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Relief Rally or Dead Cat Bounce?

October 6, 2021 by Doug Campbell

This morning as we wait for the private payrolls number, it looks as if we could suffer a punishing overnight reversal making yesterday’s rally nothing more than a dead cat bounce. However, with worries about the debt ceiling, spiking energy prices, and rising bond yields, the ADP number will have some weighty lifting to do if it’s going to inspire the bulls. With the 200-day moving averages within striking distance, I would not rule out the possibility they get tested as support. So buckle up; it could be a wild price action day as the market try’s to digest the data and quantify its fears.

Asian markets saw nothing but red across the board overnight except for China closed for a holiday. European markets trade decisively bearish this morning, with the DAX and CAC down more than 2%. With an ADP number just around the corner, U.S. futures point to a punishing overnight reversal the may take back all of yesterday’s rally and then some at the open.

Economic Calendar

Earnings Calendar

We have nine companies verified to report on the Wednesday earnings calendar. Notable reports include AYI, STZ, LEVI, & RPM.

News and Technicals’

Facebook whistleblower Frances Haugen testified before a Senate panel Tuesday, telling lawmakers they must intervene to solve the “crisis” her former employer’s products created. Haugen unmasked herself Sunday as the source behind leaked documents at the core of a revealing Wall Street Journal series about Facebook. She was a product manager on Facebook’s civil integrity team. Facebook CEO Mark Zuckerberg on Tuesday addressed claims made by whistleblower Frances Haugen, denying that the company prioritizes profits over user safety. In her annual policy address on Wednesday, Hong Kong’s controversial national security law and electoral changes have brought the city “back on the right track,” Chief Executive Carrie Lam said. OPEC+ is sticking to an earlier pact on oil output despite calls for more crude production. John Driscoll, the chief strategist at JTD Energy Services, said that OPEC+ decision was a “very prudent course of action” until one considers the ongoing energy crises and possible supply disruptions. Oil prices jumping to $100 per barrel is possible, but Driscoll said it’s not sustainable. Treasury yield moved higher this morning, with the 10-year rising 3-basis points to 1.56% and the 30-year jumping 4-basis points to 2.137%.

Yesterday’s bounce was nice but did nothing to resolve the overhead resistance or technical damage, and now it looks as if it was nothing more than a dead cat bounce. Debt ceiling worries, surging energy prices, and rising bond yields are just a few of the issues continuing to motivate the bears in a possible overnight reversal. As a result, traders picking up new long positions yesterday will likely feel a bit betrayed this morning. For years traders have been conditioned to buy the dip, but that activity can heavily damage accounts in a market correction and outright destroy them if this turns into a full-on bear market. With the 200-day moving average within striking distance in the DIA and QQQ, we can not rule out the market’s potential to test those levels in the near future. Of course, if the ADP number comes in surprisingly bullish, that could change sentiment. However, should it come in less than expected, it could also create a bearish pile-on selloff. So hang on tight; it could be a wild day!

Trade Wisely,

Doug

Bears Looking to Roar As Bond Rates Rise

October 6, 2021 by Ed Carter

Markets gapped higher and the bulls followed through all morning. However, this turned into a sideways grind in a tight range followed by a hard selloff in the last 45 minutes of the day. This left us with a Bullish Harami in the QQQ and gap-up white candles with larger upper wicks in all 3 major indices. Leading this charge were the FANGMAN stocks that led us lower Monday. However, none of the indices were able to take out their T-line. On the day, SPY gained 1.04%, DIA gained 0.92%, and QQQ gained 1.35%. The VXX fell almost 4% to 26.55 and T2122 remains in the mid-range at 60.68. 10-year bond yields shot higher to 1.531% and Oil (WTI) gained almost 2% to $79.15/barrel.

FB can’t catch a break on the news front. After a 6-hour outage on Monday, the US Senate spent most of Tuesday hearing testimony from a FB whistleblower (Frances Haugen) and making their own attacks on FB and CEO Mark Zuckerberg. The 4 main takeaways from Haugen’s testimony are that: 1) FB mechanics are designed to aid in the spread of misinformation (because the controversial or salacious draws eyes and clicks); 2) FB knows this and has decided to take the minimum possible steps to curb such posts; 3) FB has research showing the negative impacts of the platform on children and teens (especially young girls), and has decided to mislead the public about the topic rather than admit the problems; 4) FB knows its platform enables exploitation but has prioritized profits over those issues in every case, even when the impact to profit had been deemed tiny by management. During the day, FB responded with a statement essentially saying that Haugen wasn’t knowledgeable about the things she was claiming and they totally disagree with her characterizations. Despite the all-day beating in the press, FB stock rebounded to close up 2% from the terrible day it suffered Monday. Then overnight, Zuckerberg responded saying the testimony was not true and the company does not prioritize profits over user safety.

