NEW HIGHS VS NEW LOWS…NOT GOOD!

New yearly highs NYSE…15  New yearly lows NYSE…88

New yearly highs NASDAQ…27   New yearly lows…177

Yuck!

 

ONE MORE OBSERVATION AND IT IS A BULLISH OBSERVATION!

When you have a chance, take a gander at the transports. Actually setting up pretty well to break out of range…which would be above 8172. Do keep in mind that is not near the all time high of 9310 from November 2014. We gather recent lower oil prices have helped as airlines better and Fedex (FDX) reacted well to earnings.

OBSERVATIONS

We have been telling you that there were only a few groups left holding up the market. Recently, oils went bye bye…leaving the semis and financials as the ports in the storm. We are letting you know that the all-important semis are now looking to be in trouble here. If they go, all that is left is the financials. This morning, it “feels” like and looks like all selling of other areas are landing in the financials. Remember, on Wall Street, many have to stay close to fully invested so they “park” money in places that continue to hold up. So we watch financials. If this group goes, it will only add to the bearish action we are seeing.

Fear has definitely picked up so bounces can occur at any time but that’s the trees. The forest leaves a lot to be desired. As always, if anything changes…

The Closing Look

Stocks opened lower on Wednesday after the latest round of mostly disappointing earnings and economic data was announced. A handful of well-known stocks gapped down after reporting earnings which is not good for the market. FLT, PXD, ADPT, PAYC, DXCM, CERN, DATA, ZEN, PLT, MTCH, & HLF were some of the stocks to fall on earnings. Alibaba (BABA) opened higher but quickly turned lower which is not a healthy sign for the market or leading stocks. Economic news was less than stellar. ADP, the country’s largest private payrolls company, said the U.S. economy only created 147,000 new jobs last month, missing estimates for 170,000. The Fed held rates steady for the 7th straight time and said the case was getting stronger for  rate hike in December. Elsewhere, oil prices plunged after inventory levels jumped to the highest level in its 34 year history.

Gary’s Thoughts: Just a lot more weakness…BUT NEAR TERM, WE MAY GET SOME RELIEF. PUT/CALLS HAVE SPIKED BIG TIME INDICATING EXTREME FEAR AFTER A DROP. Often, that gets you close to a rally/bounce. Bigger picture remains yuck!

The Morning Look

Market Update:

Stock futures are relatively quiet ahead of Thursday’s open as investors digest the week long’s sell off, the latest Fed meeting, the latest round of earnings, and are now waiting for the election on Tuesday.

Gary’s Thoughts: FB down about $5.50 near open not helping NASDAQ but S&P futures up a wee bit. FB was down over $9 overnight. As we stated at the close yesterday, put/calls have spiked to extreme levels as massive put buying has appeared. This often leads to a relief rally but leave no doubt, more damage done yesterday. We are well aware November and December are usually decent months but different world right now with fed and election.

Economic Calendar:

  • Weekly Bill Settlement
  • Chain Store Sales
  • Challenger Job-Cut Report 7:30 AM ET
  • Jobless Claims 8:30 AM ET
  • Productivity and Costs 8:30 AM ET
  • Gallup Good Jobs Rate 8:30 AM ET
  • Bloomberg Consumer Comfort Index 9:45 AM ET
  • PMI Services Index 9:45 AM ET
  • Factory Orders 10:00 AM ET
  • ISM Non-Mfg Index 10:00 AM ET
  • EIA Natural Gas Report 10:30 AM ET
  • Fed Balance Sheet 4:30 PM ET
  • Money Supply 4:30 PM ET

Highlights:

  • 7th Straight Time The Fed Leaves Rates Steady
    Gary’s Thoughts: Blah blah blah…really sick of them. Why arent savers marching on Capitol Hill!
  • Facebook Reacts To Earnings
    Gary’s Thoughts: Down but not nearly as bad as last night. Growth has to slow as the company gets bigger.  Earnings and sales were again strong.

The Fed Bulls—s Again!

Sorry for the harsh but we are so sick and tired of these numbskulls at the Fed. When is everyone going to realize that these “boy who cried wolf” meetings are just that? We just had the fed announce:

“The Committee judges that the case for an increase in the federal funds rate has continued to strengthen but decided, for the time being, to wait for some further evidence of continued progress toward its objectives!”

After 22 months of teasing, leaking, telegraphing and trial ballooning rate hikes, during that time, there has only been one…and that led to a severe worldwide market drop…and if there is anything we know…IT IS THAT THE FED AS WELL AS THE CENTRAL BANKS AROUND THE GLOBE…ARE TARGETING MARKETS…not the economy. There is nothing they can do about the economy. After $20 trillion of printed money, 0% for 8 years, negative rates and the outright buying of markets, economies around the globe are at best, BLAH! And if the Fed was going to raise rates…THEY WOULD JUST RAISE RATES.

The Fed knows that our motto we coined back in 08 is what matters most and that is…”everything is ok as long as the markets cooperate!” If markets tank, they know it will take the curtains down on this horrid worldwide experiment by a bunch of ex-tenured professors that think they can control the world. Leave no doubt that every time markets have been hit in recent years, there comes another dose of printing money and buying up of markets.

