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.
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.
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.
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!
Futures down a wee bit after a strong day yesterday.