The bulls and bears are stuck between a rock and a hard place.  First, the bulls become energized, rushing in at any hint or rumor that the Fed may back off on rate increases.  Then the bears push right back every time we get reminded of the slowing global economy and the possibility of a severe recession.  Then, toss in earnings season, inflation, geopolitical issues, and let the price action mayhem begin.  The market-moving giant tech reports that begin this week will likely increase the challenges for the retail trader.  Expect overnight reversals and big-point intraday whipsaws, so plan your risk carefully!

Asian markets traded mixed, with the tech-heavy Hong Kong exchange dropping 6.36% and the Yen weakening despite intervention.  However, European markets trade green across the board after a report showed business activity slowed.  Ahead of a big week of earnings and the PMI report, the pre-market pump is underway, pushing for a gap up open.  Plan for another challenging week of high-emotion price action.

Economic Calendar

Earnings Calendar

This week we really ramp up the number of earnings and begin hearing the results of the market-moving tech giants.  Notable reports for Monday include AGNC, BOH, CDNS, CR, DFS, LOGI, PKG, PCH, RRC, SCHN, & ZION.

News & Technicals’

European business activity slows, impacted by high energy costs and raising concerns about a deepening recession.  In addition, firms have been under pressure due to higher inflation, mainly from energy costs and wage pressures.  “The situation economically is getting worse quite rapidly,” said Chris Williamson, a chief business economist at S&P Global Market Intelligence.  The euro lost ground against the U.S. dollar and the British pound during morning deals in London, trading at $0.982 and £0.868, respectively, following the latest PMI data. 

Tesla shares slipped in pre-market trade on Monday after the company cut the price of some of its cars in China.  The electric carmaker’s shares were down around 3% before the market opened.  The starting price for the Model 3 sedan was cut to 265,900 yuan ($$36,615) from 279,900 yuan.  The Model Y sports utility vehicle now costs 288,900 yuan versus the previous price of 316,900 yuan. 

Former Finance Minister Rishi Sunak looks set to become the next prime minister of the U.K., with votes to be counted Monday afternoon.  Former Defense Minister Penny Mordaunt is his only rival after former Prime Minister Boris Johnson pulled out of the race Sunday.  Bond yields held steady in early Monday trading, with the 2-year at 4.47% inverted over the 10-year at 4.14%.

The market seems caught between a rock and a hard place, creating challenging and dangerous price swings for the retail trader.  Any hint or rumor that the Fed may slow rate increases or pause brings out the bulls and the social media posts shouting that the bottom is in!  Then we get economic reports reminding us of the slowing global economy and the fears of a severe recession energizing the very aggressive bears.  Toss in all the earnings season hype, and you have the perfect recipe for volatility, whipsaws, gaps, and overnight reversals.  Adding to the price action mayhem is all the emotion associated with the tech giant earnings reports that begin in earnest this week.  It may be a good time to remember that cash is a position, but if you plan to trade, plan carefully and be prepared for just about anything this week.

Trade Wisely,

Doug

As bond yields and the dollar continue to increase, hopes of an earnings-driven rally seem to have quickly faded as the recession worried markets struggle with overhead resistance.  At this point, we seem to have a tick-for-tick correlation between the indexes and the price movement of the indexes.  So expect the wide-ranging price swings to continue with a light day of earnings and economic data.  With so many attempts and failures to break through resistance levels, keep an eye on price supports because it’s not hard to imagine that the bears could resume control.

Asian markets closed mixed but mainly lower as rising rates and recession fears persist.  With the U.K. in political turmoil and European markets trading red across the board this morning, monetary pressures grow with the rising dollar.  Although U.S. futures try to rally off of overnight lows in the premaket pump, the relentless rise in bond yields continues to steal the wind from the sails of the earnings rally hopes.  Plan for the uncertainty to continue as long as the yields and dollar continue to rise.

Economic Calendar

Earnings Calendar

We have a lighter day on the earnings calendar with around 20 confirmed reports.  Notable reports include AXP, HCA, HBAN, SLB, SMPL, & V.Z.

