Futures vs FV: SP +17.50; DJ +140.58; NASDAQ +84.35
Futures post strong rebound gains. Gapped upside in the wee hours, rallied a bit higher to 6:00ET, slowly eroding since but still holding near the morning gap.
Okay, that is exactly what we did not want to happen. The gap upside followed by stagnant trade is a potential trap as it gives sellers a target to shoot at versus a steady building bid that the sellers don't want to get in front of.
That means you have to watch how it is handled. More importantly for the daily bottom call attempts it fails to provide the additional downside pressure needed to drive VIX higher and force all who deal in the stock market to abandon hope. This action is the opposite. It fosters hope - 'hey honey, the market is rebounding sharply today. Must be a bottom . . .' No honey, very likely not.
Thus, we likely play the game today of watching a bounce to see if the sellers come in sooner or later. Then you play the second part of the game seeing where the market holds after they move in, what VIX does, etc. For now I can say that investors overall are much too sanguine. We were the same when the initial test started. The selling did not stop, however, and the indicators have not 'got right' since the serious selling started. Many internals did reach extremes, but VIX has not and stock patterns overall are a lousy lot, not supportive of any sustained rally. It is, however, a work in progress and they ARE working on patterns.
Therefore, today we look at stocks such as WMT and ROST and AU and some others that are contra to the overall market to see if there is opportunity worth putting money to work.
China: Trump admin says no talks until China puts together a serious plan for ending the forced stealing of IP. THAT is what was needed from the beginning as that is the real problem. Finally.
Jobless benefits: lowest number since 10/1973.
Medicaid enrollment: First decline in 11 years.
Both of these are attributed to a . . . stronger economy.
Durable Goods, Sept: 0.8 vs -1.8 exp vs 4.6 prior
Ex-Transports: 0.1 vs 0.3 exp vs 0.3 August (from 0.1)
Business investment: -0.1 vs +0.5 exp. Yuck.
Beats: TWTR; CMCSAS; LUV; COP; DNKN; MSFT; TSLA; F; ALGN
Misses: BMY (TL); SWK (TL); MCK; (TL); MRK (TL); V (TL); WHR (TL); AMD (TL)
Toppy earnings? Get it?
Bonds: 3.134% vs 3.111%
EUR/USD: 1.1427 VS 1.1397
USD/JPY: 112.29 vs 112.09
Oil: 67.18, +0.36
Gold 1235.10, +4.00
Jon Johnson, Chief Market Strategist
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