PRE MARKET

What? You never see a Dow down 150, only to finish up over 300? Seems the norm right now.

Here is what matters!

 

GLAMOUR GROWTH still acting strong measured by NASDAQ/NDX.

SEMIS strong.

FINANCIALS, especially SMALLER/REGIONALS strong. BAC and JPM holding the 50 day.

We do not need to talk about any other areas. There is simply no chance of going into a bear market until or unless these areas crack…and right now, even with the recent overall weakness, not only are they not cracking but many are thriving.  So forget all the noise about tariffs, taxes, debt, deficits. Everything is great as long as the market is not going down.

Just remember, over 60% of the stocks we scan are in poor shape. Europe (though bouncing) is in real poor shape…

Until otherwise notified, it’s still ping pong.

 

MARKETS AND PRE-MARKET

Pre market: Futures down decently as they have dropped in the past few minutes. This after a nice reversal to the upside Friday led by the glamour growth names and for a change, the small caps.

Tidbits:

The NASDAQ/NDX/SOX all held the 50 day Friday. These are your leading areas. We are actually amazed there has not been more damage here but there have been plenty of times we have seen narrow in the big leaders. To be clear…IF THEY GET THESE AREAS, GET THE FORK!

All the other major indices are in what we call “no man’s land!” All sitting below shorter term resistance but above longer term support between the 50 day and the 200 day. But…leave no doubt, the complexion is much different. Anyone who thinks the market is just going to walk back up thinks the Knicks will win the NBA championship this year. But again, glamour growth like AMZN, NFLX and a decent amount of names are still in strong bull markets.

Smaller FINANCIALS are back above the 50 day (KRE, KBE). The bigger financials not as strong but important names BAC and JPM are now sitting on the all-important 50 day.

EUROPE acts terrible. Many other countries around the globe are under pressure. ASIA is now in trouble. JAPAN has been blasted but don’t worry. BOJ’s Kuroda, the king of easy money says they can ease further if need be. Of course, they still have negative rates and are still printing but that’s not enough.

Interest rate sensitive stuff remains in trouble but oversold. Notice yields have been actually coming down in recent days. This includes real estate, utilities and housing.

Don’t know what the deal is but recession-resistant stuff in their own private bear. Food, drug, beverage, tobacco, household products.

Only about 40% (being kind) remain in good shape right now. Just a few weeks ago, this number was about 75%.

And tariffs. Nothing like being cursed out by the Trumpsters just because you say there is a better way. I actually agree with the president that trade needs to be addressed but painting everyone with the same brush doesn’t work. Do not forget that every country will act in their own self interests, not ours. Yes…we are the most important country around the globe and yes, a lot of countries cheat but again, taxing products will only hurt the economy. Remember, it is the consumer who pays the tariff. Get these country’s negotiators in a room and be the great negotiator you are President Trump and find a happy place.

Lastly, do not believe for a second the recent drubbing was only because of tariffs. The surprise tariff announcement came out almost 2 days after the market topped again….and remember, the market topped way back on January 29.

THE CLOSE

Hope you paid no attention to the Dow today. We knew something was up when the Dow was down 200 but the NASDAQ/NDX was turning green.

Today was a strong market day. Today was a strong reversal day…regardless of the DOW. The A/D on the NASDAQ is 20-8. Even the A/D on the NYSE is 17-11. On top of that, the Russell is up over 1.5%. The SOX is up over 1.5%. Add in glamour growth being very strong and you have another “A” low after a 1600 point DOW drop over past days. We also want to add the NASDAQ/NDX/SOX finishing above the 50 day.

We will have more over the weekend. Just know the boys defended very well today, albeit after a big drop.

MORE MID-DAY NOTES…POSITIVE DIVERGENCES PLAY OUT

With the DOW down 190, we noticed the NASDAQ-types coming on and thought a positive divergence was playing out. Anything can happen within the crazy days we have been seeing but the positive divergence is taking hold. The DOW is now only down 90 and the NASDAQ is up nicely with the RUSSELL (for a change) leading with a 1% gain. We suspect the market is putting in another “A” low today. After all, the DOW dropped 1600 points in the past 3+ days. THE NASDAQ/NDX/SEMIS continue to be the strongest areas. Of course, it is not even 1 pm but so far, so good.

