Busted! Pick Your Poison

BUSTED! The Dow (602 pts), S&P (55 pts), Nasdaq (206 pts), Transports (150 pts) , Russell (30 pts) all get smashed.....falling hard from the opening bell – pre-mkts had indicated a lower opening – but the depth of the pullback was not revealed until the opening bell rang and the news headlines didn't stop....so PICK YOUR POISON...you had so much to choose from....What was it yesterday that ignited the match and set the mkts on fire? I mean – just look at what you had to choose from....

GS? Oh Boy!!!! They lost 5.5% - bringing their YTD performance to a miserable loss of 20% or if you really want to rub salt in the wound – they are down 26% from the March high of $275 share. They got punched in the face after the Malaysian Finance Minister demanded that they return all of the fees paid (some $600 mil) for ‘arranging those 3 bond offerings' now at the center of the scandal ridden 1MDB funds after Goldman banker – Timmy Leissner pled GUILTY for his role in the scandal....Claims of espionage, embezzlement and money laundering have led to global investigations....and the fact that Uncle Lloyd (Blankfein – Former CEO) met with the Malaysian financier AFTER the compliance dept ‘raised multiple concerns' and advised the bank to ‘stay away' has only made the story that much more intriguing....some investors are disgusted (sellers) while there are some that are taking Goldman's side – voting with their $ and buying shares of this disgraced investment bank......but this story is far from over....and while this is a specific GS story – the tone of it only raises all kinds of questions about how far the investment banks will go to make a buck....Where is the line?

Mid- East? Barrage of rockets fired from Gaza into Israel after a ‘botched intelligence mission' left 7 Palestinians dead....pushing Israel and Palestine closer to the brink of war.....Palestinians blew up an Israeli bus and Israel retaliated with airstrikes and tank fire....this is not good for anyone....and as the day wore on this story got uglier and uglier....

Apple? It's almost laughable...'poor' IPhone sales has now forced so many analysts to re-think the whole story and love affair with Timmy Cook...remember that Timmy told us that he would NO longer report actual sales of the IPhones...and that hasn't sat well with any analyst/strategist or trader.....and the latest report suggesting that a reduction in IPhone XR production only seems to confirm that softening demand story.....Never mind that the IPhone was the biggest seller on the Alibaba (BABA) Singles Day Sale (11/11) that saw $30 bil of sales in a 24 hr period - or $1 bil of sales in the first 90 seconds – but that is another story....

@realdonaldtrump ‘s tweets about how the selloff was a direct result of @TheDemocrats newly announced threats of more investigations and ‘Presidential harassment'.... Now this is laughable.... Donny – here's the deal – don't give the Democrats that much credit.... if the broader macro stories had been positive – NO ONE would be paying attn to your tweet. But since the overall tone was in fact negative then ANY perceived negative story could take the credit for the meltdown.... Capisce?

OIL? See below.

Technical Break - now this for me is the most credible....as it goes to the ongoing story of the damage that has been done to the internals of the mkt and the internals of so many individual stocks. Concerns over surging interest rates, FED policy, ECB Policy, slowing global economies, rising dollar, collapsing emerging mkts, weakness in oil (which I think is a BS argument) are all factors that play a real role in the mkts direction......all the other stuff is NOISE.

Look the mkt has been on ‘the edge' ever since the break that began in October....after the violent collapse in a matter of days...that saw the Dow, S&P, Nasdaq, Transports, and Russell test and FAIL all 3 trendlines...(50/100/200 dma's) – DO NOT DISCOUNT THE IMPORTANCE OF THIS FAILURE. All of the other ‘stuff' is just that – STUFF....and like I said – that stuff does not help the mkts – especially when it is all NEGATIVE stuff....but what you should focus on – at this point – are the technical factors that cause risk management software programs to react to the ‘technical break and weakness'......because when we break technically – then those programs ring the warning bell and initiate SELL programs as they try to get asset managers to raise cash to protect the portfolio....and how do you raise cash? You sell stocks....

Look – the ‘program' can't really understand the implications of the GS debacle, they can't really understand the depth of the Mid-East conflict, they can't really understand the ridiculousness of Trump's Tweets and they can't really understand the conversation surrounding Timmy's decision to stop reporting actual sales...but what they CAN understand are the technical breaks in the mkt....they can understand what it means when the MATH FAILS...

These programs are written in the language of MATH – so when the MATH fails (in this case it is the failure of the mathematical technical levels represented by the trendline moving avg's) – they send smoke signals to each other....the buyers (of which there are plenty) are told to BACK OFF – and they do – thus the ‘void in prices' that causes the mkts to collapse as the sellers all run for the door looking to make sales at any expense.....Notice the swift, concise collapse yesterday in the Dow – down 600 pts or 2.3%, the S&P at – 54 or 1.9% and the Nasdaq – 206 pts or 2.8%.....and remember when the tone changes those same risk management software programs will do a 180 and send BUY signals while telling the sellers to back off – creating a void in offers which only sends the mkt surging.....

