10 day EMA on each low to end the
week, putting in a pretty darn good test. Nice trend up the 10 day EMA
continues after that mid-November tap at the 50 day EMA.

SP500: Started strong Monday, flattened out somewhat then surged Friday.
It too has quite the upward ramp since the start of 2018 as tons of money
has poured in.


LEADERSHIP

Chips: After TXN, LRCX, SWKS, STM struggled mightily on the week, INTC rode
in, crushed earnings even with those chip flaws, and gapped over the
November and December highs in its 3 month trading range, breaking out with
a breakaway gap. Others still show promise, e.g. MRVL, of course NVDA, then
CCMP, AMD, AMAT, MXL.

FAANG: AAPL continues its struggle but is holding the bottom of its range.
FB jumped back up Friday and looks promising this week. New position
perhaps. AMZN continues its runaway train imitation. NFLX gapped higher on
earnings and continued upside into Friday. GOOG stalled Wednesday and
slipped laterally into the weekend. Perhaps enough time for a pre-earnings
play on a new upside break.

Software: RHT screaming higher Friday after a steady rise on the week. VMW
exploded higher, giving us a big gain, on word DELL may buy it all. BLKB
looks interesting. FFIV surged and purged on earnings. CRM may be ready to
break higher again after its breakout and second test of the 10 day EMA.

Financial: Solid to excellent week. C hitting a higher rally high all
week. JPM ditto. BAC as well. GS strong move off the 50 day MA.

Manufacturing/Machinery: CAT tested after earnings while CMI broke higher
Friday from a consolidation. HON jumping on earnings.

China: Some excellent recoveries. BABA started higher Tuesday, we moved in
midweek, it rallied to a new high into the Friday close. BIDU struggled
through the week but held the 10 day EMA and Friday was at a higher closing
high in this rally on some solid trade. BZUN broke sharply higher. HTHT
struggled early week but held the 20 day and is trying to recover. SINA
tested on the week to the 10 day EMA, dojied, then gapped higher and rallied
to a higher high Friday.

Oil: Tested back some on the week with the big names faring a bit better.
HAL finally testing after that gap higher Monday. APC showed a bit Monday
and then crept up the 10 day the rest of the week. Some smaller names
struggled, e.g. CRZO. PTEN, DNR not spectacular but they did move higher on
the week.

Transports: Airlines down hard on their earnings, e.g. DAL, AAL, LUV.
Truckers solid either testing (JBHT) or still rallying (WERN).



THE MARKET

MARKET STATS

DJ30
Stats: +223.92 points (+0.85%) to close at 26616.71

Nasdaq
Stats: +94.61 points (+1.28%) to close at 7505.77
Volume: 2.07B (0%)

Up Volume: 1.44B (+504.59M)
Down Volume: 600.8M (-509.2M)

A/D and Hi/Lo: Advancers led 1.54 to 1
Previous Session: Decliners led 1.06 to 1

New Highs: 305 (+93)
New Lows: 30 (+1)

S&P
Stats: +33.62 points (+1.18%) to close at 2872.87
NYSE Volume: 805.1M (-8.19%)

Up Volume: 2.32B (+790M)
Down Volume: 1.05B (-1.15B)

New Highs: 292 (+27)
New Lows: 82 (+18)

SENTIMENT INDICATORS

VIX: 11.08; -0.50
VXN: 17.52; -0.73
VXO: 11.47; -0.04

Put/Call Ratio (CBOE): 0.79; -0.01


Bulls and Bears: Bulls backed off the cycle high but still very strong.
Bears ticked higher, but still at 30 year lows.

Bulls: 64.7 versus 66.7

Bears: 12.8 versus 12.7

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: 64.7 versus 66.7
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 versus 56.7 versus 53.4
versus 57.7 versus 63.1 versus 61.2 versus 61.8 versus 62.7 versus 61.8
versus 58.2 versus 60.6 versus 58.6 versus 60.2 versus 59.8 versus 59.8
versus 59.6 versus 58.8 versus 56.3 versus 55.6 versus 51.0 versus 42.9
versus 41.7 versus 47.1 versus 42.9

Bears: 12.8 versus 12.7
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 versus 19.1 versus 19.1
versus 18.3 versus 18.1 versus 17.0 versus 16.2 versus 16.5 versus 16.7
versus 18.6 versus 18.8 versus 18.6 versus 18.3 versus 19.2 versus 18.3
versus 17.1 versus 17.3 versus 17.9 versus 17.9 versus 18.3 versus 17.5
versus 18.3 versus 18.1 versus 17.3 versus 13.75 versus 17.3 versus 16.5
versus 17.5 versus 17.6 versus 16.7 versus 17.6 versus 17.5 versus 17.3
versus 18.3 versus 18.4 versus 19.6 versus 19.6 versus 19.2 versus 19.6
versus 22.3 versus 21.6 versus 23.5 versus 25.7 versus 24.3 versus 23.1
versus 23.8 versus 23.1 versus 22.8 versus 23.1 versus 24.3


OTHER MARKETS

Bonds: 2.66% versus 2.627. Traded at the bottom of the 6 month range on the
week, did manage to rebound some.

Historical: the last sub-2% rate was in November 2016 (1.867%). 2.66%
versus 2.639% versus 2.617% versus 2.656% versus 2.661% versus 2.618% versus
2.587% versus 2.535% versus 2.55% versus 2.559% versus 2.551% versus 2.482%
versus 2.456% versus 2.463% versus 2.464% versus 2.405% versus 2.434% versus
2.412% versus 2.474% versus 2.485% versus 2.484% versus 2.501% versus 2.459%
versus 2.398% versus 2.351%


EUR/USD: 1.24308 versus 1.24159. Euro surged on the week but then threw a
couple of tombstone doji to end it. A pause.

