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Aggressive Taper

December 16, 2021 by Doug Campbell

With the Fed announcing an aggressive taper and three possible rate increases next year, the market surged, triggering a short squeeze that is now looking to gap setting new record highs in the SPY! Go figure? I guess it tells us just how problematic inflation had become! Of course, with a big gap up comes the risk of a pop and drop, so watch carefully for follow-through buying before diving into risk. We have a quadruple witching this Friday so expect price gyrations to remain challenging.

Asian traded chiefly higher led by Japan surging 2.13%, seemingly celebrating the more hawkish Fed. European markets are also surging higher after digesting the FOMC decision to taper aggressively. Ahead of earnings and a slew of possible market-moving reports, Dow futures point to a gap up open or nearly 300 points, and the SP-500 is set for new record highs at the bell. Remember, big moves like this increase trading risk dramatically, so plan carefully and trade wisely.

Economic Calendar

Earnings Calendar

On the Thursday earnings calendar, we have 15 companies listed with several unconfirmed. Notable reports include ADBE, FDX, CAN, GTIM, JBL, SCS, & WOR.

News & Technicals’

As Sen. Joe Manchin withholds his support, Democrats are unlikely to meet their goal of passing President Joe Biden’s Build Back Better Act this year. The delay will have immediate implications, as the enhanced child tax credit is set to expire, and Democrats could instead turn their focus to voting-rights legislation. However, failure to pass the plan could have broader long-term implications, not only on the country’s social and climate policy but also in next year’s midterm elections. According to the Statens Serum Institut in Copenhagen, omicron cases are doubling every two days in Denmark, with variant expected to overtake delta in the next week. The rapid spread of omicron in Denmark, where 80% of the population is vaccinated, is an ominous sign for the U.S. Dr. James Lawler, an infectious disease expert at the University of Nebraska, said the U.S. has just weeks to take action to stem omicron. House Speaker Nancy Pelosi scoffed at the idea of banning congressional lawmakers and their spouses from owning stock shares of individual companies. “We’re a free-market economy,” Pelosi said. “They should be able to participate in that.” Since the beginning of the Covid pandemic, stock purchases by some senators have sparked investigations. Treasury yields traded mixed in early Thursday trading, with the 10-year dipping slightly to 1.4582% and the 30-year rising to 1.8627%.

The market surged, triggering a short squeeze after the Fed begins an aggressive taper and sees three rate increases next year. Though this is the opposite of how the market would generally react to a hawkish Fed but may suggest the impacts of inflation is the greatest evil. Yesterday’s rally didn’t break price resistance levels, but this morning, ahead of potential market-moving reports, the futures point to a considerable gap up that will set new record highs in the SPY and put the QQQ within striking distance. That said, a big gap sets up a possible pop and drop at the open, so be careful. Wait until you see some follow-through before diving in headlong. Expect price volatility to remain challenging as we head into the quadruple witching Friday.

Trade Wisely,

Doug

Bulls Loved Fed But More Data Ahead

December 16, 2021 by Ed Carter

Wednesday was quite a ride. Markets opened flat, sold off a little the first half-hour, and then bobbed along the lows until 2 pm. However, the Fed announcement led to a sharp rally and pullback that left stocks flat going into Fed Chair Powell’s press conference. It was at that point that the bulls ignited a tremendous rally for the last 1.5 hours of the day, going out very near the highs. This left us with strong, white candles with small lower wicks. In addition, all 3 major indices printed Morning Star patterns. On the day, SPY gained 1.51% (closing within cents of a new all-time high close), DIA gained 1.02%, and QQQ gained 2.24%. The VXX fell almost 7% to 20.40 and T2122 shot back up to the mid-range at 51.62. 10-year bond yields rose to 1.455% and Oil (WTI) closed up over 1% to $71.55/barrel.

As mentioned, the market loved the data the Fed released and what the group and especially what Fed Chair Powell had to say. For one thing, as expected, the Fed is doubling the speed of their bond-buying taper ($15 billion in Nov., $30 billion in Dec., and now $60 billion/month in Jan.). In addition, they announced that they expect 3 interest rate hikes in 2022, followed by 2 more in 2024. Lastly, the Fed reduced its 2022 GDP forecast to 5.5% (versus 5.9% as of September), which is still 2% above consensus economist forecasts. On a side note, the Chief Economist of the Conference Board told Bloomberg that they are forecasting 3.5% but would add another half of a percent if the President’s “Build Back Better” budget and spending passes.

