The hurry up and wait low volume chop we’ve seen this week will be over once the CPI number is revealed. So, plan for premarket price volatility, likely creating an opening gap. After that, what happens next is anyone’s guess. The bulls hope this data will finally break the overhead resistance clearing the path for more upside. On the other hand, the bears hope for inspiration to defend the resistance with hopes for more market lows. Let’s hope we finally get some better volume providing directional conviction no matter what happens! Buckle up the drama is about to begin.
While we slept, Asian markets sold off as China’s inflation rose, with the Hong Kong tech selling off nearly 2%. European markets trade mixed and primarily flat, waiting on the U.S. inflation data and what it means for future FOMC actions. However, U.S. futures show the standard premarket pump-up we have seen during this relief rally, pointing to a bullish open ahead of the CPI report. Of course, after the reveal, anything is possible as traders and investors react.
Economic Calendar
Earnings Calendar
On this hump day, we have more than 170 companies listed but less than 100 confirmed, as is usual when small-cap reports ramp up. Notable reports include AAP, BMBL, COHR, CPNG, CYBER, BROS, DIS, FOXA, FNV, JACK, MFC, MTTR, PAAS, RRGB, SONO, COOK, WEN, & WWW.
News & Technicals’
Earlier this year, the Tesla and SpaceX CEO said on social media that he had “no further TSLA sales planned” after April 28. However, after Musk’s latest stock sales were revealed, Tesla fans and promoters asked the celebrity CEO if he was done selling shares in the electric vehicle business and if he might repurchase shares in the future. Asked if he was done selling Tesla shares, Musk replied: “Yes. In the (hopefully unlikely) event that Twitter forces this deal to close and some equity partners don’t come through, it is important to avoid an emergency sale of Tesla stock.” There have been mixed messages this quarter about streaming’s growth potential. If Disney+ meets or exceeds 10 million net adds, investors bullish on streaming will sigh relief. If it falls short, investors will question if CEO Bob Chapek can hit his target of 230 million to 260 million subscribers by 2024. Coinbase’s revenue declined almost 64% in the quarter as cryptocurrency prices fell. The exchange operator lowered its full-year forecast for transacting users. Coinbase said it was trimming 18% of its headcount during the quarter. Legal and General’s CEO Nigel Wilson described the UK’s cost-of-living crisis as “a tragedy for many, many people.” The typical household is expected to spend the equivalent of £4,266 on energy each year from January. Prime Minister Boris Johnson’s spokesperson said it would be up to his successor to make decisions on the matter. Sweetgreen lowered its 2022 forecast, citing weaker sales that began around Memorial Day. The chain said it laid off 5% of its support center workforce and will downsize to a smaller office building to lower its operating expenses. Shares of the company fell about 20% after hours. Deliveroo reported a pretax loss of £147.3 million in the first six months of the year, up 54% from the same period a year ago. The U.K., food delivery firm, said it is consulting on plans to exit the Netherlands, the latest withdrawal from a major European market following its retreat from Spain and Germany. Deliveroo said it would initiate its first-ever stock buyback program, purchasing up to £75 million in shares from investors. After President Biden ratified Finland and Sweden’s NATO membership, Russia halted U.S. nuclear inspections. Treasury yields moved slightly lower in early Wednesday trading, with 2-year at 3.26%, the 5-year at 2.96%, the 10-year at 2.78%, and the 30-year at 3.00%. However, the 6-month and the 12-month bonds are now inverted over the 5,10, and 30-year bonds painting a troubling picture of recession.
Markets chopped in a narrow range Tuesday as traders and investors waited for the CPI number that could inspire the bulls or the bears, depending on the result. However, the wait is almost over, and with indexes pressed against significant overhead resistance, expect considerable premarket price volatility likely to create an opening gap. In addition, depending on the outcome, we should expect considerable movement in the U.S. dollar and bond markets, adding some volatility to commodity prices after the report. After that, a Petroleum report, a Fed Speaker, a 10-year bond auction, and a Treasury Statement round out the day. Anything is possible, so buckle up and get ready for the show!
On Tuesday, the large-cap indices opened flat while the QQQ gapped down about six-tenths of a percent. From the open, both the SPY and QQQ sold off for about an hour. Then the entire market ground sideways in a tight range the rest of the day. This gave us indecisive, black-bodied (Spinning Top type) candles that are testing whether they can stay above their T-line (8ema). With that said, we are just seeing a pullback in an otherwise in-tact uptrend.
On the day, SPY fell 0.40%, DIA fell 0.16%, and QQQ dropped 1.13%. In terms of extension, VXX fell slightly to 21.94 and T2122 is back in the mid-range at 68.60. 10-year bond yields are up slightly by remaining at 2.779% and Oil (WTI) is also up very slightly to $90.50/barrel. So, overall, it was just another roller-coaster, “much ado about nothing” day on Wall Street.
In economic news, Q2 Nonfarm Productivity fell 4.6%, but that was better than the consensus forecast of -4.7% and far better than Q1’s -7.4%. As is normal when productivity falls, Q2 Unit Labor Costs rose 10.8% which was worse than the forecast rise of 9.5%, but still better than Q1’s +12.7%. After the close, API reported Weekly Crude Oil Inventories rose far more than expected. The estimate was a flat +0.073 million barrels. However, the actual build for the week was +2.156 million barrels.
After the close, WELL, SMCI, HRB, AKAM, GO, TTEC, and ANGI all reported beating on both the top and bottom lines. Meanwhile, WYNN, ADV, and MAXR all missed on revenue while beating on earnings. On the other side, DAR, SWX, and LNW beat on revenue while missing on earnings. However, COIN and RBLX missed on both the revenue and earnings lines.
