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.