Thursday, March 21, 2019

Market Alert - Pre-Market

Futures vs FV: SP -10.48; DJ -111.67; NASDAQ -28.00

Stocks sold back into the last hour Wednesday post-FOMC and the downside pressure continues today. Investors continue contemplating the Fed accelerating its dovish posture and wondering just what that really means for the economy, i.e. the fear the Fed sees something more nefarious than what appears on the surface.

Thus, futures were soft, but then fell hard at 7:00ET. They have since traded in a range just off the lows. Thus far not a lot of 'gee let's buy on a dip' action.

A lot of the usual political news about Brexit, trade talks, political arguing -- the usual that makes you not want to turn on the news. So, don't! Ha!

The key is whether the SP500 and NASDAQ can ultimately successfully test the break over resistance. Wednesday they started the process and today will be quite telling. There are some very solid leading stocks, some of the well known brand names (GOOG, AMZN, NFLX) moving well, among others, and that gives an indication that the move is still there, that it is not necessarily going to roll over as is assumed. Again, however, SP500, NASDAQ are in the test process, and it is an important one.

Earnings beats: DRI; LE; MU; WSM -- that is a good group of stocks right there -- restaurants, clothing, chips, housewares.

Misses: CAG (processed foods, TL); GES (BL, clothing); MLHR

Upgrades: AAPL

BIIB: Sadly, it is cancelling the late stage tests on its Alzheimer's drug. The stock is getting slaughtered. Not only bad for the stock, but bad for society as much is being pinned on the hopes for fighting this disease.

Bonds: 2.519% vs 2.524%. Backing off some after that huge move post-FOMC dove times 2.

EUR/USD: 1.1365 vs 1.14314. Dollar bouncing back after the initial kneejerk reaction to the FOMC.

USD/JPY: 110.53, -0.15. Okay, not rebounding here.

Oil: 59.91, -0.32

Gold: 1317.90, +16.20. At least this makes some sense.

Futures are starting to crawl up off the lows closer to the bell. Okay, so there are still a few bids out there. Not that surprised. The economy has suffered a slow patch that started even before Powell's October 'hike until it breaks' speech, and of course the Fed tightening came as it usually does, i.e. right as the economy starts slowing on its own. The Fed exacerbated the issue, realized it and stopped, sees it not getting better in its view, and going more dovish.

At the same time, we are seeing the economic data flip back and forth of late, and that is a better sign from just being worse. Volatility shows a turn, and we also see the revisions better in some important reports; revisions are a better forecasting tool than the initial data.

Thus, with the Fed stopped and dovish, the economy has a chance to heal and recover. Not as much as if the Fed had not hiked and reduced money supply as much, but a chance. That is why you see chips still leading, some big growth surging.

The worry are the small and midcaps -- they are lagging right now. First it was just some rotation into large caps after the smaller caps led. Wednesday it was worry that the Fed knows something more and worse and that is why they sold. Domestic economy ties are strong for those. Thus, if they can hold and rebound off of the Wed kneejerk worry selling, that is a good sign.

We are seeing GOOG and other big names moving up off morning lows. MU remains up on its earnings. Those are decent indications.

Jon Johnson, Chief Market Strategist

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