In stock news, META raised $10 billion from its first-ever bond offering, with the proceeds slated to be used for share buybacks and investments in revamping the business. (This follows recent AAPL and INTC bond offerings.) NCLH pre-announced a loss for the current quarter with revenue below previous estimates. The cruise line said they expect occupancy rates will not reach pre-pandemic levels for another year, not at 65% of the 2019 levels. In contrast, rivals RCL and CCL are both saying they expect to be over 100% occupancy this year.
In energy news, Russian oil shipments to Central Europe (Slovakia, Hungary, Czech Republic) via pipeline by Transneft were halted Tuesday by Ukraine. The reason is that due to sanctions, Russia is unable to pay the transit fees to Ukraine. This has shut down 250,000 barrels per day of oil flow. Elsewhere, Bloomberg reports that the UK has a plan in place for at least several days of organized rolling blackouts next winter. The British government forecasts that electricity capacity will fall short by one-sixth of peak demand on cold days due to natural gas shortages (even after coal-fired generation plants are brought back online). Finally, the National Avg. Gasoline price has fallen below $4/gallon for the first time since March. Gas prices have fallen more than $0.18 in the last week and $0.72 in the last month. In somewhat related news, the Rhine river (a massive logistics thoroughfare for Europe, including oil, natural gas, coal, etc.) has become unpassable as a changing climate has dropped the water level too low for barge traffic over much of the major river.
Overnight, Asian markets were nearly red across the board. Only Singapore (+0.47%) and India (+0.06%) managed to stay in the green. Meanwhile, Hong Kong (-1.96%), Shenzhen (-0.87%), and Taiwan (-0.74%) led the region lower. In Europe, stocks are mixed but lean slightly to the green side at mid-day. The FTSE (+0.05%), DAX (+0.16%), and CAC (-0.12%) are typical of the region with only Norway (-1.14) and Denmark (+0.80%) showing significant moves in early afternoon trading. As of 7:30 am, US Futures are pointing toward a modestly green start to the day (before data). The DIA implies a +0.20% open, the SPY is implying a +0.24% open, and the QQQ implies a +0.29% open at this hour. 10-year bond yields are up slightly to 2.799% and Oil (WTI) is off almost 2% to $88.83/barrel in early trading.
The major economic news events scheduled for Wednesday include July CPI (8:30 am), EIA Weekly Crude Oil Inventories (10:30 am), 10-year Bond Auction (1 pm), and July Federal Budget Balance (2 pm). The major earnings reports scheduled for the day include ARCO, BHG, CAE, FOXA, HMC, LTH, NOMD, WEN, and WWW before the open. Then, after the close, APP, AVAH, AVT, BRFS, CACI, CPNG, ENS, MFC, STN, VZIO, and ZIMV report
So far this morning, WEN and LTH have reported beats on both lines. Meanwhile, WWW, ADRNY, RKUNY, DNPLY, and BHG all missed on revenue while beating on earnings. On the other side, HMC and NOMD beat on revenue while missing on the earnings line. However, VWDRY missed on both the top and bottom lines.
In economic news later this week, on Thursday we get July PPI and Weekly Jobless Claims. Then on Friday the July Import/Export Price Index, Michigan Consumer Sentiment, and WASDE Ag Report are released.
With CPI data on the docket this morning, expect pre-market trading to get volatile at about 8:30 am. (The consensus estimate is that we will see 8.7% annual inflation.) On a related note, BAC told clients they expect the yield curve to invert more deeply (more than any time since the 1980s) on the Fed’s inflation-fighting actions. Elsewhere, Elon Mush has sold almost $7 billion worth of TSLA stock. (This brings his total sale of TSLA stock to $32 billion since November.) He claims this most recent sale was a preventative move, to avoid a massive sale of the stock if the court rules against him in the TWTR court case. However, he also said he would buy more shares of TSLA in the event he wins the case. With that backdrop look for another low volume, volatile day. So, either look for longer horizons (loose stops and ability to ride fluctuations) or tighten up on the bat and take smaller, faster swings. Overall the trend remains bullish, even if we are pausing or pulling back a tick to ease over-extension.
Remember that trading is our job. So, do the work and follow the process. Stick with your trading rules, trade with the trend, and take those profits when you have them. Demonstrate patience and wait for confirmation. So, don’t be stubborn. If you have a loss, just admit you were wrong, respect your stop, and take the loss before it grows. Always move your stops in your favor (remember the “Legend of the man in the green bathrobe“…it is NOT HOUSE MONEY, it’s all our money!). Lastly, remember that you get rich slowly and steadily in Trading…not by striking it rich on one or two trades. So, give up that lottery ticket mentality.
See you in the trading room.
Ed
Swing Trade Ideas for your consideration and watchlist: CVNA, X, IGT, WFC, UBER, BAC, NTR, AA, NVAX, QNST, AR. 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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A low volume sideways chop won the day after an energic early rally that eventually found some cautions sellers likely considering the ramifications of the pending inflation data. Unfortunately, with the CPI on Wednesday morning, we still have another day to hurry up and wait, with the future direction of the indexes on the line. With the indexes tucked tightly against resistance, the stage is set for a possible significant move, but the direction is anyone’s guess. So, consider the risk and plan carefully as we head into the close of the day.
