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Wednesday, May 24, 2017

Market Alert - The Close

It took 5 days, but Wednesday SP500 finally recovered all that it lost the prior Wednesday. Yes, 5 days to recapture 1 day. Nonetheless, SP500 notched an ever so narrow new closing high, but it was a new high, the first post-Wednesday new high for the major indices.

Crappy earnings from LOW (top line, bottom line misses), TIF (top line), and AAP (top, bottom) tried to undermine the move, but they failed. Terrible existing home sales for April (-2.3% down from a downward revision to March to 4.4% after February's -3.7%) did not stop the move, though a lot of the weakness is due to inventories at a 4.2 month supply versus 6 months considered balanced market.

The FOMC minutes did not stop the move. The minutes show a 'cat-dog' FOMC with some members believing the Q1 slowdown is transitory (the Fed LOVES that word) while some need additional 'evidence' showing it was transitory before further tightening. The minutes noted some bubble-like symptoms, but of course did not use that kind of language. No, the transparent Fed used language no one but a tax lawyer could love (or understand):

". . . asset valuation pressures in some markets were notable. Although these assessments were unchanged from January's assessment, vulnerabilities appeared to have increased for asset valuation pressures, though not by enough to warrant raising the assessment of these vulnerabilities to elevated."

What the hell? Prices too high? Just look too high? Again, what the hell?

In any event, stocks appeared to take heart after the FOMC minutes as SPY jumped to a session high and closed even higher than that first spike to a higher session high. Again, good enough for a SP500 new closing high.

SP500 5.97, 0.25%
NASDAQ 24.31, 0.40%
DJ30 74.51, 0.36%
SP400 0.27%
RUTX 0.11%
SOX 0.65%


A/D: NYSE 1.3:1, NASDAQ 1.1:1

Okay, okay. The details. The move was not that great in itself. Volume was decent, moving back up near average on NYSE. Breadth was putrid. It was a new high, but by the skin of its teeth.

Further, the other indices were not tearing to their own new highs. NASDAQ and SOX were darn close, but after 5 sessions, no cigar.

Thus the recovery, while impressively higher 5 straight sessions, found just one index moving back over the pre-Wednesday highs. Dogged determination in recovering, but not powering higher and blowing away the old highs. Of course, it doesn't have to. It just has to keep chugging upside as it has done in the intervening week, something that is more the market's style. The PPTeam averted the sharp selloff, and now the market is making its progress back to new highs.

That said, the indices are still at the prior high, still looking to move through, still likely to pause before continuing. Looking at the NASDAQ chart it would be nice to see a pause, a hold, then a surge back upside to higher highs.

Leadership was okay. AMZN, GOOG, some big chips, moved higher, some stalled similar to the indices: not falling, just sluggish at this level.

On the day we licked some STMP gain and bought some FB and LMAT. SOHU had a hiccup so we closed the rest of the position and will see if it gives us a new good entry. The indices still have their resistance ahead, still have to prove they can make it through, but thus far they have not faltered.

Have a great evening!

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

Futures vs FV: SP +2.58; DJ +12.09; NASDAQ +16.10

Plunge Protection Team at work? Last night on Fast Money (CNBC) Asher Edelman openly talked about the PPT, created after the 1987 crash, and how it is supporting the current market. I have gone through the litany of times the market was rolling over but magically found support and reversed technical breakdowns. Last year I penned it as 'magic,' being of course facetious. There were obvious times we highlighted contemporaneously how the team had stepped in based upon the market action. Of course the on air personalities scoffed at the idea, showing their expert naivety. We like to refer to it as a big fund or funds doing buying. That is true, but who is directing them? Anyway, the market has done things it technically should not have done, overcoming several rollovers, getting help at the most opportune times. Take that for what you will.

What we take it for is the notion that while the market can of course and will roll over in sharp corrections, right now it continues to show resilience in recovering from events such as last Wednesday and offering up stocks with good setups. And of course other funds are buying it because they are still accumulating stocks and thus setting them up for the breakouts, bounces off support, etc. that we love to play. The PPT cannot make the market rise on its own, but it can step in at the right times to hold the line and give the big funds the courage to step in and buy. Voila, mission accomplished.

