ANOTHER LOW?

Janet Yellen was quoted as saying there are gigantic holes in the financial system and warns of another potential financial crisis. Now that’s funny. The woman, along with Bernanke, brought us 8 years of 0% interest rates, the printing of almost $5 trillion and in concert, had Europe and Japan print and actually go into negative rates enabling a massive, massive, massive, massive…did we say massive debt and leverage build-up around the globe…now warns us of trouble that would have been caused by her and her buddies. How precious!

The market experienced another strong reversal to the upside yesterday, the 2nd in 3 days. As we said yesterday, the importance can be significant for now. We say this because AGAIN, major indices held important, gargantuan, monolithic support levels that have held 3 times since late October. A hold does not mean we are off to the races but a hold can be built on. We outlined several reasons for the potential yesterday. 1) Those support levels being vital. 2) Huge bearish sentiment finally showed up. 3) Oil price crash a boon to the economy. 4) It’s December. 5) How far markets had dropped in just 3+ days. The DOW down 8%, S&P down 7.75%, NASDAQ down 8.1%, NDX down 8%, Russell 2000 down 8.4%, SOX down 10% and the TRANSPORTS down a whopping 12.5% in just over 3 days…not to mention misery around the globe. 6) The most important part of the equation, the Fed now moving to have the market’s back. We cannot continue to tell you how important this has been throughout the past decade.

And something we did not mention yesterday…trade. This morning, there was supposed good news on trade as China announced this, that and the other thing. Futures are up nicely on the news. So…another chance for a decent low. We are all for it sticking. Just know that if at any time the lows are taken out, we suspect all hell could break loose. But for now, looks like another low but don’t blink. Rallies and drops have lasted days, not weeks…and keep in mind, everything remains BELOW longer term moving averages/resistance. And lastly, don’t blink!

ANOTHER POSITIVE REVERSAL DAY BUT

-First:-

-Macron announces wage hikes and tax cuts. Let’s see, spend more taxpayer money without any productivity gains with wage hikes but take in less taxpayer money by lowering taxes…you know, the taxes that pay all the wages. Sure…that will work! –
-Second:-
-Vote yes on Brexit. Wait 2.5 years. Negotiate something that looks like it has nothing to do with the original vote. The result…nothing!-
-And:-
-We wrote to you this morning just to outline the POTENTIAL positives in this nauseating market. The report included the extreme bearishness built up, the market now sitting again at vital support, the fed now having the market’s back, oil prices continuing to drop and it’s December as we now head into the end of year.-

-The good news news is that for the 2nd time in 3 days, markets had a strong reversal to the upside after early nausea. For today, the goal line stand the market needed showed up. Hopefully, maybe, could be, we are seeing another low. On many occasions, these types of washouts at important support serve to put in near-term lows. After all (ready for these numbers), in just over three days, the recent drop had major indices tank 7.5%-12.5%. Again, those are the numbers for the major indices…not individual stocks, which always fare much worse than an index. Amazingly, from peak to trough, the TRANSPORTS dropped the worst, 12.5% in just over 3 days.-

-Normally, drops and bounces in markets like this last weeks, not days. But we get what we get and deal with it. Normally, we tell you to expect upside testing after another great defense/reversal day like today. But look what happened after Thursday’s reversal. We will just say today helps the cause in the near term…but there is nothing normal in the action we have recently seen. Just keep in mind, further upside would not change the big picture.-

-The one area that is finishing off the lows but is still nicely down is the financials. If they cannot rally, we promise you any rally will be anemic and short lived. The good news is that beta/tech had very good relative strength all day. But…don’t blink!-

PRE MARKET

Futures reversed overnight. Were down 200…now down just a wee bit…but was actually up nicely 30 minutes ago. Let’s not forget a few important factors.

MAJOR INDICES are now sitting at or near the lows that have now been hit three times. The last time was Thursday, where the market experienced a strong reversal. Friday was less than thrilling. Until the indices get taken out, they are not. DUH!

