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.

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.

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.