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Friday, December 15, 2017

Market Alert - Pre-Market

Futures vs FV: SP +8.64; DJ +108.34; DJ +13.84

Quad witching expiration. Futures trended higher in the morning but are backsliding as the bell approaches.

Not a ton of news but CNBC is harping on the tax deal and how it is not a done deal, highlighting the list of senators who are questionable. That list certainly has not changed as to the problematic members, but this has a lot of momentum. Of course I thought the ACA repeal would pass because of the scoring -- but it did not. In any event, those inside the circle say that everyone will come along. They need to do it today in terms of setting a vote Monday.

NY EMPIRE PMI, DEC: 18.0 vs 18.0 expected vs 19.4 Nov. 5-month low on the Empire and second miss in a row. Some are saying stagflation. That sure seems a stretch at this point as 18 is a long way from the breakeven 0. Gee, I sound like Greenspan and his economic 'slow patch' terminology.

Earnings beats: ORCL ($12B buyback); ADBE (upped 2018); COST; JBL (AAPL supplier)

Industrial Prod, Nov: 0.2 vs 0.3 exp vs 1.2 Oct (from 0.9)

Capacity, Nov: 77.1 v 77.2 exp vs 77.0 prior

Bonds: 2.36% vs 2.351%

EUR/USD: 1.1793 vs 1.1776

USD/JPY: 112.22 vs 112.36

Oil: 57.31, +0.27

Gold: 1264.10, +7.00

Futures are fading from morning highs ahead of the open, and as you have seen many times the past two months, morning futures are not a reliable forecast of market direction for the session. Modest gains give sellers something to shoot at.

Thursday saw small caps get knocked back to the 50 day EMA and big name NASDAQ gave up some good gains on the session. That fade by the big cap tech left them still a group to watch as they continue the test of the rebound off the sharp early December rotation selling. Of course the small caps struggled on the tax uncertainty news. Watching to see if they improve as the news flow emerges.

Futures eroding farther off their morning highs. The early bounce does not have much staying power, will be tested, and then key for the morning after that is whether the bids return. As for entering new plays we will see how they perform. Not expecting a lot of upside fireworks today given the tax reform questions and nothing really happening to lock it down until next week.

Jon Johnson, Chief Market Strategist
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Thursday, December 14, 2017

Market Alert - Last Hour

As the tax reform bill gets closer to the end of the funnel the usual 'but I want this!' no vote threats come out. Rubio and Lee want more credits for the poor, while McCain and another senator are in the hospital. The last minute anxiety, even the ACA had it, has stocks on edge, selling off in the afternoon session. Now trying to bounce off the lows toward the close, but the jitters are there.

So, Rubio and Lee will get appeased, then perhaps McCain (hospitalized for a reaction to his cancer medication) and Cochran (non-cancerous lesion removed from nose) will get a B-12 injection and hobble onto the senate floor. Cannot vote via the internet.

With this issue, many stocks in leadership areas gave up gains: financial, retail. Biotechs were up but have reversed; taxes apply to them in a big way as well. FAANG is still up but well off earlier highs that gave them the look that they perhaps were not as tired as we chided last night.

SP500 -6.8, -0.26%
NADSAQ -11.33, -0.17%
DJ30 -29.64, -0.12

The FCC voted to remove the Obama regulation of the internet, the so-called net neutrality rules. Before that could take place, a bomb scare forced the members to move the explosive vote elsewhere.

Stocks are on the rebound over the past 20 minutes as the worries subside a bit. The tax issues are the norm for any piece of big legislation though the illnesses are the wildcard. The momentum on this is such that it should pass unless something very serious happens. In any event, VP Pence cancelled a trip to be on hand as the tiebreaker, just in case. I am reminded of an old TV MASH episode where Hawkeye wanted new boots and made a series of deals with people from all different areas of the army. Then one deal fell through and in a cascade all of the deals fell. Hawkeye ended up wearing a golf bag on one leg.

That said, most stocks are holding support, and given the market fade coincided with the tax related news, once those issues are resolved the pressure dissipates. That means deals will likely be cut tonight in order to keep the bill moving on the timetable of before Christmas. Then the stocks should bounce. Looking at the charts it looks as if many moving downside are doing so on lighter volume.

