Yesterday’s booming recovery rally repaired a lot of the technical damage in the index charts, but traders will still have to watch overhead resistance levels closely. Pricing pressures, product shortages, debt ceiling politics are just a few of the uncertainties on the path forward. So expect the price volatility to remain challenging in the days ahead. With the Dow nearly 1200 points off the Monday low, I would not rule out a possible risk-off day heading into the weekend despite the bullish momentum.
Asian markets traded mostly lower as Evergrande continues to concern investors and China crackdown prohibiting all cryptocurrency exchanges. This morning, European markets trade in the red across the board as they monitor the German election and Evergrande impacts. Ahead of housing data and more Fed speak, the U.S futures currently point to a bit of profit-taking after yesterday’s energetic rally.
Economic Calendar
Earnings Calendar
On the Friday earnings calendar, we only have six verified reports. Notable reports include CCL & JOBS.
News & Technicals’
The People’s Bank of China said services offering trading, order matching, token issuance, and derivatives for virtual currencies are strictly prohibited, vowing a harsh crackdown. An American short-seller banned from trading in Hong Kong for a damning report he wrote on Evergrande, Andrew Left says the Chinese property developer’s debt crisis was “a long time coming.” Evergrande was due to pay $83 million of interest on Thursday for a dollar-denominated bond set to mature in March 2022. Foreign investors typically hold dollar bonds. So even if no payment is made on Thursday, the company will not technically default unless it fails to make that payment within 30 days. The White House on Thursday began to advise federal agencies to prepare for the first government shutdown of the Covid-19 era. The administration’s Office of Management and Budget is alerting federal agencies that they are expected to execute shutdown plans next week, barring a new appropriations bill. Meanwhile, House Speaker Nancy Pelosi and Senate Majority Leader Chuck Schumer announced “an agreement on a framework” with the White House over taxes to pay for the $3.5 trillion reconciliation package. U.S. Treasury yields rose sharply this morning, with the 10-year rising 30 basis points to 1.4406% and the 30-year trading 32 basis points higher at 1.9563%.
Yesterday’s sharp recovery rally repaired a lot of technical damage, but we’re not out of the danger zone just yet. The indexes still have significant overhead resistance, a possible government shutdown, high inflation squeezing consumers, growing product shortages, and those pesky rising Jobless Claims. Toss in tax hikes on the way and a possible Fed taper, and the path forward is understandingly uncertain. With the Dow closing nearly 1200 points above the Monday low, the current momentum favors the bulls. However, the T2122 indicator has quickly recovered to a short-term overbought condition. As we head into the weekend, we can’t rule out the possibility of profit-taking and risk reduction due to the uncertainties. Volatility remains high with housing numbers later this morning and a slew of Fed speakers, including Jerome Powell. So plan your risk carefully and have a wonderful weekend!
Markets gapped higher at the open Thursday and then followed through strongly the first half-hour of the day. Then we saw a very slow, steady rally into 2 pm before doing a very slow, steady selloff into the close. This left us with strong, white, gap-up candles that left an upper wick in all 3 major indices. On the day, SPY gained 1.21%, DIA gained 1.48%, and QQQ gained 0.92%. The VXX fell over 6% to 25.37 and T2122 rose to just outside the overbought territory at 76.21. 10-year bond yields spiked to 1.427% and Oil (WTI) rose 1.4% to $73.24 even though the Dollar fell on the day.
During the day, the White House began alerting federal agencies to prepare for a government shutdown next Thursday night. Democrats are scrambling to move ahead with a bill that links the budget (government shutdown) with increasing the debt ceiling (the next crisis). Bloomberg reports that House Speaker Pelosi and Senate Majority Leader Schumer are now pointing to a showdown vote on Saturday. If the vote fails, we can expect more machinations next week and a probable shutdown next Friday. To this point, these issues have been ignored by markets, but with the weekend news cycle ahead, Fed meeting behind, and events drawing nearer, today may be a new story.
