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Oh my, so much to talk about, and so little time. First, there’s a “new” war, this one between MSFT/AMZN over the US Gov’t JEDI (Joint Enterprise Defense Infrastructure) contract, then the old war – US/China Trade. Then. there’s the death of Abu Bakr al-Baghdadi (Leader of ISIS), who “died like a coward” in a dead-end tunnel as he tried to escape US forces. The FED meeting is coming on Tues/Wed this week, where we expect them to CUT rates. This morning, we learned that the EU has granted a 3-month extension to the UK, over BREXIT, meaning that the UK now has until January 31, 2020 to come up with a deal. And the NYSE will host the Virgin Galactic (SPCE) IPO as investors will now get a chance to consider tourism at the “edge of space.” US Futures are rallying on all of this good news, sure to set a new intraday high. But it is yet to be seen if it creates a new closing high. European markets just kicking off the day are confused…

On Friday, we saw the market surge as it teases with records highs.

The Dow is up 152 points or 0.57%, the S&P raced ahead by 12 points or 0.41%, the Nasdaq added 70 points or 0.70% (the big winner – see below) and the Russell tacked on 8 points or 0.55%.

Investors, traders, and algos are all playing the cheerleader as earnings continue to come in better than expected. Trade with China appears to be moving in the right direction and we all expect the FED to add another pitcher of Kool Aid to an already “over stimulated” market on Oct 30.

Look, if everyone blamed the fourth-quarter 2018 market meltdown on the FED being out of touch and raising rates and the President playing hardball with the Chinese — along with a slowing US (and global) economy — then I guess you have to believe “life is good” now that the FED is making the 3rd cut to interest rates this year to combat the (supposed) weakening US economy… that the ECB (European Central Bank) just initiated another major stimulus program to combat a weaker European economy, and that the US and China are seemingly making progress on trade. I mean, how can it be anything other than the “perfect” mix?

We have heard from 190 S&P companies so far. 78% (148) of those have “beaten the numbers” and provided better guidance ahead. This is enough to give algos a reason to keep buying. And this week, brace yourself, because we are going to hear from 140 more S&P companies. If history is any guide, we can expect 110 plus of those to continue the trend. As discussed, while the macro eco data has been mixed, these past three weeks have been all about the micro data (earnings). With the scorecard being what it is, the algos are happy to keep buying, because the mixed to weaker macro data ensures that the FED will move to cut.

Now what will be interesting is to see how the market reacts when the FED announcement indicates that they will go on “hold” now to see how the last three cuts work their way through the economy. Will we see the quant funds throw a hissy fit? Will we see the algos suddenly turn tail and go the other way? Will we see a repeat of November/December of 2018? We are about to find out…

Now Nasdaq and the techs began the day on Friday in the loss column, only to reverse and end higher as the better reports in “some” of the tech names, along with the news that the US and China are playing nice in the sandbox, outweighed any negatives from AMZN. And speaking of AMZN (web services), did you catch what happened after the bell? The Pentagon announced that they awarded the $10 billion JEDI contract (Joint Enterprise Defense Infrastructure) to MSFT!


Look, AMZN already has government deals. More than 5,000 agencies in the US government are supported by AWS (Amazon Web Services). So in my opinion awarding this contract to someone else, MAKES SENSE. Why put all of your eggs in AMZN’s basket? I mean don’t we already have enough in that basket; 5000 agencies? Why put the country in that position where AMZN has a major CIA and a major Pentagon contract in their portfolio? It’s the FB argument all over. Why give one company that much control over the data and the infrastructure? I mean we could talk about this for hours and it looks like we will. AMZN has already set the stage as they try to deconstruct the decision-making process, basically saying “we got screwed.”

In April, there were four contestants. ORCL and IBM were eliminated leaving only MSFT and AMZN competing for this “marquee deal,” a deal that will help to define the future for either one. (AMZN was the favorite among the bookies). When the news hit the tape, we saw MSFT surge 3% while AMZN fell 1%. (Remember that AMZN is already down after their earnings, I suspect this to put more pressure this morning). Already, we see stories in the paper that AMZN is taking this decision to court and that Trump is somehow responsible for this decision as well. Trump supposedly told the Pentagon to “screw AMZN” and his dislike of Jeffrey Bezos played a role in the Pentagon’s decision. So this will just be ANOTHER issue that makes lots of noise around the President.  

