Narrower already?

A few thoughts:

Before the market topped out, the average stock was heading south before the indices. It is early but already “feeling” a little of that right now.

Seeing and feeling the “nifty-fifty market we experienced before the top. Google and Amazon both had strong gaps that were sold into on Friday but bought up yesterday. Would love to see some time put in here building handles or a little base in here. Leave no dought these 2 have a major influence on the NDX.

This could change but as of this second, go look at the Russell 2000 and the mid-caps versus the QQQ and larger cap indices.

Apple reports after the close (we have no position). The stock as well as the suppliers continue to act icky…but that can change with earnings.

The Fed this week. Doesn’t it feel like we have a Fed meeting every week?

Its METS time!

 

Weekend market report!

By Gary Kaltbaum
@GaryKaltbaum
garyk.com
Fox News Business Contributor

The first number is earnings. The second number is sales.

The fundamental side!

EBAY…-7,-2…the stock gaps up and continues.
COKE…-4,-5…the stock rallies.
MMM…+4,-5…$6 gain on the news…and they warned going forward.
CATERPILLAR…-55,-19…the stock reverses up. Yes…that was -55 and -19.
INTEL…-3,-1…reverses up and continues up.
JPMORGAN…-19,-6…initially down, reverses up and continues up.
GOLDMAN…-37,-16…reverses up…hanging in.
MICROSOFT…+3, -12…huge gap up for a stock like MSFT.
TEXAS INSTRUMENTS…0,-2…gaps up big and continues up.
UNTITED TECH…-2,-6…rallies 4 days in a row.

We can go on and on. Earnings and sales stink and they are not getting any better. So what is going on? The same thing that has been going on since Mr. Bubble went into the easy money playbook…more easy money. Think about this. We have had 0% rates for about 7 years. We have not hiked rates in about 9.

0% rates pervade the globe with many areas now having negative rates. According to my faulty abacus, there has been $15-20 trillion printed with many areas still printing. So what happens? MORE EASING! Europe and China announce more easing…and again, markets buy into it. China cut rates for the 6th time even though they say they are still growing at 7% and Europe announces an extension of QE as well as telegraphing more QE…so away we go. Do not forget, China arrests people if they just say the wrong thing about markets and has admitted to printing big Yuan to buy up stocks. Do not forget, Japan is still printing a ton and has been buying up their market with debt.

So how does this all end? We will let the predictors deal with that. We have our own opinion but we do not want it to get in the way of what is currently happening. And what is currently happening is the market buying up bad news and gapping up good news in names like Google and Amazon.

Markets are near term stretched to the upside and quite overbought. One would suspect pullbacks are now in order but in bubbleland, anything is possible. Keep in mind, there is a crap load more earnings ready to come out with the big enchilada in Apple reporting on Tuesday.And now we get to be held hostage again by the egomaniacal Fed that has to be front and center on a daily basis. Hike…no hike…hike…no hike…blah blah blah.

Large caps are completely outperforming small and mid-caps right now. In the past two weeks, the Dow is up 600 points while the Russell 2000 is flat. The same for mid-caps. It should be obvious by now the Nasdaq and NDX continue to be led by just a few large names. Keep in mind, there are still plenty of areas not working…with Retail actually breaking down badly late last week. Massive overhead resistance straight ahead.

The METS in 5 or 6.

GOVERNMENT RUN MARKETS WORKING OVERTIME AGAIN

“THE GRM (GOVERNMENT RUN MARKETS) WORKING OVERTIME AGAIN”

By Gary Kaltbaum
garyk.com
@GaryKaltbaum
Fox News Business Contributor
We will be repeating a lot of this in our award-winning weekend report.

We are not a believer in giving out time frames and targets because no one really knows where markets are going to go down the road or in what time frame. That is just guesswork. We had been bearish for quite a while when we called “a good low” on the “poor” unemployment news of October 2. Our simple thought was that 3 reversal days to the upside culminating with a monster reversal on the bad news was the evidence that markets were defended at vital support and sellers were finally wiped out for the time being. As we stated, we never mention targets and time but our best guess at the time was a rally into 2040ish S&P and that would be about it. That thought changed yesterday and today as the GRM is back in force.

Europe not only announces an extention of maniacal money printing and an addition of the same but China announces another massive easing program this morning…which really juiced the futures. Let’s get this straight…China is growing at 7% but they have to ease? At least they told the truth. They said their goal was to lift prices.

Earnings and sales growth sucks…but in GRM, it does not matter much. It’s all about the easy.

For example…here’s just a couple.

MMM sales drop of 5% and lowers guidance…rallies $6.
Microsoft is up 8% this morning on no earnings growth and a 12% sales drop.
We can go on and on about the sales and earnings drops.

Leave no doubt, the only goal of the GRM is higher asset prices. With an unlimited supply of conjured up money, the game continues.

Please remember the recent drop the market had just on the tease our fed may raise a whopping 1/4 point. It will be just a taste of what ultimately happens when markets stop reacting to the GRM. But as of today…

We have 0% rates around the globe. We have negative interest rates in many places. We have had, according to our abacus, $15-$20 trillion of printed money AND THEY ARE STILL EASING!

The Nasdaq 100 will be skewed this morning as 3 stocks have this index almost triple the S&P. Google, Amazon and Microsoft doing the trick! Have a great weekend….and GO METS!

More central bank nonsense!

We waited to write this because we knew Draghi was going to yap this morning. He did not let anyone down as he now telegraphs that a measly trillion/year aint enough and that they will look to be printing more. Of course, the knee jerk reaction is for markets to bid up.

Coming into this morning, while everyone is talking about Valeant Pharm (VRX), we are paying some attention to what happened and what is happening with GS and a few other financial names. Go take a look.

