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A High Drama Wednesday

October 13, 2021 by Doug Campbell

Though slow and somewhat choppy Tuesday, the bears kept the pressure on the indexes with the high drama expected this Wednesday. Will the JPM and BLK report be healthy? Will the CPI come in hotter than expected due to supply chain issues, rising energy prices, and labor shortages? Will the FOMC minutes provide clues as to if or when taper could begin? As the drama unfolds, the one thing we can likely expect is challenging price action with elevated volatility. So plan your risk carefully as the answers roll out.

Asian markets traded mixed with modest gains and losses during the night, with HSI closed for a holiday. European markets also trade mixed as waiting for the key U.S. inflation data. However, keeping with the tradition, the premarket pump-up has the U.S. pointing toward modest gains across the board ahead of the data. So let’s get ready as the high drama unfolds.

Economic Calendar

Earnings Calendar

Today we get the official kickoff of the 4^th quarter earnings season with 11 companies listed but more than half unconfirmed. Notable reports include JPM, DAL, BLK, FRC, & INFY.

News & Technicals’

The good news for this earnings season is that business is good, and demand for most goods and services is relatively high. However, the bad news is the supply chain issues, labor shortages, and soaring energy prices could make it a challenging quarter for companies to produce high enough profits that support current stock prices. In addition, president Joe Biden will unveil a plan Wednesday to ease West Coast delays at the ports of Long Beach and Los Angeles by expanding round-the-clock operations. FedEx, UPS, Walmart, Home Depot, and others will also announce expanded hours operation plans during a virtual meeting Wednesday with Biden. That said, the administration will have to encourage the powerful International Longshore and Warehouse Union to get its members to work extra shifts at the ports. Today the consumer price index is expected to remain hot in September and could run hot for months to come. Economists say the recent surge in energy prices is one of the components of rising rents, making it possible that CPI could stay elevated. Treasury yields trade slightly lower this morning, with the 10-year easing to 1.566% and the 30-year declining to 2.073% in early morning trading.

On a somewhat choppy price action day, the bear kept downward pressure, waiting for the high drama of earnings and economic reports this Wednesday. We will kick off the day with big bank earnings from JPM and BLK, quickly followed by a read on inflation with the CPI report. Economists polled by Dow Jones expect the CPI rose 0.3% or 5.3% on a your-over-year basis. That said, there is a significant concern the number could come in hotter than expected due to rising energy prices, labor shortages, and supply chain impacts. Last but not least, we have the FOMC minutes this afternoon, where traders will be looking for clues regarding the taper of the easy money policies. So I think it’s fair to say anything is possible as today’s drama unfolds! The question is will it encourage the bulls or the bears? We can count on the fact that price action will remain challenging with considerable volatility for traders to battle.

Trade Wisely,

Doug

First Q3 Earnings Reports Are Strong

October 13, 2021 by Ed Carter

Markets gapped up a bit at the open on Tuesday, but it was another bull trap. Stocks immediately sold off before doing an all-day roller-coaster that ended just up off the lows. So, all 3 major indices have now taken out their 8ema, but are sitting at a recent potential support. On the day, SPY lost 0.24%, DIA lost 0.35%, and QQQ lost 0.35%. The VXX fell almost 2% to 24.63 and T2122 remains in the mid-range at 58.25. 10-year bond yields fell to 1.572% and Oil (WTI) was unchanged at $80.52.

The JOLTs report on Tuesday showed what appears to be serious wage pressure. 4.3 million workers quit their job in August, the highest amount since December 2000. A number of analysts say this is a clear indication that workers were unhappy with their current wages (and past raises) and see the huge number of job openings as a rare opportunity to improve their situations. The only way to address this would be for employers to significantly raise wages to retain as well as draw in new employees. In addition, this first month of data seems to point to “extended unemployment benefits” not being a primary driver for the problem of finding workers. Together, these will mean real earnings pressure for companies without pricing power.

At the close on Tuesday, Bloomberg reported that AAPL is likely to slash iPhone 13 production orders by as many as 10 million units. The company was expected to make 90 million iPhone 13s during Q4, but is now telling partners the number could be as much as 10 million units less. The cited reason is the TXN and AVGO are not able to meet chip demand. For its part, AVGO does not produce the chips they sell, they purchase production capacity from TSM, which may be a read-through to TSM and by extension TSM’s other major customers (AMD, NVDA, QCOM, and INTL).

