Friday, December 14, 2018

Market Alert - Pre-Market

Futures vs FV: SP -24.04; DJ -207.38; NASDAQ -79.72

Futures lower all morning, gapping lower, slowly crawling back upside toward the open, but not crawling fast enough to get anywhere near flat. Can the market start lower and move higher after starting higher and moving lower all week? Will need to show some bids it has not shown thus far.

Reasons for the gloom? Earlier in the week good news sparked upside futures. Just didn't hold. Today it is economics -- not the US -- those numbers today improved futures. No, the issues is everyone else.

China: Data keeps getting worse. Industrial output came in lower than expected at 5.4%, a 3 year low in growth rate. Retails sales 8.1%, missing expectations and showing the slowest growth since 2003.

China is also rolling back its retaliatory 25% tariff on US autos for 3 months (the 90 day period).

EU: Expanded at the slowest rate in 4 years. France business activity turned negative. Germany at a 4 year slowest pace.

US Retail Sales, Nov: 0.2% vs 0.1 exp vs 1.1% Oct (from 0.8)

Ex-auto: 0.2 vs 0.2 exp vs 1.0 prior (from 0.7)

Ex-auto, gas: 0.5% vs 0.7 prior (from 0.3)

Control Group: 0.9 vs 0.4 exp vs 0.7 prior (from 0.3)

That is a good number, showing that the drop in gasoline prices dragged sales lower. Take them out and they bounced.

Look at the revisions: impressive. Revisions are always more important as they show more clarity.

Okay, here is something to consider when you listen to the media talk economics from their Keynesian view: CPI, PPI lower. That scares Keynesians who want to devalue our currency with inflation as they think inflation is healthy versus the erosion of value it is (they don't put it that way, but that is what their policies accomplish). Indeed, the Fed, to maintain its power growth, has convinced everyone that inflation is needed and thus its 97% devaluation of the US dollar since the Fed's inception can be explained.

This data shows the reality that we CAN live with if we kick the Keynesians out. Prices are lower for producers and buyers. That is a good thing. It shows efficiency, functioning markets, free enterprise competition reducing costs. At the same time, sales are higher. Companies are producing, jobs are up, wages are up, people are buying. Yet prices are lower. In the Keynesian world that cannot happen but it is. So Powell and Keynesians on the Fed panic and say they have to hike beyond neutral to control inflation. BUT . . . IT IS INFLATION IN THEIR MIND. This is why EVERY Fed from the 1920's central bank has crashed markets and caused recessions -- BECAUSE THEIR THEORIES ARE BASED IN CONTROL, NOT working markets!

Bonds: 2.895% vs 2.913%. A bit of flight to safety

Oil: 52.59, +0.01

EUR/USD: 1.127, -0.0091

USD/JPY: 113.62, +0.01

Futures continue to scratch back toward the open, but again, a long way to go. Also, this is NOT expiration; that is next Friday.

This slow comeback is interesting. It would be very nice to see stocks come back from a weak open, and that would give the bounce from the bottom of the range some serious aspects. Considering that US Stock fund OUTFLOWS hit a record $46B and money market inflows hit a record, the timing would be right: terrible sentiment, people moving their money out -- they always do so at the wrong time.

Jon Johnson, Chief Market Strategist

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