PRE MARKET/CHINA

First: https://www.cnbc.com/2019/01/16/chinas-central-bank-injects-record-amount-to-stimulate-economy.html

 

So China going all out, for the economy or for the market or for both. Either way, the easy money, government-induced, central bank-induced markets continue…and until they stop having influence, you must obey. Since the “Powell switch,” markets act well. Yesterday was a good beta day leading to many set-ups as we continue into earnings season. All other Fed members have fallen in line. A few notes:

JPM gaps down and reverses up. CITI opens down the day before and ramps. UNH down $5 in pre-market, finishes up $9. BAD NEWS IS BEING BOUGHT. WEAKER ECONOMIC NUMBERS ARE BEING BOUGHT. Until that changes…

The NASDAQ/NDX finished a smidge above the declining 50 day moving average. A few names have jumped above it before these indices. It will be vital for this to hold.

A ton more earnings to come out.

PRE MARKET/EARNINGS

Not a great day yesterday but not the end of the world. FINANCIALS were strong as C reversed early losses to have a strong gain. That could change for FINANCIALS this morning because JPM had its first miss since 2014. Notwithstanding another reversal to the upside, JPM is trading down $2.60…as we write this. Futures were up strong last night but have faded because of earnings. Other earnings not thrilling has another DOW name UNH down about $4 pre-market. Both JOM and UNH have been recovering off lows but both still trade below all moving averages. Additionally, SHW really coughs one up. down in the neighborhood of $35 pre-market. WFC is flat on earnings. Of course, this can all change by the end of the day. Another 20 FINANCIALS names report this week including BAC, BK, CMA, GS, PNC, USB, AXP, BBT, SCHW, MS, STI.

CHINA was strong overnight…what else…easing. Lower taxes and rumors that CHINA will now buy up its own market. Yippeee.

Major indices are in and around massive resistance as well as the declining 50 day moving average. It is normal to settle down around here. If we can get controlled and rotational action here, it will go a long way in potentially sending prices higher but leave no doubt, there remains a clear lack of any leadership (except for some of those SOFTWARE names we have highlighted) and still still have to worry that this is nothing more than a counter-trend rally. We are open to all outcomes especially with the fed at the market’s back now.

A FEW FACTS:
Just about everything has rallied up into, near or on massive overhead resistance where markets had a “waterfall” breakdown or the declining 50 day moving average. In bear markets, this is where or around it is normal to fail…or start failing. This means we would get another topping process of a few days/couple of weeks before rolling over again. Notice we did not say definitely. We let cards come out of the deck. This could just pull back here.
We are now in earning’s season. We have no idea who says what and have no idea to the reactions. But we now sit back and react to the reactions. We never jump the gun. This week, about 25 FINANCIAL names report. It is vital for them to act well. They have rallied up but still no ooomph. Also, the SOX got above the 50 day Friday but finished in the mid-point. There is no way markets can go higher without these two groups so we keep a close watch on them. In the SEMIS, the only real strong name has been and still is XLNX. Everything else is just in recovery mode off of big drops…some stronger than others. If the SOX doesn’t hold the 50 day, trouble.
Markets gapping down this morning. Very weak economic numbers out of China continue. CITI also down on numbers with another blow-up in RETAIL land in TLRD.

THE BEST THING THE MARKET CAN DO NOW!

The best thing the market can do now is to pull back…even have a scare day or two. Major indices are into major and we mean major resistance as well as the declining 50 day moving average. It would be normal anyhow to stall and pull back after going coast to coast in sentiment. A pullback that is controlled with the pattern putting in a handle formation would go a long way towards getting more upside in another fed-induced rally.

Also, seeing quite a few names that are now coming up the right side of bases that have now had long enough time to build. Only one or two names have actually moved out of range but have made nominal gains. If the rally continues, we expect a plethora of names to move out.

Just keep in mind, we are into earnings season. Yesterday, a few names in RETAIL were coughed on on not so great outlooks. We do not want to see too much of that as we move forward.

Lastly, yesterday we posted our own faux interview with Jay Powell. We wrote it because of the interview we saw yesterday that was too cutesy and too softball. There is a lot of crap going on, namely, debt, deficits and markets that continue to be propped up by fed rhetoric and moves. This isn’t cutesy. It isn’t funny. If you have a chance, go watch the interview.

https://www.cnbc.com/video/2019/01/10/watch-fed-chairs-jerome-powells-full-interview-at-the-economic-club-of-washington.html

When you google the words “watch Jay Powell interview with Rubenstein,” our faux interview comes up 4th on the list. Hopefully, it gets a lot of reads.

