Jerome Powell is in the unenviable position of being criticized no matter what he does today as the entire world is focused on the Fed rate decision at 2:00 PM Eastern today. Choose to cut the rates a little and market could be disappointed, and Whitehouse tweet barrage will begin. There will likely be criticism within the committee as at least 2-dissenting votes expected to occur suggesting he has bowed to the market. As traders, no matter what the FOMC does, our job is to set aside the bias and trade the chart following our trading plan rules.
Overnight Asian markets closed mixed overall pretty flat on the day as they wait for the FOMC decision. European indexes are however seeing green across the board but only holding very modest gains as they wait. US Futures ahead Housing and Oil Supply numbers point to a flat to slightly bearish open. After the morning rush, I expect very slow and choppy price action until the Fed decision. After that anything is possible, so plan your risk very carefully.
On the Calendar
On the hump day earnings calendar, we have just 11 companies
reporting results. GIS is the notable
report on the day.
Action Plan
Oil prices moderated yesterday when Saudi Arabia said they have largely restored oil production and should be back to full capacity by the end of the month. Benjamin Netanyahu’s attempt at a 5th term as Prime Minister is struggling this morning as the election is said to be to close to call. It would seem political uncertainty is a worldwide theme these days. Today is all about the FOMC and whether they will or won’t or how much they choose to adjust the interest rates. No matter what Powell will have to face criticism. Cut the rates, and it’s likely there will be at least 2-dissenting votes cast on the committee. Don’t cut the rates enough and expect a barrage of disapproval tweets from the Whitehouse.
No matter what you think or want to happen; as traders, the best we can do is stick to our rules, set aside our bias and trade the chart. We will all know the answer at 2:00 PM Eastern and all the media spin before that is speculation and distracting noise. Currently, US Futures point to flat to slightly bearish open where we can expect choppy price action until the rate decision is released. After that, all bets are off, and anything is possible. If the market embraces the decision new, record market highs look possible. Disappoint the market, and the index charts could easily begin to show topping patterns. Hang on it could be a wild day!
One of the biggest one-day increase in oil prices in 30
years but the overall market seemed to take the blow in stride only losing
about half of one percent on the day. Rising
domestic production decreasing our dependence on foreign crude likely played a
significant role in the muted market reaction.
Another might be the no-rush response to retaliation of those
responsible for the attack. Last but not
least is the hopefulness that the FOMC will lower interest rates on Wednesday
afternoon. The question rattling around
in my head is what happens if the FOMC disappoints due to the rather strong US economic
data?
The rising geopolitical concerns and rising energy prices
led to Asian markets closed mixed with the Hong Kong exchange suffering the biggest
decline. Across the pond European are also
cautious this morning trading mixed but modestly lower overall. With the FOMC kicking of their 2-day meeting
today and ahead of Industrial Production number the US Futures points to a modestly
lower open and what could be another very choppy price action day as we wait
for the Fed decision.
On the Calendar
We have 22 companies stepping up to report today according to
the Earnings Calendar. Notable reports include
FDX, CHWY, ADBE, & CBRL.
Action Plan
Although the oil made it’s biggest one day spike in nearly
30 years, the overall market barely flinched only falling about half a percent
overall. While evidence mounts that the
oil field attacks came from Iran, the President is exercising patience on
retaliation as investigations continue. With
US energy production so high nowadays we have decreased dependence on Saudi oil,
but the other factor for a muted market reaction is the pending FOMC announcement
on Wednesday afternoon. Although fed
fund futures have recently decreased the odds of a rate cut slightly but as of
yesterday, the probability remains at 26% of an FOMC accommodation.
Ahead of the open US Futures are pointing to a modest decline
as the FOMC begins its 2-day meeting. We
have Industrial Production numbers at 9:15 and Housing Market Index reports on
the economic calendar and after the bell earings from FDX and ADBE that could
move the market. Although there could be
a news-driven event that creates some price volatility, I’m largely expected a
light and choppy day as the market waits on the Fed decision.