Mortgage rates jumped to an average of 3.14% for a 30-year fixed-rate, conforming loan for the week. This led to a 2% decline in new purchase mortgage applications while refinance applications plummeted 10%. This came to an overall fall of 7% for loan applications for the week.

STZ reported a miss on earnings but did beat on revenue. However, AYI beat on both lines in this morning’s report. News also broke this morning that PLTR has received an Army contract overnight. STX got a downgrade from Morgan Stanley. Finally, SWX announced a deal to a pipeline from D for just under $2 billion in cash and assumed debt.

Overnight, Asian markets are mostly in the red. South Korea (-1.82%), Japan (-1.05%), and India (-0.99%) led the losses. However, Indonesia (+2.06%), and Malaysia (+1.89%) bucked the trend. Mainland Chinese markets remain closed. In Europe, markets are deeply in the red across the board as of mid-day. Analysts claim another overnight spike in the US 10-year bond rate led to the European selloff. The FTSE (-1.79%), DAX (-2.28%), and CAC (-2.17%) lead and are typical of the continent in early afternoon trading. As of 7:30 am, US Futures are pointing toward a nasty gap down on our side of the pond as well. The DIA is implying a -0.96% open, the SPY implying a -1.11% open, and the QQQ implying a -1.27% open. 10-year bond yields are up strongly to 1.55% and Oil is mildly lower as the Dollar is up sharply in early trading.

The major economic news scheduled for release on Wednesday includes ADP Nonfarm Employment (8:25 am), Crude Oil Inventories (10:30 am) and Fed member Bostic speaks twice (9 am and 11:30 am). The major earnings reports scheduled for the day include AYI, RPM, and STZ before the open. Then after the close LEVI reports.

As mentioned yesterday, calling a bottom can be a very risky business. It looks like the bears are looking to punish anyone who jumped on the rally train Tuesday. With the 3 major indices all near their premarket lows, this could be an ugly open. The trend remains bearish and the resistance overhead remains plentiful. So, be careful, and regardless of the direction you trade, be prepared for heavy volatility and intra-day swings.

Once again, remember that you do not need to trade every day or even week. Cash is a position. So think about waiting, if you want to go long in this market, or at the very least hedging your portfolio. Watch your current positions before looking to add more trades. 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 (or FOMO) 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 today. 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.

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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Tech Pain, FB Outage, and the Debt Ceiling

October 5, 2021 by Ed Carter

Markets gapped lower and the bear piled on with a very strong sell-off that lasted until noon. Then we saw a short relief rally leading into a sideways grind until the end of the day. However, a heavy buying pressure the last 5 minutes brought us up off the lows. This left us with large black candles that have good-sized lower wicks and there was no confirmation for Friday’s Bullish Harami signals. In particular, the tech giants (like TWTR, FB, AMZN, AAPL, MSFT, GOOG) that have led the long rally got hammered hard again. On the day, SPY lost 1.27%, DIA lost 0.92%, and QQQ lost 2.07%. The VXX was up 3% to 25.57 and T2122 is at the lower side of the mid-range at 44.61. 10-year bond yields backed off of premarket highs to end up at 1.482% and Oil (WTI) jumped another 2.20% to $77.55/barrel.

During the day, FB (as well as their subsidiaries Instagram and WhatsApp) suffered a global outage for more than 4 hours. The problem was caused by human error in the configuration of a server backbone (network between servers). This was the service’s worst outage since 2008 when FB had only 80 million monthly users instead of the current number of almost 3 billion. In other FB news, the company filed a motion requesting that the FTC’s legal case against the company (for monopolistic behavior) be thrown out and that FTC Chair Khan recuse herself from all future regulatory matters pertaining to FB.

