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Tuesday, May 22, 2018

Market Alert - Pre-Market

Futures vs FV: SP +5.44; DJ +48.71; NASDAQ +27.97

Who would have seen that coming? China announces it is cutting tariffs on certain US autos and auto parts. Gee, the 'nothing' deal is more than first blush, and it will continue to be more. These negotiations cover a lot of ground and not all items are resolved at once. Moreover, China does not like to look as if it was forced to do anything so it makes the announcements on its own, not at summits, joint meetings, etc. Who could have missed it? Most on the financial stations apparently.

NASDAQ is leading higher this morning in something of a reversal from Monday. SOX is seeing some good performances as well as MU announces its largest ever buyback at $10B. QCOM/NXPI deal is being talked up again. Some excitement in chips.

SP500 needs to get off the dime as well. That remains to be seen. Heck it remains to be seen if NASDAQ can make and hold a decent move.

Earnings beats: KSS

Misses: AAP (TL); AZO (TL); TOL (TL, BL = TB)

M&A: ADBE buying Magento

JCP's CEO going to LOW. So is he going to take what he learned at being unable to help JCP to Lowe's?

Bonds: 3.067% vs 3.056%. Bonds fading again, yields rising again.

EUR/USD: 1.1792 vs 1.1786

USD/JPY: 110.91 vs 110.95

Oil: 72.55, +0.20

Gold: 1292.50, +1.60

Futures again gapped higher in the early morning hours, holding that range all morning. Monday saw such action result in gains, but many areas were well off the highs by the close. At least they are back on the horse, moving upside again, and the continuing upside bid shows definitely more buyers than sellers even if volume is low and breadth narrow.

Looks as if NASDAQ wants to try and join in on the upside, something the market needs. Will see if the recent leaders that are testing, software and chips, can rebound again with other market areas.

Jon Johnson, Chief Market Strategist
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Monday, May 21, 2018

Market Alert - MidMorning

Stocks gapped higher and the indices are sporting gains on top of the gaps. RUTX is continuing higher while the other indices are backing off from the recent highs just a bit as Europe closes.

DJ30, SP400, RUTX are all at new recovery highs, RUTX of course at a new all-time high. Those are important moves, taking out the prior recovery highs. Holding them through the session is key.

That leaves SP500, NASDAQ, SOX as still below the prior week's recovery highs. They are up nicely, but are not showing a powerful technical move.

SP500 23.34, 0.86%
NASDAQ 56.83, 0.78%
DJ30 349.79, 1.43%
SP400 0.86%
RUTX 0.72%
SOX 1.22%

Thus far we have taken some gain on two positions and that is all. We are waiting to see how this move holds. It is based on a positive story for sure, but the reaction to a positive story is the most important tell.

Larry Kudlow appeared on CNBC and talked about an ongoing process with China discussing other aspects of trade including IP, just what we wrote about in the pre-market alert. That only makes sense, but of course the naysayers were quick to shoot from the hip, unable or unwilling to look at the entire picture and be smart about it. Oh well.
Jon Johnson, Chief Market Strategist
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Market Alert - Pre-Market

Futures vs FV: SP +15.03; DJ +220.91; NASDAQ +50.50

Stocks futures gapped higher at the open and have held the range the entire morning. Catalyst: US/China trade status.

The US/China 'trade war' has been "put on hold" according to Treasury Secretary Mnuchin . . . as they "work toward an agreement." That last segment is what many appear to be overlooking.

No real specifics other than China is going to "substantially reduce" the trade deficit and buy "massive amounts" of US agricultural products (not specified if that is equipment, food, both, etc.).

Nothing said regarding IP theft though you know this was covered and is likely part of the "work toward an agreement" part. The way this negotiation has gone it would appear that makes sense as the 'wins' come out in dribbles.

CNBC pans the 'deal' saying nothing has changed but that is a western view. This is a different negotiation melding the new Trump western form with the Chinese 'can't lose face' form.

In any event, the agreement work to come is the potential fly in the ointment. Will the 'deal' stick as negotiations on other areas progress? EXPECT to see the same ups and downs re trade as seen the past two months. That is not great for stocks as they could open down one day as much as the open higher today. That is, however, the way this is going to get worked out.

M&A: FTBT buying MB Financial. Blackstone buying LaSalle Hotel Group, continuing Blackstone's expansion in that area.