The Bank of England saw the Fed’s shift to focusing on inflation and said “hold my beer” as it announced an unexpected rate hike. The move increased the UK interest rate from 0.1% to 0.25%. The most shocking thing about the move was that it came the same day the country announced a new record number of covid cases as the omicron variant sweeps across the UK.

In earnings news, ACN and JBL beat on both lines. Meanwhile, WOR beat on earnings but came in light on revenue. DAL also announced that it expects to post a pretax quarterly profit as both travel and airfares have increased.

Overnight, Asian markets were mostly green with Japan (+2.13%) a massive upside outlier. Thailand (+1.33%), Shanghai (+0.75%), and Taiwan (+0.71%) led the main pack higher. Only Australia (-0.43%) and Indonesia (-0.47%) were in the red. In Europe, we see strongly green markets across the region at mid-day. The FTSE (+1.01%), DAX (+1.74%), and CAC (+1.55%) lead the way, but many of the smaller exchanges are up even further. Russia (+3.20%) is an outlier. As of 7:30 am, US Futures are pointing solid gap-up follow-through to the Wednesday Fed rally. The DIA is implying a +0.64% open, the SPY implies a +0.74% open, and the QQQ is implying a +0.76% open at this hour. 10-year bond rates are flat and Oil (WTI) is up just a third of a percent in early trading.

The major economic news scheduled for release Thursday includes Nov. Building Permits, Nov. Housing Starts, Weekly Initial Jobless Claims, and Philly Fed Mfg. Index (all at 8:30 am), Nov. Industrial Production (9:15 am), and Mfg. PMI and Services PMI (both at 9:45 am). The major earnings reports scheduled for the day are limited to ACN, JBL, ADBE, and WOR before the open. Then after the close, SCS reports.

The market loved the Fed’s announcement and the bulls charged higher yesterday afternoon. It looks like they are going to follow through this morning, but be aware there is a lot of economic data coming before the open. Being back near the all-time highs is great if you are in the Long camp, but markets have not digested the UK rate hike yet. So, be careful.

Stick to your trade rules and on managing the things you can control. Trade with the trend, keep consistently taking profits when you have them, and move your stops in your favor. When you’re wrong, admit it and take your loss. (That’s why we set stops.) Trade carefully, and continue to think twice before holding through earnings…especially without a hedge in place.

Swing Trade Ideas for your consideration and watchlist: No trade ideas this morning. 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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Highest PPI on Record

December 15, 2021 by Doug Campbell

The highest PPI on record kept the bear engaged yesterday, but surprisingly, the bull worked pretty hard, trying to convince us that inflation doesn’t matter. Today we turn out attention to retail sales figures and the FOMC decision. Finally, we will learn how big the Taper will be and when the U.S. could expect interest rate increases as the Fed finally moves to fight inflation. Expect price volatility! Keep in mind we have several potentially market-moving events Thursday and a quadruple witching on Friday to keep us guessing.

Asian markets traded mixed overnight as investors digested a slew of economic data. European markets trade mostly bullish this morning as they monitor the Fed decision with modest gains and losses. Facing a big day of market-moving data U.S. Futures trade flat to mixed as we wait. So let’s get ready to rumble.

Economic Calendar

Earnings Calendar

This Wednesday, we have a bit more activity on the earnings calendar, with 20 companies listed through several remaining unconfirmed. Notable reports include ABM, BLBD, HEI, LEN, NDSN, REVG, & TTC.

News & Technicals’

Congressional Democrats voted to raise the debt ceiling just before the deadline to mark the first U.S. default. The Senate passed a borrowing cap increase late Tuesday afternoon, and then the House followed suit early Wednesday. The bill headed to President Joe Biden’s desk when the Treasury Department estimated the U.S. could run out of tools to pay its bills. The Biden infrastructure bill included $65 billion to build broadband internet access. Commerce Secretary Gina Raimondo told CNBC she is confident that every household will have a connection by the end of the decade – if not sooner. But some experts believe it will cost much more to close the broadband gap. In addition, Chinese companies listed on Wall Street will likely be cut off from U.S. capital markets in the next three years as tensions between Beijing and Washington persist, according to David Loevinger from the TCW Group. He predicted that by 2024, most Chinese companies listed on U.S. exchanges would no longer be listed in the United States. Many of China’s top internet companies listed in the U.S. have already undertaken dual listings in Hong Kong. Some high-profile names include e-commerce giant Alibaba, its rival JD.com, search engine giant Baidu, gaming firm NetEase and social media giant Weibo. Treasury yields rose slightly in early morning trading, with the 10-year climbing to 1.4445% and the 30-year moving up to 1.8301%.