PEP beat on both lines this morning. In addition, the company raised 2021 guidance. It did this despite higher costs from its supply chain (transportation, ingredients, labor, etc.). On the downside, North American sales growth moderated to 7%, and the Quaker Foods unit saw only 1% growth for the quarter. In other business news, SPWR announced a restructuring this morning. The move will shift the company’s focus to the booming residential solar market and sell off its commercial and industrial business units.

Also during the day yesterday, President Biden called on Congress to raise the debt limit in the next 2 weeks to avoid a first-ever default on US debt. This did nothing to change the facts but did raise fears in the bond markets. The President blamed Republicans for blocking efforts to raise the limit while claiming they are responsible for over $8 trillion of debt from the previous administration. He did not mention that this $8 trillion amounts to only 27% of the almost $29 trillion in our current national debt (or who he blames the other 73% on). Regardless, the GOP will not vote for any increase before the 2022 elections. So, the Democrats will be forced to do it unilaterally to avoid a default. (Then Republicans will persecute them for doing so in the mid-term election. This is exactly the opposite of both party’s positions in 2004 and 2006. So, it is a tried-and-true political game plan.) Treasury Sec. Yellen doubled down on the message this morning, by saying the nation faces a significant recession if we default.

Overnight, Asian markets leaned to the red side as mainland China remains closed. Japan (-2.19%) led the losses with South Korea (-1.89%) and New Zealand (-1.03%) following. India (+0.74%), Thailand (+0.60%), and Malaysia (+0.52%) led gainers. In Europe, outside of Norway (-0.36%), the region is green across the board at mid-day. The FTSE (+0.62%), DAX (+0.40%), and CAC (+0.95%) are typical of the spread we see in early afternoon trading. As of 7:30 am, US Futures are pointing toward a positive open. The DIA is implying a +0.50% open, the SPY implying a +0.45% open, and the QQQ implying a 0.40% open. 10-year bond yields are also up to 1.496% and Oil is at $78.41/barrel in early trading.

The major economic news scheduled for release on Tuesday includes August Import/Exports, and August Trade Balance (both at 8:30 am), September Services PMI (9:45 am), September ISM Non-Mfg. PMI (10 am), and a Fed speaker (Quarles at 1:15 pm). The only major earnings report scheduled for the day is PEP before the open.

The FAANG stocks started the week by taking a beating, but look to be trying to rebound at the open Tuesday. It looks as if “recovery stocks” such as banks, retail, and transports are also looking to move higher at the open. With that said, there is a lot of resistance above and the short-term trend has been strongly bearish the last few weeks. So, be very careful about calling a bottom. Knife-catchers usually lose fingers. At the very least, expect volatility to continue.

Remember that you do not need to trade every day or even week. Think about waiting, if you want to go long in this market, or at the very least hedging your portfolio. 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 (or FOMO) get the better of you. A good trader refuses to let winners turn into losers.

Swing Trade Ideas for your consideration and watchlist: HUT, AMN, OMC, CLDX, QS, AIG, XLU, LOW, DOG, SQQQ, UVXY. 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

Tech Under Pressure

October 5, 2021 by Doug Campbell

With tech under pressure yesterday, the attempt to pump up the open in the premaket found sellers reversing the hope of relief shortly after the open. This morning the futures once again point to a hopeful relief rally, but with significant jobs data just around the corner, can we trust bulls to hang in and fight? No matter what happens with the VIX elevated, expect the price action to challenge us with whipsaws and reversals. Keep a close eye on overhead resistance levels for entrenched bears that will likely not easily give up their current dominance of the trend.

With China closed, Asian markets traded in a choppy session, with the Nikkei falling more than 3% in early trading but recovered to close down 2.91%. However, European markets are trying to shake off market worries, trading in the green this morning across the board. U.S futures have also recovered from overnight lows, pointing to a bullish open ahead of Trade and ISM Services data.

Economic Calendar

Earnings Calendar

We have just two verified reports on the Tuesday earnings calendar, and both PEP & SAR are notable.

