In anticipation of strong big tech earnings, the DIA and SPY set new records yesterday before pulling back as we approached the close.  That left behind possible topping candle patterns, but with all the earnings energy coming our way in the next couple of days, anything is possible.  That said, a rest or minor profit-taking pullback to test price support seems to grow in probability from this extended condition in the indexes.  Traders will also have to grapple with the Durable Good data before the open that analysts suggest may come in negative. 

Overnight Asian markets closed the day mostly lower, with Hong Kong leading the way down 1.57%.  This morning, European markets trade in the red across the board with modest losses keeping an eye on the UK budget debate.  Facing another massive day of earnings and economic data, U.S. futures currently point to modest declines.  So buckle up; it could be another wild earnings season adventure.

Economic Calendar

Earnings Calendar

On the Wednesday earnings calendar, we have a busy day with 194 companies listed.  Notable reports include AFL, AEM, ALGT, NLY, ADP, AVB, BA, BOOT, BSX, BMY< BG, CINF, KO, CDE, DB, DRE, EBAY, EXR, FISV, F, GRMN, GD, GM, GSX, HOG, HLT, IP, KHC, LC, MAS, ORLY, PPC, RJF, R, NOW, STX, SF, TDOC, TWLO, VICI, WH, XLNX, YNDX, & YUMC. 

News & Technicals’

Alphabet topped analysts’ expectations on the top and bottom lines. However, CFO Ruth Porat said Apple’s privacy changes had a “modest impact on YouTube revenues.” As a result, the company’s shares were little changed after reporting.  Microsoft’s Azure revenue growth slowed slightly in the quarter, although it accelerated from the prior quarter on a constant-currency basis. In addition, PC supply constraints cut into sales of Windows to device makers.  Third-quarter transaction-based revenue totaled $267 million, with only $51 million coming from cryptocurrency trading. Revenue from crypto trading totaled $233 million in the second quarter.  Robinhood said that, barring any change in the market environment, the headwinds that dragged down last quarter would persist into the end of the year.  Senate Democrats on Wednesday unveiled a new billionaires’ tax proposal, an entirely new entry in the tax code designed to help pay for President Joe Biden’s sweeping domestic policy package and edge his party closer to a comprehensive agreement.  The proposed tax would hit the gains of those with more than $1 billion in assets or incomes of more than $100 million a year, and it could begin to shore up the big social services and climate change plan Biden is racing to finish before departing this week for global summits.

The SPY and DIA found themselves trading at new records yesterday but struggled to hold intraday highs as we moved toward the close and heavily anticipated giant tech reports.  The pullback slightly relieved the short-term overbought condition in the T2122 indicator as the VIX rose slightly off intraday lows.  Today, we ramp up the number of earnings reports and have the potential market-moving Durable Goods report to digest.  Analysts expect a -0.9 reading falling from the prior report of 1.8%.  International Trade data will follow that as well as the Petroleum Status.  Indexes remain in a very extended condition adding danger to those entering positions, so plan your risk carefully.  Remember, healthy price action commonly tests price supports, and the current rally has left little support behind and lots of open gaps in the process. 

Trade Wisely,

Doug

The gravity-defying winning streak continues as the fear of missing out intensives, so does the real risk to traders trying to enter with indexes so extended in the short term.  Fed taper, inflation, energy prices, supply chain impacts, P/E ratios, market internals, and even the chart technicals seem to be of no concern at the moment. However, the more we extend, the greater the risk of a substantial pullback, so be prepared.  I challenge you to take off those rose-colored glasses and assess the risks before entering new positions.   

Asian markets traded mixed overnight even as the Nikkei surged 1.77% as worries of property taxes pushed Hong Kong lower.  However, European markets see nothing but green this morning, fueled by earnings optimism.  Ahead of a huge day of earnings, housing, and consumer confidence data U. S. futures point to new record highs in the SPY and DIA at the open. 

Economic Calendar

Earnings Calendar

On the Tuesday earnings calendar, we step up tech earnings with nearly 100 companies expected to report.   Notable reports include AMD, GOOGL, TWTR, MSFT, MMM, AAN, AMP, ADM, ARCC, BYD, CAJ, COF, CNC, CB, CIT, GLW, CLR, ECL, LLY, EQR, ESS, FFIV, GE, HAS, IVZ, JBLU, JNPR, LOGI, NAVI, PNR, PHM, RTX, HOOD, SPGI, SHW, SSTK, TER, TXN, TRU, UBS, UPS, V, WM, & XRX.