The highest PPI on record kept the bears active yesterday, raising the stakes for the big day of data today. Before the bell, we have a significant economic data dump, including the highly watched holiday retail sales figures. Will, the Santa Clause rally make an appearance this year, or will the Grinch sneak in to steal all the goodies? We will soon find out. After that, everyone will brace for the uncertainty of the FOMC decision on Taper, future rate decisions, and the chairman’s press conference. I think it’s fair to say anything is possible, so prepare for more price volatility. With the VIX elevated and index chart price patterns showing uncertainty, there is a reason for caution as traders and investors digest the data. As you plan forward, notice several potential market moving reports Thursday morning and a Quadruple Witching this Friday that typically creates unusual price gyrations.

Trade Wisely,

Doug

Fed Day But Retail Sales and Empire First

December 15, 2021 by Ed Carter

Markets gapped down Tuesday on higher-than-expected PPI numbers and then put in an indecisive, wide-range day that both retested the T-line (and failed) and the lows from a week ago. All 3 major indices printed Doji or Spinning Top candles, meaning Wednesday’s action is more important than Tuesday’s wavering candle. On the day, SPY lost 0.69%, DIA lost 0.24%, and QQQ lost 1.04%. The VXX rose to 21.93 and T2122 dropped into the oversold territory at 9.96. 10-year bond yields rose slightly to 1.443% and Oil (WTI) fell over a percent to $70.44/barrel.

On Tuesday, the Senate passed a National Debt Ceiling increase of $2.5 trillion (to $31.4 trillion) along party lines, with one Republican absent. This is the level they estimate will cover government spending into 2023. The bill them moved to the House, who took up and passed the measure late last night. The bill then headed to the President for signature before a government exceeded the debt limit today.

Analysts seem to be moving ahead of the Fed as a wave of downgrades hit Tech stocks. This signals that they are now focusing less on growth and more on value as the Fed has now said Inflation is priority number one. Among the names taking a hit after the close were ADBE, DDOG, NET, and ZS. Those stocks all moved significantly lower in premarket trading today.

Mortgage refinancing applications fell 6% for the week, while new home purchase loan applications rose just 1%. This happened as 30-year fixed-rate loan interest rates remained at 3.30%.

Overnight, Asian markets mixed but leaned toward the red side on modest moves. Hong Kong (-0.91%), Shenzhen (-0.73%), and Australia (-0.70%) paced the losses. Meanwhile, Taiwan (+0.35%), led the 5 gainers. In Europe, stocks are mixed, but mostly green at mid-day. The FTSE (-0.24%), DAX (+0.28%), and CAC (+0.67%) are typical of the spread. However, there are a couple of outliers like Denmark (+1.07%) and Russia (+1.05%) in early afternoon trading. As of 7:30 am, US Futures are pointing to an open just on the red side of flat. The DIA is implying a -0.01% open, the SPY implies a -0.04% open, and the QQQ is implying a -0.22% ahead of morning data. 10-year bond yields are up to 1.45% and Oil (WTI) is down 1.2% in early trading.

The major economic news scheduled for release Wednesday includes Nov. Retail Sales, Nov. Import/Export index, and NY Empire State Mfg. Index (all at 8:30 am), Crude Oil Inventories (10 am), Fed Interest Rate Projections, Fed Economic Projections, Fed Interest Rate Decision, and Fed Statement (all at 2 pm), and FED Press Conference (2:30 pm). The major earnings reports scheduled for the day are limited to ABM, TTC, and REVG before the open. Then after the close, LEN, TCOM, NDSN, and HEI report.

All eyes (and most wagging tongues) will be focused on the Fed today, with widespread expectations that they double the pace of bond-buying taper. However, for my money, the $64,000 question is what they say about how soon we could see a rate hike. Many pundits now expect the statement or press conference to reveal they will end taper in Q1 and might do the first rate hike in March. (This would be at least a quarter ahead of current projections.)