News and Technicals’

PepsiCo on Tuesday raised its full-year forecast after its quarterly earnings and revenue topped analysts’ expectations. In addition, the company’s organic revenue climbed 9% in the quarter. New Zealand has become the latest country to abandon a “zero Covid” strategy, a decision that comes as the delta variant of the virus proved too potent to stop. A “zero Covid” policy seeks to eliminate community transmission of the virus. However, experts say the highly infectious delta variant makes that tricky. President Joe Biden on Monday blamed Republicans for blocking efforts to raise or suspend the U.S. borrowing limit and avert a first-ever default on the national debt. Republicans are “threatening to use their power to prevent us from doing our job: Saving the economy from a catastrophic event,” Biden said. China needs to bolster its coal supply to avoid an economic slowdown this quarter, but Beijing’s icy relations with Australia could make that difficult, according to Japanese investment bank Mizuho. The world’s second-largest economy is facing a power shortage owing to a combination of factors such as extreme weather, surging demand for Chinese exports, and a national push to reduce carbon emissions. China generates most of its electricity by burning coal, but major power plants’ inventory reached a 10-year low in August.

Although futures point to a rebound this morning, the technical damage in the chats worsened yesterday, with SPY and QQQ creating news lows with tech under pressure. The T2122 indicator suggests we have not reached an oversold condition, so we can’t rule out additional selling. However, it would also be unwise to rule out the possibility of a relief rally. Markets rarely fall in a straight line and are more commonly a very volatile process with big swings between the lows and highs of the downtrend. Should the bulls step up, it could provide some excellent relief, but don’t ignore the overhead resistance or forget the market-moving jobs data later this week. With the 200-day averages now within striking distance on the DIA and QQQ at a test of that, technical support is not out of the question. With the VIX elevated, we should also expect erratic price action, whipsaws, and reversals to challenge a trader’s discipline and trade plan.

Trade Wisley,

Doug

A Friday Short Squeeze Rally

October 4, 2021 by Doug Campbell

After gapping up then testing recent lows, the bulls stepped up to defend, resulting in a short squeeze rally to end the week. Unfortunately, though it provided some sweet relief in the selling, it did nothing to repair the technical damage in the DIA, SPY, and QQQ index charts that remain in a downtrend and under significant overhead price resistance. In addition, Evergrande missed another 120 million bond payment on Sunday, once again raising concerns about a debt bubble contagion spreading. So get ready for another week of uncertainty as we wait on Private Payroll data and the Friday Employment Situation report.

Overnight Asian market mainly traded lower, with the HSI falling 2.19% after halting Evergrand trading. China’s markets will be closed until Friday due to a holiday. European markets traded mixed this morning with very modest gains and losses. U.S. futures point to a bearish open but off overnight lows to begin a busy week of jobs data.

Economic Calendar

Earnings Calendar

We have only three confirmed earnings reports on the calendar, but only CMTL rises to be somewhat notable for today.

News & Technicals’

Facebook back under scrutiny after a whistleblower leaked documents detailing private research to The Wall Street Journal and the U.S. Congress. The documents revealed that Facebook executives had been aware of the negative impacts of its platforms on some young users. The whistleblower unmasked herself as former product manager for civic misinformation Frances Haugen during Sunday’s “60 Minutes” interview. Shares of Evergrande and Evergrande Property Services were halted Monday morning. The embattled property giant said it requested the trading halt ahead of an announcement about a “major transaction.” Chinese developer Hopson also suspended trading of its shares, citing an impending announcement of a “major transaction” to acquire a Hong Kong-listed company’s shares without specifying. Buckling under the weight of more than $300 billion in debt, Evergrande has been trying to offload stakes in other assets. The Chinese markets are closed through Thursday for a holiday and will reopen on Friday. Treasury yields rose slightly in early morning trading, with the 10-year trading up to 1.469% and the 30-year climbing to 2.046%.

Friday produced a nice short squeeze rally after testing recent lows but unfortunately did not resolve the bearish technical picture in the index charts. The DIA, SPY, and QQQ continue to face overhead resistance, downtrend resistance as well as the technical resistance of declining moving averages on the daily charts. However, with the shortages and inflationary pressures growing on energy sector stocks, the IWM managed to recover its 200 and 50-day averages though still below downtrend resistance. The Chinese developer Evergrande missed another 120 million bond payment on Sunday. As a result, they halted trading in Evergrande and another developer raising more uncertainty as to what comes next. Hong Kong fell 2.19%, and Japan fell 1.13%, with the Shanghai composite closed through Thursday for a holiday. The big question for European and U.S. markets is whether this debt bubble contagion will spread. Plan for another wild week of price action with Private Payroll numbers mid-week and the Employment Situation report on Friday.

