As you know, we have been stating that the market has been narrowing with 40% of the market in not so good shape. We have stated to avoid areas like commodities, energy, retail, biotech, autos transports and recently financials. Financials had not been hit hard but were certainly in the “loss of relative strength” camp. The issue now is the financials are on the edge of breaking the next line of support and so are the transports. This is not good news in a narrowing market.
As far as all the leading areas, many became very extended. Extended EVENTUALLY gets worked off. We shall see if EVENTUALLY is here in the days ahead but leave no doubt, today, they are less extended as just about all are starting to pull in.
Just letting you know watching them financials (BANKS,REGIONALS,S&Ls)real closely. They have been sitting range-bound under the 50 day moving average since March 21 with no ability to get back above resistance. The good news is that support has held throughout the many weeks. Support looks like it is going to be tested again soon. Needless to say, quite important.
Futures are down decently this morning as we are sure this opening move down is directly because of the latest accusation on Trump. Without taking sides, this is important. Political risk is important…especially now. We are of the belief the market has made a big bet on:
Tax reform…which included lower marginal rates, lower corporate rates, lower estate taxes, incentives to repatriate the trillions across the shore and hopefully, the unwinding of the more than 75,000 pages of tax code.
Regulatory relief…which has already begun but is not even close to what needs to be done. Dodd/Frank, the EPA and so many other things needed to be looked at.
Healthcare reform…which would unwind the continuing creep of government into the system and a fixing of the imploding Obamacare.
But now what? Again, without taking sides, how on earth is anything going to get done when you are fighting off day in and day out accusations of collusion, treason, obstruction of justice and everything under the sun and by anonymous sources?
This morning’s open is just one bad open. The good news is easy money continues to pervade as rates in many areas around the globe are still negative, money printing continues in the trillions and even here, we remain at a ridiculously easy 1%. But love and hate can be very close emotions in the market. And with a market that has narrowed over the past couple of months, with a market that leadership is more concentrated and with a market that is in the upper range of historic valuations, we have a lot to watch.
Again, it is just one bad open. But…lot’s of crap going on. As always, we will not rationalize. We will watch price, volume and the important patterns they make.
Futures down about 70 Dow points as we write this as new accusations hit the Trump administration. Next, he inflated the footballs. We will have a wide ranging opinion piece on what we are seeing real soon as we called this months ago…on radio, on tv and right here.
Another narrow day today as the NASDAQ/NDX continues to win while other things sit and about 40% of the market is bearish.
We will hold off on anything else until our pre-market notes tomorrow morning. We want to see how the night goes.
Are we going to have a day where the president is not involved in some sort of controversy? The media gets no credibility from me based on past performance. Notice everything is from “un-named sources!” We are not Trumpsters. Those that listen to the radio show know we have tons of issues with this president but it is now getting out of hand. Hoping for a quiet day but doubt it.
Futures up a wee bit with more fireworks off of earnings in tech/internet and the like.
Gapping up…WB, SINA…2 China names that had been setting up prior to earnings. Also, HD up a little more than $2 on their numbers.
Otherwise, we have been singing the same tune for a bit. About 40% of the market ain’t working…60% in shape with about 10% of those names very strong.
The good get gooder. Simple as that. Tech/internet/semis and now cyber everything (cyber attacks) working. Many now very extended. So careful. But leave no doubt, remains the bull of the woods, Semis into another new high as they cannot be stopped. A few names names setting up.
Also watching the tight action on the financials. One good day send them back towards highs and will cement the market’s upside. That said:
Continue to avoid energy/oil &gas as the move up just a bounce. Also almost everything autos, a lot of real estate names especially malls, most retail, most commodities, lenders, biotech, gold/silver.