News & Technicals’

The race to find Truss’ replacement is already well underway.  Candidates vying to succeed Truss as prime minister have until 2 p.m.  London time on Monday to gather the support of at least 100 Conservative Members of Parliament to run.  It is an exceptionally high bar of nominations for a party composed of 357 MPs and caps the number of candidates able to contest for the leadership to a maximum of three. 

Defense analysts say evacuating civilians from the occupied Kherson region in southern Ukraine could set the scene for another Russian withdrawal.  Up to 60,000 civilians are expected to be evacuated in the next few days from the part of the Kherson region on the west bank of the Dnipro River.  Aluminum is the latest casualty of global economic headwinds as prices sink amid alleged dumping of Russian aluminum, weakening global demand, and soaring operational costs.  Earlier this week, aluminum stocks in London Metals Exchange (LME) warehouses leaped, sparking concerns about the potential dumping of Russian-origin aluminum.  The White House had already considered a ban on aluminum imports from Russian producer Rusal.   Russia is not only a major producer of primary aluminum but also embedded in global supply chains needed to make the metal, bauxite, and alumina.

The yield on the 10-year Treasury hit a fresh 14-year high on Friday, while the 2-year note traded in the territory last seen in 2007, making a 15-year high as signs of a recession worried markets.  As a result, the U.S. dollar continues to gain strength and has become almost tick-for-tick correlated with the major indexes.  Currency fluctuations and growing concerns of a treasury liquidity crisis are impacting the major banks just days after surging on better-than-expected earnings results.  With a light day on the earnings and economic calendars, it may be difficult for the market to find inspiration unless something changes in bond yields.  The earnings-driven hope of relief seems to have quickly subsided, so keep a close eye on price supports because it’s not difficult to imagine new market lows.

Trade Wisely,

Doug

Monday speculation delivered a pop-and-go-nowhere, Tuesday and pop-and-drop, Wednesday and gap down and chop with low volume, so what comes next?  Uncertainties abound, making it challenging for lowered earnings estimate beats to overcome economic worries.  With a big day of earnings and economic reports, bond yields rise, and currencies continue to fluctuate, so plan for more whipsaws, reversals, and wild price volatility as a deepening recession looms.

With the Japanese Yen falling to 150 per dollar, Asian markets closed red across the board overnight.  European markets struggle for direction amidst the rising bond yields and the U.K. political turmoil.  U.S. futures recover from overnight lows, once again pumping for a gap-up open ahead of earnings and economic figures trying to sustain a relief rally despite the economic uncertainties.  Expect more whipsaws, reversals, and challenging price volatility as global recession worries continue to grow.

Economic Calendar

Earnings Calendar

As a general rule, Thursday is the busiest day on the earnings calendar, and that is true for today, with nearly 60 companies listed.  Notable reports include ABB, ALK, ALL, T, BX, SAM, DHR, DOW, FITB, FCX, MMC, NOC, NUE, NVR, PM, POOL, SNAP, TSCO, UNP, THC, & WHR.

News & Technicals’

Tesla reported $1.05 in adjusted EPS, ahead of expectations of 99 cents, on revenues of $21.45 billion, lighter than the $21.96 billion expected.  Net income (GAAP) reached $3.33 billion, more than double a year ago, while automotive revenue rose 55% from the previous year’s quarter.  The company warned about a bottleneck in transportation capacity for delivering new cars in the final weeks of the quarter and said it was “transitioning to a smoother delivery pace.”  On Tesla’s third-quarter earnings call, CEO Elon Musk said the company is not cutting production “in any meaningful way, recession or not recession.”  “We’re very pedal to the metal come rain or shine,” Musk said.  Regarding Musk’s proposed $44 billion acquisition of Twitter, he said that the company “sort of languished for a long time but has incredible potential.” 

On a fast-moving day of developments, Wednesday saw a high-profile resignation, reports of parliamentarians being bullied, and further speculation over how long Truss may have left.  The culmination of events prompted one member of the Conservative Party to express his anger with the government publicly.  “This is an absolute disgrace,” Conservative lawmaker Charles Walker told BBC News on Wednesday evening.  “I think it’s a shambles and a disgrace.  It’s utterly appalling,” he said.  

