THE FED BLINKS ON MARKETS

-We have been telling anyone who would listen that this Fed was not listening to the markets. We have been telling you this was a problem as markets have been yelling and screaming that the economic numbers were heading south. We have been telling you that this last rate hike was the last and that eventually they had to go easy and easier. Who knows? Maybe the Fed heads have been listening to us.-
-In the past few minutes:-

-“New York Fed President John Williams says Fed is turning to a more data dependent mode; Hearing risk concerns from the market; Says being data dependent means listening to the markets!”-
-Duh! Duh! Duh! Hmmm! We thought they were already data dependent.-
-As we write this, the DOW has rallied almost 300 points since this announcement. Remember, the DOW was 2,200 points below the 200 day moving average so a good bounce was overdue anyhow. This announcement looks like a short-term catalyst. Whether it lasts or not is another story but again, 2,200 DOW points.-
-Just leave no doubt, the dolts at the Fed have finally woken up to everything anyone with two eyes and two ears have been seeing and hearing…and that is the market knows something is up. Not sure it helps!-

BEYOND STRETCHED AND EXTENDED

Another economic number comes out much less than expected as durable goods not so good. We prepared you for this weeks ago as we stated the norm for earnings as well as economic expectations would be coming down and most surprises would be to the downside.

The DOW is now beyond stretched and extended to the downside, about 2,200 points under the longer-term 200 day moving average. In just the past 5 days from peak to trough, the DOW has dropped a whopping 2,100 DOW points. Combine that with the VERY EXTREME bearish sentiment numbers and ?

We put a question mark at the end of that sentence because we could have said the market was stretched and extended to the downside at around 1,200 points, 1,500 points, 1,800 points. This leads us to one of our rules of bear markets, that being oversold can become more oversold. Stretched and extended to the downside can become more stretched and extended to the downside.

So…just because we are at this point, it does not mean we bounce or rally to narrow the difference. It just means the conditions are there and would not be surprised by a narrowing. Just keep in mind, it would not change the big picture.

Unless something crazy happens (probably will), we will not be writing to you until after the Christmas break. At this time, my staff and I want to wish each and everyone of you a happy, healthy and safe holiday.

PRE MARKET

Said it all past few days on market. Really speaks for itself now. Hope you listened.

Futures flattish. Price is waaaaay stretched and extended to the downside. Bearishness has picked up markedly but oversold becomes more oversold.

The main problem now is Jay Powell does not have the foggiest clue that the best economist in the world is the market itself…and the market is yelling and screaming trouble ahead. We told you week’s ago that the norm going forward would be continued lowered expectations of everything. We are seeing it in droves yet Mr Powell said 2019 looks fine.

 

 

 

JAY POWELL SAYS THE MARKET IS WRONG

-“JAY POWELL SAYS THE MARKET IS WRONG?”-
-By Gary Kaltbaum-December 19, 2018-
-Did we hear him correctly? Jay Powell did not say the market is wrong in those words but he might as well have said those exact words. Jay Powell all but said:-
-Transports in a bear market are not telegraphing anything.-
-Russell 2000 in a bear market is not telegraphing anything.-
-Financials in a bear market are not telegraphing anything.-
-Regional banks in a bear market are not telegraphing anything.-
-Oil prices crashing is not telegraphing anything.-
-75% of the S&P in a bear market is not telegraphing anything.-
-1500-2000 new yearly lows is not telegraphing anything.-
-World markets in bear markets are not telegraphing anything.-
-Commodities and industrial metals in a bear market are not telegraphing anything.-
-Heavy machinery in a bear market is not telegraphing anything.-
-Retail in a bear market is not telegraphing anything.-
-Restaurants in a bear market is not telegraphing anything.-
-The 10 year yield down at 2.778 is not telegraphing anything.-
-Housing and housing-related in a bear market is not telegraphing anything.
-The Semiconductor index in a bear market is not telegraphing anything.-
-Corporate bonds being yonked is not telegraphing anything.-
-Instead, he is basically saying all is well, that economic expectations for 2019 are just swell…while the markets are yelling and screaming something is wrong. When arguably,  the number one money man is sticking the middle finger back at markets that are yelling and screaming slowdowns if not more, that’s a big UH OH! Mr. Powell obviously does not know one of our most important bear market rules…and that is THE BEST ECONOMIST IS THE MARKET ITSELF.-
-We have no problem with the raising of rates. We really don’t have a problem with him saying they are looking to raise some more. (That will change!) The market will have a problem knowing that the Fed has absolutely no clue what the market’s own action is telegraphing and and as of this second, it is not telegraphing good economic expectations.-

PRE MARKET MOVERS

FEDEX hit hard but FEDEX doesnt matter.

MICRON down nicely…looks like they lowered by a measly $1 billion.

PRE MARKET AND THE FED

NDX flat…DOW up about 50.

It is Fed day. They will probably raise rates ONE LAST TIME. They may even decide to not raise rates. They will say BLAH BLAH BLAH data dependent BLAH BLAH BLAH information coming in BLAH BLAH BLAH showed some deceleration BLAH BLAH BLAH can be patient BLAH BLAH BLAH if need be we have weapons in hand BLAH BLAH BLAH easy money.

FED THOUGHTS

 

After over 2,500 Dow points in 9 days, markets are bouncing this morning. This is being helped by announced buybacks…BOEING (BA) announced a humongous additional buyback and is up almost 100 Dow points as we write this. Remember, in bearish phases, rallies only serve to undo very stretched. extended and oversold conditions to the downside…and to be clear, we are in another one of those positions. Bearishness has also hit extreme numbers again. Even the original Mr. Bubble, Alan Greenspan is out this morning talking quite bearishly.-

-The Fed announces tomorrow. We were one of the first to state that the next hike would be the last hike. Subsequently, Ben (Jay Powell) Bernanke and other Fedheads talked more “dovishly!” We wanted to add something to that now popular stance. We not only think that at the very least, they are one more and done, but WE NOW WOULD NOT BE SURPRISED IF THEY DID NOT RAISE RATES AT ALL. We say this not because of Trump’s jawboning. We say it because of the markets themselves. Ben (Jay Powell) Bernanke reacts to the markets and we all know what the markets have been doing. On top of that, the long bond is yelling at him to not raise rates as in just the past 6 weeks, 10 year yields have come down from 3.25% to 2.83%. Oil prices have also crashed. Markets, yields and oil prices have simply been screaming slowdown.-

-No matter what, we believe we will be hearing that the “dependent” data is not as bullish as they thought as things have changed. We may also hear something to the effect that if things worsen, they will stand ready with their weapons. (Lower rates and even easier money!) For 10 years, all the central banks have decided markets should not be free and price discovery has to be kicked down the eternal road. As far as markets, all we can tell you is that just about every time central banks have pivoted to easy and easier money, markets have reacted well. As always, we will let the market decide on that but with price still way down, stretched, extended and oversold, wouldn’t bet against a further bounce. It had better!-