Drama in Threes on Friday as SPX Drops over 2% after China, Fed and POUTUS Speak Out...

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Too much trade and political drama overwhelmed equities on Friday as market breadth collapsed and the SPX dropped 2.59% to close at 2,847.11.  Friday’s breadth was so weak that even super strong trending stocks HSY, ROKU, SHAK and SHOP fell on Friday.

What worked on Friday was UVXY, VXX, GLD, TLT, INTU, inverse ETFs, gold stocks, gold ETFs and just about any bearish short stock or put trade.

INTU had a positive EPS reaction and at least 10 major analysts including KEY, MS, RBC, Barclays, SF, C, DB, CS, UBS and BAC, raised their price target on Friday.  

CRM gapped up on a positive EPS reaction, but finished unchanged in the wake of negative breadth on Friday.  TGT, HD, JWN, KEYS, SNPS, LOW all pulled back on Friday after strong EPS gains during the week.

Is minus $550 million in seven years a good deal or how low is America’s business IQ?

On Friday, Hu Xijin, the Editor of Global Times, a state controlled newspaper in China, tweeted ”…the US can’t find alternative market with China’s potential.  Without the US, China will meet short-term difficulties; w/o China, the US will lose driving force of long-term growth.”

A “driving force of long-term growth” for the US?  Hmm, maybe that’s the problem?  A misunderstanding of the term “driving force of long-term growth.”

In the seven years from 2012 to 2018 US exports to China have grown $9.8 billion from $110.5 billion to $120.3 billion per year.  In contrast from 2012 to 2018 China imports to the US have grown $113.9 billion from $425.6 billion to $539.5 billion.  Total US growth of $9.8 billion versus China’s growth of $113.9 billion over the past seven years.

The Bureau of Labor Statistics CPI indicates that prices were 9.37% higher in 2018 than 2012.  This means that $110.5 billion in 2012 is equivalent to $120.85 billion in 2018.  In other words, US exports to China shrunk by $550 million when adjusted for inflation.  Some would call this disparity, apparently others describe it as “driving force of long-term growth.”

The seven-year export growth of $113.9 billion for China is 94.6% of the 2018 total US exports to China.  Disparity or real growth for the US?

Any freshman business student should understand why an entity would go to great lengths, even resorting to antithetical statements, to protect a so-called cooperative growth process that allows them to grow their market penetration into their trading partner’s market by $113.9 billion in seven years while only ceding $9.8 billion penetration growth into their own market at the same time.

If US companies can’t find an alternate market that can provide an inflation adjusted minus $550 million potential growth over seven years, the China trade war may not America’s biggest problem, it just may be its own business IQ.

The DJIA, closed down 623 points at 25,628, led by weakness in AAPL, GS, MMM, V and MCD.  Closing below 27,000 for the eighteenth straight day.  

All eleven sectors were lower on Friday.

SPY down 7.51 at 284.85 on 149.3 million shares, 88% above average volume.  Down on heavy selling volume.

VIX up 3.19 at 19.87

TLT up 2.36 at 145.96 on 16.1 million shares. 

GLD up 2.77 at 144.17

Long term up trend intact.  3-day short term trend is down.

Up:  

Down: DIA, SPY, IWM, QQQ,

Breadth collapsed on Friday, as decliners led 2,534 to 425 on the NYSE and led 2,610 to 477 on the NASDAQ

The SPY MFC green line turned down at 42 and is short-term bearish. 

Uptrend sectors: XLRE, XLU, XLP, XLY, XLK,

Neutral sectors:  XLC, XLV, XLI, XLF, XLB,

Down trend sectors: XLE,

The 6-month intermediate trend is up.  The ten-day trend is down.

3-month Intermediate Term Market Trend: Up a little

3-day Short Term Market Trend: Down

2 of 100 NDX stocks closed higher on Friday.

16 NDX stocks are above their 30 DMA:  SBUX, FISV, AMGN, CELG, KLAC, TTWO, VRSK, VRTX, NTES, SYMC, PEP, EA, QCOM, ALXN, SNPS, INTU,

NDX Stocks to Watch on Monday:

Moving Above 30 DMA = 1

INTU,  

Moving Below 30 DMA = 24

AAPL, ADP, ATVI, AVGO, BKNG, CMCSA, COST, CTAS, FAST, GOOGL, IDXX, INCY, JBHT, LRCX, MDLZ, MSFT, MU, MYL, NVDA, NXPI, ROST, SIRI, TXN, WDC,

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