The Japanese yen weakened past 150 against the U.S. dollar, a key psychological level, reaching levels not seen since August 1990.  The Bank of Japan’s two-day meeting is slated for next week.  However, policymakers have ruled out a rate hike to defend against further weakening of the currency.  On Thursday, Reuters reported Japanese Finance Minister Shunichi Suzuki said the government will take “appropriate steps against excess volatility.”

So far, the wild emotion over earning results has produced a gap and go-nowhere, a pop-and-drop, and drop and chop with low volume, so what comes next?  Trouble in Britten, rising bond yields, and currency fluctuations worry markets of a possible liquidity crisis looming.  Combine that with inflation, rising interest rates, and the prospect of a deepening recession, and that’s a lot of uncertainty for earnings reports to overcome!  In addition, today, we have the potential market-moving economic reports from Jobless Claims, Philly Fed MFG Index, and Existing Home Sales figures to drive additional uncertainty about what comes next.  So sinch up your big boy pants and prepare for another day of turbulence, speculation, talking head spin, and drama.

Trade Wisely,

Doug

The GS earnings report inspired a big gap open, resulting in another pop-and-drop pattern as the indexes struggled with overhead resistance and a short-term overbought condition.  Bond yields relaxed slightly, and the dollar dipped temporally after a coordinated effort by Chinese banks to bolster the Yuan.  However, this morning bond yields rebounded as recession fears rise ahead of the pending housing data.  As earnings work to inspire the bulls to rally, the worries over inflation, rising rates, recession, and slowing global economies are likely to keep the bears engaged and price action challenging.

Asian markets traded mixed but mostly lower overnight, with the tech-heavy HSI falling 2.38%.  European markets trade flat to modestly bullish after the UK inflation climbed back above a 40-year high.  Trying to draw inspiration from earnings reports, U.S. futures struggle to hold on to overnight lows ahead of housing data that may remind the market about recession.  Plan carefully and prepare for the wild price volatility to continue.

Economic Calendar

Earnings Calendar

The earnings calendar is starting to heat with nearly 50 companies listed and about 40 confirmed reports for today.  Notable reports include ABT, AA, ASML, CMA, CCI, EFX, IBM, KMI, LVS, PG, PPG, STLD, TSLA, TRV, & WGO.

News & Technicals’

Netflix beat third-quarter expectations on the top and bottom lines Tuesday.  The company added 2.41 million net subscribers during the quarter, higher than the 1 million it had forecast.  Netflix will begin to crack down on password sharing next year.  ASML reported third-quarter revenue and earnings on Wednesday that topped analyst expectations, bucking the trend of a slowdown seen by other semiconductor firms.  Shares of chip firms have been battered this year amid a slowdown in growth among companies like Samsung and Micron as the semiconductor boom hits a wall.  But the strong results from ASML bucked the broader market slowdown, sending shares more than 6% higher in morning trade.  ASML said that it expects the direct impact of the U.S.’s chip curbs on China to be “limited.” 

DOE says the funding opportunity represents the “largest investment in tidal and river current energy technologies in the United States.”  Over the past few years, a number of projects related to tidal power have taken big steps forward.  While there is excitement about the potential of renewable technologies such as tidal power, there are significant challenges when it comes to scaling up.  President Joe Biden will announce the release of up to 15 million more barrels of oil from the Strategic Petroleum Reserve, sources familiar with the plan told CNBC.  The move aims to extend the current SPR delivery program through December.  In addition, an EU embargo on Russian oil is scheduled to go into effect on Dec. 5. 

U.K. inflation rose in September 2022 as the country’s cost-of-living crisis continues to hammer households and businesses ahead of a tough winter.  However, inflation unexpectedly dipped to 9.9% in August, down from 10.1% in July, on the back of a fuel price decline.  Treasury yields rose across the board on Wednesday as concerns over a recession spread among investors, and markets looked ahead to releasing housing market data.  The 6-month bond rose to 4.35%, the 12-month to 4.46%, the 2-year to 4.48%, the 5-year to 4.28%, the 10-year to 4.07%, and the 30-year to 4.07%. 