Crude prices rise sharply after Iranian attacks on Saudi oil fields forced the shut down of nearly 50% of their daily production. The President has authorized the opening of the US Strategic supplies in response. The UAW has officially placed 48,000 General Motors on strike, but negotiations are set to resume this week. What a difference a weekend can make! With the market hopeful of FOMC rate decision and forecasts on Wednesday afternoon and the weekend disruptions, we should prepare a bit more price volatility in the days ahead.
Overnight Asian markets closed mostly lower as higher oil
prices could pressure and the already challenged Chinese economy. European markets are seeing red across the
board in reaction to oil prices and the obvious geopolitical tensions it’s likely
to occur. US Futures had bounced slightly
off of overnight lows pointing to a gap down open. One has to wonder what comes next as a response
to the attack on world energy supplies?
On the Calendar
Although were nearing the end of the quarter we still have stragglers
yet to report. Today we have 21
companies expected to report but is see none that are particularly notable.
Action Plan
Iranian attacks on Saudi Arabian oil fields wiped out 5% of
the global supply and forced the shutdown of nearly 50% of their daily production. Not surprisingly crude price rose sharply as
futures markets reopened. What’s more,
unsettling is what comes next? Disrupt
the supply of energy, and a significant military response is not likely far
behind. Aerospace and Defense sector
stocks may join in the rally with oil prices.
Tuesday begins the 2-day FOMO meeting with their announcement on rates and
forecasts at 2:00 PM Eastern Wednesday.
Typically the market tends to chop with lighter than normal
volume ahead of an FOMC announcement but, normal may be difficult to achieve today
with the new uncertainty of energy. US
Futures have improved from overnight lows but continue to point lower this
morning with the Dow expected to gap down about 100 points. Keep in mind the 8-day rally has put the
indexes in a short-term overbought condition with 50-moving average support
significantly lower so we should not rule out the possibility of a test. However the hopefulness of lowered interest
rates could inspire the bull to hold firm.
The ECB delivered as expected, and the President said he is
willing to consider an interim trade deal adding rocket fuel an already extended
rally lifting the SPY temporarily to a new record high print. After 8-days up it hard to be a buyer but the
bulls are working hard this morning suggesting more than a 100 point Dow gap and
possibly secure more records before the weekend. With the FOMC expected to deliver even more
stimulus next Wednesday the momentum remains firmly with the bulls.
Overnight Asian markets closed with green across the board with
growing optimism of a trade deal. European
markets are mostly bullish this morning after the aggressive ECB move even as
worry of a German recession grows. The US
Futures point to another triple point gap up in the Dow on its 8th
day of rally that has recovered nearly 1400 points. Consider the risk carefully you carry into
the weekend as this rally become very extended.
On the Calendar
On the Friday Earnings Calendar, we have just 11 companies
reporting results. Looking through the
list I can find none that are particularly notable.
Action Plan
Although there was some light selling as we moved into yesterdays
close the bull, remain solidly in control with relentless upside pressure. Having said that with the indexes up 8-days
in a row and looking to extend that streak this morning, I don’t see this as a
buying opportunity. Heading into the
weekend with a gap up open on Friday seems more a profit-taking rather than a
day to add risk.
Our T2122 indicator is flashing an extreme over-bought short-term
condition, but I wouldn’t bet on a selloff until we see something in the price
action that suggests the bears are willing to fight back. That could begin today, but with the bullish
momentum and an FOMC expected to provide more stimulus I wouldn’t be surprised if
the bears have already taken the rest of week off. Have a wonderful weekend everyone!
The huge Institutional rotation into value plays created an amazing melt-up in index prices yesterday. Traders can witness this massive shift with a quick study of value ETF’s that have moved up so quickly they are nearly parabolic. Adding fuel to the fire is the expected ECB stimulus package and the likely accommodative FOMC decision next Wednesday. Toss in the Trump tariff delay from Oct. 1 to the 15 in what he called a goodwill gesture, and we have the recipe for new record highs in the indexes. I would be careful chasing this rally at this point considering the Dow has already rallied more than 1100 points in just 7-days of trading.
