THE OPEN

Market indeed gaps up. Bear market turns into bull market in less than a week off of a major change by the fed and not so major change with China trade.

Normally, we could care less about the news but when the fed is involved, it is more than material.

MARKETS ARE NOW RIDICULOUSLY STRETCHED, EXTENDED AND OVERBOUGHT ON ANOTHER NEWS GAP. We gather many or most believe a pullback has to happen. We are not so sure as we are in December. We do suspect we are going to back and fill just because we are now in the midst of massive overhead resistance…but to be clear, market has already blown through resistance.

More to come. Going to be an interesting day, to say the least.

 

PRE MARKET

Futures just rallied up to be flattish. Something about the G20.

Keep the big picture in your sight. Down 2,000 DOW points in 9.5 days…1,100 of those points Thanksgiving week. Rally up off the fed about that same 1,100 into massive massive resistance. On top of that, except for the DOW, everything pretty much remains BELOW the 200 day moving average. The TRANSPORTS are better because of the oil crash.

We believe we have seen THE LOWS for now. This simply means THE LOWS we just had will not be breached any time soon.This does not mean we do not pull back a few hundred…and frankly, would be normal. And of course, nothing is guaranteed so if we see serious distribution show up,  we will know it.

One area sticking out is SOFTWARE as a bunch of names now coming up their right side. It looks like CRM’s reaction helped. Another name, WDAY, gaps up this morning to new highs on strong numbers.

Otherwise, we suspect we now have some backing and filling and see what comes out of it. Today is end of month and then we head into what is supposed to be seasonal December strength…supposed to.

We believe the most important part of the equation is that the fed blinked AGAIN. For years, every time markets get in trouble, they have blinked. Maybe one day we will get someone who lets markets be free or maybe there will come a day where markets stick the middle finger back at the easy money moves. We also believe any further upside will continue to be narrow as too much stuff just aint happening.

 

THE LOW?

This past Monday, we called for A LOW…not because of strength but because how weak things were. The DOW dropped 1100 points Thanksgiving week and 2000 points in less than 10 days.

We believe the fed just put in THE LOW. Readers of this column know for years we have thought markets and assets were fed-induced. To this day, Japan and Europe still have negative rates and are printing money. Our rates have been a joke as people try to tell us 2% is tight. 2% is easy yet the fed again blinked to defend markets and to keep the president happy.

So…for now, we think the A LOW is now THE LOW. This does not mean we do not pull back or retest…just that the fed, for the umpteenth time since 09, has put the floor in instead of letting the markets be free. We would love to see some pulling back in here.

There is still not much leadership as all that has happened so far is that the markets got back the Thanksgiving week losses…but if this is going to last, leadership will indeed show up. The question is whether markets get going to the upside. That is another story. There is a ton of resistance and a ton of broken price charts that have to be worked through.

Futures are down but down modestly in comparison to yesterday’s gains.

Trump, Powell and the Kowtow

-By Gary Kaltbaum- November 28,2018-
-KOWTOW: “ACT IN AN EXCESSIVELY SUBSERVIENT MANNER!”-
-Jay Powell just kowtowed to Donald Trump’s tantrum over a measly 2% Fed funds rate as well as a market correction. Looks like the president knows the easy money game. It is not hard for the president to check out a chart of the markets with the easy money, bubble making policies of past years. Markets dropped, just ease. Markets drop more, ease more. Markets really crack, print. Markets really crack again, print a crap load more. In other words, there is no independent central bank. Powell is now a puppet to Trump. Trump might as well be the head of the central bank.-
-Here is what just changed:-
-Fed Chair Powell now says current interest rates are “just below”neutral. Early last month, Fed Chair Bernanke, we mean Powell, said that the fed funds rate was a “long way from neutral!”THIS IS A MAJOR BIGLY CHANGE! This was not changed by accident. The statement was meant to change the playing field. Jay Powell may say there is no preset policy path but we now know better. Jay Powell may say that their dual mandate is stable prices and sustainable employment but we all know better. Their policy is to keep markets from cracking. President Trump will now start complimenting Jay Powell again.-
-We predicted in our recent past few reports that we expected this. We expected that Jay Powell would raise one more time and that’s it. We expected it because of the pressure from the president but also because many years ago Powell was quoted as saying investors knew the fed had their back. But it still irritates the heck out of us as real price discovery moves down the road again. The fed was never supposed to kowtow but kowtow they are. The fed was never supposed to backstop the markets but backstop the markets they are.-
-The A LOW we called after Monday’s close may just turn into THE LOW as central banks and their moves matter. We have learned that over the past bubble making years. We will get a better feel after the close and the days ahead as most everything is still trading BELOW longer term moving averages…but looks like they are going to continue to inject the steroids…with GDP over 3% and unemployment under 4%.-
-And lastly, as we finish writing this, we are listening to Powell whining about boom/bust cycles. Unfortunately, it has been these same central banks that are the creators of the boom/bust cycle…not the savior. More to come!-

 

A continued A LOW

The A LOW continues to bounce. Keep in mind the last time we called A LOW, the market rallied for a whopping 7 trading days before rolling over.

These lows are occurring not because of strength but because of weakness. After all, the DOW dropped 1,100 points in 3.5 days last week and 2,000 points since the recent high in just 9.5 days. Bounces do happen. As we stated, the DOW was 900 points stretched away from the longer term 200 day average. Eventually, bounces occur to get back to the norm. Also, it is end of month window dressing week even though window dressing is illegal and does to happen.

Positives:

As we mentioned this weekend:

OIL PRICES are providing a huge expense cut to the consumer and business. It is no accident AIRLINES are now showing great relative strength.

The 10 year yield has been coming down.

A ton of bulls had and have turned bearish. We do not mention names. (contrary indicator)

So we bounce!

We are watching:

Salesforce.com (CRM) is gapping up this morning. Other names in the group are up in sympathy. In the recent past, all these gaps have been sold off. Something to watch. Would be good news if any gap holds.

The G20…in that it feels like expectations are so low. Any surprise would be a surprise.

China…yes China…it seems the lows continue to hold. A confirming break to the upside would be a huge help to markets as this area has led the market down. Not there yet.

The president…we cannot believe how many people who lambasted Obama for targeting industry and companies are all of a sudden thrilled with Trump for doing the same.We are completely against a president targeting businesses for acting in their best interest, for targeting a central bank who is doing nothing more than slowly raising rates to a whopping 2% and for talking down anyone or anything that remotely disagrees. We want free and unfettered markets…but looks like that is an impossibility with this president. And don’t get us started on the continuation of more and more threatened tariffs.

Could this A LOW become THE LOW? We are all for it but we must tell you, even with yesterday’s 100 point gain, small and mid-caps were nicely down, new lows expanded and the a/d was very weak. We will need to see a few more bullish cards come out of the deck. Today looks to be better but don’t blink. It’s a long day. As we stand, this is A LOW from  stretched, extended and oversold conditions but we will gladly take it.