After the close, the CDC endorsed the use of PFE booster shots for older and at-risk patients. TRIP reported a missed on both lines last evening. Meanwhile, NKE reported a miss on revenue, but COST managed a beat on both lines. NKE is down 5% in premarket even as TRIP is down half of a percent and COST is up six-tenths of a percent this morning.
Overnight, Bitcoin and other major cryptocurrencies fell by more than 5%. Ethereum, the second-largest crypto fell more than 8%. The moves come after China’s Central Bank posted a Q&A on its website that said all crypto-related activities are illegal and that there would be a harsh crackdown on that entire market. This is not China’s first attack on the alternate currencies, but adding to the earlier moves against crypto mining along with the country’s trials of their own digital currency last year, some analysts believe this is the start of their move to force the use of only government-transparent digital currencies. This is a move likely to be followed by all major powers as governments do not want to give up control of and visibility to at least as much of all transactions as they have now. In other foreign political news, polls say Germany is poised to see a new ruling party after elections on Sunday. (The current CDU has been in power since 2005.)
Overnight, Asian markets were mixed. Japan (+2.06%) and Taiwan (+1.07%) stood out on the upside while Hong Kong (-1.30%) and Shanghai (-0.81%) stood out to the downside. In Europe, stocks are red across the board at mid-day. The FTSE (-0.20%), DAX (-0.72%), and CAC (-0.94%) are representative. However, the much smaller exchanges are feeling the hit much harder. Greece (-2.28%), Norway (-1.89%), and Finland (-1.56%) lead the pain parade in early afternoon trading. As of 7:30 am, US Futures are pointing toward a gap-down at the bell. The DIA is implying a -0.38% open, the SPY implying a -0.50% open, and the QQQ implying a -0.67% open at this hour. The Dollar is rebounding this morning as 10-year bond yields are at 1.417% and Oil (WTI) is down a third of a percent in early trading.
The major economic news scheduled for release on Friday is limited to August New Home Sales (10 am) and a trio of Fed speakers (Chairman Powell, Bowman, and Clarida all at 10 am). The major earnings reports scheduled for the day are limited to CCL before the open. There are no earnings reports scheduled for after the close.
A volatile week that started with a sizeable Evergrande gap-down and has proceeded with a whipsaw-filled recovery of that gap is now about to wind down. With more Fed speakers seeking to soothe markets on tap for today, but the prospect of a showdown vote over a government shutdown and debt ceiling coming this weekend…do not be surprised if we see a Mr. Market be manic again today. The short-term trend is now bullish, but we have yet to take out the downtrend that goes back to the beginning of the month, at least in the SPY and QQQ. So, the bulls still have serious work ahead if they want to overcome the pullback’s technical damage.
Manage your existing trades before you chase any new ones. Focus on the process and on managing the things you can control. Don’t worry about the things you can’t control. Remember that 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. Finally, it is Friday, so consider how you want your account sitting Monday morning, and don’t forget to pay yourself.
Ed
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.
DickCarp: 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
|607% in just 24 months |
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.
DISCLAIMER: Investing / Trading involves significant financial risk and is not suitable for everyone. No communication from Hit and Run Candlesticks Inc, its affiliates or representatives is not financial or trading advice. All information provided by Hit and Run Candlesticks Inc, its affiliates and representatives are intended for educational purposes only. You are advised to test any new trading approach before implementing it. Past performance does not guarantee future results. Terms of Service
The relief rally is underway, but unfortunately, a lot more work is still needed to repair the technical damage in the index charts. Though they gave no beginning date, the Fed says tapering is on the way. China has smoothed the waters in the Evergrande default by essentially nationalizing the company, but there are still questions if the contagion has spread to other companies. So keep an eye on overhead and technical resistance in the index charts as the bears could mount their defense there. With Jobless Claim and PMI ahead, stay focused as it could improve or even reverse the open.
Asian markets traded mixed overnight, with the HSI recovering some of its recent losses, rising 1.19%. However, European markets see modest gains across the board this morning, apparently pleased with the Fed’s actions. U.S. futures point to a bullish gap-up open with an overhead resistance challenge above ahead of earnings and economic data. Relief rallies are fantastic but remember, they can also be quite volatile, so trade wisely.