So, futures are up again as the indices prepare to again test the recent highs. This is another important day for the markets, but as noted last night, we expect something of a pause here before trying to take out the highs. The PPT likes it to look as natural as possible, right? Actually, a good run after it stepped in, now it tests for a few sessions, then a new break higher. That is normal upside action and we would not be surprised to see the market hang around this level again today but not yet make the upside break.

Oh, and Robert Shiller, the Nobel Prize winner, says to stay in the market because it could go up 50% from here. Okay, there is a counterbalance to the negative comments about the market rally.

Oil: OPEC meets in Vienna to try and extend the production cuts.

Earnings: Lots of misses today. TIF (TL); LOW (TL, BL); AAP (TL, BL)

Beats: INTU (Turbo Tax) beat estimates

China: Moody's downgraded to A1 on debt issues. First downgrade since 1989, but Asian markets are higher. Seems no one cared.

FOMC minutes out today. Everyone will wait for it, no one will care. Move on, nothing to see here.

Bonds: 2.276% vs 2.287%. Bonds rallying off the short test, still look as if want to break higher and push yields lower.

Euro/USD: 1.1197 vs 1.11868. Euro back up versus dollar as ECB warns housing prices are too exuberant.

USD/JPY: 111.815 vs 111.835

Oil: 51.29, -0.18

Gold: 1252.60, -2.90

Futures are holding at the top of the range held all morning. Tuesday futures were up all morning as well in a range, not necessarily a good thing as they are not rising and thus a target for sellers, but the market held the gains. They were, however, not much in terms of gains, and we anticipate something similar at least during the first half of the session as we wait for the FOMC.

Of course as soon as that is penned the S&P futures spike to morning highs, breaking from the top of range. There is buying out there still, and of course there are some good patterns out there in position to take advantage of it.

Jon Johnson, Chief Market Strategist
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Tuesday, May 23, 2017

Market Alert - First Hour

The stock indices came closer to the pre-Wednesday highs and reversed. Growth indices are negative with SOX leading lower after XLNX received a double whammy of being downgraded and not having a takeout announced.

SP500 1.47, 0.06%
NASDAQ -3.98, -0.06%
DJ300 12.60, +0.06%
SP400 -0.29%
RUTX -0.34%
SOX -0.92%

The relevant action is not so much the why, but the what. Thus far the what is that the indices have not been able to take out the prior highs yet.

We banked some gain on NVDA, ZBRA, SOHU, looking at more depending upon the market action.

Picked up some MNST and it is for now holding its nice break higher.

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

Futures vs FV: SP +4.73; DJ +54.17; NADSAQ +14.60

UK terror attack that had futures solidly lower last night is not standing up to the better EU PMI readings and the market's continued upside resilience.

EU PMI: 57.0 vs 56.5 exp vs 56.7 prior

Germany PMI: 59.4 vs 58.0 vs 58.2. Sentiment hitting record highs for business.

Trump Budget: Big slashes in spending ($3.6T) as we try to turn some away from entitlement society to productive society. Basically if you are able bodied you should be working, not opting to take benefits and not work. And like it or not, admit it or not, we pay people not to work. Period.

Also proposes selling half of SPRO (strategic oil reserve). May make sense given oil supplies right now.

Of course the budget is being savaged, saying it will stifle growth as government spending is cut. No, no, no. This country is still killing more businesses than creating. This country needs to throw off the shackles that are killing our small and new business creation and allow people to create, innovate, earn, keep their money, grow wealth. That is what the Reagan tax cuts did in an era that saw the same kind of taxation and regulation. Why would we automatically make goods 35% more expensive via the corporate tax? Get rid of it completely, have prices fall, have that money stay with consumers to invest, spend, create. History shows this works, but we have economic history deniers.

But, I digress.

Bonds: 2.245% vs 2.254%

Euro/USD: 1.1231 vs 1.12390. Dollar rebounds some

USD/JPY: 111.237 vs 111.076. Dollar rebounds some here as well.

Oil: 51.19, +0.06. Up even as Trump proposes selling 1/2 of SPRO.

Gold: 1261.80, +0.40

Futurs jumped as the opened trade and have held that move since. the indices are going to test the pre-Wednesday highs, at least NASDAQ, SOX, SP500. Okay, the litmus test will be underway soon.

