Markets gapped lower Thursday on fear stoked by the huge jump in reported cases and deaths from the coronavirus. (As noted yesterday, this jump was likely largely due to the Chinese changing the way they report cases, which may be prone to cause trends that are less smooth.) At any rate, after the gap down, the bull immediately charged in to fade the gap. From that point onward, the rest of the day was a sideways grind around the break-even line. For the day, the DIA closed down 0.30%, the SPY down 0.11% and the QQQ down 0.13%. So, we recorded a down day, but not by much considering the gap down. The VXX remains low at 13.69 and T2122 fell again, but remains in the mid-range at 69.27.
In the news, the Fed announced it will reduce new Repo market purchases (purchases will continue, just at a lower rate). AMZN also obtained a temporary injunction against MSFT working on the Pentagon cloud contract. WMT also announced it would discontinue its unprofitable high-end personal shopping service called Jetblack and W reported it will cut 500 jobs (3% of its workforce). In other market news, CSCO stock was hammered Thursday after it reported falling revenue and failed to beat earnings expectations on Wednesday evening.
However, once again coronavirus was the top story of the day. As mentioned, China changed its reporting methods and overnight Wed. reported over 15,000 "new" cases and 250 "new" deaths. Obviously, this scared markets and the White House did not help matters by publicly stating it did not have confidence in the information coming from China. (While true, expressing that skepticism after such an increase in the numbers was reported does not help public confidence.)
As of Friday, the counts stand at 64,000 cases and almost 1,400 deaths. The impact is continuing to spread as airlines, cruise lines and other travel-related industries have been hit hard by decreased demand. In addition, KHC and FCAU were among the companies that closed their manufacturing operations in China within the last 24 hours. Many other companies warned of revenue and earnings impacts, perhaps obviously including BABA.
Overnight, Asian markets were mixed. However, as of this point in their day, Once again, Europe has shaken off the fear and is mainly green, As of 7:30 am, U.S. futures are back on the bullish side, pointing toward a gap higher of between a quarter and half a percent across the major indices.
Major economic news today includes Jan. Retail Sales Core and Imports/Exports (both at 8:30 am), Jan. Industrial Production (9:15 am), Michigan Consumer confidence (10 am) and another Fed speaker just before noon. In addition, both China and the US are scheduled to reduce more tariffs on Friday. The only major earnings reports for the day are NWL and PPL, both before the open.
Friday could be a selling day as traders look to lock in gains in front of a 3-day weekend. (Don’t forget this is a long weekend with US markets closed Monday for Washington’s Birthday.) Certainly, there are great headline risks from coronavirus over that period, but also from the follow-on impacts/statements of businesses over the period as well. However, the trend remains strongly and stubbornly bullish and all the major indices are very near all-time highs (including even the IWM).
All I can do is continue to tell you to not fight the trend, but also keep locking in profits, being cautious and remaining nimble or hedged. Remember to make the trade come to you (rather than chasing), plan the trade and trade the plan. Don’t get complacent and let a profitable position (or several) go South on you.
No Swing Trade Ideas for your consideration and watchlist on a Friday in front of a 3-day weekend. Today is payday. So, book some profits. Trade smart, take profits along the way and trade your plan. Also, don't forget to check for upcoming earnings. Finally, remember that the stocks/etfs we mention and talk about in the trading room are not recommendations to buy or sell.
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