But something has changed. In the past 2-3 years, major averages are basically flat. This calls into question whether we have finally hit the “diminishing returns” period of all this nonsense.

As far as markets, more nausea today. Many high beta names are being smoked. Strong earnings out of Google and Alibaba do not matter. And now we are starting to see the areas that have held up best coming under pressure. As we have told you, if they go, the market goes…that being the financials and the semis.

Because of central bank intervention, we have not had a real bear market in the Dow and S&P since the 09 lows though many areas have and the Russell 2000 dumped 30%. Keep that in mind as things continue to deteriorate.

The Closing Look

Stocks fell on Tuesday causing the S&P 500 to slice below major support (Sep’s low of 2119 & Oct’s low of 2114). It also briefly broke below the psychologically important 2,100 level before buyers showed up in the afternoon. There is a lot of technical damage in the major indices. Over night, three major central banks (Japan, Australia and Canada) concluded their latest meetings without announcing more easy money. The “less dovish” stance worried some investors especially as the Fed wants to tighten in the near future. Economic data was mixed. The Markit manufacturing PMI came in at 53.4, above September’s number of 51.5. Meanwhile, the ISM manufacturing index matched expectations at 51.9, while construction spending data for September missed estimates.

Gary’s Thoughts: Except for late rebound, not much good you can take from the action as new high/new lows, advance/declines continue to be poor. On top of that, seeing more and more stocks blow up on earnings. But at the close, important indices right into the midst of vital support. As we told you, russell 2000 already has broke support.

The Morning Look

Market Update:

Stock futures are relatively quiet ahead of Wednesday’s open as investors digest Tuesday’s sell-off and wait the Fed to wrap up its latest meeting this afternoon.

Gary’s Thoughts: Fed day. Anything is possible especially with markets somewhat oversold here. Keep in mind, lots of blow-ups with this morning no different. DXCM,PAYC,PXD,X,ADPT,AGN,CERN,DATA for starters. Patience and defense important here. We expect nothing different from the fed today…blah blah blah…December maybe possibly could be….accomodative blah blah blah.

Economic Calendar:

  • MBA Mortgage Applications 7:00 AM ET
  • ADP Employment Report 8:15 AM ET
  • Gallup U.S. Job Creation Index 8:30 AM ET
  • Treasury Refunding Announcement 8:30 AM ET
  • EIA Petroleum Status Report 10:30 AM ET
  • FOMC Meeting Announcement 2:00 PM ET

Highlights:

  • FBI Unexpectedly Releases Files on Bill Clinton’s Pardon of Marc Rich
    Gary’s Thoughts: What’s going on here?
  • U.S. Stocks Fall to July Low With Election Anxiety Rising
    Gary’s Thoughts: They had better hold July lows. Internals very worrisome on a daily basis.

Some icky midday notes!

We know we have a maniacal Fed meeting tomorrow. We know we have an election next Tuesday that looks like as of this juncture, anything is possible. But absent the Fed announcing another round of QE, our thoughts of the market deteriorating continues. In fact, on a daily basis, the underlying action continues to worsen. While the Dow and S&P continue to hold the vital support we have outlined for you, the Russell 2000 has already gave way while many sectors continue in their own private bear markets.
In fact, we can maybe count on one hand the sectors that have good relative strength and in uptrends while a ton of areas are being bludgeoned. Have you seen what they have done to everything healthcare lately?
We are also noticing something else. Names like Panera,Tesla, Google have strong reaction to earnings only to immediately sell off and break down. This is not good news. So to repeat, if at any time the DOW takes out 17,950-18,000 and the S&P takes out 2114-2119, get out the fork.
Watch the semis and the financials. These have been the two strongest areas. We believe a break of support would coincide with these two strong areas finally topping out.
Lastly and to repeat, the market has been and is again acting like it did late last year in advance of the January smackdown. Stock by stock and sector by sector, the market’s underpinnings were giving way. Under all that weight, the major indices finally gave way.  Of course, another round of gargantuan QE by Japan, Europe and China stanched the bleeding in February. Will they have more in store if markets buckle?
Going to be quite the interesting next couple weeks.

The Closing Look

Stocks were quiet on Monday which was the last trading day of October. All the major averages ended lower in October with the S&P 500 and Dow Jones Industrial Average experiencing their third straight monthly decline. News was relatively quiet as investors continued to digest the latest round of mixed earnings data and continued watching the ongoing drama around the election. Since Friday’s FBI announcement, Clinton’s lead over Trump narrowed significantly as the election season enters its final week. Baker Hughes (BHI) merged with General Electric (GE) and October was the biggest M&A month on record. According to the latest data, around $337 billion in M&A news was announced, easily surpassing the previous high of $282.2 billion from January 2000. Companies are rushing to close deals before the Fed raises rates. Elsewhere, crude oil fell -4% after rumors spread over the weekend that OPEC will not reach a deal to cut production at its November meeting.

Gary’s Thoughts: Few notes: China ADRS coming in with a few breaking. The DOLLAR looks tired on the upside while a few COMMODITY areas emerging so watch for that. STEEL,GOLD,SILVER may be ready to rally. Keep in mind, November and December are often good months for markets but we will need to see better internals.