PRE MARKET

What? You have never seen a 12% drop in days? Massive thousand point reversals? How about on Wednesday of this week? Up 300 at 230 pm, only to drop 470 points by the close.  How about gains cut in half yesterday with the NASDAQ giving it all back? We have a pattern. Big gaps to the upside but in the real trading session, the big money selling.

Today, of course…another decent size gap to the upside. Will this one hold? Don’t know. But if it does hold, it will give markets a chance to break out of this recent range and give markets a chance to move back towards the old highs.

We continue to believe the lows of 2/9 are damn good lows but must tell you, all these negative reversals makes one wonder whether it will be revisited. The market gets another chance today to hold one of these big gaps.

HOW’S THAT SOCIALISM?

SOURCE: https://www.reuters.com/article/us-venezuela-food/venezuelans-report-big-weight-losses-in-2017-as-hunger-hits-idUSKCN1G52HA

PRE MARKET

After yesterday’s gross, ugly, yucky, icky reversal to the downside, futures are up decently as we write this. Futures were way down overnight. Often, the day after some Fed nausea, the opposite reaction happens. In any case, lighter remains better but keep in mind, some of the mega-cap, high growth, beta tech/internet still leading big time…though a good part of yesterday’s gains reversed. All are bidding up again this morning. Also, continue to watch FINANCIALS. They remain relatively strong though they also reversed big gains yesterday.

The bond market in a bit of rally mode today (for a change). Yields have moved up into important resistance.

THE CLOSE

The DOW dropped 470 points from 225 pm after ripping to the upside after the Fed minutes. The S&P dropped 48 points. The NASDAQ dropped 120 points. We are being inundated with emails asking why.  Frankly, we don’t know and could care less. The fact is the Fed was actually more dovish than most expected., We were not surprised as they will be stay easy as long as they possibly could. They have lived off the easy money. On top of our Fed, Japan and Europe still have negative rates and are still printing. We will just say the same thing we have said for quite a while…let’s just hope we never get to the point where the Fed is forced to raise rates to fight off whatever monster they are creating finally shows up.

We think we just saw the opposite of what happened two Fridays ago when the market had a vicious reversal to the upside. That was the day we called A low because we felt sellers petered out and buyers finally got going. We think that after the recent sharp rally, give or take a few, buyers finally petered out and sellers got the upper hand. Not by coincidence, the Dow and S&P petered out right around the 50 day average.

This does not mean we have to revisit the recent lows. But it does mean to be more careful here. There are already more than 50% of markets and sectors in bearish shape. It will not take much. We also make note the market has become narrower in the past couple of days where most of the $ headed into some of the FAANG names. Narrower markets are great if you own the narrow areas but are also indications of trouble just ahead. It is narrow markets that often leads to drops.

Just expect markets to continue to be a tougher proposition…and watch to see if the 10 year breaks 3%. Looks like it is a gimmee at this juncture. Not sure if it is an end of the world scenario but higher rates do provide competition for money as well as the cost of capital going up.

 

PRE-MARKET

DOW down 250…NASDAQ hardly budged with the NDX up. SEMIS were also strong.  We walk in today with DOW/S&P flat but NASDAQ/NDX up strong. That is a theme this second. Not sure it is good news when a select few get all the money but won’t argue with it. You know the names. All the “glamour” TECH/INTERNET.

Walmart hurt the DOW yesterday but everything counts. When it went up nicely in the past year even though they had no growth, it counted…so it counts now.

Don’t want to go any further than that as the rest of the market is blah!

 

MIDDAY NOTES

PAY NO ATTENTION TO THE DOW TODAY.

The DOW was down over 200 points earlier and are still down 75 as we write this but:

NASDAQ/NDX/SOX are doing the job in a big way. FAANG is doing the job in a big way. We would always rather see the growth/beta areas leading while the Dow lags. Some are saying it is the upped buyout price for NXPI. We could care less.

Of course, markets reversed Friday’s gains, more than likely indicating sellers getting some of the upper hand with potential to pull things in after the strong bounce but when we see the action in those strongest of areas today, we wonder how much pullback we get.

Keep in mind, with more than 50% of our stock universe in poor technical shape, things have become tougher. It is just good to see the growth names leading. Watch them closely. They need to keep it up.