Economic Calendar
Earnings Calendar
We have the biggest day on the earnings calendar this week, with 23 companies listed. Notable reports include DRI, NKE, AIR, CAN, CAMP, COST, PRGS, RAD, TCOM, & MTN.
New & Technicals’
The FDA authorized Covid vaccine booster shots for people 65 and older. Those 18 through 64 years old who are at high risk of developing severe Covid are eligible. Individuals 18 through 64 years of age who are frequently exposed to Covid either through their work or “institutional” exposure to the virus are also eligible. The ongoing semiconductor chip shortage is expected to cost the global automotive industry $210 billion in revenue in 2021, according to consulting firm AlixPartners. The forecast is up by 91% from an updated forecast of $110 billion in May. The Fed kept benchmark interest rates anchored near zero. Officials indicated they expect to reduce monthly asset purchases “soon” but did not say when. Economic projections pointed to slower overall growth this year but higher inflation than previously projected. Evergarnde surged overnight when China essentially nationalized the company.
We had a great rally yesterday, but a lot more work is necessary to repair the technical damage in the index charts. All four indexes may soon test overhead resistance levels and downtrend, which will likely be the battlezone for the bulls and bears. Remember, we still have the battle ahead in the Senate over the debt ceiling as the House scrambles to pass nearly 5 trillion in additional spending. So expect some political bumps ahead. Speaking of bumps, we have Jobless Claims and PMI numbers this morning that could improve the bullish open futures currently suggest or bring out bears depending on the result. Stay focused and flexible because relief rallies can often have volatile price action that can even include retests of recent lows.
Markets gapped four to six-tenths of a percent higher Wednesday as fears over the Chinese Evergrande debt crisis faded. The bulls followed though all morning and then volatility set in during the afternoon after the Fed announcement and press conference. This left us with gap-up indecisive Spinning Top candles in all 3 major indices. On the day, SPY closed up 0.98%, DIA gained 0.99%, and QQQ gained 0.93%. The VXX fell over 6% to 27.06 and T2122 rose a bit but remains in the mid-range at 68.70. 10-year bond yields fell to 1.307% and Oil (WTI) gained 2% to $71.95/barrel.
The FOMC held rates near zero as expected Wednesday afternoon. Fed Chair Powell also said that the tapering of asset buying will come soon, which most analysts expect to mean the taper will start in November following an October announcement. During questions, Powell implied the taper (any purchases) would come to an end in mid-2022. The Fed now forecasts 5.9% GDP growth for the year (down from a 7% forecast in June) and 3.8% in 2022 (versus the June 3.3% estimate). They expect inflation of 3.7% for the year (versus 3% previous estimate) and 2.3% for 2022 (compared to the June estimate of 2.1%). Powell also told reporters that the Fed is considering “whether to issue” their own cryptocurrency (and perhaps in a more telling follow-up answer “in what form that may be”).
After the close, FB announced its Chief Technology Officer is stepping down. In other evening news, Auto Industry consulting firm AlixPartners has raised its forecast of lost vehicle sales due to the global chip shortage. The firm now estimates 7.7 million units of lost production for 2021 (up from 3.9 million in their May forecast), which would amount to $210 billion in lost revenue for the industry. This will primarily be felt by US giants GM, F, and FCAU (Fiat, Chrysler, Dodge, and Jeep), because the Japanese auto industry had a normal practice of holding a year’s worth of supply inventory in their supply chain. Now that the inventory has been used up, Japanese auto firms are hurting as well, but they postponed their pain far longer than US automakers.
The FDC is set to vote on PFE booster shots for “older and at-risk patients” today. In the meantime, Covid-19 surpassed the 1918 Spanish Flu as the deadliest pandemic in US history on Monday. As of yesterday, the US has seen 43.4 million total cases and 699,748 total deaths in the country. Meanwhile, the averages 130,121 new cases and 1,678 new deaths per day across America. In related news, yesterday the President announced the US will buy another 500 million doses of the PFE vaccine to donate to poorer nations, raising the total US donation commitment to 1.1 billion doses.
