MARKETS/PRE MARKET

Even though price is about the same as the previous two rallies, this one feels different. We are seeing beta/tech acting better. We are seeing a few names in that SOFTWARE group setting up or edging out of range. We are just feeling the overall tone as being much better.

But:
We are now starting to close in on that massive “waterfall” breakdown…which should provide near-term resistance. We are now starting to close in on that massive “waterfall” breakdown while markets are now very, very, very overbought…with all major indices still below the 50 day moving average, which is still below the longer-term 200 day moving average.
Potentially coming out of bear markets takes time. It takes 2 steps up, 1 step back. It takes some scare days. It takes a process. We are not in the “new bull phase” camp yet but are open to the possibility. We have moved up in price about as much as the past two failed moves. If sellers show up soon, it would not be good news as rallies and failures into resistance are a part of bear markets…but again, the Fed matters. We hope it’s a new bull so we don’t have to write as much. Next up…not earnings but what will matter more, the reaction to the earnings…and oh yeah, the Fed has 9 speeches this week including one by the head honcho, top dog, big cheese.

 

PRE MARKET

Futures flattish and that is actually good news. Need some working off the latest surge off of extreme conditions both in price to the downside and bearish sentiment.

This rally feels better than the last two. We completely doubted the last two as they were nothing more than bear market rallies. Both lasted less than 7 days. This one ‘feels” like it can last longer but leave no doubt, if sellers start showing up, a word to the wise…careful. Every major index is still BELOW the recent “waterfall” breakdown and also below the declining 50 day moving average which is below the longer-term 200 day moving average. Also, we cannot find one new high but we can find a few SOFTWARE names near the highs and seeing a few beta names turn the corner.

Lastly, we believe the fed is back holding hands with the market. Whether or not it matters, time will tell. For years, it has mattered.

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YESTERDAY/PRE MARKET

Gross day yesterday but a gap to the upside today.

Futures turned up when China eased overnight…again. Also, news of ANOTHER trade meeting even though everyone knows there will be trade meetings.

The big economic story is a MUCH MUCH MUCH better than expected employment number as we are being told more than 300,000 jobs were created. This is an outlier number in comparison to the norm. The past couple of times this happened, the next month was soft…but we shall take it and not throw cold water on it.

The DOW closed 1,900 points below the declining 50 day moving average which is bearishly BELOW the 200 day average…so a further rally to contract that spread is always a possibility. We do not believe the lows of December 26 will break any time soon…but be careful about thinking it is THE low. We are open to anything but…you know the stance.

REVERSALS?

We are being asked quite a few times today whether the market can reverse back up today…so…in past weeks we have seen a 900 point reversal in 90 minutes…a 1,000 point rally out of nowhere in just a few hours and our actual favorite was NewYear’s eve day when the Dow rallied over 150 points in 30 seconds…so of course one is possible.

 

But again, too many remain focused on the short-term craziness (the trees) when they should be more focused on the big picture (the forest). The big picture, notwithstanding near term craziness, reversals, reversals of the reversals and all that crap…remains quite suspect. Shorter-term is just that.

PRE MARKET AND APPLE

APPLE (AAPL) down $14 this morning cutting about $65 billion in market cap. Futures down decently but off their lows from the overnight. It used to be weather or the strong dollar. Now all warnings are blamed on China.

To take the positive side:

Weak open yesterday…stronger close though the day had more wild swings. Always a possibility for another positive reversal day though we can never predict one.

Markets are still in bounce/rally mode off the lows…but that’s only after 4,268 Dow points in 14 days.

While oil is bouncing, it is still way down from the highs saving tens of billions for the consumer and business.

The fed is done.

The 10 year is now down to 2.645.

That ADP # much better than expected…but why is the 10 year yield down on the news. One would expect a spike in yields on that news.

Other than that, you know our big picture stance.