Another grim day for just about everything tech/internet/growth/semis and all that stuff. We make note that it is now way stretched and oversold on a near term basis but that doesn’t mean they bounce. Amazing what can happen when an area is over-owned, over-loved and over-leveraged. Many are coming out defending all these names. We will not quibble with them but we would rather let the market decide.
What is more important is what we mentioned yesterday and that is most major indices are sitting on either long-term support or double bottom support. Again, double bottoms simply mean price went down to a level, rallied over a period of time and then revisited. Just take a gander at the Dow or the financials (XLF) which revisited to the penny.
Today is end of quarter. We are seeing another one of those gaps to the upside and suspect this occurs because of how oversold things are combined with end of quarter combined with sitting at vital support. LET US BE AS CLEAR AS CAN BE! A BREAK BELOW WILL INVITE MORE NASTY SELLING BY THE INSTITUTIONAL CROWD AS THEY WILL REALIZE IT’S PARTY.
Yesterday, Sarah Sanders stated that while the president cares about level playing fields, they had no plans to go after Amazon right now. Of course, with this administration, Wednesday has nothing to do with Thursday as this morning, the president tweets:
“I have stated my concerns with Amazon long before the Election. Unlike others, they pay little or no taxes to state & local governments, use our Postal System as their Delivery Boy (causing tremendous loss to the U.S.), and are putting many thousands of retailers out of business!”
We have a couple of messages for the president.
Not arguable, the two most important stocks to the stock market in the 15 month romp since the election were Boeing and Amazon, both with amazing gains. Boeing is potentially in the cross hairs of retaliatory measures because of tariffs and now Amazon is potentially in the cross hairs of the president. Mr. President…if the big leaders in the market go by the wayside, there is a chance the market goes by the wayside. If the market goes by the wayside, there is potential for the “wealth effect” to go by the wayside. If the wealth effect goes by the wayside, the economy goes by the wayside, if the economy goes by the wayside…you get the hint.
If you think Amazon has hurt the mom and pops, then Mr President, why not just go after Home Depot, Lowes, Wal Mart, Best Buy, Bed Bath and Beyond? How about going after Publix because in the southeast, they have put a lot of supermarkets out to pasture or just go after Wawa as they are taking over in Florida and shutting down smaller gas stations? Shouldn’t Costco be a target? Do you know how many businesses they have shut down? Hey…why not go after the New England Patriots? Look how many teams they have defeated throughout the years. Mr. President, do you know what all these businesses have in common? They do things right. They are what makes this country great. They have created wealth. They have created jobs. They have turned many a cashier into managers. They have changed the face of the economy for the better…just like Amazon. What else do they all have in common? They have hurt the competition because they are just better than the competition…just like you beat your competition because you obviously did better than your competition. Mr. President, do not castigate success stories like Amazon. Praise success stories like Amazon. The US Postal Service does not lose money because of Amazon. Amazon is one of their saviors. They have done so well for the service that they actually deliver for Amazon on Sundays.
We, for 8 years, complained about Barack Obama targeting many industries…and it was not just the coal industry. We complained that all the targeting would put uncertainty into the economy.
Mr. President, if you want to do the same, keep targeting the great success stories like Amazon. Nothing good will come from it.
We pay a lot more attention to the big picture but needed to let you know those vital, vital, vital longer-term support levels are still holding. Go take a gander at the S&P right on the 200 day moving average. Go look where the DOW is sitting, in and around the Feb lows. The FINANCIALS (XLF) right at support.
This does not take away from the further carnage in a bunch of TECH/INTERNET names today with AMAZON taking the brunt but them major averages are still holding…and as we write this, AMAZON has cut its losses in half….
DOW futures back to up just a wee bit but NDX futures hit as they are coming after AMZN and other high growth beta. End of quarter not helping so far.
NVIDIA announces stopping the driver-less car crap for now. This leading stock drop $19. More trouble with FACEBOOK…that did not help. FACEBOOK trouble leads to TWITTER and GOOGLE smacked. TESLA continues to implode because when markets go on defensive, big money losers get clipped. Also, someone put out report saying they will be bankrupt. All this knocked all tech for a loop. Big leaders mauled. When the DOW was up 200, the NASDAQ was flat so something was up. When the DOW came in, it was bye bye.