Overnight, Asian markets were mostly higher as China pumped $17 billion of liquidity into their banking system and told local governments to “prepare for a storm and be ready to step-in (if needed) at the last minute” to prevent spill-over events from the Evergrande defaults. Japan (-0.67%) and South Korea (-0.41%) were the only red in the region today. India (+1.57%), Hong Kong (+1.19%), and Australia (+1.00%) were the leaders to the upside. In Europe, markets are green across the board at mid-day. The FTSE (+0.05%) is the laggard after British PM Johnson failed to get the trade deal he had been promising prior to and shortly after Brexit. However, the DAX (+0.76%) and CAC (+0.85%) are typical of the region, even though some of the smaller exchanges are up almost 1.5% in early afternoon trading. As of 7:30 am, US Futures are pointing toward another gap higher. The DIA is implying a +0.47% open, the SPY implying a +0.52% open, and the QQQ implying a +0.54% open. 10-year bond yields are flat with Oil down three-quarters of a percent even as the Dollar is down sharply in early trading.
The major economic news scheduled for release on Thursday is limited to Weekly Jobless Claims (8:30 am), Mfg. PMI and Services PMI (both at 9:45 am). The major earnings scheduled for the day include CAN, DRI, and RAD before the open. Then after the close, AIR, COST, NKE, and TCOM report.
As markets digest (second-guess) the Fed results and afternoon reaction and fear over the Chinese debt default from Evergrande fades, US stocks are looking to rally at the open again. The question is whether the overhead resistance created on the recent pullback will hold or if the bulls will have their way. Either way, volatility remains elevated, the short-term trend remains bearish, and the next news story will be the success or failure of both the US Debt Ceiling raise and passing a budget to allow continuing government operations after September. It now appears any bipartisan efforts have failed, which leaves open the question of whether Democrats can come together enough to ram-through one-party solutions to those problems.
Remember, the trend is your friend until it ends. Right now, that trend remains bearish with a lot of volatility. So, manage your existing trades before you chase any new ones. Focus on the process and on managing the things you can control. Don’t worry about the things you can’t control. Discipline and good trading rules are what separates 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.
Ed
Swing Trade Ideas for your consideration and watchlist: PLUG, FCEL, BB, NET, PLTR. 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.
DickCarp: 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
|607% in just 24 months |
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.
DISCLAIMER: Investing / Trading involves significant financial risk and is not suitable for everyone. No communication from Hit and Run Candlesticks Inc, its affiliates or representatives is not financial or trading advice. All information provided by Hit and Run Candlesticks Inc, its affiliates and representatives are intended for educational purposes only. You are advised to test any new trading approach before implementing it. Past performance does not guarantee future results. Terms of Service
Last night the U.S. House passed a bill to suspend the debt limit and fund the government through early December. Futures markets responded with a sharp reversal from overnight lows despite the bill’s steep challenge in the Senate. Consider that carefully as you approach today’s opening gap up ahead of an FOMC decision. The pop and drop has become a regular occurrence the last couple of weeks, so stay focused and avoid chasing into the gap. After the morning rush of energy, don’t be surprised if the price becomes choppy while we wait on the Fed.
Overnight Asian markets traded mixed but mostly higher as investors watch the fallout of the Evergrande default. However, European markets have a relief rally in mind seeing green across the board. The U.S. points to a bullish gap-up open after a debt ceiling suspension and ahead of the Federal Reserve decision on a taper. So, let’s hurry up and wait!
Economic Calendar
Earnings Calendar
On the Wednesday earnings calendar, we have just nine companies listed. Notable reports include BB, GIS, FUL, KBH, & SCS.