Venezuela elections show a person with 75% disapproval winning. Hmmm. US threatens sanctions. What is new?

Dollar: Continues its surge.

Bonds: 3.074% vs 3.06%

EUR/USD: 1.177 vs 1.1775

USD/JPY: 111.22 vs 110.74. Dollar crushing the yen again after breaking through the 200 day MA last week.

Oil: 71.39, +0.11

Gold: 1268.50, -4.80

Futures are locked in at the same gains for hours. Okay, stocks will jump early. Staying power is the key along with whether we can get some decent entries today.

Jon Johnson, Chief Market Strategist
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Friday, May 18, 2018

Market Alert - Pre-Market

Futures vs FV: SP -4.03; DJ +9.02; NASDAQ -30.38

Futures were up earlier in the session but hit the skids over the past 2.5 hours. A weekend article critical of GOOG (losing the AI fight to AMZN's Alexa), China trade issues are the lead stories on top of AMAT's weak guidance last night that is impacting chips.

Trade: China says it did not offer a $200B reduction in the trade deficit. Gee, surprise. The Chinese don't want to talk about deals in public. Nothing new there.

On the other hand, China did drop its probe into alleged US Sorghum dumping.

This is the idiocy of our media. They cannot or refuse to see the big picture. Negotiations between nations has changed. The old stodgy behind closed doors that resulted in bad deals is usurped by the 'Art of the Deal' as every nation has now read the Trump books and adjusted negotiation tactics accordingly. Thus you have statements, denials, apparently outlandish positions, etc. Just look at NKorea the past week, China's comments, US comments. Hello, McFly?

What is happening: they are talking, attempting to get deals. Even when Trump says he does not believe a deal will be reached with China, or that NKorea will be 'decimated' if no nuclear deal is reached those are not final statements. They are the negotiating plays.

Not a lot of other hard news. Chips under pressure, GOOG under pressure, other stocks decent. GOOG is important: it is in a good pattern but is looking at 20 clicks lower at the open. Not good as we have a position and it was in good sync with FB, AAPL in nice pullbacks.

Bonds: 3.091% vs 3.123%. 3% is here, Mr. Burton

EUR/USD: 1.1765 vs 1.1802. Dollar still running

Oil: 71.39, -0.10

Futures are running back to the upside as the open approaches. Okay, another session of trying to find itself in terms of the large cap indices. Still looking for bids.

Jon Johnson, Chief Market Strategist
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Thursday, May 17, 2018

Market Alert - Pre-Market

Futures vs FV: SP -2.31; DJ -17.93; NASDAQ-26.21

After gapping lower in the very early session, futures range-traded then the past 45 minutes futures bottomed and have climbed halfway off the lows. The end result? Still a weaker open but not that weak.

Big name earnings such as CSCO weighing on NASDAQ. WMT beta and showed good internet growth, embracing its 'inner Amazon' as one reporter puts it.

In sum, the indices are going to open lower as WED may not have been the start of the second leg higher on this move. That said, this is a modestly weak open, and those are good things in rising markets. Thus, there could be a soft open that sees bids return. That is the real tell for the session.

Philly Fed, May: 34.4 vs 20.0 exp vs 23.2 April.
New Orders: biggest print in 45 years. Impressive.

Jobs: Continuing claims hit a 45 year low (1973). Under the Trump administration, continuing claims have plummeted. It goes to show what I said all along: implement some pro-growth policies after a decade of anti-growth policies, actually require people to work if they can, and you get the people from 'disability' nation back to work. As I always tell the school board, the kids when they complain, or someone who just can't understand why their dog disobeys: if you expect nothing you get nothing.

Mueller Investigation: Guilliani says Mueller told him no Trump indictment. Okay, but Rudy has not been exactly a beacon of accurate statements the past few weeks.

Earnings beats: WMT; CSCO

Misses: JCP (TL); TTWO (TL); JACK (TB)

Bonds: 3.096 vs 3.096. Moved over 3.1 but backed off

EUR/USD: 1.1804 vs 1.1812

USD/JPY: 110.70 VS 110.34

Oil: 72.06, +0.57

Gold: 1289.30, -2.20

Futures off the lows, still mushy, but nothing seriously low. A good setup to see if the bids return, a good session to let some leaders test and consolidate a bit more. The action is still decent though WED was disappointing with upside on crappy internals. It just was not the day. Now we will see if bids return with some gusto off a lower open.

