I Will Remember you - GE. Markets Discount the Trade War

Sara McLachlan said to best -

“I will remember you, will you remember me?  Don’t let your life pass you by, weep not for the memories......” I will Remember You – Album: Fumbling toward Ecstasy - 1993
 
And so it is with a heavy heart that we recognize that GE’s time has come....(and gone...) yesterday after the closing bell - S&P announced that GE will no longer be a member of the DOW Industrial avg at the end of the month.....The announcement was made with no pomp and circumstance at all.....they just made this sterile, non-emotional announcement (which kills me – because you know I’m all about the emotion)  saying that after 111 yrs - GE - Once the pillar of the US economy reaching an all-time mkt capitalization high of $594 bil in 2000 is now worth a fraction of that ($113 bil) after struggling ever since Jack Welch handed the reigns over to Jeff Immelt.....(that was a disaster almost as bad as the election of Jimmy Carter)
 
I mean Jack Welch must be turning over in his grave right now - wait did he die yet?  No - I just googled it so Ok - then he must be turning over in his bed right now… Either way - it is THE END of an era for sure. and it is a sad statement about what it says about the US economy and the role that GE once played....  S&P will replace GE with WAG (Walgreens - a retail drug/convenience store chain) .......and while WAG is a fine stock - it is NO GE....which reminds me of the now famous line used during the 1988 VP debate - after Rep candidate - Senator Dan Quale compared himself to Jack Kennedy....and that sent Democratic Candidate Senator Lloyd Bentsen into a tizzy - and after recovering fired off this statement -
 
“Senator - You are no Jack Kennedy”  
 
And so, it is……A phrase used today when trying to cut somebody up that clearly thinks too highly of themselves.... But that’s another story.... time to move on....
 
The mkt came under some pressure yesterday morning early on.... leaving the Dow down 400 pts, the S&P down 32 pts and the Nasdaq down 78 pts in the moments after the opening bell rang.......clearly setting it up for a break down and thru support.  The broader S&P -which is the most indicative of the US economy traded right down to 2745...a level I pointed out in yesterday’s note.....that should offer some support....and it did.....Now while the mkt had every reason to push lower and the sellers were there to make it happen - the buyers said - ‘Not today, Not on my watch’ - while the news of add’l tariffs and talk of trade wars dominated the airwaves - by 10 am - cooler heads prevailed and the ‘hysterical tone’ that presented itself in the pre-mkt trading  began to subside and the sell algo’s backed off.....allowing the mkt to stabilize right where I suggested...from there the rest is history......
 
As the morning turned to afternoon – The indexes rallied back although still ended the day a bit lower – but well off their lows….while the Russell small/midcap index - went positive……The Dow took the biggest beating yesterday as the  big large cap names that could potentially be impacted by the ongoing trade war chatter continued to come under pressure - so investors played it a bit safe - raised some money in the big names and then re-deployed it across other sectors and names that will not be affected by all the trade war chatter…..
 
Tech – except for AAPL – managed to hold up well….and is clearly a place to put some cash until the trade war storm settles…. Industrials and Basic Materials – XLB got hit the hardest…. – losing 2% and 1.8% respectively…. while Telecoms and Utilities carried the load ending UP 1.4% and 1% respectively.  Consumer Staples, Consumer Discretionary, Healthcare and Tech played a supporting role in helping the mkts find stability….
 
In the end – my sense continues to be that the Trade War chatter is just that…. each side positioning themselves for battle – while neither side really wants to go there…and that is what the mkt told you yesterday afternoon and that is what it is telling you this morning….
 
This morning – Americans are waking up to find global mkts are ALL HIGHER…not one of them in the red as investors are betting that the US/China trade negotiations move forward and that both side negotiate in good faith…. Japan and Australia led the mkts higher overnight closing 1.2% and 1.06% while…. Hong Kong and China followed up with gains of +0.77% and +0.4%.  
 
In Europe this morning – mkts there are also on a tear…. German PPI was better than expected coming in at +0.5% vs. 0.4%.  FTSE +1.13%, CAC 40 + 0.40%, DAX + 0.50%, EUROSTOXX + 0.66%, SPAIN +1.02% and ITALY +0.77%.
 
