Futures vs FV: SP 26.24; DJ +236.05; NASDAQ +93.40
After a drop to the October closing lows to end last week, stocks are bouncing. Is it just an oversold hope move given the potential 're-test,' solid Black Friday sales, Italy populists softening toward EU proposals, Brexit progress (though many would not call it that)?
Yes. But then, solid retail sales is another reason for the Fed to stay the course even though, as noted over the weekend, sales are a lagging indicator as are jobs. Doesn't matter given the Fed's point of view.
Futures gapped higher and have more or less held their gains all morning. One of those gaps to a tight range that goes nowhere after the gap. Hope does spring eternal, but sellers are still there and the question is how aggressively they go after this move.
It well could be a move of several days given the test of the prior low and the oversold condition. The setup in the recent leaders (VZ, PG, etc.) is certainly solid, but those are not growth stocks. Those growth stocks could bounce off the market double bottom, and we are looking at the semiconductors as possible plays given they sold much earlier than the other stocks and put in their own bear market, now sporting some decent patterns.
What is for certain is the market overall remains in a selling bias overall. The big indices are working on bases, some groups are working well, most are not. We are going to focus on the working groups and the few that have set up some decent patterns.
After that you see how any rebound holds and if it fails at resistance, then you load up with some downside plays.
The News is quite limited.
Italy populists decide going alone would be more damaging than marginal concessions to the EU. Europe is happy about that.
Brexit deal supposedly a done deal. Not sure that is the case, but that is another reason they are happy in Europe.
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Jon Johnson, Chief Market Strategist
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