Asian markets traded mixed overnight with a 7% drop in SoftBank with the Nikkei leading the declines. European markets traded in the red across the board this morning focused on U.S. inflation and the outlook of the FOMC. Ahead of a busy earnings day, U.S. futures reversed early gains pointing to a flat open with the uncertainty of the CPI data looming. Watch for intraday whipsaws as prices chop while we wait on data that could secure or disrupt the relief rally in the blink of an eye.
Economic Calendar
Earnings Calendar
We ramp up the number of earnings today with over 250 companies listed with a large group unconfirmed. Notable reports include AKAM, ARMK, ARWR, BHC, BE, COIN, CPRI, CG, CRON, DIN, EBIX, EMR, GFS, GO, HRB, HGV, H, IAC, IRBT, MAXR, NCLH, PRGO, PLNT, RXT, RL, RBLX, SAVE, SMCI, SYY, TTD, TTEC, U, WMG, WWE, & WYNN.
News & Technicals’
Spirit Airlines reported a second-quarter loss after costs surged despite a jump in revenue. The airline agreed to sell itself to JetBlue for $3.8 billion late last month. Spirit executives are scheduled to discuss results with analysts on Wednesday morning. Trump said that the FBI raided Mar-a-Lago, former President Donald Trump’s resort home in Palm Beach, Florida. In a lengthy statement, Trump said his residence was “currently under siege, raided, and occupied by a large group of FBI agents.” The raid came after months of questions about whether Attorney General Merrick Garland was planning to pursue investigations into the former president. Novavax cut its 2022 sales outlook by about 50% and now expects to generate $2 billion to $2.3 billion in revenue. Novavax previously forecasts $4 billion to $5 billion in revenue. CEO Stanley Erck said Novavax expects no new sales in the U.S. market or from Covax, an international vaccine alliance, in 2022. Ezra Miller, who portrays Barry Allen, aka the Flash, as part of the DC Extended Universe, has been charged with felony burglary in Stamford, VT. The felony burglary charge against Miller comes almost a year before Warner Bros. is slated to release “The Flash,” a $100 million film that is part of the studio’s DC franchise. The news comes just days after Warner Bros. Discovery’s CEO praised the film during an earnings call. Bed Bath & Beyond and AMC Entertainment surged as meme traders were betting on the stock despite the lack of apparent catalyst. The heavily shorted stocks have been a part of the meme stock craze that has recently hit Wall Street. Allbirds cut its financial forecast for the year, citing a slowdown in consumer spending. The sustainable shoemaker said it was slowing hiring as part of its efforts to cut costs. For the second quarter ended June 30, Allbirds said its revenue rose 15% from a year ago. The U.S. Treasury’s blacklisting of Tornado Cash on Monday will do more than take down criminals. Many ordinary crypto investors are likely to be hurt, experts say. Treasury yields ticked higher in early Tuesday trading, with the 2-year at 3.22%, the 5-year at 2.94%, the 10-year at 2.79%, and the 30-year at 2.88%. Most surprisingly, the 12-month are currently inverted over the 2,5,10, and 30-year bonds, trading at 3.26%.
Yesterday’s early pop in the indexes met with caution, bringing in some sellers at price resistance and spending the rest of the day in a low volume sideways chop. However, no technical damage occurred, and the bulls remained in control of the relief rally despite the low volume and loss of momentum. Earnings continue to come in mixed, and the bond yields rise as the market waits in anticipation of the CPI and PPI inflation data. I would not rule out another day of choppy price action while waiting for the data. Speculation is high as meme stocks rose sharply yesterday without an apparent catalyst illustrating the high emotion around the recent run. There is a chance we are building up for a big move. Your guess in direction is as good as mine, so plan your risk carefully!
With the indexes stuck in consolidation at significant overhead resistance, the battle for the market’s future direction could be a bit choppy as we wait on the Wednesday CPI and Thursday PPI reports. Of course, we will also have to deal with another busy week of earnings reports keeping market emotion high. In light of the hot jobs numbers, the talking head narrative that inflation topped last month is now in question, so plan for another hectic week as the data rolls out. It would not be unreasonable to expect some wide-ranging choppy price action as we hurry up and wait.
As we slept, Asian markets trading in a muted, choppy session with Hong Kong tech stocks slid lower with Chinese expanded military drills around Taiwan. However, European markets trade modestly green across the board this morning. With a busy earnings calendar, U.S. futures have recovered from overnight losses pointing to a bullish open as the battle continues at resistance for the future direction of the market with inflation data waiting in the wings.
Economic Calendar
Earnings Calendar
We kick off a new trading week with more than 200 companies listed, but many of them are unconfirmed. Notable reports include DDD, ACAD, BIRD, AIG, GOLD, BNTX, BLNK, CBT, CARG, APPS, D, ELAN, ENR, FRPT, GBT, GDRX, GRPN, IFF, LMND, VAC, NWSA, NE, NVAX, OKE, PLTR, PUBM, QLYS, RDRW, SDC, SWCH, TTWO, SKT, TSN, UPST, & VRM.