On the POTENTIAL…and only say POTENTIAL positive side:

Sentiment is extremely bearish. One of our main indicators is now sitting where it was at the June and August lows. Keep in mind, just because sentiment is bearish, it does not mean the market turns. Sentiment is a secondary indicator. price is primary.

We continue to believe THE FED AND BEN (JAY POWELL) BERNANKE WILL BE DONE WITH RATE HIKES NEXT WEEK. As you know, at least we think you know, markets have been on a magic carpet of easy money through the years where rates were kept at 0% for 8 years and $trillions were printed. We are amazed at so many that are pissed because the fed is at a measly 2%. On top of that, the more important 10 year is less than 2.9% To this day, Europe and Japan are still negative with rates and still printing money. WE DO NOT IGNORE THIS BECAUSE WE HAVE SEEN FIRST HAND WHAT EASY MONEY HAS DONE FOR MARKETS. The question will be whether we are finally to the point where markets ignore the fed. WE ALSO EXPECT FEDHEADS TO JAWBONE EASY MONEY IN THE WEEKS AHEAD. They already started last week.

OIL PRICES are a HUGE expense cut to the consumer and business. If prices just stay around here for the next year, the consumer keeps about $80 billion in their pocket. Of course, as we have stated, a crash in oil prices may be telegraphing big slowdowns…which we are starting to see right now.

It’s December. We know. We also said it was Thanksgiving week. Just realize this is the big money’s chance to make things right into the end of year. We will be watching extra closely in the days ahead. Seasonal strength is important but has not worked 100% of the time, especially in bearish markets.

RANDOM THOUGHTS AND WORRIES

As we rapidly approach the end of 2018, it is time to let you know what we are seeing as well as thinking on any number of subjects. As you know, we really do believe price talks, markets talk and we must listen. This report will cover some facts and some worries. We will have a market report later tonight. Think ugly but think Fed trying to continue to save the day.

We received this and verified. Below all time highs in cryptoland:

BITCONNECT 100%

QTUM 99%

ICON 99%

BITCOIN GOLD 98%

BICOIN CASH 98%

NEO 97%

IOTA 96%

LITECOIN 93%

ETHEREUM 93%

BITCOIN 83%

We only listed 10 names but the morons/crooks/charlatans brought out about 2,500 names including the POTCOIN from Dennis Rodman and a coin from Venezuela. Most are down in the 90s with many already turned to dust. This is one of our proudest calls as we yelled and screamed back when these coins were having their final ridiculous run that they will all “turn to dust” and dust they are going. We believe the only reason BITCOIN is not down further is because it is now held in a few big hands. If they sell, they kill each other. Thus you are seeing what we call the slow death. Remember this for the future as easy money creates manias and bubbles. There will be more and unfortunately, these bubbles are touted by a bunch of hypsters who are talking their book and ultimately their mistake. We are still amazed how many still are touting this crap…and how a certain media outlet that touted this crap at the highs, still brings them on.

Last week, APPLE (AAPL) posted a banner on top of its website advertising the new IPHONE XR for just $449 if you trade in an IPHONE 7 PLUS. The XR usually sells for $779. They also started offering a promotion boosting the trade-in value of other older IPHONES. Maybe price does matter as suppliers continue to cut their numbers and APPLE’s stock continues to swoon.

A recent survey found 44% of Facebook users between 18-29 say they’ve deleted the app from their phone in the last year. Sales and earnings have had a serious deceleration in recent quarters. Facebook and Apple HAD been big leaders in the market.

Corporate debt, enabled by the dolts at the fed is up approximately 86% since 07. About 25% of junk rated issuers are now rated at B-MINUS or lower, up from 17% four years ago and the highest level since 09. Remember what we have been saying for years. Easy money creates dislocations in price and yield…and almost always ends badly when things normalize.