Expect volatility and whipsaw action after the Fed. So, don’t rush into trades before the afternoon Fed news. Stick to your trade rules and on managing the things you can control. Just keep consistently taking profits when you have them and move your stops in your favor. When you’re wrong, admit it and take your loss. (That’s why we set stops.) Trade carefully, and continue to think twice before holding through earnings…especially without a hedge in place.

Swing Trade Ideas for your consideration and watchlist: TZA, NEE, AKAM, PFE, TSCO, TSN, MDLZ, BAC, TMSU. 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

Bears Returned to Work

December 14, 2021 by Doug Campbell

The SPY could not hold onto Friday’s record as the bears returned to work, creating minor technical damage in the QQQ and raising uncertainty with bearish candle patterns left behind. In addition, concerns of economic impacts from the rapidly spreading variant dinted investor sentiment. Today we will turn our attention to the pending PPI report and the beginning of the FOMC meeting. If the inflation numbers come in hot will, we again choose to ignore? If we don’t get a significant reaction from the PPI, then look for choppy market conditions as we wait on the FOMC decision Wednesday afternoon.

Overnight Asian markets worried about potential impacts of the new variant closed in the red across the board with led by Hong Kong falling 1.33%. This morning, European markets trade mixed and muted, keeping an eye on rising pandemic infection rates and central bank decisions. With a light day of earnings and key inflation data just around the corner, U.S. futures point to mixed open with a notable gap down forming in tech before the data.

Economic Calendar

Earnings Calendar

We have just 15 companies listed on the Tuesday earnings calendar, with several unconfirmed. Notable reports include ASPU & CLSK.

News & Technicals’

The report said that the recovery to be affected by a new surge in Covid-19 cases, with jet fuel getting hit hard. In addition, its authors noted that the emergence of the new omicron variant had already brought about new restrictions on international travel. Toyota, one of the world’s largest automakers, is planning to invest 4 trillion yen ($35 billion) to build a full lineup of 30 battery-powered electric vehicles by 2030. It aims to increase global sales of battery electric vehicles by 3.5 million units a year by 2030. Most of Toyota’s current electric vehicle sales are hybrid EVs powered by an internal combustion engine and battery-operated electric motors. ACCORDING TO FINANCIAL FILINGS OUT LATE MONDAY, Tesla CEO Elon Musk sold another 934,091 shares of his electric car company, which are worth around $906.49 million. Musk also exercised options to buy 2.134 million shares of Tesla at the strike price of $6.24 per share granted to him via a 2012 compensation package. Musk, the wealthiest person globally and was just named Time Magazine’s 2021 Person of the Year, still has millions of stock options that he needs to exercise by August 2022. Treasury yields tick higher in early Tuesday trading, with the 10-year trading up to 1.4326% and the 30-year inching higher to 1.8145%.

The bears returned to work on Monday; the rapidly spreading variant fears of economic impacts grow. Adding to the uncertainty, another key inflation PPI report and the beginning of the FOMC meeting may double the amount of taper and signal rate increases possible in 2022. The DIA left behind an evening star pattern at price resistance but managed to hold current support levels. The SPY could not hold onto Friday’s record falling back into a consolidation zone holding just above support. Finally, the QQQ suffered technical damage in the Monday selling, breaking support and falling into the huge gap left behind on December 7^th. IWM remains the weakest of the indexes nearing a retest of the December 1^st low. The question for today is, will the bulls find the energy or inspiration to defend, or will the bears gain the edge? Last Friday, the market chose to ignore the surging inflation. Can they do the same today if the PPI number comes in hot? We will soon find out. So, buckle up and prepare for another dose of price volatility.

Trade Wisely,

Doug

Fed Meeting Starts and New EU Online Rules

December 14, 2021 by Ed Carter

Markets opened flat to just slightly lower on Monday. However, stocks then proceeded to sell off until 11:30 am before bouncing along the bottom the rest of the day. This took us back down into the range of the recent week in the large caps, but the QQQ gave up last week’s range. All 3 major indices printed ugly black candles. On the day, SPY lost 0.89%, DIA lost 0.89%, and QQQ lost 1.44%. The VXX rose 4% to 21.64 and T2122 (4-week New High/Low Ratio) dropped to 32.51. T2108 (Percent of stocks above their 40sma) fell to 28%, indicating there are relatively few stocks holding the market up. 10-year bond yields dropped to 1.414% and Oil (WTI) fell to $71.13/barrel.