Tuesday served a pop-and-drop price move after a big gap up open inspired by the better-than-expected GS earnings.   Chinese currency operations took some pressure off the dollar, lifting the Yuan slightly as bond yields modestly relaxed.  Unfortunately, as we stare down the barrel of the Housing Starts and Permits number, fears of recession resurfaced this morning, with bond yields rising along with the dollar.  While earnings have provided us with a relief rally, the indexes remain challenged by significant overhead resistance.  I expect price volatility to remain high with overnight reversals and intraday whipsaws as inflation, rate increases, and the slowing global economy continue to weigh heavy on investors’ minds. 

Trade Wisely,

Doug

The stage is set for an epic week of price action as the 4^th quarter earnings ramp up amid geopolitical and economic uncertainty.  Despite the considerable danger, retail speculation remains remarkably high, so plan for big point whipsaws, overnight reversals, and short squeezes to challenge the talents of even the most experienced traders.  We remain overdue for a relief rally, but if it begins, be wary of thinking it’s a market bottom.  Earnings guidance and stock buybacks will be far more critical than the company hitting the vastly lowered estimates, so be patient jumping right after the headline report. 

Asian markets traded mixed overnight as recession weighs on investors despite China holding firm on medium-term rates.  European markets trade cautiously higher, waiting on UK fiscal statements and hoping they calm the currency fluctuations and repair some of the ECB credibility.  Premarket futures are again pumping up a bullish open on earnings speculation but will the big banks inspire the bulls or the bears after reporting?  Of course, anything is possible, so plan carefully.

Economic Calendar

Earnings Calendar

We begin the week relatively light on the earnings calendar, but we have some potential market-moving big bank reports in focus.  Notable reports include BAC, BK, SCHW & ELS.  

News & Technicals’

The UK’s new finance minister plan to scrap almost all planned tax cuts hoping to calm the markets.  However, markets are uncertain by various factors, such as the prospect of much higher government debt.  The worries include the enormous subsidies for consumer and business energy bills, the BOE’s current monetary tightening, and the government’s stimulus package.   In addition, European solidarity is being tested as Russia’s war in Ukraine continues to cause energy turmoil for countries across the bloc.  Paolo Gentiloni, the EU’s economics commissioner, has called for a “united approach,” while Pascal Donohoe, President at Eurogroup, says he “understands” why individual countries are bringing forward their monetary policies.

Stellantis’ electric vehicle plans to compete with firms such as Elon Musk’s Tesla and companies like Volkswagen, Ford, and GM.  According to the International Energy Agency, electric vehicle sales are on course to hit an all-time high this year. 

After two years of port congestions and container shortages, disruptions are now easing as Chinese exports slow in light of waning demand from Western economies and softer global economic conditions, logistics data shows.  “The retailers and the bigger buyers or shippers are more cautious about the demand outlook and are ordering less,” logistics platform Container xChange CEO Christian Roeloffs said in an update on Wednesday.   “On the other hand, the congestion is easing with vessel waiting times reducing, ports operating at less capacity, and the container turnaround times decreasing, which ultimately frees up the capacity in the market.”

The ramp-up of 4^th quarter earnings, the volatility of last week, and the massive willingness to speculate despite the danger set the stage for an epic week of wild price action.  Earnings have the potential to trigger a short squeeze, punishing reversals, and huge intraday whipsaws.  Keep an eye on bond yields, and currency fluctuations as the quantitive tightening threaten a banking currency crisis.  Company guidance and stock buyback news will be more important than the actual earnings because of the massively lowered estimated targets.  We are overdue for a relief rally, and perhaps a bear market rally is possible but be careful thinking it’s a market bottom until we finally see a higher low in the charts.  Day traders will likely have the upper hand due to volatility, but they will likely have challenges due to the speed of the potential price swings. 

Trade Wisely,

Doug

Yesterday’s CPI number triggered a rollercoaster ride of market emotions ranging from despair to euphoria, swinging the Dow more than 1400 points from low to high.  The big question for today is can it continue facing higher rates, rising inflation, recession, and slowing world economies?  With a busy day of potentially market-moving earnings and economic reports, will the rally continue or come to a screeching halt as quickly as it began?  The one thing we can say for sure is the wild price volatility makes for a dangerous trading environment that could whipsaw or reverse suddenly, so plan your risk carefully heading into the uncertainty of the weekend.

