PRE MARKET AND MORE NAUSEA
The market had a good chance for a good day yesterday but fumbled the ball. The DOW was up 125 but finished down 100. The NASDAQ was up a whopping 120 but finished flat. We are never thrilled when markets reverse down but today is another day.
Futures have moved up nicely in the past hour after being down to flat. As we write this, the DOW is up 160 with the NDX up 50.
There are a few things the market has going for it.
Firstly, the DOW dropped 1,000 points and the NASDAQ dropped 366 points since Thursday. Stocks do not go down forever…we think.
Secondly, our A LOW call from 3 Wednesdays ago still stands. Those lows have not been broken.
Thirdly, we are in a seasonal strength period. This does not guarantee a good market but in the past, the end of year action has a good record.
Lastly, seeing some decently high bearish readings indicating AFTER the drop, the masses are finally getting worried.
Combine and at any random time, we can bounce. Today’s open is as good as any time but just remember, they reversed yesterday to the downside.
The big picture has not changed. Most everything continues to trade below the 200 day average and what leadership there is remains defensive. Let’s just hope the A LOW turns into THE LOW but expect a lot more back and forth before any real attempt to get going.
And Germany just announced a shrinking economy…9 months after the German Dax topped with just about all of Europe. Remember the thesis that markets are pretty darn good at telegraphing the shape of things to come.
https://www.zerohedge.com/news/2018-11-14/german-economy-shrinks-first-time-3-years-car-production-collapses
NAUSEA AND THE PRE MARKET
Hey…the Giants won!
We heard yesterday:
One pundit say the action in the market doesn’t worry him a bit.
One pundit say this is how a bottoming process works.
One pundit say it is good news when they get names like AAPL and GS.
Our take:
Except for the DOW, all major indices and most countries trade below the longer-term 200 day moving average with many trading way below.
Many “death crosses” are now occurring. That’s where the 50 crosses the 200 day…a sign of even more weakening conditions.
Some of the 200 day averages are now turning down indicating price staying below longer.
Leadership remains defensive and few and far between.
Growth continues to act horrid.
Good news is sold. Bad news is sold hard.
Recent strong gaps to the upside off of earnings have been sold.
We do not need to predict. We deal with the evidence and facts at hand.
Markets are probably a little short-term oversold off of the recent drop…not sure what that will mean. Notice the NASDAQ/NDX failed in and around the 200 day average late last week. That must change.
WEEKEND NOTES AND PRE MARKET
As we write this now, futures nicely down. LITE just warned and warned badly. The stock is down over 30% in pre market:
Lumentum cut its fiscal second quarter earnings and revenue guidance sharply today, saying one of its largest Industrial and Consumer customers for laser diodes for 3D sensing requested Lumentum materially reduce shipments to them for previously placed orders scheduled for delivery in Lumentum’s fiscal second quarter.Per Lumentum’s 10K filing, Apple (AAPL) was the company’s biggest customer in fiscal 2018, accounting for 30% of total net revenue. Huawei accounted for 11.0% of total net revenue, as did Ciena (CIEN). It will be assumed that Apple is the customer in question. Accordingly, look for a trickle down effect in Apple supplier stocks today. AAPL is down almost $5 this morning on the news. Not helping futures with NDX futures down decently.
WE WROTE THIS YESTERDAY ON OUR WAY BACK HOME!
To all the the veterans of the U.S. Armed Forces and active duty members of the military, from 38,000 feet on our way back home to the great USA, we honor and thank you for your service, not only today but every day.
To the firefighters in California, to all affected by the fires, all our prayers. We know the areas well and cannot fathom what is happening or what we are seeing on the tv.
To Pete Davidson and Rep.elect, retired Lieutenant Commander and former Navy Seal Dan Crenshaw, THANK YOU THANK YOU. Thank you for just throwing a little harmony back into the realm. From afar, all we saw last week was both left and right pissing all over each other. Amazingly, in a week leading up to Veterans Day as well as the 100 year anniversary of Armistice day, both spent days whining and crying over whether a reporter touched an intern’s arm. We know. There is some serious shenanigans again going on in my home state of Florida but good to see a little respite.
To anyone who lives in Central Florida, this Wednesday is the 15th (maybe 16th or 17th, who’s counting) Kaltbaum family Thanksgiving dinner for kids and young adults from the Boys and Girls Clubs of Central Florida. Over those years, we have served somewhere in the neighborhood of 5,000-6,000 Thanksgiving dinners to these great kids. If you would like to volunteer, just email at gkaltbaum@kaltbaum.net. Famed magician Kostya Kimlat and a few of his friends will be performing and you never know who else will show up. https://www.youtube.com/watch?v=SCFXV6o7cro
And the markets:
From some of the deepest stretched, extended and oversold conditions, markets rallied. We had thought A LOW was put in 2 wednesday’s ago, but as usual, stronger than most expected. But outcome is what matters and while we think markets can still go a bit higher:
The transports, russell 2000, small-caps, mid-caps, nyse, sox, nasdaq, nasdaq 100, industrials, financials, regionals, materials, biotech, gold, silver, commodities, chemicals, autos, housing, housing-related, just about every foreign market and junk bonds ALL REMAIN BELOW THE ALL-IMPORTANT 200 DAY MOVING AVERAGE. Again, even with the rally off the lows…this tells you how deep the correction has been. The DOW remains the best index but this is not what we want to see. When markets go defensive, they usually buy up the DOW. A few DOW names are at new yearly highs.
On top of that, GROWTH continues to act horrid with growth’s rally looking like it ended during the day on Thursday. FAANG is now ———
Where’s the beef? Utilities, a few selective REITS, soft drinks, drugs, other consumer staples, discount retail, drug stores, managed care, …have we thrilled you yet? Sure, there are few growth names sticking out, coming off earnings reports. We just don’t think the market is conducive here…and certainly do not believe what is leading is the cream of the crop.
