Once again, the markets gapped higher on Monday. There was also follow-through as news came that the US is removing China from the “Currency Manipulators” list and this helped the bulls continue to run all day. At the end of the day SPY was up 0.69% and QQQ up 1.16%, while the DIA was up only 0.27% (held down by UNH). As you’d expect, the VXX fell to the extremely low value of 13.78 while T2122 climbed back just barely into the overbought region at 81.71.
In addition to the China news, two other stories made news on financial outlets Monday. The first of these was that the US Budget Deficit topped $1 trillion in 2019. This was a 17% increase from 2018 and led the National Debt to climb to $23.2 trillion. The second story was that the Impeachment trial of President Trump is likely to start Tuesday, January 21.
However, today (the current Tuesday) another earnings season kicks off as the big banks report before the open today. As this process starts, FactSet is reporting that earnings are expected to have fallen 2% in the fourth quarter. This would be the fourth straight quarter of reduced earnings. Still, as always, the companies have sand-bagged their numbers by guiding down forecasts during last quarter’s reports. So, it's anyone's guess as to whether Mr. Market "goes with the flow" or "registers protest over the trend."
Tuesday’s major economic news includes Dec. Core CPI (8:30 am) and Dec. Federal Budget Balance (2 pm) as well as another Fed speaker. As mentioned above, C, JPM, WFC, DAL, and INFO all report before the open.
Overnight, Asian markets were mixed. Europe is mixed but mostly red so far in their day. As of 7:30 am, U.S. futures are pointing to a flat open, just on either side of break-even at this point.
Markets remain at their all-time highs, with the bulls in control of the trend. However, over-extension remains a risk and earnings kick-off again today. So, continue to use some caution while trading with the trend. Look for opportunities, but don’t chase. Most importantly, remember to plan your trades, and trade your plans. Take profits on a very regular basis, move your stops to protect yourself, and wait for the trade to come to you.
Swing Trade Ideas for your consideration and watchlist: LHX, DAR, AMD, VRNT, INTC, MYL, UMPQ, KSU, TEL, AMCX, GRUB, BURL. Trade smart, take profits along the way and trade your plan. Also, don't forget to check for upcoming earnings. The stocks/etfs we mention and talk about are not recommendations to buy or sell.
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