Historical: 1.24159 versus 1.24340 versus 1.23083 versus 1.22567 versus
1.22169 versus 1.2241 versus 1.2198 versus 1.22698 versus 1.22060 versus
1.20608 versus 1.19507 versus 1.19322 versus 1.19662 versus 1.20313 versus
1.20756 versus 1.20177 versus 1.20573 versus 1.2001 versus 1.1936 versus
1.1936 versus 1.18998 versus 1.18593 versus 1.18628 versus 1.18658 versus
1.18792 versus 1.18408 versus 1.17703 versus 1.1752 versus 1.17798 versus
1.18392 versus 1.17430 versus 1.17652 versus 1.1764 versus 1.17754 versus
1.17990 versus 1.18276 versus 1.18727 versus 1.18983 versus 1.18976 versus
1.18529 versus 1.18489 versus 1.1899 versus 1.19329 versus 1.18148 versus
1.17402 versus 1.1791 versus 1.1787 versus 1.1786 versus 1.1799 versus
1.16443 versus 1.16646 versus 1.16439 versus 1.15871


USD/JPY: 108.601 versus 109.411. Dollar melted on the week, failing at the
10 day EMA and tumbling. It is ripe to rebound to test the 10 day EMA, but
it is in a downtrend now and will hit the early September low. Then it
tries to rebound some.

Historical: 109.411 versus 109.033 versus 110.159 versus 110.159 versus
110.70 versus 110.834 versus 111.036 versus 111.290 versus 110.357 versus
111.024 versus 111.204 versus 111.534 versus 112.706 versus 113.15 versus
113.58 versus 112.749 versus 112.677 versus 112.27 versus 112.690 versus
112.758 versus 113.216 versus 113.208 versus 113.304 versus 113.363 versus
113.334 versus 112.870 versus 112.625 versus 112.619 versus 112.298 versus
112.639 versus 113.555 versus 113.476 versus 113.48 versus 113.473 versus
112.473 versus 112.554 versus 112.442 versus 112.190 versus 112.55 versus
112.102 versus 111.583 versus 111.244


Oil: 66.14, +0.63. After testing back to the 10 day EMA for a week, oil
broke higher once more, closing at a new rally closing high.


Gold: 1352.10, -10.80. Big surge on the week to a higher high past the
September peak, but gave it up with a Friday gap lower to test the 10 day.


MONDAY

It is either a certainty the market will at least correct or it will keep
going for some time without correcting. Ah, when is, as usual, the key.

Many are afraid of flying because they have seen the crashes before. You
have to respect the downside to keep what you made on the upside. You also
want to play the upside while it is making you great money as it has. You
just want to avoid, to borrow a trite but descriptive expression, picking up
nickels in front of the steam roller.

As noted earlier, the move could end Monday. The new money getting pushed
into the market could have seen its end Friday. Perhaps. The charts are
extended, but nothing Friday showed they were done. A couple of volatile
sessions with higher selling volume is something to note and watch for more
occurrences, but they don't end the rally themselves. There are still very
good stocks in good position, and if they can make the moves, then they make
the moves.

Therefore we will look at some more upside positions this coming week and
see if the money still comes into the market. Important earnings reports
from AMD, FB, MSFT, AAPL, AMZN, BABA, GOOG, stocks that initiated the
October break higher into the current run, are all due. Given the runs,
will there be enough good news to push them not just higher for that day,
but into new runs? The more they rally into the numbers, often the less
likelihood of a sustained move afterward. NFLX, of course, excepted.

So, we are concerned about when the top comes, but even so we are looking at
upside plays because the leaders are still setting up and rallying. As long
as they set up, rally, and don't reverse those rallies the upside remains in
charge and we want to play there.

Have a great weekend!



SUPPORT AND RESISTANCE

NASDAQ: Closed at 7505.77

Resistance:

Support:
7300 from a modest mid-January consolidation
The 20 day EMA at 7254
The 50 day EMA at 7049
7,000 from mid-December
6914 is the late November all-time high
6796 is the early November 2017
The 2016 trendline at 6720
6641 is the October high
The 200 day SMA at 6494
6477 is the September intraday high
6461 is the July 2017 prior all-time high
6450 is the early September high
6341.70 is the all-time high from early June.
6300 is the mid-June interim high
6205 is the late May all-time high
5996 is the recent May 2017 low
5937 is the all-time high from April
5915 is the tops of the March to April 2017 range
5910 is the lower gap point from mid-April
5800 from the February consolidation lows


S&P 500: Closed at 2872.87

Resistance:

Support:
2808 from the mid-January consolidation. Some support, not that strong.
The 20 day EMA at 2782
2751 from early January 2018
The 50 day EMA at 2710
2694 is the mid-December peak
2597 is the November 2017 high
2569 is the upper channel line from the March 2009 uptrend channel
The 200 day SMA at 2523
2491 is the August all-time high
2480 the late August and early August highs
2453.46 is the June prior all-time closing high
2409 is the July 2017 closing low
2406 is the all-time high from May 2017
2401 is the March 2017 all-time high
2352 is the May 2017 low


Dow: Closed at 26,616.71

Resistance:

Support:
26,000 from mid-January consolidation
The 20 day EMA at 25,740
24,835 is the mid-December consolidation range
The 50 day EMA at 24,923
24,312
23,602 is the early November 2017 high
23,608 is the early November high
The 200 day SMA at 22,564
22,420 is the September high
22,179 is the August 2017 all-time high
22,086 is the mid-August lower high
21,681is the July prior all-time high
21,638 is the July 2017 closing high
21,529 is the June 2017 high

End part 1 of 3