As the index stretch higher with its 6^th straight day of gains, the Dow briefly touched the rarefied air of new highs before pulling back slightly, heading into the close.  Will the bulls find the inspiration to keep the pedal to the metal with a jam-packed earnings calendar, jobless number, manufacturing, and housing data?  Perhaps, but the futures currently suggest a profit-taking pullback could begin.  Unfortunately, price supports are substantially lower, so it could prove a bit painful for those buying late in the rally if selling picks up. As a result, expect price volatility to remain challenging. 

During the night, Asian markets traded mixed with Evergrande impacts back on the minds of traders.  European markets see modest losses across the board this morning as they monitor China’s rapidly deteriorating real estate situation.  Currently, U.S. futures point to a lower open with a busy day of data ahead and bonds on the rise.  Get ready. It could prove to be a bumpy ride this morning.

Economic Calendar

Earnings Calendar

We have a busy day this Thursday on the earnings calendar with more than 75 companies listed.  Notable reports include ABB, ALK, ALLY, AAL, T, AN, BCS, BX, BJRI, CMG, CROX, DHR, FCX, GPC, INTC, KEY, MMC, MAT, NUE, POOL, DGX, SAP, SCHN, SNAP, SNA, LUV, SIVB, TSCO, UNP, VLO, & WHR.

News and Technical’s

Heavily indebted, Evergrande was in talks earlier this month to sell part of its services unit to Hopson Development Holdings, its smaller rival. However, Hopson said Wednesday that talks fell through to purchase just over half of shares issued by Evergrande Property Services.  The collapse of the Hopson deal comes as Evergrande faces the end of a 30-day grace period on Saturday for a closely watched $83 million interest payment to investors in an offshore U.S. dollar-denominated bond.  As a result, China’s real estate sector has to be “substantially smaller” to keep the overall economy healthy and stable, said Li Gan, an economics professor at Texas A&M University.  “We have too big of a risk in the sector. We built too much housing, so the stabilization first has to come [from] trimming the sector,” said Gan.

Additionally, Gan estimated that about 20% of China’s housing stock is left vacant, yet developers continue to build millions of new units each year.  The Food and Drug Administration on Wednesday authorized Covid vaccine booster shots made by Johnson & Johnson and Moderna, another critical step in distributing the extra doses in the U.S.  Americans will also be allowed to “mix and match” vaccines, getting a booster shot from a different drugmaker than the one that made their initial doses.  Treasury yields traded slightly higher in early price action as the 10-year held above 1.649% and the 30-year climbed to 2.118%.

The bulls inked their 6^th straight day of gains, briefly touching a new record high with earnings enthusiasm overcomes inflation and supply chain worries. However, chart technicals are flashing a short-term overbought condition and the price action extension over the last six days of trading adds significant risk to traders entering late-stage positions.  That said, we have our biggest day of earnings data so far this season that could keep the party going if the bulls continue to find inspiration.  Although China is trying to convince the markets that the Evergrande situation is contained and a one-off event, real estate prices are plunging, reminiscent of the 2008 U.S.-led financial crisis.  Keep an eye on this as it could quickly become a spreading market contagion.  Besides a busy day of earnings, we will get the latest reading on Jobless Claims, Manufacturing data, and Existing Home Sales data to digest this morning.  Currently, futures point to a lower open, but price supports and open gaps could create a painful pullback if selling picks up. So buckle up, and let’s get ready to rumble!

Trade Wisely,

Doug

Energized by earnings, the bulls continue to march toward resistance highs and possible new records if the momentum is maintained.  That said, there is a substantial growing risk to traders with unfilled gaps left behind and the rapid extension seen in the index charts. Moreover, as energy prices continue to surge, adding to inflationary concerns and the supply chain bottlenecks clouding the path forward, earnings reports will have a lot to overcome.  That said, anything is possible during the highly emotional earning season. So study the risks carefully and trade wisely as the silly season ramps up to include the tech giants. 

