Our concise thoughts:
With yesterday’s action, we think the lows of the past few days hold for now. We would be surprised if it breaks any time soon. BUT…we do think we can pull back/retest. We say this because as we scanned 1500 names, 200 sectors, every country and every commodity, most stocks and stuff look like they just had a lower volume reaction to some serious ugly. We say this because there remains a clear lack of leadership. We say this because RUSSELL, MID-CAPS, FINANCIALS, SEMIS and so much other stuff trade below THE 200 DAY MOVING AVERAGE. So before you go out and call THE BOTTOM, relax. AND do not forget a few thousand names reporting earnings in the weeks ahead.
NFLX up nicely this morning helping the Qs but S&P down this morning. Big subscriber numbers helping NFLX out.
UAL,LRCX,WGO,VICR,ASML up…IBM, NTRS are down. HOUSING stocks being downgraded this morning AFTER a big drop.
And lastly, the president trying to assign blame to the fed. Mr. President, if 2% fed funds gets you worried, then we are really screwed. We’ll just leave it there by saying no president should be calling out the fed like Trump is. Imagine the fed raising rates a whopping 1/4 point and on that same day the president says it will hurt markets…guess what those words can do to markets?
The DOW in March, early May and late June.
The S&P in February, early April and early May.
The NASDAQ in February and early April. The NDX in February, mid April and late April.
What do these dates have in common? For these major indices, it was the dates that each held the all-important 200 day moving average. This moving average is a longer term moving average that if broken, look out. It is a point that defines bull or bear.
Guess where all these indices are sitting in and around right now? Correct…the 200 day average. A couple are just above with a couple just below.
WE CANNOT BEGIN TO TELL YOU HOW IMPORTANT A HOLD WOULD BE HERE. If it does not hold, the big money would recognize it. The big money would recognize that on several occasions, it was able to make a stand. If broken, it would lead the big money to “give it up”…which means even deeper selling.
Keep in mind, so many other areas have already moved below, some far below. The RUSSELL 2000, the MID CAPS, the TRANSPORTS, the BIG FINANCIALS, the REGIONALS, the METALS/MINING, the MATERIALS, the SEMICONDUCTORS, the many FOREIGN MARKETS….so with so many in such bad shape, the market will not be able to withstand a break from the “BIG 4”.
We walk into another gap to the upside today as earnings season gets into full swing. We believe the big money knows how vital this support is and will do everything to defend. Just keep in mind that even if these major indices hold here, the broad market and the average stock is in much worse shape than these indices evidenced by all the other areas we listed. It is definitely goal-line stand time.
The best looking patterns remain in the asininely valued MARIJUANA stocks. It is not very often froth stays frothy as markets head lower. TILRAY (TLRY) trades with a$17 billion market cap with only $25 million of sales while incurring losses. CANOPY GROWTH (CGC) has a $12 billion market cap with $90 million of sales while incurring losses. That did not stop an outfit from putting a BUY on TLRY this morning. Just remember, in the end, valuation will matter. While froth pervades the air, valuation is thrown out the window. Just remember what we told you about all those coins while they were going parabolic. We know the weed business is different as maniacal governments move to legalize but ultimately, you cannot fit a 10 pound salami in a 5 pound bag. Valuation will matter.
Futures are down a wee bit after being down much more over night. OIL and GOLD strong out of the gate. We have believed there is a good chance GOLD has turned a corner off of its recent lows.