Art Cashin, Brown and Boockvar, discuss China deal, January rule, Powell and the Fed Minutes.
Cashin, Brown, Boockvar
January 9 (King World News) – Here is a portion of today’s note from legend Art Cashin:
Questions About Another Seasonal Pattern – My good friend and fellow market veteran, Jim Brown, the chart guru at Option Investor, took a look at one of the so-called January Indicators. Here’s a bit of what he wrote:
The first five days of January are behind us. Under the January five-day rule if the market is higher over that period it will end the year higher. Apparently, it is not much of a rule. Since 1950 the first five days have been positive 44 times and only 36 times did the market close the year higher. For those 36 times the average gain was 13% so we can hope this will be a year where the rule is followed.
Thirteen percent sounds like a lot. However, the S&P is already up 8.5% from the post-Christmas low. Another 5% would put us at 2,700 or 130 points higher than today’s close. Maybe Barclays knows something we do not. They cut their 2019 S&P guidance today from 3,000 to 2,750. Most analysts have started shaving their numbers but that 2,750 puts them close to the low end of the consensus estimates with 3,150 the current highest estimate.
I would rather worry about the rest of January than try to pin the forecast tail on the market donkey for 12 months from now.
The S&P rebounded 25 points to close almost exactly on the 50% retracement level from the December drop. The next resistance level is 2,580 followed by the 10% decline level at 2,637 and the double bottom in November at 2,630. The S&P has rebounded 228 points from the December low and only one day of material decline and that was the Apple warning. We are due for some consolidation soon.
Maybe we’ll take another look next week.
Another Pair Of Eyes – My friend, Peter Boockvar put out a note to clients and friends this morning. Here’s how he opened up:
One month ago I wrote this: “It now seems we have a 3rd party at the US/China trade negotiation. His name is Mr. Market.” This comment followed a WSJ report “As Trade Battle Unfolds, Trump Keeps Close Focus on Markets.” Randall Forsyth also hit it on the head in Barron’s the weekend before saying “It’s the Stock Market Stupid.” I also said, “live by the Tweet on the stock market, die by it.” Now we have the Bloomberg news story yesterday titled “Trump wants deal with China to boost stock market, sources say.”
Bottom line, are we going to get a deal that is substantive or one that is optically nice for the sake of saving the stock market? If it’s the latter, what a complete waste of time, resources, jobs, money and livelihood for many this has all been on the road of tariffs. I am hopeful and do believe though it will be the former. Regardless, any tempering of the tensions will be welcomed.
I don’t expect any new news within today’s FOMC minutes from the meeting 3 weeks ago. Markets heard all they wanted to hear from Jay Powell. I do want to point out again the circular nature of the focus on ‘financial conditions’ when Fed policy is the front car, not the caboose in driving it. Fed tightens, markets have a hissy fit as any child does, financial conditions cramp up, the Fed then backs off. Market then rallies, financial conditions ease and the Fed is back in the game (have you seen what rate odds have done since Powell was supposedly dovish? We took out the rate CUT odds and balance sheet will keep on shrinking). We also get a bunch of Fed speak today from members but again, Powell has spoken.
I completely agree with the China assessment but have a very slightly different view on the Fed minutes. While I completely agree that Powell is the final word on policy, I think the markets may pore over the minutes to see if they have a more hawkish tone. If so, it will prove that it was the market action that converted Powell. Just guessing.
Overnight And Overseas – Equity markets in Asia are seeing rallies of various shapes and sizes. Tokyo closed up the equivalent of 250 points in the Dow. Hong Kong was even better closing up the equivalent of 525 Dow points. Shanghai and India saw far more moderate rallies.
In Europe, stocks are trading up, generally up the equivalent of 200 Dow points.
Among other assets, Bitcoin is flat, trading around $4150. Gold is a shade softer, while crude continues to rally with WTI moving above $50. The euro is a touch higher against the dollar. Yields are also a tick or two, higher.
Consensus – Market looks a bit overbought after a pretty good run. We may be tied up with some post-speech counter-punching.
Stick with the drill – stay wary, alert and very nimble.
In the meantime, amidst the recent carnage, one mining company is threatening to hit a new 52-week high. To learn which mining company is attacking a one-year high and to read the press release that set off a stampede of buying in that stock CLICK HERE.
KWN has released the outstanding audio interview with Bill Fleckenstein discussing what he believes is in store for the stock market, gold, silver, bonds, China, and much more, and you can listen to it by CLICKING HERE OR ON THE IMAGE BELOW.
ALSO RELEASED: Multi-Billionaire Hugo Salinas Price – Hope For Humanity, Gold, And $325 Trillion Of World Debt CLICK HERE TO READ.