For those continuing to say fundamentals are fine, Germany and Japan just announced contractions even though both are still printing money and have negative rates. There is no ammo left. On top of that, estimates for US GDP just dropped from 3% to 2.4% in just the past few weeks.  We recently told you the norm going forward will be lowered expectations. Markets seem to know this.

The main cause of the recent protests in France is not only about a scheduled 25 cents/gallon increase in gas taxes but also the elimination of a wealth tax put upon the country by the last socialist who ran the show by the name of Hollande. Of course, Macron already has backtracked on the tax with our expectation that the wealth tax will come back. Not sure this will appease as Macron is polling just below root canal. But the real story is a $49/gallon tax. What? You haven’t heard of this. From Forbes: “If Paris streets burned over a proposed 25 cents/gallon climate change tax, imagine the global conflagration over a $49/gallon tax. That’s what a UN special climate report calls for in 12 years, with a carbon tax of $5,500 per tone- equal to $49/gallon of gasoline or diesel. Follow the money!

We believe we have heard several different stories coming out of the administration on the arrest of the CFO from Huawei. We repeat. Nothing happens by accident and to believe nobody knew about this in the administration? We continue to believe tariffs suck and this whole trade thing has been mishandled. It seems we are hearing different stories from different people. Yes…we know China is a bad player but what happened to the greatest negotiator of all time and the “Art of the Deal?” Companies cannot plan when they do not know costs/expenses or what they can charge. Trust is usually part of negotiations and not sure there is any from each side.

Let us repeat. Ben (Jay Powell) Bernanke said this in 2012. “Investors really do understand now that we will be there to prevent serious losses!” You are now seeing what he meant over the past two weeks. If they actually raise rates one more time next week, we expect more language to come out trying to do one thing…defend the markets. So far, markets have stuck a certain finger back at him and his now-dovish yapping, a complete 180 from just a few weeks ago. It is also no accident that a couple of other fedheads came out in the past couple of days, one saying we should be getting close to the end and the other amazingly saying the fed shouldn’t even raise rates next week..

The taxpayer’s interest tab in 2018…a measly $523 billion. That’s $523 billion not going towards roads, bridges, highways, the poor, the elderly, the indigent, children. Yet, there is still talk about the need for infrastructure money and money for a wall when all these people created all this. And don’t get us started on Obama’s $800 billion stimulus for “shovel-ready jobs. We know the only thing that got shoveled. But don’t worry. Many of the same people who brought us to $22 trillion of debt are still in power. They promise to fix the problems of this country.