News & Technicals’
SoftBank posted one of its biggest losses at its Vision Fund investment unit for its fiscal first quarter, as technology stocks continue to get hammered amid rising interest rates. As a result, the Japanese giant’s Vision Fund posted a 2.93 trillion Japanese yen ($21.68 billion) loss for the June quarter. This is the second-largest quarterly loss for the Vision Fund. According to a court document, Celsius has withdrawn its motion to bring back ex-CFO Rod Bolger at $92,000 a month, prorated over a period of at least six weeks. The notice of withdrawal came just ahead of a hearing scheduled for Aug. 8 to review it. The decision to dismiss the motion came three days after CNBC first reported on the request to enlist the help of Bolger as a consultant during the bankruptcy process. China’s Eastern Theatre Command said it would conduct joint drills focusing on anti-submarine and sea assault operations — confirming the fears of some security analysts and diplomats that Beijing would continue to maintain pressure on Taiwan’s defenses. Pelosi’s visit to Taiwan last week infuriated China, which regards the self-ruled island as its own, and responded with test launches of ballistic missiles over Taipei for the first time and ditched some lines of dialogue with Washington. The duration and location of the latest drills are unknown, but Taiwan has already eased flight restrictions near the six earlier Chinese exercise areas surrounding the island. Fed Governor Michelle Bowman said she supports the central bank’s recent 0.75 percentage point rate increases and believes they should continue until inflation is subdued. “I think similarly sized increases should be on the table until we see inflation declining in a consistent, meaningful, and lasting way,” she added in a Saturday speech. Markets anticipate a third big increase when the central bank meets again in September. Treasury yields declined slightly in early Monday trading, with the 2-year at 3.21%, the 5-year at 2.93%, the 10-year at 2.80%, and the 30-year at 3.03%.
As we begin a new trading week, the indexes remain in consolidation at significant as the bulls and bears battle for the future direction of the market. We have another big week of earnings to keep the price action volatile, but all eyes will likely be on the CPI and PPI later in the week. In addition, last Friday’s hot jobs number raised questions about the overall inflation narrative having topped. The Senate passage of another massive spending bill that levies taxes on companies and shareholders may have some adverse side effects in the fight against inflation. Only time will tell but expect some positive and negative reactions in targeted market sectors. With a two-day wait for the CPI report, it would not be surprising to see some wide-ranging chop due to the uncertainty. Plan carefully and avoid overtrading as we wait.
With jobless claims rising, Thursday was a choppy session as we waited for the Employment Situation report before today’s bell. Predictions range from solid job growth to a rather sharp decline over the last month, 372,000. With fewer market-moving earnings reports and the indexes tucked snugly against overhead resistance, today could be the bulls or bears decide breakthrough or pullback from this critical area. As we slide into the weekend, keep in mind that next week get to find out if inflation has topped with CPI and PPI reports.
Asian closed the Friday session green across the board as Taiwan stocks shook off the intimidation of China’s military drills off their coast. However, European markets trade slightly bearish this morning, waiting on U.S. jobs numbers. With the pending Employment Situation report and a much lighter day on the earnings calendar, futures trade mixed, but anything is possible by the open. Will the overhead resistance break or hold? We will soon find out!
Economic Calendar
Earnings Calendar
We get to take a breath and slow the pace of reports today with about 100 companies listed and quite a few not confirmed. Notable reports include AAWW, BEP, CGC, DKNG, GOG, GT, WDC, & WOW.
News and Technicals’
China sanctions Pelosi over her trip to Taiwan, calling it an egregious provocation. In addition, political analysts have warned that Pelosi’s decision to visit Taiwan could undermine U.S.-China relations. At the 2022 Tesla shareholder’s meeting, CEO Elon Musk touched on various topics, including macroeconomics and the possibility of share buybacks. He also said Tesla aims to produce 20 million vehicles annually by 2030 and thinks this will take approximately a dozen factories, each producing 1.5 million to 2 million units annually. Musk said that the Cybertruck is still slated for next year but won’t have the same specifications and pricing that were originally given when the company unveiled the experimental pickup in 2019. AMC on Thursday said it plans to issue a dividend to all common shareholders in the form of preferred shares. The company has applied to list these preferred equity units on the New York Stock Exchange under the symbol “APE.” The company said that the new class of shares carries the same voting rights as the existing common shares. Oil prices have fallen sharply from their recent peaks, but there’s still a case for buying oil stocks, according to Bill Smead, chief investment officer at Smead Capital Management. That’s because energy prices are likely to stay high or even increase further, he told CNBC’s “Street Signs Asia” on Thursday. A reopening of China’s economy would lead to a spike in demand for energy, and supply remains tight, Smead said. India’s central bank raised key rate by 50 bps to 5.40%, with inflation above 7% and over the RBI tolerance level in Q2 and Q3, and economists see more hikes in the coming months. Treasury yields ticked slightly higher in early Friday trading Witht eh 2-year at 3.06%, the 5-year at 2.80% the 10-year at 2.70% and the 30-year at 2.97%.
The pending Employment Situation report made for an uncertain choppy Thursday session, with index prices holding against overhead resistance levels. As a result, anything is possible through the open of Friday trading. The Econoday consensus suggests a decline, but an early CNBC report said the number could be strong this month and weakening in the future. Needless to say, all the predictions are meaningless its how the market reacts to the data that matters! Plan your risk carefully as we slide into the week with CPI and PPI inflation data coming next week.
Earnings continued to fuel the bulls on Wednesday, and Thursday may be much the same with a hectic earnings calendar but be careful with over-exuberance and complacency. We still have a tough road to recovery, and in a rising rate environment and a strained consumer, we should expect challenges ahead. So, enjoy the bullish ride but remember to take some profits and after such a long bull run, be careful not to overtrade! Also, with layoff headlines in the news lately, keep an eye on the Jobless claims before the bell that has started to creep up.
Asian markets traded mostly higher overnight, with the Hong Kong tech sector up 2.06% at the close. While waiting on a significant U.K. rate increase, European markets trade cautiously bullish this morning. What’s become all too common during this earnings season U.S. futures point to another gap up open ahead of a jam-packed calendar of reports. Buckle up for another busy day!