Jon Johnson, Chief Market Strategist
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Wednesday, May 16, 2018

Market Alert - The Close

After a Tuesday pullback stocks were a bit soft to start hump day. The question in our mind was whether stocks would put in another good test or consolidation session. As it turns out, stocks tested only modestly, and all of that was before the open. When the bell sounded, stocks rallied to positive and held the gains through the session.

More than just rallying off a lower open, RUTX started higher and powered to a new all-time high. After just two day's rest on the heels of its 6 session rally, the small caps set the upside pace yet again and RUTX is the first index to break to new highs.

SP500 11.01, 0.41%
NASDAQ 46.67, 0.63%
DJ30 62.52, 0.25%
SP400 0.68%
RUTX 1.00%
SOX 1.41%
NASDAQ 100 0.60%

VOLUME: NYSE -3%, NASDAQ -1.5%. Unfortunately, no new surge of buying on the bounce from a short test. Well below average on NYSE, again a shade below average on NASDAQ. Not the same more impressive upside volume seen in the initial leg of this rally.

ADVANCE/DECLINE: NYSE 1.9:1, NASDAQ 1.9:1. Rather anemic breadth given the small cap performance.

Okay, so the internals were not a huge success. That is disappointing because the first leg of this rally was built on internals the market has not shown for quite some time. It would be quite nice to see internals rally again as the move resumes. On what looked to be day one, that was not the case.

Yes, the question is whether the move was the start of the next leg higher and whether it can lead to new highs for the other indices. RUTX is there. No other index is close. You have to like the look of the SP400 midcaps pattern, but it still has a long way to go to new highs. The large cap index patterns are not bad, they just are not as strong and have to show they can seriously resume the upside started early May.

And that is what Thursday is about: will it prove Wednesday to be the start of a new upside leg in the rally that started on that Thursday reversal early May or is there more testing/consolidation ahead for the large caps? Always questions about this market's rallies because there always seem to be weak links in the internals.

Leadership remains decent enough but most that faded to test are not making great moves to the upside just yet.

Oil stocks found legs again with SLB surging over 2% on volume. NBR added 3%, PTEN up again, SPN 1.9%. ESV touched the initial target. HAL still cannot get out of the lateral range but still looks good.

Software saw some upside, some downside. Mixed. ULTI moved higher but just no volume. RHT faded farther; its move is over until the 50 day EMA is tested. CRM bounced weakly. FFIV still in a nice weeklong test to the 10 day EMA. DATA bounced just modestly at the 10 day EMA while NOW faded to the 20 day. VMW faded as well and afterhours TTWO (gaming) was slammed on earnings but has recovered almost to flat.

China was mixed but still solid as BIDU took off upside for us again. BABA edged higher. HTHT added more upside. BZUN is trying to bounce form the trendline and 50 day EMA. ATHM is steady, SOHU flat NTES is interesting, showing a big volume spike as it works laterally.

Chips showed some decent moves. LRCX rallied off the 50 day SMA on rising but still low volume. MU was upgraded and gapped over the April peak, AMD as well. ENPHS jumped on some rather huge trade. XLNX is setting up for a run to the top of its range. SLAB is trying to break higher again. QRVO still working on its 10 day EMA test. NVDA may just about be finished with its 20 day EMA test.

Metals: Some great action from STLD as it surged 3% on volume, clearing its base. AKS showing good volume as it possible is ready to move off the bottom of its range. SID could be similarly situated. X trying to make a break higher.

FAANG: FB in a very nice 1-2-3 pullback could be setting up a new entry. AAPL bounced off the 10 day EMA test. AMZN still at the 20 day. NFLX still at the 10 day. GOOG managed to hold the 10 day after that Tuesday thump to that level.

Retail: HD missed on revenues but said things were great. After gapping lower Tuesday it still could not break higher Wednesday. TGT surged higher on volume. BBY was off but solid. COST started to make a break higher form its 5 week lateral range. ZUMZ jumped almost 4%.

We took some gain on CDXS and ESV, picked up a position on SQ. As for new positions, well, just as everyone else we have to see if this market can continue the move and add some internal strength as it did leg one. If so, beautiful; we can pick up positions off a test and be in great position for a new leg higher.