Overnight Asian markets traded mixed with Hong Kong, once again leading the way as Chinese tech surged.  This morning European markets seem to be taking a wait-and-see approach with muted gains and losses as they ponder global market sentiment.  With a ramp-up in earnings reports and a pending petroleum number, U.S. futures point to a flat open at the time of writing this report. 

Economic Calendar

Earnings Calendar

We rap up again today with more than 60 companies listed on the calendar.  Notable reports include TSLA, ABT, ANTM, ASML, BKR, BIIB, CP, CFG, CMA, CCI, CSX, DFS, EFX, IBM, LRCX, MMLP, NDAQ, NEE, NEP, PPG, SLG, THC, TZOO, & VZ.

News & Technicals’

Netflix gained 4.4 million new subscribers in the third quarter, but only 70,000 of them came from the U.S. and Canada.  The streaming service has added fewer than 1 million new subscribers from the U.S. and Canada in the past 12 months.  Netflix said 142 million subscribers have watched at least two minutes of its new hit “Squid Game.”  In August, Federal Reserve Chairman Jerome Powell laid out five reasons supporting his view that the current run of high inflation will go away.  Powell has plenty of time to be correct, and many professional economists also hold the “transitory” position.  However, expectations for inflation among consumers and investors, as well as from some Fed officials, continue to rise.  This year, supply chains everywhere have been hit by massive disruptions from container shortages to floods and Covid infections, setting off port closures.  “Suddenly retailers and manufacturers are overordering because of these supply chain issues, and that’s just leading to essentially an even worse scenario,” Jonathan Savoir, CEO of supply chain technology firm Quincus told CNBC’s “Squawk Box Asia” on Monday.  In addition, the energy crises in mainland China and Europe are the latest to roil the shipping industry.  The 10-year Treasury yield topped the highest point since mid-May, rising to 1.67% late Tuesday night and trading at 1.68% early Wednesday morning.  The 30-year bonds also rose in early trading to 2.02%.

Though the bulls continue to matain control energized by earnings, we also have a substantial extension in the charts that create a signifiant risk.  With the T2122 indicator in a short-term overbought condition, traders should be on the lookout for potential consolidation or even a profit-taking pullback. In addition, the index charts have several unfilled gaps in the recent rally.  Surging energy prices continue to add pressure on consumers and the inflationary impacts on everything bought or sold.  Supply chain bottlenecks are also a significant concern as we head into the holiday season as worries of empty shelves add additional pricing pressures.  Recently the IMF downgraded growth expectations with a warning of global stagflation.  Of course, anything is possible during earnings season, and with emotions running, hot traders should expect challenging price volatility to stick around in the weeks ahead.

Trade Wisely,

Doug

The bulls breathed a sigh of relief on better than expected earnings and economic data.  Futures are already pushing higher in the premarket in anticipation that GS and PNC will keep good reports coming.  That said, we will have to keep an eye on Retail Sales numbers that economists expect to come in negative and could dampen bullish energy. So be careful rushing in with a fear of missing out because we have about the perfect setup for a pop and drop if retail numbers disappoint. 

Asian markets finished the week on a bullish note, closing green across the board.  European markets share the same sentiment this morning, with modest gains across the board fueled by earnings results.  Ahead of market-moving earnings and economic U.S. futures point to a bullish open that will gap the DIA and SPY above their 50-day averages.

Economic Calendar

Earnings Calendar

We have 19 companies listed on the earnings calendar, with just eight confirmed.  Notable reports include GS, JBHT, PLD, PNC, & TFC.