 

MID-DAY POSITIVE DIVERGENCES

Anything is possible in this market so let us just report:

With the DOW down 290, the NASDAQ starting to get a big bid with the A/D going nicely positive.

With the DOW down 290, many NASDAQ names are green.

With the DOW down 290, some of the major indices have penetrated into the big reversal day low. We are not so sure we break those lows right now.

We have no idea how this nonsense finishes today and frankly, we hate micromanaging. For all we know, we finish down 500 today. We are just reporting to you what we are seeing as potentially positive divergences are occurring nearer to the recent lows with the NASDAQ/NDX/SEMIS trying to lead the way.

TARIFF SCHMARIFF!

Everyone blaming the recent drop on tariffs. We have news for you. Obama had tariffs. Bush had tariffs. Everyone has had tariffs. Maybe the difference is that those tariffs were not announced with a bull horn. Maybe this is about going about it loudly. Maybe. We think markets are just doing what they were going to do and that is ping and pong. We are now in the pong.

Remember, markets topped out badly weeks ago. Markets put in a good near-term low 10 days later. Markets are now retesting. This is normal. Even more normal is that yesterday, they came after the good stuff as big leaders like Amazon, Boeing and the like were ripped. This is part of the process. BUT…the recent lows had better hold. A break below and we will be talking about heading towards the dreaded 20%. As the cards keep coming out of the deck, it is not out of the question. Stay tuned. Underneath the surface is much worse as European markets have been imploding. Much worse are countries like the important German Dax which has already broken lows. On top of that, many sectors hardly bounced while the NASDAQ/NDX went back to the old highs. Areas like housing, utilities, real estate, food, drugs, beverage, tobacco, household products, oil  &gas, energy all act like we are already in a bear market. Important indices like the TRANSPORTS and the NYSE act horrid.

We think there is a bigger issue than the tariffs, some of the issues we have written to you about. Just think that in the past few days:

The president announced tariffs.

The president suggested confiscating some guns without due process. No really. He said it.

The president intimated what Duterte (look him up) does to drug dealers (they are murdered) is a good idea. No really. He said this.

On top of that:

The president, along with RepubliCONS McConnell, Ryan and the rest RAISED federal spending and uncapped spending going forward. This is the opposite of what they campaigned on. In case you did not know, more debt is a higher tax because we end up paying for it.

Our new central bank dude, someone who is supposed to be a protector, said the massive debt and deficits were not short-term risks and also said he did not advocate balanced budgets.

And these are the conservatives? We think the bigger issue is that the Democrat leaders are now socialists and the Republican leaders are now Democrats. Feel better now?

In any case, we do not rationalize price. We pay attention to price and price is speaking loud and clear here. We will have the microscope out as price approaches the lows of February 9th. We think it will take a lot to take out the lows of that day but with so much margin and leverage and passivity (think that’s a word) in the system, anything is possible.

 

 

We posted this last night but did not show up.

We will have more after the close.

 

By Gary Kaltbaum- February 28, 2018
First thought and message to the president…the #1 rule of people management is when praising, praise loudly and profusely! The #2 rule is when criticizing, criticize quietly and privately. We don’t think the president read the manual on this. If you treat your people badly, why would anyone else want to work for you?
Second thought…who said this about our debt and deficits? “Not a near term risk!” Yup, arguably the #2 money guy in the world, our new head of the Fed thinks everything is just fine. $21 trillion of debt is not a near term risk. $1 trillion deficits each year is not a near term risk. Every day, $3 billion being added to our debt is not a near term risk. In the coming year, the first $400 billion of our tax dollars goes towards interest and that’s not a near term risk. And who said this? “Not a supporter of a balanced budget!” Yup…the same dude. Feel better now!
Third thought. The “ping pong” market is now in force as price now bounces back and forth in a wide range. The problem is that the rally was very narrow and that narrowness is coming back to haunt the market. Except for the NASDAQ and NDX, all major indices are back below the 50 day with some never getting above. In fact, areas like the NYSE, TRANSPORTS and SMALL CAPS look downright horrid. The best areas remain the mega-cap tech/internet that has a major influence on the NASDAQ/NDX. Lose those big names and get the fork. Need to add Europe much worse than us. We had better not play catch-up. At the very least, it is going to remain a tough proposition as the market’s complexion has definitively changed.
Fourth thought. The Knicks stink. The Rangers stink. The Giants stunk. Next up…the Mets. Not feeling better!
Serenity now!