Monday, December 31, 2018

Market Alert - Pre-Market

Futures vs FV: SP +16.76; DJ +189.60; NASDAQ +50.73

Futures gapped higher early on as Trump talks of a very long and successful phone conference with Xi regarding trade. Trade hopes up, not much other news, year end, stocks resume moving higher in the late Santa Claus rally.

China: Perhaps Xi has reason to strike a US deal. China's PMI turned to contraction (49.4 vs 50.0 in November), showing its lowest reading since 12/2008. New orders 49.7 vs 50.4 Nov. Could it be Trump is . . . winning? No one wants to say anything positive right now, but the intent was to drive China to make a deal when before China had zero incentive to make a deal. Now, if the Fed would let the US economy work we could pull off a fate similar to the USSR. Not saying China communism folds immediately, but if it has to reform to compete it has to reform to compete. Wake up Fed.

GS economic call: Sees US eco growing at 2.0% from 2.4%, predicts just 1 rate hike in 2019.

Lots of stories looking back at they year, the usual end of year worthless recap and even more worthless predictions for 2019. In short, the real news is a China tweet (a tweet mind you) and the Chinese PMI. That is THE news along with the Fed once again missing its policy.

Don't get me wrong, I think the Fed needed to act -- it just needed to act 7 or 8 years ago, not immediately killing off an expansion as soon as it started. That is so . . . Bank of Japan. I said all through the 2000's we had become Japan as people such as Ron Insana argued we were not. Be we have followed all of its policy themes even up to this Fed desire to stop an expansion once it started. The Fed just follows the wrong policies that thus give wrong signals at the wrong times prompting the Fed to make the wrong moves at the wrong times. If you have company executives that consistently implement policies that cause the company earnings to decline, how long would that executive group last? As it is the end of another year where a Fed has torpedoed growth, this one after the first growth in over 10 years, I again ask why do we have the FOMC?

Bonds: 2.741% vs 2.716% 10 year

EUR/USD: 1.1444 vs 1.1436. Euro continues to rise against $.

USD/JPY: 110.03 vs 110.26. Weaker here as well.

Oil: 46.12, +0.79

Gold: 1282.60, -0.40

Stocks will open higher with a gap after trading in a range all morning. Struggled to hold a move Friday, will see if it can hold again today. Would like the move to hang on, provide another few sessions higher to start 2019, we take some gain then play what the market throws at us after that.

Jon Johnson, Chief Market Strategist

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