The so-called “meme stocks” took another beating Monday. AMC lost over 15% and GME lost almost 14%. BBBY lost “only” 6.5% on the day. This brings AMC and GME’s total loss for the month to over 30% each. BBBY is faring a bit better for December, down only 9.7%.

Bloomberg reports that the EU Parliament passed new rules, limiting online content and advertising on Monday evening. These rules would make significant changes to the way online behemoths operate. Among the new rules are one that would put major limitations on advertising to minors, prohibit companies from requiring users to submit to online tracking, and would require content providers to take down any posts or materials the EU deems illegal. Sources told Bloomberg that the entire Parliament must now ratify the rules in January, but that the entire EU Parliament is expected to go for even more restrictions that would prohibit all online targeted advertising. GOOG, AAPL, and FB could see major changes if this happens and every major advertiser might be impacted if this altered marketing effectiveness.

Last night, on the eve of the Fed meeting, the CEO of MS called for the FOMC to raise rates soon. He also said, “the Fed is 10 rate increases behind normal (where they should be)”. It is widely expected that the FOMC will double the speed of their bond-buying taper. If they do, this will conclude during Q1. The MS CEO seemed to be calling for a rate increase by March, which would be months sooner than the market currently has priced in and quarters ahead of previous Fed guidance. (A CNBC survey is predicting the first rate hike in June.)

Overnight, Asian markets leaned heavily to the red side, with only two exceptions, but on mostly modest moves. Hong Kong (-1.33%), Taiwan (-0.95%), and Malaysia (-0.93%) paced the losses. In Europe, stocks are more mixed at mid-day, again on modest moves. The FTSE (+0.46%), DAX +0.07%), and CAC (+0.05%) are fairly typical in the region, with only Denmark (-1.17%) as an outlier. As of 7:30 am US Futures point toward a slightly lower open. The DIA implies a +0.08% open, the SPY implies a -0.11% open, and the QQQ is implying a -0.42% open at this hour. 10-year bond yields and Oil is flat in early trading.

The major economic news scheduled for release Tuesday is limited to Nov. PPI (8:30 am). There are no major earnings reports scheduled for the day. However, as mentioned above, today is the beginning of the December Fed meeting.

Global markets seem to be trying to hold ground waiting to see just what FOMC says on Wednesday afternoon. This “wait and see” stance is likely to make for a dead market today and Wednesday morning. However, it also can magnify the impacts of other news like omicron, politics, etc. So, just be prepared for a market similar to how Naval pilots describe night patrol flights…hours of boredom punctuated with moments (landings) of high anxiety.

Take your time. Don’t rush into trades the first minutes of the day. Stick to your trade rules and on managing the things you can control. Just keep consistently taking profits when you have them and move your stops in your favor. When you’re wrong, admit it and take your loss. (That’s why we set stops.) Trade carefully, and continue to think twice before holding through earnings…especially without a hedge in place.

Swing Trade Ideas for your consideration and watchlist: CNC, TMUS, COST, XLRE, TSLA, TSN, PFE, AMC, ZION, TZA, SQQQ, PTON. 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

Squeaked Out a New Record

December 13, 2021 by Doug Campbell

In defiance of surging inflation, the bulls took it as a buying battle cry and squeaked out a new record high close on the SPY Friday. Although the premarket is pushing for more with a gap open, it would be wise to remember the Fed may double the taper rate on Wednesday as the committee appears to learn more hawkish going forward. That said, we can’t rule out price volatility, so watch for the possibility of a pop and drop, whipsaws, and overnight reversals as we wait.

Asian markets began the week trading mixed, pondering the outcome of central bank meetings. This morning, European markets trade mixed but mostly green with monetary policy decisions in focus. With a light day of earnings and economic data, the U.S. tries to follow through on Friday’s record, pushing for a bullish gap up open.

Economic Calendar

Earnings Calendar

Kicking off a new week, we have a very light day with 15 companies listed, but several are unconfirmed. Notable reports include JILL, PHX & REPX.