Picked up some biotechs early (CUR, ENDP) and they looked good, but they got caught in the afternoon pullback. NUVA still looks interesting today.
Jon Johnson, Chief Market Strategist
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Market Alert - Pre-Market

Futures vs FV: SP +4.19; DJ +61.20; NASDAQ +13.35

Futures bled higher in the last session Wednesday and that carried over into the open today with futures trading in a range all morning. As the bell approaches futures are back to the bottom of the morning range. This action is not that convincing it will hold the morning gains.

Retail sales, NOV: 0.8% VS 0.3% EXP VS 0.5% Oct(FROM 0.2%)

Ex-Autos: 1.0 vs 0.65 ex vs 0.4% prior (from 0.1)

Control Group: 0.8 vs 0.4% prior

Clothing +0.7%; sporting goods 0.9%; online2.5%; food and drink: 0.7%

ECB, BOE leave rates as is.

Fox/DIS deal is officially announced.

Bonds: 2.369% vs 2.367%

EUR/USD: 1.1812. Euro is higher as ECB holds pat on rates, likes its liquidity position

USD/JPY: 112.65 vs 112.53

Oil: 56.16, -0.44. Continues to struggle in a consolidation of the recovery high

Gold: 1256.30, +7.10

Futures a bit off their highs into the open. Again, FAANG and large cap tech have to reignite to the upside as they are stalling on their rebound attempt. Small caps were promising Wednesday and will see if they can follow through today.

Jon Johnson, Chief Market Strategist
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Wednesday, December 13, 2017

Market Alert - The Close

Somewhat status quo Wednesday, but a status quo that likely won't last much longer. As has been usual of late, DJ30 put in a new all-time high. Much rejoicing. RUTX was actually the market leader (+0.55%) as the House and Senate claim to have reached agreement on a tax bill. The rest of the market, mushy at best.

SP500 -1.26, -0.05%
NASDAQ 13.48, 0.20%
DJ30 80.63, 0.33%
SP400 -0.01%
RUTX 0.55%
SOX -0.01%
NASDAQ 100 0.17%

VOLUME: NYSE 2.5%, NASDAQ 2%. Volume held at just above average levels for NYSE, rose to average on NASDAQ. Some churn on SP500, but then again, DJ30 and RUTX rose on some buying. NASDAQ shows a bit of churn, that higher volume running in place that indicates some overall selling of stocks even as buyers enter as some use the buyers to unload.

ADVANCE/DECLINE: NYSE 1.3:1 NYSE, 1.6:1 NASDAQ. Obviously some small caps at work on RUTX and even on NASDAQ as NASDAQ was overall higher than NASDAQ 100.

Now it was FOMC day, and as expected the Fed raised rates 25BP to a 1.25 - 1.50% target range. Nothing else changed other than the Fed noted inflation was declining -- and it was ironic that the dollar sold while bonds and gold rallied after a rate hike. Very strange actions in the financial markets.

In any event, on an FOMC day the market often fades post-announcement, and after a rise all session into the decision and rising higher on the decision, the last hour saw the indices fade from the intraday twin peaks. Once again, the close saw DJ30 at a new high, everything else kind of milling around outside of RUTX. As noted, kind of status quo.

Now, why do I say this status quo won't last much longer? Because NASDAQ and NASDAQ 100 look a bit tired after approaching the prior high from late November on this 6-session rebound from the early December rotation selling. They are going to make a more definitive next move in the near future, either upside to continue the move or the move fails and they head lower.

Perhaps when a recognition comes that the tax bill will pass then the next move starts upside. Of course, if it does not come to pass, the next move is likely downside after the recovery. The latter does not appear to be the case, but then again, who would have thought that conservative Alabama would elect a very liberal democrat? When you get bad choices, bad outcomes can ensue, and that is what some on the republican side feel about the tax bill. Thus, it is not a sure thing. If that changes and appearances indicate passage is a sure thing, then the market likely reacts ahead of the actual news.