And as I noted – this is a big week for earnings and for macro data… Besides the 140+ earnings announcements due this week, we will also get a slew of big macro data points: Chicago Fed, Retail Inventories, Dallas Fed, Pending Home Sales, ADP Employment exp of 110k jobs, 3rd Qtr GDP – est of 1.6%, FOMC Rate Decision (cut 25 bps), Pers Income, Pers Spending, and on Friday – the NFP report (Non-Farm Payroll) – exp of +90k jobs… So stay tuned and don’t fall asleep.  

Dow futures are up 60 pts, S&P’s are up 5 pts, the Nasdaq is up 21pts and the Russell is +4 pts.  If nothing changes, we will open at a new intraday high on the S&P (anything above 3027.98). At this point, there is no upside trendline resistance until you hit 3125! Now if we do in fact breach the current high with any force, then watch as the “buy” algos kick in and the sellside liquidity dry up, leaving a void in the book — which can cause a “melt up” in the market. And there are already calls for a strong holiday season, which will only further support the strength of the consumer and question whether the US economy is really in trouble or not.

The tone is positive this morning as the excitement builds over earnings and the FED. The upside now identified as ~3125ish on the S&P while it should find trendline support at 2980. The market has climbed on lighter and lighter volumes, so any unexpected negative news could see a swift reaction. But I suspect that the buyers are waiting in the wings at the century mark and at trendline support (3000 and 2980 respectively).

Pay attention to what the FED says this week and then begin to brace yourself for a culling of the Democratic Presidential field. There are still 18 candidates in the race — and that needs to consolidate before you start making any real investment decisions based on who you think rises to the top. Today it might look like Lizzy, but that could all change tomorrow… Iowa kicks it off on Feb. 3, followed by NH (11th), NV (22), SC (29th) on the 11th and then March 3rd is Super Tuesday where 15 states and American Samoa all go to the polls. After that, the list should be much smaller as the fringe candidates get eliminated… and then it is time to consider what the Democratic platform really looks like (think more taxes, new healthcare, elimination of student debt and FREEBIES everywhere).

In Europe, the markets are a bit lower… and while earnings remain in focus… BREXIT is once again on the front burner as the EU grants the extension… So when is the snap election coming?  Sometime in early December. FTSE -0.34%, CAC 40 – 0.06%, DAX +0.25%, EUROSTOXX -0.14%, SPAIN -0.19% and ITALY -0.07%.  

Oil is lower — down 21 cents at $56.39 as China reports a decline in Industrial profits. But this is nothing to worry about. Oil did rally some 7% last week, piercing both the short and intermediate resistance lines — now attempting to kiss the longer term resistance at $57.35, where I think it finds plenty of sellers… at least until we get word that the US and China have inked the phase 1 part of the trade agreement. Production cuts by the Saudis are also helping to support prices and with the US now protecting the Syrian oil fields from ISIS, we can expect more oil will come to the developed nations. But I suppose no matter what, any news of a trade deal will cause the tone to change and suddenly. There will plenty of ‘demand’ causing prices to move up.

Take good care.


Skirt Steak Marsala

For this you will need: Skirt Steak, S&P, garlic, Olive oil, a dab of butter, flour, white mushrooms, beef broth, marsala wine, heavy cream, fresh lemon juice, chopped Italian parsley — served with sautéed spinach.

Light the grill.

Start by seasoning the skirt steak with S&P. Set aside. After 10 mins put it on the grill — careful not to burn.

For the marsala sauce: add one minced garlic clove and the sliced mushrooms to the sauté pan and cook until they become golden brown — should be no more than 10 mins… (season with a bit of salt to help them make water). Now add about 1 tbls of flour. Mix well and cook for about another min or so… Next add the beef broth — maybe ¾ cup and the Marsala wine— a bit less — so maybe ½ cup.  Let this come to a boil and stir constantly. Turn heat to med low and add in the heavy cream — like 1/3 – ½ cup. Let it simmer until it thickens nicely. Again, no more than 10 mins max. Remove from the heat and add a squirt of fresh lemon juice and the chopped parsley.  

In another pan, heat up some butter and olive oil and add the spinach. Cook until wilted. Once wilted, add another squirt of lemon juice, and season with S&P.  

Once the steak is done — slice it on an angle and place on warmed plates in a fan-like presentation.   Spoon the Marsala sauce over the steak and finish off with a nice serving of the spinach. The spinach is intentionally left simple so that it does interfere with the meal.  

Enjoy with your favorite Red — maybe a Pinot Noir or even a Merlot…

Buon Appetito.