OUR JAY POWELL INTERVIEW

-“OUR JAY POWELL INTERVIEW”-
-We love David Rubenstein. David Rubenstein  is an “American financier and philanthropist best known as the co-founder and co-executive chairman of The Carlyle Group!” We have followed his great career as well as his great interviews on Bloomberg. Mr. Rubenstein had an interview with Jay Powell today at some Economics Club. The back and forth was something we wanted to watch and to hear. We thought he asked some substantive questions and some important questions but sorry, for us, it was too cutesy. Cutesy is not good. We believe Mr. Rubenstein had a missed opportunity.-
-We do not think there is anything cute about $22 trillion of debt. We do not think there is anything cute about $trillion yearly deficits. We do believe it has been the fed who has enabled a lot of this and has done nothing to change the trajectory of all this. So in the interest of fairness, here is what we would have asked Jay Powell.-
-1) What do you tell all the savers that were screwed by the Fed by keeping rates at 0% on their risk-less income investments for 8 years…and handing that money they would have been earning over to the banks and lenders that caused the financial problem in the first place?-
-2) Why since 09, every time the markets get in trouble, the Fed either talks easier money or enacts easier money? (We would show Mr. Powell a chart going back to 09 including what markets have done leading up to his changed his stance right at the recent lows.)-
-3) Why do you keep calling it the Fed’s balance sheet? A balance sheet is supposed to contain real assets. Your “supposed” assets is nothing but the fed printing money out of thin air.-
-4) You just said you fought to have the debt ceiling raised. Many years ago, it was a sin to raise the debt ceiling. Politicians fought against raising more debt but now, you, economists, politicians and ratings service have conned everyone by saying that if we DON’T raise more debt, we would be in trouble. What happened to economics 101 that says more debt, out of control debt, is bad?-
-5) Depending on which abacus you use, there is $15-20 trillion of central bank-printed money around the globe. Europe is still printing and has negative rates. Japan is still printing and has negative rates. China is easing markedly it seems every week. Are we to the point where what central banks have done has made markets addicted to your steroids and there is no way out of this web?-
-6) And to that point. We are starting to see recessionary-like numbers from places like Japan and Germany. What ammo could they possible have left if this is true?-
-7) Where would the markets be and where would economies be around the globe if all central banks just normalized?-
-8) Will we ever be normalized?-
-9) There is now more than $250 trillion of government debt around the globe, record corporate debt around the globe, record junk debt around the globe with many saying enabled by the ridiculously low rates brought on by the central banks. What happens if economics 101 finally come into play and the markets stop reacting to everything central banks say or do?-
-10) You do know that economics 101 states that the more debt there is, the higher the rates should be? But Bernanke et al artificially kept rates down that enabled all this debt.  So what if rates finally give the middle finger to central banks that have rigged rates lower for years with the conjured up money that you say are assets but are not really assets and rates skyrocket? What is your next move if let’s say the 10 year yield goes to 5% regardless of your futile attempts to print more money to take them down?-
-11) Do you think this economics 101 scenario can play out? Is the magic number $260 trillion? 300 trillion? Higher?-
-12) Did you know that in the coming year, because of all the debt, the first $500 billion of precious taxpayer dollars is going towards interest on the debt that was created by government? That’s $500 billion not going towards the poor, the indigent, the children, the elderly, the roads, bridges and all the infrastructure promised. $500 billion to nothing. Did you know this and how do you feel about this?-
-13) If the  DOW dropped 2,000 points in the next two weeks, what would be your reaction? How about 5,000 DOW points over the next 2 months? Should it continue to be the Fed’s place to react to these market moves?-
-Mr. Powell.Thank you for your time. We know that we asked some tough questions but numbers do not lie. We are very worried. It seems many of the same people who put us in this position are still running the show and simply showing they do not give a crap about doing anything about all of this. We are now starting to see you go into your friend’s playbook that many call the “Bernanke put!” Instead of letting markets be free, it seems you are now measuring yourself based on market moves and worry this will do more harm longer-term than good shorter-term. After all, markets were supposed to be free and not move based on the whims of a few people running central banks around the globe.-
-We would have loved to ask you about your bicycle riding or your guitar playing or your salary but we think there is much bigger fish to fry going forward. We wish you well. Ladies and gentlemen, that concludes this interview. Have a great lunch and drive home carefully!-