PRE MARKET

Futures flattish and that is actually good news. Need some working off the latest surge off of extreme conditions both in price to the downside and bearish sentiment.

This rally feels better than the last two. We completely doubted the last two as they were nothing more than bear market rallies. Both lasted less than 7 days. This one ‘feels” like it can last longer but leave no doubt, if sellers start showing up, a word to the wise…careful. Every major index is still BELOW the recent “waterfall” breakdown and also below the declining 50 day moving average which is below the longer-term 200 day moving average. Also, we cannot find one new high but we can find a few SOFTWARE names near the highs and seeing a few beta names turn the corner.

Lastly, we believe the fed is back holding hands with the market. Whether or not it matters, time will tell. For years, it has mattered.

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YESTERDAY/PRE MARKET

Gross day yesterday but a gap to the upside today.

Futures turned up when China eased overnight…again. Also, news of ANOTHER trade meeting even though everyone knows there will be trade meetings.

The big economic story is a MUCH MUCH MUCH better than expected employment number as we are being told more than 300,000 jobs were created. This is an outlier number in comparison to the norm. The past couple of times this happened, the next month was soft…but we shall take it and not throw cold water on it.

The DOW closed 1,900 points below the declining 50 day moving average which is bearishly BELOW the 200 day average…so a further rally to contract that spread is always a possibility. We do not believe the lows of December 26 will break any time soon…but be careful about thinking it is THE low. We are open to anything but…you know the stance.

REVERSALS?

We are being asked quite a few times today whether the market can reverse back up today…so…in past weeks we have seen a 900 point reversal in 90 minutes…a 1,000 point rally out of nowhere in just a few hours and our actual favorite was NewYear’s eve day when the Dow rallied over 150 points in 30 seconds…so of course one is possible.

 

But again, too many remain focused on the short-term craziness (the trees) when they should be more focused on the big picture (the forest). The big picture, notwithstanding near term craziness, reversals, reversals of the reversals and all that crap…remains quite suspect. Shorter-term is just that.

PRE MARKET AND APPLE

APPLE (AAPL) down $14 this morning cutting about $65 billion in market cap. Futures down decently but off their lows from the overnight. It used to be weather or the strong dollar. Now all warnings are blamed on China.

To take the positive side:

Weak open yesterday…stronger close though the day had more wild swings. Always a possibility for another positive reversal day though we can never predict one.

Markets are still in bounce/rally mode off the lows…but that’s only after 4,268 Dow points in 14 days.

While oil is bouncing, it is still way down from the highs saving tens of billions for the consumer and business.

The fed is done.

The 10 year is now down to 2.645.

That ADP # much better than expected…but why is the 10 year yield down on the news. One would expect a spike in yields on that news.

Other than that, you know our big picture stance.

AN IMPORTANT REMINDER ABOUT MOVING AVERAGES

With this poor open, just a reminder that the 200 day moving average is still around 25,000 and the 50 day moving average which has crossed below the 200 is still way above at approximately 24,600.  The DOW is at 23,100 as we write this. That is a lot of territory between. This probably…probably means there is some more time and price, some more choppiness, some more back and forth before markets can possibly break the recent lows again. Just remember that when we called that first low around October 30, it took over 7 weeks to break that low because of how stretched, extended and oversold things were. Of course, the recent lows can turn out to be THE lows BUT have seen nothing to indicate that as of yet.

PRE MARKET NAUSEA

Darn it. We were actually going to lay low until this weekend when we hit you between the eyes on markets but:

Before we even start, Mitt Romney, the Sybil of politics, went after Trump (we are no fan) in an op-ed in the Washington Post. We have one simple question for Mr. Romney. If this is how you felt, why not call the president, order some pizza, spend an hour telling him your concerns and give the president what you believe are solutions? Why add fuel to the media fire? Of course, we can now name the next week “kiss Mitt Romney’s a– week” by the media who ripped Romney to shreds when he ran for president.

FUTURES are smacked hard this morning. The blame is on continued weakening numbers out of China. 6 months ago, 5 months ago, 4 months ago, 3 months ago, 2 months ago, last month, last week…we have been telling you that foreign markets were telegraphing slowdowns. We have been telling you that all economic data and all earning’s estimates would be  coming down and that the norm would be surprises would be to the downside. In other words, the markets had been yelling and screaming with a bull horn. Dallas fed, Philly fed, Richmond fed, housing, durable goods and many other numbers have missed estimates.

We are not immune. Estimates for GDP have come down from the high 3s to the low 2s. The markets are predicting lower. Estimates for earnings growth have been coming down to about 7% growth for 2019. We believe that number remains much, much too high.

The bear market in stocks and credit continues around the globe. Too many continue to bark out PAST FUNDAMENTAL NUMBERS which matter not. Too many continue to call it a correction in a bull market. Too many continue to say buy the dip. Too many continue to use the words, cheap, value, over-done, over-reaction and all that crap. We have news for you. Markets do not care a shred about opinion…the main reason why we interpret price.

We were actually in hopes of a couple more weeks of drifting higher for another big short selling opportunity but looks like that may not happen. Bearish conditions continue. The road map for a classic bear market continues to play out in classic fashion.