The bulls worked hard on Thursday amid a bit more bearish activity due to economic data supporting a hawkish Fed at the next meeting.  With a light day on both the earnings and economic calendar today, the growing inflationary issues in Europe may drive the price action.  Though the bullish trend remains intact, we may want to keep an eye on support levels if the bears start showing their teeth.  I would not expect the bulls to give up easily, but if trends or support begin to falter, it could inspire a sharper profit-taking sell-off due to the extreme index extension.  As this bull/bear battle at price resistance grows, expect price volatility to become more challenging.

Asian market closed Friday mixed and primarily flat as a heat wave in China complicates an already challenged economy.  European markets see red across the board this morning after economic data shows a worsening inflation problem.  Finally, with a light day of earnings and economic reports, U.S. futures point to a bearish open in reaction to the deteriorating world economic conditions.

Economic Calendar

Earnings Calendar

We have a very light day on the Friday calendar with less than 15 companies confirmed, most of which are small caps.  Notable reports include BKE, DE, FL, & VIPS.

News & Technicals’

After a sudden sell-off, Bitcoin is trading under $22,000, a more than three-week low.  Ether, Binance Coin, Cardano, and Solana all fell simultaneously.  The reason for the drop was not immediately apparent.  The filing shows that Cohen’s RC Ventures dumped its stock on Tuesday and Wednesday at a range of prices between $18.68 per share and $29.22 per share.  The firm also sold its call options.  Cohen originally purchased his Bed Bath & Beyond shares at an average of roughly $15.34 per share.  U.K. inflation jumped to a 40-year high of 10.1% in July as food and energy costs continued to soar, exacerbating the country’s cost of living crisis.  The Bank of England expects consumer price inflation to top 13.3% in October.  The country’s average energy bills (set via a price cap) are expected to rise sharply in the fourth quarter to eventually exceed an annual £4,266 ($5,170) in early 2023.  Germany’s economy stagnated in the second quarter as soaring energy prices and the pandemic and supply disruptions caused a gloomy outlook for Europe’s largest economy, according to its finance ministry.  The office said that energy prices were up 105% compared with July 2021, due mainly to higher prices for natural gas and electricity.   China is caught in a devastating heatwave that could seriously impact its economy, according to a chief economist at Hang Seng Bank China.  The heatwave “is a quite dire situation,” Dan Wang told CNBC’s “Squawk Box Asia” on Thursday, adding it probably could last for the next “two to three months easily.”   “It will affect those big energy-intensive industries, and it will have[a] knock-on effect throughout the economy and even the global supply chain,” she said.  Starbucks Chief Operating Officer John Culver is departing the company after two decades with the coffee chain.  His exit comes in the middle of a broader executive reshuffling at Starbucks.  The company will eliminate the role of the COO, instead shifting many of its responsibilities to its head of strategy and transformation.  Morgan Stanley cuts Meta price target, citing declining engagement and lower monetization from reels.  Treasury yields were little changed in early Friday trading, with the 12-month at 3.21%, the 2-year at 3.25%, the 5-year at 3.07%, the 10-year at 2.92%, and the 30-year at 3.17%.

Though the bears showed a little activity on Thursday, the bulls work hard to hold their ground, ignoring the economic reports likely to keep the Fed aggressively hawkish.  However, the details of the slowing world economy have bears showing their teeth this morning.  The ECB was slow to react to the rising inflation and, consequently, produced the highest PPI number on record while the U.K. had a 10.1% inflation rate!  Perhaps we need to embrace the aggressiveness of the Fed, considering the deficit spending from Congress, lest we may suffer similar consequences here in the United States.  With a very light day on the earnings and economic calendars, the compounding world economic issue could drive the days’ price action.   The bullish trends continue to hold but watch for the possibility of aggressive bear attacks if supports begin to fail.  However, don’t expect the bulls to give up easily, so plan for some price volatility as the battle at resistance ensues.

Trade Wisley,

Doug