In market news this morning, JPM posted a significant beat on earnings ($3.74 vs $3.00 per share estimated) but missed on revenue. BLK reported significant beats on both lines while FRC posted more modest beats on both lines. DAL also reported significant beats on both lines on growing travel demand. Weekly mortgage demand continued to stall last week as rates rose. 30-year fixed-rate conforming loan rats rose from 3.14% to 3.18% on average. As a result, refinance loan applications fell 1% while new home purchase loan applications rose 2% versus the week prior.

Overnight, Asian markets were mostly in the green. Taiwan (-0.70%) and Japan (-0.32%) showed the only real red in the region. Meanwhile, Shenzhen (+1.54%), Singapore (+1.43%), and South Korea (+0.96%) led the region higher. In Europe, a similar story is taking shape. Russia (-1.05%) is the only significant red. Meanwhile, the FTSE (-0.09%), DAX (+0.74%), and CAC (+0.24%) are typical of the spread we see across the continent at mid-day. As of 7:30 am, US Futures are pointing toward a mildly positive open. The DIA is implying a +0.11% open, the SPY implying a +0.15% open, and the QQQ implying a +0.34% open at this hour. The Dollar is trading lower, while 10-year bond yields and Oils are both slightly lower in early trading today.

The major economic news scheduled for release on Wednesday includes Sept. CPI (8:30 am), Fed. Budget Balance and Sept. FOMC Minutes (both at 2 pm), and a couple of more Fed speakers (Brainard at 4:30 pm and Bowman at 8 pm). Earnings season kicks off again today with reports scheduled from BLK, SDAL, FRC, INFY, JPM, and WIT before the open. There are no major reports scheduled for after the close.

Premarket prices seem to be modestly bullish this morning as the first indications from earnings are that corporations are doing just fine, despite the fear over inflation, chip shortages, supply chain woes, and Covid. However, remember that the downtrend remains intact and the 8ema seems to be acting as resistance in early action. Trade carefully, today is only the first salvo of earnings data. Don’t jump to conclusions or get caught up in the need for action or FOMO.

Focus on your trading process and on managing those things you can control (while not worrying about things you can’t influence). Watch your current positions before looking to add new trades. Remember, it’s discipline and good trading rules that protect us from ourselves. Consistently take profits when you have them. Don’t let greed get the better of you. Finally, remember that we have monthly options expiring at the end of the week. So, it’s time to think about closing, rolling, or riding into expiration with very little time value left.

Swing Trade Ideas for your consideration and watchlist: RLX, ANY, GOTU, AG, FSM, NKLA, COST, MO, AOS. 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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Intraday Whipsaw Oil Surges

October 12, 2021 by Doug Campbell

Worries of soaring energy prices and the inflationary pressures it causes crated a nasty whipsaw, likely disappointing morning session buyers. Unfortunately, that resulted in another failure at the DIA 50-day average while also creating low high failures on SPY and QQQ. The technical damage adds additional uncertainty as we await the beginning of 4^th quarter earnings. After the JOLTS report, this morning could easily experience more of the same choppiness with JPM earnings, consumer price data, and possible clues of taper in the FOMC minutes on Wednesday. Plan your risk carefully.

Overnight Asian markets traded red across the board, with the HSI leading the way down 1.43%. European markets trade mainly lower this morning with modest losses as investors monitor declining global sentiment. U.S. futures that were lower most of the night now point to a modestly bullish open as the premarket pump tries to shake off rising energy price impacts to inflation.

Economic Calendar

Earnings Calendar

On the Tuesday earnings calendar, we have 13 companies listed, but only six are confirmed reports. Notable reports include AZZ, FAST, PNFP, & SGH.

News and Technicals’

China is not alone — India is also teetering on the edge of a power crisis. As of Oct. 6, 80% of India’s 135 coal-powered plants had less than eight days of supplies left — more than half of those had stocks worth two days or fewer. The power crisis would likely have an immediate impact on India’s nascent economic recovery, created by industrial activity instead of services, according to Kunal Kundu, India economist at Societe Generale. Millions of Americans will be one step closer to receiving a Covid booster shot when a key FDA panel meets this week to debate extra doses of the Moderna and J&J vaccines. The Biden administration hopes boosting the U.S. population will ensure long-term and durable protection against severe disease. “Even with delta, the current vaccines are holding up quite well as far as hospitalization and severe disease,” said Norman Baylor, former director of the FDA’s vaccines office. Treasurys were relatively flat in early Tuesday, trading ahead of the August job openings reports. The 10-year edged higher to 1.6137%, while the 30-year ticked lower to 2.156%.

