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Monday, April 9, 2018

Market Alert - Pre-Market

Futures vs FV: SP +13.38; DJ +166.24; NASDAQ +49.29

The week opens with hopes the trade wars/tensions are easing. Bully. I recall the same sentiment last week. The week before that as well. Get a little lift, people feel better, but the internals stunk and stocks fell back down at the first sign of bad news. Higher volume on the selling as well, e.g. Friday.

Thus, this early bump is not that comforting after the Friday tail into the weekend. That left the indices at the same place, at the same support, trying to hang on and trying to find footing.

What was the trade news? Trump said he felt China would do what is right. While China likely will ultimately make necessary adjustments to try and regain legitimacy (even an Obama trade rep says that Trump's position on China is correct), that is a long road ahead with potholes. Case in point, China is said to be looking at devaluing the yuan as a response. As we reported last week, it looks as if China is already doing this looking at the yuan action on a few suspicious sessions.

Russia: US initiates sanctions, Russian currency, stock and other markets tank. Russia blames Israel for attack in Syria. Israel does not deny it. I am trying to ascertain where some of these doom and gloom websites get their bias in favor of Russia. Russia under Putin is the same as the USSR. Not good actors. Yet, places such as Zero Hedge fawn over the poor Russians being abused at the hands of NATO and the US. It MUST be Russians providing the stories and comments on the stories. Ha! Russians everywhere! Ha!

Bonds: WSJ, Bloomberg are noting what appears to be the signs of a possible yield curve inversion.

Economics: Kudlow is to talk to CNBC this morning and cheerlead again.

Economy has WSJ, NYT talking about a slowdown. 3 months negative retail sales, ISM's slipping. As I said over a month ago, we have hit a slow patch. RUTX, SP400 not acting well, following along at best. They are important domestic economic indicators and thus there is some credence to at least a slowdown. The bond curve is of course very important to watch and see if an inversion develops.

Bonds: 2.779% vs 2.775% 10 year

EUR/USD: 1.231 vs 1.2281

USD/JPY: 106.95 vs 106.91

Oil: 62.72, +0.66

Gold: 1336.20, +0.10

Stocks are holding their early session gaps higher, more or less. With the market hostage to headlines, these bounces are suspect. Need to see more volume and breadth upside. The Kudlow interview to come likely adds some sugar to the Monday morning rush. Then it is a question of sustainability. Thus far, the past two weeks of testing the support, the upside is unable to find the kind of strength needed to make serious, sustained moves.

Therefore we will see what kind of strength this move shows and gauge the upside prospects based on that. I do believe the market can rally off these tests/double bottoms, but after reaching higher off a good setup, if economics do not show improvement from the tax cuts, then the move after that could be pretty ugly, even compared to February.

For now we will see stocks gap higher and will have to see if this time some volume comes in. Still have patterns out there we like a lot from DO to ICLK to MCD and on. They can make money on a bounce, and for now, any upside move is still viewed as a bounce, set up or not, until it shows more strength.
Jon Johnson, Chief Market Strategist
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