Before the Open (Aug 25)

Posted on by Jason Leavitt

Good morning. Happy Tuesday.
The Asian/Pacific markets moved in opposite directions. China (down 7.6%) and Japan (down 4%) got crushed. Taiwan rallied more than 3%, Malaysia and Australia more than 2% and India, Indonesia and Singapore more than 1%. Europe is currently posting big, across-the-board gains. Greece is up 8.6%; Germany, France, Austria, Belgium, Netherlands, Switzerland, Prague, Denmark, Finland, Italy and Portugal are up more than 4%. Futures here in the States point towards a huge gap up open for the cash market. S&P futures are up 75; Dow futures are up 600.
The dollar is up. Oil and copper are up. Gold is down, silver is up. Bonds are down.
The numbers above are not typos. China really did fall another 7.6%, and S&P futures really are up 75. I don’t think I’ve ever seen movement like this – not after the market opened after 9/11, not during the financial crisis. The gains will not completely recoup yesterday loss, but they’ll certainly calm people down.
Yesterday I said China used to be ignored but suddenly China mattered. Now it seems China doesn’t matter again.
from barchart.com -> The PBOC lowered the 1-year lending rate by 25 bp to 4.6% effective Wednesday and cut the 1-year deposit rate by 25 bp to 1.75%. The PBOC also lowered banks’ reserve requirement ratios by 50 bp to 18.00% in an attempt to boost bank lending. This is the fifth time in the last nine months the PBOC has cut its benchmark lending rate.
The movement has so much to do with fear right now. At yesterday’s open dividend-paying stocks took big hits. That means grandma and grandpa were selling. Then high-quality stocks – I posted many on the Long List over the weekend and labeled them as buys when the market dropped – rallied big off the opening levels. Now we have a big gap up, and many of those stocks will be posting gains for the week. Ridiculous movement. Fear of losing. Fear of missing out.
Many technical indicators dropped to levels not seen since 2011. Some dropped to levels I’ve never seen.
The biggest up moves take place within downtrends. We know this. I’ve said it many times. That’s why even though the trend is now down, you have to be of your toes for these big rallies. They happen a lot.
If you don’t consider yourself a very good seasoned trader, I would not take big chances here. The market will be very unforgiving. In a slow market, there’s lots of time. If a stock moves against you, you lose a little, perhaps a couple percent. Now you could be 10% up or down in a short period of time, and you can’t expect to get good fills if you try to exit at the same time others are doing the same.
My personal opinion is I think the market will remain volatile for a while – perhaps not 75-point gaps every day, but big intraday swings…a big range…lows taken out and then a vertical move up…big rallies to lure investors in before a vertical move down. Lots of movement. Lots of big movement. Fortunes will be made and lost.
Stock headlines from barchart.com…
Best Buy (BBY -3.02%) reported Q2 EPS of 49 cents, better than consensus of 34 cents.
Apple (AAPL -2.50%) was upgraded to ‘Outperform’ from ‘Market Perform’ at Wells Fargo.
JPMorgan Chase (JPM -5.27%) was upgraded to ‘Buy’ from ‘Outperform’ at CLSA.
Sherwin-Williams (SHW -2.69%) was upgraded to ‘Buy’ from ‘Neutral’ at Sterne Agee CRT.
Macy’s (M -3.50%) was upgraded to ‘Hold’ from ‘Sell’ at Deutsche Bank.
Adobe (ADBE -5.83%) was upgraded to ‘Outperform’ from ‘Neutral’ at Baird.
American Eagle (AEO -1.07%) was upgraded to ‘Outperform’ from ‘Market Perform’ at FBR Capital.
Bank of America (BAC -5.03%) was upgraded to ‘Outperform’ from ‘Market Perform’ at Bernstein.
SunEdison (SUNE +0.09%) was downgraded to ‘Neutral’ from ‘Buy’ at UBS.
Toll Brothers (TOL -4.73%) reported Q3 EPS of 36 cents, weaker than consensus of 49 cents.
KLX Inc. (KLX) reported Q2 adjusted EPS of 62 cents, higher than consensus of 58 cents.
Raven Energy Holdings reported a 10.4% passive stake in SunCoke Energy Partners (SXCP -6.80%).
Ilex Partners reported a 5.0% passive stake in Genie Energy (GNE -2.54%).
Great Point Partners reported a 5.87% passive stake in Adamas Pharmaceuticals (ADMS -5.73%).
Fortune Brands (FBHS -5.27%) was initiated with a ‘Buy’ at Cantor with a price target of $58.
Earnings and Economic Numbers from seekingalpha.com…
Today’s Economic Calendar
8:55 Redbook Chain Store Sales
9:00 FHFA House Price Index
9:00 S&P Case-Shiller Home Price Index
10:00 Consumer Confidence
10:00 State Street Investor Confidence Index
10:00 Richmond Fed Mfg.
10:00 New Home Sales
1:00 PM Results of $26B, 2-Year Note Auction
Today’s Earnings here
Other…
today’s upgrades/downgrades from briefing.com
this week’s Earnings
this week’s Economic Numbers

0 thoughts on “Before the Open (Aug 25)”

  2. the damage to sentiment has now already been done
    NOW EVERYONE KNOWS THE BENANKIE/YELLEN /DRAGONIE/CHINA PUT DOES NOT WORK
    it is being openly talked a\bout on t.v and people are angrey and dismayed that so much debt has been spent proping up the banks and not the economy
    they also know the cant now count on the central banks to help them out
    my targets for the dead cat are dow 16400-500—spx 1950-70
    wave five down should start by end of week
    NEXT MAJOR CRASH TO BE IN SEPT OCT
    it will be a liquidity crash and europe soverign debt
    merlin the magician told me all this

  3. merlin the magician resides now on mars
    when large wave 3 hits in oct the dow will loss 5000 to 8000 points
    merlin is old now and suffers dementur and i beleive he is easy influenced by lucifer,whom is now also a marsian

  4. “China’s central bank cut interest rates for the fifth time since November and lowered the amount of cash banks must set aside”
    That sounds like a green light for the banks to lend out more more more . . . to help pump the market back up of course. Kind of makes you wonder just how many trillions worth of bad loans they must already have. Just as well in China trading while insolvent is the normal way business is done.

    1. china has a large surplus so it can afford to write of a lot of debt
      its banks are govt owned
      its sharemarket is played by retailer daytraders and a closed market to outsiders
      the same shares trade much lower in hong kong
      its trying to become a capitalist society and have the chiness yaun as the reserve currency of the world
      its growth is still very good but has to face WORLD DEFLATION
      Deflation when i went to school was to little real money chasing to many goods–supply
      AFTER THE DEBT BUBBLE BUSTS AND THEIR IS NO MORE EUROPE /JAPAN/USA THEN CHINA WILL TAKE OVER

      1. DEBT–
        the 4 big usa banks have $600 TRILLION in in under the counter derivitives bets between them selfs
        they cant all be right
        so what happens when one of them has to default
        down with corupt insolvent world banks
        in the next crash coming to a town near you 1000’s banks will go under

  5. looks like we are in a 4th wave ABC of larger wave 1
    and we are in the b part heading slowly lower ,
    with c up to finish it by end week
    then impulsive wave 5 down of larger wave 1 to take us to new lows

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