Trade Wisely,

Doug

Bears Still In Control And China Trade

October 4, 2021 by Ed Carter

Markets gave us another gap higher at the open on Friday and then proceeded to sell off the first couple of hours. However, then the bulls stepped in for a rally that lasted until 3 pm when traders took some profits at day end. This left us with bullish Harami candles with plenty of wicks in all 3 major indices. On the day, SPY gained 1.19%, DIA gained 1.45%, and QQQ gained 0.62%. The VXX fell to 26.82 and T2122 jumped back up to mid-range at 66.12. 10-year bond yields fell sharply to 1.465% and Oil (WTI) rose almost 1% to $75.74/barrel.

On Sunday, TSLA announced they had shipped 241,300 vehicles in Q3, well above the 220,900 predicted by analysts. The company also produced 237,823 cars in Q3. Both figures were well above the 201,250 shipped and 206,421 produced in Q2. As a comparison, GM delivered 446,997 vehicles in Q3, which itself was a 33% drop from the prior year due to the chip shortage.

In other weekend news, an oil spill of roughly 3,000 barrels is washing up on beaches in CA. The spill currently covers 13 square miles of ocean. The rig from which the spill originated is operated by a subsidiary of AMPY. GOOG also announced it will abandon the idea of offering bank accounts to users via Google Pay. In the announcement of this move, GOOG said it has decided that competing with banks was not as good of an idea as focusing on a digital ecosystem to be used by banks and financial services firms with existing customers.

US Trade Rep. Tai will be outlining the Biden Administration’s trade strategy for China today. She will speak to a Washington think tank at 10 am. In the speech, she is expected to announce targeted tariffs after saying that China has failed to live up to their “Phase 1 commitments” from the Trump administration trade deal. She is also expected to address “serious concerns” over China’s “state-centered and non-market practices” that were not addressed in the previous administration’s trade deal. Analysts expect China to again retaliate with their own “targeted tariffs.”

Overnight, Asian markets were mixed, but leaned to the green in uneven trade. Hong Kong (-2.19%), South Korea (-1.62%), and Japan (-1.13%) were all sharply lower. On the other side, Indonesia (+1.83%), Singapore (+1.26%), and India (+0.91%) were higher. (Mainland Chinese markets were closed.) In Europe, markets are mixed at mid-day. The FTSE (+0.15%), DAX (-0.02%), and CAC (-0.21%) lead as usual. However, smaller exchanges are split between strong gains in Russia (+0.90%) and strong losses such as Finland (-1.19%). As of 7:30 am, US Futures are pointing toward a down open. The DIA is implying a -0.30% open, the SPY implying a -0.36% open, and the QQQ implying a -0.49% open at this hour. 10-year bond yields are up sharply to 1.496% and Oil is flat as the Dollar is weaker in early trading.

The only major economic news scheduled for release on Monday is August Factory Order s (10 am). However, the regular monthly OPEC+ meeting is also scheduled to begin. There are no major earnings reports scheduled for the day.

As we start the first full week of October, it looks like the mega-cap tech names are starting the week lower, and dragging the rest of the market with them. All 3 of the major indices have now backed down from their premarket highs. In addition, markets still face that bearish trend and resistance levels overhead. So, be careful taking too much constructive from Friday’s white candle or Harami signal. Candle signals are not real until they have confirmation. So for now, the bears are still in overall control.

Consider waiting, if you want to go long in this market, and even if you trade to the short side, stay nimble because you know bear moves end faster than bull moves. Focus on your trading process and managing the things you can control. It is discipline and good trading rules that separate trading success from failure over the long run. Above all, consistently take profits when you have them. A good trader refuses to let greed turn their winners into losers.

Swing Trade Ideas for your consideration and watchlist: DISH, RJF, FITB, RHI, SABR, SAVE 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

Feisty Bears

October 1, 2021 by Doug Campbell

Those feisty bears once again reversed early market gains and maintained that bearish pressure right into the close even with the news that the government would not shut down. Congress managed to kick the can down the road until December 3^rd setting up another uncertain debt-ceiling battle. As the Eurozone sells off due to an inflationary reading that nearly hit a 30-year high, we face a similar report this morning. So far this morning, we have rallied sharply off the overnight futures low, but we can’t rule out another test of that low today. Plan a wild day of price action that could include sharp reversals and quick and even punishing whipsaws the market digests the data.