Economic Calendar
Earnings Calendar
Thursday is usually our most hectic day on the earnings calendar, and today is no different, with more than 350 companies listed. Notable reports include SQ, ABMD, ALB, APD, AMC, BABA, AMGN, AAOI, BDX, BYND, BRCX, CABO, CVNA, CHH, CHUY, CLNE, COP, CROX, CUBE, DUK, DVAX, EXPE, FIS, FNKO, GPRO, IHRT, IPI, IRWD, ITT, K, KTOS, LLY, LNG, LOCO, LYFT, LYV, NKLA, NUS, PZZA, PCTY, PH, DOC, PSA, SEAS, SHAK, SWKS, TRIP, TWLO, OLED, VMC, W, WW, XPO, YELP, YETI, & ZTS.
News & Technicals’
The companies that hired most aggressively during the pandemic are now overstaffed and forced to cut back or impose hiring freezes. Meanwhile, airlines and hospitality companies are desperately trying to staff up after Covid-19 lockdowns led them to downsize. “The pandemic created very unique, once-in-a-lifetime conditions in many different industries that caused a dramatic reallocation of capital,” said Julia Pollak, ZipRecruiter’s chief economist. In addition, Walmart confirmed on Wednesday that it has begun to lay off corporate employees. The news comes about a week after the company slashed its profit outlook and warned that consumers had pulled back on discretionary spending due to inflation. Pay cuts are expected across wide swaths of the financial industry as bonus season approaches, according to a report released Thursday by compensation consultancy Johnson Associates. “There are going to be a lot of people who are down 50%,” Alan Johnson, managing director of the namesake firm, said in an interview. IPO issuance has plunged 95% to $4.9 billion through July, while total equity issuance has fallen 80% to $57.7 billion, according to SIFMA. DBS Group CEO Piyush Gupta said the bank’s wealth management and capital markets businesses continue to see “headwinds” despite the bank reporting robust second-quarter earnings. “Business momentum is a bit mixed. Our corporate lending activities are actually doing quite well. And so the balance sheets continue to grow,” Gupta told CNBC’s “Capital Connection” following the release of the bank’s results Thursday. “Private banking customers have been reluctant to put money to work, that obviously is a challenge. The headwinds on wealth management and capital markets mean that the overall fee incomes are down year-on-year,” he added. The Indian rupee has come under intense selling pressure in recent weeks due to a perfect storm of global headwinds, which analysts say will continue to pummel the currency in the months ahead. It has already tested record lows falling more than 80 to the dollar level twice in July, only recovering after the Reserve Bank of India stepped in to stem the slide. Finance Minister Nirmala Sitharaman attributed the rupee’s depreciation to external reasons in a written statement to parliament recently. Treasury yields moved lower in early Thursday trading, with the 2-year trading at 3.10%, the 5-year at 2.85%, the 10-year 2.73%, and the 30-year at 2.97%.
There is no question that bulls are in control but has this turned into over-exuberance considering the economy’s overall condition? While I would expect a pullback or consolidation to begin at any time, earnings inspire retail buying while volume lags behind. Ride the bullish wave as long as it lasts but be careful with complacency because the bull run may be getting a bit long in the tooth. Try to avoid overtrading, and don’t let greed prevent you come taking some profits if the tide begins to go out. Today we get a reading on International Trade, and with the recent layoff notices, keep a close eye on the Jobless Claims coming out before the bell.
The Pelosi visit made for a choppy price action day as China’s threats become more aggressive and worries about what their retaliation might mean for the markets and future relations with the country. However, though earnings results remain mixed, the bulls found enough inspiration to keep the relief rally intact with no technical damage in the index charts. The next challenge is the resistance of the long-term downtrend and significant price resistance levels above. With the next two days chocked full earnings reports, the battle at resistance is likely to create substantial price volatility, so plan carefully.
While we slept, Asian markets traded mixed, watching the development of the Pelosi visit to Taiwan closely. European markets also trade mixed with the U.K. expected to raise rates to combat the 40-year high 9.4% inflation rate. However, the premaket pump is underway in the U.S., fueled by the hope of two huge days of earnings reports. So, who wins the battle at price resistance? The next couple of days could tell the tale!
Economic Calendar
Earnings Calendar
More than 300 companies are listed on the earnings calendar for Wednesday though some are not confirmed. Notable reports include ABC, ALGT, ALL, BKNG, BRMN, BWA, CARS, CIVI, CLX, CVS, ELF, FATE, FSLY, FTNT, FUN, GDDY, GNK, GNRC, TWNK, HOOD, HST, MCK, MELI, MET, MGM, MRNA, MRO, MBI, MNST, NYT, NVAX, O, PACB, PDCE, QRVO, RGR, RUN, SSTS, STOR, UAA, WU, & YUM.
News & Technicals’
Pelosi’s visit to Taiwan makes her the highest-ranking U.S. official to visit Taiwan in 25 years, drawing the ire of China, which has called the move a breach of the one-China policy and interference in China’s internal affairs. However, Tsai said she was committed to working with the U.S. over security in the Taiwan straits and the wider Indo-Pacific region and vowed to deepen economic cooperation and supply chain resilience with the U.S. Tsai thanked U.S. House Speaker Nancy Pelosi for her support of democratic values. The Fed has a good chance of not tanking the economy and achieving a soft landing, St. Louis Fed President James Bullard said. Markets lately have been making the opposite bet, namely that a hawkish Fed will hike rates so much that an economy will fall into a recession. The Bank of England is expected to rise by 50 basis points, the largest increase in 27 years. Inflation hit a 40-year high of 9.4%, deepening a historical cost of cost-of-living crisis. Some of the 1.7 million Celsius customers ensnared by the alleged fraud are now directly pleading with the Southern District of New York to help them get their money back. It is the latest sign that the bankruptcy court has become the de facto arbiter of crypto policy in the U.S. Treasury yields dipped in early Wednesday trading, with the 2-year at 3.09%, the 5-year at 2.88%, the 10-year at 2.78% and the 30-year at 3.03%. Keep an eye on the 12-month bonds at 3.06%, which now show an inversion over the two, five, ten, and thirty-year bonds.
