As we said earlier, things going to get random. At 1035 am, NASDAQ up 48…at noon, only up 15. But don’t blink.
We do not like micromanaging. We just wanted to point out what typically happens after a day like yesterday.
Take your time here.
Remember what we said. Things will get random after a day like yesterday. Big leaders are indeed bouncing after one big ugly day. This is random but somewhat normal. We will know a lot more as to how and where they bounce…which we won’t know for a bit.
One casualty today is Brazil with reports that President Michel Temer of Brazil might have paid potential witness to remain silent in graft probe. The Brazil ETF (EWZ) is actually down a whopping $5.70 to $33.40 as we write this. This is a huge drop. Seeing a couple of Brazilian banks down 15-20%. Wow! Brazil had been a strong area of the market.
Again, and we emphasize, things will get random in here. More later!
Futures down but off lows. After yesterday’s ugly, things may get a little random here. Watching most closely how the leaders act after knifing down yesterday.
Gappers on earnings: PLCE, LB, RL on the upside. CSCO, BABA on the downside.
More to come.
Well, that wasn’t funny. How dare the market go down? And go down nastily! Let’s back up!
We have reported to you that about 40% of the market was already in bearish phases of differing ugliness. Because of that, we reported to you to avoid retail, biotech, commodities, energy, oil&gas, autos, transports and financials. Financials had not been hit hard but were under-performing under resistance and the 50 day average. Today, the bad got badder and the good came in hard as the complacency that has pervaded the air was unwound and quickly. The big leaders are hit harder because they get over-owned late in the move.
We report to you the outcome of the day. Things worsened. On top of all the troubled areas, the transports and the financials have a chance here to complete major tops put in place for a bunch of months. This would be very important. We now have a skeptical eye towards even more names and areas. Keep in mind, we have not had a decent correction since before the election. It has been overdue. Stay tuned. Things are getting interesting…and not in a good way.
As you know, we have been stating that the market has been narrowing with 40% of the market in not so good shape. We have stated to avoid areas like commodities, energy, retail, biotech, autos transports and recently financials. Financials had not been hit hard but were certainly in the “loss of relative strength” camp. The issue now is the financials are on the edge of breaking the next line of support and so are the transports. This is not good news in a narrowing market.
As far as all the leading areas, many became very extended. Extended EVENTUALLY gets worked off. We shall see if EVENTUALLY is here in the days ahead but leave no doubt, today, they are less extended as just about all are starting to pull in.
Just letting you know watching them financials (BANKS,REGIONALS,S&Ls)real closely. They have been sitting range-bound under the 50 day moving average since March 21 with no ability to get back above resistance. The good news is that support has held throughout the many weeks. Support looks like it is going to be tested again soon. Needless to say, quite important.
Futures are down decently this morning as we are sure this opening move down is directly because of the latest accusation on Trump. Without taking sides, this is important. Political risk is important…especially now. We are of the belief the market has made a big bet on:
Tax reform…which included lower marginal rates, lower corporate rates, lower estate taxes, incentives to repatriate the trillions across the shore and hopefully, the unwinding of the more than 75,000 pages of tax code.
Regulatory relief…which has already begun but is not even close to what needs to be done. Dodd/Frank, the EPA and so many other things needed to be looked at.
Healthcare reform…which would unwind the continuing creep of government into the system and a fixing of the imploding Obamacare.
But now what? Again, without taking sides, how on earth is anything going to get done when you are fighting off day in and day out accusations of collusion, treason, obstruction of justice and everything under the sun and by anonymous sources?
This morning’s open is just one bad open. The good news is easy money continues to pervade as rates in many areas around the globe are still negative, money printing continues in the trillions and even here, we remain at a ridiculously easy 1%. But love and hate can be very close emotions in the market. And with a market that has narrowed over the past couple of months, with a market that leadership is more concentrated and with a market that is in the upper range of historic valuations, we have a lot to watch.
Again, it is just one bad open. But…lot’s of crap going on. As always, we will not rationalize. We will watch price, volume and the important patterns they make.
Futures down about 70 Dow points as we write this as new accusations hit the Trump administration. Next, he inflated the footballs. We will have a wide ranging opinion piece on what we are seeing real soon as we called this months ago…on radio, on tv and right here.
Another narrow day today as the NASDAQ/NDX continues to win while other things sit and about 40% of the market is bearish.
We will hold off on anything else until our pre-market notes tomorrow morning. We want to see how the night goes.