The bulls are just relentless. A gap higher (strong one in the QQQ) led to a green day in the markets. The DIA was up only 0.39%, the SPY up 0.48%, and the QQQ up a strong 0.96%. The led to another new all-time high close in both the SPY and QQQ. While the SPY and DIA were not decisive, the QQQ put in a strong white-body candle. Again, the VXX shows no fear in the market at 13.56 and the T2122 remains in the mid-range at 61.13. The long and short of it is that nothing has slowed the bulls much in this run. This is the case despite the NASDAQ being well extended and the large-cap indices having consolidated or even looked toppy recently.
On the news front, the Producer Price Index for January came in much higher than expected (highest in 18mo), but Building Permits were also higher than expected. The Fed speakers and FOMC Minutes both confirmed that no rate changes are expected this year. However, it also confirms that the Fed does see coronavirus as a global economic threat. Both Bloomberg and CNBC report that other analysts and firms also think the market is underestimating the virus impact, but so far the bulls could not seem to care less.
On the coronavirus front, the headline numbers are over 76,000 confirmed cases and about 2,150 deaths worldwide. With that said, new cases reported in China continue to show a trend toward slowing growth. However, China has changed the way they report cases again, which dramatically lowered the numbers from yesterday. In terms of impact, there were rumors of the Chinese government either pumping money into or simply buying out their airline industry, which has been decimated by over least six weeks without flights. In addition, 10 days after it was supposed to restart, Foxconn (AAPL main iPhone supplier) said it will cautiously restart production in its larger plants.
Overnight, Asian markets were mixed. On the other hand, Europe is red across the board at this point in their day. As of 7:45 am, U.S. futures are also pointing toward a mildly lower open, looking to open down less than two-tenths of a percent in the major indices.
Thursday’s major economic news includes Weekly Jobless Claims and the Feb. Philly Fed Mfg. Index (both at 8:30 am) and Oil Inventories (11 am). On the earnings front, AEP, CPB, HSIC, HFC, HRL, LKQ, NEM, NCLH, PWR, SO, TFX, VTR, and VIAC all report before the open. LNT, COG, ED, and SBAC report after the close.
The bulls haven’t even hesitated over coronavirus so far. It certainly hasn’t paid for those who bet a pullback must take place. However, more and more analysts are expecting that pullback to come. Meanwhile, the markets just keep climbing that wall of worry. This, of course, leads to a concern about overextension, especially in the QQQ.
So, the trend remains bullish and the major indices are all at or very near their all-time highs. However, we need to keep in mind that the large-caps have been indecisive for a few days now, overextension is real, and Logic would tell us there will eventually be some market impact from a global event (particularly one devastating the second largest economy in the world).
So, remain cautious and continue to be nimble or hedged. Just keep consistently taking profits and moving stops. Plan the trade and trade the plan. Don’t chase or get complacent and let a profitable position (or several) go South. As traders, our job is to keep producing those singles and doubles, hit an occasional home run among a string of strikeouts.
Swing Trade Ideas for your consideration and watchlist: ZTS, MSI, CTSH, ALL, CLX, KO, WRB, ZBH, DHI, EHC, MSFT, ROL, CSX, MS, INFO. Trade smart, take profits along the way and trade your plan. Also, don't forget to check for upcoming earnings. Finally, remember that the stocks/etfs we mention and talk about in the trading room are not recommendations to buy or sell.
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