News & Technicals’
The House passed a bill last night that would temporarily fund the government and suspend the debt limit. However, the legislation will face a challenge in the Senate, as Minority Leader Mitch McConnell says Republicans will vote against raising the debt ceiling. If not approved, the government would shut down on Oct. 1, and the U.S. would be unable to pay its bills sometime in October if Congress does not pass legislation addressing both issues. The Fed’s September meeting has been widely anticipated since the central bank is expected to signal that it’s close to announcing the taper of its bond purchase program. But the focus of markets will be squarely on what the Fed now forecasts for interest rates and inflation. According to Jamie Dimon, the top uncertainty for the Fed is the path of inflation. Dimon said that if those hot inflation figures continue into December, U.S. policymakers may have to admit that at least part of the price increases are here to stay. Treasury yields are again falling this morning, with the 10-year dropping 8 basis points to 1.3328% and the 30-year falling 11.5 basis points to 1.8685%.
Another gap up open that closed the day lower kept the VIX elevated into the Tuesday close. However, after the House suspended the debt ceiling and temporarily funded the government until early December, the futures rallied off of overnight lows, pointing to another attempt to pump the market this morning. With the debit suspension facing a substantial challenge in the Senate and facing an FOMC decision on taper, one has to wonder if we’re setting up another pop and drop this morning. The index chart technicals showed little to no improvement yesterday, and I suspect after a morning burst of energy, prices will become choppy as they wait for the Fed. We never know how the market will react to their decision, so remain focused and flexible, prepared for whatever comes our way.
Markets gapped about six-tenths of a percent higher at the open Tuesday as markets tried to recover from the ugly Monday session. However, volatility continued to reign as prices swung in waves all day. Unfortunately for bulls, the last two major waves of the day were to the downside. This left us with black-body candles with upper wicks that went out on or near the lows in all 3 major indices. On the day, SPY lost 0.10%, DIA lost 0.09%, and QQQ gained 0.12%. The VXX fell to 28.70 and T2122 popped back out of the oversold territory to 28.37. 10-year bond yields rose to 1.323% and Oil (WTI) rose slightly to $70.51/barrel.
After the close, a US government agency, headed by Attorney General Garland, reported it will be “reviewing” the proposed ZM acquisition of FIVN (announced in July). In the announcement, the agency pointed to foreign participation (ZM has R&D operations in China and FIVN has operations in Russia).
Elsewhere after hours, FDX shares fell as the company missed on earnings and cut its Q4 profit forecast as cost increases are expected to outpace their recently announced price increase. In addition, DIS shares fell hard when CEO Chapek told a GS event that his company believes the Delta variant will cause Q4 subscription growth to come in below previous estimates. On the other side, SFIX shares jumped after the company unexpectedly reported a profit while beating on both lines. ADBE also rose after beating on both lines.
Following very strong Housing starts data yesterday, this morning’s weekly mortgage demand spiked to the highest level since April. Analysts say this points to strong home sales for September. The average 30-year fixed, conforming loan rate remains at 3.03%. However, new purchase loan applications rose 2%, but refinance applications climbed 7% week-on-week. While mortgage demand remains below the same week a year ago, the gap is narrowing.
Overnight, Asian markets were mostly modestly lower. An IMF spokesman said they do not expect the Evergrande crisis to be a “Chinese Lehman Brothers moment.” She said the differences include the company owning physical assets (properties) and the Chinese government has much stronger controls over their financial markets and is in a better fiscal position to simply take ownership of the debt and assets if needed than the US/West did in 2008. Taiwan (-2.03%) was the outlier because after a drop at the open, Shanghai (+0.40%) recovered fully and both Shenzhen (-0.57%) and Japan (-0.67%) made significant comebacks. In Europe, markets are up significantly at mid-day, bouncing as they have seen a lack of panic in Chinese markets. The FTSE (+1.15%), DAX (+0.55%), and CAC (+1.11%) are typical of the region in early afternoon trading. As of 7:30 am, US Futures are also pointing to another up open. The DIA is implying a +0.58% open, the SPY implying a +0.51% open, and QQQ implying a +0.30% open.