Have a great evening!
Jon Johnson, Chief Market Strategist
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Market Alert - To the Close

RUTX broke to a new all-time high and now it is a race to the close to see if it can hold it. Small caps, chips clearly lead the way with the second tier consisting of SP400, NASDAQ. A growth bias today.

SP500 7.11, 0.26%
NASDAQ 36.68, 0.49%
DJ30 17.40, 0.07%
SP400 0.55%
RUTX 0.99%
SOX 1.15%

Not exactly a further test, and even those indices that see a solid gain are not all surging past recent levels. That is pretty much the province of RUTX.

Not much new news on the session after the morning headlines. Political parties in Italy forged a compromise and now the country has a government.

Looking at SQ, RIG as possible entries.
Jon Johnson, Chief Market Strategist
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Market Alert - Pre-Market

Futures vs FV: SP -2.35; DJ -36.41; NASDAQ +1.71

Futures range-trading all morning in a mostly negative range though NASDAQ is more or less flat. Not a bad start at all given the pullback, the doji action Tuesday. The question is whether the bids return today.

Housing Starts, April: -3.7% vs -1.4% exp vs _3.6% March (from 1.9%)

Permits: -1.8%

The key here: again there are very nice positive revisions to the prior data, showing the soft patch is ending. Economists never catch turns. They are late to rein in their bullishness and are slow to catch up to recoveries. Always. That is what is happening now.

Mortgage apps: Hit a 10 year low. Gee, what a surprise as rates spike from absurdly low levels.

Retail: Generally higher on M beat in earnings, SSS. But the rub: 2% of the 4.2% was an accounting change. Another chunk was from the friends and family sale that was moved up this year. So, 1.7% is what the real increase is. That is what you call quite a difference. Good headlines, however, and algos read the headlines and trade accordingly, and thus retailers are bid higher.

Industrial Production, April: 0.7% vs 0.6 exp vs 0.7 March (from 0.5)

Capacity: 78.0 vs 77.6 March (from 78.01). That makes April the highest since 3/2015.

Again, the revisions are not bad though capacity was written lower.

EU: First GDP drop in three years

NKorea: Diplomat says if the US continues trying to back NK into a corner it would not discuss nuclear disarmament, will end meetings before they start. Also had some comments about Bolton's statements. Reports on the ground, however, say the summit is going to happen, NK is just doing its best Trump imitation regarding expectations ahead of a meeting.

MU: Upgraded at RBC, up about 1.50 pre-market.

Bonds: 3.059% vs 3.069%. Holding over 3%

EUR/USD: 1.1769 vs 1.1827. Dollar continues its surge.

USD/JPY: 110.05 vs 110.31

Oil: 71.04, -0.27

Gold 1286.50, -3.80

Futures are on an upswing in the range as the bell approaches. After a modest pullback (when you average in both Monday and Tuesday) you have a decent setup, but it might take a third session and make that 1-2-3 pullback we really like in uptrends. Watching how the bids return on leaders such as NOW, DATA, ULTI and the like. HD will be interesting as well, trying to bounce just under $1 pre-market.

Jon Johnson, Chief Market Strategist
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Tuesday, May 15, 2018

Market Alert - To the Close

The financial stations are focusing on the DJ30 256 point (1%) drop with NASDAQ down 1% as well, SP500 -0.93%. Lions, tigers and bears, oh my.

RUTX is of 0.05%. SP400 -0.38%. The flip of Monday that saw small and midcaps lag. Now they are showing relative strength. They have been the leaders in the move.

Then there are some very good pullbacks. ULTI, VMW, NOW, DATA, PANW, VEEV, AKAM, FLIR, WDAY -- these are not bad. No, these are setting up just as we wanted. China stocks working well.

Do you move in today? You can, and if the market gaps higher you have great entries. We typically prefer to see the next move start upside off the doji we are seeing. A doji is a signal change may be coming. In 98% of the cases it needs confirmation from the move. Thus we are more or less content to let them test and be a bit patient.

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

Futures vs FV: SP -15.18, DJ -138.41; NASDAQ -55.87

The test of the bounce off support and break through first resistance is on. Stock futures traded modestly lower early morning, even bouncing off the modest lows. As of 7:00ET, however, futures started to slid, falling to early morning lows. Held, looked as if they were going to rebound in the range, but at 8:30ET they morning support broke. Futures tumbled. Trying to rebound a bit pre-open, but not expecting any kind of new bids to send the market higher this morning.

