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Bears could be in for a 'great few weeks' as S&P 500 hits a wall

MARKETWATCH 7:28 AM ET 2/19/2019

Critical information for the U.S. trading day

Investors left equities parked in a choice spot ahead of the President's Day break, as trade-talk euphoria helped drive the best winning streak for blue chips since late 2017 and tech stocks out of a bear market.

(https://twitter.com/Callum_Thomas/status/1096837920852447233)

Can the bulls keep it up? Sour news on retail sales, which some brushed aside as an aberration, was a blip in a strong week. All the more reason to pay attention to Walmart's strong earnings this morning, which may reassure those worried about a consumer-led recession.

And trade headlines may have something to say about further gains for stocks as Europe threatens to mix it up over potential U.S. auto tariffs (see buzz below), and China and D.C. negotiators sit down in Washington to pick up where Beijing left off last week.

Our call of the day from Adam Kobeissi, founder and editor in chief of The Kobeissi Letter (https:// www.thekobeissiletter.com/), sees some near-term dark clouds gathering around the S&P 500, and judging by soggy action in premarket, he may be onto something.

"Beginning with the December 24th bottom in the S&P 500 at 2,346, the narrative has been that the global economy is slowing, the Fed is becoming more dovish, and a trade deal between the United States and China is imminent," which all contributed to the index rallying 430 points from the Dec. 24 low at 2,346, said Kobeissi.

But an overly dovish Fed is now fully baked into stocks, along with a trade deal -- so much so that it could cause stocks to fall, he says. Others, like MarketWatch's Mark Hulbert has been warning about a market that has gone from extreme pessimism to extreme optimism (http://www.marketwatch.com/story/the-stock-market-is-careening-down-a-dangerous- slope-of-hope-2019-02-15).

See:Trade deal blues? Some say stocks are happier when a trade deficit worsens (http://www.marketwatch.com/story/for- the-stock-market-a-trade-war-win-may-be-a-hollow-victory-2019-02-12)

Here's where Kobeissi says we stand now - the S&P held a key level of 2,700 last week and reclaimed 2,750 for the first time since Dec. 3, but is seeing resistance at 2,790 and that big 2,800 level.

"Looking forward, we believe that upside is limited and buying equities now presents a highly unfavorable risk-to- reward ratio as expected return has dwindled with recent bullishness," said Kobeissi. Watch the S&P 500 to test 2,750 and 2,700 as a point where stocks could move further south.

"We maintain our target at 2,550 on the S&P 500 and believe that short positions in equities are set for a great few weeks," he said.

The market

Dow , S&P 500 and Nasdaq futures are pitching lower. Last Friday's (http://www.marketwatch.com/story/us-stock- futures-lower-as-investors-fret-over-economy-politics-2019-02-15) session saw gains of more than 1% for the Dow and S&P 500 , and just enough for the Nasdaq's bear-market exit.

Gold is climbing, while the dollar is steady and crude is inching up.

(http://www.marketwatch.com/story/long-dated-treasury-yields-stage-biggest-daily-jump-since-day-after-trumps- election-2018-10-03)Europe stocks are largely down across the board, and stocks were mixed in Asia (http:// www.marketwatch.com/story/asian-shares-rise-as-investors-look-to-trade-talks-in-washington-2019-02-19), with a flat Nikkei .

The chart

Back in the early 90s, a degree racked up $12,000 in student-loan debts for this reporter. It felt like a huge burden at the time, took years to pay off. Hold our beers, say the millennials, which brings us to our chart of the day.

It comes from Jesse Colombo, analyst at Real Investment Advice (https://realinvestmentadvice.com/u-s-student-loan- delinquencies-are-surging/), who noted recent data showing U.S. student-loan delinquencies hit a record $166.4 billion in the last quarter of 2018. Here it is, in chart form:

"One of the main reasons for the student loan bubble is the soaring cost of a college degree (it's actually a self- reinforcing relationship -- the student loan bubble also enables tuition inflation). On average, inflation-adjusted private college tuition, room, and board has nearly tripled since the early-1980s," says Colombo, who made his name sending out flares in the years up to the U.S. 2008 financial crisis.