The major economic news scheduled for release on Wednesday includes August Existing Home Sales (10 am), Crude Oil Inventories (10:30 am), and Fed Interest Rate Projections, Fed Interest Rate Decision, and FOMC statement (all at 2 pm), and the Fed Chair presser (2:30 pm). The major earnings scheduled for the day include GIS before the open. Then after the close, FUL, KBH, and SCS report.
With the rest of the world rebounding as the Evergrande debt crisis in China did not look so scary today, US markets are likely to wait and see what the Fed does/says before making big bets. The ugly day Monday and volatility then and Tuesday should give us pause about any further pullback or reversal into rally mode. We have resistance overhead and some support below. So, consider how much confirmation you want before blindly chasing an intraday trend.
Remember, you don’t have to trade every day. Activity does not equal progress. And when you do trade, the Trend is your friend. Right now, that trend remains bearish with a lot of volatility. So, manage your existing trades before you chase any new ones. Focus on the process and on managing the things you can control. Don’t worry about the things you can’t control. Discipline and good trading rules are what separates 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.
Ed
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.
DickCarp: 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
|607% in just 24 months |
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.
DISCLAIMER: Investing / Trading involves significant financial risk and is not suitable for everyone. No communication from Hit and Run Candlesticks Inc, its affiliates or representatives is not financial or trading advice. All information provided by Hit and Run Candlesticks Inc, its affiliates and representatives are intended for educational purposes only. You are advised to test any new trading approach before implementing it. Past performance does not guarantee future results. Terms of Service
With worries, the Evergrande default contagion could spread significant technical damage to the index charts yesterday. Although the significant overnight reversal certainly relives yesterday afternoon’s short-term oversold condition, it does not relieve the extremely high price volatility danger. Consider the overhead resistance and the very real possibility of substantial intraday whipsaws. The Evergrande problem is just beginning, not over, and we have an FOMC meeting just around the corner. Emotions are high, so trade wisely.
With China markets still closed for a holiday, the NIKKEI sold off 2.17%, monitoring Evergreade developments. This morning, European markets are in relief rally mode, seeing green across the board trying to overcome some of yesterday’s selloff. Ahead of Housing numbers and an FOMC meeting decision just around the corner, the U.S. futures point to a substantial gap up, this time punishing those that held short positions overnight. Stay focused as substantial intraday whipsaws are possible, making for very high-risk trading.
Economic Calendar
Earnings Calendar
We have just 11 companies listed on the earnings calendar, with most of several unconfirmed reports. Notable reports include FDX, ADBE, ACB, AZO, CBRL, NEOG, SFIX.
News & Technicals’
With government funding expiring at the end of September, Treasury Secretary Janet Yellen has said the U.S. would likely not be able to pay its bills sometime in October if Congress does not suspend the debt limit. As a result, Congress will attempt to include a debt ceiling suspension that will kick the can down the road funding the government through December. Economists expect Chinese officials to stem the spillover from liquidity issues at Evergrande, the country’s largest property developer, before it slams the banking system and bleeds into foreign financial centers. But strategists also say Beijing needs to act quickly to restructure Evergrande because markets are becoming nervous and hurting sentiment. Early this morning, the yield on the 10-year Treasury notes dropped 17 basis points to 1.3220%, while the 30-year fell 15 basis points to 1.8625%.
Yesterday created significant technical damage in the index charts, and likely shook investor confidence to the core. However, a substantial overnight reversal is underway to punish any short traders who chose not to take profits during yesterday’s rout. The T2122 indicator was signaling a short-term oversold condition and with a hopefulness that Beijing will step in to curb the credit crisis in the aftermath of the Evergrande default watch for a robust short-squeeze relief rally. That said, be very careful as we approach resistance levels and watch for possible whipsaws because the bear may not give up so easily this time around. The big emotional gap up this morning makes for high-risk long entries, especially when you consider the very high implied volatility and FOMC decision just around the corner. I suspect the rollercoaster ride is not over, considering the considerable decline in bond yields this morning.