Yesterday’s price action whipsaw was likely quite disappointing for those trying to buy the morning rally in hopes it would zoom higher as it has in recent dips. However, this time, the bears seem to be willing to fight, and for a good reason. First, soaring energy prices are and will continue to pressure the inflation worries, with all products moving higher as a result. In addition, with winter on the way keeping your home warm will be double the cost or more than just last year. Finally, with food, energy, and shelter costs consuming a more significant portion of income, companies may find it challenging to compete for the remaining disposable income. The consensus suggests the JOLTS report could top 11 million job openings today and could move the market, but I suspect we will again see choppy price action as we wait for JPM earnings, a reading on CPI, and the FOMC minutes on Wednesday.

Trade Wisely,

Doug

Supply Chains and Energy Lead News

October 12, 2021 by Ed Carter

Markets mostly recovered in the premarket Monday, to give a tiny gap down in the large-cap indices and a four-tenths of a percent gap down in the QQQ. However, the whipsaw was in effect and we got an immediate strong rally into the highs of the day during the first hour. At that point, markets ground sideways for a couple of hours before beginning a strong and protracted selloff that took us out on the lows. This left us with ugly black candles with large upper wicks in all 3 major indices. The SPY and QQQ both gave up the 8ema, while the DIA closed while testing that level. On the day, SPY lost 0.72%, DIA lost 0.73%, and QQQ lost 0.77%. The VXX rose to 25.12 and T2122 fell back to 43.40 (mid-range). 10-year bond yields were just below flat at 1.612% and Oil (WTI) rose 1.5% to $80.51.

During the day, MRK submitted its request to have FDA approve its new anti-viral treatment (not vaccine) pill for emergency use. The company says the data shows it improves survival and hospitalization rates by 50% for mild to moderate cases of Covid. This comes as the 7-day average of new cases in the US falls below 85,000 and a few days before the FDA is scheduled to debate and vote on approval of the MRNA and JNJ vaccines for booster use. The independent panel is expected to approve the booster shots of those two vaccines, since it previously said the panel was frustrated that only the PFE vaccine was available for boosters.

Bitcoin surged back above $57,000 on the day. The primary drivers appear to be that the head of the SEC and Fed Chair Powell said they have no intention of banning Bitcoin. In addition, several Bitcoin or other cryptocurrency EFTs are the works that are expected to be approved and launched soon, thereby allowing many new buyers into that market.

For the first time in perhaps decades, coal is center stage on the economic front. The shortage of coal is causing major problems for several countries, including China and India. Global logistics issues and massively increasing demand seem to be the main causes. However, in China the country is also trying to achieve global climate emissions standards. One might think this could help the shortage, but in order not to shut down one region’s businesses entirely they have instituted rolling brownouts and scheduled power cuts nationwide to help achieve their goals. This means that coal needs to be everywhere in the country at the point the local power plant is allowed to go back online, which prohibits the centralization of coal inventories. As of now, India’s power plants are down to an 8-day supply of coal on average, with some as few as 2 days of supply. Coal accounts for 70% of India’s electricity. In China, coal prices have hit a record as both supply shortages coming into the country and massive logistics challenges are hampering the situation. This includes mass flooding in China’s main coal production region, which has 60 coal mines offline due to floods. Coal accounts for 60% of China’s power production.

Overnight, Asian markets leaned heavily to the red side. Some of the smaller exchanges, like Malaysia (+0.83%) and Thailand (+0.62%) managed gains. However, most followed Shenzhen (-1.62%) Hong Kong (-1.43%), and South Korea (-1.35%). In Europe, stocks are also mostly in the red on smaller moves as of mid-day. Denmark (+1.36%) is the clear exception to the rule, but the FTSE (-0.35%), DAX (-0.30%), and CAC (-0.46%) are more typical of the region in early afternoon trading. As of 7:30 am, US Futures are pointing to a start to the day just on the green side of flat. The DIA is implying a +0.05% open, the SPY implying a +0.10% open, and the QQQ implying a +0.28% open at this hour. 10-year bond yields are down to 1.596% and Oil (WTI) is up another half of a percent as the Dollar is dead flat in early trading.

