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Economic Impacts of Inflation

January 14, 2022 by Doug Campbell

The bulls did a good job ignoring the economic impacts of inflation throughout the morning session, but around mid-day, the bears emerged from hibernation. Unfortunately, they left some lower highs in the indexes as we began the earning’s high price volatility session. Stock valuations are very high, so companies will have to report solid results. Anything is possible so expect wild price volatility with overnight gaps and reversals traders and investors react in the weeks ahead.

Asian markets closed red across the board even as China exports beat expectations. European markets are also currently red across the board at the time of this report as they react to the hawkish comments from the Fed. However, that is not the case here in the U.S.; futures lean toward a bullish open as we wait for big bank reports and retail sales numbers. So, here comes the silly season!

Economic Calendar

Earnings Calendar

Today begins the 1^st quarter earnings season kicking off will big bank earnings. Notable reports include BLK, C, FRC, JPM, & WFC.

News & Technicals’

Philadelphia Fed President Patrick Harker said Thursday he sees three or four interest rate hikes this year as likely to fight inflation. The policy tightening would respond to inflation that is running at the highest level in nearly 40 years. While Harker expressed support for hikes and the end of monthly bond purchases, he favors waiting before decreasing the Federal Reserve’s $8.8 trillion balance sheet. In addition, president Joe Biden will nominate Sarah Bloom Raskin to be the Federal Reserve’s next vice chair for supervision, a powerful regulatory role. According to a person familiar with the matter, Biden will also nominate Lisa Cook and Philip Jefferson to serve as Federal Reserve governors. The nominations come at a precarious time for the Fed, which has signaled it will soon move to raise interest rates to fight inflation in recent weeks. Navient, one of the largest student loan servicers, will cancel $1.7 billion in private student loans after a deal it reached with 39 states. The lender was accused of giving out private loans to students who could not pay them. As part of the settlement, Navient denied that it violated the law. On Thursday, the Supreme Court blocked the Biden administration from enforcing its sweeping vaccine-or-test requirements for large private companies. But the conservative-majority court allowed a vaccine mandate to stand for medical facilities that take Medicare or Medicaid payments. The OSHA mandate required that workers at businesses with 100 or more employees get vaccinated or submit a negative Covid test weekly to enter the workplace. Treasury yields were again on the rise in early Friday trading, with the 10-year trading up to 1.7398% and the 30-year rising slightly to 2.0796%.

Although the market tried hard to ignore the economic impacts of inflation by mid-day, the bears went to work, creating some technical damage, particularly in the tech sector. The lower high failures in SPY and QQQ are the most concerning and suggest more selling, BUT we have earnings to consider. As we have seen in the past, earnings can disrupt any hint of bearishness if companies beat analysts’ estimates. However, with current stock valuations so incredibly high, even the slightest miss could result in some swift punishment in price. So, long story short, plan carefully and avoid over speculation. Anything is possible, and we can expect substantial price volatility with overnight gaps and reversals possible. So, fasten your seatbelt; silly season has begun!

Trade Wisely,

Doug

Earnings Season Kicks Into Gear Again

January 14, 2022 by Ed Carter

Markets made a small gap higher on slightly better than expected PPI results. However, after a short grind sideways, that was all she wrote for the bulls in the SPY and QQQ. The DIA held out until noon, but then it too started selling off. All 3 major indices closed near their lows of the day and failed their T-line tests. In addition, if you can look past the DIA having a long lower ick on the first candle, all 3 finished printing Evening Star signals Thursday. On the day, SPY lost 1.38%, DIA lost 0.48%, and QQQ lost 2.50%. The VXX gained over 6% to 18.74 and T2122 dropped back into its mid-range at 54.81. 10-year bond yields fell to 1.701% and Oil (WTI) dropped a bit over a percent to $81.70/barrel.

Click for video

During the day, another FOMC voter called for a rate hike in March. This makes 5 voting members which have publicly made a call for a rate hike at that meeting. In addition, after the close, Philly Fed President Harker told CNBC that he does not know if 3 rate hikes in 2022 will be enough. He said that he personally sees 3 or 4 needed, in addition to other Fed tightening measures.

After the close, the Supreme Court blocked the Biden Administration’s “vaccine or test” requirement for large private employers. The reversal impacts 84 million employees of private companies with more than 100 employees. However, the court left the vaccine mandate for healthcare workers (in any facility that accepts Medicare or Medicaid). This does not change company-mandated testing or vaccination such as required by the major banks (GS, MS, BAC, JPM, etc.).

Earnings season kicks into high gear again this morning with the big banks. So far, C, JPM, WFC, and regional bank FRC all beat on both lines. BLK beat on earnings but came in a little light on revenue.