Stop me if you’ve heard this one before. So, China caught a virus and the US got sick. Ba-dum-dum. In this case, China’s virus is the Evergrande fund’s $300 billion loan default, and “the US” refers to US markets. At any rate, US markets started the week with a big gap down and then put in a wide-ranging, indecisive Spinning Top candle day in all 3 major indices. On the day, SPY lost 1.66%, DIA lost 1.80%, and QQQ lost 2.17%. That made Monday the worst day since May. However, for context, it’s important to remember that we are still just 4-6% off the all-time high in the various indices. The VXX rose almost 11% to 29.74 and T2122 dropped deep into the oversold territory at 3.54. 10-year bond yields fell to 1.311% and Oil (WTI) dropped 1.56% to $70.85/barrel.
Afterhours, RDS.A announced a deal to sell the entirety of its Permian Basin assets (operations and drilling rights) to COP. The deal was for $9.5 billion and includes current production of 175,000 barrels per day. This deal ends Shell’s US onshore production operations, but RDS.A will continue to operate their production offshore from Texas.
On Monday, Covid-19 surpassed the 1918 Spanish Flu as the deadliest pandemic in US history. There have been 43.1 million total cases and 694,619 total deaths in the country. Meanwhile, the averages 133,979 new cases and 1,623 new deaths per day across America. In related news, this morning JNJ (whose top vaccine selling point was a single dose) says that the vaccine is 94% effective when a booster dose is given two months after the original dose.
Overnight, Asian markets were mixed, but mostly green. Japan (-2.17%) was a huge e outlier as fear from the Evergrande debt crisis impacting Japanese firms gripped the Nikkei. However, the region’s few other losses were very minor. Meanwhile, India (+0.95%), Thailand (+0.74%), Shenzhen (+0.71%), and Singapore (+0.71%) led the gainers. In Europe, we see green across the board at mid-day. The FTSE (+1.14%), DAX (+1.53%), and CAC (+1.37%) are typical as the continent rebounds from the initial Evergrande shock. As of 7:45 am, US Futures are pointing toward a gap higher at the bell. The DIA is implying a +0.83% open, the SPY implying a +0.77% open, and the QQQ implying a +0.75% open. 10-year bond yields and Oil are also rebounding in early trade as the Dollar is just on the red side of flat so far this morning.
The only major economic news scheduled for release on Tuesday are August Building Permits, Q2 Current Accounts, and August Housing Starts (all at 8:30 am). The major earnings scheduled for the day include AZO and CBRL before the open. Then after the close, ADBE, FDX, and SFIX report.
Markets are trying to rebound after the ugly Monday session. However, a lot of technical damage was done and the whipsaw is in effect both intraday and interday. Be careful not to get caught in that whiplash. Also, with the Fed Meeting starting today, it would not be surprising for markets to start drifting until the FOMC shows its next card Wednesday afternoon. So, be ready for a dead drift sideways if it comes.
Keep in mind that you don’t have to trade every day. And when you do trade, the Trend is your friend. Right now, that trend is bearish. So, manage your existing trades before you chase any new ones. Focus on the process and on managing the things you can control. Don’t worry about the things you can’t control. Discipline and good trading rules are what separates 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.
Ed
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.
DickCarp: 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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The next shoe drops as the liquidity issues of the Evergrande default create shock waves around the world. The dip buyers on Friday will feel considerable pain this morning due to the weekend reversal, and the technical damage to the index charts signals tremendous uncertainty ahead. Finally, with an FOMC meeting just around the corner, will bulls defend the or will the bears continue to push lower at the open of today trading?
Asian markets traded mixed overnight, with the Hong Kong plunging 3.30% and ASX dropping 2.10%. Additionally, this morning, European markets are decidedly bearish, with the DAX, CAC, and FTSE indexes down more than 2%. Finally, U.S. futures point to a mean and punishing weekend reversal, with the Dow signaling a gapping down more than 500 points. So get ready for a wild ride.
Economic Calendar
Earnings Calendar
To kick off the new trading week, we have 17 companies listed on the earnings calendar, but many of them are unconfirmed. So the only notable report today would be from LEN.
