How does a market that closes so bad just gap up in a big way in the morning?
We always cast a wary eye when they can’t rally markets during the trading day but get the “mystery” gaps overnight. Let’s just leave it at that because no matter what, price always counts.
How bad is the technical condition?
As bad as can be on a short term basis…which means markets are beyond oversold. Of course, the market decides to piss off everyone who wanted to get in by gapping up this morning. Just keep in mind, repairing will take time. Just keep in mind, while some major indices just recently topped, foreign markets topped long ago as well as the average stock. The S&P just broke below the 200 day average, the 1st time since June 2016, the longest run above in history. The VIX doubled in 6 days. 10% of the stocks in the S&P 500 are above the 50 day moving average. In other words, a lot of damage and again, beyond oversold.
Why is the new low list so important?
It tells you how much real weakness there has been…and to be kind, it has been brutal represented by just about every major industry.
How does earnings look that are coming up?
We expect strong numbers. We worry about a potential for a peak in earnings as well as guidance as the cost of everything has gone up.
Many are saying this will end just fine and that the year after mid-terms are always a good year…and just buy…?
We are not sure what we are having for lunch today let alone next year…and that is not sarcasm.
Why do you disagree with Trump calling out the Fed?
You cannot have the president with “out loud” opposing views of the man who moves short term interest rates. It certainly does not help calling the arguably, the most important money man on earth, crazy! Let us not forget we are at a whopping 2% on the short end…which is still ridiculous easy money and memo to the prez, it is the 10 year that is attached to mortgages. So all you Trumpster whiners are wrong.
Could Trump fire Powell?
In a nanosecond. I have an idea…just fire Powell. Hire Bernanke. Bernanke comes in and immediately takes fed funds back to 0% and announces QE4. YIPPEEEE!
Best guess on markets?
More time and price. Anyone who tells you they know how this plays out…well, they probably had the Giants against Philly last night. What I can tell you is there is a ton of technical damage which normally takes time. The good news is that SO FAR, this is acting like the top in late January…a steep drop…a low and then a few months of repairing as the market slowly drifted back up. We will gladly take that outcome. That is our best case scenario. Not sure you want to hear our worst case scenario. Let’s not forget, we just dropped 1400 DOW points in 2 days. The average stock is much much worse. Leader AMAZON is up $63 as we write this…but is till down $250 in less than 10 days. Again, a very oversold bounce.
Gold/gold stocks look like its forming a darn good bottom. Volume was heavy on yesterday’s move. Watching on pullbacks but think something’s up here.
We will have some thoughts on Kanye and the abysmal reaction a little bit later.
Can the market crash?
Define crash! Early this year, markets dropped double digits within days. We could call that a crash. If you are asking whether we could have a 1987 crash…well, that would be approximately 6,000 Dow points. Oh hush! We never take any price action off the table but crashes just do not happen often. The world is littered with pundits calling for crashes on a daily basis. Every time the market is hit, they come out of the woodwork professing genius. Let’s just say that conditions are such that yes, things can worsen. Why? LEVERAGE/MARGIN… is the highest on record. Margin is the best friend of the market while it is going up. It is the biggest enemy when markets are going down as the leverage has to come off first before the real selling starts. Why? THE PASSIVE INVESTOR has been lulled to sleep by a market that refuses to go into a real bear market. Passive becomes less passive when markets go down. There are trillions in passive funds. Why? THE MORONS AT THE CENTRAL BANKS have created asset bubbles that only when the music stops will we know.
Can the markets wash out soon?
Sure! We saw it happen early this year. Markets bottomed and then took time repairing but the lows were in.
Could a further drop affect the election?
Hell yes. Every 100 point drop matters. I can see the ads now. “THE TRUMP DUMP!” “LOOK WHAT TRUMP HAS DONE TO YOUR 401K!” Of course, the media who hardly reported the good…will run 24/7 if markets turn bearish.
Are you worried about President Trump blasting the Fed?
Again, hell yes. It is not a whopping 2% Fed funds that could cause a worsening stock market. Guess what could cause a worsening stock market? Correct. President Trump interfering with markets and the Fed with his mouth. His words are simply ill-advised. To think a 2% Fed funds rate is problematic…sorry. Keep in mind, the important capital is tied to longer rates that the Fed is not playing with right now. The president is making a huge mistake calling Powell “crazy!” If he wants to call someone crazy, let it be Bernanke who started this easy money train down the tracks.