News & Technicals’

A new study says that the commercial real estate industry faces an intensifying threat from flooding, likely leading to billions of dollars in increased costs. Approximately 730,000 retail, office, and multi-unit residential properties face an annualized risk of flood damage in the United States. The structural damage from flooding is projected to cost $13.5 billion in 2022, according to First Street Foundation, a nonprofit group, and global commercial engineering firm Arup. The research incorporated sea-level rise but focused more on flash floods, also known as pluvial flooding. Chinese President Xi Jinping is set to meet virtually with Russian President Vladimir Putin on Wednesday, China’s Ministry of Foreign Affairs said Monday. The U.S. and other G-7 leaders issued a statement Sunday condemning “Russia’s military build-up and aggressive rhetoric towards Ukraine.” The lira was trading at 14.33 to the dollar at 1:25 p.m. in Istanbul, a slight recovery from the record low of 14.99 earlier in the day. Turkey’s central bank has subsequently announced it will intervene directly in the foreign exchange market, selling dollars to prop up the lira. MotorTrend named the all-electric Rivian R1T the publication’s 2022 truck of the year, beating out other pickups from Ford, General Motors, and Hyundai. MotorTrend called the R1T “the most remarkable pickup truck we’ve ever driven” in a release announcing the award. Treasury yields trade slightly lower in early Monday trading, with the 10-year dipping to 1.4735% and the 30-year sliding to 1.8627%.

With the SPY squeaking out a new record high close on Friday, it could do the job of attracting more money to the market as we move toward the end of the year. The SP-500 PE ratio is 96% above the historical average, and the Buffet Indicator puts the composite market values to GDP 213% above the historical trend. That said, the bulls are in control, and bad jobs data, soaring inflation, low productivity numbers will not stand in the way of more buying! U.S futures point to more records at the open but be careful chasing until you see some follow-through buying. We can not rule out the possibility of pop and drop with the investors eyeing a Fed taper on Wednesday.

Trade Wisely,

Doug

Fed Watch Begins

December 13, 2021 by Ed Carter

Markets gapped higher on Friday, apparently pleased with the 6.8% CPI number (the highest since 1982). After the open wandered sideways most of the day before a rally the last hour took markets out near the highs. This left us with gap-up, white, Hammer or Hanging Man candles in all 3 major indices. It is worth noting that the SPY closed at a new all-time high in the SPY. On the day, SPY gained 0.94%, DIA gained 0.59%, and QQQ gained 1.09%. The VXX fell to 20.78 and T2122 rose to mid-range at 45.89. The 10-year bond yields fell to 1.487% and Oil (WTI) rose to $71.98/barrel.

On Monday, British PM Boris Johnson reported that at least one person has died of the omicron variant in his country. He went on to cite an Oxford University study that has found the omicron can infect those that have had the full initial vaccination (one or two jabs depending on the vaccine requirements). Johnson said it appears omicron is a somewhat milder version of the virus, but that needs to be set aside to focus on what his experts are telling him will be a tidal wave of omicron cases in the UK. The FTSE reacted to this news and pulled back after his comments.

Regulatory filings this morning show that PFE is acquiring ARNA in a $6.7 billion deal. PFE will pay $100 per share for ARNA, which is a 100% premium to the companies Friday close. The move bolsters PFE’s portfolio of treatments in the gastric, dermatology, and cardiology arenas. In other stock-related news, a RIVN

Over the weekend, technology industry news gave some interesting perspectives on the global “ship shortage.” It seems that despite all the talk of chip shortages (from automakers, electronics, etc.), semiconductor manufacturers have sold more chips in 2021 than ever before. As an example, computer graphics card sales are at a significant new high despite being “out of stock” for long periods in commercial outlets. The main reason for this seems to be sales to crypto miners, many of which buy in bulk. This is sometimes hidden because NVDA (the largest GPU manufacturer) began selling directly to mining operations last year and does not report those sales separately. (Miners often pay a premium and buy in lots of 1,000 or more cards at a time.)

Overnight, Asian markets were mixed but leaned to the green side in modest trading. Japan (+0.71%), Shenzhen (+0.67%), and outlier New Zealand (+1.13%) led to the upside. Meanwhile, India (-0.82%), Singapore (-0.50%), and Taiwan (-0.33%) paced the losses. In Europe, markets are mostly green at mid-day. Only Russia (-1.52%) shows significant losses while the FTSE (-0.19%) is the only other red. However, the DAX (+0.94%), and CAC (+0.02%) are more typical of the range seen across Europe in early afternoon trading. As of 7:30 am, US Futures are pointing to a modest green open. The DIA is implying a +0.06% open, the SPY implies a +0.22% open, and the QQQ implies a +0.38% open at this hour. 10-year bond yields are moving lower (1.47%) and Oil (WTI) is off three-quarters of a percent in early trading.

