YESTERDAY/PRE-MARKET

Not a  thrilling day yesterday…but ramped a bit into the close as the confusion out of the White House continues on trade. We think we heard 3 different stories yesterday.

We are of the camp that yesterday’s highs will be the highs for now but earnings earnings earnings.

This morning, DOW futures best as IBM up $9 on crappy numbers and a ridiculously low tax rate…BUT…they say things are getting better. PG up $3.70 and UTX up $4.50 doing the trick.

Except for the employment number, most economic numbers (not all) continue to be soft and softer. Housing numbers yesterday were terrible. But there is a line of thinking that bad is good because it insures our fed to stand pat and the rest of the central banks to continue easing. CHINA just went on a one day whopping $83 billion spending spree on top of everything else they have been doing.

Think choppy!

PRE MARKET

Futures down but that’s after being up another 300+ on Friday. We are actually in hopes of pullbacks. Markets need one or two to set things up better. Maybe this starts one. Most all early weakness has been bought so far. Massive amount of earnings next two weeks. Patience here. More tonight.

PRE MARKET/CHINA

We are not going to complain about the fake China trade news that moved markets yesterday. We just want to concentrate on:

The reaction was good…and now we have another little gap to the upside this morning.

The DAX, the CAC and the FTSE break above the 50 day average this morning. This on top of our major indices.

While still not a lot of names moving out of range and breaking out…there are a good amount of set ups.

Bad news has been bought. JPM, PNC and a few other names opened lower on missed earnings and rallied. Good news has been bought up…a GS comes to mind.

On January 4th, we heard the magic words out of Powell. He was now going to react to worsening markets. On top of that Mnuchin called a meeting with the “President’s working group on financial markets!” AKA “the plunge protection team. On top of that, China has been easing culminating with a whopping $83 billion added to the system in one day this week. And lastly, Japan and Europe, who have been telling the world they were going to stop printing money…well, that ain’t happening. So when people try to tell you markets are moving up on fundamentals, remember, we came off our bearish stance on January 4th because of all this.

But as we have told you, we follow certain rules.

#1- IT’S NOT THE NEWS. IT’S HOW MARKETS REACT TO THE NEWS.

#2- SEE RULE #1.

PRE MARKET

Most notable is how FINANCIALS have been reacting whether numbers good or not so good. JPM, PNC open down on misses and rally up. Names that beat ramp up…like a GS. MS misses this morning…but only down a wee bit. There is no way the bear resumes unless FINANCIALS roll over again.

Notable: China unleashes a measly $83 billion into the system. Repeat $83 billion. That’s a lot of cake and tells you they are worried.

Notable: Maybe, just maybe the deceleration we have seen in the numbers here are stabilizing and maybe even accelerating a bit here.

There are still no names that have broken out of range and had good moves off the breakout…but a decent amount of set-ups remain.

NETFLIX (NFLX) after the close. We do not think it the biggest bellwether but one we watch nevertheless. The stock has ramped hard since them low in the market and had a strong move off of raising prices.

Up to 800,000 people still not getting paychecks. Our continued motto: both sides suck.

Futures down nominally…we are into the lows of the meat of resistance here…and thousands more names to report.

 

PRE MARKET/CHINA

First: https://www.cnbc.com/2019/01/16/chinas-central-bank-injects-record-amount-to-stimulate-economy.html

 

So China going all out, for the economy or for the market or for both. Either way, the easy money, government-induced, central bank-induced markets continue…and until they stop having influence, you must obey. Since the “Powell switch,” markets act well. Yesterday was a good beta day leading to many set-ups as we continue into earnings season. All other Fed members have fallen in line. A few notes:

JPM gaps down and reverses up. CITI opens down the day before and ramps. UNH down $5 in pre-market, finishes up $9. BAD NEWS IS BEING BOUGHT. WEAKER ECONOMIC NUMBERS ARE BEING BOUGHT. Until that changes…

The NASDAQ/NDX finished a smidge above the declining 50 day moving average. A few names have jumped above it before these indices. It will be vital for this to hold.

A ton more earnings to come out.