Overnight, Asian markets were mostly in the red. South Korea (-1.36%), Japan (-1.28%), and Australia (-1.08%) led the way lower. In Europe, markets are down on every exchange except Norway at mid-day. The FTSE (-0.16%) is hanging on better, but the DAX (-0.73%) and CAC (-0.79%) are typical of the continent in early afternoon trading. As of 7:30 am, US Futures are pointing toward a modestly down open with a lot of data to come this morning. The DIA implies a -0.18% open, the SPY is implying a -0.21% open, and the QQQ implies a -0.34% open at this hour. 10-year bond yields have spiked back up to 1.74% and Oil (WTI) is up three-quarters of a percent in early trading.

The major economic news scheduled for release Friday includes Dec. Retail Sales and Dec. Import/Export Price Index (both at 8:30 am), Dec. Industrial Production (9:15 am), Nov. Business Inventories and Michigan Consumer Sentiment (both at 10 am), and a Fed speaker (Williams at 11 am). However, earnings season gets going again with pre-market reports from BLK, C, FRC, JPM, and WFC. There are no major reports scheduled for after the close.

The hawkish sentiments expressed by Fed members the last few days have world markets worried. With lower highs confirmed in all 3 major indices Thursday, the trend is to the downside now and all 3 have also failed their T-line. For the swing trader, this puts us in a bearish market at least short-term. The fact that the mega-cap DIA is the strongest of the indices tells us that money is seeking safety and continues to rotate out of high-growth/high-volatility names. Keep in mind that whipsaw volatility remains likely at least intraday and that bear moves tend to be faster than bullish ones. In short, be careful of long positions, unless they are in inverse names.

Remember this is Friday and we have a long holiday weekend since US markets are closed Monday in celebration of Martin Luther King Day. Stick to your trading rules and on managing the things you can control. Don’t chase, trade with the trend, keep consistently taking profits when you have them, and move your stops in your favor. And keep in mind that the first rule of making a lot of money in the market is to not lose a lot of money in the market. So, don’t be stubborn. When you’re wrong, just admit it and take your loss. (That’s why we set stops.)

Swing Trade Ideas for your consideration and watchlist: VXX, COST, FSLY, PANW, NVDA, PENN, PLTR, SNAP, GMA. 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.

🎯 Mike Probst: Rick, Got CTL off the scanner today. Already up 30%. Love it.

🎯 Dick Carp: the scanner paid for the year with HES-thank you

🎯 Arnoldo Bolanos: LTA scanner really works $$, thanks Ed.

🎯 Bob S: LTA is incredible…. I use it … would not trade without it

🎯 Malcolm .: Posted in room 2, @Rick… I used the LTA Scanner to go through hundreds of stocks this weekend and picked out three to trade: PYPL, TGT, and ZS. Quality patterns and with my trading, up 24%, 7% and 12%…. this program is gold.

🎯 Friday 6/21/19 (10:09 am) Aaron B: Today, my account is at +190% since January. Thanks, RWO HRC Flash Malcolm Thomas Steve Ed Bob S Bob C Mike P and everyone that contributes every day. I love our job.

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Disclosure: We do not act on all trades we mention, and not all mentions acted on the day of the mention. All trades we mention are for your consideration only.

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7% year-over-year Inflation

January 13, 2022 by Doug Campbell

After learning, we have a 7% year-over-year inflation with income growth lagging behind more than 2%; the bulls found reason to push the DIA, SPY, and QQQ higher. However, the IWM closed lower, and we should keep in mind despite the sharp rally, the Nasdaq and Russell remain below their 50-day averages. This morning we will turn our attention to jobless claims and another reading on inflation with the PPI report. Remember that we kick-off the big bank earnings Friday morning, so plan your risk accordingly.

Asian markets closed mixed with the Nikkei leading the selling. European trade cautious this morning with small gains and losses with concerns about U.S. inflation. However, investors seem to not share those concerns with the U.S. futures, pointing to a bullish open with jobless claims and PPI reports just ahead.

Economic Calendar

Earnings Calendar

We have a light day on the Thursday earnings though we have more stocks listed with only a few confirmed reports. Notable reports include DAL & TSM.

