CERN, the European Organization for Nuclear Research, says its goal is to uncover what the universe is made of and how it works. It does this by using the world’s most powerful particle accelerator complex. It hurls atoms into each other at nearly the speed of light in order to one day recreate the Big Bang and to unlock the secrets of the universe.

The biggest discovery yet is the so-called Higgs Boson particle that Stephen Hawking says could destroy the universe.

I have different thoughts on the origins of the universe, but as I watched the stock market gyrations over the last couple of days, I couldn’t help but think about those atoms spinning around and around at the speed of light, ultimately smashing together. The market is moving in big chunks in the blink of an eye, and it feels as if it’s going to smash into something soon.

The question is whether it’s that support point, which continues to hold up very well, or maybe it will turn and rally through the resistance, which would be a stock market Big Bang.

Yesterday, the Dow rallied up 368 points out the gate, and then tumbled 200 points before the late afternoon move of 170 points higher before finally settling down 53 points. If the folks at CERN could figure out a way to tie an atom to these gyrations, they might get the answers they’re looking for. 

Meanwhile, investors are still seeking answers, but for now, they would settle for calmness.

The 1,000-point Dow Jones Session

The Message Of The Market

I have to say, while most of the smart investors and traders I know and interview, see the recent action as a prelude to doom. I’m very impressed at how the market continues to climb off the canvas and rally off key support points. 

Of course, there’s a long way to go to challenge the upside resistance. It’s way too premature to speculate on breakouts, but this testing of weaker hands has shaken out a lot of folks that must also be eager to buy. I continue to see initial strength in momentum names setting up the upside test.

Symbol	Select Sector SPDR Fund	Last	Change	% Change
XLC	Communication Services	43.77	+0.04	+0.09
XLY	Consumer Discretionary	103.49	+0.04	+0.04
XLP	Consumer Staples	55.17	+0.45	+0.82
XLE	Energy	63.09	+0.02	+0.03
XLF	Financials	24.52	-0.24	-0.97
XLV	Health Care	91.19	+0.28	+0.31
XLI	Industrials	67.80	-0.40	-0.59
XLB	Materials	51.88	-0.17	-0.33
XLRE	Real Estate	33.89	+0.06	+0.18
XLK	Technology	65.57	+0.08	+0.12
XLU	Utilities	56.80	+0.23	+0.41

Geopolitical Hijinks 

Huawei

Last night, a Canadian judge granted bail to Meng Wenzhou, the Huawei CFO arrested for violating U.S. sanctions on Iran. While both sides say the arrest has not interfered with the negotiations, the bail news is a sigh of relief in a tension-filled environment. Bail wasn’t cheap:

• $7.5 million cash and assets from Wenzhou
• $3.0 million cash from friends as guarantors to vouch she shows up to court

Brexit

The vote of no confidence has been triggered, which means a larger vote happens later today.  It takes 48 conservative MPs to trigger a vote.  May needs 158 votes, out of the 315 Conservative MPs who are eligible to vote, to win the confidence vote.  Right now, betting is May will win, but there will still be pressure to resign.   The Brexit news played a big role in yesterday’s wild gyrations. 

Trump News

Last night, President Trump said he would intervene in the Huawei case if it helped trade and North Korea negotiations.  Also, last night, President Trump said the Federal Reserve would be “foolish” to raise rates at next week’s gathering.

Today

News that China is prepared to make changes in its Made in China 2025 plan has added move to the market, that has been higher all morning, in part due to the belief Theresa May will survive her no confidence vote, and comments from President Trump’s willingness to potentially return the Huawei executive if it helps trade negotiations.

On the upside key resistance numbers for the Dow

• 24,762
• 25,043

The big breakout that everyone must own comes with a close above 26,000

 

Comments

We have a market being driven by poorly constructed algorithms that are being triggered by news sound bites and headlines. Our fundamentals are great and should be built upon and not torn down by humans relying upon some math wonk to make decisions. Our market looks like a loose cannon on deck in rough seas. Can you imagine where the market would be now if Wall Street understood we are the Golden Egg, stop killing it! Don on 12/12/2018 10:57:03 AM

There are a lot of forces at play contributing to volatility (Euro, Trade, US Budget, Interest rates). As investors we need to ignore the noise and focus on fundementals - the bottom line is the US is fundementally doing well and will continue to grow, albiet a little slower than last year. Its still growth. I’m still buying the dips and have bottom feeding orders incase there are big swings. Ken Knight on 12/12/2018 11:42:56 AM

Thank you for your excellent analysis of the market. Would you mind explaining why you chose 24,762 and 25,043 as important resistance points? They don't seem to align with any moving averages that I normally look at, or recent highs or lows where trend changed direction. I believe as you do that a close above Dow 26,000 would be a higher high, and change the downtrend (lower highs), and thus be the most important buy signal. Rich B on 12/12/2018 2:06:53 PM

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