We do not think the next sell-off can take us down to the lows or break the lows. (later is another story) We just think this is going to be a “pain in the a–” market for now. Remember, it is our job to get THE BIG PICTURE correct. The minor stuff is what gets one in trouble. It is protecting capital and keeping good psychology during these times that saves the day for when great fat pitches are again available. We can promise you that fat pitches are few and far between in here.
PREMARKET
Futures down a wee bit after a strong day yesterday.
By the book:
Wednesday’s action was a clear, high volume, follow through day. Some say it was because of the election. We could care less. We have been wary of this rally though we called A LOW last Wednesday. There has been no bases. There has been hardly any leadership except for some defensive areas and then today, beta, tech,software and all that uff popped. A lot of growth put their feet in the ground and turned up though still off the highs with most still below the 50 day average.
The good news is that if this is real,we are in the November/December seasonality window. There are no guarantees on this and to be blunt, any further rally will remain narrow as many areas and indices are STILL below the longer term 200 day…and many names and areas have done nothing more than bounce.
Lastly, make note of managed care and hospitals which showed up on our screens. The election outcome makes sure Obamacare stays…which is a huge help to these areas. Mre to come…will know more on how they pull this back but we stay with A DARN GOOD LOW WAS PUT IN LAST WEDNESDAY!
MARKETS AND ELECTIONS
By Gary Kaltbaum-The day after the election!
-Well, the world has not ended…yet. In spite of the president pulling a Krugman to say your 401Ks are going to be slammed because of an election, so far…nothing doing. In fact, markets are set to open up quite nicely. Of course, we know that could change but we like to deal with the evidence at hand. Of course, if any of these big gaps get reversed, it could be the end of any rally. To repeat again, we told you last Wednesday morning that we thought A LOW had been put in for now. Since, a quiet move higher continued and now we get another strong gap to the upside,akin to what we saw last Wednesday. Maybe the move back up gets not so quiet. Let’s just say if today holds, we can say A LOW is looking like A DAMN GOD LOW. Whether it is THE LOW is another story but the farther you get away, the better.-
-A few of our early thoughts on the election:-
-The pollsters for my state of Florida…suck! Seriously…6 points up, 7 points up…we saw one over 10 points up. Who were they polling? Gillum and Nelson’s family over and over. In our opinion, my state dodged one as Gillum is left of left. Not only was he looking to raise corporate taxes but would have gone for the income tax. Whew! As far as Nelson…not kidding when we say we don’t think we had even seen him in months leading up to the election.-
-Don’t want to ever hear any New Jersey voter for Menendez ever complain to anyone about someone else’s sleaze and ethics.-
-Don’t want to hear either from voters who voted for the two Reps that were elected while indicted. Yes, we know… innocent before guilty but sorry, these people are not running to be dog catcher.-
-A passed away brothel owner from Nevada won whatever he was running for.Yup! Voters!-
-Start counting. Start counting how many times we will be hearing the word “subpoena” over the next two years.-
-Start counting. Start counting the days until Hillary announces she must run again because Trump must go. She will run. She believes it is her destiny.-
-We are now getting some yapping from both sides’ leadership that they will come together. Sure! Right! Who they trying to kid? The 2020 elections start today.-
-Former Navy Seal Dan Crenshaw won his race. Memo to Pete Davidson and SNL…GO SCREW! Where is NBC and where is Lorne Michaels? It wasn’t cutesy. It wasn’t nuanced. It wasn’t funny. Do better!-
-Celebrities? Even Oprah lost. Even Oprah. We love Oprah! Do these candidates ever learn a lesson? How did that Taylor Swift do in Tennessee? How did Beto do thanking Beyonce in a tweet? Memo to candidates…hardly anyone gives a crap what these people think.-
-We love stories of persistence. We love stories of those that are down and out and never give up. Politically, we are no fans of Nancy Pelosi but we must and you should also give her kudos. More than likely, against not only odds from the other party but from her own party, this women looks like she will be again Speaker of the House again.-
-Lastly, no matter who won or lost…approximately $3 billion will be added to our debt today and every day going forward. Nothing has changed.-
MARKETS/ELECTION
We continue to stick with our call from last Wednesday morning that A LOW was finally put in after nauseating drop. It is at that point we let the cards come out of the deck feeling that sellers were finally washed out. Since, markets have edged up but we must tell you, the rally so far is maybe a B- to a C+…just not that great. We are less than thrilled that our favorite growth/high beta names continue to act just a wee bit better than the Knicks and Giants offense…and that is definitely not saying much. TECH/GROWTH/BETA and all that stuff must lead if the market is to get going again. Always has, always will.
On top of that, except for the DOW, most everything continues to trade below longer term moving averages. Every day below is a bad day. If selling rears its ugly head again, it will be easier to shred the market again being below these vital levels.
We are writing this at 330 am et…looks like the Dems got the house, while the Reps added in the Senate. We expected both. We did not think this would change markets. Trump was telling all that if the Dems win, all hell will break loose. We are not so sure as gridlock ain’t the worst thing with a bunch of dolts on both sides who have brought us to near $22 trillion of debt. We will do the smart thing and just stick with the big picture at hand. We do not think the big picture changes much regardless. Markets are still in yuck mode regardless of this rally off of deeply stretched, extended and oversold conditions. Leadership remains fleeting and what leads is very defensive. But, we have no problem with higher prices for now to continue to work off the drop in a period of seasonal strength. Just know this ain’t going to be easy street. Just not enough in the way of leadership.
As we write this, futures are up nicely but of course can change overnight.
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