Wednesday, October 10, 2018

Market Alert - Pre-Market

Futures vs FV: SP -6.04; DJ -34.57; NADAQ -39.87

Stocks are pointing lower again after a bounce attempt failed Tuesday. A slow ebb lower since 7:30ET to morning lows, trying a bounce post-data.

PPI: 0.2 VS 0.2 VS -0.1

Core: 0.2 vs 0.2 vs -0.1

Final demand year/year: 2.6% thanks to a 3.5% mo/mo drop in gasoline. Lowest FDY/Y since 12/17.

The big story continues to be whether there is an economic slowdown and if the Fed is hiking into it. There is a slowdown, but the issue is whether it is just a cyclical slowdown in a continuing advance or a real, this is the end of this leg kind of slowing. The latter would mean the tax cuts had their impact and are done. I don't think that is the case.

What this could be is the yearly fall slowdown that manifests in the data released and the activity in October. I have tracked this event since in high school and it is a very consistent slowdown ahead of the US holiday season.

Still, there are companies reporting problems such as PPG and TSE. TSE's products go into all kinds of building materials as it makes styrene and other polymers.

Then again, FAST (fasteners, bolts, nuts, etc.) just reported a top and bottom line beat.

Either way, should the Fed be hiking or more importantly, taking such a blanket, 'we will continue hiking as far as the eye can see' approach that it changed to at the last rate hike decision? I think the market is telling the Fed 'no,' as are commentators such as the President and Cramer.

China: Mnuchin says that a yuan agreement (read no manipulation) must be part of a trade deal.

SHLD: Prepping for a bankruptcy filing this week.

Downgrades: KC, CD, CLX by DB, citing a good rally.

Bonds: 3.239% vs 3.206%

EUR/USD: 1.1502 VS 1.1495

USD/JPY: 113.21 VS 113.01

Oil: 74.60, -0.36

Gold: 1189.40, -2.10

Still the same angst regarding interest rates (bouncing back up) and the Fed's position on the economy. CPI Thursday may help clarify, and if it is sluggish as was PPI, that may assuage some of the Fed Fear angst. The Fed is afraid to let the economy go, and thus Powell is a major disappointment, adopting in force the Phillips Curve dogma that is just historically proved to be junk. The market is buying into a Fed-induced problem of some sort, and the current action is the market's attempt to gauge the slowdown degree.

That said, kind of like the lower open here as it works to get more people out of the market. That it occurs after a failed rebound attempt is good in that sense, but also concerning in that the rebound failed and stocks are heading lower. It all comes down to SP500, DJ30, RUTX, SP400 and how they hold the support they are all currently testing (50 day, 20 day, 200 day MA).

Jon Johnson, Chief Market Strategist

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