Wednesday, October 31, 2018

Market Alert - Pre-Market

Futures vs FV: SP +30.07; DJ +244.36; NASDAQ +103.63

Stocks are set to open significantly higher in an effort to continue the Tuesday rally. If they can close higher it would be the first 2-day 'winning streak' in a while. Much rejoicing. Yeah.

This looks to be the relief move from the second leg lower in the selling. Some are saying FAANG is back, a bottom is in, blah, blah, blah. Any upside has to prove itself. We saw good patterns breaking higher and moved in. There will be more moving higher today, but this is the second day of what is likely a relief move and it is opening with a gap. That makes finding good entries more difficult and it raises the risk in the risk/reward equation: if it is just a 4 to 5 session bounce then these gaps are eating up the potential gains.

ADP: 227K vs 180K exp vs 218K (from 230K). ADP was adjusted to closer reflect the government report starting a couple of years ago. It is as lousy as forecasting the Friday report as it was before.

China: Reports lower than expected manufacturing growth numbers but that is okay because the government 'vows' to provide more stimulus. Great! More stimulus is a market favorite -- even if it does further balloon China's utterly massive credit issues and debt.

Employment Cost Index, Q3: 0.8% vs 0.7% exp vs 0.6% Q2. 2.8% year/year, the fastest growth in 10 years (Q3 2008)

Wages and salaries +3.1%, also the highest in 10 years. 2008. Hmm. The end of the prior expansion, then the drought through 2016. Policies changed, regulations slashed, taxes reformed, growth resumes. Amazing how this is shown time and time again, but no one learns.

Yellen: Feels two more rate hikes appropriate, fears the debt (NOW she fears it?). Says if she had a magic wand she would raise taxes. Why not, if you had a magic wand, have it eliminate waste, duplication, fraud, and other unnecessary spending by the government? Less government, motivated workers who do the will of the electorate versus pursue their own agendas? Yellen is an idiot as she proved in trying to get Greenspan to 'pick a number' in terms of what is acceptable inflation. The Fed members have untold hundreds of thousands of dollars of education, perhaps millions, between them, yet they absolutely do not understand how real world, real life economics works.

Earnings beats: GM; ATHM; CLX (but warned); EL; GRMN; YUM; EA; TMUS; AMGN; FEYE

Misses: FB (TL, users miss); CAKE (TL)

Warnings: BIDU. Duh.

Bonds: 3.151% vs 2.119%

EUR/USD: 1.1318 vs 1.1342

USD/JPY: 113.20 vs 113.09

Oil: 66.35, +0.17

Gold: 1218.40, -6.90

Futures holding their gains, gap upside at the open. Looks to be day 2 of the relief move off the second leg of selling. We will see if we can get any decent entries.

Jon Johnson, Chief Market Strategist

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