We still have two days of month-end here so maybe they can bounce this. Futures were way down overnight but DOW now up 100 and NASDAQ bouncing…but don’t blink. Long term support is just underneath and NEEDS TO HOLD.
As far as Facebook, we are learning they are like the NSA…sticking their nose into everything. We are finding out they are logging calls and texts. What the hell is with that? Facebook has lied to the zillions of people that are on their platform. There is video of Zuckerberg telling the world they would never sell our stuff. As far as transparency, there isn’t any. It’s like you wake up in the middle of the night because your dogs barked. You turn on the tv. Every channel is an infomercial telling you to take a pill and lose 100 pounds or take a pill and your hair on your head will grow back. But at the bottom in small letters hardly readable, it says “RESULTS NOT TYPICAL” meaning it does not work. There is then a paragraph underneath with all kinds of disclaimers that is so small, Superman could not read it. That is Facebook. Try checking out their privacy settings. Einstein couldn’t understand it. On top of that, you are automatically opted into everything but takes an act of God to opt out. And even after you opt out, they keep all your stuff. Is it any wonder they are in the cross hairs now? Just have full and fair disclosure. Is that asking too much? No one ever complains when they know what they are getting but Facebook, in our humble opinion, went over the top. No doubt there will be changes on privacy, transparency and ease of use.
Another decent gap to the upside this morning. Yesterday saw a much larger gap.
“STOCKS REBOUND AS TRADE FEARS EBB!” That’s the type of headline we are seeing this morning. There always has to be a reason. But yesterday, Mnuchin stated they are going forward with tariffs. Yes, there were rumors we were negotiating with China but we are always negotiating with China. So what happened yesterday? Frankly we really do not care much but:
The Dow HAD already dropped from 25,800 to 23509 in the latest leg to the downside. The S&P HAD already dropped from 2801 to 2585 in the latest leg to the downside. The NASDAQ HAD already dropped from 7637 to 6992 in the latest leg to the downside. We do make note that the drop for the NASDAQ/NDX came from yearly highs. Drops like that do lead to vicious bounces.
We are treating yesterday as something akin to February 9th when after a nauseating drop, the market experienced a massive high volume reversal, leading to a few weeks of upside which led to this latest drop…only this one is much more important.
It is much more important because intermediate-term corrections often put in lows on the 2nd time down. It is much more important because a bunch of important areas tagged LONGER-TERM areas of support/moving averages. It is much more important because a break of those LONGER-TERM areas of support/moving averages…and then we talk something much worse than what we have already seen.
So take a look at :
The S&P 500 tagging for the 2nd time, the longer term 200 day moving average and bouncing off it it…again almost to the penny just like February 9th.
The DOW getting very close to the lows of Feb 9th and bouncing…possibly putting in what in technical terms is called a “double bottom!” This simply means price revisited the last low and rallied off of it again. Many other areas and indices did the same.
The strongest area (the SOX) rallied back above the 50 day average still showing great relative strength versus everything else.
The FINANCIALS (XLF) dropped down to $26.77. The low February 9th? $26.76.
We told you over the weekend that we were headed into the “end-of-quarter window dressing” period into a holiday-shortened week. We suspected a bounce. Backs to the wall, we would have guessed a few hundred Dow points after 1400 points to the downside last week. Those few hundred points were fulfilled on a gap and now suspect there is more upside testing.
But words to the wise. There has been a lot of technical damage. It is the mark-up period. There is a clear lack of leadership. But as long as the weekend’s lows hold, we are good. But if those longer-term support areas give way, we expect the big money to give way but for this week, highly doubt it happens.
S&P almost to the penny hold of 200 day average which also held Feb 9. A bunch of potential double bottoms. A drop, a retest, a rally. Beta went nuts. Gap to the upside into end of quarter…which we warned you about. End of quarter moves off of oversold conditions can be vicious.
We suspect more upside into end of holiday-shortened week. As we scanned a couple thousand names…still a ton of technical damage. Most everything except the SOX is below the 50 day average…but good day at vital support areas. The process continues.