Read:Watchdog slams Department of Education's oversight of student-loan companies (http://www.marketwatch.com/story/ watchdog-slams-the-department-of-educations-oversight-of-student-loan-companies-2019-02-14)

The buzz

Walmart (WMT) shares are moving higher as sales and earnings at the retailing giant beat forecasts.

HSBC (HSBA.LN) , Europe's biggest bank, is tumbling after missing forecasts (http://www.marketwatch.com/story/hsbc- misses-profit-blames-brexit-trade-tensions-2019-02-19), as it blamed both Brexit and trade tensions. Meanwhile, Honda (HMC) says it will close its Swindon, U.K. plant (http://www.marketwatch.com/story/honda-to-shut-uk-production-plant- amid-brexit-uncertainty-2019-02-19), which employs thousands, but says it has nothing to do with Brexit.

While we wait to hear whether the U.S. is going to slap down tariffs on auto imports, the EU fired back on President's Day with a warning that it will hit back in a "swift and adequate manner" (https://www.bloomberg.com/news/articles/2019- 02-18/trade-war-heats-up-as-eu-vows-to-retaliate-on-u-s-auto-tariffs). (https://www.bloomberg.com/news/articles/2019-02- 18/trade-war-heats-up-as-eu-vows-to-retaliate-on-u-s-auto-tariffs) That's as the White House says U.S.-China trade negotiations are set to begin today. China itself reported some bruising auto sales figures over the long weekend.

California and 15 other states have filed a lawsuit (http://www.marketwatch.com/story/california-leads-16-us-states- in-lawsuit-against-trumps-wall-emergency-declaration-2019-02-19) to stop POTUS's wall-emergency declaration, accusing him of "flagrant disregard for the separation of powers."

Tesla's (TSLA) website is no longer mentioning a cheaper $35,000 Model 3, and fans are in a panic (https:// electrek.co/2019/02/18/tesla-standard-model-3-battery-website-fans-panic/amp/?__twitter_impression=true).

(https://electrek.co/2019/02/18/tesla-standard-model-3-battery-website-fans-panic/amp/?__twitter_impression= true)Social media doesn't miss a beat after a SeaWorld (SEAS) gondola ride breaks down (https://nypost.com/2019/02/19/ more-than-a-dozen-people-trapped-on-seaworld-ride-police/), leaving more than dozen people to be rescued.

(https://twitter.com/YungMacdonald/status/1097755103895777280)

A home builders' index is on tap for later.

The quote

"We began the political revolution in the 2016 campaign, and now it's time to move that revolution forward." -- That was Vermont Sen. Bernie Sanders, who says he's ready to take another shot at the White House, as he launched his 2020 presidential campaign. And POTUS is fattening up his re-election team, with a trio of new hires, including one in media relations (http://www.marketwatch.com/story/trump-adds-senior-campaign-staff-for-2020-race-as-risk-of-a-gop-primary- challenger-rises-2019-02-19).

Meanwhile, Democratic presidential hopeful Elizabeth Warren is planning child-care for all, (http:// www.marketwatch.com/story/presidential-candidate-warren-will-propose-a-universal-child-care-program-2019-02-19) (http:// www.marketwatch.com/story/presidential-candidate-warren-will-propose-a-universal-child-care-program-2019-02-19) and wants the wealthy to pay for it.

Random reads

Trump tells Venezuelan dictator Nicolas Maduro to give up, which went down about as well as could be expected (https:/ /www.theguardian.com/world/2019/feb/18/trump-venezuela-nicolas-maduro-juan-guaido)

Drunken JetBlue passenger didn't want to sit next to a 3-year old. Ejected (https://nypost.com/2019/02/19/jetblue- passenger-kicked-off-flight-after-throwing-tantrum-about-sitting-next-to-child/).

Winter is back for more than 200 million Americans (https://www.aol.com/article/weather/2019/02/18/more-than-200- million-americans-will-see-snow-rain-ice-or-a-wintry-mix/23672077/)

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-Barbara Kollmeyer; 415-439-6400; [e-mail]


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