Breathing Sigh of Relief

Whoa!  It finally happened.  There were more 52-week highs than lows on the NASDAQ Composite in yesterday’s trading.  

• 29 New Highs
• 18 New Lows

This might seem insignificant, but it has the potential to be huge. Remember when there was a shift in mid-2018 (two more lows than highs), it was a harbinger of very difficult times to come later in the year.  This development will have to continue before it’s the kind of trend that suggests the worst is over. However, it’s already remarkable, considering how desperate market breadth has become.

On December 24, 2018:

NYSE Highs 2 Lows 1,256

NASDAQ Highs 8 Lows 1,107

No Negative Knee-Jerk

Yesterday’s session was very encouraging for several reasons, mostly because we saw investors pause and look at the details in a news releases rather than simply reacting to headlines.  After the Institute for Supply Management (ISM) Services report was released, the market moved sideways and then began to move higher.

Ironically, at 57.6, the headline missed Wall Street consensus of 59.6 and declined sharply from 60.7% in November. 

I’m not sure if they turned off the headline readers that triggered the algorithm that took the Dow down 300 points in the blink of an eye. After the ISM Manufacturing Services report missed, humans took a deep breath, actually read the report, and saw reasons to be optimistic:

• Robust Business Activity: 59.9 from 65.2
• Strong New Orders: 62.7, a 5-month high
• Prices Paid: 57.6, an 18-month low, which keeps the Federal Reserve away

ISM Non-Manufacturing Report Five Year Chart

Construction Worker Woes

The hit to the ISM Services report came from employment, or more succinctly, the lack of workers (particularly in construction), which has dragged on for months.

Length of Worker Shortage:

• Construction laborers: 33 months
• Subcontractor: 12 months
• Construction temp workers: 4 months

Positive Earnings Guidance

Much is being made of the fact corporate earnings cannot keep up with the blistering improvements of 2018, and the market has been grappling with finding new levels of valuation. That’s been the bad news.  The good news is by having a low bar, it makes for the potential of big beats and big rallies.

We saw it yesterday in half a dozen stocks that raised guidance before the open. Check out these eye-popping moves:

• STAAR Surgical (STAA): +5.3%
• EXACT Sciences (EXAS): +14.8%
• ROKU, INC. (ROKU): +25.1%
• Orthopediatrics Corp (KIDS): +5.6%
• Cerus Corp (CERS): +4.6%
• Radius Health (RDUS): +6.0%

Portfolio Approach

We added another position in Consumer Discretionary (XLY) yesterday based on company execution, consumer and industry trends, and recent trading levels. If you are not already a subscriber to our service, click here to get started today. 

Communication Services	Consumer Discretionary	Consumer Staples
2	4	1
Energy	Financials	Healthcare
1	1	1
Industrial	Materials	Real Estate
3	4	0
Technology	Utilities	Cash
1	0	2

Today’s Session

Good stuff coming out of both sides as China and the United States wrap up their 48 hour meeting.  President Trump tweeting about positive progress as well.  I think America is on the cusp of something monumental. 

Jobs Matter

The availability of better paying jobs is undeniable and the cornerstone of the economy.  NFIB came in slightly below consensus, but the most important job and wages components continue to climb.

Job Openings Soar

Comments

Charles, thank you, you are the voice of reason in a Democratic & mainstream news media scandal, its sickening news that report OPINIONS as FACTS & OMITTED TRUTH on our ECONOMY & jobs created. USA CITIZENS have PRIDE in THEMSELVES again, & CONFIDENCE which was driven out by ALL THE NEGATIVE CONSTANT REPEATED LIES. THANK YOU CHARLES PAYNE & FBN. WE THANK ALL THAT VOTED FOR PRESIDENT TRUMP. MRKT IS LOOKING BETTER AND HAS BEEN OVERSOLD, BY THOSE WILLING TO LOSE BILLIONS IN HOPES OF COLLAPSE OF USA, SO THE DEMOCRATES SOCIALIST COMMUNIST PARTY WILL REBUILD THE RUINS TO A VENEZUELAN, N.KOREA, SOCIALIST PARADISE . PATRIOTISM IS BACK, AND WE THANK PRESIDENT TRUMP, CHARLES PAYNE, FOX & FBN, & ALL OUR USA MILITARY & VETERANS. J on 1/8/2019 11:55:29 AM

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