There is no major economic news scheduled for release Monday. There are also no major earnings reports scheduled for the day either. However, remember this is Fed meeting week.

With the Fed meeting coming this week, global markets seem to be waiting to see what the fallout is from the FOMC discussing speeding up the taper. (And whether there is any news or wording implication of faster rate hikes in 2022.) This “wait and see” stance is likely to carry over into the US and might make for a dead market over the next 2-3 days. However, it also can magnify the impacts of other news like omicron, politics, etc. So, just be prepared for a market similar to how Naval pilots describe night patrol flights…hours of boredom punctuated with moments (landings) of high anxiety.

Stick to your trade rules and on managing the things you can control. (Not trying to force the market to obey your desires.) Consistently take profits when you have them and move your stops in your favor. Don’t be in a hurry to chase, trade carefully, and continue to think twice before holding through earnings…especially without a hedge.

Swing Trade Ideas for your consideration and watchlist: BBIG, RIVN, ON, MSFT, ORCL, F, HIMX. 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

Hurry and Wait

December 10, 2021 by Doug Campbell

By the end of Thursday, we had an interesting mix with tech shares sliding south and the defensive names holding their ground. So the question is that a sign of trouble or just another choppy session as we hurry up and wait on the CPI number? If estimates are correct, we could see an inflation rate at nearly a 40 year high! If true, will it inspire the bears, or will the market choose to ignore as it did with the big miss on job data last week? Expect some volatility price action as we react and follow up with a reading on consumer sentiment.

Asian markets finished the week with selling across the board during the night. Likewise, European markets are taking a wait-and-see approach with muted price action and modest gains and losses as they wait. Here in the U.S., however, the morning pump has begun pointing to a gap up open ahead of the CPI. So the wait is about over, but will it inspire the bulls or the bears?

Economic Calendar

Earnings Calendar

We have a very light day on the Friday earnings calendar with 14 companies listed, but only two confirmed. Notable reports include ASO and JOUT.

News and Technicals’

Elon Musk sold 934,091 Tesla shares, according to filings with the Securities and Exchange Commission published Thursday. Musk sold a total of $9.85 billion in Tesla stock last month. Some of the shares were sold in part to satisfy tax obligations related to an exercise of stock options. Last week, Chinese ride-hailing app Didi announced that it would delist from the New York Stock Exchange and pursue a listing in Hong Kong. Delisting means a Chinese company traded on an exchange — like the Nasdaq or New York Stork Exchange — would lose access to a broad pool of buyers, sellers, and intermediaries. In addition, rising political pressure in the U.S. and China is increasing the chance that Chinese stocks listed in New York might be forced off exchanges there. While the Chinese government has yet to ban foreign listings outright, new rules announced this summer have discouraged what was once a rush of Chinese IPOs in the U.S. Late Thursday; Fitch Ratings said Evergrande had not confirmed payment of its latest debt obligation, triggering a default. As of Friday afternoon, S&P Global Ratings did not have a statement and referred CNBC to its report Tuesday that said: “default looks inevitable for Evergrande.” Moody’s, another rating agency, did not respond to a request for comment. “We should have been calling this a technical default for a long time already, but nobody dared,” Alicia Garcia-Herrero, Natixis’ chief economist for Asia-Pacific, said Friday. Treasury yields moved slightly higher in early Friday trading, with the 10-year rising to 1.5145% and the 30-year moving up slightly to 1.8811%.

Yesterday we had another choppy morning session, but tech shares began to slide later in the day while defensive names held their ground. However, it was nothing more than a hurry up and wait for the CPI number coming out before the bell today. Economists expect the index to climb 0.7% from the previous month bringing the number up to a 6.7% inflation rate. To put that in perspective, if estimates are correct, it will be the highest reading in nearly 40 years! We will then check the temperature of the consumer with a reading on the sentiment, which estimates suggest declined slightly. The numbers, of course, are important, but to traders, the only thing that matters is how the market reacts to the data. On that measure, your guess is a good as mine. Of course, we have been able to ignore bad data lately, so who knows, we could set new records as we head into the weekend.