News & Technicals’

“It’s hard to process what’s happening right now, which is most people are going to get Covid,” acting FDA Commissioner Janet Woodcock said. First, however, she said the U.S. must ensure the record levels of new infections do not disrupt essential services. For example, the World Health Organization reported record numbers of cases of Covid-19 globally for a single week amid the omicron surge. A report from the WHO published Tuesday noted that the highest numbers of new cases over the week came from the U.S., with 4.6 million new cases. But hospitalizations are lower than previous surges, though the death rate remains unsustainably high. According to a report from Douglas Elliman and Miller Samuel, the average apartment rent in Manhattan hit $4,440 in December. The more widely watched net effective median rent rose to $3,392 — the highest level for December on record, the report said. While many landlords are trying to work with existing tenants to limit the increases, some are being quickly priced out of a market they could finally afford in 2020. According to new figures published on Wednesday, U.S. inflation came in at 7% in December on an annual basis, its highest print since 1982. Curto told CNBC on Wednesday that the higher carbon and energy prices required to achieve governments’ emission reduction aims would prevent the kind of “normalization” that would pull inflation back down towards central bank targets. Treasury yields are rising again in early Thursday trading, with the 10-year trading up to 1.7571% and the 30-year trading at 2.0985%.

We had a choppy price action day closing slightly bullish despite the 7% year-over-year inflation rate at the highest level since 1982. The market reaction is surprising considering that rising wages and salaries are more than 2% behind the rising cost to the consumer. The average cost of inflation to the consumer is now $5000. While the DIA, SPY, and QQQ remained bullish and the technical picture improved, the QQQ and the IWM remained below their 50-day averages. We will get another key inflation report before the bell with the PPI and weekly jobless claims. Remember, Friday; we have retail sales, industrial production, and the big bank reports coming from BLK, C, JPM, and WFC as you plan forward. So, let’s get ready for another dose of price volatility.

Trade Wisely,

Doug

PPI Data is On Deck Today

January 13, 2022 by Ed Carter

Markets shrugged off the CPI data and gapped higher at the open as the bull desperately tried to follow through on the prior two up days. However, after the gap, we saw whipsaw action that ended near where it opened. This gave us indecisive black Doji-type candles sitting at or just above the T-line in all 3 major indices. (Not what I would call clearly breaking any T-line resistance.) On the day, SPY gained 0.31%, DIA gained 0.16%, and QQQ gained 0.44%. The VXX fell a percent to 17.63 and T2122 remains in the overbought territory at 82.13. 10-year bond yields fell to 1.739% and Oil (WTI) jumped another 1.91% to $82.78/barrel.

Click for video

As mentioned, before the open the December Consumer Price Index (CPI) data was released. It came in a +7.0%, which was right in line with consensus forecasts and was the highest since 1982. However, the last couple of days talking-heads on the various financial media outlets had been preparing traders for an even higher print. So, apparently, the market took “in-line, at many-decade highs” as good news. Later in the morning, crude oil inventories came in down significantly more than expected (-4.55million barrels vs -1.9million barrels est.), which was at least part of the reason for Oil price spikes on the day.

In a follow-up to last year’s Texas electricity crisis, Bloomberg reports there still appear to be problems. At the start of the year (starting January 2), a cold snap caused the state to lose over 1.3 gigawatts of electric generation. The losses were related to cold and specifically to their natural gas-fueled power plants. This lost capacity caused short-term blackouts in areas of the state as the peak demand exceeded capacity by 2.4%. Since Texas is not connected to the national electrical grids, the state is unable to pull the needed shortfall from other regions of the country.

Overnight, Asian markets were mixed again. Shenzhen (-1.96%), Shanghai (-1.17%), and Japan (-0.96%) were the main losses. Meanwhile, the rest of the region was green, but only on modest moves. In Europe, stocks are leaning to the downside on modest moves (with the exception of Russia (-2.25%) at mid-day. The FTSE (-0.06%), DAX (-0.02%), and CAC (-0.61%) lead the region lower, but half a dozen of the smaller exchanges are green by half of a percent or less in early afternoon trading. As of 7:30 am, US Futures are pointing toward a flat open. The DIA implies a +0.12% open, the SPY is implying a +0.06% open, and the QQQ implies a +0.06% open at this hour. 10-year bond yields are moving higher again to 1.746% and Oil (WTI) is down slightly in early trading.

The major economic news scheduled for release Thursday is limited to Dec. PPI and Weekly Initial Jobless Claims (both at 8:30 am). However, there is also a Fed speaker (Brainard testifies before her nomination hearing for the Fed Vice-Chair position at 10 am). The major earnings reports scheduled for before the market is limited to TSM and DAL. There are no major reports scheduled for after the close.

Markets seemed unphased by the CPI data, but indecision quickly set in. All 3 major indices are struggling to break through and free of their T-line as traders contemplate the next move. However, the rotation out of growth and toward value (as well as names with pricing power) sure looks like a longer-term trend as inflation will be the underlying driver of markets for the foreseeable future. Remember that whipsaw action has been the norm. So, don’t take positions unless you can handle at least short-term pain.