The only major economic news scheduled for release on Tuesday is the August JOLTs (10 am), and the WASDE world Ag report (noon). However, there are a couple of Fed speakers (Clarida at 11:15 am and Bostic at 12:30 pm). There are also no earnings reports scheduled for the day as the market prepares for earnings season to begin on Wednesday.

Premarket prices are recovering from the overnight lows at this point and seem headed toward a slightly green open. However, a downtrend remains intact and the bears have the momentum both from overseas and Monday’s US price action. That said, don’t be surprised if Tuesday is a quiet day as markets get ready for earnings season, which kicks off again before the open tomorrow. Trade carefully and don’t get caught up in the need for action or FOMO.

Watch your current positions before looking to add trades. Remember that it’s discipline and good trading rules that protect us from our own worst mistakes. So, focus on your trading process and on managing the things you can control. Consistently take profits when you have them. Don’t let greed get the better of you. Finally, remember that we have monthly options expiring at the end of the week. So, it’s time to think about closing, rolling, or riding into expiration with very little time value left.

Swing Trade Ideas for your consideration and watchlist: FCEL, MGM, APRE, NKE, AMD, BX, GOTU, CRM, MSFT, FCX, OPEN. 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

Range-Bound Below the 50

October 11, 2021 by Doug Campbell

After gapping up, Friday proved to be a day of rest with the indexes chopping and range-bound below their 50-day averages. Unfortunately, we could see more of the same chop today with the Federal holiday, Columbus Day, closing the bond markets and banking. In addition, with no earnings events or Economic calendar reports finding inspiration could be challenging. We may, In fact, have to wait until Wednesday when JPM kicks off earnings season and investors search for taper clues in the FOMC minutes later the same day. As we used to say in the Army, hurry up and wait.

Asian markets traded mixed overnight with tech surging. European markets trade mixed but mostly lower this morning, as the U.S. point to a lower open to begin the week with oil surging over $81 per barrel.

Economic Calendar

Earnings Calendar

Although we have nine companies listed on the earnings calendar, none of them are confirmed. Consequently, there are no notable reports this Monday.

News & Technicals’

Merck said it asked the FDA to authorize emergency use of its experimental antiviral pill to treat mild-to-moderate Covid-19 in adults. Phase three clinical trial data showed that the drug molnupiravir reduced the chances that patients newly diagnosed with Covid were hospitalized by about 50%. The experimental drug could be available to Americans by late this year. Southwest has canceled more than 1,800 flights over the weekend. The Dallas-based airline blamed the disruptions on air traffic control issues, bad weather, and staffing shortfalls. The energy crises in mainland China and Europe are the latest to roil shipping. Capital Economics noted that the number of ships waiting outside Chinese ports had jumped again in recent weeks. Factory shutdowns in Vietnam, where many firms moved manufacturing amid the U.S.-China trade dispute, have also affected the production of many goods. U.S. bond markets are closed due to the Columbus Day Federal Holiday.

The indexes spent most of the day Friday chopping and range-bound as they struggled to find the energy below their 50-day averages. With the bond markets and banking closed for Columbus Day, I would not be all that surprised to see the choppiness continue today. With nothing on Economic Calendar and no verified earnings reports, we struggle to find inspiration. Perhaps the political debt ceiling wrangling and sound bite jousting over the social programs bill could inspire, but it is more likely to inject volatility into the chop. This week traders will search for clues of taper in the Wednesday FOMC minutes and the kickoff of 4^th quarter earnings with the big banks with JPM Wednesday morning.

Trade Wisely,

Doug

Oil Surge, GDP Forecast Cut Start Week

October 11, 2021 by Ed Carter

Markets gapped slightly higher at the open, in a counter-intuitive move to the Sept. Payroll Additions coming in less than half of expected (+194k vs +500k estimate). At the same time, the Unemployment rate fell much further than expected (to 4.8%) as participation also dropped. Regardless, despite the gap higher of about four-tenths of a percent, all 3 major indices immediately gave back that gap. The large-cap indices spent the rest of the day in a roller-coaster ride to nowhere as markets chopped sideways. However, the QQQ kept selling of until it started its own sideways chop in the early afternoon. This left us with Bearish Engulfing candles of various sizes in all 3 major indices. On the day, SPY lose 0.18%, DIA lost 0.03%, and QQQ lost 0.50%. The VXX fell just under 2% to 24.79 and T2122 fell outside the overbought territory to 70.85. 10-year bond yields jumped up to 1.614% and Oil (WTI) gained 1.5% to $79.48/barrel.

