JPM: "Until Market Abandons Hope For A Tax Deal, There Will Be No Significant Weakness"

Tyler Durden's picture

Monday's session started off poorly, with one of the biggest pre-opening selloffs of 2017 on fears surrounding the implementation of Trump's fiscal agenda. Since then, however, the Friday gap has been almost filled as a new batch of "buy the dippers" came out and did what they have done so well over the past 8 years.

Why the intraday bout of hope that this morning's low is as bad as it gets?  According to the intraday market update from JPM, the answer is simple: "the market isn’t abandoning hope of action on the tax front by any means and until that happens the SPX will struggle to sustain sig. weakness." The result: as shown in the chart below, the S&P is now just barely in the red, after being over 20 points lower earlier in the session.

Below is the full intraday note from JPM's Adam Crisafull:

Market update – it’s been a very quiet session so far. Stocks are obviously weak but flows are orderly and not particularly busy (and the major indices have bounced well off their opening lows).

Recalibrating political expectations is the main reason for the softness as investors debate the timing and scope of a tax bill, although the market isn’t abandoning hope of action on the tax front by any means and until that happens the SPX will struggle to sustain significant weakness.

 

It seems like many are circling ~2300 as an approximate area of support (premised on the SPX’s ability to earn ~$133-135 in ’18 w/o anything happening in Washington) and thus sentiment isn’t alarmed or panicked.

 

One of the biggest problems for this tape is the lack of scheduled catalysts – there isn’t anything major on the calendar over the next few days and weeks (Mar jobs Fri 4/7, CQ1 earnings season beginning Thurs 4/13, etc.). Work is underway on a tax bill but it will likely be several weeks before even rough signs of a consensus begin to emerge in the press (and in the meantime a gov’t shutdown is possible at the end of Apr). At this point the SPX is down ~2.6% from its recent high (2400) and ~1.1% from where it stood before Trump made his address to Congress on 2/28 (2363). The index is still up ~4% YTD and ~9% from where it closed on 11/8 (2139).

 

* * *

US sector trends – the weakest groups include banks (esp. regional banks), cap goods, autos, and steel while retail, healthcare, tech, and staples are outperforming. Within healthcare a lot of stocks levered to ACA are rallying following the demise of ACHA (HCA, UHS, CNC, etc.).

 

Retail is a notable bright spot as expectations for BATs fall further (BBY, SIG, DLTR, KSS, TGT, JWN, GPS, LB, etc., are all doing well). Some of the bond proxy groups bounced at the open although they have weakened from their morning highs. Most of the leading laggards within the SPX are either financial or material/industrial-related (FCX, MS, HBAN, CMA, SCHW, ZION, RF, etc.).

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NugginFuts's picture

Exactly. The whole rally is based on The Great White Hope - kinda like Spaceballs 2, The Quest for More Money. If Trump doesn't deliver yuuuge tax cuts, bye bye bottom. 

Ironic considering "Hope" was more an O'blahblah mantra, and he wanted to tax the shit out of everyone....

BigFatUglyBubble's picture

Even in the future nothing works!

Pareto's picture

+100 There's a whole lotta awesomeness right there alright.

bob_bichen's picture

You have NO IDEA how troubled this individual, Xythras, is.  He has trolled and spammed his website crap on here forever, always with the same M.O. of "upvotes" from a long series of "imaginary playmates." It really is quite perverse and whoever "he" is, he seems to really get his rocks off fondling himself and giving himself green arrows; he appears to have no life beyond making off-topic comments with his link to the SPAM-, TROJAN-, VIRUS-INFESTED  "dailywesterner,com"

Other ZHers  may wish to take one minute to send an email to abuse@zerohedge.com requesting that all of the "imaginary friends"  as well as XYTHRAS  be permanently banned for spamming.

As you do that, use your imagination to try to conceive of what type of whackadoo would spend their life in pajamas, eating stale chips and drinking cheap soda from the dollar store, popping zits, watching Road Runner cartoons and spamming zerohedge.

BorisTheBlade's picture

Correction: whole market reversely trades Gartman.

Hammer823's picture

Always buy the dip.  It's almost guaranteed money.  I wrote here this moring that losses would be cut in half by close and it happend before noon.  The stock market simply cannot go down without massive intervention.  https://www.instagram.com/the_rigged_street_journal/

NugginFuts's picture

I'd say it's very likely this strategy only works in an uptrending market. I'd be curious whether it works in a down-trending market. If this dip is followed by another dip, and another, and another, down 10k pts, your entry/exit timing has to be as good as or better than the Algos. 

Hammer823's picture

I make MORE money in a downtrending market.  I get way more dips to buy that way.

I've used this strategy in the energy market from 2014-2016 where XLE lost HALF it's value.

That period was one of the most lucrative for me ever.

It works just as well on an uptradning market, although there are way less trades to be made on rally days.