The first rule of making a lot of money in the market is to not lose a lot of money in the market. So, don’t be stubborn. When you’re wrong, just admit it and take your loss. (That’s why we set stops.) Stick to your trading rules and on managing the things you can control. Don’t chase, trade with the trend, keep consistently taking profits when you have them, and move your stops in your favor.

Swing Trade Ideas for your consideration and watchlist: BUD, TX, CAT, MDLZ, KO, XP, T. 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.

🎯 Mike Probst: Rick, Got CTL off the scanner today. Already up 30%. Love it.

🎯 Dick Carp: the scanner paid for the year with HES-thank you

🎯 Arnoldo Bolanos: LTA scanner really works $$, thanks Ed.

🎯 Bob S: LTA is incredible…. I use it … would not trade without it

Hit and Run Candlesticks / Road To Wealth Youtube videos

Disclosure: We do not act on all trades we mention, and not all mentions acted on the day of the mention. All trades we mention are for your consideration only.

Free YouTube Education • Subscription Plans • Private 2-Hour Coaching

Recovery Rally Continued

January 12, 2022 by Doug Campbell

The recovery rally continued Tuesday after a very turbulent start, with the Dow first sinking nearly 300 points. If you feel the price action has become challenging, buckle up with two significant inflation reports and the beginning of earnings season; the wild price volatility may become even more challenging in the days ahead. Be prepared for possible large point whipsaws and even full-on reversals that could occur overnight as the all-or-nothing market enters the silly season with valuations already extremely high.

Asian markets closed green across the board during the night, with Hong Kong advancing a whopping 2.79%. This morning, European markets are bullish, with a bit more tentativeness in price action as they wait on inflation data. Ahead of earnings and the CPI report, U.S. futures pump for more gains suggesting another gap up at the time of this report. So, let’s get ready for another wild ride!

Economic Calendar

Earnings Calendar

On the Wednesday earnings calendar, we have 18 companies listed with nine confirmed reports. Notable reports include AONNY, BBCP, GHG, INFY, JEF, KBH, SJR, & VOLT.

News & Technicals’

The consumer price index is released by the Labor Department Wednesday and is expected to show headline inflation jumped by 7%, its fastest pace since 1982. The Federal Reserve is already on a path to raise interest rates to battle rising prices. So a hot number should justify the Fed’s policy shift. “It’s still hot, hot, hot, and it’s important because we’re now where the Fed worries about that 7% number getting baked into wages and getting more entrenched,” said Diane Swonk, chief economist at Grant Thornton. On Tuesday, Federal Reserve Chairman Jerome Powell said that the economy is both healthy enough and in need of tighter monetary policy. That likely will entail interest rate hikes, tapering of monthly asset purchases, and a smaller balance sheet. Powell made the comments during a confirmation hearing in which key senators indicated they would be supporting him for a second term. Russia’s dealings — or, more accurately, its clashes — with the West have focused on one country that has been a particular flashpoint for confrontations in recent years: Ukraine. This week, this has come into focus with a series of high-stakes meetings taking place between Russian and Western officials. The talks centered on trying to defuse heightened tensions between Russia and its neighbor Ukraine. Treasury yields dipped once again ahead of CPI data in early Wednesday trading, with the 10-year slightly lower at 1.7428% and the 30-year edging lower to 2.0643%.

Tuesday notched another day in the recovery rally after a bumpy start selling off nearly 300 points to begin the day. These huge point moves in this all-or-nothing market add substantial risk for the retail trader. Although we have seen a significant technical damage improvement in the DIA and SPY, the large point moves open the door for damaging whipsaws or even full-on reversals with little to no pice action support below. Since the low on Monday where the T2122 indicator nearly reached an oversold condition is now warning of an overbought condition. Indeed an all-or-nothing condition with crucial inflation data and the beginning of earnings season could quickly increase the level of price volatility, adding to the challenging environment. So stay focused, watching for potential large-point swing whipsaws and full-on reversals that could appear in the overnight session. Despite all the bullish hype, keep in mind that a Hawkish Fed typically slows economic activity. So trade wisely and avoid complacency.

Trade Wisely,

Doug

CPI Data Likely to Call the Tune Today

January 12, 2022 by Ed Carter

Markets opened down very slightly on Tuesday and meandered around in lower territory until 11 am. From that point, all 3 major indices sallied hard (especially in the QQQ) for an hour. After 12 pm, all 3 then drifted bullishly, closing near the highs. This left strong white candles that followed through on Monday’s intraday rally, but have yet to test their T-lines (8ema). On the day, SPY gained 0.91%, DIA gained 0.49%, and QQQ gained 1.50% as the rotation out of tech reversed on the day. The VXX fell 3.5% to 17.82 and T2122 spiked up into the overbought territory at 87.92. 10-year bond yields fell to 1.742% and Oil (WTI) spiked 4.15% to $81.48/barrel.