After the close, the Organization for Economic Cooperation and Development (OECD) announced a major breakthrough. The 136 countries agreed to a global minimum corporate tax rate of 15%. This includes the agreement of smaller “tax haven” countries like Ireland. The breakthrough came after the countries agreed that the 15% rate will not be increased at a later date. The deal will ensure that companies pay tax in the countries in which they operate rather than shifting money to a tax haven to avoid taxes by creative accounting. The new deal is scheduled to start in 2023, but some countries have work to do inside their own laws to implement the agreement.

On Sunday, GS cut their forecast for US economic growth for 2021. Although it was a small cut (to 5.6% for the year versus the previous 5.7%), they also reduced the 2022 forecast substantially, from 4.4% to 4.0%. The stated reason for the move was a delay in the recovery of consumer spending. This may well be reflected in earnings reports that start again this week. They also cited their current assumption is that chip supplies will not recover until at least the second half of 2022. The potential good news from this report was that they increased out-year growth forecasts based on a later recovery in consumer spending and removal of semiconductor shortage restraints from the economy.

LUV had a rough weekend. The airline had to cancel more than 1,800 flights, well over 27% of its schedule. The company blamed the disruptions on air traffic controllers and bad weather. While LUV would not comment on whether staff shortages contributed to the outages, but the company has stated in the past that they have had trouble hiring enough new staff since the pandemic. Oddly, in the same region of the country where LUV reported its outages, AAL only had to cancel 2% of their flights and SAVE only canceled 4% of its schedule.

Overnight, Asian markets were mixed, with the majority of exchanges in the red, but the big movers on the green side. Hong Kong (+1.96%) and Japan (+1.60%) were the winners on the day. The odd part of the Hong Kong rally was that Chinese Tech stocks surged higher even after a Chinese regulator slapped a $534 million fine on a giant food delivery app. BABA jumped nearly 8% on the Hong Kong exchange. In Europe, stocks are also mixed, but lean to the red side at mid-day. The FTSE (+0.32%), DAX (-0.36%), and CAC (-0.26%) are typical of the continent in early afternoon trading. As of 7:30 am, US Futures are pointing toward an open lower. The DIA is implying a -0.21% open, the SPY is implying a -0.38% open, and the QQQ is implying a -0.61% open at this hour. However, the major overnight news is another huge rally in Oil. The WTI is up almost 3.5% in early trading to $81.97.

There is no major economic news scheduled for release on Monday. There are also no major earnings reports scheduled for the day.

The bears are starting the week with follow-through to Friday’s Bearish Engulfing signals, especially in the tech-heavy Nasdaq. Add to that the huge jump in Oil prices and we can expect a lot of fear in the markets at least early today. We also have earning season kicking off again, new inflation data, and a slew of Fed speakers later in the week. So, a bumpy ride is likely to continue. Be prepared for intraday volatility, gaps, and remember that the trend remains bearish.

Once again, bear in mind that you don’t have to trade every day or week. Either way, watch your current positions before looking to add trades. Remember that it is discipline and good trading rules that protect you from your own worst mistakes. So, focus on your trading process and managing the things you can control. Most importantly, consistently take profits when you have them. Don’t let greed get the better of you. Finally, remember that we have monthly options expiring at the end of the week. So, it’s time to think about closing, rolling, or riding into expiration with very little time value left.

Swing Trade Ideas for your consideration and watchlist: HUT, SOFI, BTU, GOTU, BEKE, SQQQ, ORCL, MRVL. 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

Bulls Recovered Ground

October 8, 2021 by Doug Campbell

The bulls recovered a lot of ground in yesterday’s short squeeze but fell short of breaking downtrends or breaching price resistance levels. With bonds on the rise this morning, there is a lot at stake as we wait on the Employment Situation report. Consensus is looking for a growth of 500,000 nonfarm payrolls. There is a fine line here; an overly robust report could set the stage for a Fed taper, or a miss on the expectation could both bring back the bears. What do we love the most; jobs or newly printed money? That could be the question of the day?

The Chinese market reopened after a 4-day holiday with a modest rally as the Nikkei surged 1.34%. European market trade cautiously lowers this morning as they wait on the U.S. Jobs data. However, U.S. is trying to put on a brave face ahead of the data pointing to modest gains ahead of the release. So will Friday be a winner or loser? Your guess is as good as mine. So let’s hurry up and wait.