Concerns over China’s threats and potential reaction to the Pelosi visit to Taiwan made for a choppy day that had lost some ground by the close. However, the mixed earnings results helped the bulls hold on, producing no technical damage to the relief rally trend. Nevertheless, with the four major indexes challenging the longer-term downtrend and price action overhead resistance, the massive number of reports today and tomorrow could tell the tale. Will it inspire the bulls to break through, or will the bears be inspired to defend resistance levels? The T2122 indicator caught a little break yesterday but remains overbought as the bulls and bears prepare to battle at resistance. Expect price volatility to continue, and keep an eye out for the potential China retaliation and what it might mean for the markets and our future relations with the country.
The earnings results fueled bulls continued to push higher yesterday, but the overhead resistance seemed to slow their progress yesterday. Could this become the battle line between the bulls and Bears? Adding to the price action challenges, Pelosi’s visit to Taiwan is creating market repercussions around the world, rising tensions between the U.S. and China. So, the question for today is whether earnings results can overcome the political drama and the overhead resistance. Only time will tell but plan your risk carefully, keeping a close on the trend and support levels if the bears gain the upper hand.
Overnight Asian markets closed mostly lower, with Hong Kong leading the Pelosi-driven tension selloff, falling 2.36%. The mood is much the same across the pond this morning, with European markets reacting bearishly to the global risk. Likewise, the U.S. futures point to a bearish gap down at the open even as earnings roll out as the China saber-rattling spotlights their growing aggression toward the free people of Taiwan!
Economic Calendar
Earnings Calendar
The number of earnings reports ramped up today with around 160 companies listed, and the majority confirmed. Notable reports include AMD, ABNB, ARNC, AIZ, CAT, CZR, CWH, CNP, CRUS, CMI, CXW, DD, EA, AQUA, EXAS, FMC, GILD, HLF, HSIC, HUN, INCY, JBLU, LEA, LDOS, MPC, MAR, TAP, MTCH, MCHP, MSTR, OXY, PYPL, PRU, SEDG, SWI, SBUX, TRUE, UBER, WYNN, & ZBRA.
News & Technicals’
California’s declaration comes after Illinois declared a public health emergency earlier Monday. New York declared a state disaster emergency in response to the outbreak late Friday. The U.S. has reported nearly 6,000 cases of monkeypox across 48 states, Washington D.C., and Puerto Rico, according to the CDC. California, Illinois, and New York – home to the nation’s three largest cities – have reported 47% of all confirmed monkeypox infections in the U.S. The Biden White House has tried for weeks to convince Beijing and the world that House Speaker Nancy Pelosi’s expected visit to Taiwan says nothing about U.S. policy toward China or Taiwan. Yet experts say that effort misses the point because intra-party schisms in Washington are effectively meaningless to the rest of the world. The fact that U.S. policy toward Taiwan is deliberately ambiguous has only made it more difficult for the White House to distinguish between what Pelosi is doing and what Biden is saying. According to senior administration officials, President Biden has yet to decide on the options his advisors have presented on the tariffs. Ambassador Katherine Tai, as U.S. Trade Representative, holds the leading role on the tariffs and has suggested they have strategic value in maintaining leverage in negotiations with China. The world’s largest oil and gas companies have shattered profit records in recent months following a surge in commodity prices prompted by Russia’s invasion of Ukraine. Environmental campaigners and union groups have condemned Big Oil’s surging profits and called on the U.K. government to impose meaningful measures to bring down the cost of rising energy bills. The International Monetary Fund last week upgraded Russia’s GDP estimate for 2022 by 2.5 percentage points, meaning the economy is now projected to contract by 6% this year. However, many economists see long-lasting costs to the Russian economy from the exit of foreign firms, the loss of its long-term oil and gas markets, and its diminished access to critical imports of technology and inputs. Pinterest posted disappointing financial results and guidance that missed Wall Street expectations, but user numbers were better than expected. The company blamed a weak advertising market for its revenue miss, following similar comments from Meta, Twitter, and Snap. Elliott Management confirmed that its Pinterest’s biggest investor and said it has “conviction” in the company.
Although the bulls gave it a solid effort, the overhead resistance slowed their advance and could be the short-term line of defense for the bears. The Pelosi visit to Taiwan is raising tensions will China and having a negative effect on markets around the world. According to reports, China’s warplanes are buzzing the line that divides the Taiwan Strait, once again proving they are no friend to the United States. Today is a busy day for earnings, vehicle sales data, and the JOLTS report with some Fed speak tossed in for good measure. It will be interesting to see if the earnings results can overcome the significant price resistance and the Chinese saber-rattling. After such a strong rally, a little rest or consolidation would be healthy for the market as long as price supports and trends hold.
Whiplash was the order of the day in markets Monday. Stocks gapped down by more than one-half of a percent to start the week. However, the bulls immediately stepped in to rally sharply until 11 am. They then managed to grind sideways for about an hour…until a strong selloff started at 11 am. By 1:50 pm, the original gap-down level was reached again, but only to whipsaw back the other direction to recross the gap and then start back lower about 3:20 pm. All 3 major indices closed modestly on the downside of flat.