Click for video

During the day, Fed Chair Powell spoke to the Senate in hearings on his renomination. He told the Senators that the economy is healthy enough and needs a tighter monetary policy to control inflation and that the Fed will tackle the problem. While he avoided any specifics on actions or timing, he did say that this will include the end of Bond Purchases, interest rate hikes, and a significant reduction in the Fed Balance Sheet (selling bonds and mortgage-backed assets). Powell also explained that there were two key factors that caused the Fed to be wrong about inflation. First, he said the Fed expected supply chain issues to be resolved SUBSTANTIALLY faster than they have been. Second, he said the Fed expected a much quicker and more significant return of the workforce (reducing wage pressure) than materialized with the “great retirement.” While his testimony on inflation was not new, markets did take heart from the session and stocks rallied

Just before the close, a Federal District Judge granted the FTC a second chance to file suit against FB. FTC Commissioner Khan is expected to refile the suit alleging that FB engaged in illegal monopolistic activity. FB did not have time to react during the day on Tuesday, but after hours the stock is pulling back.

C announced Tuesday afternoon that it is exiting retail and small business banking in Mexico. This is the latest move in the company’s shift toward focusing on operations centered around global wealth centers. There are several “potential” candidates to purchase the C Mexican operation, but none are listed in the US. The C Mexican banking operations accounted for $3.5 billion in revenue and $44 billion in assets during the first 9 months of 2021 and the company was Mexico’s third-largest bank.

Overnight, Asian markets were mixed green across the board with the lone exception of Malaysia (-0.07%). Hong Kong (+2.79%), Japan (+1.92%), and South Korea (+1.54%) led the gainers. In Europe, markets lean heavily to the green side with only two smaller exchanges in the red at mid-day. The FTSE (+0.55%), DAX (+0.18%), and CAC (+0.43%) lead the way in early afternoon trade. As of 7:30 am, US Futures are pointing toward a flat open ahead of the CPI data. The DIA implies a +0.08% open, the SPY is implying a +0.08% open, and the QQQ implies a +0.16% open at this hour. 10-year bond yields are flat and Oil (WTI) is up half of a percent in early trading as we wait on the CPI data.

The major economic news scheduled for release Wednesday includes Dec. CPI (8:30 am), Crude Oil Inventories (10:30 am), the WASDE report (noon), Fed Beige Book (2 pm), and Dec. Federal Budget Balance (2 pm). However, there are also 2 Fed speakers (Brainard at 10 am and Kashkari at 1 pm). The major earnings reports scheduled for before the market is limited to INFY, JEF, and WIT. Then after the close, KBH reports.

Markets seem to be waiting on the CPI data this morning before traders decide how to move next. With T-line resistance tests in all 3 major indices in the immediate future, keep an eye on the markets before you chase individual tickers. Yes, we have had two white candles. However, this is not how uptrends are measured. So, be careful of getting caught in the “buy the dip” rush. Also, remember that intraday whipsaw (like Monday’s massive reversal) continues to be the norm lately.

Remember that the first rule of making a lot of money in the market is to not lose a lot of money in the market. So, don’t be stubborn. When you’re wrong, just admit it and take your loss. (That’s why we set stops.) Stick to your trading rules and on managing the things you can control. Don’t chase, trade with the trend, keep consistently taking profits when you have them, and move your stops in your favor.

Swing Trade Ideas for your consideration and watchlist: ITUB, BABA, WFG, TME, AA, BWA, T, APA. 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.

🎯 Mike Probst: Rick, Got CTL off the scanner today. Already up 30%. Love it.

🎯 Dick Carp: the scanner paid for the year with HES-thank you

🎯 Arnoldo Bolanos: LTA scanner really works $$, thanks Ed.

🎯 Bob S: LTA is incredible…. I use it … would not trade without it

Hit and Run Candlesticks / Road To Wealth Youtube videos

Disclosure: We do not act on all trades we mention, and not all mentions acted on the day of the mention. All trades we mention are for your consideration only.

Free YouTube Education • Subscription Plans • Private 2-Hour Coaching

Economic Calendar

Earnings Calendar

We have nine companies listed on the Tuesday earnings calendar and with just four confirmed reports. Notable reports include ACI and SNX.