Asian markets mostly rallied on the Trump tariff delay news
but continue trouble in Hong Kong kept the HSI in the red at the close of
trading. European indexes have reversed
earlier gains on fears of a German recession even as the ECB is expected to
make an accommodative decision today.
Undeterred by European concerns the US Futures point to yet another gap
up open to challenge the all-time high resistance levels in the DIA, SPY, and
QQQ.
On the Calendar
The Thursday Earnings Calendar indicates that 25 companies are
confessing their quarterly results. Notable
reports include KR, AVGO & DLTH.
Action Plan
An amazing rally yesterday as the indexes relentlessly marched
higher. To put this extraordinary rally
into perspective, the Dow has gained more than 1100 points in just 7-days or
trading. A big portion of the rally
seems have occurred in a huge institutional rotation into value plays that happen
to be heavier weighted in the indexes. Also,
there appears to be a substantial rotation out of safety plays, such as precious
metals and bonds into stock value plays.
One reason for this is the expectation that ECB and the FOMC
will both provide a monetary backstop to fears of slowing world economies. The president in what he called a goodwill
gesture in delayed the tariffs that were scheduled to increase on October 1 to
the 15th of the month. As a
result this short-term over-extended market is pointing to further extension
this morning. The tariff extension,
continued institutional rotation, and the likely ECB stimulus package expected
today could easily inspire the bulls to set new record highs in the
market. I would, however, caution traders
to be careful not to chase this rally after so many days up. Profit-taking could begin at any time so keep
a watchful eye on price signals.
Today we remember one of the most tragic days in US history,
September 11th, 2001, where nearly 3000 fellow citizens died. First responders that give their lives that day
will be honored this morning at the market open with the ringing of the
bell. We are also waiting to see if the
ECB will provide a stimulus package and the latest reading of the Producer Price
Index. The bulls and bears continue to
battle in a very tight and challenging to trade chop. Perhaps the market can find some inspiration from
the ECB today, or perhaps we continue to chop as we wait on the FOMC next Wednesday.
Asian markets closed mixed waiting on the ECB, and Apple
suppliers rallied on the unveiling of their new product yesterday. European markets are green across the board
this morning in anticipation of their central bank decision. The US Futures point to a modestly higher
open waiting on the ECB. There is something
about the smell of freshly printed money that the bulls can’t get enough of and
just maybe the ECB will score them the fix they desire.
On the Calendar
The hump day Earnings Calendar has 24 companies expected to
report results. ACB & TRLD are among
the notable reports today.
Action Plan
As we remember and honor the nearly 3000 Americans that died
on September 11th 2001 we wait to hear from the ECB and a possible
stimulus package. There is not much that
the market loves more than the smell of freshly printed money. It’s a little like a heroin addict that knows
the drug is not good for them, but the immediate gratification of the next high
outweighs the long-term effects. The damaging
effects of debt no longer appears to matter as long as the market continues to
go up in the short-term. The President agrees
tweeting just a few minutes ago, “Fed boneheads’ should cut interest rates to
zero ‘or less,’ US should refinance debt.”
Wow!
US Futures point to a slightly higher open this morning as
we wait on the ECB and ahead of PPI numbers at 8:30 AM Eastern that is expected
to decline according to consensus estimates.
Although indexes continue to show signs of short-term overbought
conditions the bulls currently seem determined to attack all-time highs and a
stimulus package could be just the inspiration to get it done. However, we could also see more choppy price
action as we wait for the FOMC to chime in on interest rates next Wednesday. An institutional rotation seems to be underway
with risk coming out to defensive assets and rolling into value plays such as financials
and energy.
