WEEKEND NOTES

Futures down…NASDAQ worse than DOW. Foreign markets pulling back after good week of gains.
The thought process has not changed from anything we have been seeing. Two weeks ago, we wrote the report about “changing of the guard” in the market..and since, this is exactly what has happened. Relative strength in the market has been turned on its head. What was lagging is now leading and what was leading is now lagging. How long this lasts is anyone’s guess. In that report, we started seeing money flows out of growth and into low beta. Most growth names have now put in near term tops, if not more while the DOW now leads the way. Friday was just another day as the DOW was up 86 while the NASDAQ was down 41. For the week, the DOW was up 588 points, a 2.25% gain but the S&P was only up 24, a .85% gain. The NASDAQ, NDX and the RUSSELL were all down.  With the DOW up that 588, important names like AMAZON and APPLE were both down almost 3%. AMAZON is on the verge of breaking the 50 day. A break would be negative for growth is this is the leading name. It is important to recognize growth has had its way for quite a while becoming a bigger and bigger percentage of the S&P while value continued to shrink.
The other part of our “changing of the guard” theme is the rest of the world putting in hopefully, a decent low. This is still not 100% sure and as of this second is a counter-trend rally in an overall bearish trend. Countries like CHINA, RUSSIA, BRAZIL, EMERGING MARKETS are already overbought from the recent move so suspect some retesting here. We will watch the retest closely.
We have been saying if we can get past September and October earnings that we could get a good end of year. But so far, rallies have been narrow and disjointed. A sustained move needs to have broad based participation…which ain’t happening just yet. We also have to make note that oil prices are breaking out of range. Not sure it is good news for markets as this is a huge “tax” on consumers and business.
Lastly, we have been inundated with a news report highlighting some “experts” saying a crash is overdue as well as a deep recession, if not a depression. We have no interest in arguing as anything is possible, especially with the massive debt and deficits, both here and around the globe. Of course, all this being enabled by maniacal central banks. We just wanted to make sure you knew that these “experts” have been calling for doom for about 16,000 DOW points yet somehow get front and center in an article and are still called “experts”. In case you did not know, everything about the market is timing. Broken clocks are right twice each day.

GTXI DOWN 95% THIS MORNING!

GTX Inc (GTXI) has been trading since 2004. In the 2000s, it traded as high as $234. At those highs, it gave the company a $5 billion+ market cap. This in spite of the fact the company has never had any sales…not earnings…sales. Fast forward 14 years to yesterday. The stock closed just over $23, still giving the company a market cap of over $500 million even though in those 14 years, the company still has never had sales. This morning, the stock will open down 95% as it looks like the drug did not do well in trials. Moral of the story? We guess you know the moral.

That said, we have also missed the many no sales, no earnings BIOTECHS that have soared throughout the years. We have never felt comfortable going to sleep at night owning a company knowing that if the placebo did better than the drug in trials…that the next day it would be cut in half. And to be clear, there have been many…in the hundreds.

As always pick your poison but know your poison.

PRE MARKET

Strong day yesterday. Noticing a bunch of pundits not believing the move. We have news for them…price is smarter than them.

As we told you, we thought a decent low was being put in for the REST OF THE WORLD. It has been the rest of the world that have been holding back markets. We never know how long it lasts or how far it goes but breakouts of indices are usually meaningful.

As we do our scans, we notice the weakest of DOW names have turned the corner. Names like even IBM seems to have put in lows. When the weakest put in lows, that is another good sign. Also, notice BA on the verge of a large base breakout. That had been the leading DOW name before the correction started.

We still believe growth may be losing its relative strength. This is not end of the world news. It [probably just means rest time. Growth has blown away value for a good while. Also, commodities are so under-owned and under-loved…most in a long time…so we think that is in play. Just realize it is mostly things off the lows and suspect retests or at least partial retests can occur.

PRE MARKET

Another changing of the guard day as money flows out of growth and into all the areas that were lagging. FINANICALS, COMMODITIES and all the COUNTRIES we were telling you to avoid. This is why you see the DOW now leading and other areas lagging. We suspect this is going to continue. When you have a chance, look at EEM, EFA, FXI and other areas and see that a decent low may be in. The same for GLD/GDX and XME.

Again, on the other end…growth has become extended, over-owned, over-leveraged, over-loved…may need some time to build new bases.

As far as TLRY…it is expensive at the IPO price. Good luck! Don’t be the last one in.