News & Technicals’

Slapping sanctions on Russia may not help resolve tensions with the U.S. over Ukraine, two experts said Tuesday. “Sanctions don’t work on Russia,” said Tony Brenton, a former British ambassador to Russia. “Russia just becomes even more obdurate.” Angela Stent of Georgetown University said many sanctions have been explicitly discussed in the U.S., but “that doesn’t seem to have deterred Russia at all.” Federal Reserve Vice Chairman Richard Clarida said Monday he would be leaving his post-Friday, shortly before his term expired. The resignation comes following more questions into stock fund trades for Clarida in February 2020. “The two doses, they’re not enough for omicron,” Pfizer CEO Albert Bourla said. Bourla said the two-dose vaccine does not provide robust protection against infection, and its ability to prevent hospitalization has also declined. Bourla said third shots provide good protection against death and “decent” protection against hospitalization. According to Mortgage News Daily, the average rate on the popular 30-year mortgage hit 3.64% on Monday morning, after rising sharply last week. For the median-priced home, currently about $350,000, buyers putting down 20% will now see a monthly payment of $125 higher than they would have just three weeks ago. Stocks of the public homebuilders are all down in 2022. Treasury Yields declined in early Tuesday trading, with the 10-year dipping to 1.7569% and the 30-year declining to 2.0766%.

Yesterday’s massive sell-off and rebound left more questions than answers in the index charts. Though the end-of-day surge will likely inspire the buy-the-dip buyers to rush back in, caution should be exercised as we approach the significant price resistance levels above. However, big institutions seem to be singing off the same sheet of music, suggesting the sell-off is a significant market mispricing. So, what’s a trader to do? Remember Price is King! Stay focused on price and your trading plan and work to avoid the emotional reaction created by big price swings and all the talking head hot air. Follow your trading plan making sure the risk you take is acceptable at all times, or emotion will take over your decision-making. Today Powell will be testifying in the Senate as they move forward with his confirmation. Expect price volatility to remain high, and remember we have inflation data coming our way first thing Wednesday morning.

Trade Wisely,

Doug

Bulls Look to Follow-Up Dimon Reversal

January 11, 2022 by Ed Carter

Monday was certainly a wild ride. Markets gapped down (0.8% in the SPY, 0.36% in the DIA, and 1.4% in the QQQ) and proceeded to follow through, selling off to the lows by 11 am. However, from that point, stocks rallied hard in a wildly whipsaw-like rally that ended the day on the highs. This left us a white hammer in the SPY, a black hammer in the DIA, and a large-body white candle with a long lower wick in the QQQ. On the day, SPY lost 0.12%, DIA lost 0.45%, and QQQ gained 0.07%. It should be noted that the QQQ was down nearly 3% before its torrid intraday rally. The VXX was down almost 2% to 18.47 and T2122 fell to 38.15 (still in the mid-range). 10-year bond yields fell just a bit to 1.759% and Oil (WTI) was down two-thirds of a percent to $778.40/barrel.

Click for video

During the day, two different major banks came out saying they expect at least 4 rate hikes by the Fed this year. Before the bell, GS said they are now forecasting 4 rate hikes in 2022. Later in the day, Jamie Dimon of JPM said he expects “the best growth in decades,” a “soft landing” on inflation, and is very bullish. (Whether coincidence or not, this is when the market started its intraday rally.) However, he also said he would not be surprised if the Fed went further than 4 hikes. In fact, he said he would be surprised if it was only 4 rates hikes in 2022. Of course, we have to temper his words by the fact the Fed has projected that it will do 3 rate hikes this year…and big banks do best during periods of rising interest rates (so he could be “talking his book”).

After the close Monday, Fed Vice-Chair Richard Clarida announced he will be stepping down as of this Friday. The surprise move comes with his term expiring in a few weeks on January 31. The move seems to stem from scrutiny over Clarida’s trading done in February 2020 just as the Fed was preparing to roll out its unprecedented array of rate cuts, QE, and lending facilities that caused markets to go on one of the strongest rallies in history starting in late March 2020. Clarida has always maintained that the trades were part of a “long-planned portfolio rebalancing” and were not related in any way to Fed plans.

In what is likely to be a global trend, China has taken the next step with its digital currency (e-CNY). The country has already gotten all leading Chinese mobile payment and e-commerce companies like BABA, TME, WeChat, and Alipay onboard. However, now the regional tests (10 major cities) have now been rolled out nationally. The PBOC (Central Bank) announced Monday that it will also be pushing the “digital Yuan” at this year’s Olympics in an effort to gauge global interest and speed broader adoption. While the US and other countries are far behind China in the move toward a block-chain digital currency (complete government visibility of all transactions), the trend is clear around the world, including the US

Overnight, Asian markets were mixed again. Shenzhen (-1.27%), Japan (-0.90%), and Australia (-0.77%) paced the losses. Meanwhile, Malaysia (+0.91%), Thailand (+0.61%), and Singapore (+0.60%) led the gainers. In Europe, markets are green across the board at mid-day. The FTSE (+0.67%), DAX (+1.12%), and CAC (+1.33%) are fairly typical of the spread across the region. As of 7:30 am, US Futures are pointing toward a mixed green open. The DIA implies a +0.17% open, the SPY is implying a +0.31% open, and the QQQ implies a +0.49% open at this hour as rotation back toward tech (growth) seems to be back in play. 10-year bond yields are down a bit to 1.762% and Oil (WTI) is up almost 1.5%.

