E Market Briefing For Wednesday, Jan. 16

Stocks may be 'temporarily furloughed,' like many Federal workers, for a couple of reasons. One of course results from an extension of the Government shutdown, which as we mentioned the other day, and Jamie Dimond of JP Morgan (JPM) also noted today; at some point this does matter in fundamental terms. Delta Airlines (DAL) also emphasized this concern, related to lower 'traffic' from Government and related travelers (in this regard they've not mentioned the greater impact from lower Chinese bookings, which lots of corporate customers are deferring or minimizing, until things resolve).

Incidentally, JP Morgan had misses all-around, yet the shares stabilized (of course when dealing with banks, you can imagine there is support aimed at cushioning at a meaningful negative impact). Also the trading 'miss' shouldn't have surprised anyone; as we believe banks in-general would be negatively impacted by capital market pressures during much of 2019's first half.

As to the technical market picture; it rebounded very nicely as expected, not just to the S&P 2600 level; but a bit into congestion above it. There are some technicians that not only agree with this idea; but are either selling now (generally premature), or suggesting it's 'all-clear' if the S&P gets over 2700 or so (too optimistic).  

In-sum: generally this market is doing our preferred pattern of hanging-in; of absorbing financial aspects of the Government Shutdown (so far, but that's a temporary aspect if they don't resolve it quickly; and it's no longer quick); as well as handling the sloppy bank results from Citi (C) and JP Morgan (JPM). And late yesterday United Airlines (UAL) soared by giving better guidance than usual.  

We really do need to see a Trade Deal later this month; the idea is for the market not to explode higher, but 'grind' a bit more into congestion; and then perhaps a spike higher (which could conclude the short-term) 'if' we get a Trade Deal. If we don't, well, there are definitely more bearish alternatives. 

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Bill Myers 3 months ago Member's comment

You said there are two reasons for the "stock furlough" and explained that one was the government shutdown. What's the other?