This left us with something like white body, Spinning Top candles with more wick than body, and at least some of the wick on each end. And once again, volume remains well below average. Three of the 10 sectors are green with Consumer Cyclical by far the biggest winner and Energy by far the biggest since sector on the day. On the day, SPY lost 0.31%, DIA lost 0.20%, and QQQ lost 0.07%. The VXX surged almost 4% to 21.77 and T2122 fell but remains in the overbought territory at 90.63. 10-year bond yields fell sharply to 2.584% and Oil (WTI) plunged over 5% to $93.65/barrel.
In economic news, both the July Mfg. PMI and the July ISM Mfg. PMI came in stronger than was expected. However, both also came in lower than the June readings. This news out of the US, in combination with worse-than-expected factory data from China and Europe Monday, resulted in a huge correction in Oil prices ahead of the coming OPEC+ meeting.
After the close, AFL, BCC, DVN, CAR, TA, FANG, SANM, AMKR, SPG, CNO, MATX, ANET, SBAC, KMT, CACC, VNO, MPWR, AMRC, RRX, ENSG, STRL, TWI, RIG, NSP, UNVR, and RHP all reported beating on both the top and bottom lines. Meanwhile, DVA, WMB, CF, LEG, and KFRC all missed on revenue while beating on earnings. On the other side, ATVI, and KMPR beat on revenue while missing on earnings. However, MOS, PINS, EHC and WWD missed on both the revenue and earnings lines.
In stock legal news, West Virginia’s counties and cities reached a $400 million settlement with the 3 main medical distributors (MCK, ABC, and CAH) resolving more than 100 lawsuits over liability for the fueling of opioid use. (This is separate from the $26 billion national settlement that the 3 companies plus JNJ had reached, which excluded WV.) Elsewhere, AAPL was sued for violations of US Antitrust Law by a French App Development company. This suit closely resembles one brought by the same law firm against AAPL, which resulted in a $100 million settlement for a smaller app developer last August as well as one the law firm settled with GOOGL for $90 million in June. Finally, OPEN was fined $62 million by the FTC for cheating potential home sellers between 2017 and 2019.
On the Russian war story, Ukraine was able to launch its first ship full of grain since the start of the invasion. Ukrainian President Zelenskyy said this was a positive sign and that 16 ships are already loaded with grain and other agricultural products and ready to sail, but that only 3 ships will leave port per day for the next two weeks as per the agreement. In Russia, the Russian Central Bank (which has been lying already about the state of the economy) told Reuters that the 4.3% economic contraction will likely increase to 7% in Q3. (Overall, they claim the Russian GDP will fall only 4-6% in 2022 and 1-4% in 2023.) In addition, Russia has instituted a “stealth national mobilization.” New edicts require each of Russia’s 85 provinces to raise a new brigade for deployment to Ukraine. In addition, some major factories are being asked to recruit a battalion each. (Each battalion represents 500 – 1,000 men and each brigade 2,000 – 8,000 men.) If actually implemented, that 200,000 fighting-age men would be a significant drain on the Russian economy.
Overnight, Asian markets leaned to the red side. Chinese markets lead the drop as House Speaker Pelosi visits Taiwan and Chinese reaction is not yet clear. Shenzhen (-2.37%), Shanghai (-2.26%), and Hong Kong (-2.36%) led the region lower but losses were widespread. In Europe, stocks are nearly red across the board at mid-day with only Norway (+0.34%) and Greece (+0.23%) managing green. The FTSE (-0.02%), DAX (-0.72%), and CAC (-0.47%) are leading the region lower in early afternoon trade. As of 7:30 am, US Futures are pointing to another lower start to the day. The DIA implies a -0.54% open, the SPY is implying a -0.59% open, and the QQQ implies a -0.72% open at this hour. 10-year bond yield continue to fall to 2.552% and Oil (WTI) is up three-fourths of a percent to $94.64/barrel in early trading.
The major economic news events scheduled for Tuesday we get June JOLTS (10 am), API Weekly Crude Oil Stocks (4:30 pm), and Fed voter Bullard speaks (6:45 pm). The major earnings reports scheduled for the day include AME, ARNC, BP, CAT, CNP, CMI, DBD, DD, ETN, ENTG, EXPD, RACE, IT, GEO, GPRE, HSC, HSIC, HUN, IDXX, ITW, INCY, IGT, JBLU, KBR, KKR, LCII, LEA, LDOS, LGIH, MPC, MAR, TAP, MPLX, PEG, SPGI, SABR, SEE, SGRY, SYNH, BLD, TSEM, VSH, WAT, WEC, WLK, XYL, ZBRA, and ZBH before the open. Then, after the close, AMD, ABNB, ANDE, AIZ, BXC, BFAM, CZR, CWH, CHK, CLW, CNDT, CTRA, CXW, DCP, EA, EXAS, FMC, GILD, GXO, THG, PEAK, LFUS, LPLA, MTCH, MCY, MCHP, OI, OSH, OXY, PYPL, PFSI, PXD, PRU, RNG, SCI, SKY, SEDG, SBUX, STE, TEX, TX, UNM, VRSK, VOYA, and WCN report.
