Whatever OPEC decided to do has energy prices spiking. ENERGY STOCKS are gapping up nicely. There has been a lot of deterioration in this area recently, the opposite of what it did into the highs of mid-May. If a low is in, this would be a big help to some indices. Of course, will not help airlines and cruise lines.
Futures bouncing but our themes do not change.
The DOW remains worse than everything…S&P better…NASDAQ/NDX/RUSSELL lead. The best pulled back yesterday.The worst has been ugly. Let’s just add in a lot of world markets are under severe pressure. Notwithstanding bounces, look at EEM, EFA, RSX, FXI, EWZ, TUR and others. Wow!
This is what happens when half the markets are not working. The good are gooder. The bad are badder. We don’t see it changing yet.
Only standout this morning is RHT…recent leaders goes bye bye on numbers. DRI gapped up yesterday to a high.
The Supremes decide states can collect internet taxes. For a change, we are in between. Normally, we take a definitive side. We hate more taxes. Government (federal, state, local) takes over $6 trillion out of us every year….yes…$6 trillion. One would think that’s enough. But the other side says all retail should be taxed and that bricks and mortar retail is at a disadvantage. We understand that side also. But again…we hate more taxes.
Charles Krauthammer passed away after a long bout with cancer. We will have thoughts on this great man over the weekend. We never met him but never missed him when he was on the tube.
Futures going nowhere today.
Yesterday…another day where NASDAQ/NDX leads…DOW is down. These divergences can last a long while but must be watched. Keep in mind, the NASDAQ/NDX is where the best growth is.
DRI breakaway gap this morning. MU up a bit on good numbers.
Yesterday, SBUX to new yearly lows as they lower numbers. Quite amazing because of the lines we constantly see…but no doubt, work to be done there.
We are being asked about Tesla and how a company that continues to lose a ton of money, that will need to raise more cash…can be rallying the way it is. Welcome to the markets. There is a huge short position so any movement gets short covering…but again, they promised more car delivery going forward. The market reacted very positively even though past promises did not come to fruition. Keep in mind, time and time again, we have seen biotechs with NO SALES go skyward on promises. Very often, they drop overnight 50% when the placebo does better than the drug in trials. This week, there are a bunch of NO SALES biotech IPOs coming out…again NO SALES. These companies can get away with it during good markets but the curtains come down in bear markets.
We know the DOW was down almost 300 points yesterday but nothing changed. If you noticed, the NASDAQ/NDX almost came all the way back off of the same select few megacap names. That’s for starters.
Emerging and other markets continue to underperform and badly…go look at EEM, EFA, FXI, TUR, RSX, EWZ, IEMG just for starters. The only good thing we can say is that the selling is way overdone and suspect a bounce is due. Just leave no doubt how weak they are.
The DOW remains the weakest of the major indices. BA not helping any more. This was a staunch leader for a long time. The trade issue does not help.
Big FINANCIALS remain comatose but notice important BAC and JPM holding longer-term 200 day average.
INDUSTRIALS (XLI) is now rolling over.
STEEL (SLX) and METALS/MINING (XME) have rolled over on a near-term basis.
UTILITIES (XLU) remain gross but notice not going lower.
TRANSPORTS may have hit a wall but RAILS and TRUCKERS still act well. FDX will be down a few this morning.
OILS have weakened but seems like somewhere in here, support is showing up. A bunch of oil names remain in shape but leave no doubt, many names have broken down.
BIG BIOTECH blah but a little better.
SEMI-EQUIPMENT dead look oversold.
DEFENSE stocks dead.
CHEMICALS and MACHINERY in poor shape.
There are other areas in poor shape. We do believe they are all oversold and could bounce but remain amazed how many weak areas, some very weak areas there still are.
What still works? TECH/INTERNET/CLOUD/SOFTWARE…especially a few megacaps that influence the indices. Also RESTAURANTS, a bunch of RETAIL/APPAREL, MANAGED CARE, RAILS, TRUCKERS. Lastly, a bunch of speculative, money losing IPOs have been strong but are now in pullback mode…
In other words…quite the split tape!
Tariffs and trade wars make no sense. They raise prices. They cost consumers. They hurt jobs. They create uncertainty.
Business owners, large and small, cannot plan. They do not know what will happen next. They do not know if a tariff will be implemented. They do not know if a tariff will be taken away. They do not know what our country will do next. They do not know what other countries will do next.
They create automatic cost increases. Who do you think ultimately pays for those cost increases?
When business cannot plan, when business has to think twice, when business does not know what is next, business cannot make decisions. When they cannot make decisions, they tend to stop hiring and stop spending. As things escalate, it just gets worse.
We believe President Trump needs to be careful. We can control what we do but there is no way of controlling or knowing what others will do. So far, the “others” are sticking a certain finger back at us in a tit-for-tat, tariff threatening festival.
We understand we need to do something about the inequities of past trade deals as well as the current numbers. We understand there is intellectual property theft. We are not so sure continued threats of more and more tariffs are the answer. We can promise you that if this continues and this escalates, markets and the economy would take a hit…and that would be a shame as things have been moving swimmingly…in spite of the massive debt and deficits which will eventually have a day of reckoning.
Futures are whacked this morning. DOW down about 320 as we write this with NDX down 100. Blame is being put on Trump for ratcheting up the “trade war!” We do believe that is the catalyst this morning but we think markets were ready to correct anyhow.
Remember, we wrote to you yesterday that soooo many areas of the market remained bearish indicating a narrow market. On top of that, we have seen more froth in the past 2 weeks than we have seen in ages. A couple dozen IPOs, many with big losses, heading skyward. On top of that, 8 NO SALES Biotech IPOs are coming public. Yes…we said no sales.
It’s only a little over 1% and these weak openings have been bought up just recently. It’s now a great time to see where they pull back the leading growth names in tech/internet/cloud/software and all that crap.