Economic Calendar

Earnings Calendar

We have no notable reports on the Friday earnings calendar as we make our way toward the 4^th quarter reports that begin next week.

News & Technicals’

Ireland, which held out against the global minimum tax, gave in yesterday, raising its corporate tax rate from 12.5% to 15%. The new rate will affect 1556 companies in Ireland employing 500k people, including AAPL, GOOG, AMZN, and FB. In addition, the Senate Democrats passed the short-term debt ceiling increase to allow a 450 billion limit that should get the government to December 3^rd. The bill will not move to the U.S. for a vote. Tesla officially moved its headquarters from Palo Alto, California, to Austin, Texas CEO Elon Musk announced at its 2021 annual shareholder meeting. In April 2020, on a Tesla earnings call, Musk lashed out at California government officials calling their temporary Covid-related health orders “fascist” in an expletive-laced rant. Fed Governor Lael Brainard should figure prominently as President Joe Biden weighs who will chair the central bank and specifically supervise banks. Even without getting the chair’s position, Brainard can be a major influence on banks. If she is not nominated as chair, she’s a good bet to be named the vice chair for supervision. There are likely three areas where her influence would be most felt: Climate change, central bank digital currency, and getting banks to raise capital during prosperous times. Treasury yields traded higher on Friday morning, with the 10-year hitting 1.601% before setting back down to 1.598%. The 30-year climbed to 2.157%.

The bulls recovered a lot of ground yesterday on the technical front, squeezing out short traders as the Dow tested its 50-day average as resistance. The Spy came close to a 50-day average test but ran into some price resistance, as did the QQQ, before pulling back, leaving behind some shooting star candle patterns. The overall downtrends remain intact as we turn out attention to the Employment Situation number. Consensus is looking for 500,000 nonfarm payroll increases and expects unemployment to fall from 5.2% to 5.1%. With futures relatively flat ahead of the report, a hopefulness job grew but an evident uncertainty as we wait. A strong number could set the stage for a Fed taper to begin, bringing out the bears. So buckle up it could prove to be wild price action morning.

Trade Wisely,

Doug

Sept Payrolls Data Leads The News Today

October 8, 2021 by Ed Carter

Stocks gapped higher and followed through the first half-hour Thursday on relief over a deal to temporarily raise the debt limit. However, from 10 am until 1:30 pm we saw a sideways grind in a very tight range and then a selloff all the way into the close. This left all 3 major indices pretty much where they started the day in something resembling a Shooting Star candled after a 2-day relief rally. On the day, SPY gained 0.86%, DIA gained 1.03%, and QQQ gained 0.92%. The VXX fell to 25.26 and T2122 shot all the way up deep into the overbought territory at 89.95. 10-year bond yields spiked again to 1.569% and Oil (WTI) gained 1.78% to $78.81/barrel.

Overnight the Senate passed a short-term minimal increase in the US debt limit. The House will take up the bill in the next couple of days, but the Senate was the hurdle, due to Senate rules requiring 60 votes. The $480 billion increase basically kicks the can down the road to December 3, when the country will face exactly the same problem again. That is also the date the temporary budget extension expires. So, December 3 becomes critical for both a government shutdown and default on US debt.

Overnight, the Chinese Central Bank (PBOC) withdrew over $2 trillion dollars in liquidity from their banking system. Not only was the move massive, but it broke the trend whereby they had added about $16 billion in liquidity each day of the previous week (that preceded the Chinese 5-day holiday). The big reduction was seen as a signal that the Chinese government now feels that the Evergrande default situation is under control and the system no longer needs emergency liquidity. Chinese 10-year bond prices fell 0.4% in reaction (a massive move), but have started to creep back up as their day went on.

In other business news, TSLA announced Thursday that it is moving its corporate headquarters to Austin Texas (from Palo Alto CA). This comes 17 months after CEO Elon Musk had first threatened the move while he fought with local CA government officials over Covid restrictions. In the announcement of the move, Musk took another swipe at CA, saying TSLA workers can’t afford the cost of living in CA. However, that does not seem to be the real concern. At the same event, it was announced that while corporate jobs are moving to Texas, the CA production plant will remain in place and is still planned to expand by 50%. So, it seems the company is not concerned about their production workers’ ability to afford the cost of living in that area.

