SOUNDING OFF ON FRIDAY’S ACTION
On Friday, the DOW lost 876…as we write this, up 370. The NASDAQ was down 820…as we write this, it is up 390. It’s a long night.
If the drop last week was not on tariff news, we would be telling you the “market” had topped for now. When we say “market,” we mean the big indices. The big indices have been acting admirably riding trend with not a stop below the 50 day. But underneath, it is getting hairy as we have told you and showed you how many areas are much worse than the big indices.
But the drop was on tariff news and will give every chance for the “market” to right itself as we believe there is a 0% chance of the threatened sized tariff. Yes, there is that much power in words and threats. That said, let us not forget that even before Friday’s drop:
Restaurants, rails, truckers, airlines, cruise lines, hotels, transports, payroll, waste management, food, beverage, tobacco, insurance, private equity companies, auto dealers, autos, a ton of retail, the a/d versus the NASDAQ, housing, housing-related, regional banks and most oils…were already in tops, toppy, topping with areas like restaurants, payroll and others in downright bear markets. Private equity names have been blasted because of worry on credit.
On Friday, they came after pretty much all strength except gold. And when we say they came after, they came after. Big banks break the 50 day badly. China and China names break the 50 day badly. Anything leading came in hard including leading AI in semiconductors, data storage and energy. The good news is most remain above moving averages but leave no doubt, left a nasty mark. We will keep concentrating on this strength.
As usual, there has been backing away from the harsh rhetoric because the players involved know a bad market hurts their chances next November. We loathe all this. We are not fans of tariffs as they are a tax on us, not them. But we are just spectators. Our decent guess again is that no chance we get that 100% tariff on China which would be on top of what tariffs there already are. We all know what would happen if they do occur and last a while. In an expensive market, a waning job market and lots of froth and speculation in many NO SALES things…would not be a reach to say look out below.
But that is not the case. We expect…we hope the harsh rhetoric goes away and cooler and smarter heads prevail. Meanwhile, we have very little edge near term when you get sudden meltdowns and now what looks to be a gap back up to fill some of that drop. We now also have to deal with thousands of earnings reports just ahead starting with big banks and financials this week. Expect some lovely whipsaw back and forth where hopefully, we will isolate the big strength. If markets cannot bounce well off of the friendlier rhetoric, you will be hearing from us.