Outside of that, there does not appear to be much to stimulate the market more than it already is. The holiday train is definitely here and moving on toward Christmas and New Years, holiday sales look strong, tax reform appears in the bag, the FOMC raised rates as expected and next year's hiking schedule is as expected. Not much to push stocks other than seasonal trends.

Seasonal trends are not a bad thing for the upside, but with NASDAQ below the prior highs and looking a bit weary on this recovery bounce, a slight seasonal trend does not suggest a lot of strong upside movement. NASDAQ and NASDAQ 100 are at crossroads on the bounce and they need a catalyst.

As for the other indices, the midcaps look solid enough with the 10 day EMA test, RUTX looks good enough with its 20 day EMA test, DJ30 continues onto another planet, though after 5 upside sessions it usually takes a break. SP500 reached a new high then faded, still trending nicely higher though a bit piqued near term. SOX, well, it still looks haggard, scrounging around below the 50 day MA.

Of course some of the best movers were on DJ30. HON jumped higher again and we picked up a position on it. We also picked up XNET and it came back to flat to close. Still some great leaders, but many stocks found the footing harder to hold either after good early moves Wednesday or in trying to hang onto good moves from Tuesday (e.g. the financials). That is a sign of a market that has rallied or rebounded, and is looking for something to keep things going.

Thus far nothing has impeded the upside, but nothing has come along to really excite the upside to a stronger move. Thus there may just be a creep higher in hopes a Santa rally shows up into Christmas. Sounds kind of ho-ho-hope, and that is why we say the status quo may change before much longer. If there is a tax reform vote that passes both legislative bodies, then the market likely puts in a quick rally. That may be the rally to use to take some profits and close out some problematic positions.

Have a great evening!
Jon Johnson, Chief Market Strategist
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Market Alert - FOMC Decision

As expected, the FOMC raised rates 25BP to a 1.25-1.50 target. In an 8-2 decision (Evans, Kashkari dissented) the FOMC noted economic conditions will warrant gradual increases in the FFR for the next three years, but the peak will be lower than in decades past due to changes in the economy. As it stands, the FOMC holds at 3 anticipated hikes in 2018.

Unemployment is expected at 3.9% in 2018 and 2019.

GDP to 2.5% in 2018, up 0.4% from prior forecasts

Inflation at 2%, noting that pressures have declined. There is that Greenspan conundrum popping up again as the yield curve remains flat despite hikes at the short end.

After the action bonds are rallying, the dollar is lower, both the opposite of what you would expect when there is tightening by the FOMC.

Stocks sold starting 11:50ET from the session peak to 1:30. Then they started a climb into the FOMC announcement, jumped on the news, and have recovered back to the prior session highs as chairman Yellen conducts her press conference.

Small caps are the strongest with the Dow the second strongest. Wow, both ends of the spectrum lead with the rest in the middle. Picked up one of those leaders, HON, and a smaller cap XNET. Getting some decent action in the likes of FB as it tries to come off its 50 day MA test.

SP500 7.43, 0.28%
DJ30 32.88, 0.48%
DJ30 144.56, 0.59%
SP400 0.32%
RUTX 0.77%
SOX 0.35%

Jon Johnson, Chief Market Strategist
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Market Alert - Pre-Market

Futures vs FV: SP +5.74; DJ +58.20; NASDAQ +27.35

FOMC day and an expected 25BP rate hike. The market appears ready for it as futures are on the rise since the early morning hours, hitting fresh highs just ahead of the bell.

Elections: Moore lost in AL by 1.5%, refuses to concede. That is about par for that election I guess.

CPI, Nov: 0.4% as expected and prior. Year/year 2.2% vs 2.0% Oct.

Core: 0.2% or 1.7% year/year. That is a drop from 1.8% in Oct.

Apparel had its largest drop since 1998.

Taxes: Could have a completely reconciled bill today. 21% corporate rate, 20% pass-through and more. But they are still working on it.

Bonds: 2.383 vs 2.404

EUR/USD: 1.1751 vs 1.17430

USD/JPY: 113.11 vs 113.555

Oil: 57.50, +0.34

Gold: 1246.60, +5.10

FOMC decision this afternoon, Yellen's last. Today we see if the gains can hold and still of course watching FAANG and NASDAQ large caps to see if their rest turns into a second leg of the recovery move.

