PRE MARKET

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On radio yesterday, we said down 100 Tuesday, up 87 Wednesday, down 100 Thursday…for the Nasdaq…why not just go up 90 on Friday? That was sarcasm but you never know.

Futures up decently after a yuck day Thursday. To take the positive side, the Nasdaq was down 150 yesterday and finished only 90…and by no coincidence, right at the 50 day average. To our eyes, at best, big Nasdaq/tech/internet and all that stuff is just finally stopping the uptrend and putting in new bases. At worst, it is the start of something nefarious. As far as the semis, a little bit weaker but it has come a long way.

Away from the Nasdaq, the financials are trying as the stress test was passed (now that’s funny) and long rates have backed up. Also, still seeing a decent amount of patterns remaining in good shape in lower beta/value land.

Today is the last day of the quarter. Expect window dressing even though window dressing is illegal. 1/2 day of trading Monday. Still don’t know why they do 1/2 day trading.

“The sea was angry that day, my friends!”

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“The sea was angry that day, my friends – like an old man trying to send back soup in a deli.”

George Costanza

First off, please pay no attention to those who have been bearish since Noah and his ark! Whenever markets get hit, well…you know what they do.

After being bullish on TECH/INTERNET/NASDAQ/NDX and all that stuff for months, we told you on the weekend, right after June 9th that the action of June 9th was not subtle selling but a smack in the face selling. We told you we thought it marked a top in all those areas. We told you to expect some violent action after. We told you that ultimately, there would be more time and price. This Tuesday was gross. Yesterday got almost all of it back and today, right back down. This is the violent action we told you to expect that quite often marks important changes in direction.

Technically, we believe June 9th was the start of the “TECH WRECK” we are now just starting to experience. It occurs because how long it has gone without a correction but also because it became a one-sided trade. We have taken pains to tell you how narrow recent rallies have been creating the one-sided trade.

As usual, we have no idea how long it lasts or how far it goes but best guess this is not the end of the trouble in these areas…but the beginning. AND JUST WATCH THE SEMICONDUCTORS. They led up and are now on the lead to the downside. Bearish phases do happen.

The last question is whether any further downside will affect other areas. So far, other areas have not been hit too hard. BUT…we don’t think we have ever seen a market that does too well when TECHNOLOGY corrects in a big way. Remember, this is a process and not an event. We suspect more violent moves but in the end and to repeat, we suspect there is more time and price to come. There is huge support on the NASDAQ at 5936-5996, the last breakout and the last hold of support. We are in hopes it does not get breached. A move back there would be about a 6-7% correction. Not sure that will do the trick but we are open to anything. Central banks are still alive.

Gary Kaltbaum

PRE MARKET

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Yesterday, NASDAQ/NDX/SOX hit 50 day moving average and bounced nicely with broader market having good day. We remain cautious on the areas that held the 50 day so far as they are trading a little wider and looser and have had a good run. To be watched.

Gee…financials pass the stress test so financials will have a 2-3% gap to the upside today. When the central bank rigs rates down to 0%, screwing the saver…they had better pass the stress tests. Imagine, giving bank trillions of free money they should be paying out in interest.

So pre market…S&P up a little bit but NDX futures down decently. Will be watching to see if they can hold the financials up off this mini-gap. Lots of jello moving on the plate.

 

THE NASDAQ

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After dropping 168 NASDAQ  points in 2 days down almost to the penny to the 50 day average…good bounce today into the end of quarter, pre-holiday period. A few things to remember:

BIOTECHS still in shape. They were hit yesterday but technically, still fine. Helping out today.

The SOX is sitting around the 50 day. Better hold. After early red, turned green today.

Away from Tech, our “changing of the guard” theme just may be playing out. Seeing some real good patterns in airlines and other transports…better action in Commodities (though no leadership yet) and the DOW/S&P-types still acting fine.

Do remember it is end-of-quarter shenanigans.

 

THIS IS WHAT HAPPENS WHEN YOU DICTATE TOO MUCH TO BUSINESS OWNERS!

