Market Alert - Pre-Market

Futures vs FV: SP +14.02; DJ30 +147.21; +48.63

9/11 anniversary. Do you remember where you were, what you were doing when it occurred? I do. I was writing the morning alert and saw the first images of the first burning tower. I remember talking with the crew and telling them the market would open lower but would likely recover; it was just a plane hitting a building--bad yes, but it happens. Then while watching, I saw the other plane hit. I told everyone the markets were not going to open and might not open for the rest of the week. My sons were tiny, we were up in the mountains in Telluride, we were safe, but I remember how heavy everyone's hearts were for days and days. We always discuss this with our children and those kids we have taken into our home to help them through rough spots in their lives -- it puts your troubles into perspective.

Stock futures surge as apparently all is well after no North Korea weekend tests or launches and a western jog by hurricane Irma reduced damage estimates by 1/3. All must be well.

The stock market indices tested Friday as they had all week. They were in position to spring and needed a trigger. They are springing this morning, gapping upside early on and holding the move all morning. This kind of gap and hold is not our favorite type as it is sometimes subject to selling. With the weeklong test setup in still good index patterns, the notion of a gap and reversal is much more removed.

Other than the storm, virtually no economic news.

Middle East: News just leaked of a secret meeting between the Saudi prince and Israel. Not so secret really.

Fed: Last week we reported on Dudley's comments. One that is noteworthy in its highlighting the backward theories the Fed pushes in order to justify its currency manipulation: Harvey and Irma will boost the economic "over the long run." No it won't. It is the broken window of economics analogy. If you have a perfectly good window then break it on purpose in order to employ a window repairman, have you created any lasting 'long run' benefit? No! You just went to status quo and indeed pulled resources from a productive area to something that was not needed. Did that ditch, then refill it with the same dirt. By Dudley's argument we would all be rich if we just paid people to dig ditches then refill them. No wonder the dollar is 97% lower under the Fed.

Just heard Cramer talking about climate deniers with respect to the two storms. Hold it, didn't CNBC JUST report that it was 11 years since a major storm hit on the US? Don't they come in cycles as in 2004 when Florida was hit by 4 storms but almost none since then? Call me a fool but looking at these two storms and then concluding they were caused by global warming (the first phrase used) is faulty logic. But, our society is founded upon faulty logic now as news reports tell you some of the facts then make fantastic leaps of illogic in extremely general conclusions. I saw a black cat last night walk across my path and stubbed my toe while watching the cat over my shoulder. Therefore black cats crossing your path obviously lead to foot injuries. This is the kind of logic you hear.

But, I digress. Happens when there is not a lot of news.


OTHER MARKETS
Bonds: 2.111% vs 2.042%. Bonds sell off hard as the fears subside.

EUR/USD: 1.1983 vs 1.2037. Dollar recovers some from its hit.

USD/JPY: 108.77 vs 107.847. Recovering here a bit as well

Oil: 47.46, -0.02

Gold: 1337.40, -13.79


Stocks are going to gap sharply higher. A good setup might be hard to buy. We are looking at this as perhaps the last leg on this particular move before the cycle repeats, i.e. the indices top then fade to the bottom of the range. Thus we gladly let the positions we have and the ones we added last week run, but for new ones, the gap is tougher. If we get some good entries, i.e. gaps not too huge, we can pick up some positions. We will have to see how the gap holds/tests, and what kind of gaps our plays show on the open.



Jon Johnson, Chief Market Strategist
InvestmentHouse.com
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