All you have to do is look at November 7th ... - the day after the mid-terms - do you remember how the Dow added 550 pts, the S&P added 58 pts and the Nasdaq tacked on 200 pts on that day sending the message that the ‘meltdown' that happened in October was way overdone and that the mid-terms were as expected....... And BOOOMMMM!!! They couldn't buy stocks fast enough....and yesterday they couldn't sell stocks fast enough and once the trendline resistance levels were pierced the risk management algo's lit up and BUY orders flooded the mkts..........In the end - Until the mkts find some balance and are able to technically stabilize – we can expect this almost daily volatility to continue. Period. (And again, do not discount the completely FRACTURED/FRAGEMENTED mkt structure that we have that only adds to the angst.... but THAT is another story).

So, this morning we wake up and find out that the Asian mkts initially got clobbered overnight as the meltdown continued.... only to settle down and take a breath.... Stocks in China bucking the trend – saw that mkt rise by 1%. Japanese stocks took it on the chin falling 2% and stocks is South Korea fall by 0.45% as fallout from the Apple story continued to hit tech stocks hard....and in Australia – energy and financials got smashed falling 1.9% and 2.2% respectively.

In Europe – mkts there are all higher....as the Europeans assess the damage around the world cherry picking some of the names that have absolutely gotten oversold. Telecoms outperforming after Vodafone reported earnings....loss of 7.8 bil euros BUT CEO Nicky Read promised to cut operating costs by 1.2 bil euros going forward.....Now just so you understand – this stock (VOD.LN) is down 34% ytd as of this morning.....the chart looks horrendous – so this pop is nothing to really write home about unless you are someone who bot it yesterday and flipped it today.....And in Italy – they have until the end of day today to submit a new 2019 budget to the EC – European Commission – and if they don't they are in BIG trouble.....UK PM Terry May told us that BREXIT negotiations are ‘hitting the endgame' yet there are still "CONSIDERABLE DIFFERENCES TO FIX".... And in Germany – the ZEW survey missed badly....58.2 vs the exp of 65.0 – but no one is paying attn.........FTSE +0.19%, CAC 40 +0.40%, DAX +0.77%, EUROSTOXX +0.53%, SPAIN +0.29% and ITALY +0.03%.

And OIL! As I said yesterday – oil is in a bear mkt...... and overnight WTI (West Texas Intermediate) broke $60/barrel and is now trading at $58.71....... screams about the ‘lack of demand' due to a slowing global economy continue to dominate the discussion.........blah, blah, blah,.....Again I will say it - It is NOT lack of demand - the world is awash in oil and the rate of production around the world is creating a ton of supply - and a TON OF SUPPLY does not mean that there is a LACK OF DEMAND. Yesterday the Saudi's and OPEC promised to cut production to try and boost the price of oil.... Donny immediately tweets that the Saudi's should not cut production... (diplomacy in the 21st Century) .... blah, blah, blah....

Now by now you are all well aware that the US is now a major oil producer and that creates a new problem for us.....because when we were NOT a major producer then weaker oil prices were good for us...but now that we are a major producer – our energy companies do not want to see oil prices fall....while lower oil prices are good for the country and the world – they are NOT good for the oil producers....so now we are caught in a nasty conundrum....Do we want lower or higher oil prices? If you are an investor in XOM, SLB, HAL, CVX, BHGE – you WANT higher prices, but if you are an American – you WANT lower prices.... Oh! it's a tangled web we weave....My vote – Lower oil prices is long term better for the global economy.....Stocks will adjust to the new reality...they always do......The charts tells us that oil could find support right here at $58....but if it too fails then a test of the February $54/$55 lows is next....

US futures are UP 18 pts at 2746 (Surprise!) Did you really think they were going lower today after that drubbing they took yesterday? If for no other reason today – they need to bounce off the dramatic losses from yesterday.... Expect 2762 on the S&P to represent resistance....and 25,852 on the Dow....

HD – reported strong earnings and some in the media are crediting this report as the reason for the surge....GET OVER YOURSELF.....While HD is trading up 6 pts at $185/sh it is NOT the reason to go out and buy the mkt at all.....The mkt is thrashing around – as it has been doing since the October break.....looking for support somewhere.....and notice – all of the negative stories from yesterday STILL exist – I mean – they didn't go away overnight..... – but the algo's are NOT paying attn!