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Monday, July 16, 2018

Market Alert - The Close

DJ30 led the market thanks to JPM riding the BAC earnings coattails, but it was hardly a major Dow move.

SP500 -2.86, -0.10%
NASDAQ -20.26, -0.26%
DJ30 44.95, 0.18%
SP400 -0.55%
RUTX -0.56%
SOX -0.12%
NASDAQ 100 -0.24%

I suppose investors and traders were concerned about the President's 'treason' as former CIA director Brennan (he strikes me as a lonely, angry man -- am I alone on that?) called Trump's press conference with Russia's Putin. Didn't know you could do that in a press conference, but then again, I am not ex-CIA. Or ex-KGB -- wanted to make sure that was clear.

Thus, another President purportedly unable to understand Putin, setting the US up for disaster. We will see. I recall Bush II saying he looked into Putin's eyes and saw his soul. He didn't say if it was roses or a garbage scow, but he acted as if they had an understanding. That worked out well. Not. Obama had his infamous caught on tape exchange with the then Russian president saying to tell Vladimir he would have more latitude after the election. Looks like more of the same, trying to be chummy but as the old cold war saying goes, once KGB, always KGB.


Retail sales were solid but understandably backed off some from the strong May levels that were revised even stronger. Still solid enough, and as noted, understandably lighter.

Retail Sales, June: 0.5 vs 1.4 May (from 0.8%)
Ex-Autos, June: 0.4 vs 1.4% May (from 0.9%)


The indices hovered, more or less, around the flat line all session, unable to add much to the prior week's upside.

SP400 and RUTX both closed lower, still in the pullback after testing the prior all-time highs. No money moving back their way yet as both slid lower to test the 20 day EMA.

NASDAQ was off a bit after it too moved to a higher high. NFLX was up, down, then up ahead of earnings. All running in place because it missed top line, bottom line, and on subscribers (by about a million). It is down a cool 55ish points afterhours. That is not going to play well on NASDAQ tomorrow with such a big stock with such a miss. Not pleased about that as well as we are in it, looking for that one-day kind of earnings bounce. Wrong way, and big time.

SP500 lost some ground even as banks jumped on the BAC earnings. A breakout over resistance last week but unable to add anything to start this week.

DJ30 landed the lone gain on the back of JPM's 3.93% move that pushed it through the 50 day and 200 day SMA. The Dow itself is still mired well below its resistance, including the early June high. Up, but with CAT, JNJ, IP and others struggling, JPM could not do it all. The Dow continues to enjoy a few upside moves but mostly suffers through stocks not receiving any money.

SOX was off but just modestly. The majority of semiconductors, less some quite nice patterns, are struggling. They are working laterally over the 200 day SMA, in a mass of indecision.


As for NFLX' earnings, of course it is one of the markets horsemen, and it has stumbled. What does that mean for the others as well? Is there a relationship economically or was this just NFLX unable to match expectations in its business that continues to explode higher, just not as fast as expected this quarter.

If the big names supporting the market, FAANG, MSFT, software, and the like cannot keep supporting, and if the NYSE large caps continue their flounder imitations, unable to get money pushed their way, then the market uptrend is at significant risk.

Indeed, all of FAANG is off afterhours, starting the moment NFLX announced. NVDA is off 3 points (closed at 248). Software appears to be hanging in for now. If the biggest earners are flinching, the market in general feels it. Of course, AMZN is still to announce, but as noted, it is off as well, about 27-30 clicks.

Fed chair Powell is also on tap to address Congress this week, giving his semiannual state of monetary policy address. That likely won't throw any solace to the market as the Fed sees the economy as great and thus in need of more rate hikes. To be fair, it did note the yield curve in the last meeting minutes, but noting it and heeding it are not the same thing -- heck, Greenspan noted it and then explained it away JUST as many are doing this time saying the Europe is buying our bonds. Danger, danger, danger (as the late great Crocodile Hunter, Steve Irwin, would warn).

Thus, Tuesday could be about as rough on the market as Stage 9 over the cobbles was to the Tour de France participants. Heavyweight contenders crashed out completely, hit the cobbles hard but managed to continue, or flatted repeatedly right out of contention.

After a lower open Tuesday from some of the big names we will see 1) if any bids return, 2) if other leader areas are impacted negatively, e.g. software, 3) if other groups receive bids, e.g. banks as they did Monday. Depending upon the response, it will be time to pare positions for what could be a last half of summer slump while looking to move into areas that might get money pushed their way such as those banks.

Have a great evening!
______________________________________
Jon Johnson, Chief Market Strategist
InvestmentHouse.com

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