Are you frustrated with the current price action, overnight
gaps and go nowhere choppy days? Do you
feel as if your missing out and feeling the pressure to trade not wanting to
miss out on your share? Believe me; you
are not alone! I speak with may traders
every day that share the same frustration with this uncertain news-driven market. Those that succumb to the emotion of missing
out have and continue to suffer significant losses while traders standing aside
waiting for their edge to return are equally frustrated by the market condition
but retain their capital as they wait.
Are you holding onto an edge, or are you trading on emotion and
finding your account suffering as a result?
The choice is yours. You are the
CEO of your trading business. The buck
stops with you! It’s perfectly okay to
feel frustrated with the current condition of the market and the wild price action. That’s normal, but if you’re giving up your
trading edge and allowing your emotion or sheer boredom to guide your trading
your capital and your confidence will both disappear very quickly. Make your choice!
On the Calendar
We have just 14 companies on the Earnings Calendar to fess
up to quarterly results. Notable reports
today include GME, PLAY, RH & ZS.
Action Plan
Choppy consolidation consumed the vast majority of yesterdays
price action. However, it would seem there
is an institutional rotation underway selling-off market leaders and picking up
value plays. The rotation also appears
very targeted into heavily weighted index names that have significant impacts on
overall index valuation. Overnight Britain’s
Prime Minister failed in his attempt to force a new vote on Brexit creating a
stalemate with Parliament as the deadline nears. Forty-Eight states have joined an antitrust
investigation into GOOG while 11 states have joined in antitrust investigations
into FB. Big Tech is also under federal antitrust
scrutiny as AAPL, FB, GOOG & AMZN come under fire.
US Futures rallied off overnight lows currently pointing to
modestly lower open. We have the APPL
dog and pony show this morning as they unveil there new iPhone line up so
expect some volatility in the stock. I
would not be surprised to see continued choppy price action as the market waits
and hopes on as ECB stimulus package later this week and the FOMC decision Wednesday
the 16th. Of course, any is
possible in this emotional and news-driven market, so plan your risk carefully.
Hong Kong citizens ask for US help to gain their freedom while
China directly accuses members of Congress of inciting new violent riots that
resumed last night. How will this affect
the scheduled US/China trade talks next month?
The Taliban issued a direct threat to US lives after the President
abruptly canceled peace talks, and Afghanistan is said to be bracing for
violence. The British Prime Minister is
once again attempting to force a vote on Brexit today while at the same time a
new Parliamentary bill to block the action is supposed to go into effect today
as well. With all this in play the bulls
are pushing for another gap up open continuing to stretch toward all-time highs.
Overnight Asian markets closed mixed but mostly higher as
Hong Kong protests flair up and Chinese exports unexpectedly decline. European markets are also mixed but mostly
lower at this hour as the Brexit battle continues and hoping for an ECB stimulus
action. US Futures point to another gap
up open ahead of a light day of earnings reports and a quiet economic calendar. I would not rule out the possible pop and
drop, and I would also not be surprised to see the bulls try very hard to keep
the momentum marching higher.
On the Calendar
The Monday Earnings Calendar expects 25 companies to fess up
to quarterly results today. The notable
report of the day is CTRP.
Action Plan
The US pulls out of peace talks with the Taliban this
weekend and violent protests once again break out in the streets of Hong Kong. While Hong Kong asks for US help to gain
freedom, China is directly accusing members of Congress for encouraging the
riots. One would rationally assume that could
be a major stumbling block to the scheduled trade talks scheduled next month.
Whether focused on the hopefulness of a future rate cut or
the sheer momentum of the current rally, the US Futures point to a bullish open. In the UK, Prime Minister Boris Johnson is
once again trying to force a vote for a no-deal Brexit while at the same time Parliament’s
new bill to block such an action goes into effect today. How all the uncertainty warrants the US markets
rallying toward record highs in the light of declining job increases makes little
sense. T2122 suggest we are at or very
near a short-term overbought condition, so watch the possible pop and drop but
don’t ignore the bullish momentum as this all or nothing emotional trading
continues.