Trade Wisely,

Doug

ORCL Post Great Report and CPI On Tap

December 10, 2021 by Ed Carter

The bulls had a tough day Thursday as all 3 major indices made a modest gap lower at the open. From there the SPY and QQQ went on a gradual all-day selloff. However, the DIA went on a gradual rally until afternoon profit-taking took it down off the highs. This action left us with Bearish Evening Star-type candles in the SPY and (especially) the QQQ. However, at least as of the close, all 3 major indices were able to stay above their T-lines. On the day, SPY lost 0.68%, DIA gained 0.03%, and QQQ lost 1.47%. The VXX gained 3% to 22.20 and T2122 fell to 29.55. 10-year bond yields were little-moved at 1.497% and Oil (WTI) fell 2.5% to $70.55/barrel.

After the close, GOOG told its employees that they would not be giving raises to match inflation. Executives told a company-wide meeting that it was already had high labor costs and said they have no plans for any “inflation adjustment” on a companywide basis. The move came in response to more than 400 employee requests for the company to address the impact of high inflation (especially in the Silicon Valley area). Clearly, an issue that companies will need to address, and the pressure may get worse with today’s CPI number.

Also, after the close, ORCL beat strongly on both lines. They also announced an additional $10 billion buyback program and raised their forward guidance. However, the company also said they swung to a loss for the quarter when considering the payment of a court judgment over the compensation of former CEO Mark Hurd. Elsewhere, AVGO, COST, and LULU all beat on both lines. CHWY missed on earnings, but beat on revenue.

In government news, the Senate voted to allow them to raise the debt ceiling with a simple majority vote in a 59-35 vote. This signaled a change in stance by Minority Leader McConnell (return to bipartisan debt ceiling increases as was typical in the past) and immediately led to dissent from Republicans who oppose the idea. This eases the path to avoiding a shutdown by the December 15 deadline. They are expected to raise the limit by about $2 trillion early next week. As an aside, Senate Majority Leader Schumer said the debt ceiling vote as well as votes on the Budget and Climate packages before the Christmas break.

Overnight, Asian markets were broadly in the red, with only two green exchanges on modest moves. Hong Kong (-1.07%) and Japan (-1.00%) were outliers to the downside with most moves in the one-quarter to one-half of a percent range. In Europe, stocks are also mostly in the red on modest moves, with the big exchanges flat. The FTSE is flat (+0.01%), DAX is flat (+0.05%), and CAC (-0.01%) at mid-day. As of 7:30 am, US Futures are pointing toward a gap higher at this early hour. The DIA is implying a +0.28% open, the SPY implies a +0.35% open, and the QQQ implies a +0.29% open an hour ahead of CPI data. 10-year bond yields are up to 1.511% and Oil (WTI) is up a percent to $71.71/barrel in early trading.

The major economic news scheduled for release Friday includes Nov. CPI (8:30 am and analysts expect the highest CPI number in 40 years), Michigan Consumer Sentiment (10 am), and Nov. Federal Budget Balance (2 pm). The major earnings reports scheduled for the day are also limited to ASO before the open. There are no reports scheduled for after the close.

We got the expected rest Thursday after a few very strong days in all the major indices. However, the candles indicated there may be more of a pullback to come. Remember, not to get too tied up in the “hard right edge” of the chart and that a pullback was needed at some point to give us a higher high and higher low of a trend. Regardless, it is hard to predict the open today since the CPI number will call the tune at least early. We are expecting a terrible number, but just as a thought experiment, what would markets do if it came in even worse than is being expected? Also, remember the Fed meets next week and that is a risk because they are expected to accelerate the Taper and POSSIBLY change their long-standing position that rates will not rise in 2022.

Also, bear in mind that it is Friday. So, don’t forget to pay yourself and prepare for the weekend news cycle. Don’t be in a hurry to chase. Stick to your trade rules and on managing the things you can control. (Not trying to force the market to obey your desires.) Consistently taking profits when you have them and moving your stops in your favor should be part of your plan. Trade carefully and continue to think twice before holding through earnings…especially without a hedge.

Swing Trade Ideas for your consideration and watchlist: ADVM, FANG, ERX, MRO, BP, VALE, CVS, CAT, TSN, BEKE. 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