Jon Johnson, Chief Market Strategist
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Monday, May 22, 2017

Market Alert - The Close

A third day of upside following the Wednesday selloff looks somewhat promising, but still, after 3 sessions, the indices have yet to recover the pre-Wednesday levels. Perhaps a 1-2-3 bear flag that leads to more selling, but of course with this market you can never count out the upside. Indeed, many leaders rallied again with several key chips hitting higher highs, AMZN at a new high, MSFT rebounding nicely. Not a huge number of leaders moving up, but obviously enough stocks moved higher to post some very decent index gains.

SP500 12.29, 0.52%
NASDAQ 49.92, 0.82%
DJ30 89.99, 0.43%
SP400 0.50%
RUTX 0.72%
SOX 1.09%

VOLUME: NYSE -26%; NASDAQ -10%. Well, after some good recovery volume last week -- that was expiration week -- the continued move trade was rather pathetic, dropping below average on NYSE and NASDAQ. Not the thing great recoveries and subsequent new highs are typically made of.

A/D: NYSE 2.2:1, NASDAQ 2:1. Not bad breadth on a third day of upside, even improving for NASDAQ. Then again, volume was low . . .

There was a dearth of economic news, and with Trump in the Mideast the political headlines died down, at least enough for the market. Didn't hurt that defense contractors surged on a big Saudi Arabia arms deal and a $40B infrastructure announcement from Saudi Arabia and Blackstone, most of which would be used in the US. Hard money, hard deals tend to interest investors and traders more.

This even as one of the big names that called the market upside post-election is now calling the end of the 'big equity run.' More negative sentiment in some headline names does not hurt the upside; the more negative sentiment the better.

With the Monday upside the market response to the Wednesday selling remains positive enough, though I have to say again, even after three upside sessions the indices still have not recovered the pre-Wednesday highs. They are doggedly recovering, but the real test is if they can continue and recover those highs straightaway, showing the Wednesday selling was a one-day event.

We let positions run as most performed very well. Picked up some SIMO and CGIX, let SQ, SEDG, SOHU, BITA, NVDA and others continue strong moves.

Now as the indices move up to those prior highs, at least on SOX, NASDAQ, SP500, the real character of the recovery move is revealed. For now the market is making the recovery without missing a step, pretty much as it has done in response to most sharp selloffs during the rally.

Have a great evening!

Jon Johnson, Chief Market Strategist
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Market Alert - To the Close

Well, the indices continue their recovery. Nothing flashy but continuing with a 3rd upside session in the recovery from the Wednesday selloff. NASDAQ and SOX again lead, but the other indices are not that far back.

SP500 13.32, 0.56%
Nasdaq 51.68, 0.85%
dj30 98.69, 0.48%
sp400 0.57%
RUTX 0.69%
SOX 1.12%

Chips are moving higher again and we picked up some SIMO. Some other plays we are looking at, e.g. VECO, FB are just not putting in exciting moves. CGIX is off its high but it is showing a good break on volume. Looking at that as a possible entry. PCRX, SRPT are struggling.

Most of the news is out of the Mideast with those countries heaping praise upon Trump for his straight talk, willingness to make deals.

With the lack of political intrigue, the markets are putting in that third upside session. Much better than they looked Friday, still not out of the woods, but doing what is needed with some leadership along the way from chips, MSFT and other large caps though a lot of FAANG is so-so (AMZN, GOOG the exception).

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

Futures vs FV: SP +5.72; DJ +53.16; NASDAQ +11.44

More rally demise predictions. Mark Grant, one of the many that suggested people should buy stocks post-election, says the 'big equity run' post-election is over. Keep the negative calls coming!

Political news: Quiet this morning with the focus on the Trump trip to Saudi Arabia, Israel, etc. Defense stocks are rallying on arms deals with Saudi Arabia. Supposedly SArabia will make great strides with women's rights. Sure it will. And there will be peace in the Mideast this year. Hey, you have to hope, but every new President since forever has said they felt they had a shot at bringing peace to the region. When will they learn it is all a ruse by the powers that be there to extract deals with a new President, then go back to the same old, same old?

M&A: Huntsman to merge with Clariant (European). Chemicals businesses e.g. plastic colorants, etc.