Jon Johnson, Chief Market Strategist
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Tuesday, December 12, 2017

Market Alert - To the Close

SP500 and DJ30 hang on to positive while the other indices, already lagging the NYSE large caps as the session started, are negative.

SP500 4.58, 0.17%
NASDAQ -12.89, -0.18%
DJ30 130.61, 0.54%
SP400 -0.20%
RUTX -0.16%
SOX -1.00%
NASD 100 -0.19%

It looked as if all was 'go' when Senator Cornyn stated a tax bill could be ready as early as today. Stocks rallied. Then Senator Paul, kind of an expert at blind-siding, blind-sided Cornyn stating the Senate just cannot increase the debt -- in good conscience of course. Now Paul may have been simply referencing the spending bill and that they needed to live by their limits, but his comments has their impact. The nice ramp higher on Cornyn turned into a ramp lower on Paul.

Okay, that leaves financial and large drug stocks in good shape. GS is up 3+%, JPM is up, PFE is up - - no wonder the Dow is up over a half percent while the others languish. Heck, even MSFT is still up.

FAANG was up but has faded. AAPL is in a modest test of the Monday surge. AMZN working laterally over the 10 day MA. FB tested the 50 day MA nicely then rebounded; looked great, we picked up some positions, and it has since faded back to the 50 day. GOOG rallied nicely higher, gave it up, showing a big doji. Not a great session for FAANG but they are holding the near support, still holding the first leg of recovery and still testing and resting.

Chips are struggling with LRCX, AMAT, NVDA, MU turning lower from their bounces. Looking at the NVDA downside play as an entry ahead of the close.

A bit of a struggle as tax reform, after slipping off the front page after the Senate passed its version, is coming back around as the GOP wrangles. Remember, Senator Corker/Corksrew/Korkers is a 'no' vote already.

Jon Johnson, Chief Market Strategist
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Market Alert - Pre-Market

Futures vs FV: SP +6.06; DJ30 +93.97; NASDAQ +1.11

NYSE large cap futures are easily stronger than NASDAQ, raising the suggestion that the market may be moving back to favoring those stocks over the techs investors have shown an affinity for the past week as they played the bounce off the sharp drop.

Of course that means watch FAANG and those such as MSFT that broke to new highs Monday after shaking off that selling. FAANG stocks bounced but have slowed/stalled the past two sessions. Either testing and resting or out of gas. No real carnage on those stocks pre-market, just more or less flat again.

PPI, NOV: 0.4% as expected and as in October

Core: 0.3% vs 0.2% exp vs 0.4% October

Final Demand: 3.1% year/year, highest since 12/11. Energy played a large role in the price rise and interestingly the price of loan services rose. Is there enough demand for loans to warrant price increases? Apparently. Signs of a further economic recovery as companies acquire funds for expansion or inventory loans or payroll loans? Or, is it just that they have to take out loans to operate? Half full or half empty?

FOMC: Begins its 2-day meeting, expected to raise rates 25 BP Wednesday.

Russia: Pulling out of Syria. Again. Heard that before.

Malls: Consolidation. France's largest mall owner buying Australia's largest. Trying to combat the online threat.

Bonds 2.396% vs 2.389% 10 year. Bonds weaker as FOMC starts its 2-day rate hike meeting. Everyone has anticipated a December rate hike and now we see if it plays out.

EUR/USD: 1.1749. Dollar up just a hair.

USD/JPY: 113.48. Dollar down a hair.

Oil: 58.42, +0.43. Brent back over $65/bbl.

Gold: 1244.50, -2.40. Gold continues its woes. Fed hiking? Bitcoin stealing volume away?

Futures mostly holding their gains as the NYSE large caps take the early point. That begs the big question, i.e. whether FAANG and large cap tech will still find some favor or will fall back into the left behind. AAPL made a strong move Monday in price and on volume. Perhaps AAPL will lead the NASDAQ big caps now. This will be the day to show it.