Asian markets traded mostly lower overnight, led by the Nikkei, which fell 2.31%, followed by ASX dropping 2.00%. On the other hand, European markets trade decidedly bearish across the board due to soaring energy prices and inflation. U.S. futures point to a bearish open this morning but well off the overnight lows as we wait on potential market-moving data.

Economic Calendar

Earnings Calendar

Though we have three companies listed on the earnings calendar, there are none confirmed. As a result, there are no notable reports today.

News & Technicals’

Inflation brings tremendous pressure to the Euro Zone, with consumer prices rising 4.1% in September, the highest level in almost 30 years! Furthermore, as winter approaches, their energy prices continue to rise, hitting a 13-year high, adding insult to injury. That said, central bankers are of the opinion recent spikes in inflation are “transitory,” and that price pressures will ease in 2022. Hmmm? Facebook’s Antigone Davis, the company’s global head of safety, testified before the Senate Commerce subcommittee on consumer protection. In their questioning, lawmakers were backed by Facebook’s own internal documents leaked by a whistleblower. “If we’re dealing with Facebook’s real world where the safeguards are more illusory than real, there should be no Instagram for kids, period,” Sen. Richard Blumenthal, D-Conn., told reporters. A phase 3 trial of Merck and Ridgeback Biotherapeutics’ oral antiviral treatment molnupiravir showed it reduced the risk of hospitalization or death by around 50% in Covid-19 patients. Merck plans to seek Emergency Use Authorization in the U.S. and submit marketing applications to other global drug regulators. If authorized by regulatory bodies, molnupiravir could be the first oral antiviral medicine for Covid-19. U.S Treasury yields are pulling back this morning, with the 10-year trading at 1.4944% and the 30-year moving lower to 2.056%.

Although Congress kicked the can down the road averting a government shutdown yesterday, those feisty bears remained in control, closing September with a nasty selloff. During the night, futures continued to sell off strongly, but the time of writing this report had recovered substantially from overnight lows. Today, we face key inflation data with economists forecasting that core CPI climbed 0.2% in August and 3.5% year over year. Over in Europe, that number rose to its highest level in nearly 30 years, so buckle we could have another wild ride if the number happens to come in higher than projections. Despite the soaring inflation, the U.S. House will be working hard to pass trillions, more likely adding more inflationary pressure. With the wild price volititly, we can not rule out a retest of overnight futures lows or a sharp recovery rally depending on the inflation reading. Perhaps both could be true in the same session. So, let’s get ready to rumble!

Trade Wisely,

Doug

Futures Up But Chart Bearish to Start Q4

October 1, 2021 by Ed Carter

Markets gave us another bull trap Thursday with about a four-tenths of a percent gap higher met with immediate and all-day selling. This took us out very near the lows and gave us big, ugly, black candles for the session in all 3 major indices. On the day, SPY lost 1.22%, DIA lost 1.59%, and QQQ lost a comparatively small 0.37%. The VXX was flat at 27.83 and T2122 fell back into the oversold territory at 18.51. 10-year bond yields fell to 1.496% and Oil (WTI) rose slightly to $75.02/barrel.

During the day Thursday, both the Senate and House passed a government funding bill. This will keep the federal government operating until early December as well as providing for some hurricane and Afghan Refugee Resettlement aid. However, it just kicks the can down the road on the $3.5 trillion budget and avoids altogether the Debt Ceiling issue, which could result in a US default on debt if not raised in the next 18 days. On the other agenda item, the bipartisan Infrastructure Bill, House Speaker Pelosi failed to push through a vote Thursday night as the progressives of her party balked. She now “hopes” for a vote on the bill today.

MRK and Ridgeback Biotherapeutics announced they are seeking FDA emergency authorization for an oral antiviral treatment (not vaccine) that phase 3 trial results have now shown to reduce the risk of hospitalization or death by 50%. If approved, the drug, molnupiravar, would be the first oral treatment for Covid-19. As long as we’re on the subject, as of yesterday, the US has seen 44.3 million total cases and 716,847 total deaths in the country. Meanwhile, the averages have fallen back to 109,464 new cases and 1,626 new deaths per day across America.