AAPL: RBC says AAPL could be $1T market cap in 18 months or something like that. Gee, that is shocking.

Infrastructure: Saudi Arabia sovereign fund and Blackstone announced this weekend a $40B infrastructure fund for projects mostly in the US.

Budget: Administration floats a 25% cut in food stamps, $1.7T cut in entitlements to see how much screaming there is.

Bonds: 2.247% vs 2.233% 10 year. Bonds off, yields up as should be the case if all is well.

EUR/USD: 1.1243 VS 1.12077. Euro rallying versus dollar as Merkel says euro is too damn weak.

USD/JPY: 111.293 vs 111.271

Oil: 50.44, +0.11

Gold: 1257.30, +3.7

Futures are on a steady rise into the open, showing nice bids as the indices continue their attempt to shake off the Wednesday selloff. Thursday and Friday were up but not hugely convincing, but there are still good stocks out there in good position to move AND some 'new' sectors trying to break higher, e.g. oil, chemicals.

Still has to prove it can hold the moves, but as has been the case many times in this rally, the indices have overcome selling shocks and posted new highs.

Jon Johnson, Chief Market Strategist
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Friday, May 19, 2017

Market Alert - Pre-Market

Futures vs FV: SP +6.33; DJ +33.98; NASDAQ +26.14

Stock indices try to continue the Thursday relief move that was, in most cases, nothing more than a relief move. SOX was solid and will continue to be solid thanks to AMAT earnings and its comments about the chip equipment space helping NVDA's price as well. Everything else has to prove itself.

That means NFLX, AAPL and other 'sure thing' stocks. One analyst is saying this is a rare opportunity to buy AAPL on a dip. Perhaps. Friday after a selloff is not necessarily the best indicator sessions.

That said, there are some nice patterns out there upside. If the selling resumes, the drugs/biotechs with some very good patterns will move. Today perhaps not as the indices are in the second day of relief. There are other stocks in good position that are not drugs and the more defensive.

Earnings Beats: GPS; ROST; CRM; ADSK; AMAT

Misses: DE (TL, but really increased guidance); FL (TL, BL); CPB Soup (TL, BL); MCK (TL)

CRM, DE and others noted the weaker dollar helping earnings. If that is the case, AAPL should really be helped as most of its business is outside the US.

Bonds: 2.243% vs 2.229%. Bonds fade, yields rise as political scene calms.

EUR/USD: 1.1187 VS 1.10985. Dollar fades again against euro.

USD/JPY: 111.05 VS 111.584. Down a bit against the yen as well.

Oil: 44.91, +0.56. Was back over 50/bbl, but slipping a bit of its gains.

Gold: 1255.20, +2.40

Trump heads to Saudi Arabia. When it gets hot in DC, leave, right?

We will look for opportunity upside from good patterns; if they show the moves, they show the moves. The overall market bounce is still a question mark, but it is going to start higher and that could spring some good patterns.

Jon Johnson, Chief Market Strategist
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Thursday, May 18, 2017

Market Alert - Pre-Market

Futures vs FV: SP -3.78; DJ -49.93; -7.05

Futures are off the lows a bit and are improving into the open. Last night the appointment of a special investigator for the Russia link appears to have calmed things a bit. Makes one wonder if it will include an investigation of the ALL the claims, including the DNC hack that, as many claimed, was an inside leak, not a hack. These investigations go on forever, at least typically, and that means likely no quick answers, but the market appears to be dealing with this better.

Philly Fed, May: 38.8 actual versus 22.0 prior

New Orders: 25.4 versus 27.4 prior
Employment: 17.3 versus 19.9.
Two key areas were worse on this big jump.

Earnings beats: CSCO (but guides much lower, 1.1K jobs cut); WMT (online sales +69%); PLCE; BKE; LB

Misses: BABA (BL); HIBB (TL)

NAFTA: Back on for a renegotiation

Brazil: President in a scandal over 'hush money' payments. Real is getting smashed as Brazil government heads toward very shaky days ahead.

DB: DB is sued in Italian courts as an 'international criminal organization.' Yes, there is not much love for Germany and its entities in much of Europe. Hey, and DB and indeed other European banks, based upon reports of what they did during and after the financial crisis with LIBOR, gold prices to name just two, sure looked to be acting with some criminality.