Jon Johnson, Chief Market Strategist
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Monday, December 11, 2017

Market Alert - The Close

Bitcoin futures started to trade on the CME, a pipe bomber/attempted murderer botched his bombing attempt in NYC, and stocks ignored it all. Futures were up modestly, not surging, not tanking, and when the open came stocks moved up.

Not all stocks. The midcaps and small caps started higher but peaked out in the first hour, sliding all session into the close, putting in modest losses. Not bad action, just modest tests of the Thursday/Friday bounce to end last week.

SP500 8.49, 0.32%
NASDAQ 35.00, 0.51%
DJ30 56.87, 0.23%
SP400 -0.14%
RUTX -0.12%
SOX 0.59%

SOX was positive on the session, but it did nothing to improve its pattern. A lot of the prior leaders in the group traded flattish in rather uninspired trade. Chips certainly are uninspired at this juncture.

NASDAQ continued its now 4-day recovery move, gapping higher, closing higher. Big names of course helped given RUTX was lower on the day. AAPL was the star in our book, rising 1.95% and more importantly, breaking higher in its downward wedge on some very good volume. MSFT completed its recovery from the prior Monday selloff, notching a higher closing high on this move. CSCO is not bad and GOOG was up as well. FAANG overall was blah, but blah is good: FB, AMZN and even GOOG could use a bit of rest and they mostly took it. Not selling off and taking a breather is not bad action.

SP500 and DJ30 put in new closing highs if not new all-time highs, continuing the upside after their rather textbook test of the 10 day EMA last week following new highs once again. For the Dow, the tech contingent of AAPL, MSFT and CSCO did a lot of the lifting, but DIS, PFE, MRK, VZ and NKE were up nicely as well.

Leadership saw a bias toward tech, particularly large cap tech. AAPL, MSFT, CSCO, GOOG.

FAANG was led by AAPL while AMZN and GOOG added modest gains. FB traded flat after trading just a bit lower, a good session of consolidation that could set up its next leg higher in this recovery. Not bad overall.

Oil stocks rallied nicely. PTEN moved higher as did many. CVX gapped higher but just stalled with a doji. Still very good patterns, but that has been the case all along. They are starting to break higher here and there, and we continue to look at them as well.

Industrial, machinery were somewhat off on the day as HON, MMM took a breather. CAT, DE, CMI, TEX flat to slightly higher.

Financial stocks were just flat on the session after a decent last half of the prior week.

Drugs/Healthcare showed nice moves as noted on the DJ30 discussion. Big cap biotechs are not bad, and many smaller issues are set up well.

Basically, leadership continues to slosh in the same groups with the large cap techs trying to continue their comeback and rally with the financials, machinery, transports, etc. Thus far they are hanging in.

We anticipate playing more upside as these stocks test their recent moves and start back upside. We saw AAPL doing this and moved in, NTES as well. We keep looking for opportunities in good setups just as we have done on others such as ROKU.

Have a great evening!
Jon Johnson, Chief Market Strategist
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Market Alert - Pre-Market

Futures vs FV: SP +3.9; DJ +42.84; NASDAQ +7.18

Very slow news morning and futures are edging higher, continuing last week's recovery.

Bitcoin futures are trading (BTX) and when everyone joined in, it was sold some first, but then rallied over 18K. Handled the first test.

Pipe bomb explodes prematurely at New York Port Authority train hub. Because it went off early, only the would-be murderer was injured. Luck was on our side.

FOMC meets this week and is anticipated to raise rates as promised.

Work on the tax bill continues. Read last night that some high earners could see their marginal rates exceed 100%. When that happens you get nonproductive tax avoidance. That will need correcting because in tax reform you want all money being used as it would be in the economy without tax considerations being the first concern.

Given there is little news and the FOMC is midweek, stocks are on their own a bit and they are modestly rising. Of course you watch SOX and chips as many rebounded last week but rebounded to serious resistance. An important test for them in the rebound.

Also a key test is for the large cap NASDAQ, up last week, paused Friday. Trading mostly flat pre-market with AMZN up a few points. Would not mind another 1-2 days of testing/pausing then continuing higher.

