PRE MARKET

That was one heck of a body blow yesterday…not because of the drop but because of what dropped. The financials have led since November 9th, simple as that. So the question must be asked whether if this ugly continues, will they lead down? Back in early January, we thought the financials were being distributed…but after a few days down, they rifled off the 50 day average and turned up. This time is different as support and the 50 day average have been taken out and on very big volume. Some names like an FITB have given a ton back.

You ask whether this is all about Trump and possibly not seeing proposals going through. We would suggest some of it is…but this was real ugly. If tax and healthcare proposals do go through, will the financials just run right back up and everything will be fine? We are not so sure of that.

In any case, pay heed. We finally got the 2% off the highs but we do know normal corrections go farther than that. You do remember corrections do happen?

Real weakness can be seen in the small caps vs large caps and the TRANSPORTS continue deeper into correction and are now trading below January support. All the areas we have been telling you to avoid get worse…retail,energy,commodities and the like. Money flows moving into defensive utilities and some consumer staples.

Futures flat this morning after being down overnight.

FEDEX (FDX) gaps up on missed numbers. NIKE (NKE) down a wee bit on numbers.

THE CLOSE

Take a close look at all the financials…most all have rolled over. Most have broke near term support and most have broken the 50 day moving average. Most have very big volume. Since financial led the market up from the election, it is not a reach that if it continues, it leads market down. After all, we have not had a 2% correction but one looks like it is here. Start looking at next support levels and recognize, markets do go down. Do not worry about why. Everyone emailing me asking if this is about Trump/Russia/taxes/healthcare. We don’t know. We just know when we see high volume selling and when we see a market going on the defensive. None of this mean the end of the world is at hand…but with sentiment off the charts bullish (we have been telling you this), froth picking up and the one-sided trade built up because of lack of corrections, it is imperative to pay attention.

As we scan, it is not just financials…we will have more on the radio show at 6:06 pm. You can listen at garyk.com if not in your city and will be archived soon after if you cannot listen live.

PRE MARKET

Futures are up a wee bit with NASDAQ-types a wee bit better.

Not much happening here as markets been sitting for 3 weeks. But notice…markets still cannot correct for even 2%. So we are sector specific until indices go one way or another. But the motto has been if they cannot send em down, eventually, they are going to send em up.

Recently, we have been yapping about financials. Continue to watch. Past two days less than thrilling with more than a few names with short-term rolling over patterns. Keep in mind, one strong day can change things as none have broken down longer term. We saw this in late January, only to resolve to the upside.

Not seeing anything in the way of big movers this morning. Facebook (FB) did get the upgrade.

THE CLOSE

We think the market was paying more attention to Capital Hill today than anything else but:

As we have stated…watch them financials…and today, another day of some distribution. Needless to say, they have led this move up.

Other than that, not much else to take away from today…maybe tomorrow.

PRE MARKET

Earnings this week:

Tuesday…after the close- FEDEX, NIKE…both important names. NIKE in the dow.

Wednesday…before open…LENNAR…homebuilders been strong

Thursday…after the close…MICRON…goes without saying important semiconductor name.

Futures flat…not much happening…small downside opening in financials off of weakness Friday. Watching the all-important 50 day average for this group.

 

WEEKEND REPORT- WATCH THE FINANCIALS

Recently, we told you to watch the financials as they were starting to show slight distribution. This is a no biggie until it becomes more than slight. On Friday, it started to get more than slight. We tell you to watch the financials because along with the semis, they have led the market upwards since the election. If they start to break down, one has to pay attention. Specifically:

KRE below $56                                                                                                                                                                 KBE below $44ish                                                                                                                                                             XLF below $24.30 and then $24.                                                                                                                                 On top of that, start watching the 50 day moving average for names like Goldman, Morgan Stanley, Citigroup and others. A break below and a stay below changes the complexion for now.

The good news is that major indices still have not had a 2% correction since the election. Good because of it but bad because one would think when a correction occurs, the one-sided trade could cause a bigger than normal correction…but until that time…

There continues to be bull and bear markets side by side as it is imperative you stay in tune with “what’s working!”

From our recent notes, HOUSING continues to be strong but BIOTECH was roughed up off of some drug news on Friday. AMGN and REGN were smoked. We still think the group is in shape. We would now add CASINO/GAMING to the emerging file as a few names are on the cusp of moving out. One more group that is now showing up on our screens in the SHIPPERS. We also like recent action in many of the CONSUMER STAPLES.

Areas we would continue to avoid are just about everything RETAIL/APPAREL, ENERGY and as we have said, most commodity names as they have turned down and broke support recently. We are also less than thrilled with the TRANSPORTS now trading below the 50 day with AIRLINES being sold down.