News & Technicals’

On Friday, the Biden administration unveiled a government-wide plan to address what he says is a systemic threat climate change poses to all sectors of the economy.  The roadmap accounts for how climate change will impact the companies people are invested in and aims to protect the savings of American families with retirement plans.  Additionally, his plan also identifies how agencies can strengthen infrastructure resilience in response to worsening climate disasters.  A key FDA advisory committee unanimously recommended Thursday giving booster shots of Moderna’s Covid-19 vaccine to people ages 65 and older and other vulnerable Americans.  The endorsement is a crucial step before the U.S. can start giving third shots to some of the millions of Americans who originally received Moderna’s vaccine.  Bitcoin surged as high as $59,920, notching its highest level since May. 10, but struggled to break above the $60,000 mark.  Traders are optimistic about the SEC’s chances of giving the green light to the first bitcoin futures exchange-traded fund.  This morning, Treasury yields rose in early trading, with the 10-year climbing to 1.544% and the 30-year rising 2.047%.

The bulls found more than enough inspiration to rally on better than expected earnings and economic data.  The DIA and SPY tested their 50-day averages as resistance through the QQQ lagged somewhat behind.  The big winner of the day was the underdog index of IWM, with financials and oil sector stocks working together bullishly.  With earnings from GS and PNC this morning, futures are pumping up the premarket in anticipation of additional bullish results.  However, this morning, we do a possible stumbling block with the Retail Sales report that consenses expects to come in slightly negative.  The Consumer Sentiment reading should also be interesting to keep an eye on it see in inflationary pressures have dampened spending spirits.  Though it was nice to see the rally, remember the real test is when it pulls back to test the new support levels.  That said, be careful chasing stocks already extended in case a pullback occurs.

Trade Wisely,

Doug

A glimmer of relief rally hope appeared yesterday with yesterday’s rebound off intraday lows, leaving behind potentially bullish hammer candle patterns.  The question for today can that hammer follow through with bullishness today after big bank earnings, Jobless Claims, and the possible inflationary PPI report.  Futures certainly thinks so, as they pump up the premarket adding risk with a large gap into price resistance levels. So which side gains the inspiration after the data, bulls or bears?  We will soon find out.

Overnight Asian markets traded mixed but mostly higher, with the HSI still closed for a holiday.  This morning, European markets are in a decidedly bullish mood, trading in the green across the board. However, ahead of significant market-moving data, the U.S. futures point to a substantial gap up open.  Could it create a short squeeze or just another pop and drop at price resistance that have been so pervasive over the last month of trading?

Economic Calendar

Earnings Calendar

We have a busy morning of big bank earnings this Thursday.  The earnings calendar has 20 companies listed, yet there are several not verified.  Notable reports include UNH, AA, USB, BAC, WFC, C, CMC, TACO, DPZ, MS, TSM, USB, & WBA. 

News & Technicals’

Pandemic-related mortgage bailouts are ending, and foreclosures are now rising.  Foreclosure starts jumped 32% in the third quarter of this year from the second quarter and were 67% higher than the third quarter of 2020. However, the foreclosure numbers should stay relatively low because of aggressive modifications by lenders and high levels of home equity. According to minutes from the September meeting, the Federal Reserve could begin reducing the pace of its monthly asset purchases as soon as mid-November. The summary, released Wednesday, indicated the tapering process could see a monthly reduction of $10 billion in Treasurys and $5 billion in mortgage-backed securities.  Officials at the meeting expressed concern about inflation, saying it could last longer “than they currently assumed.” Treasury yields traded mixed in early Thursday trading with the 10-year dipping slightly to 1.546% and the 30-year rising to 2.058%. 

Yesterday’s rebound off the lows left behind bullish hammer candle patterns offers a glimmer of relief rally hope.  That said, we still have the significant drama of big bank earnings, Jobless Claims, and another possible inflation stumbling block with the PPI report all before the market opens.  However, the relief rally hope has added danger to morning pumping up the premarket futures to suggest a significant gap at the open.  That could quickly move indexes right into resistance levels where bears could be entrenched and ready to fight.  So, becare chasing the open with a fear of missing out.  Instead, give the price action some time to settle, ensuring there will be some follow-through buying because the volatility risk is still high.  There is also a possibility of triggering a short squeeze if the data can sufficiently inspire the bulls.  However, should the bears find inspiration in the reports, watch for the dreaded pop and drop that has become so prevalent over the last trading month. 

Trade Wisely,

Doug