THE OPEN

Market indeed gaps up. Bear market turns into bull market in less than a week off of a major change by the fed and not so major change with China trade.

Normally, we could care less about the news but when the fed is involved, it is more than material.

MARKETS ARE NOW RIDICULOUSLY STRETCHED, EXTENDED AND OVERBOUGHT ON ANOTHER NEWS GAP. We gather many or most believe a pullback has to happen. We are not so sure as we are in December. We do suspect we are going to back and fill just because we are now in the midst of massive overhead resistance…but to be clear, market has already blown through resistance.

More to come. Going to be an interesting day, to say the least.

 

WEEKEND NOTES MARKETS/FED/CHINA

-By Gary Kaltbaum- December 2, 2018-

-Never met the man but more than being the president for 4 years, George H.W. Bush was a great husband, great father, great grandfather and great friend…and that means more than anything. RIP!-
-Last Monday night, we alerted all on tv, radio and in pen that we thought another A LOW was in. To repeat, the thought process was simple…just about everyone turned bearish, markets were ridiculously stretched, extended and oversold to the downside…and we were entering the end-of-month as well as the December period. Just because it is A LOW, it does not mean it is THE LOW. And then who said this in October of 2012?-
-“INVESTORS REALLY DO UNDERSTAND NOW THAT WE WILL BE THERE TO PREVENT SERIOUS LOSSES!”- 
-It was not Greenspan. It was not Bernanke. It was not Yellen. It was a dude named Jay Powell. Yes…that Jay Powell who on Wednesday ,went from being Paul Volcker to being what he said back in 2012…just another easy money, bubble inducing, central bank bubble maker. He appeased the whining Trump and all the whining wall streeters who never see a bearish phase coming and whine all the way down. Yes…with unemployment below 4% and GDP above 3%, another central bank joke could not even stand a measly 2-2.25%, and while Europe and Japan are still negative and printing. But…for us, that confirmed THE LOW. As soon as we saw Powell’s words, we again knew the fed was looking to stop even more serious losses. Remember, every time the market corrected under Bernanke, he eased and eased ever higher. So, just when you thought price discovery would finally be here, the juices get flowing again. Just remember, all these moves continue to enable massive…and we mean massive debt, deficits and leverage…to the tune of $250 trillion of global government debt…but don’t worry because our mantra has always told you everything is fine as long as markets cooperate.-
-And:-
-Now we are told a major breakthrough with China trade has occurred as the president is now putting off more tariffs and promises to continue to talk. We ask what changed? China agreed to buying some things? Trump agrees to not raise tariffs? What day is it?- 
-But:-
-We waited to write this until futures opened up and open up they did. Currencies that were going one way are going the other way. Think yuan! Futures are up 450 Dow points. All problems have been eliminated.-
-We stand fast with our A LOW call this past Monday and upon the latest from Powell, our THE LOW call. It does not take a rocket scientist to tell you if we indeed open hot tomorrow, markets are now ridiculously stretched, extended and overbought, this time to the upside…and in 5 days and a gap. Sell time already? See what central banks will do for you. Until markets act otherwise, never fight an easier fed. – 

PRE MARKET

Futures just rallied up to be flattish. Something about the G20.

Keep the big picture in your sight. Down 2,000 DOW points in 9.5 days…1,100 of those points Thanksgiving week. Rally up off the fed about that same 1,100 into massive massive resistance. On top of that, except for the DOW, everything pretty much remains BELOW the 200 day moving average. The TRANSPORTS are better because of the oil crash.

We believe we have seen THE LOWS for now. This simply means THE LOWS we just had will not be breached any time soon.This does not mean we do not pull back a few hundred…and frankly, would be normal. And of course, nothing is guaranteed so if we see serious distribution show up,  we will know it.

One area sticking out is SOFTWARE as a bunch of names now coming up their right side. It looks like CRM’s reaction helped. Another name, WDAY, gaps up this morning to new highs on strong numbers.

Otherwise, we suspect we now have some backing and filling and see what comes out of it. Today is end of month and then we head into what is supposed to be seasonal December strength…supposed to.

We believe the most important part of the equation is that the fed blinked AGAIN. For years, every time markets get in trouble, they have blinked. Maybe one day we will get someone who lets markets be free or maybe there will come a day where markets stick the middle finger back at the easy money moves. We also believe any further upside will continue to be narrow as too much stuff just aint happening.

 

THE LOW?

This past Monday, we called for A LOW…not because of strength but because how weak things were. The DOW dropped 1100 points Thanksgiving week and 2000 points in less than 10 days.

We believe the fed just put in THE LOW. Readers of this column know for years we have thought markets and assets were fed-induced. To this day, Japan and Europe still have negative rates and are printing money. Our rates have been a joke as people try to tell us 2% is tight. 2% is easy yet the fed again blinked to defend markets and to keep the president happy.

So…for now, we think the A LOW is now THE LOW. This does not mean we do not pull back or retest…just that the fed, for the umpteenth time since 09, has put the floor in instead of letting the markets be free. We would love to see some pulling back in here.

There is still not much leadership as all that has happened so far is that the markets got back the Thanksgiving week losses…but if this is going to last, leadership will indeed show up. The question is whether markets get going to the upside. That is another story. There is a ton of resistance and a ton of broken price charts that have to be worked through.

Futures are down but down modestly in comparison to yesterday’s gains.

Trump, Powell and the Kowtow

-By Gary Kaltbaum- November 28,2018-
-KOWTOW: “ACT IN AN EXCESSIVELY SUBSERVIENT MANNER!”-
-Jay Powell just kowtowed to Donald Trump’s tantrum over a measly 2% Fed funds rate as well as a market correction. Looks like the president knows the easy money game. It is not hard for the president to check out a chart of the markets with the easy money, bubble making policies of past years. Markets dropped, just ease. Markets drop more, ease more. Markets really crack, print. Markets really crack again, print a crap load more. In other words, there is no independent central bank. Powell is now a puppet to Trump. Trump might as well be the head of the central bank.-
-Here is what just changed:-
-Fed Chair Powell now says current interest rates are “just below”neutral. Early last month, Fed Chair Bernanke, we mean Powell, said that the fed funds rate was a “long way from neutral!”THIS IS A MAJOR BIGLY CHANGE! This was not changed by accident. The statement was meant to change the playing field. Jay Powell may say there is no preset policy path but we now know better. Jay Powell may say that their dual mandate is stable prices and sustainable employment but we all know better. Their policy is to keep markets from cracking. President Trump will now start complimenting Jay Powell again.-
-We predicted in our recent past few reports that we expected this. We expected that Jay Powell would raise one more time and that’s it. We expected it because of the pressure from the president but also because many years ago Powell was quoted as saying investors knew the fed had their back. But it still irritates the heck out of us as real price discovery moves down the road again. The fed was never supposed to kowtow but kowtow they are. The fed was never supposed to backstop the markets but backstop the markets they are.-
-The A LOW we called after Monday’s close may just turn into THE LOW as central banks and their moves matter. We have learned that over the past bubble making years. We will get a better feel after the close and the days ahead as most everything is still trading BELOW longer term moving averages…but looks like they are going to continue to inject the steroids…with GDP over 3% and unemployment under 4%.-
-And lastly, as we finish writing this, we are listening to Powell whining about boom/bust cycles. Unfortunately, it has been these same central banks that are the creators of the boom/bust cycle…not the savior. More to come!-