BERNANKE HAS ARRIVED

-“IF AT FIRST YOU DON’T SUCCEED, TRY, TRY AGAIN!”-            
           
-December 7th…National Pearl Harbor Remembrance Day! If you have a chance, please go visit and learn of the heroics.   https://www.youtube.com/watch?v=LZzIetRBiME-  
-Bernanke strikes again. No longer will we be calling Jay Powell by his name. His new name is Bernanke. Why? Back during Bernanke‘s tenure, every time markets got in trouble, Bernanke would either talk more easy money, do more easy money or the big enchilada of printing the easy money. You remember! QE1…market rallies. QE1 stops…market drops…time for QE2. Market rallies. QE2 stops…market drops…QE3. Market rallies. It looks like Bernanke part 2 is here.-
-Markets have been crushed recently. What is Bernanke to do? First, announce you are back near neutral. In other words, we are going easier. Markets rally. But oops. Markets stop rallying because they are just words. Markets tank. What is Bernanke to do? Announce part 2 in less than a week that you will slow the rate increase pace. You did see the headline this morning in the WSJ? The fact is Bernanke has to raise rates in December because all credibility would be lost…but that’s it. You will not see another rate hike. These people that created the bubbles know they cannot have the bubbles pop…so here we go. If it first you don’t succeed, try try again. Of course, markets rallied nicely into the close yesterday off this news. We must admit all 700 points points did not come after the announcement because we know Bernanke would never leak the announcement first before making the announcement. Right? That would be unethical. That does not happen.-
-Just leave no doubt the man who said in 2012 that investors know the Fed will protect them from losses has put his cape on and is trying to save the day. A further market drop and you will be hearing the trial balloon of actually lowering rates.-
-But the big question is whether there is any ammo left. Germany just announced contraction but the ECB is still negative with rates and still printing money. Japan just announced contraction but they are also negative with rates and still printing money. What other arrows would they have in their quiver. We are at a tight (sarcasm) 2% with the 10 year now under 3%.- 
-Technically, the markets held the lows for the third time yesterday. This is vital. We told you midday yesterday that if any day was going to reverse, it had to be yesterday. We did not predict it but knew the market needed another goal line stand. We will know a lot more by how strong the market bounces but after we scanned 2000 stocks, 200 sectors, every country and every commodity last night…not very thrilled. It is good to see the major indices hold for the 3rd time but less than impressed with what we are seeing. Leadership remains in the most defensive of areas in utilities, reits, a few defensive consumer staple names but actually seeing some real good action in a few names in the software group…but we never argue with decent reversals. And before we forget, there were over 1100 new yearly lows yesterday while major indices held the lows. Internals not so great.-
-This brings us to this morning. We told you weeks ago that the norm going forward would be a missing and a lowering of economic expectations. Markets have been telling us so. We just received one in the employment report. Expect more of this. Futures actually rallied off the weaker news because why? Bernanke is back as any weakening of markets or the economy will move this man. Whether or not it helps is another story.- 

MIDDAY NAUSEA NOTES

-By Gary Kaltbaum- Midday December 6, 2018-

-OK…it’s a long day but how about a potential positive for a change…BUT JUST FOR THE NEAR TERM!-
-Since we are being asked…a couple hours ago we noted how strong TECH/INTERNET/GROWTH/BETA was in relation to the DOW being down 700. As we write this, the DOW is still down a whopping 500 points but the NASDAQ has come all the way back to only down 50. We always watch beta when markets are in trouble. If beta can show relative strength, there is potential for the “market” to follow. After all, we just dropped 1,500 Dow points in less than 2 days. Of course, if the DOW rolls back over today…fuggedaboutit!-
-With major indices back near their yearly lows, already very oversold after two nauseating days, with the only index to break the lows (RUSSELL 2000) undercutting and trying to reverse and with most in despair…we predict nothing but if there is any day markets have a chance to wash out, it is this one. It had better!-
-But just to show how the average stock is much weaker than the indices, there are 1,100 new yearly lows today on the NYSE and the NASDAQ with no index below the yearly lows. Just pointing out some potential.-

MARKET NOTES

Tonight, futures are down over 300. The latest:

“A top executive and daughter of the founder of the Chinese tech giant Huawei was arrested on Saturday in Canada at the request of the United States, in a move likely to escalate tensions between the two countries at a delicate moment.” AND…Senator Ben Sasse, a Republican of Nebraska, linked the arrest to the American sanctions against Iran. Huawei, China’s largest telecom equipment maker, has been under investigation into whether it had broken American trade controls to countries including Cuba, Iran, Sudan and Syria. So let us get this straight, at the same time we are trying to cut an important trade deal, this is what we do? Who is running this joint?

But even before tonight:

Last Monday, after a 2,000 point drop in 9.5 days, with 1,100 of those points Thanksgiving week, we thought a low had been put in.  We thought we were about to get the December seasonal strength. And then on Wednesday, “easy money” showed up again in the name of Jay Powell adding 600 points in the afternoon. Then the “whatever” trade deal gapped the market up over 400 points this past Monday. That was 1,600 points in 5 days and a gap. That 1,600 points normally happens in weeks, not days…but the easy money news and the “whatever” had the juices flowing and shorts scrambling. That may have been the December rally. After all, 1,600 Dow points is a lot of territory covered. Monday finished 200 points off the high and then yonk. That WAS the rally to work off the oversold condition. The outcome:

Even though no major index has broke the lows yet, already, there are over 600 STOCKS ALREADY AT NEW YEARLY LOWS. This indicates serious weakness and poor internals.

