Tuesday, November 20, 2018

Market Alert - Pre-Market

Futures vs FV: SP -36.23, DJ -351.44, NASDAQ -125.99

Futures were lower but in a range to about 7:00ET. Then the cracks opened and stocks fell in. Retail is getting slaughtered despite some good -- truly -- earnings. This market is starting to tear down even good sectors and THAT is a signal of a bear market. Drugs, food, personal products still working for now.

Lots of earnings, most good, but the market does not want anything to do with it.

TGT is the one cited. It missed bottom line, citing rising costs. That is killing the sector regardless of KSS' stellar report where it beat handily, beat SSS expectations, raised guidance. Yet, it is being sold harder than TGT.

Beats: KSS, LOW, MDT (increased guidance), INTU, URBN (increased SSS guidance), LB, A, PURE and good old Campbell Soup.

Misses: TLT (BL); HRL (TL)

Downgrades: AAPL (GS)

BA: down hard, contributing about -100 to DJ30, as it cancelled a conference call regarding the 737 issues. Never a good idea.

Sentiment: Cramer says perhaps this is a capitulation phase. Uh oh, a bottom seeking comment still.

GS says to get to cash, go defensive, and watch out below if more tariffs.

AAPL: downgraded by GS

FAANG: -$945B from the top. Useless stats they are spouting on financial stations.

Housing Starts, Oct: 1.5% vs 2.4% expected. Interest rates.

Death Crosses: NFLX, NVDA, GOOG all in 'death crosses,' i.e. where 50 day MA crosses down through the 200 day MA. FB was in one back in September but no one said anything. Now that is the report on every financial stations. That typically leads to more selling -- at some point That is good to note, but it is right now part of the process. You want to play the downside once it is established, and that comes after the death cross is tested, i.e. there is a good bounce. Then you go way downside when that move fails.

Bonds: 3.043% vs 3.056%. Bonds continue to rise, yields fall, but it is a slow move, not a collapse. thus the smart money says some issues but not an economic crush coming -- despite GS' predictions.

EUR/USD: 1.1404, -0.0047

USD/JPY: 112.34, -0.21. Was bumping 115 just a short time ago.

Oil: 57.76, 0.00

Gold: 1228.70, +3.99

The market psychology has not changed yet. VIX has not rallied, still tenaciously remaining low as the buy the dip mentality is still engrained after 10 years of Fed-backed upside that thwarted every dip. Remember when I would say the market should be selling and had indeed rolled over on three occasions during that time but the Fed and the plunge protection team bailed it out. That is not happening anymore and many analysts, fund managers, and pundits that grew up in a market of Fed-put don't understand.

There was still a chance the market could bounce as late as last week. Sure it was diminishing, but the patterns were still there. When software gave up Monday, that spelled the end of a serious bounce potential for tech. It will likely put in a bounce ahead of Christmas and that will likely be a nice tradeable bounce -- if VIX can spike some -- and then when it ends near the first of the year that is a major downside opportunity.

Until then we play the opportunities such as ABT, AEP, and will have to see how DRI, DG and similar retail stocks survive the retail carnage today. Fewer sectors to play for sure, another sign of bear market contagion, kind of like Matrix: Revolutions if you know what I mean. Keep the powder dry, play some upside in the good sectors, let VZ, JNJ and the like continue to work while they work. While the market makes this sausage and bounces up just to sell, stay lighter and more in cash as we have been doing.

Jon Johnson, Chief Market Strategist

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