Auto industry forecasters are now predicting that car sales plummeted in Q3. The consensus among the 3 main industry analyst groups say that sales between July and September were down 13%-14% from Q3 2020. The primary driver of this lack of sales is the global ship shortage that caused production cuts across all major manufacturers. September alone is expected to come in 25% below the 2020 sales number. While Japanese manufacturers have faired a bit better (due to keeping larger inventories of components as a normal course of business), all regions of the globe are now feeling the pain.

Overnight, Asian markets were mixed but mostly red on Friday. Japan (-2.31%), Taiwan (-2.15%), and Australia (-2.00%) paced the losers. Meanwhile, Shenzhen (+1.63%) and Shanghai (+0.90%) led the gainers as Evergrande contagion fears waned. In Europe, markets are also mostly red at mid-day. The FTSE (-1.02%), DAX (-0.65%), and CAC (-0.37%) represent a typical spread across the continent in early afternoon with only Greece and Portugal barely holding on to the green side of flat. As of 7:30 am, US Futures are pointing toward a slightly lower open ahead of data. The DIA is implying a -0.21% open, the SPY implying a -0.15% open, and the QQQ implying a flat -0.04% open at this hour. However, 10-year bond yields, the Dollar, and petroleum commodities are all down in early trading.

The major economic news scheduled for release on Friday is limited to August PCE Price Index and August Personal Spending (both at 8:30 am), Mfg. PMI (9:45 am), and ISM Mfg. PMI and Michigan Consumer Sentiment (both at 10 am). There are no major earnings reports scheduled for the day.

Welcome to October and Q4. Mr. Market seems to be greeting us with more of the same as overnight markets were down significantly, but are recovering strongly so far this morning. So, volatility remains the watchword. Overall, having broken out of their “dreaded h” patterns, the major indices are going to be seeking support below. However, it is Friday. So, many traders will be looking to reposition for the weekend.

Again, remember you don’t have to trade every day. Cash is a perfectly valid position. Consider waiting, if you want to go long in this market, and even if you trade short, stay nimble because you know bear moves end faster than bull moves. Focus on the process and on managing the things you can control. It’s discipline and good trading rules that separate trading success from failure over the long run. Above all, consistently take profits when you have them. A good trader refuses to let greed turn their winners into losers.

🎯 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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Modest Relief Rally

September 30, 2021 by Doug Campbell

Although the Wednesday modest relief rally was nice, it, unfortunately, did nothing to improve the technical picture of the index charts. This morning the market will have to digest GDP data that economists expect to increase and that pesky Jobless Claims report. If that were not enough, traders will need to keep an on Congressional decisions to spend a few more trillions and prevent a government shutdown at midnight. That should be enough to keep price volatility high.

Asian market traded mixed overnight as the data showed an unexpected contraction in Chinese factory activity. European market trade with modest gains and losses this morning cautiously attempting to shake of market jitters. However, the premaket pump up is well underway in the U.S., pointing to another gap-up open ahead of critical market data.

Economic Calendar

Earnings Calendar

We have our busiest day of the week on today’s earnings calendar, with 16 companies listed, although about half are unconfirmed. Notable reports include BBBY, ANGO, JEF, MKC, & PAYX.

News & Technicals’

It looks like today is shaping up as a big day of political news. First, Congress has to hammer a deal to avoid a government shutdown at midnight tonight. Then the battle begins on the infrastructure bill and the enormous social programs bill. Next, Fed Chairman Jerome Powell still expects inflation to ease eventually but said he sees the current pressures running into 2022. The central bank leader said the current inflation pressures are “frustrating.” Finally, more than half of restaurant operators surveyed by the National Restaurant Association say that business conditions are worse now than three months ago. The delta variant, understaffed restaurants, and higher food costs are among the issues plaguing the industry. U.S. Treasury yields eased slightly early this morning, with the 10-year falling less than a basis point to 1.531% and the 30-year also drifting lower less than a basis point to trade at 1.078%.

Though yesterday’s modest relief rally was nice, it sadly did nothing to improve the bearish technical issues in the DIA, SPY, and QQQ charts. In truth, the QQQ could not hold early gains making a new low by the close of the day. This morning we face two potential market-moving reports that will likely set the tone for the morning session. According to consensus estimates, the GDP analysts see a slight increase, and the Jobless Claims expect a decline. We will also have to keep an eye on the political developments in Congress as their decisions could have substantial market ramifications. Traders should also keep an eye on bond rates because if they continue to rise, it could be particularly damaging to the tech sector. Volatility is likely to remain high, so remember, if you don’t have an edge, cash is a position!

