MARKET NOTES AND PRE MARKET

Wild day yesterday. WE CONSIDER YESTERDAY A DECENT REVERSAL YESTERDAY UNTIL OTHERWISE. We outlined the potential for a reversal yesterday morning only because good reversals occur on a break of support off of a wicked open. We can never predict one happening…just outline when one could happen.

Another word for a reversal is a washout. It serves to wash out late sellers AFTER a break of support intraday…only to suck those late sellers out at the most inopportune time.

That said…THE TAPE IS A MESS….THERE ARE ONLY A HANDFUL OF DECENT LOOKING NAMES…. JUST ABOUT EVERYTHING IS BELOW THE 200 DAY AVERAGE….SEEING A DECENT AMOUNT OF BLOW-UPS…AND YES, STILL FEELS COMPLACENT OUT THERE.

But after a day like yesterday, you usually see some upside testing…usually. Would not go further than that. Again, the tape is a mess.

This morning, futures were down recently but now flattish. BOEING (BA) up $16 this morning…about 100 DOW points…a big help. MCD was a big help yesterday with CAT and MMM being the opposite. TXN down $6 not helping the SEMIS but a look at the SOX from yesterday shows a long tail from new yearly lows.

We remain in the midst of earnings season. Lots of jello going to be moving on the plate.

TESLA up $33 yesterday and another $7 this morning. Go to www,citronresearch.com for why. TEFLON!

Lastly, in answer to a question…yes, we are entering what usually is a seasonally strong period of November/December…but just watch price.

MARKET NOTES AND MORE

BY GARY KALTBAUM- OCTOBER 23, 2018

“The sea was angry that day, my friends – like an old man trying to send back soup in a deli.”
George Costanza
So let’s recap what we saw, what we said and where we stand:
World markets turned bearish months ago and never came back.
The U.S. market had only about 50% of it in good shape while the DOW kept moving to new highs into early October.
While the DOW kept moving into new highs in early October:
Amazingly, new yearly lows picked up. A who’s who of industry were hitting new yearly lows…again, all while the DOW was hitting new highs. HOUSING, HOUSING-RELATED, AUTOS, METALS/MINING, MATERIALS, CHEMICALS, PAPER, FOREIGN MARKETS…and that’s for starters.
Advance/declines topped out while the DOW hit new highs. 
More and more names and more and more sectors started to break down (the other 50%)….while the DOW was hitting new highs.
GROWTH STOCKS were topping out while the DOW was hitting new highs.
Small and mid-caps broke down while the DOW was hitting new highs.
TRANSPORT names broke down while the DOW was hitting new highs.
The two most important areas to our work, FINANCIALS and SEMIS broke down while the DOW was hitting new highs.
We did not believe those who have been calling for a bottom every day.
We did not believe the many that said the market cannot go down because the economy and earnings were strong. In fact, markets look forward, not backwards. We were worried about what markets were telling us going forward. If this continues, we will eventually find out. 
When markets do indeed top, money flows out of risk and parks itself into the largest mega-cap, defensive areas before even those areas succumb to the overall weakness…thus the DOW strength.
This is the worst we had ever seen the internals of the market with the DOW only down about 6% from the highs.
Defensive areas are starting to lead…GOLD, CONSUMER STAPLES, UTILITIES…
THE FACT WAS THE BROAD MARKET WAS ALREADY BEARISH AND WAS JUST WAITING FOR THE POPULAR INDICES TO FOLLOW SUIT.
If we take out the recent lows, we expect a “give up” as the big institutions that were defending longer term support, “give up” as they see just how weak things are.
This morning:
This morning, the market will open poorly. First, if they cannot reverse today’s pre-market nausea, do we dare say another leg down? The “give-up phase?” A few are calling for, actually hoping for a reversal today. Reversals are always a possibility. They are just guessing. We predict nothing. A big reversal would be good news near-term but would still not change the big picture. The only good news right now is that MANY are going to convert to the bearish side. 
The media who hardly covered 9,000 DOW points to the upside will now cover the “TRUMP DUMP” 24-7.
Trump will blame Powell.
Powell will no longer raise rates this year.
If this indeed means the economy is stalling, expect the next Powell move is to lower rates.
Trump made up this latest  tax cut out of thin air yesterday to stanch the bleeding. The market was ignoring the China meeting b.s. so had to go to something else. There is no chance of another tax cut any time soon.
Every 100 DOW points will matter to November 6th.
As we have stated, it is not the news, it is how markets react to the news. CAT is down $11 and MMM is down $16. Europe will be a problem. Asia will be a problem. Debt and deficits will be a problem. Remember, it is only bad when markets come down.  
 

The Giants are still pathetic with a coach who should not be coaching high school.
If we win the megamillions, you will find us in our new Amalfi Coast office. 
Wish we had better news. If this is a top of consequence, it will be another in a long line of classic tops…played out like most tops we have experienced…in textbook fashion.

WEEKEND NOTES AND PRE MARKET

Futures are up…yippee! For a change, a strong last two days from China. China continues to ease even though they tell is economy grew at 6.5%. Hmm!

Recently, while we have watched many flail away calling the bottom on every uptick, we have let the market dictate policy with its price action. To put it mildly, price action remains about as suspect we have seen in quite a while. Remember, this recent downturn did not come out of thin air. While the DOW kept hitting new highs, many new lows were occurring, advance/decline figures had topped out, a laundry list of industry had topped badly with many at new lows, small and mid caps had broke support, the transports had broke support, the semiconductors were blasted…again, all with the DOW hitting new highs. Our studies have shown that when markets do indeed top, money will flow out of risk areas and find its way into the largest, liquid, boring mega-caps. This enables the big money (which has to be near fully invested) to avert some of the big drops. It is sell high beta, buy low beta time. Friday was another case in point as the NASDAQ was up almost 100 on the open when the DOW was up 200. Throughout the day, the gap open enabled the big money to again sell the risk. You can see all day the NASDAQ losing its bid on any pullback in the DOW. This has now been going on for quite a while.
Earnings reactions have not been thrilling. The standout is Netflix (NFLX)…gaps up $30 on perceived great numbers and drops back $45 in 3 days. That wasnt aunt Mary and uncle Bob selling. That is the institutions that have over-loved, over-owned and over-leveraged themselves in names that have worked for so long.
The “BIG 4” of the NASDAQ, NDX, DOW and S&P still trade in and around the 200 day average and a little above recent lows. If these “BIG 4” take out recent lows…well, not sure we want to go there.
Leadership is in UTILITIES and CONSUMER STAPLES. What does that tell you? Hoping for better days ahead but less than thrilled at everything we are seeing.

SHORT MARKET NOTES

By Gary Kaltbaum- October 19,2018

In a sea of red, in a market where the average stock is so much worse than the major indices, in a market where a laundry list of industries are at or near new yearly lows, in a market where Netflix gaps up 30 points on great numbers and gives it all back in a day…we’ll end the week on what is not necessarily good news but for bulls clinging to hope, some good news.
The good news is that the BIG 4, the DOW, S&P, NASDAQ and NASDAQ 100 are still holding the longer term support/200 day moving average. Of course, a break below and look out. But for now, still holding.
And one more bit of maybe good news. THE WHITE HOUSE IS WATCHING THE MARKET. For the umpteenth time in past weeks, whenever markets look to be in trouble,we get another timed announcement of a meeting with China…the latest one this morning. We thank the White House for watching and this timely information but eventually, markets will ignore…and if the market wants to go lower, these bumps off the news just gives the institutions higher prices to sell into.
Lots of earnings to deal with. Hope to not see more of Netflix, Snap On or United Rentals.