Bears Look to Follow-up Tuesday Move

Markets opened mostly flat on Tuesday and then ground sideways until about 1:30 pm.  From there, the bears had control right into the close.  This left us with ugly candles as all 3 major indices closed near their lows and also completed something similar to an Evening Star pattern (without the gap-up star) in all three.  On the day, the SPY lost 0.86%, the DIA lost 0.74%, and the QQQ lost 0.68%.  The VXX rose about 1.5% to 40.45 and T2122 fell back into the mid-range at 55.83.  10-year bond yields were down slightly to 1.639% and Oil (WTI) fell over a percent to $65.46.

Better than expected earnings from big retailers were offset by a 9.5% drop in Housing Starts.  In other news, it was leaked that AMZN is in talks to buy MGM, not for the casinos, but for the media content and as a counter-move to the agreed WarnerMedia merger with DISCA.  It also came out Tuesday evening that the DISCA-WarnerMedia deal was structured so that it can easily be sold in the future. CNBC reports that AAPL, AMZN, and DIS might all be suitors to buy the merged group in the future.

In miscellaneous business news, Bitcoin fell below $40,000 for the first time in over 3 months.  F also unveiled a new electric F-150 during a visit from President Biden.  (The official unveiling will be Wed. evening.)  This is just the latest of traditional carmakers moving to compete with the all-electric TSLA.  QSR (Burger King) has thrown its hat in the ring of the Chicken Sandwich market with a new menu item launch. And RTX has announced it will cut office space by 25% as it is the latest company to realize that large portions of its work can be done remotely and at a lower cost.

Related to the virus, US infections are rising again after plateauing at a level above the fall level.  The totals have risen to 33,774,945 confirmed cases and deaths are now at 601,330.  The number of new cases is falling again and are back down to an average of 31,004 new cases per day (the lowest number since June). However, deaths are still plateauing at the new lower levels, now at 623 per day (the lowest number since July 2020).  The CDC reported Tuesday that 60% of American adults have received at least one shot and just under 48% are fully vaccinated.  This comes one day after new research showed that the PFE-BTNX and MRNA vaccines appear to be effective against the Indian 617 (double mutation) variant.  So, great news on that front. 

Globally, the numbers rose to 164,965,197 confirmed cases and the confirmed deaths are now at 3,420,858 deaths.  The trends are slightly better again as we have seen a slowing in the rate of increase no that India is believed to have peaked.  The world’s average new cases are falling quickly now, but remain at 650,594 new cases per day.  Mortality, which lags, is also falling, but remains at 12,462 new deaths per day.  The protests hoping to get the Tokyo Olympics cancelled continued to grow Tuesday, as only 1% of the Japanese population is fully vaccinated now.  However, the head of the Intl. Olympic Comm. say the games will be held and safely.  In that region, after recent outbreaks China has vaccinated 100 million people in just 9 days in Anhui and Lioning provinces.  Meanwhile, in India, the country reported a record of over 4,500 deaths on Wednesday.  For our part, the White House announced Monday that the US would share 80 million doses of vaccine with COVAX (the international vaccine sharing initiative) over the next six weeks, which are intended for poorer nations.  This includes equal amounts of the PFE, MRNA, JNJ, and AZN vaccines.

Overnight, Asian markets were mostly in the red.  Hong Kong (+1.42%) and South Koreas (+1.23%) bucked the trend.  However, Australian (-1.90%), Japan (-1.28%), Indonesia (-1.27%), and Singapore (-1.22%) were more typical of the region.  In Europe, markets are red across the board.  The FTSE (-1.14%), DAX (-1.37%), and CAC (-1.13%) are typical of the continent.  As of 7:30 am, US Futures are pointing to a nasty open.  All 3 major indices are implying a one percent or larger gap down at this point in the morning.

The major economic news scheduled for Wednesday is limited to Crude Oil Inventories (10:30 am), FOMC April Meeting Minutes (2 pm), and a Fed speaker (Bostic at 11:35 am).  Major earnings reports before the open include ADI, JD, LOW, TGT, TJX, VIPS, and ZIM.  Then after the close SQM, CSCO, CPRT, BEKE, KEYS, LB, SNPS, and ZTO report.

The bears showed up again on Tuesday afternoon and look to get some follow-through at the open today. The impact of supply chains that have been focused on efficiency and short-term profit (just-in-time, low inventories throughout the entire supply chain) continues to wreak havoc. In addition to very short supply of many products (i.e. chips), the situation has created abundant opportunities for companies to use this excuse to flex pricing power. So, inflation fear will continue to weigh heavily on the market psyche and with very limited economic news scheduled that might change the narrative, the bulls will need to dig deep to reverse that momentum.

If you're trading to the long side, be very nimble, hedged and/or small. As always, keep locking in your profits when you achieve your trade goals and maintain discipline by following your trading rules. Follow the trend and respect support and resistance levels. However, don't just assume they will hold. Consistency is the key to long-term trading success. So, keep hitting singles and doubles rather than swinging for the fence.

Ed

Swing Trade Ideas for your consideration and watchlist: IQ, HBI, F, DHI, IBB, FIS, GM, MJ. You can find Rick's review of tickers on his YouTube Channel here. Trade your plan, take profits along the way, and smart. Also, remember to check for impending earnings reports. Finally, remember that any tickers we mention and talk about in the trading room are not recommendations to buy or sell.

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