PRE MARKET- DIVERGENCES ALL OVER THE PLACE

The hope was if we could get past September and October earnings that we could have a good end of year rally. We have already had a decent rally and a bigger rally could still happen but:
While the DOW goes into new highs, nothing else is.
While the DOW goes into new highs, advance/declines have made relative lows.
While the DOW goes into new highs, the RUSSELL 2000 and the MID-CAPS have broke initial support and are woefully under-performing.
While the DOW goes into new highs, new yearly lows have expanded markedly while new yearly highs have contracted. (Many muni-bond funds are on this list. While they are non-operating companies, it tells you the state of interest rates!)
While the DOW goes into new highs, a slew of leading growth names have topped with a decent amount of names breaking down.
While the DOW goes into new highs, OIL PRICES continue to soar.
While the DOW goes into new highs, LONG BOND YIELDS have broken out to new yearly highs.
While the DOW goes into new highs, FINANCIALS continue to meaningfully under-perform.
While the DOW goes into new highs, FOREIGN MARKETS continue to meaningfully under-perform.
While the DOW goes into new highs and nothing else does, tons of froth and speculation pervades the market as “no sales” marijuana stocks get market caps in the tens of billions and 80% of this year’s IPOs lose money.
A couple of other notes:
For every 10 cent move in gas prices to the upside over a year’s time, estimates are that it takes $10.6 billion out of the pockets of consumers. That’s a lot of cake. Considering prices are up 50–60% in the past year, this must be watched. This does not include the costs to truckers, airlines, cruise lines and any gas-centric business…in fact, all of business…as the cost to move everything goes up and the cost to make a lot of things go up.
As rates continue to move up, affordability goes the other way for home buyers. Is it any wonder that one of the worst acting groups in the market is housing as well as many housing-related names? On top of that, costs on all loans go up…and let us not forget the gargantuan, monolithic, over-the-top, blame both parties debt and deficits…which will certainly continue to explode.
We know! The DOW just hit new highs…but for us, it always is the weight of all the evidence that gives us a leg up. We do not just look at the DOW. We scan almost 2000 names, 200 sectors, all the commodities and all foreign markets. The weight of all this evidence says underneath the surface, not so great. Markets, as well as the economy, may not be used to these higher rates or higher energy prices. Keep in mind, we will not turn overall bearish until the DOW, S&P, NASDAQ and NDX break support…and right now, not there yet.

PRE MARKET

We cannot begin to count all the negative divergences. But first…NEGATIVE DIVERGENCES DO NOT HAVE TO BE THE DEATH KNELL FOR THE MARKET…BUT IT BEARS WATCHING!

New highs vs new lows…horror show.

Small and mid caps vs large caps…bad. Just go look at the charts of the russell (iwm) and mid caps (mdy) vs the dow.

A ton of growth names under distribution.

FINANCIALS very weak…though, felt like yesterday they were trying to take a stand…and go look at AMTD, ETFC, SCHW.

A/D figures topped out a while ago.

Add in froth, speculation, the continuation of NO SALES and NO EARNINGS IPOs continuing to come out…

But…THE DOW, S&P, NASDAQ, NDX still look fine with the DOW at highs. Until they break,..they don’t. Just know it is narrower and narrower.

We do want to mention that the SEMIS “feel” like they are finally getting a bid. The SOX looks ok but so many individual names look terrible.

Also, GOLD as well as GOLD stocks may be waking up out of a coma.

Futures up nicely. Just because.

PRE MARKET

Very weird day yesterday with a ton of divergences.

More new lows than new highs.

A/D negative.

Small caps and mid caps smacked.

Growth/beta smacked…for the first time in weeks, seeing a few names breaking support.

ENERGY continues upside. (not good news)

FINANCIALS still gross.

All this with the DOW up 200.

TESLA gets it all back from Friday. Again, Musk needs to raise money…had no choice. Now let’s see if his promise of profits and cash flow comes through.

 

 

PRE MARKET

Futures be down. Weak Europe doing the trick.

TESLA down $38 as the SEC looks to bar Musk from serving on board or any capacity with a public company FOR LIFE. This is a WOW moment because we have seen worse where the SEC was not looking to ban for life…but we think that this violation in PLAIN SIGHT moved them to be tough. Also, the SEC moved quickly…normally it would take longer…telling us they believe this is open and shut. We told you on day one this was fraud and that if it wasn’t Elon Musk, any board would have removed him but Elon Musk IS TESLA…so a lot tougher.

Continues to be a very narrow market. We are amazed just off highs, more new lows than new highs. Also, seeing divergences in advance/declines.

We need to add the continued relative weakness in the SEMIS and now FINANCIALS. TO BE WATCHED CLOSELY.

 

PRE MARKET

Markets reversed down yesterday off the fed as financials led down. This is to be watched. Very poor action combined with the poor action in the semis give us pause.

BUT most indices remain fine…most. A glance at the mid caps and small caps (MDY and IWM) show both breaking slightly below the 50 day moving average. This showing under-performance in these areas. Paty attention to this.

S&P futures about flat…NASDAQ better as AAPL gets analyst bump.

Off tv today as Kavanaugh stuff front and center.