Overnight, Asian markets leaned heavily to the green side. Japan (+1.34%), Indonesia (+1.02%), and Australia (+0.87%) led the way. On their first day of trading in over a week, Shanghai (+0.67%) and Shenzhen (+0.74%) both closed higher. In Europe, markets are more mixed at mid-day. The FTSE (+0.05%) and DAX (-0.09%) are flat, while the CAC (-0.35%) is down a bit. Part of the indecision on the continent comes from Poland, where judges have ruled that Polish law is supreme over EU law, which raises the specter of a potential exit from the EU by Poland. As of 7:30 am, US Futures are pointing toward an open just on the green side of flat. The DIA and SPY are both implying a +0.12% open, and the QQQ is implying a +0.10% open. 10-year bond yields reached above 1.6% overnight, but have retreated to a still higher 1.58% in early morning trading. Meanwhile, Oil continues its rally, up almost another percent in early trading.

The major economic news scheduled for release on Friday includes Sept. Nonfarm Payrolls, Sept. Participation Rate, Sept. Unemployment Rate, Sept. Building Permits, and Sept. Avg. Hourly Earnings (all at 8:30 am). There are no major earnings reports scheduled for the day.

Yesterday’s late-day fade, leaving us with large high wicks does not breed a lot of confidence that the relief rally has legs. However, so far this morning, markets seem to be waiting on the Payrolls data before making up its mind. Also bear in mind that earnings season kicks off in earnest again next week. So, with the weekend ahead and a lot of positioning to do, expect the volatility of intraday swings to continue.

Watch your current positions before looking to add trades. Remember that it is discipline and good trading rules that protect you from your own worst mistakes. So, focus on your trading process and managing the things you can control. Most importantly, consistently take profits when you have them. Don’t let greed get the better of you. A good trader refuses to let winners turn into losers.

Swing Trade Ideas for your consideration and watchlist: No Trade Ideas for Friday. 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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Short-term Debt Ceiling Solution

October 7, 2021 by Doug Campbell

The market found some levity yesterday after the R’s offered the D’s a short-term debt ceiling solution providing the bulls the necessary energy to defend support levels. The relief was nice, but the rally did not resolve overhead resistance, chart technical damage, overall downtrends. This morning we will turn our attention toward Jobless Claims and then might see some choppy price action as we wait for the Friday Employment Situation data. Because the D’s don’t much like the offer, expect the debt ceiling battle to create more bumps in the market as they toss sound bites at each other.

With China’s markets still closed, all other Asian markets traded higher overnight, with the HSI shaking off developer defaults to rise 3.07%. European markets are also in relief rally mode this morning, seeing nothing but green across the board. Ahead of Jobless Claims and buoyed by a possible debt ceiling solution, futures point to a bullish gap open but watch overhead resistance levels for entrenched bears that might not give as easily as they have before.

Economic Calendar

Earnings Calendar

Although we have more companies listed on the earnings calendar than we have seen all week, most of them are unconfirmed. The only notable reports I could come up with are CAG & HELE.

News & Techniclals’

On Wednesday, Senate Minority Leader Mitch McConnell offered a short-term suspension of the U.S. debt ceiling to avert a national default. “We will also allow Democrats to use normal procedures to pass an emergency debt limit extension at a fixed dollar amount,” McConnell wrote. The stopgap offer from McConnell would take some pressure off both parties to reach a compromise by Oct. 18, when the government says they could default. But, of course, the Democrats are not happy with the proposal and will likely take the fight right up to the deadline. Russia rode to Europe’s rescue and offered to increase gas supplies to the region amid soaring prices on Wednesday. Experts said the move showed Europe is now essentially at Russia’s mercy when it comes to energy. Of course, the U.S. has been warning for years that, just as the U.S. had warned. Natural gas contracts hit new highs in Europe this week — and regional benchmark prices are up almost 500% so far this year. Toy manufacturers are grappling with a massive bottleneck in the global transportation pipeline caused by the coronavirus pandemic and worsened by the blockage of the Suez Canal in March. Power outages in China, a resin shortage, and higher labor costs have also strained the supply of goods and increased prices. MGA Entertainment had anticipated 50% sales growth this year but now expects to grow by 18% to 20%. Treasury yields fell slightly this morning, with the 10-year slipping less than one basis point to 1.516% and the 30-year dipping less than one basis point to 2.069%.

