Tuesday, February 12, 2019

Market Alert - Pre-Market

Futures vs FV: SP +19.45; DJ +204.89; NASDAQ +56.86

The tentative budget deal reported last night has gapped futures higher and they have mostly held that gap, trending slightly upside. The past hour the move leveled off.

After 4 days of testing, the indices are set to break higher and we see if this is a resumption of the upside, a new leg, or if the President tweets on the tentative deal and spanks this early move right back down. Have not heard from him yet but you know it is coming.

The deal includes, reportedly, $1.4B for 55 miles of some kind of barrier versus the $5.7B the White House wants. House republican minority leader said Pelosi and the democrats 'caved' on the wall funding. That must be DC math -- how can getting less than 25% of what you are asking for be a 'cave' by the other side? Only inept republicans could call that a win. And they will because . . . they have caved and received nothing so many times during their negotiations that 24.5% appears huge. It is like a weatherman -- correct 10% of the time and a giant in the field. It is like our economy during the 10 years it never averaged 3% annual growth. You get used to mediocrity, so when you get mediocrity-plus it appears grand.

But, I digress.

The deal has triggered a new bounce after a test. The President could scuttle it so we will see how it holds. There is also trade in the background with the Mnuchin side leaking that the US was amenable to getting some kind of deal done. Not smart. China's economy is worsening by the day. Play your strong hand when you have it just as Reagan. But, these folks are not Reagan.

NFIB Small Business sentiment: 101.20 vs 104.4 December.
Lowest reading during Trump's tenure.

Earnings beats: US, Shopify

Misses: Molson-Coors (TL)

Downgrades: CSCO

Warnings: AMKR guides current qtr sales lower, citing 'inventory correction.' AMKR supplies AAPL.

Japan: Today marks the 20th anniversary of the BOJ going 0% interest rates. My, how that has worked so well.

Bonds: 2.679% vs 2.672% 10 year

EUR/USD: 1.129 vs 1.1286

USD/JPY: 110.43, +0.07

Oil: 53.62, +1.21

Gold: 1316.30, +4.40

Futures are catching another bid toward the open as the budget bounce continues to work. At some point the President will give his thumbs up or down, and with his ego it is hard to see 24.5% 55 miles of what he asked for satisfying his base and thus him. That is a risk for the gap higher and morning session. Overall, however, the market will survive his tweet, just may lose some of the opening fluff when it comes. that does not in itself change the nice test of the third leg higher. Thus, if good patterns show good breaks higher, we will be ready to pick up positions.

Jon Johnson, Chief Market Strategist

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