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Afternoon Note

Sell Programs Tripped

By Charles Payne, CEO & Principal Analyst
12/4/2018 1:23 PM
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Looks like sell programs have kicked in, which means one program trips another, and that in turn trips another. It started as a typical session during jobs week, non-farm payrolls are on Friday, with the Dow off 75 points.  Then President Trump began a series of tweets on trade.  There is no doubt his tweets had the duel goal of sending a message to China, but also needling the doubters.

The same folks that said there would never be a meeting and such a meeting couldn’t cure all the issues at hand, are now griping about details.  Of course, we’d like more details, but in a reasonable time.  Moreover, there is no way to resolve everything in 90 to 120 days, but that timeframe provides a sense of urgency.

China has the list of America’s 142 demands and has already promised the world that there would be broad movement.  There are reports today that China’s government is outlining 38 different penalties for intellectual property theft.

But the tweets where just the excuse some needed to begin selling.

Donald J. Trump


.....But if a fair deal is able to be made with China, one that does all of the many things we know must be finally done, I will happily sign. Let the negotiations begin. MAKE AMERICA GREAT AGAIN!

Donald J. Trump


....I am a Tariff Man. When people or countries come in to raid the great wealth of our Nation, I want them to pay for the privilege of doing so. It will always be the best way to max out our economic power. We are right now taking in $billions in Tariffs. MAKE AMERICA RICH AGAIN

Donald J. Trump


......on seeing whether or not a REAL deal with China is actually possible. If it is, we will get it done. China is supposed to start buying Agricultural product and more immediately. President Xi and I want this deal to happen, and it probably will. But if not remember......

Donald J. Trump


The negotiations with China have already started. Unless extended, they will end 90 days from the date of our wonderful and very warm dinner with President Xi in Argentina. Bob Lighthizer will be working closely with Steve Mnuchin, Larry Kudlow, Wilbur Ross and Peter Navarro.....

I said last week the big technical buy signal comes with the Dow Jones Industrial Average closing above 26,000, until then all major equity indices would be vulnerable.

Right now, the Dow chart doesn’t see a lot of support until 24,285.  The index doesn’t have to go down that much, but it’s vulnerable to that level if buying doesn’t emerge.  Note: none of this has anything to do with fundamentals, so make sure you aren’t victimized by the next downturn.

That said, I think the biggest news this week will be the jobs report.  The Federal Reserve is out of the picture as a possible impediment to the economy and market, so the number on Friday has to be robust, but not too strong.

Yes, it must be a Goldilocks number.  I think 200,000 to 220,000 jobs and year to year wage growth under 3.0%.  Meanwhile, nobody is talking about the plunging 10-year yield which is coming down so fast it is creating jitters of its own.


The nervousness is palpable and hard to fathom unless one realizes that common sense really is not that common and economic sense is even more rare! A few interest rates ever so slightly invert and the markets tank on ONE indicator that has never been 100% predictive. The only one that is 100% is the LEI Leading Economic Indicator and last time I checked it was still climbing. Yes, its rate of ascent has decreased, but it is still climbing none the less. Add the hatred and blindness of the press to Trump's negotiating skill and you have the perfect formula for a severe drop.

Yesterday we had a powerful boom with strong technical support and a day later all is forgotten. Maybe the market is getting dementia? At the very least it has definitely shown indications of being bi-polar.

Of course Charles wisdom is spot on with the moves being exacerbated by quants algorithms gone awry. If the market was a soap opera it would easily qualify.

As always, patience and fundamentals will prevail and reward it's owners well. Indeed.

Ray Weldon on 12/4/2018 1:57:33 PM
we miss you in the 6:00 Fx Bus. slot!

jan on 12/4/2018 2:49:52 PM

ERNEST REMUS on 12/4/2018 3:46:10 PM
Of course we heard from Trump's side. But it is all lip service, until we here something from the other side, and so far its just crickets. Trotting out the usual talking heads does nothing to affect the program trading nowadays.

Ken Gervais on 12/4/2018 6:17:12 PM
Thanks Charles, for your voice of calm and reason.

James Park on 12/4/2018 7:26:46 PM
Watch the revisions of the data from September and October. There was a huge upward revision of the non-seasonally adjusted private sector data that resulted in a "not quite as dramatic" increase in the seasonally adjusted data for August. The final NSA CES data was 175,000 workers greater than the advance value.

Jack Dunn on 12/5/2018 3:55:17 PM

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