Monday’s gargantuan reversal after the NASDAQ dropped a whopping 14.5% in less than 7 days still holds sway. The NASDAQ had dropped over 19% to Monday’s low. We can never predict reversals but as always, stated mid-day Monday that after such a harrowing drop, with bearishness spiking big time, there was that opportunity. Since, those lows did not get taken out. Yesterday’s action? Not so great with another sell-off into the close, filling some of Monday’s reversal. This morning, we come into (guess the gap) a good gap to the upside. To tell you how fragile things are, after MICROSOFT numbers, futures were again smoked as MICROSOFT was hit hard. After better guidance, everything turned. A stronger Europe has the market gapping up. MSFT is gapping up just above the 200 day moving average and is still down mid-teens from the recent highs. And that is a stronger name.
We do believe a good chance that Monday’s reversal has carved out A low which will not be taken out right now. Notice we did not say THE low. We will need to see more cards come out of the deck. Just remember, REAL BEAR MARKETS USUALLY HAVE 3 LEGS TO THE DOWNSIDE. Just remember, BEAR MARKET RALLIES ARE SHARP, QUICK, MAKE YOU FEEL GOOD, SUCK YOU IN AND BURY YOU SOON AFTER. Let’s hope this is not one of them.
Pretty much the only bullish areas in up-trends are ENERGY as oil prices continue higher and STAPLES as they are quite defensive.. There is a smattering of other things in shape like some FINANCIAL/INSURANCE and COMMODITY names. There is not much after that.
We have Mr. Powell today. We have no clue what comes from him as they tease, tease, change, change and then do their blah blah blah. All this man has cared about since DEC 2018 is markets but now has to care about the inflation he has caused.
Earnings season. Many biggies to report. APPLE, TESLA, BLACKSTONE,MASTERCARD, VISA, MCDONALDS, CATERPILLAR to just name a few of the many this week ahead.
We are in the end of month window dressing period but right now, not sure what they can window dress and of course, window dressing is illegal so it does not happen.
Russia/Ukraine. Our guess is there is nothing imminent because most forget the Olympics from China is soon. Mr. Putin will not dare hurt his Communist buddy Xi Jinping by taking the Olympics off the front page. We mean this. Would be quite surprising if he does act before.
A lot of the bombed out names up 3-5% pre-market. Remember, a stock that dropped 50%, rallying up 20% is still down down 40% and still in a bear market. As far as the gap, we would be surprised if it reverses back down even with Powell yapping but in this wildness, all possibilities on the table. It is a “duh” statement to say a reversal today would not augur well..
Markets slammed last week.
Markets slammed again Monday with a big gap.
Markets have the mother of all reversals as after a big drop, the masses got very bearish.
Markets gap to the downside this morning.
Hey, let’s play markets.
Can they reverse another bad open? Of course. It would go a long way to show serious defense. But after scanning last night, energy, staples and a smattering of other stuff with good charts. Most look like crap.
And tomorrow, we get Mr. Bubble. We repeat. THE FED SHOULD BE ABOLISHED! We should have never got to the point where one man’s whims can conjure up trillions of dollars to distort all price and yield while screwing Aunt Mary and Uncle Bob with 0% rates, creating bubbles that have popped everywhere, creating inflation that he never saw coming and then said it would go away. Who knows what damage he is going to do next?
Even us dummies knew this would happen:
There is talk this morning on crypto being slammed overnight but most coins are already way down with some turned to dust. Technically, the 2 biggies BITCOIN and ETHEREUM topped on Nov 16, 2021. Our canned line has been for a long time…”when all is said and done, 90% of the coins will drop 90% or more with many going to 0!” We stand by this as it is just another bubble. We dont care who got involved. We dont care how famous and rich they are. Estimates at the highs, there were over 8,000 crypto coins. THAT’S A BUBBLE. Does one really think merchants will take in crypto as payment as it swoons? DOGECOIN started as a lark went from nothing to 77 cents. It is 15 cents. Not worth spit. And we want you to keep in mind, most of the biggies are held in a few hands, touted by many that bought in the past 2 years AFTER a gigantic move up.
Futures down as NETFLIX of no help, down $97 as we write this. One of our mantras: “in bear phases, surprises happen to the downside!” In past days, AAPL finally took out the 50 day. The SEMIS broke a few month support and swooned. Bad reactions by JPM, GS, BLK. Closes have seen markets sell off badly after big gaps to the upside on the open.
For a change, not a gap to the upside today but a gap to the downside off of NETFLIX news. A reversal to the upside today? We are surprised by nothing. Just know any reversal would not change the trend in place right now. Not a prediction, just a possibility as bearishness has picked up.
OILS probably put in near term top yesterday and pulling back. Yields look to be doing the same. Lower yields are supposed to help the growth arena. In the past couple days, high beta growth has outperformed only getting hit as markets swooned into the close. Maybe the 50% drops in many names is close to the end of their bear market. Jury still out and most all still in bear markets.
CHINA lowered rates. There will be more. Unfortunately, this is the modus operandi of just about all countries. Try and stanch the bleeding instead of just letting the markets do their thing. Chinese ADRs and ETFs making a higher low off this news. Need to see if this sticks as we need some better themes.
Speaking of that, do notice the fed has still not done anything. We thought there was a chance all their talk is just jawboning the market to do their bidding. The problem for the market right now is that the bond market is tightening so they are way behind. Powell is praying yields come back down. We weep that the president is looking to Powell, one of the main culprits of the inflation, to be the guy to fix the inflation problem. The nerve of these people who think they can control the markets and play God with them as well as control inflation.
Bad close yesterday. Gap em back up today. The move by China looks to have helped. Bearishness has really picked up. That is potential good news. Would not be surprised by a counter-trend. Just don’t blink! We are open to all outcomes as we have no bias as to what the market decides to do. Would love to see some evidence that the worst is at hand.
Put GOLD and GOLD STOCKS on your watch list. Have not been able to say this in quite a while. The last time was just another tease.
Cannot be thrilled by the reaction to JPM, GS, BLK earnings. Best not see more of these types of reactions as we move deeper into earnings season.
The SEMIS (SOX) joined the ugly parade the past 2 days. The SOX fell below December and early January’s lows. Needs a save soon. ASML was up $24 on earnings yesterday and finished down. It is gapping up over $20 this morning.
OIL PRICES remain stretched, extended and overbought but also persistent in moving higher. The cost of almost everything goes up if oil prices keep going up. We suspect we could get some relief soon but that would not change the trend.
Bond yields pretty much the same thought. Have you noticed HOUSING stocks over the past 2 weeks? They are logically being smacked off of the higher mortgage rates. This, combined with the problem of affordability and we worry about the housing market going forward.
The bombed out growth stocks were actually better yesterday until the late selling. We would not be surprised if they finally start to outperform a bit in here but they are bombed out so much, a bounce/rally would not change trend. The best thing to happen would be to bounce and retest a few times over a few weeks. If yields can pull back, we should get them doing better.
Importantly, the NASDAQ fell deeper below the LONGER TERM 200 DAY MOVING AVERAGE YESTERDAY. Do not think for a second institutions do not see that. ONLY BAD THINGS HAPPEN IF BELOW THE 200 DAY.
AAPL closed below the 50 day moving average yesterday, the last of the biggies to break that important level. But it is just below. 1 or 2 good days gets it back above. The good news is that everyone has noticed it. A move back above would just keep it in this range pre-earnings. All other biggies are below the 50 day with quite a few deep into their bear phase, below the 200 day.