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We are always amazed when life-long government bureaucrats think they know better than business owners on how to run their businesses. There is a simple formula. Go too far in mandating higher costs to business owners without commensurate productivity gains and business owners will eventually figure out how to cover for the higher expenses. Well, they have. Fewer employees, less hours and more technology is the outcome of utter stupidity on the part of people who do not understand business, have never run a business, have never written out a paycheck and have absolutely no understanding of the sweat, the toil, the time, the risk, the risk capital that business owners put into their business. That’s because many of these bureaucrats have lived off the tax payer since day 1. We have been telling you for years that if they go too far, there will be a reaction…and we are getting the reaction. We are asked what can someone do to get off minimum wage. Simple! Education and training. There are millions of high paying, unfilled jobs in this country that are waiting to be filled. On top of that, for example, a good percentage of Wal Mart managers started minimum wage. All companies want to promote from within. Companies grow best this way.

SOURCE: https://www.washingtonpost.com/news/wonk/wp/2017/06/26/new-study-casts-doubt-on-whether-a-15-minimum-wage-really-helps-workers/?utm_term=.cb54595e80f1 

PRE MARKET, PHIL JACKSON AND CENTRAL BANKS

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As a die-hard New York Knicks fan, we are thrilled to wake up and see Phil Jackson is gone. Phil and is .350 record running the team destroyed the team. But unfortunately, Dolan remains the owner.

We love central banks. As you know, we still believe we are in the midst of a gargantuan central bank-induced bubble. At last count, our faulty abacus has about $20 trillion of printed money interfering and sloshing around the financial markets. Just when the U.S. slowed up on the easing, conveniently, Europe, Japan and others ramped up the easing. They are each currently printing a trillion/year and have rates at -.5%

Which leads us into the recently laboring market for growth/beta/technology. Doesn’t take a genius to tell us it is now somewhat oversold after yesterday. But bounces are random. So futures were down this morning as supposedly, the ECB head actually talked hawkish, that maybe they need to roll back the easy money. Futures were again down off of this. Lo and behold, another ECB dude didn’t like this so he came out to say the reaction was a mistake, that the stance had not changed. And, futures turned right around. We just love these people/.

As we write this, NDX futures up .3% and S&P a little better at .4%. The NASDAQ is sitting right on the 50 day. The NDX a smidge below. Goal line stand time!

 

THE CLOSE

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We wrote the following report the day after the June 9th debacle in tech/internet and all that stuff. We were not kidding. We believe today’s action confirms our interpretation of what happened on June 9th. Read every word but we put in bold the more important lines. We do expect more nausea notwithstanding violent bounces.
“CHANGING OF THE GUARD?”
By Gary Kaltbaum- June 12, 2017
~When it comes to markets, our favorite line is “when things change, we will let you know!” There are times where the changes are subtle and there are the times the changes smack you right in the face. Maybe, possibly, could be, we got a little bit of a smack in the face on Friday.
~For months, we have been telling you our favorite groups were tech/internet/semiconductors with the bigger cap names getting all the headlines. You pretty much know all the names because the majority has been talking about those names recently as the noise got louder. Think FANG or FAANG or whatever other acronym people have come up with.
~What happens this past Friday? Just about everything in those areas had either massive volume reversals or  massive volume drops off the highs. To us, it felt like someone took the pin and popped the balloon. Keep in mind, these areas have been going up, up, up with nary a correction…which is out of the norm. These areas have been extended and stretched to the upside from the norm. Corrections were way overdue. Corrections are usually more harsh when the trade becomes so one-sided…thus we think at the very least, a good short-term top and maybe even more occurred on Friday. Keep in mind, tops do not usually happen in a day. They are a process. We think Friday was just a loud shot across the bow and suspect we are now going to see some violent backing and filling but ultimately we are going to see some time and price for a while. Keep in mind, this has nothing to do with a year from now, two years from now and beyond. We don’t go farther than what our headlights see.
~Often when big leaders top out, it is bad for the market. But not so sure right now. The jury is still out for us. We say that because while the leading areas were hit, other areas look to be coming to the fore. In other words, rotation out of a few areas and into a few other areas. For instance:
~We see money flows coming back into the financials. On Thursday, we thought they were holding very important support. On Friday, we think the low was confirmed as a few names like Citigroup (C) are actually moving out of long, 6 month trading ranges.We will know in time whether they can get legs as there are only a few names that look good to us. On top of financials, we are seeing flows into utilities, a bunch of Dow names (thus the out-performance Friday), about half the REITS we watch (the other half is gross), insurance, investment management, beverages,  and several biotechs. Speaking of biotech, watch $302 for the IBB and $72.60 for the XBI. A move above for both would be major breakouts to the upside.
~Central bank noise, more testimony on the hill and who knows what other surprises from Washington this week. Can’t wait!