The nascent topping of SOFTWARE turned into a route yesterday as the big money dumped the heck out of the group. A bunch of names down $5-25 as the air came out. Take a listen to yesterday’s radio show for the explanation on why. The short version…in late stages of a bull move, the big money is usually over-owned, over-loved and over-leveraged into the group, thus the drops are sharper. Yesterday is exactly what happened. Other growth names were also hit.
But…as we told you, we think bonds have topped for now. But we think it more a short term top. We will let you know if it turns into anything more. This has helped the financials, especially the regionals.
Oil prices look like they are breaking above range. We are now seeing money flows into oils. Keep in mind, they are very seep down in their chart patterns but it’s a start.
Same for many commodity areas.
The big 4 majors remain above the 50 day. This must continue. Better action yesterday in the smalls and mids as no doubt there are a lot of value plays in them. Yesterday was about value as the weakest of the weak in areas like retail got bid up off lows.
Futures are up. What else is new? We are heading into massive easing by the ECB and more easing here. Do not worry about anything else. (sarcasm)
But the most important part of the equation is that the big 4 are now above the 50 day. The SOX is above the 50 day. We promise that overall, nothing bad can happen if these important indices and areas stay above. Of course, underneath the surface, not so great. Small and mid not so great. Transports not so great. A bunch of areas not so great. Foreign markets not so great but all these areas bumped up some in the recent move higher. It just tells you to stay large cap over everything else.
A few other thoughts:
A decent chance that the highs of the past 3 weeks in bonds is the highs for now. Just for now. It is still a bull market in bonds.
A decent chance we have seen the highs in GOLD/SILVER and underlying stocks for now. Just for now. This area continues to be in a bull market. Just extended and need of rest. We expect some up and down for now.
One negative to watch is the whole software group continues to worsen with many names breaking the 50 day if not more. Not thrilled the leading group of recent months looks like toast but for now, other things getting rotated into.
Market strong yesterday on better than expected numbers.
Market gets worse than expected numbers this morning. Still up a wee bit.
Let’s see how this finishes but get the hint. On Wednesday, Bullard (Powell’s mouth piece) called for 1/2 point cut.
We shall leave it at that as the big 4 back above the 50 day average. You know how important that is to us. Needs to stay there…and improve on.
Another gap? Another gap to the upside? Another gap on another bit of news on China? Another gap on news of another meeting with China? Another gap on another meeting that may or may not happen with China? What’s the number? 30, 40, 50 meetings or announcements of meetings in the past 15 or so months? So why would markets keep listening?
BULLARD! Getting short shrift is that yesterday morning, James Bullard, a fedhead, came out and stated we need a 1/2 point cut in rates, not a 1/4 point cut from the upcoming fed meeting. Why is this man so important? He is Powell’s mouthpiece. Do remember we highlighted for you on several occasions that it was Bullard who was sent out around Christmas 2018 to leak a change of position of the fed from raising rates to “patience!” It was Bullard who was sent out to change the stance from “patience” to “lowering of rates.” That was back near the lows of June. So here we go again. We believe this is a big catalyst for the recent ability for the markets to gap up on what we would consider to be the same news we have heard dozens of times on China.
The big 4 will be gapping back above the 50 day this morning. Quite the important. Will be watching to see if it sticks. The good news is that we think there is a ton of cash out there and a ton of bearishness based on slowing economies around the globe, including here. Remember, it has been the easy money and easier money that have been the driver of markets for years. Nothing has changed.
Words of wisdom on gapping up after gapping down after gapping up after….and just running in place.
Tread lightly and tread carefully. Eventually and always, markets will come out of this one way or another.
The past 5 weeks support still holding but internals remain crummy.
And do not mention what happened to the Mets last night.