The bears slowly react to inflation, hitting a 30-year high after an early attempt to rally the markets as if it didn’t matter at all.  The wild speculative nature of this market is evident with the pricing of Rivian that has yet to produce 10,000 vehicles an expecting to lose more than 1.2 billion next quarter, now worth more than Ford and General Motors. Of course, that happens to be just another marker that is very reminiscent of the 1999 market bubble.   Look for the possibility of light and choppy price action today due to the Federal Holiday of Veterans day.

Asian markets traded mixed with Hong Kong surging 1% as Evergrande makes another last-minute payment to avert default.  European market trade mixed with modest gains and losses this morning.  With government offices and banking shutdown, U.S. futures point to a bullish open with tech leading the way, trying to recover some of yesterday’s losses. 

Economic Calendar

We have a very rare day with nothing on the economic calendar due to Veterans day.

Earnings Calendar

We have more than 160 companies listed on the Thursday calendar, but there are quite a few unconfirmed small caps.  Notable reports include MARA, MT, ARRY, XAIR, BLNK, BRDCY, BHG, BAM, COUP, WATT, FRGI, FLO, GFI, RIDE, LAZR, OGN, SBH, SIEGY, TPR, UTZ, VPG, WB, WIX, & YETI.

News & Technicals’

Climate lawsuits will target banks and boards.  “I think that the next step is to start also litigating against financial institutions who make these emissions and fossil fuel projects possible,” said Roger Cox, the lawyer for Milieudefensie, an environmental campaign group and the Dutch branch of Friends of the Earth.  The Hague District Court on May. 26 ordered the Anglo-Dutch oil giant to reduce its global carbon emissions by 45% by the end of 2030, compared with 2019 levels.  The ruling marked the first time in history that a company had been legally obliged to align its policies with the Paris Agreement and reflected a watershed moment in the climate battle.  The congestion at U.S. ports, the trucker shortage, and the rise of e-commerce have created a unique opportunity for autonomous trucking, Embark Trucks CEO Alex Rodrigues told CNBC.  Embark has completed its SPAC merger and will begin trading Thursday on the Nasdaq under ticker EMBK.  Rodrigues will also become one of the youngest CEOs of a U.S. public company ever at 26 years old.  Disney added just 2 million Disney+ subscribers after more than 12 million last quarter. However, Netflix bounced back in the third quarter with 4.4 million net adds after just 1 million in the second quarter.  Disney, HBO Max, and AMC Networks were among the media companies affirming previously announced forecasts.

Although we saw the bears slowly react to the highest inflation reading in the 30 years, the selling appeared to be relatively controlled.  The VIX closed below a 19 handle, and the index charts held well above price and technical support levels. Nevertheless, yesterday’s selling reminded us that bears still exist and that overextended conditions can produce some painful selloffs.  I suspect today could be a very muted day with the observance of the Federal holiday of Veterans Day.  Though there may be some local exceptions, banking and all government offices are closed.  As a result, we could see light and choppy price action trading today.

Trade Wisley,

Doug

There was a modest experience of the bears yesterday as the inflation worries increased with increased producer prices.  Today that worry continues with a reading on consumer prices before the bell.  Economists expect CPT to increase to its highest level in nearly 30 years, so buckle up the stage is set for some price volatility at the open.  With Bullard suggesting two rate hikes next year and the Fed warning investors of potential sharp market declines, it’s understandable traders are a little on edge this morning.

Asian markets mostly declined overnight, with the Chinese developer Fantasia prices plunging by nearly half as the real estate crisis worries investors.  European market trade mixed and near the flatline with all eyes focused on U.S. inflation data.  Ahead of CPI, Jobless numbers and another big round of earnings futures point to lower open, but anything is possible by the open as we react to the inflation data. So prepare for an extra dose of price volatility that could easily include head fakes and whipsaws.

Economic Calendar

Earnings Calendar

We have another busy mid-week earnings calendar with more than 230 companies listed, with a number of them unconfirmed.  Notable reports include DIS, ADDYY, AER, AFRM, AWH, ATO, BZH, BYND, BMBL, TAST, HLTH, ENR, GSL, DGRX, HGBL, IFNNY, KGC, LZ, LX, NGMS, PRGO, PTE, RRGB, RSI, SIEN, SMRT, SOFI, TCEHY, WEN, WWW, & ZIP.

News & Technicals’

Central banks would usually push up rates to tame inflation, and the Fed has started to normalize policy after the economic fallout from the coronavirus pandemic.  It said last week that bond purchases would start to taper “later this month.”  The Fed also acknowledged that price increases had been more rapid and enduring than central bankers had forecast.  Economists expect the consumer price index to rise 0.6% in October and 5.9% on a year-over-year basis, the most since 1990.  The CPI is hotter than economists initially expected, and they now see it staying elevated into next year.  “What we’re seeing is there’s this second wave of inflation that appears more broad-based, and it’s also backed up with a sharp increase in wages,” said one economist.  This is not the first time the EU’s General Court has ruled on an antitrust case brought by the European Commission and directed at a tech giant Google.  Wednesday’s verdict can be appealed and taken to the EU’s highest court.  The EU is currently discussing how to toughen its rulebook to ensure fairer competition across the 27 member nations. Rivian had previously raised its expected price range to between $72 and $74, up from an initial range of $57 to $62.  The company, which Amazon and Ford back, recently began production on its electric pickup, the R1T, and plans to deliver 10,000 as soon as next year.  Rivian expects to lose up to $1.28 billion this quarter while generating no more than $1 million in revenue for the period.  Treasury Yields moved higher this morning, with the 10-year trading up to 1.4796% and the 30-year rising to 1.8519%. 