At 8:30ET retail sales hit along with Empire manufacturing. Not bad numbers. Before that, HD issued its earnings and missed on the TL thanks to the very cold winter. With HD missing and the stronger economic data, the 10 year yield jumped over 3%. Algos had the combination to sell and the sell programs triggered. Thus, the test is on.

HD: Missed top line, missed on comparable sales but fully affirmed the year and said May was a 'resumption' of the consumer cycle. Not helping HD this morning as the algos are in control for the moment.

Chips: STM raises its guidance. Not all bad.

Oil: Hitting a 3.5 year high at 71.60, even as the dollar rises. The word is all the excess supply if finally getting sopped up.

Retail Sales, April: 0.3% vs 0.3% exp vs 0.8% (from 0.6%)

Ex-Auto: 0.3 vs 0.4 prior (from 0.2)

Control Group: 0.4 vs 0.4 vs 0.5 prior (from 0.4)

You have to like the revisions. That shows unexpected strength. On the other hand, fuel cost increases played a significant role in the monthly number. Remember, it is not units purchased, but dollars spent. Thus if inflation is causing the rise in dollars spent it is not a great number and indeed bad because inflation controlling retail sales moves higher is actually detrimental.

Empire PMI, May: 20.1 vs 15.0 vs 15.8 prior

China: Kudlow says 'bromance' between Xi/Trump and predicts a deal. At the same time the US ambassador says China wanted specifics from the US, it got them, but is balking. Says they are 'far apart.' Optimist versus a realist (or is that pessimist?)

Ebola: Congo preparing for 'worst case.' Well, it should. That is an appropriate reaction for any outbreak of this stuff.

Bonds: 3.043% vs 2.997%

EUR/USD: 1.1845 vs 1.1935. Dollar has resumed its run

USD/JPY: 110.19 vs 109.63. Resumes here as well

Oil: 71.60, 0.68

Gold: 1299.20, -19.00

Futures bounced off morning lows hit just before 9:00ET, but they have rolled over again. Thus, at the open there will very likely be no upside bid reversal to drive stocks higher. Again, the test is on and it is a matter of where the leaders and the indices hold support. HD is not helping the DJ30.

A couple of areas to watch: chips (showed some life Monday, STM upped guidance) and cloud software that was down Monday (e.g. NOW, DATA, ULTI).

Will see how we can ride out the continuation of the test that really started in some areas Friday, more Monday, but today all.

Jon Johnson, Chief Market Strategist
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Monday, May 14, 2018

Market Alert - Pre-Market

Futures vs FV: SP +7.08; DJ +79.83; NASDAQ +17.69

Stock futures are higher again for another session though quite the modest bounce to start the week. The good thing is it shows the upside bias in a lack of news -- a dearth today for sure. The same question arises, right? Will this upside open hold.

There is not much news.

China: Trade wars are seen as less likely this morning as Trump tweeted that he and XI were working to get ZTE, a huge Chinese phone company in trouble, back in business as fast as possible. That implies a warming of tariff wars, but it also suggests that perhaps China is starting to work with the US in getting out the bad people in the company that were assisting Iran and start acting more responsibly. Perhaps.

Chips: Also a China story. China is reopening the consideration of QCOM's acquisition of NXPI. Quid pro quo with the ZTE actions? Of course.

Other than that there are some upgrades, some downgrades, the US is opening its embassy in Jerusalem to large protests/rioting.

ECB: Governor Villeroy spooked markets saying the end of asset purchases was near (September or December). Euro is marginally higher. Didn't hit the markets THAT hard.

Bonds: 2.984% vs 2.97% 10 year. Still hanging out just below 3%

EUR/USD: 1.1984 vs 1.1941

USD/JPY: 109.49 vs 109.384

Oil: 70.83, +0.13

Gold 1318.50, -2.20

Futures are hanging in the same range all morning as the upward bias boosts stocks modestly in the absence of any major news. It may be the early upside move fades as the recent leaders test their solid breaks higher. Some were already testing late last week, and a bit of pause to start this week could have those leaders heading back higher to lead the next leg. May take a day or two to get there, but while they take a pause we are watching to see if other areas pick up the move as our weekend plays show.

Jon Johnson, Chief Market Strategist
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