News & Technicals’

Facebook shares rose in extended trading Monday after the company reported better-than-expected third-quarter earnings while revenue missed estimates. In addition, the company announced its plans to break out its Facebook Reality Labs into its reporting segment starting in the fourth quarter. As a result, Facebook said it expects fourth-quarter revenue of $31.5 billion to $34 billion.  Democrats are making some hard choices about their signature spending plan to satisfy key moderates in the Senate, slashing the topline cost from $3.5 trillion to between $1.5 and $2 trillion.  Several of Biden’s campaign promises have been abandoned altogether, such as providing free community college and instituting a clean electricity standard with penalties for utilities that don’t comply.  Other programs that were initially permanent will instead be set to expire in a year or two, like the expanded Child Tax Credit and expanded Medicaid.  According to economists, shipping backups at big U.S. ports are not likely to resolve themselves until well into 2022.  Goldman Sachs said that the problems should lessen after the holidays and Lunar New Year as container traffic backs off.  Companies have been left to find ways to keep their products moving amid the supply chain disruptions.  Treasury yields dipped slightly in early Tuesday trading, with the 10-year trading at 1.63.17% and the 30-year falling to 2.0783%.

The bulls continue to run higher in a gravity-defying winning streak that at this point shows no signs of stopping.  Inflation and supply chain issues seem to be of no concern.  A Fed taper and now the prospect of 2 potential interest rate increases next year of no consequence as traders rush to add risk. A rapidly deteriorating China economy and a growing number of foreclosures in the U.S. we ignore. The fear of missing out is so intense that even the charts’ technicals and the internal indicators are rendered essentially useless.  What does that mean?  Could this be the preamble to the classic blowoff top forming?  It is very reminiscent of the last rush into stocks in late 1999, where just like today, P/E ratios were wholly ignored.  How long can this last?  Your guess is as good as mine but enjoy the ride as long as it lasts because there could be a reckoning at the end of it.  At the risk of sounding like a broken record, I will once again caution traders to be cautious chasing already stocks.  That said, whatever you trade, make sure you have considered the risk carefully because this kind of rally can produce some painful reversals overnight and big intraday whipsaws. 

Trade Wisley,

Doug

Futures markets opened traded decidedly bearish yesterday afternoon but, following the typical protocol of late speculation on earnings, now boasts a bullish open.  Nearly a 3^rd of the Dow and SP-500 stock will report this so so get ready for a wild week of emotion-driven price volatility as markets react.  With the disappoints delivered by IBM, INTC & SNAP, and the other big tech being bid up into their reports, there is a significant risk should they stumble. So plan your risk carefully and avoid chasing stocks with the fear of missing out.

Asian market traded modestly higher with only the Nikkei seeing red on the day with HSBC earnings beat setting the mood.  Across the pond, European markets trade mixed with modest gains and losses with a big day data ahead. Finally, U.S. futures have recovered sharply off of overnight lows to suggest a modestly bullish open ahead of a massive week of earnings data and nothing of consequence on the economic calendar for today. 

Economic Calendar

Earnings Calendar

We have a big week of earnings beginning this week with more than 70 companies listed on the calendar.  Notable reports include

News & Technicals’

House Speaker Nancy Pelosi said Sunday that Democrats are close to finalizing an agreement on the social safety net plan that would allow the bipartisan infrastructure bill to move forward.  “We have 90% of the bill agreed to and written; we just have some of the last decisions to be made,” Pelosi said on CNN’s “State of the Union.”  Twitter co-founder and crypto advocate Jack Dorsey weighed in Friday on escalating inflation in the U.S., saying things will get considerably worse.  “It will happen in the U.S. soon, and so the world,” he tweeted.  More than 47 million Pfizer vaccine recipients who received both shots at least six months ago became eligible for a booster Friday. More than 39.1 million Moderna vaccine recipients who received both shots at least six months ago became eligible for a booster Friday.  The CDC adopted a slightly different criterion for J&J’s one-shot Covid vaccine, making almost 13 million recipients immediately eligible.  U.S. Treasury yields ticked higher Monday morning, with the 10-year topping the 1.66% mark and the 30-year rising to 2.1084%.