Trade Wisely,

Doug

Senate Kicks Budget Can to Christmas

September 30, 2021 by Ed Carter

Markets made a modest gap higher after the previous brutal day. However, this turned into a “Dead Cat” bounce as waves of price action followed the volatility all day. At the end of the day, we went out near the lows, leaving us with indecisive candles with larger upper wicks in all 3 major indices. On the day, SPY gained 0.15%, DIA gained 0.25%, and QQQ lost 0.16%. The VXX rose to 27.81 and T2122 popped out of the oversold territory at 34.25. 10-year bond yields fell slightly to 1.529% and Oil (WTI) dropped nine-tenths of a percent to $74.62/barrel. Natural Gas plummeted 7.24% on the day (from a 7-year high) after having been down over 8% in the early afternoon.

During the day, Fed Chair Powell told a conference hosted by the ECB that inflation was “frustrating” and that he sees it continuing into next year. He also expressed frustration that not enough people are getting vaccinated to stop the spread of the Covid Delta variant and that is having “important economic policy impacts.” He is scheduled to testify before the House on Thursday.

Early this morning, the Senate reached a deal to avoid a government shutdown. The deal would fund the government through December as well as provide funds for hurricane relief and Afghan refugee resettlement. It seems Democrats were the ones that blinked in these negotiations because the bill does not address the debt ceiling (that now will require a separate bill and fight), which previously had been included in all Democratic proposals. The House still needs to pass this bill, as -is before midnight to avoid the shutdown.

Z released a report saying that the national average rent skyrocketed by 11.5% (year-on-year) in August. States like FL and GA saw much higher 25% average increases over the same time. Another firm (Yardi) reported a “more reasonable” increase of 10.3% in August (again, year-on-year). The Dallas Federal Reserve estimates over the next two years rents will continue to rise at the highest rate in more than 30 years. These increases help underscore the dramatic real estate market price increases but also are likely to lead to dramatic housing problems with wages simply being unable to keep pace.

Overnight, Asian markets were mixed. Indonesia (+2.02%), Australia (+1.88%), and Shenzhen (+1.64%) led the gainers. Meanwhile, Malaysia (-0.64%), India (-0.53%), and Hong Kong (-0.36%) were among the losers. In Europe, markets are mostly green at mid-day in modest trading. The FTSE (+0.21%), DAX (-0.20%), and CAC (+0.06%) are typical of the region. As of 7:30 am, US Futures are pointing toward a green open. The DIA is implying a +0.44% open, the SPY implying a +0.45% open, and the QQQ implying a +0.51% open at this hour. Natural Gas continues its tear, up another 2+% in early trading.

The major economic news scheduled for release on Thursday is limited to Q2 GDP and Initial Jobless Claims (both at 8:30 am), Chicago PMI (9:45 am), and 4 Fed speakers (Chair Powell testifies at tbd, Williams at 10 am, Bostic at 11 am, and Harker at 11:30 am). The major earnings reports scheduled for the day include BBBY, KMX, MKC, PAYX, and HNNMY before the open. Then after the close, JEF reports. The month and Q3 also come to an end today.

As Q3 comes to an end today, beware of rotation as funds window-dress their portfolios prior to reporting. Also, keep in mind that we have 4 Fed speakers again today, including Fed Chair Powell for the third straight day. There is no reason to think the volatility will lesson today as stocks attempt to retest resistance above in the bearish trend.

Remember you don’t have to trade every day. Cash is a perfectly valid position. Nobody has ever consistently predicted reversals. So, don’t think you can either. Consider waiting if you want to be long this market and stay nimble if you trade short as bear moves end faster than bull moves. Focus on the process and on managing the things you can control. It’s discipline and good trading rules that separate trading success from failure over the long run. Above all, consistently take profits when you have them. A good trader refuses to let greed turn their winners into losers.

Swing Trade Ideas for your consideration and watchlist: MRK, FCEL, XLK, TSLA, NFLX, SPXU, SPY, SDS, LUMN, SQQQ, UVXY. 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