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Wednesday, April 11, 2018

Market Alert - The Close

The market takes a positive step forward, then early morning the President threatens missiles at Syria, nice new smarter ones, at Russia because Russia said it would shoot down any missiles the US threw Syria's way. I say the President, but it had the sound as if John Bolton 'borrowed' the President's phone and sent that tweet. Futures crashed lower.

Later, the Chief of Staff must have secured the phone and sent a second tweet that relations with Russia was as bad as ever, but that the US was willing to help Russia's economy and we would all move forward together. And disarm. Futures recovered, but just a bit. I am pretty sure that tweet was received with as much anger as the first. Why? Because I remember back when the tech titans all went to Moscow to talk with the Russians. Michael Dell, still of DELL, asked Putin 'what can we do to help you?' Putin stonily replied 'nothing. We don't need your help.' He met that arrogant question with typical Russian arrogance.

In any event, futures were set for a 350+ drop at the open. Ah, you have to love the world we are in right now. There is a veritable cornucopia of issues, problems, tensions, stupidity, ignorance that are in a big mixing bowl. It makes you kind of pine for the days we could just focus on Al Qaeda with the pipe dream that if we could only get Bin Laden everything would be back to normal. Yes, that worked out well. All problems solved because . . . we got Bin Laden.

Though traders awoke to ice water thrown on their Tuesday upside move, the upside was not dead. Futures improved a bit heading toward the open and intraday all but DJ30 turned positive. There was not enough ED medication, however, and none of them outside modest RUTX and SOX gains, could keep it up.

SP500 -14.68, -0.55%
NASDAQ -25.27, -0.36%
DJ30 -218.55, -0.90%
SP400 -0.13%
RUTX +0.22%
SOX +0.04%
NASDAQ 100 -0.49%

VOLUME: NYSE -18%, NASDAQ -17%. Okay, so the indices struggled the entire session, fading off a recovery attempt. Volume dried up impressively. There was not selling even with the bad news, just a bid pull. That suggests that traders and investors are really looking to move in at opportune times (e.g. today's dip) to build some positions ahead of earnings. That is, by the way, an upside positive.

ADVANCE/DECLINE: NYSE 1.03:1, NASDAQ -1.07:1. With the down, up, then down, about what you would expect, and not deleterious to an upside bounce.

I wrote about a tradeable bounce shaping up, perhaps one that did not reach new highs, but one that could make good money on a recovery move from the selling ahead of earnings. Patterns were conducive, some leadership is coming around -- not tons, but some key names set up.

What 'caused' the recovery to fail? The conventional wisdom is that the FOMC minutes were too hawkish, that the members felt the tax cuts would produce good economic activity. On the other hand, they voiced concern that the trade issues would cause economic instability. Hmm. Is not that what Trump said when he referenced there might be some pain after the good stock market gains as he corrected decades of trade distortions?

Thus, we are to believe the Fed did it. Could be: this market jumps around like a flea in a kennel.

The Wednesday internals, however, were weak as the market stumbled early then gave up gains starting midday. Volume dried up. Good stocks closed off their highs, but there were still some good moves, and good moves on some volume (e.g. NFLX, DVAX, ECYT, LITE, HLF, HAL, DO).

The point: even with the volatility on the day, there was no dumping of stocks. That makes this look more like a pause session on a second bounce from the February lows (in some cases February-ish). A pause in a tradable rally ahead of and into earnings. The indices still need to get through last week's high (where they are now) that saw an internally weak bounce fail, but this action looks and feels better than that prior attempt.

Therefore, we were picking up some more good stocks, several of those mentioned above: NFLX, DVAX, ECYT, LITE, VCEL, and good old Big Mac. At the same time HAL, DO surged, HLF added a good move. Other patterns look quite good as well, e.g. RH, M, DDS, LRCX, FFIV, RHT, WYNN, PANW, FND, CAT, AKAM.

As you can see, many quality stocks are in very good position to move. Internals were weak, showing no dumping. Looks like a pause in the tradable rally off the lows.

Have a great evening!
Jon Johnson, Chief Market Strategist
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