Futures markets opened on the bearish side, but following the typical protocol of late, they have rallied back into the green in anticipation of earnings results.  With nearly a 3^rd of the SP-500 and Dow expected to report this week, traders should prepare for a significant dose of volatility.  We have experienced a powerful buy the dip rally fueled by tremendous earnings speculation in the last couple of weeks.  As a result, the technicals of the charts have vastly improved but so has the risk to the retail traders feeling the fear of missing out.  This season we have seen some big winners, and dramatic earnings losers bid up into the report.  Consider this rick carefully should you choose to trade high-flying stocks nearing a report.  That said, get ready for a wild week of price action that could set new records or start the next correction. 

Trade Wisely,

Doug

With tech stocks stretching higher, it was the SP-500’s turn to touch the sky, setting a new record-extending the index into seven straight days of gains.  The earnings miss from big blue briefly sent the Dow lower only to recover by the end of the day as the ravenous bulls continue to buy, buy, buy! Although the INTC and SNAP point sharply lower after disappointing earnings, the U.S. futures suggest new records may be set at today’s open.  Can we extend the party as we head into the weekend?  Your guess is as good as mine, but I would be more of a profit taker today rather than a buyer.

Asian markets closed mixed as Evergreade made a bond payment in the grace period to avert default.  European indexes see nothing but green across the board this morning as Chinese property fears temporarily subside.  Though somewhat muted, U.S. futures point to a bullish open in the Dow and SP-500, while the QQQ looks slightly lower after rallying off overnight lows. 

Economic Calendar

Earnings Calendar

We have a slightly lighter day on the Friday earnings calendar, with 37 companies listed. So let’s call it the calm before the next week’s storm of giant tech reports.  Notable reports include AXP, SAM, CLF, HCA, HON, RF, SLB, STX, & VFC.

New & Technicals’

The U.K. is seeing rampant Covid infections and a slowly increasing number of hospitalizations and deaths.  The warnings come just as government officials have insisted that more restrictions on public life are not yet necessary.  Making matters potentially worse, the U.K. is also monitoring a mutation of the delta variant.  Evergrande has remitted the funds for a required interest payment due Sept. 23 — ahead of a 30-day grace period that ends tomorrow, according to the Chinese state media Securities Times.  The $83.5 million interest payment on Evergrande’s March 2022 offshore bond had been closely watched by investors ever since the indebted property developer warned twice in September that it may default.  Analysts say any easing by the People’s Bank of China may not come in overt moves, significantly as the U.S. tightens monetary policy. In addition, the PBOC needs to support a slowing economy while keeping inflation in check.  On Thursday, Snap reported its third-quarter earnings, missing revenue expectations after Apple’s iPhone privacy changes disrupted its advertising business.  The company also warned that global supply chain interruptions and labor shortages reduce the “short-term appetite to generate additional customer demand through advertising.”  The 10-year Treasury yield traded higher to 1.6846%, and the 30-year fell slightly to 2.1257% in early Friday trading.

It was the SP-500’s turn to touch the sky, setting a new record as the bulls continued to buy up tech in anticipation of earnings.  Unfortuntually, disappointing results from INTC and SNAP after the bell yesterday have the stock indicated to open sharply lower this morning.  Other digital ad stocks are also taking a hit this morning as a result and adding a bit of uncertainty as we move next week’s big tech earnings bonanza.  That said, the ravenous bulls at this point seem undeterred, with U.S. futures pointing toward a new record open in the DIA and SPY.  No price seems too high as we extend this bullish run keeping the T2122 indicator pegged in a short-term overbought condition.  Today we turn our attention toward PMI with a lighter day of earnings reports.  With the tech giants slated to report next week, the anticipation is very high, and it seems to me the risk is even higher with such elevated P/E ratios. 

Trade Wisely,

Doug

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

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

Economic Calendar

Earnings Calendar

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

News and Technical’s

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

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

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

Trade Wisely,

Doug