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Good Morning Team,
BOJ Blinked
Futures are up nicely after the Bank of Japan changed its stance and is "dovish" again.
Last week, the BOJ raised rates by a quarter point and that caused the Yen to spike and their stock market to plunge. That triggered a lot of selling across the globe as the so-called "carry trade" quickly fell apart. The carry trade is when investors borrow one low interest rate currency in exchange for another higher yielding currency. The BOJ kept rates at/near zero for years and "only" raised rates by a small amount and markets tanked. Don't worry the BOJ blinked and it is now dovish again after the rate hike spurred a market meltdown. Those are the "headlines"- my primary focus is Price
(how the market reacts to the news).
Day 2 Of A New Rally Attempt
Stocks rallied on Tuesday but sellers showed up in the final hour causing the major indices to close in the lower half of their ranges which is not a "strong" sign. That said, it was still an "up" day and that was enough to mark Day 1 of a new rally attempt. Assuming Tuesday's lows hold, we continue counting the days and the window will open for a new FTD to show up anytime on/after Thursday. If we sell off again today (after the BOJ's dovish switch) that will be bearish. Conversely, if we rally and this pullback is over, then we can keep moving up from here.
Lackluster Earnings:
In earnings news, we continue to have a mostly negative reaction to earnings. I was interviewed yesterday and quoted on CNBC (read here) saying that earnings so far this quarter, especially for tech/AI stocks, have been lousy at best. SMCI was a high-flying AI stock and is the latest stock to get "smacked" (not an official term) during this earnings season. Take your time out there and I'll keep posting the strongest stocks everyday for an updated watch list to see what survived and thrived during this big selloff. Take a look at MMM, yes that is 3M but the stock is acting great! That's what I'm looking for, stocks that refuse to budge as the market gets hit. This way, when the market recovers, and there is a high likelihood that the sell off is over, the strongest stocks I send you everyday will likely be the ones that take off and lead the market higher.
I'll be back after the open with today's breakouts report.
Enjoy your day!
Adam