Bonds: 2.209% vs 2.223% 10 year

EUR/USD: 1.1109 VS 1.11447. Dollar on a bit of a rebound.

USD/JPY: 110.81 vs 111.1677. Not so much here.

Oil: 48.53, -0.53

Gold: 1257.00, -1.70. Giving back some of the Wednesday knee jerk reaction.

Futures are showing some resilience as stocks such as NVDA bounce back though it will take more than the opening bounce in these stocks to recover what Wednesday lost.

This selling is based upon the pile of accusations against the Trump administration, many by anonymous sources, that threaten its agenda of tax cutting, healthcare reform, regulatory reform, geopolitical reform. It comes down to what investors believe will be gleaned from any investigations. I believe it is mostly an optics thing, that a politically inexperienced group is in the White House and handling business as they would in business and the loyal opposition is jumping on any potential appearance of impropriety as a major issue as the loyal opposition will. I know the use of that phrase makes some comment they are not so loyal, but for now you have to at least believe we are still all ultimately in this together. If, as is very likely, these are just overblown, then a selloff is a good opportunity.

That is why, we are still looking at STMP, DIOD and others, and will look at more as the selling winds down, for opportunity. That still requires good patterns, and we will see how the patterns hold up to this selling bout.

Jon Johnson, Chief Market Strategist
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Wednesday, May 17, 2017

Market Alert - The Close

The memo that broke the market rally's back? Perhaps. The afterhours announcement of a President to FBI Director memo asking the Director to call off the dogs in an investigation of General Flynn appeared to be the last story of many regarding purported President indiscretions that finally broke the market's upside momentum.

Looking at the timeline it appears this was a post-firing memo with the President, on behalf of a now private citizen Flynn, asking the FBI to give the guy a break given all of Flynn's years of service for the country. In this political environment, however, the optics are bad and the opposition is very ready to scream first and maybe ask questions later. Happened to Obama, happening to Trump, but Trump has more enemies than Obama because Trump plays outside the government's and DC's prearranged course.

The market knows this and is relatively quick to adjust pricing. With these latest allegations and the predictable boisterous outrage from the usual sources, the chance for tax, healthcare, regulatory, and other reform dims further. The more time an administration spends on damage control, the less time and clout it has regarding its agenda. Clinton got nothing done after his lying under oath though he did manage to stay in office. Reagan didn't get much done after the Iran-Contra affair. Bush, well, neither one got a damn thing done; as part of the DC establishment they just went along to get along and the democrats were happy to let them occupy their presidencies fighting wars.

Thus, with this latest controversy, one that will take some time to clear up as now the FBI's documents have been subpoenaed and Comey is to appear before Congress next Wednesday, the market decided to avoid the summertime rush and bale now. Remember, it is May, so when in doubt, sell them out. Thus a sharp drop with the rush to get out, trying to avoid the rush but creating the rush as it does.

SP500 -43.64, -1.82%
NASDAQ -158.63, -2.57%
DJ30 -372.82, -2.57%
SP400 -2.07%
RUTX -2.78%
SOX -4.37%

VOLUME: NYSE +26%, NASDAQ +17%. NYSE trade spiked above average for its strongest showing in 2 weeks. NASDAQ volume also spiked, easily its highest volume since mid-March. On selling so of course that means shares were dumped.

A/D: NYSE -3.7:1, NASDAQ -5.6:1. Impressively negative.

So, the NYSE indices finally made a move in the 12 week patterns, and that move was decisively lower. SP500 broke the 50 day MA's in a single bounce, just about filling the mid-April upside gap. Same action on DJ30 as it too is close to that lower gap point.

NASDAQ sold through the 20 day and is near the April upper gap point; kind of. It was a lot higher to start with.

SOX sold through the 10 day EMA and into the early May upside gap zone that started the move, holding over the 20 day EMA.

SP400 was wrecked, gapping through the 50 day MA's, closing at the session low and not far from the March and April lows at the bottom of its base. RUTX shows the same kind of massively weak action.

The noteworthy points of the move. New breaks higher by the indices and many stocks were harshly reversed. The indices that were not at highs but setting up bases broke hard downside, destroying the bases. The magnitude of the loss: in one day SOX lopped off the gains of prior 5 sessions. It can still hold the breakout, but that misses the point of the virulence of the selling.