Even with the move up, only about 30% of stocks were in shape. For those without an abacus, that’s 70% of stocks bearish.

Most everything rallied into the declining 50 day moving average and failed miserably. This in itself is bearish market action.

Citi, Morgan Stanley, Goldman, Suntrust, Capital One, Discovery Financial, Barclays, Deutsche Bank, Regions Financial, Comerica, Allstate, Prudential, AXA, Athene, Lloyds, Bank Montreal, Pacwest, Bank Ozark, Umpqua, Texas Capital, Aegon, Eaton Vance…we can continue. These are all financials at new yearly lows with another 50-100 names within a stone’s throw from the lows. THIS IS NOT GOOD NEWS. In fact, it is terrible news when financials lead down. They hardly rallied in the 1,6000 point move to the upside.

The 10 and 30 year yield are breaking down. We gather you will be hearing the word “inversion” as much as you hear the name “Mueller” on those 2 networks.

The TRANSPORTS were down almost 500 points Tuesday. That does not happen in bull markets. On top of that, the market squashed important names FEDEX and UPS. On top of that, important TRUCKER JB HUNT is at new yearly lows. What’s with that?

The RUSSELL 2000 is already near the lows. In fact, while the DOW went up 1,600 points, it hardly budged. Don’t worry. It is only 2,000 stocks.

Ditto for the MIDCAP 400.

Everything and we mean everything has made lower highs. That’s everything except all the defensive areas we have been telling you were acting best. (Utilities, consumer staples, reits) Risk sold, defense held up!

You already know what we think energy prices are forecasting.

A COUPLE MORE IMPORTANT NOTES.

We are hearing a little too much that every time the market heads lower it is because of the computers, algos, programs and all that crap. Our answer to that: stop it! Are you telling us the 1,600 points to the upside in just over 5 days is real buying but the selling is just fake selling? We call that making excuses.

Lastly…if nothing changes overnight, major indices will be opening near the lows with the RUSSELL probably opening below the lows. This gives the market another big chance to hold but…IF all these major indices break the lows, you will be hearing “bear market” for the major indices.

THE HIGH?

-By Gary Kaltbaum- December 4, 2018-
-The hope that the rally would turn into more than a bearish market rally is now dwindling. The hope that pullbacks would be controlled and rotational just aint happening. We called A LOW last Monday and THE LOW last Wednesday off the Fed…but now think that’s it for the rally. Yesterday’s highs will be THE HIGH for now…with markets heading back to test towards THE LOW…but…something is up and it is not good!-

-As we write this, TRANSPORTS are down over 440 today…and what’s up with FEDEX and UPS? Not bullish! And why is JB Hunt (JBHT) at new yearly lows? Again…not bullish.-
-The 10 year is down to 2.92%…someone is making a certain bet. Not bullish.-
-FINANCIALS are rolling over with a few names at new lows. Have you looked at Goldman? (GS) Not bullish.-
-REGIONAL BANKS acting horribly. Not bullish.-
-MID CAPS and SMALL CAPS hardly budged in this rally off the lows. Not bullish. The RUSSELL 2000 is almost back to its lows. Not bullish.-
-The SEMIS act horrid. Not bullish.-
-RETAIL acts horrid…not bullish.-
-HOUSING gross…not bullish.-
-INVESTMENT MANAGERS near lows. Not bullish.-
-GAMING, AUTOS, DEFENSE, CRUISE LINES, DISCOUNT RETAIL, OIL, COMMODITIES, STEEL, METALS, MINING, INDUSTRIALS…all have very poor patterns, rallying into resistance and selling off badly. They continue to act bearish even though from trough to yesterday’s peak, DOW was up 1,600 points. And this all happening with knowing the Fed is now dovish and supposedly a deal will come with China. Something’s up!-