Market Alert - Pre-Market

Futures vs FV: SP -19.60; DJ -162.75; NASDAQ -38.06

Futures are off their lows over the past hour as the open comes around. Don't want to see any real recovery too early. Want to see the selling continue as a good shakeout to get a better chance of finding some kind of sustainable move.

Overreaction? Sure. This was politics, not financial. UK didn't like what the EU was doing re immigration, etc., viewing the EU's decisions not on the financial best interests of the union but for political correctness. When a union made for financial benefits instead focuses on politics, time to leave. Good for the UK, and the others should consider it.

Looking at the headlines you would think the entire world is in financial turmoil. Well, Japan and China have financial markets that are actually higher today. The east and west splitting? Of course, Japan is no economic stalwart right now and China's 7% GDP growth is a paper tiger, built on massive amounts of debt that makes even the US Treasury Secretary blush (if that is possible; never met a deficit spending plan it didn't like).

European banks are bombing lower again on downgrades. 25% losses are the norm.

8 EU nations are discussing their own referendum on leaving the EU.

Currencies:
China: Devalues yuan the most in 10 months, using the EU turmoil as the reason.

Japan: Abe gives the financial manager the nod to intervene on the yen's behalf. Recall Japan promised it would not engage in intervention and it has held to that even as the yen climbs higher and higher. As it tickles 100, however, and using the EU turmoil, Japan will intervene. To Japan's defense, these events are something it did not bring about.

M&A: MDT buying HTWR. Life does go on.


OTHER MARKETS
Bonds: 1.48% vs 1.57% 10 year. Global bond surge continues in the run to more safety.

EUR/USD: 1.0993. Dollar picking up some speed against the euro.

USD/JPY: Yen falls closer to 100 and Abe gives his financial minister the green light to intervene. After all, it is not Japan that changed but the EU is causing the market reverberations.

Oil: 46.53, -1.11. Continuing lower toward support at 45-41

Gold: 1332.60, +10.20. Continues the run higher


Futures are down but off the lows the past hour+. This is giving the market more of the needed downdraft, but when looking for bottoming action you look for capitulation. Futures rising off the lows before any US trading does not show capitulation. Thus we would not be surprised to see a secondary move lower this session.

Watching the leadership groups (e.g. oil, chips, metals, retail) to see how they hold support as an indication money is not wholly leaving the market. That is the key for a real rebound.

Jon Johnson, Chief Market Strategist
InvestmentHouse.com
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