Soul Glow's picture

Flipping houses is making moar money than ever too, so I guess I should get into that as well.....

Na I'll keep stacking silver and gold 

8)

The central planners's picture

To hear JPM is like to hear MR Gartman.

Ring_Of_Fire's picture

These fucks have no clue about markets anymore, this POS S&P 500 is going down 5% minimum this week.. Volatility is coming back with a vengeance!! 

BullyBearish's picture

It's that HOPE thing again...

 

H  how 

O  our

P  prosperity

E  ended

BigFatUglyBubble's picture

Work is underway on a tax bill but it will likely be several weeks before even rough signs of a consensus begin to emerge in the press (and in the meantime a gov’t shutdown is possible at the end of Apr).

Mnuchin did not back off from the Obamacare plan as a priority over tax reform but stated "they are both big priorities" noting that "we need some more time to get tax reform done," suggesting his more aggressive August deadline was perhaps a little optimistic.

http://www.zerohedge.com/news/2017-02-26/mnuchin-manages-expectations-tr...

TheSilentMajority's picture

SNB and BOJ buying heavy after US open today.

trouba z ceska's picture

JPM nailed it. Hope is keeping markets above water and will so for much longer. There's only one emotion powerful enough to defeat hope: fear. Though I can't think of anything that can push tax heaven dreams out of traders' heads

Dog Will Hunt's picture

As the Trump Turd Tornado picks up steam, ZH conveniently returns to financial articles. Kicks you in your itty bitty balls to have to report the truth, now, doesn't it?

Golden Showers's picture

Um, ZH was always about financial articles. That's kind of what's in a name.

Why don't you just put some peanut butter on your itty bitty balls and let your dog lick it off like a lesbian realator, like your mother, since daddy went away and mommy keeps you all to herself.

You are a bad boy.

Golden Showers's picture

Just sit back folks, and listen to the wonderful sounds of the "Pleasure and Privelege" of the Rothschilds. On LP.

http://mediamonarchy.com/2017/03/rothschilds-musical/

When you are done, don't forget to shag a hooker and enjoy an 8 ball off her loins. For old times. Garrotes and underage boys are for your betters.

Vinividivinci's picture

No jobs, no spending, no hope for the plebs...the rest is all bullshit.
Mark-its...who gives a fuck what DOW, S&P and the rest think.

Soul Glow's picture

One thing I have been thinking about lately is just how intuitive AI is.  Not, how well do they recognize patterns, and not how quickly can they read a headline, but what is their intuition?  First let's define intuition - "the ability to understand something immediately, without the need for conscious reasoning" and "a thing that one knows or considers likely from instinctive feeling rather than conscious reasoning."

On the surface maybe AI could be great at this, as they are not concious at all.  I think many people over think situations instead of listening to their instinct anyway, and if AI is all instinct, then maybe they have the greatest intuition of all.  Yet the problem here is that AI intuition has been programmed, and so now we must take into affect not just the program but who programmed the program.  Now we are talking about MIT math geeks and the like, whom I don't think have an instinctual bone in their body.

The market then is at the whim of programmers who likely hold the belief they and the banks that run the algos are infaluable.  Well if I know anything it is those with the largest egos that have the greatest fall.  So I will bet against the algos having proper instinct, and will say the market will believe the Fed will always be there for them with the Fed's breast out to nurture.  This of course is like a 10 year old still sucking at a tit, which is gross and incestous.  Soon the algos will grow up and learn the mother's milk was herion the whole time, and the algos will die along with the corrupt fiat ponzi scheme.

business as stusual's picture

How is this for intuition, AI does not exist in any shape or form. You are refering to machine learning.

MACHINE LEARNING IS NOT A.I.

Herdee's picture

"More Time" means control over spending by The WhiteHouse in conjunction with Treasury. The budget/debt situation will be the ticket for slashing Socialism that's been created within Government Departments the size of elephants that serve as a drain on taxpayers. Clinton/Bush/Obama agendas on globalization and the so-called "new world order" are killing taxpayers and their job is the selling out of Americato European and Communist Red Chinese interests that are wiping out jobs.

CPL's picture

Good, keep printing and making excuses.  Dow 36000 is magical day of feasting.  Drive it harder and faster.

thunderchief's picture

Talk about wishful thinking. .

Hope springs eternal at JPM..

order66's picture

So it was JPM who loaded up on those 20k contracts from the opening lows.

mily's picture

Gap filled, what now?

adr's picture

The problem with habitual gamblers is that in the end, they always lose it all.

If you always bet your whole pot, and keep on winning, you think you'll always win until the day you lose everything.

The smart money always uses other people's pots to book their gains.

jamesmmu's picture

The data is rolling over already.

vaft's picture

Oh good, no further weakness in the banking sector pending a hopium infusion for a tax reform deal. Does this mean I need not worry about the next saga in the Greek debt crisis I have scheduled on my calendar for this summer?