Look – the world his treating all this trade war chatter as a broad negative that will impact mkts across the board – when in reality – any tariffs imposed will be to very specific industries and companies and may have a significant impact (if they are in fact imposed) but there are other sectors that will be unaffected – and so this is not all ‘doom and gloom’ at all….and you saw that yesterday as the US mkt recovered……
 
 
The O’Neil Methodology tells us:
 
The S&P 500 and Nasdaq reversed off early session losses for the third straight session to close relatively flat (compared to what they looked like at 9:30) …. Leadership remains strong with multiple ideas consolidating constructively at highs, while new ideas continue to surface. Stocks to look at are ones that are finding key moving average support or ones that are breaking out from consolidation.
 
Software names like ADSK, BOX, internet names like ANGI, GOOG, SEND, payment processor names like FLT, PYPL and SQ, medical product names like ALGN, EW, restaurants like BJRI, WING, apparel names like GOOS & LULU and personal care names like WTW will NOT be affected by trade tariffs…. ….in fact, the O’Neil methodology has these groups ranked in the top 50 and notes that they are all under accumulation…. (FYI – that is bullish).   
The rotation graph shows that Retail, Consumer Cyclicals and Tech are leading the mkt higher while Cap Equipment and Energy are starting to lag……
  
 
The VIX – Fear index – shot up 16% yesterday morning reflecting the overall risk off tone overnight on Monday – but ended the day up 8% as that fear subsided. This morning the VIX is down 4% as the rhetoric cools down….
 
Oil is basically flat at $65.03 after the API (American Petroleum Institute) revealed that there was a 3-mil barrel draw down vs. the exp 2.5 mil….so this is giving some support to the oil mkts ahead of this morning’s EIA (Energy Information Admin) print.  After finding support yesterday at $64.85 level – this asset remains in the $65.84/$67 range.
 
Gold as you can imagine is down $3 at $1,275.  Yesterday – gold had a $14 range as the news turned from sour to semi-sweet……as it looks for stability…. This morning’s move has now broken the recent lows and it looks like gold is set to test $1,250 IF tensions remain calm.
 
US Futures are pointing up – currently +9 and that puts us right back at 2775…… we remain in the 2745/2800 range for now.   We have a group of 4 central bankers – Powell (US), Kuroda (Japan), Draghi (Europe) and Lowe (Australia) -  appearing at the ECB (European Central bank) Forum in Portugal and they will be live and in color at 9:30 am est.  Do not expect any fireworks from this appearance – it is just FYI.
 

Beef Short Rib Bolognese w/Meatballs

I am giving you this at the request of a MT reader….and it is sooooo good.
 
For the sauce you need:  4 beef short ribs, garlic, onions, Olive Oil, crushed tomatoes (not puree) s&p.1/4 stick of butter. 
 
Season the beef with s&p and brown in a large sauce pan with some olive oil.  …. making sure to brown the ribs on all sides…should be about 20 mins or so….be careful not to burn.  Remove and set aside.
 
Next – add chopped garlic (4 cloves) and 2 large sliced Spanish onions…sauté until the onions are smooth and translucent…. keep the heat on med hi…you do not want to burn this either.  When ready – add the tomatoes, season with s&p and bring to a boil – turn the heat down to low and add back the beef short ribs and the butter and let it simmer for 3 or 4 hrs…. stirring occasionally.
 
Now the meatballs.
 
You CAN NOT USE LEAN GROUND BEEF.  Absolutely not.... they will taste like cardboard.... you need GROUND CHUCK.... Do not buy the 90/10 (90% lean/10% fat) you are wasting good money and your time!!!  You need at least 80/20.... (80% lean/20% fat)
 
Now that we got that right -  you need 1 ½ lbs of ground chuck, 2 eggs, s&p, handful or two of grated Pamegiana, 2 med cloves of chopped/crushed garlic, ½ of a chopped onion diced small, 2 lg slices of Italian bread soaked in butter milk. and a splash of olive oil...
 
 Remove any rings and wash your hands.... and mix all the ingredients together….
 
Now form the meat balls.... bigger than a golf ball, but smaller than a baseball.... next -  place on a baking sheet and bake in the oven for 15/20 mins or so on 400 degrees – they should be turning nice and brown and a bit crispy – remove and add to the sauce. 
 
After 3 hrs…remove the beef ribs from the sauce and let them cool for 10 mins – remove the bone and now with 2 forks – shred the rib meat and add back to the sauce…. mmmmmm! 
 
Once you have the sauce you can use it for a number of pasta and parmigiana dishes…. Spaghetti and meatballs, Baked rigatoni, cheese raviolis, Mostaciolli, Penne Rigate or Lasagna.  For the parmigiana – you can make eggplant, chicken or even pork cutlet parmigiana.

Buon Appetito.