Before the Open (Jan 15)

Posted on by Jason Leavitt

Good morning. Happy Friday. Happy Options Expiration Day.
The Asian/Pacific markets closed mostly down. China fell 3.6%. Hong Kong, India and South Korea dropped more than 1%. New Zealand rallied 1%. Europe is currently down across-the-board. Russia is down more than 4%; Austria, Denmark and Portugal are down more than 2%; London, Germany, France, Spain, Italy and many other countries are down more than 1%. Futures here in the States point towards a big gap down open for the cash market.
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The dollar is down. Oil and copper are down. Gold and silver are up. Bonds are up.
Easy come, easy go. Big down day Wednesday; big (but smaller) up day yesterday; now big gap down today. Given the oversold nature of the market, if we don’t get a rally that lasts at least a couple days, the market is in much worse shape than I already believe it’s in.
Today’s big story is oil. The last three days it has stabilized just above $30, but as of this writing, it’s down $1.72 to trade at $29.48. The $30 level doesn’t mean anything…it’s not a magic level…it’s just one more checkpoint on the way down. Oil stocks are, of course, in very bad shape. Many won’t survive the next year. Heck, even if oil rallied back to 40 bucks, many wouldn’t survive. In the same way that consumers over-leveraged themselves during the housing run-up, many oil companies took on too much debt while oil traded between $90 – $110. It was all fine and dandy as long as oil held up, but without that big source of revenue, the house of cards eventually implodes.
My overall bias remains to the downside. Any counter trade to the upside is very short term only. Any trade to the downside has the potential to be held…although I’ll admit with the big swings, it’s not always easy to hold.
The current action reminds me of the financial crisis. Big gaps and big intraday swings. Lots of risk. More after the open.
Stock headlines from barchart.com…
Intel (INTC +2.60%) dropped over 5% in pre-market trading after it said it sees Q1 gross margins at 58% +/- a couple of points, below consensus of 61%.
Goldman Sachs (GS +1.51%) fell -1.0% in pre-market trading after it agreed to settle a U.S. probe into its handling of mortgage-backed securities for about $5.1 billion, which will cut its Q4 profit by about $1.5 billion.
Best Buy (BBY -9.67%) was downgraded to ‘Underperform’ from ‘Neutral’ at Wedbush.
BlackRock (BLK +1.77%) reported Q4 EPS of $4.75, weaker than consensus of $4.80.
U.S. Bancorp (USB +2.36%) reported Q4 EPS of 79 cents, right on expectations.
Fastenal (FAST +1.24%) reported Q4 EPS of 39 cents, below consensus of 40 cents.
DR Horton (DHI -1.17%) was downgraded to ‘Neutral’ from ‘Buy’ at UBS.
Hyatt Hotels (H -3.06%) tumbled nearly 5% in after-hours trading after it was downgraded to ‘Sell’ from ‘Neutral’ at Goldman Sachs.
Analog Devices (ADI +0.80%) dropped over 2% in after-hours trading after it cut its Q1 revenue estimate to $745 million-$765 million from a previous forecast of $805 million-$855 million, well below consensus of $829.9 million.
AbbVie (ABBV +6.60%) rose over 1% in after-hours trading after Amgen lost a challenge to two AbbVie patents on Humira.
TreeHouse Foods (THS +1.20%) fell over 3% in after-hours trading after it lowered guidance on 2016 EPS to $2.95-$3.10, below consensus of $3.17.
Orbital ATK (OA -0.80%) gained over 1% in after-hours trading after NASA awarded the company six NASA missions valued between $1.2 billion-$1.5 billion.
Earnings and Economic Numbers from seekingalpha.com…
Today’s Economic Calendar
8:30 Producer Price Index
8:30 Retail Sales
8:30 Empire State Mfg Survey
9:15 Industrial Production
10:00 Business Inventories
10:00 Reuters/UofM Consumer Sentiment
1:00 PM Baker-Hughes Rig Count
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 (Jan 15)”

  1. Jason,
    If you would simply detach yourself from your permanent upside bias, you would find it a lot easier to hold bearish positions for the downmove.
    This would require you to stop describing rising markets as “good” , “doing well”, healthy”, “great”, “I like this market…” and falling markets as “bad”, horrible”, “terrible”, “I don’t like…”, etc.
    Try it. You’ll be amazed!
    Regards,
    Richard

  2. I will go back to my Quarterly chart assessment where I think the technical signal was clear. The SPX quarterly chart to me was very distuinguishable. Wednesday 9/30/15 (3rd Q) to Thursday 12/31/15 the last trading day of 2015 (4th Q) price did not close at or above 2067.00(3rd Q closing price).*Here is the prime technical sigal in my humble opinion(If this then that scenario): If by the last trading day on Thursday Dec. 31, 2015 price didn’t close at or above 3rd Q close (making it a bullish engulfing candlestick pattern) as in hindsight it didn’t, It would be interpreted as the market being exhausted. My Dec. 23rd, 2015 outlook my bias was telling me higher highs before year-end for the short-term. That wedge pattern played out, markets are shaky and in panic mode as is now evident. The fundamentals hasn’t deterioarated as prices has. 2016 won’t be an easy year for stocks. I would use the presidential elections as a forward guidance,atleast on a cyclical basis.*Quick Note: The best scenario for all investors has been a Democratic president and a Republican controlled congress as is to be.

  3. the top was in a long time ago and no new highs will be acheived–this is a bear market
    teck chart patterns are to hard to predict as their are to many liquidations and things under the hood happening–oils–saudi arabia-china japan not to mention europe–currencies and margin debt
    the last 6 years have worsened things with fantasy manipulationd
    that said we could see a bounce from obvious support but maybe not
    as in 08/09 i can only trade the intraday on high margin as trying to put targets only creates a expectation /biases that i dont need
    i am not set up for long/medium term swings and make more just trading the intraday with the flexability of up or down

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