The S&P closed at 2677.84 – So today’s circuit breakers are:
Level 1. 187.44 pts (7%) or 2490.40
Level 2. 348.12 pts (13% total) or 2329.72
Level 3. 535.57 pts (20% total) or 2142.27
Stocks rallied hard on Monday - ignoring all of the geopolitical BS and instead focusing on earnings. - The Dow added, the S&P added, while the Nasdaq tacked on x pts. Volume was even LOWER than it was on Friday - again leaving voids in liquidity - (but that’s another story) ...
In the end - investors/traders tested the resistance level that I pointed out yesterday....at the crossroads of the declining 50 dma and the flattening 100 dma at 2685....then stalled - unable to break up and thru yesterday...but his morning it is a different story, the momentum from yesterday is alive and well this morning....US Futs are pointing higher - currently up 13 pts about to test 2699 on the index....a level that represents the last frontier….it is the final resistance point and if the index successfully breaches it then it puts the SPX on the north side of all 3 technical levels. A level that now allows the index to rally further from here as it looks to challenge the march highs 2780ish....And while that is about 3.5% from current levels - it is not out of the question at all as we move thru what is expected to be an exciting earnings season.
So far - the banks have NOT disappointed .... better top and bottom lines have allowed these CEO’s to report blow out numbers….... pictures of the various CEO’s with broad grins on their faces as they think - “Cha Ching’ - This is gonna be a good year for ME”
Yesterday it was BAC - in the early morning hours – Brian Moynihan (CEO) announces BLOW OUT numbers - beating the estimate by 3 cts! And that was all the mkt needed to hear.... In addition, the wait for NFLX earnings last night created excitement all day....as traders took the stock on a ride - up big in pre-mkt trading only to give it all back by midday -only to end the day down 1.9%......then after the bell rang - NFLX reported ‘blow the doors off the house’ numbers.... (again, are you really surprised?) - The afterhours session went into ‘stroke mode’ as the algorythms did a complete 180 - taking the stock UP 5.2% in the moments after their announcement....and this morning the excitement continues as the pre-mkt venues open allowing traders to take the stock to $328/sh or up 6.8% from last night’s close at $307. Yes – it is the same story, qtr after qtr…subscriber growth – they added another 7.41 mil new subscribers (5.6 mil of them come from abroad)
The transports had a great day - with truckers, rails etc....all joining in. JB Hunt - the first trucker to report - reported strong numbers - all beating the estimates - allowing investors to consider the fact that a healthy economy depends on the movement of goods - and if JB is any indication - then we can expect the others in the group NOT to disappoint.... the Transports are now flat on the year – after a tough start but a quick look at the chart reveals upside. This index has broken out of the doldrums.... piercing all 3 technical levels of resistance - leaving it ready to advance to the March highs of 10,800.
It is exactly the ‘feel good’ mood and expected strong earnings that now has the ability to fuel the next advance. So, unless we get hit with something out of left field - some geo-political event rather than a hiccup in earnings (unlikely) or a weakening of macro data (also unlikely at this point) then the path of least resistance is UP.
Now while I say that a weakening of the macro data is unlikely - there is one warning sign that is flashing a yellow.....and that is the flattening yield curve.....and why is this important - because history shows that as the curve flattens - and ultimately inverts - then a recession is not far off....as of yesterday the difference between the 2 yr and the 10 yr yield had slipped to just 45 basis points…..Which means that the gov’t will pay you 2.39% for 2 yr money and 2.845% for 10 yr money……..why would you tie up your money for 10 yrs in this case? You wouldn’t – so why does this matter? Because there is plenty of eco research that tells us that a flattening yield curve becomes an inverted yield curve – where the gov’t will pay you more on 2 yr notes than on 10 yr notes….and that my friends suggests that an economy that is about to enter a recession….
But hey – we’re not there yet…but do not get caught by surprise – just know its brewing….
This morning – global mkts are all celebrating….as the focus is squarely on earnings….and not on missile strikes. Chinese macro data mostly in line (no surprises) while the German ZEW Survey missed the estimate - suggesting that the Germans could get caught up in this US/China trade dispute…. – but is not causing any angst in the equity mkts. FTSE + 0.18% CAC 40 +0.43%, DAX +0.77%, EUROSTOXX +0.61%, SPAIN +0.31% and ITALY + 1.16%.
US futs are spiking higher + 13 pts trading at 2694….as the focus shifts to earnings, earnings, earnings…. JNJ already reported and they beat the number stock is trading up $1, UNH – beat the estimate and that stock is up $4.50, GS beat the number as well and they took it up $2.50 and now it has backed off just a bit….…… We are waiting on PLD, NOG……After the bell is UAL, IBM, CSX, ISRG, LRCS.
Eco data today includes: Housing Starts +2.5%, building permits of +0.2% and Industrial Prod of +0.3% and Capacity Util of 77.9…. now this is one to watch…as the number gets closer to 80, then you will hear the FED and everyone else tell us that we are nearing FULL capacity which then leads to higher rates of inflation – GET IT? Just sayin’
So, the SPX is about to pierce 2700 and one that happens expect the algo’s to kick in harder as the ‘technical signal’ given off to the risk management programs will go into overdrive – sell side liquidity will move higher causing the buy side algo’s to reach for stock sending the indexes to the March highs….and up 40 on the S&P is not out of line these days….
Oil is up 5 cts at $66.28 – concern that we could see more unrest in the middle east continues to fuel this argument. Oil is well above resistance and is looking to test the most recent highs of $67.75.
Gold is down $5 at $1,345/oz as the tensions ease…. look for support at $1,336.
Sweet & Sour Chicken
Sweet and Sour Chicken – kind of goes with the mood…. the mkts are sweet but the geo-politics are sour…. (work with me here….)
This is not a difficult dish to make and once you simmer it - set the table, break open the wine, turn on some dinner music and enjoy the night.
You need: Chicken pieces - legs, thighs and breasts, olive oil, s&p, diced onion, chopped carrots, chopped celery, plenty of sliced garlic cloves – 6+, ¼ c sugar, 1 c Chianti, ½ c red wine vinegar, ½ c orange juice with pulp, *sliced almonds – optional.
Season the chicken pieces with s&p – set aside. In a heavy frying pan – heat up some olive oil, - now brown the chicken on all sides. Remove and place on a platter.
Now add the garlic, carrots, celery, and onion – sauté for 10 mins on med heat…. Now add the sugar, wine, vinegar, orange juice, and almonds…. bring to a boil - add back the chicken – skin side up. Place a lid off center and turn heat to simmer. Cook for about 30 mins. (This is where you take the bubble bath, get into something comfortable and kick back....)
Now remove chicken and place on a platter, - turn heat up to high and stir until it is nice and thick…not long…maybe like 4 mins max…. taste – adjust seasoning with s&p. Spoon the sauce over the chicken pieces and serve.
This dish works well with a green veggie – like French cut green beans or broccoli. Make a large mixed green salad with tomatoes, red onion and cucumbers. Dress in a balsamic Vinegar and Olive oil dressing. Keep it simple – as the chicken and marinade carry the dish.
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