With inflation worries on the mind of investors, the market broke its record-setting streak yesterday with some modest selling.  Inflation weighs on the market this morning as well, with the pending CPI report before today’s bell.  Economists expect the number to come in at its highest level in nearly 30 years. In addition, the Fed late afternoon yesterday warned that the recent rally in the market has the potential to trigger an abrupt crash.  That will make a person wonder if the Fed thinks the CPI might come in higher than expectations?  Because there is little in the way of price support for the recent rally, a substantial selloff is undoubtedly within the realm of possibility.  However, with the current bullish energy, it is also possible we could experience a sharp rally today if the number comes in better than expected.  Plan your risk carefully as the price volatility could be high, and intraday whipsaws have the room to be quite punishing to those rushing into the fray this morning.

Trade Wisely,

Doug

Though we experienced modest pop and drop patterns in the index charts, we still managed closing records across the board.  The daily records in the Dow hit its 8^th straight day not seen since 1997 even has the VIX rallied.  Today we will get a reading on inflation with the Produce Price Index, and consensus is looking for a slight month over month increase.  If it were to come in hot, will it wake up the bears, or will it just keep ignoring the impacts on the economy?  Stay tuned; we will find out soon.

Overnight Asian markets traded mixed as the real estate price declines are beginning to raise some contagion concerns from the Fed.  European markets trade mostly higher, but gains are modest as they keep an eye on the pending inflation data. Finally, with a big day of earnings, PPI, and more Fed speak, U.S. futures suggest a flat open except for the continued push in the Nasdaq. 

Economic Calendar

Earnings Calendar

We have a big day on the Tuesday earnings calendar with 250 companies listed, but many of them are small-cap.  Notable reports include COIN, ADT, ACB, AXON, BAYRY, BNTX, APRN, ELY, CAH, CCEP, DHI, DASH, EGRX, EBIX, FTEK, GLNG, HAIN, TWNK, IIVI, INO, IGT, JBI, JAZZ, NDUT, MNKD, MCFE, MLCO, NIO, PLTR, PAAS, PRTY, POSH, PUBM, RNG, SGMS, STWD, SYY, U, UPST, WES, WRK, WKHS, & WYNN.

News & Technicals’

The White House on Monday said businesses should move forward with the requirements despite the court-ordered pause.  The U.S. Court of Appeals for the 5th Circuit considered one of the most conservative appellate courts in the country, halted the requirements Saturday pending review. In addition, Republican attorneys general in at least 26 states has challenged President Joe Biden’s vaccine and testing requirements in five different U.S. appeals courts.  The Biden administration asked the court to lift the pause Monday evening, claiming it could cost dozens or hundreds of lives per day.  “Stresses in China’s real estate sector could strain the Chinese financial system, with possible spillovers to the United States,” the Federal Reserve said Monday in its financial stability report, released twice a year.  “The nexus of the Fed’s concern is that China’s real estate activity is slowing, but the developers have large debts [and] some of them (like Evergrande) are diversified into other areas of the economy,” said Paul Christopher, U.S.-based head of global market strategy at Wells Fargo Investment Institute.  The bulk of the report discussed domestic U.S. financial conditions, and analysts downplayed the significance of the Fed’s comments on China real estate.  Treasury yields dipped early this morning, with the 10-year dipping slightly to 1.488% and the 30-year falling to 1.8835%.

Closing records across the board in all for indexes with the Dow hitting its 8^th straight daily record in a row which has not been seen since 1997.  At the same time, the VIX rallied for the 3^rd day while the price action in the indexes largely chopped sideways.  The T2122 indicator continues to ring the bell that the indexes trade in a short-term overbought condition, but bulls are having none of it as they continue to push higher.  Technically speaking, the odds of consolidation or pullback continue to grow.  That said, the relentless buying is unwise to fight, so stay with the trend but have a plan in place because the tumble from these hights would likely be very painful.  Today we will get a reading on inflation with the PPI.  However, even if the number comes in hot, we may ignore it and keep plowing in new records but ready if it wakes up the bears.

Trade Wisely,

Doug

Although the index charts have gone parabolic, there is no stopping the bulls from setting records daily.  Logic would suggest that the odds of a substantial pullback are growing, so watch carefully for the classic pop and drop possibility as the futures point to a gap up open.  That said, it’s also not wise to fight a relentless bull because there is no telling how long it can push higher.  However, avoid extended stocks with the fear of missing out and plan your risk carefully because when the bears do show themselves, the move lower could be swift and painful. 

