Markets gapped higher Tuesday (despite HD and KSS both missing and lowering Q4 forecasts). However, after the gap-up, the selling began immediately and took us to red territory across the board. However, a late-morning rebound rally recovered some of the losses. The rest of the day was a range-bound grind sideways that left the DIA (anchored by HD) printing a Bearish Engulfing candle, the SPY barely red and the QQQ printing a new all-time high close that was also a black-body Hanging Man candle. In addition, the rally may be showing more signs of being stretched as T2122 fell again (meaning we are maintaining all-time highs on fewer participating companies).
It is worth noting that during his Tuesday Cabinet Meeting Photo Op, President Trump again threatened to raise tariffs on China (if they don’t make a deal). That made no impact on markets. This was the first time in a long time, a China Trade headline or rumor had no impact at all on markets. Impeachment Hearings, which dominated news all day, also seemed to have no impact on markets today. However, overnight the Senate passed the Hong Kong Democracy Bill (President Trump is expected to sign), which immediately drew China's ire and spooked International Markets (on fear this would provoke more escalation in the Trade War).
Wednesday's major economic news is limited to Oil Inventories (10:30 am) and the release of October FOMC Minutes (2 pm). However, since all Fed votes were made public and most Fed voters have spoken publicly since the FOMC Meeting, this too may be a non-event for markets. Major earnings before the bell today include LOW (which beat earnings, missed on revenue and raised guidance) and TGT (which posted had a huge beat on the top and bottom lines and also raised forecast for Q4.) In addition. Impeachment Hearings resume at 9 am.
Overnight, Asian markets were flat to green. In Europe, markets are mixed, but mostly green at this point. As of 7:30 am, U.S. futures are pointing toward a gap higher of between 0.2% (DIA and SPY) and 0.4% (QQQ). However, HD also reported a sales miss and lowered its full-year guidance this morning. It may also be worth noting that the Hong Kong siege may be winding down with only 100 people still hold-up inside the surrounded University campus.
Once again, we have no scheduled news, all the important earnings already done before the bell, and Impeachment Hearings will likely control the news cycle during the day. However, since we're in a Trade War, that front always has the potential for news. Nonetheless, it would not be surprising for markets to gap and then drift the remainder of the day. Unexpected news can always surface. Regardless, the bulls remain very resilient, only willing to hear good news for months now. So, don’t get caught over-reacting to a temporary shock. Continue to be cautious, take profits and move stops. Remember that a Trader’s job is to consistently make gains…not to hit the occasional home run.
Swing Trade Ideas for your watchlist and consideration. Long – DT, ALLE, ARNC, MGM, IPG, FEYE, PKG, GE, FITB, INTC, WFC, GS. Short – MYL, NI, FE, FANG, OXY, MCD, DG, CCEP. Trade smart, take profits along the way and trade your plan. Also, do not forget to check for upcoming earnings. Stocks we mention and talk about are not recommendations to buy or sell.
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