THE DOW THEORY

We are not  “Dow theory” people. The Dow theory basically states the transports and the Dow should go hand in hand. You can go and look it up.

We have seen plenty of times where one under-performs the other and the rest of the market does not crater. No matter what, we will just pay attention to what is working and what aint. Just letting you know the transports continue to act awful. We have been telling you to avoid them for quite a while. Go take a gander at the transports now. Looks like they are about to take another leg down. It is bad enough they are trading below the all-important, longer-term 200 day average but now looks ready to worsen. We suspect 8800-8900 on the transports is next. Whether or not it finally caves in a market that is down to about 40-60 good versus bad is another story. Just realize regardless of yesterday’s up day, there is a lot of suspect action going on underneath the surface.

The good news remains there continues to be a decent amount of strong growth names acting just fine in tech/internet/growth land as well as a slew of Chinese ADRs.

The short, sarcastic pre-market!

Yesterday…gap to the upside. Today…gap to the downside. And the Knicks still suck!

CREE,LOW,LZB,RARE gap down…smaller gaps to the downside in CRM and INTU.

Have a great day!

LEARNING FROM THE LITTLE ONES ON SPORTSMANSHIP!

SOURCE: http://www.espn.com/sports/llws17/story/_/id/20410683/opposing-coaches-players-console-llws-pitcher-gave-walk-off

DON’T WORRY. THERE’S NO BOND BUBBLE!

TESLA bonds should yield 8-9%…

SOURCE: https://www.wsj.com/article_email/tesla-bonds-tumble-in-sign-of-concern-over-finances-1503350854-lMyQjAxMTI3MTI3MjgyNTI5Wj/ 

PRE MARKET

Last night, we told you we thought yesterday’s close indicated that a bounce was ready to happen. We don’t giving short term calls as we like talking big picture but thought worth mentioning because of what we saw. And lo and behold…nice gap to the upside today. Yippee. Keep in mind, this is so far, an oversold bounce as sellers dry up. We suspect we could chop around but are open to anything. The problem remains the internals.  The good news is there are still a bunch of leading names that are now settling down into new bases. As long as they hold in those bases, the potential for more breakouts down the road is still there. Names that have settled below the 50 day are not included. Bases should form above.

Of note:

COPPER (JJC) into new high ground so the BHP, RIO and stuff like that still working. The weak dollar helping this out.

A couple strong CHINA ADRs getting smacked this morning during earnings roulette. BZUN and MOMO down in the 10% range off of numbers. Another blow-up is NDSN.

Yesterday, WUBA big CHINA ADR mover to the upside on numbers.

 

THE CLOSE

Did you see the close? Suspect we bounce here but suspect at best, some flopping and chopping. There are just too many stocks and areas now in rough shape so headwinds prevail. The good news remains major indices have only dropped a few percent…which is a no biggie. But internals blah. A lot more new lows than new highs again today. More in the morning!

PRE MARKET

No big Monday gap this morning.

Futures flattish to up a wee bit.

WUBA another Chinese name gapping up.

HLF gaps up on possible buyout. Whoa is the short sellers of this stock. Only 23 million of the 66 million float shorted.

Don’t go blind looking at eclipse. Make sure you have the glasses.

WEEKEND REPORT

First off, we don’t know why but just about every Monday has seen a mystery gap to the upside in the market.

But the name of the game is more deterioration in the market. We’ll just report the facts!

Before this past week, the market was about 50-50 in our proprietary scan. We think it is more like 40-60 now. This is a pitiful number considering we are just a few percent off the highs.

On top of that, new yearly lows have outpaced yearly highs just about every day. Again, this should not be happening just a few percent off of highs.

The RUSSELL 2000 (don’t worry, it is only 2,000 stocks) is now entrenched below the longer-term 200 day moving average. We have been telling you to underweight small caps versus large for months.

The TRANSPORTS continue to act poorly and now also trade below the 200 day.

The S&P, NASDAQ, NDX all trade below short term support, the 50 day average.

REGIONAL BANKS (KRE) are trading below the 200 day and are now testing vital support at around the $51 area.

INDUSTRIALS (XLI)…HEALTHCARE (XLV)…MATERIALS (XLB) now trade below the 50 day.

JUNK BONDS (JNK,HYG) trade at longer term support after breaking short term support.

And let’s just say more and more names continue to head south while fewer and fewer names are working. At the very least, the market is a tougher proposition. But until major…and we mean major support gets taken out, do not get too bearish. Just know 60% of the market aint happening. We have been listing those areas for you for months. Just staying out of areas we told you to avoid like ENERGY/OIL &GAS, RETAIL and others have saved a ton. And amazingly, those areas are not getting any better.

Watching that 1335-1340 are for the RUSSELL.

Watching the 2400 area for the S&P (the big breakout area)

Watching 6080-6100 area on the NASDAQ.

Bullish markets do not die easily. They are a long process where more and more areas break down and fewer and fewer areas are working. Eventually, under the weight of the ugly, major indices cave in. We do not believe we are there yet but any more weakness will not help the cause. Back in 07, it took many months of deterioration in the average stock as well as the major negative divergence in the FINANCIALS that eventually killed the market. Stay tuned. Central banks are still at the ready. The ECB gave another b.s. excuse last week to keep printing money and keep rates negative. The excuse: the Euro would strengthen too much if they tightened. We think they are full of it. They know what would happen if they stopped printing and buying up assets.