Although there seems to be swirling political uncertainty everywhere the market will not turn its primary focus to the beginning of the 4^th quarter earnings season results. JPM has already let the way this morning with a solid beat gaping the stock higher and emboldening the bulls in the futures market.  Let’s hope the other big banks can do as well this week as earnings ramp-up in the weeks ahead.

Overnight Asian markets closed mixed as traders remain cautious on the proposed Phase 1 deal that many are now calling a temporary cease-fire.  European markets are mixed but mostly higher as EU negotiator gives hope of Brexit deal this week.  US Futures are currently green across the board as big bank earnings roll in this morning.  As of now, futures point to gap up of more than 100 Dow points, but that could easily improve or sharply diminish so expect volatility and stay focused on price action for clues forward.

On the Calendar

Today begins 4^th Quarter earnings with 42 companies on the Earnings Calendar expected to report.  Among the notable reports are C, JPM, KEY, BLK, SCHW, TACO, GS, JBHT, JNJ, PGR, PLD, SNBR, UAL, UNH, WFC & WIT.

Action Plan

How we deal with today depends very much on how the market responds to the early morning earnings reports.  Futures seem to have considerable confidence that the results from the big banks this morning pointing to more than a 100 point gap up open.  According to reports very early this morning, one of the Brexit negotiators says a deal is still possible this week, creating a rally in the sterling.  We, of course, will have to watch closely for developments in the Phase 1 deal is being renamed by some as merely a temporary cease-fire in the trade war.  Tariffs on China will increase to 30% in December if the deal fails.  Attempting to punish Turkey for its Syrian invasion the President has raised steel tariffs on the country to 50% and cleared the administration to pursue all available economic sanctions.

Though all this political uncertainty has made for very challenging price action focus will likely turn to earnings results as 4^th quarter reports ramp up this week.  With the DIA, SPY, and QQQ holding above their 50-day averages with significant gaps below, we will need some sold results to prevent prices from sliding into the gap.  As I write this, JPM has reported positive earnings results and is gaping higher. Let’s hope the other big banks can do the same settling frayed trader’s nerves and put some structure back into the chart technical’s without all daily reversals and whip.

Trade Wisely,

Doug

Friday’s huge short squeeze rally seems the market seems to be struggling this morning with the very vague so-called Phase 1 deal as China now says they need more discussion before signing anything.  Over the weekend, we’ve also learned that the Brexit deal is once again proving elusive with the Sterling reversing Friday’s hopeful gains.  We also know the conflict between Turkey and Syria has escalated and that Hong Kong protesters are talking about scaling back on their activities.  What a difference a weekend can make!

Asian markets closed green across the board overnight, but that sentiment has not translated into bullish notions in Europe, which are currently seeing red across the board this morning.  US Futures have recovered from overnight lows as the vague Phase 1 deal may be harder to close than the hopeful market initially thought.  With today being a banking holiday and 4^th quarter earnings beginning Tuesday a light and choppy day would not be out of the question after a what could be a volatile open.

On the Calendar

Because it’s the national holiday Columbus Day banks and bond markets will be closed today.  As a result, we have no Economic Calendar reports today.

We have just nine companies reporting earnings today, but none are particularly notable and unlikely to be market-moving.  However, keep in mind, the official beginning of the 4^th quarter earnings begins Tuesday morning with several big banks reporting.

Action Plan

What a difference a weekend can make.  After a huge short squeeze rally that closed the Dow over 300 points higher on news of a partial trade deal.  This morning the news seems to have reversed, suggesting that China needs more discussion before a possible deal can be signed.  Details of the so-called Phase 1 deal have been few and far between; in fact one could argue extremely vague.  By the way, how many Phases are there?  In other news, the conflict between Turkey and Syria has escalated over the weekend with Turkey preparing to invade a northern Syrian city. 

The positive news of Brexit progress seems to have also shifted as many not suggest Britain will need to ask for another extension which the Prime Minister is not in favor of doing.  On a technical basis the DIA, SPY, and QQQ are now well above their respective 50-day averages but have left significant gaps behind as well as not so confident shooting start candle patterns behind.  As I write this report, futures are pointing to lower open but rallied to cut the overnight lows almost in half.  I would not be at all surprised to see the overnight lows tested after the open.  With today being a banking holiday with the bond markets closed, I’m expecting a light and choppy price action after the morning rush as we wait for the official kick-off the 4^th quarter earnings on Tuesday.

Trade Wisely,

Doug

Abounding optimism of a trade deal has the market surging higher this morning even though we have not seen any details as to what negotiations have produced.  Will there be a deal, a partial deal or could this morning gap be irrational exuberance?  Could this trigger a huge short squeeze that drives short traders of the market, or might this create a big pop and drop pattern if we learn there is no deal and tariffs increase next week?  The bigger question is, how will you manage your risk as we head into the weekend if we have no answers to these questions by the close of today?

Overnight Asian markets closed the week green across the board on trade optimism.  European markets are also decidedly bullish this morning amid rising hopes of a Brexit deal coming together.  US Futures point to a wildly bullish gap up open of more than 250 Dow points as the President, and the Vice-Premier conclude the 2-day meeting today.  With such an emotionally charged market, remain flexible and prepare for volatile price action in reaction to trade developments.

On the Calendar

We have 14 companies expected to report on the Friday Economic Calendar.  Notable reports include FAST and INFY before the open today.

Action Plan

Looking at the US Futures this morning, I’m honestly speechless at the huge bullishness this morning after positive comments on negotiations with early today.  It seems we’ve been down this road before that ended with no deal, but the market is wildly this morning even though there have been no details released.  Perhaps we’ll know more later today but be prepared for potential violent volatility as the news rolls out.  There is also hopeful news from across the pond that the British Prime Minister and the EU have found some common ground after reporting a path to a Brexit deal is improving.

Today’s huge gap up could trigger a big short squeeze forcing the market even higher.  T2122 could easily swing from short-term oversold to short-term overbought all at once, making a mess of the chart technical.  We should also not rule out the possibility of a pop and drop pattern that could quickly develop if the trade news happens to spin the opposite direction.  The big question for me is, what happens if we hear no details on trade negotiations until after the market closes?  How much risk are you willing to hold into the weekend?  Plan carefully and remain focused on price as the emotionally charged market could provide a very wild ride today.

Trade Wisely,

Doug