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Monday, February 12, 2018

Market Alert - Pre-Market

Futures vs FV: SP +18.3; DJ +157.10 NASDAQ +48.32

The volatility remains, and this morning it is big upside as the stock market continues the Friday afternoon reversal rally. Futures are off their highs, however, heading toward the opening bell.

Battle of the analysts: MS throws in saying the 'price damage is done, time to buy.' Contrast with GS, Bridgewater saying there is a bigger shakeout to come. What is likely: we get the rebound off the Friday low rally, then there is another selloff to find the bottom.

M&A: GD buying CSRA

Infrastructure: Trump rolls out a $200B package as both democrats and republicans throw away all pretext of concern about the budget. Crazy. Oh sure, there was a senator today talking about how he is sticking tough on the budget, etc., but no one believes it. Heck, he voted FOR the budget deal that further explodes the budget. Hello, China? You sure you don't want to buy more US treasuries?

Sentiment: E-trade reports +37.1K new brokerage accounts, +154%.

Bonds: 2.862% vs 2.857%. At 4 year high yields

EUR/USD: 1.2243 vs 1.2233

USD/JPY: 108.65 vs 108.78

Oil: 60.27, +1.07

Gold: 1320.20, +4.50

Stock futures are off their highs heading toward the open. We were hoping for a bit of a dip to start the week. Not happening as stocks are set to gap higher. The fade toward the open means we watch how the upside gaps trade in the first part of the day to see if there are better entries.

We view this as the start of the relief bounce and a tradable move higher, and we want to get in with some decent entries if possible. We don't view it as the new rally but one that will be sold again. May not be, but that is the bigger picture we see. Still want to play this move if we can get some decent entries.

Looking ahead on the week, the Wednesday CPI is getting bigger and bigger. If it comes in hotter than expected that could dampen the upside on fears of a more active Fed, and no market likes a more active central bank, at least on the hiking side. That news may provide an upside entry point as well if the relief rally is knocked back some. Thus, we want to take some positions today if we can and also have an eye out for Wednesday.

Volatility is still here. Today it just happens to open to the upside and that makes everyone happy. It is not gone, and indeed, the futures are dipping some and that can give us some entries to play a move higher.

Still not loading up, not wanting to be anywhere near 100% in. This is to make some money while the market works through the correction. Still too much volatility to take a lot of big positions designed to be position trades for more than a few days.

Jon Johnson, Chief Market Strategist
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