Asian markets began the week trading mostly lower, and as energy prices and rapidly declining real estate prices worry traders.  European markets trade mixed but mostly lower this morning with muted gains and losses.  However, with earnings fanning the fire, U.S. futures show nothing but green, with the Dow pushing for another record open. 

Economic Calendar

Earnings Calendar

To kick off a new trading week, we have 200 companies listed on the earnings calendar.  Notable reports include PYPL, DDD, ACAD, CBT, CXW, COTY, FWRG, FTK, FRPT, NVTA, LMND, OCN, PSTL, APTS, RBLX, SDC, TME, TSEM, TTD, TRIP, SPCE, WOW, & ZNGA.

News & Technicals’

Since August, Walmart and Silicon Valley start-up Gatik said that they’d operated two autonomous box trucks, without a safety driver, on a 7-mile loop daily for 12 hours.  “Taking the driver out is the holy grail of this technology.” Gatik CEO Gautam Narang, who founded the company in 2017, told CNBC.  In a Twitter poll launched Saturday, Musk said: “Much is made lately of unrealized gains being a means of tax avoidance, so I propose selling 10% of my Tesla stock. Do you support this?”  The billionaire gave people the option to vote “Yes” or “No” and pledged to abide by the poll results, whichever way it went.  Some 3,519,252 people responded, and 57.9% of them voted for “Yes.”  The U.S. on Monday will lift a pandemic travel ban on international visitors from more than 30 countries after 19 months.  New rules will replace the ban, requiring international visitors to show proof of vaccination and a recent negative Covid test.  Exceptions include travelers under age 18 and those traveling from countries with low vaccine availability.  Treasury yields begin the week slightly higher, with the 10-trading up to 1.474% and the 30-year rising to 1.8999% early this morning.

Though the SP-500 current P/E ratio is 99% above the historical average, there is no stopping the bulls at this point.  During the 1999 tech bubble, the same ratio hit 132%, and I guess this record-setting market may also want to take that record.  The T2122 indicator also indicates a short-term overbought condition, so with the futures gapping to new records, be on guard for the possibility of a pop and drop pattern.  That said, avoid fighting a relentless market because there is no way to know when it might finally stop.  However, stay focused because, with this extension, the reversal down could be very punishing.  Remember, market internals indicate the economy is slowing due to the crushing impacts of inflation.  Nationally gas prices are up $1.32 per gallon in just the last 11 months, and I suspect they only go higher as we head into winter.  That adds cost to everything we do or buy, robbing consumers of disposable income every day it’s allowed to continue.

Trade Wisely,

Doug

As traders rush to buy tech, it’s hard to ignore that the QQQ chart is going parabolic as we look for another gap up in the QQQ this morning.  Analysts expect today’s employment situation number to come in very bullish, so maybe the buying party continues into the weekend.  However, carefully plan your risk and remember to take some profits noting that the economic situation in China continues to worsen.  Odds of a pullback continue to grow, so don’t be the last the last dollar in the door chasing extended stocks.

Overnight Asian markets mostly sold off with the news of another developer default as their real estate crunch continues. However, European markets show modest gains across the board after the BOE maintained rates but began tapering easy money policies.  Ahead of the employment situation report and a lighter day of earnings, the Dow and Sp-500 futures trade muted with the Nasdaq suggesting a gap to new another new record. 

Economic Calendar

Earnings Calendar

We get a little break from the breakneck pace of earings this week with just 105 companies listed and a good number of them unconfirmed.  Notable reports include AMCX, CGC, D, DKNG, ELAN, FLR, GCI, GT, GRPN, HMC, JCI, DOC, & PNW.

News & Technicals’

Analysts expect the economy to have added 450,000 jobs in October, according to estimates from Dow Jones. That’s up sharply from 194,000 in September. In addition, they see hourly wages rising by 4.9% on a year-over-year basis. That will be a significant number since the market sees inflation and whether it will continue to run hotter than expected.  The jobs report is back in focus as a critical input for the Fed, which announced plans to start tapering back its bond purchases this month. That opens the door to potential interest rate hikes next year, economists say.  Asad Rehman, a spokesperson for the COP26 coalition, a U.K.-based civil society representing indigenous communities, frontline activists, and grassroots campaigns from the global south, told CNBC that he had been struck by the comparisons between the meeting in Glasgow and previous talks in Copenhagen.  The 2009 summit in Denmark’s capital city is widely regarded as a failure, with a deal many countries criticized for falling short of the action needed to tackle the climate crisis.  The summit continues after pledging $18 billion to end the use of coal. 

The Nasdaq’s surge continues to set records, the chart now going parabolic and looking to gap higher ahead of the employment situation report. However, plan your risk carefully and prepare as we continue to extend because simple logic would suggest the odds of a substantial pullback growing with every tick higher the indexes extend.  At some point, we will hit a point of exhaustion, and when that last dollar is in, look a sideways move at a minimum and more likely a strong profit-taking selloff. 

Trade Wisely,

Doug