We are also big fans of the semis but now they are skewed as there seems to be another buyout or another rumor of a buyout every day. This is always a help to an industry’s stock price.

Lots more earnings coming out. We make note of TXN as earnings were flat, sales were down but they beat the number as guidance came down throughout the quarter. Lots of that going on right now.

We believe both Amazon and Google report today.

Mets…Mets…Mets!

 

 

Anatomy of a top – Valeant Pharmaceuticals (VRX)

As we write this, Valeant Pharmaceuticals (VRX) has dropped from $264 down to a current price of $88 and change in just two months. There has been issues with this company in the last few weeks as a few are accusing them of accounting chicanery as well as other things. In another chapter of our “Anatomy of a Top,” a keen eye would have taken you out in the 220 to 240 range, never having to deal with this carnage. Keep in mind, when something tops, one never knows how bad things can get but one needs to know what a good top looks like. The stock was a classic case. The following chart shows a break of the 50 day moving average on August 20 (POINT A). This is the first break below that important level since last October 2014.

But one can blame the bad action in the market at that time. It is the rest of the action that told us that the stock was topping. Notice how for four weeks the stock could not get going. Volume contracted indicating no interest in buying the stock back up. Notice how for four weeks the stock stayed below the all-important 50 day moving average, a complete change of what had been done for the prior 10 months. That brings us to (POINT B) on September 21. That day, the stock showed distribution right off the 50 day moving average which turned into the first stair step to the downside. The stair step completed just a couple of days later on September 25 (POINT C) when the stock did the one thing a bull does not want to see and that’s a break of the longer-term 200 day moving average. If the 50 day didn’t get you out, the 200 day  must get you out. As you can see, since that day the stock is now been cut in half. To repeat, there is no way of knowing how bad something is going to get.  But there is a way of knowing when something is topping out and risk has picked up.  Valeant was a classic leading stock topping out, breaking down and then breaking down badly.

No positions

Earnings time!

We will stay quiet this morning except to say WATCH THEM EARNINGS.

CMG down $55 but BIIB up $18. It is earnings roulette….which means sit back and react to the reactions.

And more days like this morning and there soon will be 5 semiconductor companies left as everyone being bought. When you cannot grow, you buy others.

 

So far…no selling!

Intraday selloffs only to be bought up…indices closing on the highs…crappy earnings being bought.

SO FAR, this is what we have been seeing off the lows. There has been a persistent lack of selling in spite of markets being overbought and stretched to the upside on a near-term basis.

Leadership is expanding a wee bit with leaders being the same names that held up best before the market crack. Relative strength has led to the same relative strength.

Massive overhead resistance straight ahead but so far, so good.

There are many that email us telling us this is just a bear market rally. We are all for anything the market wants to do. But a word to the wise. Let the market be your guide. Predictions are worthless. Wasn’t the market supposed to crash on Friday? Harry Dent said so.

Markets overbought here into resistance!

Due to loads of travel, we are going to keep this short and have a bigger report tomorrow.

When we call a low for the market, we never know what’s gonna come of it. We just ride it until it says otherwise. So far, it has not said otherwise. We called a low because the market had three straight upside reversal days culminating with the big enchilada on the employment number day. We thought the fact the market was buying bad news was good news.  We also told you we thought China had turned the corner and that in fact is going on.   Leave no doubt the easy money play is back. Bad news for the economy is good news.

Markets are overbought on a near-term basis here. We suspect as we get closer to resistance, pullbacks will be in order. We are close.

The good news is a few leaders are emerging. There has not been too much in the way of leadership as this rally has been mostly stuff off the bottom. Most leaders have inched up or just sat. The strongest groups are auto parts retail, tobacco, defense, cruise lines, internet travel with a few airlines, reits and utilities working.

A massive amount of earnings are about to come out. The good news is that some perceived bad news has been bought up. A few big financials reported blah numbers, opened down and finished up. This is a change from the recent past. We’ll see if it continues.

Watch the dollar!

While the markets are driving people up the wall and with the Jell-O moving all over the plate there a couple of things that are starting to stick out like a sore thumb. What makes it more interesting is not many people are talking about it.

We think you are about to start hearing that the dollar is breaking down.against all other currencies. This could be very important. There is no doubt this is happening because markets believe the Fed is full of it and that the Fed will stay put. A weaker dollar will:

Buffer multinationals that have been hit hard.

Lift commodities. We are already starting to see gold, oil and the like getting much better bids. We expect you will be hearing more about these areas going forward.

Lift commodity-based countries. We are already seeing much better action in China, Russia. If this happens, the U.S will go for the ride. Yes…easy money is here to stay.

There continues to be very little in the way of leadership and as of the close Wednesday, we started to see some areas that have been holding up starting to break down. Financials are also acting horrid.

So far, earnings are putrid but estimates have already been taken down…so the game of beat the number continues to be played.

We also wanted to alert you to the semiconductors which had a monstrous day on Wednesday off of Intel’s poor numbers as well as more rumored mergers. Yes…poor numbers! This group remains hugely important to the market.

Lastly, Walmart is being crushed even more. Yes, there’s competition but leave no doubt, the higher wage issue is coming into play. Wal Mart just announced a measly $2.5 billion in costs for the higher wages as well as job training. We expect more. The mandating of costs to companies without an equal proportion of productivity is never a good thing. Think pink slips and robots!

Resistance!

Many areas of the market encountered resistance yesterday…and sold down.  Regardless, while there ism some leadership, there is not a lot.  There are hardly any good bases to be found. So patience.

Earnings season time. We expect blah numbers…but expect many beats because guidance has come down throughout the quarter. Remember, it won’t be the news. It will be how things react to the news.