Bears Finding Strength?

Stocks gapped higher Wednesday, as markets looked to good earnings and tried to ignore coronavirus for a second straight day.  However, this gap woke up the bears and the rest of the day was a selloff back down to Tuesday’s closing levels.  The DIA ended the day dead flat, the SPY closed down 0.09%, and the QQQ gained 0.16% (after coming back after a morning swoon).  The VXX gained slightly to 14.85 and the T2122 fell back to 33.90, so it remains in the mid-range.

AAPL helped markets after their Tuesday evening beats resulted in them printing another all-time high on Wednesday.  Oddly, BA rallied 2% on the day even though it reported its first loss in decades before the open.  Other earnings reports were too numerous to mention. 

Another story during the day was the Fed leaving rates unchanged and saying it plans to continue adding liquidity via REPO operations through at least April.  Chairman Powell also stressed the need to reach a 2% inflation target, meaning the Fed will be slow to raise rates in the foreseeable future.

Despite the earnings and Fed news, the coronavirus story remains at the top of mind.  The death toll has now topped 170 with 7,700 confirmed cases globally. (There are also tens of thousands of potential cases/patients being tracked.)  Business shutdowns, flight cancellations, city quarantines and major companies telling employees to work from home (for example Google and Microsoft) continue to pile up, especially focused on China.

Thursday’s major economic news is limited to Final Q4 GDP and Weekly Jobless Claims (both at 8:30 am).  However, once again there will be way too many earnings reports to list the tickers all here.

Overnight, Asian markets were heavily in the red as virus fear grow and traders returned from their holiday.  In Europe, markets are also red across the board at this point in their day.  As of 7:45 am, U.S. futures are pointing to a gap lower of three-quarters of a percent.

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Wednesday’s close near the lows implies that we will see a lower-low Thursday.  The US futures seem to be confirming this signal.  So, virus fear may be coming back into the forefront.   However, a large number of earnings have the power to jerk us around. 

Be cautious when considering any new positions.  Look for opportunities, but hedge your risks, keep taking profits and move your stops to protect yourself. Above all, wait for the trade to come to you...plan your trade and trade your plan. Remember, it's the consistent base hits, not the occasional home run, that wins the pennant.


Swing Trade Ideas for your consideration and watchlist today: ERI, MU, STX, CVS, LULU, MUSA, AGN, KLAC. 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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Disclosure: We do not act on all trades we mention, and not all mentions acted on the day of the mention. All trades we mention are for your consideration only.

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