With this kind of action and the likely cause of the selling being something that won't likely resolve overnight or otherwise near term, we unloaded a lot of positions. We kept those holding some kind of support, but on a relief kind of rebound that stalls, we will be using that to close out more upside unless the improbable occurs, i.e. the alleviating of the Trump agenda worries.

That seems highly unlikely, but I do note that Senator Thune is set to unveil his tax proposal, and out of the din of political rhetoric, sometimes these kinds of moves work. That won't likely help the market near term, but as the market works through its selling you keep an eye on stocks that hold up relatively well along with the news flow on these kind of proposals. If they start lining up with some positives, you are then ready for any 'surprise.'

A harsh selloff, issues that likely will not be quickly resolved. No new stories hitting thus far this evening, so perhaps as sharp as the selling was Wednesday a reflex bounce occurs. That can be an indication of a false break and rebound, or more likely it is just a reflex bounce before more downside that we use to leave upside positions and look for the next plays.

Have a great evening!

Jon Johnson, Chief Market Strategist
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Market Alert - Last Hour

Stocks are on a rebound that started 35 minutes back. That of course after a big loss. I noted a few 'no buyers on the dip!' headlines screaming on the web mid-afternoon. That makes you look for a late rebound. It started, looks somewhat decent, but it has to add a lot more into the close to make a dent in the index losses.

SP500 -35.42, -1.48%
NASDAQ -132.99, -2.16%
DJ30 -312.87, -01.49%
SP400 -1.74%
RUTX -2.38%
SOX -3.71%

Many stocks are down hard, many testing support from the 20 day EMA to the 50 day MA. If they are holding support we are inclined to let them bounce, particularly if this last hour rebound gets stronger and stronger. We have several positions that are between support levels. If they can recover to support, we leave them alone. If not we will close them.

The move was working and now there is perhaps a so-called black swan event with these leaks that have implications aplenty but thus far it is a long way from clarity. Congress has subpoenaed the FBI and Comey records, memos, etc. on and about just about everyone in the news the past month. Comey is to testify next Wednesday. Comey has been all over the map when he appears before Congress so who knows who will show up that day.

The selloff is attributed to something of a straw breaking the market's back, the straws being the many stories about the President's actions. The battle lines are getting drawn clearer now. Even Dennis Kucinich, former House Rep and very liberal, says this is an operation from the intelligence community to take down the President and Kucinich, while not a Trump fan, says the problem is not Trump.

The timeline on the Flynn memo is the key piece we are seeing: it occurred AFTER Flynn was fired, thus not to protect him while holding office but in pursuing him after he left public office. We will see. If that is the case, that might be a relief for the market. That has not settled out yet, however.

The former Wells Fargo CEO summed up something we have been saying today: the President has too many 'unforced errors,' i.e. making statements that are unnecessary and cause problems for the agenda that most people want: taxes fairer, healthcare fixed to where it is high quality and affordable. That is the hammer on the stock markets.

The rebound is trying to continue after a pause.

Oil: -1.8M bbl draw this past week and that has kept oil stronger and oil stocks are showing relative strength as well.

Bonds are up as you would expect with the yield down to 2.228% 10 year.

Gold is up 22 clicks and back over the 200 day MA.

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

Futures vs FV: SP -18.87; DJ -164.75; NASDAQ -43.44

The NYSE indices are finally making a break and it is going to be to the downside. The daily early evening stories hitting the wires relating to Comey appear to have finally broken the meme that there is still a chance the Trump administration can accomplish tax, healthcare and other reform. The public wants it, but it does not appear the politicians are going to allow it, either through their own missteps and resistance to the change. It seems axiomatic, but in politics perhaps not: if you are under scrutiny, you don't hand your critics or opposition the ammunition to use against you.

There are always two sides to a story and we tend to only hear one side these days, but regardless, the optics are bad and that puts the kibosh on tax reform, healthcare reform, etc.

Earnings Beats: TGT, JACK, RRGB

Misses: URBN

AMZN: appears to be positioning to enter the pharmacy market. Seems a rather natural fit.

Taxes: Senator Thune is set to put forth his own tax plan. So, at least some are still attempting to make something happen. Out of these times this kind of quiet, consensus building effort may work. People still want something done.