There is no major economic news scheduled for release Tuesday. However, there are 3 Fed speakers (Mester at 9 am, George at 9:30 am, and Chair Powell faces his re-nomination testimony at 10 am). The major earnings reports scheduled for before the market is limited to ACI and SNX. There are no major reports scheduled for after the close.

The market seems to be trying to follow through this morning on what may have been a “Dimon’s outlook rally” yesterday. However, keep in mind that all 3 major indices are still in a downtrend and none of them have tested (let alone broken through) their T-lines yet. So, be careful of getting caught in the “buy the dip” rush. The bears still have the trend and overall momentum. Also, remember that intraday whipsaw (like Monday’s massive reversal) has been the norm lately.

Swing Trade Ideas for your consideration and watchlist: TREE, ABBV, DVN, TRIP, GSK, BMY, CVS. 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.

🎯 Mike Probst: Rick, Got CTL off the scanner today. Already up 30%. Love it.

🎯 Dick Carp: the scanner paid for the year with HES-thank you

🎯 Arnoldo Bolanos: LTA scanner really works $$, thanks Ed.

🎯 Bob S: LTA is incredible…. I use it … would not trade without it

Hit and Run Candlesticks / Road To Wealth Youtube videos

Disclosure: We do not act on all trades we mention, and not all mentions acted on the day of the mention. All trades we mention are for your consideration only.

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Attention to Inflation

January 10, 2022 by Doug Campbell

Finishing last week lower, the market will now turn its attention to inflation and the kick-off to earnings with big bank reports on Friday. In addition, Jerome begins congressional testimony on Tuesday, CPI Wednesday, PPI Thursday, and retail sale and industrial production on Friday. All of this with the SPY, QQQ, and IWM in a precarious technical position adding to the uncertainty. I think we can expect price volatility to remain high, so plan your risk accordingly.

Asina markets traded mixed with the HSI rebounding 1.08% overnight. Across the pond, European markets trade mostly lower, albeit a choppy trading session. Facing a big week of market-moving data, U.S. futures have recovered from overnight lows, but with treasury yields continuing to rise, the NASDAQ remains under pressure this morning. So trade wisely; it could prove to be a challenging week ahead.

Economic Calendar

Earnings Calendar

We have just eleven companies listed and only six verified reports to kick off the new trading week. Notable reports include AZZ, CMC, and VOXX.

News & Technicals’

U.S. and Russian officials are in Geneva on Monday to begin a series of high-stakes talks this week. Tensions remain higher than ever over Ukraine, but both sides have already warned prospects for a resolution are low. Moreover, Russia has been building up its military presence at its border with Ukraine in recent months, leading to heightened concerns that Russian President Vladimir Putin is planning on invading the country. Moscow denies such claims, saying it has a right to place troops where it likes within its territory. Draghi’s government, comprised chiefly of politicians from different parties and some technocrats, has appeased markets due to its parliamentary support and reform plans. However, analysts at Goldman Sachs said Draghi’s departure would “trigger uncertainty regarding the new government and its policy effectiveness.” Over 1,000 of the country’s parliament and regional representatives will begin voting on Jan. 24. North Korea is seeking to build up its missile capability to boost its “bargaining position,” says one political analyst, who pointed to the country’s latest attempt last week to test-fire a hypersonic missile. On Thursday, state media claimed the country had test-fired a “hypersonic missile” the previous day. “You start the new year, and North Korea does this type of test that shines the light back on it,” John Park, director of the Korea Project at the Harvard Kennedy School, told CNBC’s “Squawk Box Asia” on Monday. Treasury yields climbed higher in early Monday trading, with the 10-year rising to 1.7975% and the 30-year trading at 2.1469%.

After finishing the week lower, the market will turn its attention to inflation and the congressional testimony of Jerome Powell. While the DIA remains in a bullish technical position, the SPY, QQQ, and IWM indexes now have some challenges to overcome if the bulls want to remain in control. The overhead resistance level is substantial, but I’m guessing there are still some very high hopes that earnings season can provide the inspiration needed. We kick off the big bank earnings on Friday. The Fed testifying in congress, inflation data, retail sales numbers, and the beginning of earnings season! Add in geopolitical tensions with Russia and North Korea chiming in, and we have a week of uncertainty ahead. What could go wrong with that? Expect uncertainty and price volatility to remain high so plan your risk accordingly.

