Wednesday, May 08, 2019

Market Alert - Last Hour

Modest gains on the large cap indices to flat on the small and midcaps. Ever so slightly investors bought into the notion that a trade deal, similar to those suffering from the plague in 'Monty Python and the Holy Grail,' is not quite dead yet. Of course, China has responded that if the US imposes new tariffs it will make 'necessary' counters, but that is all bluster. Headlines also suggest why Trump should not 'start' a trade war -- news flash -- a trade war is ongoing and has been ongoing for years. We have just done nothing about it but now we are. Good grief.

Stocks, again, are just modestly higher and notably it is the small and midcaps lagging as they are more domestic. It is not as if there are a lot of buyers, just the selling has abated, allowing stocks to rise. A slow, steady move higher on the day punctuated by a drop at 11:00ET when China mumbled about the 'necessary' countermeasures.

Uber drivers are protesting in a few cities for higher wages, saying the company takes advantage of them. They want certain minimum wages, etc. Hmmm. A bit more and they will be no different from the industry Uber, Lyft and others are trying to supplant.

The action today does not preclude SP500, NASDAQ NASD 100, SOX from testing the 50 day MA; just a pause on a tweet. DJ30 can also test the 200 day MA from here. While that may seem like carnage to many, it is really just a very normal test in an otherwise good run higher. A test that allows the indices to take a breather and have a better run at those prior highs.

Still in question is the 2018 flat top and if the indices can break it. That is the bigger story, but a test of the 50 day MA and 200 day MA (for DJ30) is a good start and litmus test based upon how they move from there.

Of course, if there is a trade deal of any kind the market will forego that test, but we are still not banking on one. And if there is not one, will the market necessarily plunge? No. It will likely test and consolidate as it is doing, but if we don't have a trade deal with China, it won't cause the death of the market uptrend.

Stocks are softening again ahead of the close. SPY just hit session highs at 3:30ET and are now peeling back aggressively into the close.

SP500 4.24, 0.13%
NASDAQ 4.74, 0.06%
DJ30 73.84, 0.27%
SP400 -0.09%
RUTX -0.01%
SOX -0.42%
NASDAQ 100 0.01%
Jon Johnson, Chief Market Strategist

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