Market Alert - Pre-Market

Futures vs FV: SP 17.65; DJ 121.06; NASDAQ 56.08

Whatever worried the markets has taken a back seat today. Futures soared when they opened hour ago, held steady, then rallied farther over the past 2 hours.

I saw 'whatever' because despite the desire to pin gains on a specific event, often that just is not the case.

Fed: Some are saying the more dovish comments from the Fed vice-chair Fischer are prompting this rally. Those comments were Monday morning, however. Perhaps when combined with the really bad data from the NY PMI and the Production and Utilization numbers? Again, old news.

How about the rumors of some Chinese stimulus? Always good for a rally. Word out of the East is that China may have plans on stimulus given its economy is falling hard according to the comments we are hearing.

Is there some new poll out on the election showing House republican, President Clinton and thus supposed gridlock? Of course gridlock is now a fiction as Congress has ceded authority to the Executive via failure to assert its Constitutional controls over it. Heck, the Judiciary as well as the Court writes laws from the bench but the Congress has constitutional authority to set the Court's jurisdiction. Congress, however, is now just a group of people who go there to get the connections for post-public life and to get the better healthcare and pensions that the rest of us cannot get. But . . . I digress.

How about earnings? That is often the driver, but most earnings cited were out this morning after the futures massively gapped upside. They certainly are not hurting, but outside NFLX, are they the reason?

Earnings Beats: NFLX, GS, UNH, JNJ, RF, IBM, UAL. Top and bottom lines.

That is the story. Better results, dovish Fed, what more could you want?

CPI: 0.3% vs 0.3% vs 0.2%. Yr/yr: 1.5% vs 1.1% prior

Core: 0.1% vs 0.2% vs 0.3%. Yr/yr: 2.2% vs 2.3% prior

Up: Gasoline (5.8%), Rents (0.3%), Airlines (0.4%), Services (0.2%)

11 months of the core over 2%.


OTHER MARKETS
Bonds: 1.775% vs 1.766%

EUR/USD: 1.1002 vs 1.1005

USD/JPY: 103.951 vs 103.872

Oil: 50.32, +0.38

Gold: 1261.20, +4.60


Stocks are set to gap higher after the NYSE indices faded to the September lows but did not take them out. Oh, some did on the Thursday low, but magic occurred that session. Now some magic upside as well explains the big break higher. Perhaps. In any event stocks are going to gap higher and we see how they hold.

We will look to bank some IBM profits; it is off last night's lows but is still in the 150 range, below our initial target. We will see how it trades. Often you have a gap lower, a modest bounce attempt, then deeper selling. With the rest of the market surging, however, you may not want to wait to see if a rebound fizzles. Perhaps with part of the position.

As for new positions, we will see what kind of entries we get and importantly, what kind of holds of the moves there is.


Jon Johnson, Chief Market Strategist
InvestmentHouse.com
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