Monday, December 03, 2018

Market Alert - The Close

Over the weekend I posited that a trade 'deal' such as the one agreed to Saturday night between China and the US was priced into the market after a week's gains and word Friday that seemed to assure some type of deal. You would think that would be the case, particularly with the kind of deal reached, i.e. a deal to try and make a deal. Oh sure there is reportedly an agreement for China to buy more agricultural products and Trump says China will end tariffs on US vehicles. That is nothing new, however, as this kind of deal making in the past produced a goose egg.

Quite obviously, however, the news was not priced in. Futures jumped 400+ points higher Sunday morning and when the early Monday session opened they were up around 400. Not so priced in after all.

Futures held the same range all morning, and when stocks opened of course stocks gapped higher. The open, however, was the zenith. The indices sold back into midday and RUTX and SP400 even turned negative. An afternoon bounce regained some of the fade, leaving the indices mostly showing doji.

SP500 30.20, 1.09%
NASDAQ 110.97, 1.51%
DJ30 287.97, 1.13%
SP400 0.89%
RUTX 1.02%
SOX 2.67%
NASDAQ 100 1.68%

VOLUME: NYSE -35%, NASDAQ +3%. NASDAQ trade was much higher, indeed posting close to the highest levels of the past month. NYSE trade dropped back hard to just above average.

ADVANCE/DECLINE: NYSE 2.8:1, NASDAQ 1.9:1. Frankly, breadth was hardly commensurate with the price moves.

After a week of upside, a gap that failed to advance is not that surprising. The indices had rallied to resistance and the trade news gapped them through that resistance. Sitting on top of a solid gain and then gapping higher over resistance begs a test of that resistance. That the indices peaked at the open and faded from there suggests a quick test is coming. Thus, we were not chasing this move as we may get better opportunities on a test.

We did pick up AUDC as it posted a solid upside break -- not a big gap -- that held the move on good volume. Most other plays gapped to doji or gapped away. We will see if they test and set up better entries for a continuation of the yearend rally.
Jon Johnson, Chief Market Strategist

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