Bonds: 2.369% vs 2.378%

EUR/USD: 1.1782 vs 1.1764

USD/JPY: 113.39 vs 113.48

Oil: 57.45, +0.09

Gold: 1249.50, +1.10

Jon Johnson, Chief Market Strategist
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Friday, December 8, 2017

Market Alert - Pre-Market

Futures vs FV: SP +15.27; DJ +131.52; +53.72

DJ futures were up 49 points pre-jobs thanks to an EU/UK Brexit agreement, worked nicely higher after, and holding the gains toward the open.

Non-Farm jobs: 228K vs 190K v 247K prior (from 261K)

Unemployment rate steady at 4.1%

Wages: 0.2% vs 0.3% exp vs -0.1% prior (from 0.0%)

Wages year/year: 2.5% vs 2.7% expected. Wages disappointing given manufacturing jobs still improving, but retail jobs surged as well (holiday hires) and that offsets wage gains in the increasing better paying jobs.

Participation rate: 62.7%

Workweek: 34.5 vs 34.4 exp vs 34.4 prior. Not many talking about this, but it is very important to see it moving up. Now, can it hold?

Manufacturing jobs: +31K
Manufacturing unemployment rate: 2.6%. First time below 3% since the recession.

Bitcoin: Down today, showing very large swings as volatility picks up. It has formed a head and shoulders just in time for futures trading to start next week. Sellers will show up and give selling a shot.

Brexit: UK and EU reach agreement, ready to take talks to 'Phase 2.' That helped the futures rise even before the jobs report.

Bonds: 2.378% vs 2.362%. Bonds off again on future expectations

EUR/USD: 1.1766 vs 1.1772. Dollar up again against the euro

USD/JPY: 113.24 vs 113.09. Dollar still moving up

Oil: 57.64, +0.95. Solid rebound

Gold: 1250.50, -2.60. Still falling

Okay, futures are up sharply and the questions are 1) will they hold post-open, 2) will stocks rise together or will there still be favored and disfavored areas?

I note that DJ30 futures were at 141 but have slipped to 119 while NASDAQ futures are adding strength. That suggests similar action to Thursday where some of the big cap techs outperformed large cap NYSE. Maybe, but all are up nicely to get the session moving.

There are stocks we are still interested in, e.g. AMZN (+7 pre-market), LH, ORBK, SQ, AAP etc. We will see what kind of entries we get.

Jon Johnson, Chief Market Strategist
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Thursday, December 7, 2017

Market Alert - Pre-Market

Futures vs FV: SP -1.37; DJ -41.91; NASDAQ +6.70

Somewhat the same story of the past day or two with NASDAQ in the lead pre-market, but its lead is down from 18.95 futures points to around 7 toward the bell as futures continue their all-morning trend lower from decent levels in the post-close session Wednesday. For SPY, basically a round trip from the WED rise afterhours.

Challenger Jobs: +30.1% yr/yr, the worst since 2012 in terms of planned layoffs.

GE: laying off 12K workers worldwide. Call it the revenge of Imelt's outsourcing US jobs after receiving hundreds of million in US 'stimulus.'

Taxes: Senate working on it. SALT is a sticking issue debated on CNBC this morning. The 'economists' say they don't know if people will leave a state or area because of taxes. But we do know businesses do. AND, if they have to bear the cost of their state government's profligate spending, maybe they will demand more frugal leaders. Others do not want to pay for the over-spending that deductions of SALT provide the cover for. It is a way to prop up big state and city spending on very expensive healthcare, etc. Montana doesn't want to pay for it.

Bitcoin: $15K+. Rallied $3K in 36 hours. CME futures are set to start trading.

Bonds: 2.331% vs 2.34%. Still rallying, but CNBC says it does not mean economic troubles - - this time.


USD/JPY: 112.58 vs 112.25. Dollar up

Oil: 56.28, +0.32. Rebounding some.

Gold: 1256.60, -9.50

Futures sliding all morning to a mushy start. NASDAQ names trying to bounce some but they too are losing some momentum pre-market. On the other hand, some retailers look strong. CONN to bap higher. FSLR (not retail) is also opening higher. Looks as if there are some possibilities out there -- as usual.
Jon Johnson, Chief Market Strategist
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