News & Technicals’
Evergrande, the Shenzhen-based company, faces a default on its debt burden of roughly $300 billion. The crisis has echoes of the Lehman Brothers bankruptcy, which marked its 13-year anniversary last week, a development that at the time sent shockwaves through global markets. So the question is it a so-called too big to fail, and the government comes in to save the business? In addition, the U.S. is tiring to smooth the tensions with France after they recalled its ambassadors, creating another geopolitical crisis. On Sunday, Treasury Secretary Janet Yellen asked Congress to raise the federal debt ceiling as the risk of default draws near. Remarkably as the debt ceiling looms, the U.S. dollar is on the rise this morning due to the liquidity crisis in China. As a result, bonds are falling hard this morning, with the 10-year dropping to 1.3633% and the 30-year falling to 19030%.
It would seem the liquidity issues of the Evergande default did make its way into the U.S. markets with a big over the weekend reversal. This morning, traders will wake to the SPY well below its 50-day average and the QQQ gapping down to test its 50-day as support. In one fell swoop, the DIA will wipe out nearly two months of gains, and the IWM will gap below its 200-day average. Ouch! The question is, will the bulls defend, or will the bears continue to push the indexes lower. If that were enough uncertainty to deal with, we have an FOMC meeting and the possibility of tapering easy money policies on the lips of the committee. With so much uncertainty, price volatility is likely to become very challenging. Experienced day traders will likely have the edge, and the buy the Friday dip buyers get severely punished. So fasten your seatbelt tightly; it’s likely to be a very bumpy ride today.
Even after the surprise increase in retail sales, the price action produced another punishing whipsaw to test recent lows after gaping up at the open. The wild volatility favors the experienced day traders but has likely left everyone else with little to no trading edge due to the extreme whips. I wish I could say it’s over, but honestly, I think there is more uncertainty to come with the FOMC meeting scheduled for next week. That said, plan your risk carefully as we slide into the weekend.
Asian markets finished the week with a bit of relief rally overnight, facing the enormous uncertainty of an Evergrande default. This morning, European markets trade in the red across the board with modest losses as UK retail sales fall. With a very light day of earnings data and a reading on Consumer Sentiment later this morning, U.S. futures are uncharacteristically muted, pointing to a modestly lower open.
Economic Calendar
Earnings Calendar
We have just 13 companies listed on the Friday earnings calendar, with only two verified. So the only somewhat notable report for today is that from MANU.
News & Technicals’
A key FDA panel meets Friday to debate and vote on Pfizer and BioNTech’s application to offer booster shots to the general public. The meeting comes as some scientists, including at least two at the FDA, say they aren’t entirely convinced every American who has received the Pfizer vaccine needs extra doses at this time. French officials in Washington canceled a gala at their compound over frustration with the new security partnership between the U.S., U.K., and Australia. The development comes after France expressed outrage over a new partnership that, in part, ends a long-standing submarine contract between Australia and France. Snowed under its crushing debt of $300 billion, Evergrande is so huge that the fallout from any failure could hurt not just China’s economy. Contagion could spread to markets beyond China. The U.S. Treasury’s are moving opposite of each other this morning, with the 10-year advancing to 1.334% and the 30-year declining to 1.877%.
After a disappointing Jobless claims report and a surprise increase in the retail sales number, the market once again opened with a gap up but quickly found sellers producing another punishing whipsaw. However, as the day wore on, the bulls buckled down and went to work defending recent price lows in the indexes. Unforunintly, by the end of the day, the price action left us with more questions than answers, with the DIA remaining under its 50-day while the SPY and QQQ held their bullish trends. Additionally, today we will get the latest reading on the Consumer Sentiment at 10 AM Eastern that could create some price volatility. Finally, as we slide into the weekend, the question we all need to answer for ourselves is, do I feel I have an edge? Intraday traders could answer that question, yes, but swing and position traders may feel much more uncertain about the path forward.
Mike Probst: Rick, Got CTL off the scanner today. Already up 30%. Love it. 
