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Things you need to know

  • Traders/Algo’s take     profits on news of a trade deal
  • Construction Spending     weak – but that is NOT a driver
  • More relevant eco data     today
  • But it is still about     TRADE – Period

 Well the mkts whipped around yesterday – beginning the day on the move higher as global investors celebrated what looks like a US/Sino trade deal and ending the day in negative territory causing some to ask – What Happened?  The Dow swung 544 pts, the S&P swung 50 pts, the Nasdaq swung 142 pts and the Russell swung 30 pts – all the indexes ended the day off their lows but still in negative territory – but I told you this in yesterday’s note…in fact I said

 “Remember – the mkt is up nearly 20% since the end of December – as we continue to see a string of higher highs and higher lows –and while the news of a trade deal is all positive – you have to ask how much of that is already priced into the mkt and how much is not?  Do not be surprised at all if a deal is announced and the rally stalls – causing a reversal in the trend…the mkt is not going to fall out of bed – unless the deal completely breaks down – which is highly unlikely, but none the less – we could see a pullback…..……I would argue that any pullback in March only sets us up for gains post April 15th…..”

 Word over the weekend has it all but done as the brain trusts tie up the loose ends – or at least that is what it seems…….Asian mkts had surged, while the Europeans were a bit more cautious – US investors ran with it in the pre-mkt and then once the bell rang the excitement waned….. in fact the high of the day was the opening print – essentially – the mkt surged some 13 pts to 2816 and then ‘nothing’.  The excitement that had built up over the weekend didn’t have the energy to keep pushing and it began to fail by 9:45……. …then at 10 am – the gov’t reported on Construction Spending – which disappointed – coming in at -0.6% vs. the +0.1% expectation – some in the media (cheddar)  blamed the change in tone of the mkts to this soft gov’t report – that is almost laughable.  Let’s be clear – the US and China are on the verge of what some describe as a historic deal – and you think that this one gov’t report derailed the euphoria?  NOT HAPPENING!

 So, soon after the mkt opened and the chatter started over what the deal is or will be or what it looked like – so many chimed in dissecting the news that we knew and laying out the groundwork –  the tone started to change – NOT because we don’t understand the deal or NOT because the deal blew up – but because – as I pointed out yesterday – this is a classic ‘Buy the Rumor/Sell the News’ kind of event……Look – let’s refresh our memory’s – Fall 2018 – still no deal, threats of more tariffs, a FED that was a bit tone deaf, the  ECB that began to pull in the reigns, a weakening China AND a mkt that had surged by 10% ytd – even in the face of all that…until it didn’t, until the FED lit the fuse and others speculated that a trade deal was never coming to pass caused a swift and painful correction driven mostly by the algo’s /robots that control so much of the mkt– sending global mkts into a tailspin.

 And then it ended – the FED had a change of heart, the US macro data was NOT as soft as so many feared, The ECB reconsidered their stance and the trade talks ADVANCED and the mkts began a new surge – thinking ‘maybe we overreacted just a bit’ (Do you think?).  Between the end of December until yesterday – the mkt  surged by ~20% taking it to more reasonable levels based on the latest news and data – mostly by the news that a deal was going to get done – both sides wanted it.  And so the mkt BOT THE RUMOR (it is considered a ‘rumor’ -until it happens)…and then over the weekend – there was an  apparent breakthrough –  headlines appeared everywhere – WSJ, FT, CNBC, Bloomberg, Reuters, Twitter…etc.….the story pieced together by people ‘not authorized to talk’ (see my note from yesterday) – all of the main characters – were (are) noticeably quiet – so is it any wonder that we saw this pullback?  Is it any wonder that we saw the tone change? 

 Absolutely not – and don’t get dragged into the soft construction report – so Tech, Healthcare, Energy got dragged lower because of this soft CONSTRUCTION report?  THAT is ridiculous.    In the end – the mkts did exactly as expected and as I pointed out – the pullback was the relief valve – it was the realization that a deal is within site – so the trader types and robots take profits in sectors that had rallied the hardest since the pullback – so think Tech, Industrials, Energy, Healthcare – and then think overall weakness across the other sectors as the robots hit the sell button on those sectors as well –  UNABLE to sift thru the headlines and make a rational decision. 