So far this morning, BP, MPC, CMI, LEA, DD, TAP, LDOS, MAR, WLK, MPLX, ZBH, HUN, CNP, WEC, AME, ZBRA, XYL, RACE, IT, LCII, BLD, VSH, GPRE, INCY, WAT, ATKR, and GEO have all reported beats on both lines. Meanwhile, CAT, ETN, HSIC, KBR, SEE, SYNH, IGT, DBD, IDXX, LGIH, and TSEM all missed on revenue while beating on earnings. On the other side, UBER, PEG, ARNC, JBLU, ENTG, AQUA, and WLKP all beat on revenue while missing on earnings. However, SPGI, RDSMY, and SGRY all missed on both the top and bottom lines.
In economic news later this week, on Wednesday we get the July Services PMI, June Factory Orders, July ISM Non-Mfg. PMI, and Crude Oil Inventories. Then on Thursday Import/Exports, Weekly Initial Jobless Claims, and the June Trade Balance are announced and Fed voter Mester speaks. Finally, on Friday we get July Avg. Hourly Earnings, July Nonfarm Payrolls, July Participation Rate, and July Unemployment Rate.
Markets started August on a very volatile day. Today, geopolitical fear of Chinese reaction to House Speaker Pelosi’s Taiwan visit (highest ranking US visitor in 25 years) has global markets on edge as China’s Foreign Minister has now said the PLA (Chinese Army) won’t sit idly by if she did make the visit. The other uncertainty is US political games as Republicans look to use obscure rules to block the Democrat’s tax, health prices, and climate deal they are trying to pass through reconciliation (which only requires 50 votes instead of 60). With that backdrop and pretty strong earnings coming in again today, look for another low volume, volatile day. So, either look for longer horizons (loose stops and ability to ride fluctuations) or tighten up on the bat and take smaller, faster swings. Overall the trend remains bullish, even if we are pausing or pulling back a tick to ease over-extension.
Remember that trading is our job. So, do the work and follow the process. Stick with your trading rules, trade with the trend, and take those profits when you have them. Demonstrate patience and wait for confirmation. So, don’t be stubborn. If you have a loss, just admit you were wrong, respect your stop, and take the loss before it grows. Always move your stops in your favor (remember the “Legend of the man in the green bathrobe“…it is NOT HOUSE MONEY, it’s all our money!). Lastly, remember that you get rich slowly and steadily in Trading…not by striking it rich on one or two trades. So, give up that lottery ticket mentality.
See you in the trading room.
Ed
Swing Trade Ideas for your consideration and watchlist: VIPS, KWEB, FUTU, BABA, PDD, BZ. 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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Earnings results continued to fuel an unstoppable buying enthusiasm as the bulls pushed the indexes higher right into the weekend. Adverse economic data such as rising rates, a negative GDP, and a PCE number that continued to show inflationary pressure was no deterrent to the rally’s energy. But, with many of the big tech reports now in the rearview, can the upcoming reports push the indexes through the significant overhead resistance? Keep an eye on the PMI, ISM, and Construction spending reports later this morning.
Asian markets closed green across the board with modest gains after a private survey showed Chinese factory activity grew. European market trade cautiously bullish this morning with modest gains across most indexes. As we kick off August, trading U.S. futures recovered from overnight losses suggesting a flat open at the time of this report. Ride the bullish wave as long as it lasts but keep an eye on the overhead resistance for the possibility of entrenched bears.
Home price gains are cooling fast as demand wanes and supply builds. As a result, the annual rate of price appreciation fell two percentage points from 19.3% to 17.3%. However, price gains are still otherwise strong because of an imbalance between supply and demand. The housing market has had a severe shortage for years. Google CEO Sundar Pichai announced to employees Wednesday a new effort called “Simplicity Sprint,” which will solicit ideas from its more than 174,000 employees on where to focus and improve efficiency. Pichai said Google’s productivity as a company isn’t where it needs to be given the headcount it is and warned of a toughening economy. HR chief Fiona Cicconi also acknowledged industry-wide concerns about layoffs and said the company is “not currently looking to reduce Google’s overall workforce” but reiterated the need for greater efficiency and focus. Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, told CBS’ “Face the Nation” that inflation poses a larger threat than a potential recession. “We’re going to do everything we can to avoid a recession, but we are committed to bringing inflation down, and we are going to do what we need to do,” Kashkari said. Chinese e-commerce giant Alibaba said it would comply with U.S. regulators and work to maintain its listings in New York and Hong Kong. “Alibaba will continue to monitor market developments, comply with applicable laws and regulations and strive to maintain its listing status on both the NYSE and the Hong Kong Stock Exchange,” it said in a statement to the Hong Kong bourse on Monday. Last week, supplies via Nord Stream 1 were reduced to 20%, with Gazprom citing technical issues. There are renewed price pressures every time Russia decreases its supplies to Europe, given how important the commodity is for several sectors. With supplies reduced and prices higher, the gas crisis is shaking Europe’s economic prospects. Treasury yields traded higher in early Monday trading, with the 2-year at 2.89%, the 5-year at 2.68%, the 10-year at 2.65%, and the 30-year holding at 3.02%.
Last week the buying enthusiasm was unstoppable as earnings beat lowered expectations. Rising interest rates, a negative GDP, and a rising PCE (the Fed’s preferred inflation indicator) could not deter the bulls hungry for risk. With the indexes not facing significant overhead resistance and a T2122 continuing to signal an over-extended condition, can the earnings supply enough bullish inspiration to keep the rally going? We now seem to have the ability to ignore adverse economic reports, so maybe the PMI, ISM, and Construction numbers won’t matter all that much, but it would be wise to keep an eye on them for a potential reaction. Ride the wave as long as it lasts but observe for clues from bears at or near overhead resistance levels.