Speaking of Bernanke, the WSJ took him to task this morning in an op-ed. THANK YOU. We know it is now many years ago, but he started this moronic experiment. He also got other countries to follow suit. Europe and Japan still have negative rates and are still printing money. They will never know real price discovery…until price shoots the middle finger back…which may be happening now.
What people are saying:
IT IS GOOD WE ARE OPENING DOWN THIS MORNING AS IT GIVES THE MARKET A CHANCE TO WASH OUT.
We think that is thinking a little too short term. We suspect the damage that has been done, at the very least, needs some more time and price.
THE ECONOMY IS STRONG AND EARNINGS WILL BE GREAT.
Careful. Markets look forward, not backwards. In fact, markets could not give a crap about yesterday. Keep in mind, with energy prices and interest rates spiking, the cost of everything has gone up. We will know soon enough how much effect there has been during not just earnings reports, but more importantly, the guidance. We do not want to hear more of what PPG just said.
THE MARKET HAS CORRECTED 5% 23 TIMES SINCE THE 09 LOWS AND EVERY TIME, THE MARKET CAME ROARING BACK EVENTUALLY.
That is the good news…BUT IT IS ALSO THE BAD NEWS as we promise you, the bear market has not been extinguished….even with all the easy money…and yes, way overdue.
“THIS IS JUST A BLIP! STOCKS ARE CHEAP! THE DROP IS PROVIDING GREAT VALUES.”
The market could care less about what people think. Value is what the market thinks.
And lastly, just remember our reports of past months. Remember what we have been saying on radio. With the DOW/S&P/NASDAQ/NDX all near highs, a ton of stuff was already bearish including many of the world markets. Negative divergences were all over the place and picked up in the past couple of weeks. With 50% of the market bearish, it is easier to sell off markets if they decide to come down. We were in hopes that if we could get past September and October earnings, that we could have a normal end of year rally, narrow but nevertheless, a rally. But when we saw last week that the 50% that was working start to roll over, we knew something was up causing us to get real worried on October 4th. We are amazed but not so amazed how much destruction there has been but what really has us worried is what is on the new low list. INDUSTRIALS, AIRLINES, CHEMICALS, MATERIALS and all kinds of crap are plunging. If you are a big believer the market is a great forecaster…then one has to wonder whether the economy is topping out with the numbers heading south in the months ahead. We are already seeing some worrisome numbers in other parts of the world. Hopefully, this is just another nasty correction, akin to what we saw at the beginning of the year. But we must tell you, the internals are much worse, world markets are much worse and now a president is interfering with something he should not be interfering with.
THIS IS A MAJOR HURRICANE. HOPE YOU ARE ALL LISTENING TO GET OUT OF THE WAY.
OOOPS…NDX futures down decently…DOW and S&P less so.
We have absolutely no idea of where this market goes…just that:
RATES GOING HIGHER
OIL PRICES (while pulling in a wee bit) HAVE HAD A BIG RUN
GROWTH STOCKS CONTINUE TO BE YONKED
THE DOW REMAINS STRONGEST (not the best news)
THE S&P SITS ON THE 50 DAY
Trump states he is not happy with the fed because they are raising rates too quickly. The last time we had an economy like this, rates were 6%. We hope he shuts up on this. He should not worry. Any blip will have them not only stop…but they will lower rates…as they are quite insane. Europe and Japan are still negative and still printing…and China has eased twice in the past month.
“You cannot be civil with a political party that wants to destroy what you stand for, what you care about,” “That’s why I believe, if we are fortunate enough to win back the House and/or the Senate, that’s when civility can start again. But until then, the only thing that the Republicans seem to recognize and respect is strength.” This statement from Hillary Clinton. For all the complaints about Trump, this is what she says!
Mark these words down. THERE IS GOING TO BE A WAR ON AMAZON. Look for many to call for some sort of break-up using anti-trust. I am seeing it and feeling it on a daily basis…and I am not just talking Trump blasting on Bezos because of the Washington Post. I am seeing not so subtle rhetoric from the left on this.
Taylor Swift…Kanye West…BOOOOOOORING!
Lastly, Nikki Haley…the only way to describe my feelings…is that whenever she talked, I wanted to listen. Can’t blame her for taking a break.
Futures down off of weak Europe and Asia. China down even though they eased again. Not thrilling news.
Markets short-term oversold but as we stated, oversold can become more oversold.
Earnings start to come out in droves late this week with a few important FINANCIAL names like BLK, C, JPM, WFC. PNC.