After hearing that the GOP offered a short-term debt ceiling solution, the bulls got busy defending price supports and ending a very volatile whipsawing morning session. However, the Democrats don’t like the offer, and we can expect this political drama to extend to the deadline. Unfortunately, yesterday’s rally did not resolve any of the charts’ technical damage, so we will still have to closely watch overhead resistance levels that may harbor entrenched bears. This morning the market will turn its attention to the Jobless claims number that has proved problematic over the last couple readings. Though futures are pumping up the premarket, keep in mind with the Employment Situation number looming Friday morning, it would not be uncharacteristic for the price action to become light and choppy as we wait. Also, keep in mind the Shanghai will reopen tonight, having to catch up with the developer default impacts.

Trade Wisely,

Doug

Debt Default Avoidance Cheers The Bulls

October 7, 2021 by Ed Carter

Markets gapped down strongly Wednesday and then went on an all-day roller coaster ride as volatility reigned. However, the mid-afternoon bullish wave coming from good news on a possible debt ceiling deal and then strong buying the last 20 minutes left us near the highs. This gave us gap-down, big white candles that have managed to close above the T-line (8ema) in the large-cap indices and is just below it in the QQQ. On the day, SPY gained 0.42%, DIA gained 0.29%, and QQQ gained 0.64%. However, it is worth noting that the downtrend still remains unbroken. The VXX fell slightly to 26.21 and T2122 fell back to the lower end of the mid-range at 38.96. 10-year bond yields fell, but only a bit, to 1.528%, and Oil (WTI) fell 2.5% to $76.94/barrel.

During the afternoon, GOP Senate Minority Leader McConnell offered Democrats a short-term suspension (until December) of the debt ceiling and said Republicans would not block the Democrats from using the reconciliation process (which only requires a majority vote in the Senate, not 60 votes) to raise the debt limit permanently. Markets loved this news and rallied hard shortly afterward. Essentially, this move is the GOP saying they want the debt ceiling raised (to avoid default), but they also want the Democrats to do it on their own. After the close, Democrats signaled that they will accept the short-term suspension. This takes the pressure off (kicks the can) and bond markets are likely to be happy with this development.

K announced it is planning to restart operations at 4 plants that have been closed this week by a strike among 1,400 workers who are seeking wage increases. The company said that it plans to use salaried employees as well as “third-party resources” to operate the plants. This is the latest in a string of strikes this fall among various food manufacturers such as PM (Nabisco), PEP (Frito Lay), and MDLZ (Oreo).

In other business news, GM said Wednesday that they expect to double sales by 2030. They expect their new emphasis on electric vehicles to be aided by regulations around the globe, forcing more vehicle owners to upgrade sooner. Bitcoin also soared 10%, back above $55,000 on a Bloomberg report that George Soros both owns cryptocurrencies now and has plans to expand his fund’s holdings in this area because he sees crypto as more than just an inflation hedge.

Overnight, Asian markets were strongly green for the most part, but mainland China remains closed another day. Hong Kong (+3.07%), Taiwan (+1.96%), and South Korea (+1.76%) led the charge. In Europe, markets are also thrilled about the avoidance of a US default. At mid-day, the FTSE (+1.20%), DAX (+1.32%), and CAC (+1.63%) are typical of the continent. As of 7:30 am, US Futures are pointing a gap higher. The DIA is implying a +0.83% open, the SPY implying a +0.94% open, and the QQQ implying a +1.19% open. 10-year bond yields are also down and Oil (WTI) is off 1.50% in early morning trading.

The major economic news scheduled for release on Thursday is limited to Weekly Jobless Claims (8:30 am) and a Fed speaker (Williams at 8:40 am). The major earnings report scheduled for the day includes CAG, HELE, and LW before the open. There are no major reports scheduled for after the close.

Relief on the assumption the US will not default on its debt gave the bulls strong afternoon energy and it appears overnight confirmations are giving them strength again early today. We should still remain leery of volatility and resistance. However, as of this moment, it looks like we will challenge the downtrend in all 3 major indices at the open. Just bear in mind that a challenge does not guarantee success and a break of the downtrend does not mean a bullish trend immediately replaces the bearish one. So, be careful getting carried away by FOMO.

Swing Trade Ideas for your consideration and watchlist: CDAY, DLPN, SPWR, RSG, APPS, DDOG, WFC, AIG, C, MSFT, MRVL, UBER. 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