After gaping up triggering a brief short squeeze, the market
chose to chop sideways the rest of the day once again leaving the biggest price
action of the day in the gap. The question
for today is whether the Employment number and the Powell speech will inspire
for the bulls to push higher or if the bears will get the energy to attack backfilling
the gap below. After rallying nearly 850
Dow points in just 3-day on nothing more than a commitment to talk about trade
in month one has to wonder if emotion got way too far ahead of common sense?
Overnight Asian markets closed the week with green across
the board as Hong Kong protest subside.
European markets appear tentative and mixed this morning with the swirling
uncertainty of Brexit as they head into the weekend. Ahead of the Employment Situation Report, the
bulls are pushing for another gap up open but how the market actually opens
will greatly depend on the reaction the 8:30 AM report. Get ready for a wild day as we close out this
gap a day week and head into the uncertainty of the weekend.
On the Calendar
On the Friday Earnings Calendar, we have just 10 companies
reporting results. About the only somewhat
notable report is GCO.
Action Plan
A day after a short squeeze triggered on news that the US
and Chian will return to the negotiations table traders are now holding there
breath hoping the employment numbers will allow the bullishness to continue. The ADP report and the consensus estimates
suggest the economy created more than 160K jobs last month and that the unemployment
rate will remain flat. Currently the US
Futures, suggest a desire to extend the short squeeze into the weekend. However, a surprise miss would likely quickly
reverse that sentiment, and if the number were to come in better than expected
what would that mean for the hoped-for interest rate cut?
Technically speaking yesterday’s gap and go nowhere price
action saw key resistance levels broken and the DIA, SPY, and QQQ closed above
their respective 50-day averages for the first time in more than a month. Unfortunately, the 3-day gap riddled rally
has moved the indexes from a short-term oversold condition to a short-term
overbought condition according to the T2122 indicator. So the question is can the bulls hold on to this
big bullish reversal or will the bear’s attack and fill the big gap below? That leaves some tough choices for traders as
we head into the weekend.
High emotion continues to govern the market price action
this morning with yet another large news-driven morning gap. China and the US have agreed to hold
ministerial-level talks one month from now with deputy-level talk not expected
until mid-September. While it is very
good news that we will return to the negotiations table, a lot can happen during
that month of waiting as the uncertainty swirls around the market. I guess what I’m saying is that the All-Clear
is a long way off so expect volatility to continue and carefully plan your risk
as we navigate through this new-driven minefield.
Overnight Asian markets Asina markets closed mixed but
mostly higher as traders closely monitored the developments in Hong Kong. Currently, European markets have mixed
results but mostly modestly higher, reacting to UK developments and China-US
news. US Futures are very happy this morning
ahead of a big day of economic reports and earnings. The Dow points to gap up of nearly 250 points
as it waits for the data dump.
On the Calendar
The Thursday Earnings Calendar is the biggest day of reports
this week with more than 40 companies reporting. Notable reports include LULU, ZM, CIEN, DOCU,
GIII, LE, MDLA, FIZZ, SIG, and ZUMZ.
Action Plan
US and China have agreed to hold ministerial-level trade
talks in early next month with the deputy-level meetings not taking place until
mid-September. British Prime Minister
Boris Johnson has now failed in his attempt to force a no-deal Brexit by the
end of October stabilizing the Sterling and kicking the can further down the
road. US Futures are bullish on this
news ahead of busy morning on the Economic Calendar as well our biggest day of
the week for earnings reports.
So once again the market is expected to significantly gap
this morning, but at least it’s in the same direction as yesterday’s gap up and
chop price action. Honestly, I have a
hard time understanding agreeing to talk about trade one month from now warrants
a gap of more than 200 points. However,
I also have to say that I’m not all that surprised considering how erratic and
emotional the price action has been over the last month. The question now is, can it hold as the
uncertainty swirls around us for another month.
