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.

PRE MARKET/EARNINGS

Not a great day yesterday but not the end of the world. FINANCIALS were strong as C reversed early losses to have a strong gain. That could change for FINANCIALS this morning because JPM had its first miss since 2014. Notwithstanding another reversal to the upside, JPM is trading down $2.60…as we write this. Futures were up strong last night but have faded because of earnings. Other earnings not thrilling has another DOW name UNH down about $4 pre-market. Both JOM and UNH have been recovering off lows but both still trade below all moving averages. Additionally, SHW really coughs one up. down in the neighborhood of $35 pre-market. WFC is flat on earnings. Of course, this can all change by the end of the day. Another 20 FINANCIALS names report this week including BAC, BK, CMA, GS, PNC, USB, AXP, BBT, SCHW, MS, STI.

CHINA was strong overnight…what else…easing. Lower taxes and rumors that CHINA will now buy up its own market. Yippeee.

Major indices are in and around massive resistance as well as the declining 50 day moving average. It is normal to settle down around here. If we can get controlled and rotational action here, it will go a long way in potentially sending prices higher but leave no doubt, there remains a clear lack of any leadership (except for some of those SOFTWARE names we have highlighted) and still still have to worry that this is nothing more than a counter-trend rally. We are open to all outcomes especially with the fed at the market’s back now.

A FEW FACTS:
Just about everything has rallied up into, near or on massive overhead resistance where markets had a “waterfall” breakdown or the declining 50 day moving average. In bear markets, this is where or around it is normal to fail…or start failing. This means we would get another topping process of a few days/couple of weeks before rolling over again. Notice we did not say definitely. We let cards come out of the deck. This could just pull back here.
We are now in earning’s season. We have no idea who says what and have no idea to the reactions. But we now sit back and react to the reactions. We never jump the gun. This week, about 25 FINANCIAL names report. It is vital for them to act well. They have rallied up but still no ooomph. Also, the SOX got above the 50 day Friday but finished in the mid-point. There is no way markets can go higher without these two groups so we keep a close watch on them. In the SEMIS, the only real strong name has been and still is XLNX. Everything else is just in recovery mode off of big drops…some stronger than others. If the SOX doesn’t hold the 50 day, trouble.
Markets gapping down this morning. Very weak economic numbers out of China continue. CITI also down on numbers with another blow-up in RETAIL land in TLRD.