PRE MARKET NOTES

Major indices remain BELOW the 50 day moving average. This does not have to mean the death knell. It just means markets have no chance of going higher until price gets back above this important level. It just means things get tougher. Fewer and fewer things are working and will work.

The biggest issue is the SEMIS (SOX) as this most important group is on the defensive. The latest is QCOM smacked this morning on some anti-trust issues. We urge you to scan names in this group to see what we are seeing.

The good news is there remains a good sized list of growth names that are still above moving averages and act well. It is imperative they continue to act well.

Other issues the market may have is the tariffs, impeachment talk, earnings slowdowns and just flat out stalling around many areas around the globe. We do not want to see the indices lose the 200 day average.

A few RETAIL names coughing it up this morning…LOW, URBN, JWN…on top of KSS yesterday. TGT is the outlier up nicely on numbers.

PRE MARKET

Yesterday: Markets to gap to the downside on Huawei restrictions.

Today: Markets to gap up on easing of those same restrictions.

Hey…we just report the news. Just leave little doubt we have decision making by market movements.

Nevertheless, internals heading more south with the all-important SEMIS in somewhat of a freefall…thought they will gap to the upside this morning.

Not much else to say as we do not know what decisions will be made tomorrow.

PRE MARKET-HUAWEI

-So much for the events surrounding Huawei not being important to the “trade issue” which is now a much bigger issue.On Friday,the Commerce Department added Huawei to its restriction list. Implications: 1) US companies restricted from selling to Huawei unless specifically granted a license (waiver) 2) RETALIATION (a lock) 3) supply heads south…demand heads south, and uncertainty.-

-This morning, we are seeing a bunch of very important companies cutting ties with Huawei. This can and will have serious consequences for Huawei, the trade talks and much more. This morning, some of Huawei’s biggest suppliers, Intel, Qualcomm, Xilinx and Broadcom, told their employees they would not supply Huawei till further notice, while Google cut off the supply of hardware and some software services to Huawei smartphones. Huawei bonds have been hitting the skids on this news. All these stocks are hitting the skids.-

-We continue to hear that the U.S. and President Trump have the upper hand in trade talks. If it wasn’t clear that the President was ready to use Huawei as a “chip” in the trade talks, it should now be. But anyone who thinks that China will take this sitting on its rear end has probably been betting the Mets every day. The problem for Huawei is that it is heavily dependent on U.S. semiconductor products and one has to ask the question on whether they can find supplies elsewhere.-

-It looks like the “trade issue” no longer has Huawei as a separate issue. If the President wanted Huawei as part of the negotiations, he now has it…but at what cost? Technology stocks are again bludgeoned this morning. Technology leads the markets both up and down. For a President who watches every tick in the market, not so sure he is going to be thrilled with this latest reaction. We suspect we are going to see a decent amount of technology warnings based on one sentence: “trade and Huawei!”-

-We think tariffs suck but we do understand China was the side that backed away recently from things they had agreed to in negotiations. We only care about outcome and unfortunately, we are not so sure the President understands that this “trade issue” is just starting to heat up and suspect markets will not be too friendly to it.-

 

PRE MARKET

Guess the gap…up or down. Seems that is the m.o. now. What news is going to cause a gap to the upside? What news is going to cause a gap to the downside? This morning, nothing really news. We still have tariff issues. We still are hearing about Iran. Immigration is still a problem. But yesterday, we gap up. This morning, we gap down.

We think we may add anew rules. Buy on the worst down days, when everything is uncomfortable, when everyone is calling for the end of the world. The next day is sure to gap to the upside. When things look great, when things are being bought with a fervor, selllll!

Just a little sarcasm as we head into the weekend. The market is narrower but what is working still works well. SOFTWARE was the strength again yesterday. SEMIS the weakest on Huawei concerns. Always watch the SEMIS.