Bonds: 2.257% versus 2.32%. Bonds of course are rallying.

EUR/USD: 1.1118 vs 1.10882. Euro continues running upside.

USD/JPY: 111.863 vs 113.077. Dollar takes quite a hit this morning.

Oil: 48.84, +0.18

Gold: 1252.10, +15.70. Breaking upside again after that sharp break lower.

Futures are at session lows, steadily lower over the past 2 hours as the stories from last night are hashed and rehashed. As noted above, the optics are just not good in any respect because regardless, it could take weeks to get the details out to a point where people have any confidence in what actually happened. During that time the agenda people want done will not get done. Some say this is a planned coup attempt; saw that on CNBC of all places. This is certainly how you do it in a digital age.

The bottom line: the market has had enough for now and has decided to fold its hand for now, see what shakes out, and assess when it wants to try higher again.

This means a sharp gap lower. Will see what kind of relief move forms and how stocks can hold key support, but not anticipating this to be a one-day event. Why? the indices set up their bases, took their time getting into position, and now that is getting upended. Thus some bounces will likely be exit points. Futures are modestly bouncing into the opening bell, but that is likely a head fake.

Jon Johnson, Chief Market Strategist
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Tuesday, May 16, 2017

Market Alert - Pre-Market

Futures vs FV: SP +3.03; DJ +37.06; NASDAQ +8.47

Futures are working higher again, trading near session highs before the bell. All kinds of 'leaking' stories on the political side from Trump supposedly leaking sensitive information to the Russian ambassador to WikiLeaks communications reportedly on the computer of murdered DNC staffer Seth Rich. Recall, seems ages ago, WikiLeaks said the Russian DNC emails were leaked not hacked by Russians. Leaks everywhere. The Russian hysteria reminds me of the early 1980's when it was the Libyans. That reached a peak in the movie 'Back to the Future' with the famous Michael J. Fox line 'It's the Libyans!'

Leaks aside, there is news.

Housing Starts, April: -2.6% vs +3.7% expected vs -6.6% March. March was supposedly due to the weather. April was due to what, a weak economy?

Permits: -2.5% versus -3.4% prior (from -3.6%). Hey, at least March was not as negative. Much rejoicing. Yea.

Industrial Production: 1.0% vs 0.3% exp vs 0.4% (from 0.5% March)

Capacity Util: 76.7 vs 76.2 vs 76.1 March.

These are at least better numbers.

Jobs: F reportedly cutting 10% of its workforce. F will not comment on 'speculation.' Perhaps it should. Something called damage control. That would be a mere 20,000 people. Seems worth it to get out in front of that story. Unless . . . F is pulling a Disney and bringing in foreign workers. Nah. Just a reaction to a world STUFFED with car inventories.

Earnings beats: HD

Misses: SPLS (TL); TJX (TL); DKS (TL)

Did I mention yet today that retail remains in trouble, at least the traditional stores?

Bonds: 2.342% vs 2.34%. Jumped to 2.350% but has backed off as bonds recovered.

EUR/USD: 1.1078 vs 1.09823. Euro, after its breakout test, is surging again against dollar.

Oil: 49.27, +0.42. The upside move in the range continues as oil takes on the 200 day MA again.

Gold: 1235.30, +5.30. Trying upside again after breaking down over a week back.

Monday showed some 3:1 NYSE breadth. This morning there is a story that hedge funds are 'piling' into just six stocks: FB, AMZN, AAPL, MSFT, NFLX, GOOG, and that they are accounting for most of the move.

It is true that those stocks, after their own hiatus, are back on track and punching out new highs. Often. But there are other stocks rising as well. If that NYSE breadth continues, if RUTX, SP400 follow NASDAQ, SOX (and now SP500?) the move not only continues, but it spreads out. There are, after all, leaders in a rally that move earlier, then others follow.

The funny thing is the leaders start early, people are happy, then complain it is only the leaders (as now). Then the move spreads out and the griping is then that there is a 'dash for trash' when the other stocks join in. The point: they will complain at all times. Look at the leaders, play the leaders, play other good stocks with good patterns as they emerge upside.

Jon Johnson, Chief Market Strategist
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