 In the end – the mkts closed off their lows and this morning US futures are pointing higher – the S&P, which broke down thru 2800 yesterday (another level that I have said over and over was going to prove to be a stumbling block) is now once again trying to challenge it.  S&P futs are up 5 at 2797 as the mkts continue to ‘monitor trade developments’.  Look – word is still that the trade talks are in the ‘final stages’ (that is bullish) and that the rendezvous at Mar-A-Lago is slated for the end of the month (that is bullish)…so don’t panic – as a long term investor – this is all good. 

 Eco data today is full of stuff that speaks directly to the economy – MORE than yesterday’s construction spend report.  Today we are getting – Markit US Services PMI – exp of 56.2 (solidly in expansion mode), ISM Non-Manf Index (which is another way of saying services) at 57.4 (again – in expansion mode) – remember – the US economy is more than 70% about SERVICES….so these numbers are good….We will also get New Home Sales and those are expected to be soft –(think time of year vs. real weakness) – I mean who buys a house in February – unless you have to.  Those numbers are sure to turn once the season changes and with the FED on pause – mortgage rates have in fact come in a bit – and that is good for the sector. 

 I suspect that the S&P will challenge and then struggle with 2800 until we get real clarity on the trade talks, until we get someone that is ‘authorized to speak’ on center stage – think Kudlow or Lighthizer – I would rather leave Mnuchin and Ross in the dressing room.  They just don’t present the same way – there is something about their personalities that reminds me of fingernails on the chalkboard.  (Don’t you hate that?)   Remember ( I said this yesterday)  – we always see pressure on the mkts as we get closer to April 15th and this year will be no different – especially as the reality of the TAX Reform act kicks in….we have already heard countless stories of how people are getting clobbered because they did not adjust withholdings appropriately and that could cause some tax selling over the next month.  Look – it happens every March into April – the mkts come under pressure as we approach tax day – and then they quickly recover post the 15th.

 I still believe that we are in the 2750/2810 trading range – (with 2800 being difficult) until this is resolved and until after April 15th.  Don’t panic and use any weakness in good names as an opportunity to build a strong portfolio. 

 Global mkts all reacting the same way – Asian mkts ended the day with little fanfare and European mkts are trading around the flatline. 

Take good care.


Sweet Sausage Risotto

 This dish can be a first or main course depending on how hungry you are.

 You will need:  olive oil, butter, onions, sweet Italian sausage (removed from casing), minced garlic, thyme, Arborio Rice, white wine, chicken broth, frozen peas and Parmegiana Cheese.

 In a sauce pan – heat up about 6 cups of chicken broth.

 In a heavy pan – heat the oil and ¼ stick of butter over med heat.  Add chopped onion and sauté until soft and translucent. Next add the sausage meat and brown.  When ready add minced garlic – no more than a tblspn, and some thyme….do not overdo….about ¾ tspn.   You can always add less and then taste.  Sauté for another couple of mins to blend the flavors.  Now add 1 ¼ cup of Arborio Rice and about 1 cup of dry white wine…mix well and stir until the wine is absorbed.  Season with a bit of pepper.  NO SALT needed.

 Now – one ladle at a time…add the hot stock to the rice and stir…you must stay at the stove – this is key.  You need to stir the rice and not allow it to stick.  As the stock is absorbed – add another cup and stir…continue this until the rice is tender and creamy….maybe like 20 mins….but taste as you go to determine. (You will not need all of the stock – but just in case you did it wrong you can always try to save by adding a bit more stock.)   Now add 1 cup + of frozen peas…you can always add more if you like peas…..and a handful of grated Parmegiana Cheese.   Stir well for about another 5 mins so that the peas have time to warm up……taste.  Taste good?  then you are ready to serve…If not – keep stirring.  Do not let the rice dry out…  This meal should take you about 30 mins – (40 max).

 Serve in warmed bowls and garnish with a bit of chopped Parsley…always have extra cheese on the table for your guests.

 Buon Appetito.

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