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Thursday, January 5, 2017

Market Alert - Pre-Market

Futures vs FV: SP -4.9; DJ -31.16; NASDAQ -8.71

As soon as the stock indices broke higher off of the 2016 year end pullback, markets are hit with some currency intervention stories from struggling economies.

China: Yuan flight is a huge issue as citizens seek to put money anywhere but China, speaking to the country's economic issues in the clearest way. We like to look at insider selling as a possible indication of overvalued stocks. Well, when the citizens with money seek to put it somewhere else, that is a pretty solid indicator of the economic conditions.

Thus China intervened big in favor of the yuan, sending Bitcoin diving lower after talk of currency controls sent Bitcoin over 1,000. China is trying to give its citizens a reason to stay in yen as it targets what it calls "virtual currencies." China also had choice words for Trump, talking about flowers at the gate of its economic relations but sticks inside the doors.

Mexico: Intervenes to support the peso after it was crushed on the idea that perhaps Trump has a lot more power over companies wanting to put factories or continue factories in that country.

Oil: Up on a surprise draw of 7.43M bbl.

Jobless claims: 235K vs 260K exp vs 263K prior.
After big moves higher for a few weeks, the holiday shortened week showed a big drop as the offices were not open.
Continuing Claims rose for the fourth week, showing the truer story.

Turkey: Car bombs set off within the last hour.

FOMC: Market is still digesting what the Fed intends because as noted last night, the Fed has no idea what to do. Reminds me of the classic line in the show 'Miracle' about the 1980 US Olympic hockey team. With the game with the USSR winding down with the US in the lead, the Soviet coach looked confused and did not pull his goalie. The US coach Herb Brooks looked at his assistant coach and said 'he doesn't know what to do.' You get the same sense about the Fed. It does not have a clue, but unlike the Soviet coach who had never been in a situation of losing late in a game, the Fed has been losing late in the game many times. It has just never been right.

That indecision, however, is of course disdained by the market and possibly part of the issue.

M, KSS: After all, the Fed says things are better and better yet M and KSS show they are not as they both missed holiday sales, slashed 2017, and M is closing stores and laying off thousands. How is that for jobs, sales, and general economic health erstwhile economic wizards of the Fed?

OTHER MARKETS
Bonds: 2.419% vs 2.45% 10 year

EUR/USD: 1.0524 vs 1.0525

USD/JPY: 116.186 vs 116.46

Oil: 53.63, +0.37

Gold: 1176.80, +11.50


So, stocks break higher then start softer. The key is can they use a soft open to rally? Can SP500 hold and move back up and through the prior high? Will semiconductors rise off of this test of near support? Can the other early leaders, e.g. metals, start higher as well and continue the Wednesday moves?


Jon Johnson, Chief Market Strategist
InvestmentHouse.com
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