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.

AN IMPORTANT REMINDER ABOUT MOVING AVERAGES

With this poor open, just a reminder that the 200 day moving average is still around 25,000 and the 50 day moving average which has crossed below the 200 is still way above at approximately 24,600.  The DOW is at 23,100 as we write this. That is a lot of territory between. This probably…probably means there is some more time and price, some more choppiness, some more back and forth before markets can possibly break the recent lows again. Just remember that when we called that first low around October 30, it took over 7 weeks to break that low because of how stretched, extended and oversold things were. Of course, the recent lows can turn out to be THE lows BUT have seen nothing to indicate that as of yet.

PRE MARKET NAUSEA

Darn it. We were actually going to lay low until this weekend when we hit you between the eyes on markets but:

Before we even start, Mitt Romney, the Sybil of politics, went after Trump (we are no fan) in an op-ed in the Washington Post. We have one simple question for Mr. Romney. If this is how you felt, why not call the president, order some pizza, spend an hour telling him your concerns and give the president what you believe are solutions? Why add fuel to the media fire? Of course, we can now name the next week “kiss Mitt Romney’s a– week” by the media who ripped Romney to shreds when he ran for president.

FUTURES are smacked hard this morning. The blame is on continued weakening numbers out of China. 6 months ago, 5 months ago, 4 months ago, 3 months ago, 2 months ago, last month, last week…we have been telling you that foreign markets were telegraphing slowdowns. We have been telling you that all economic data and all earning’s estimates would be  coming down and that the norm would be surprises would be to the downside. In other words, the markets had been yelling and screaming with a bull horn. Dallas fed, Philly fed, Richmond fed, housing, durable goods and many other numbers have missed estimates.

We are not immune. Estimates for GDP have come down from the high 3s to the low 2s. The markets are predicting lower. Estimates for earnings growth have been coming down to about 7% growth for 2019. We believe that number remains much, much too high.

The bear market in stocks and credit continues around the globe. Too many continue to bark out PAST FUNDAMENTAL NUMBERS which matter not. Too many continue to call it a correction in a bull market. Too many continue to say buy the dip. Too many continue to use the words, cheap, value, over-done, over-reaction and all that crap. We have news for you. Markets do not care a shred about opinion…the main reason why we interpret price.

We were actually in hopes of a couple more weeks of drifting higher for another big short selling opportunity but looks like that may not happen. Bearish conditions continue. The road map for a classic bear market continues to play out in classic fashion.

REVERSALS/COMPUTERS AND THE PRE MARKET

-On Wednesday, after 4,268 points to the downside, aunt Mary and uncle Bob left their house in their Toyota Supra and drove over to their EF Hutton office and told them to buy 100 shares of Digital Equipment. Around the United States, thousands and thousands of people got into their cars and did the same. All felt the market had gone down far enough and felt there was value.  They went to E.F. Hutton, Dean Witter, Lehman Brothers and many other firms, all buying their favorite company’s stock. Out of nowhere, a major rally ensued. The market experienced its first 1,000 point day ever . Yesterday, with the Dow down 600 points, that same aunt Mary and uncle Bob, drove to see their broker and bought 100 shares of of their other favorite stock, Eastman Kodak. Thousands of others did the same. Out of nowhere, the market experienced an amazing 900 point rally in 90 minutes.-
-We hope you know that was sarcasm. We have watched the past couple months as many people have been blaming the modern technology of computers, programs and algorithms for Wall Street’s drop and volatility. We have news for you. Yesterday’s 900 point rally has been reported to be one of the top five biggest computer program trades in history. We have news for you. Wednesday’s rally was also computer driven programs. We have news for you. The Dow going from a low of 6,469 to a high of 26,951 in nine years with no real bear market was with programs, was with computers and was with algorithms. We did not see anyone complain about them during this amazing run to the upside…yet possibly the first real bear market in almost 10 years and we hear nothing but whining. Very simply, if you’re going to blame the downside, give some credit for the upside. Technology is here to stay. It ain’t going nowhere. Just saying.-
-On Wednesday morning, we  told you we were very close to a bear market rally. We did not know when but knew we were getting closer. This thought was based on two simple things. First, the DOW had dropped an amazing 4268 points in just 14 days.  Second, bearish sentiment had gone off the charts. We also had the idea that there were just a few days left not only in the month, not only in the quarter but in the year. Of course, window dressing is illegal so it does not happen. 1,000 points came out of nowhere. This led to  yesterday morning when we told you not to worry about the market being down 300 points pre-market because we were going to see a lot of gaps and the lots of reversal. Volatility always picks up when price is stretched away from the norm. Well….that was one hell of a reversal. We had no clue one would happen and we certainly had no clue 900 points in 90 minutes. But again, we do know what happens when things get so stretched.-
-We have already been asked a few hundred times in the past day whether we could possibly have seen the bear market low. We never take anything off the table especially with central banks at the ready and the president that watches every tick in the market. We are all for it being THE low. But, you have seen a 2100 point rally in 7 days. You have seen a 1700 point rally in 6 days. Both failed miserably. And…”bear market rallies are sharp, quick, make you feel good, suck you in and bury you soon after.” Maybe this time it is different. So far, to our bleary eyes,  this is nothing more than a gargantuan oversold rally in a bear market that by no coincidence happens at the end of month, end of quarter, end of year window dressing period. Again, 4,268 points in only 14 days will get you some serious sized bounces. We suspect there is even more upside to fill some more of that 4,268 points. We will know a lot more on how they pull back this move off the lows. Typically, markets experience an A-B-C rally. A to the upside. B on the pullback. C one more upside higher than the A…and then resumption of the major trend. We do believe Wednesday’s lows will hold for a while though. It had better.-