Trade Wisely,

Doug

Bear Looking to Keep The Momentum

January 10, 2022 by Ed Carter

Markets opened flat on Friday. However, the SPY and QQQ proceeded to sell off until 11 am. During this time the DIA simply meandered sideways. From 11-noon, all 3 indices rallied and then ground sideways until about 3:15 pm. All 3 then sold off the last 45 minutes of the day. This left indecisive candles in all 3 indices with a white Doji in the DIA, a black Spinning Top in the SPY, and a black candle with good-sized wicks on both ends in the QQQ. On the day, SPY lost 0.40%, DIA lost 0.02%, and QQQ lost 1.08%. VXX lost almost 3% to 18.82 and T2122 remained in the mid-range at 61.99. 10-year bond yields rose sharply again to 1.767% and Oil (WTI) lost seven-tenths of a percent to $78.90/barrel. For the first week of the year, SPY was down 1.87%, DIA was down just 0.28%, but the rotation was obvious as the QQQ was down 4.52%.

Click for video

During premarket Friday there was some conflicting data. December Nonfarm Payrolls came in a +199k, which was less than half of what was expected. (Oddly, the ADP Dec. Nonfarm Payrolls had come in a +807k, versus the same +400k expected just two days prior.) However, the Dec. Unemployment rate fell to 3.9% (versus 4.1% expected) while the Participation rate remained steady. So, markets were left with either “which data do you believe?” or “None of the data is good” as their options.

During the day Friday, C followed up on its October announcement that vaccination is a condition of employment. It sent a memo to all employees saying that if they had not proven they have been vaccinated by next week they will be put on unpaid leave and will be terminated as of January 31. CNBC reports that about 90% of the workforce at C has already submitted proof of vaccination, but that still leaves 22,000 employees at risk of termination, which could have an impact on bank operations. So far, the other major banks (JPM, BAC, WFC, GS, and MS) have not gone as far as terminating their non-compliant staff.

Friday gave us some very odd food inflation data. Despite widespread food inflation and news of high food prices, fertilizer prices had a wild week, especially on Friday. After the price of urea (nitrogen) had swung at least $100/short ton each day of the week, Friday saw fertilizer prices fall 12% (most since 2009). This massive fall in price is unexplained and comes despite the fact very little of that commodity was available at the discounted price. (US production is sold out, there are production plant closures across Europe due to a lack of natural gas, China still not willing or able to export until at least May, and the Middle East essentially sold out with production already sold through the end of February.) Yet the prices fell 12% on a single day.

Overnight, Asian markets were mixed. Hong Kong (+1.08%) and India (+1.07%) led the gainers while South Korea (-0.95%) was the only red ticker that was not nearly flat. In Europe, stocks are strongly in the red, with only a couple of minor exchanges showing green at mid-day. The FTSE (-0.12%), DAX (-0.39%), and CAC (-0.54%) are typical of the region in early afternoon trading. As of 7:30 am, US Futures are pointing toward a down open. The DIA implies a -0.13% open, the SPY is implying a -0.31% open, and the QQQ implies a -0.67% open as it appears both the rotation and pullback will remain in place at least early Monday. 10-year bond yields are up very slightly and Oil (WTI) is down two-thirds of a percent in early trading.

There is no major economic news scheduled for release Monday. The only major earnings report scheduled for before the market is CMC. There are no major reports scheduled for after the close.

The bears seem to have maintained the momentum over the weekend as premarket prices are sitting at the lows across the board. Be very careful with long positions and remember that hedging and waiting are both valid ways to reduce risk. However, also remember that intraday whipsaw has been the norm lately, especially in large-cap spaces.

Swing Trade Ideas for your consideration and watchlist: JNJ, CTRA, CVS, FCX, DG, TNA, MMC, GME, SKIN. 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.

🎯 Mike Probst: Rick, Got CTL off the scanner today. Already up 30%. Love it.

🎯 Dick Carp: the scanner paid for the year with HES-thank you

🎯 Arnoldo Bolanos: LTA scanner really works $$, thanks Ed.

🎯 Bob S: LTA is incredible…. I use it … would not trade without it

Hit and Run Candlesticks / Road To Wealth Youtube videos

Disclosure: We do not act on all trades we mention, and not all mentions acted on the day of the mention. All trades we mention are for your consideration only.

Free YouTube Education • Subscription Plans • Private 2-Hour Coaching