Asian markets surged higher overnight in reaction to the vast U.S. short-squeeze reversal.  This morning, European markets trade green across the board, hoping for a U.K. fiscal policy reversal.  As earnings results roll out with a pending retail sales report, U.S. futures point to a bullish open but be prepared for just about anything with market emotions so high.  Buckle up; it will likely be another very hectic day of price gyrations.

Economic Calendar

Earnings Calendar

The earnings ramp-up begins with several more reports that are potentially market-moving today.  Notable reports include C, JPM , MS, PNC, USB, UNH & WFC.

News & Technicals’

Kwarteng’s abrupt departure from a series of international finance meetings in Washington, D.C., comes amid a growing political backlash against the Conservative government’s proposed tax cuts.  The debt-funded measures announced on Sept. 23 and estimated to total £43 billion ($48.7 billion) sent financial markets into a tailspin.  As a result, Prime Minister Liz Truss is under immense pressure to rethink her economic policies as opinion polls show support for her government has collapsed. 

People are increasingly using their social networking “feeds” to discover compelling content as opposed to viewing the media shared by the friends that they follow.  Zuckerberg referred to TikTok as a “very effective competitor.”  Therefore, it’s important for Meta to develop AI that can recommend a range of content, including photos and text, to users besides just short videos.  Twitter said in a court filing that it’s been trying since July to obtain materials related to a federal investigation into his effort to buy the company.  “This game of ‘hide the ball’ must end,” Twitter lawyers said in the filing. 

President Joe Biden recently claimed the “pandemic is over,” but the extension of the public health emergency indicates the administration does not believe the U.S. is out of the woods yet.  The public health emergency, first declared in January 2020 by the Trump administration, has been renewed every 90 days since the pandemic began.  The powers activated by the emergency declaration have greatly impacted the U.S. healthcare system and social safety net.

Thursday was a rollercoaster ride, with the Dow futures falling as much as 600 points after the much hotter-than-expected CPI.  However, after the open, they trigger a massive short squeeze, recovering the early losses and surging up more than 800 points.  The dollar pulled back, and the bond yields eased, helping the bulls to relieve the selling pressure.  But, with the hard-to-face economic facts of slowing economies, inflation, and recession, can the rally continue?  This morning we will get several potential market-moving earnings and economic reports that could keep the rally going or bring it to a screeching halt.  There is a lot at stake, and the potential amlitude of these huge point moves makes for a very dangerous trading environment. 

Trade Wisely,

Doug

If the choppy price action of late has been frustrating, the wait is over, and let the volatility begin.  Not only do we have the CPI and Jobless Claims, but we also kick off the wild speculation and price manipulation of the 4^th quarter earnings season.  While companies may hit substantially lowered earnings estimates, the guidance forward and the commitment to stock buybacks will likely be most important for the future direction of the stock prices.  Expect the challenging price action to continue with the path forward, which is looking so uncertain at this time.   

Asian markets declined across the board as investors traded cautiously ahead of U.S. inflation data.  European markets, however, show some willing bulls as they brace for the coming numbers.  This morning looks like a repeat of yesterday’s premarket pump, pointing to a bullish open ahead of earning and economic report results.  I guess the question to be answered is, with this pump-up speculation be successful, or will it result in another disappointing pop and drop?  Buckle up; we’re about to find out!

Economic Calendar

Earnings Calendar

We’ve made it to the official kick-off day of the 4^th quarter earnings.  Notable reports include BLK, CMC, DAL, FAST, PGR, TSM & WBA.

News & Technicals’

Belgium’s central bank chief told CNBC that the European Central Bank needs to raise interest rates into positive territory when considering inflation, despite recession fears.  “My bet would be it’s going to be over 2%, and I would not be surprised if we have to go to above 3% at some point,” said Pierre Wunsch, governor of the National Bank of Belgium.  However, he said that September’s hike in the ECB’s benchmark deposit rate to 0.75% meant rates were still negative in real terms. 

Cash, one of the most hated corners of the market for years, is getting some newfound love from money managers as the Federal Reserve’s firm commitment to rate hikes roiled nearly every other asset class.  Global money market funds saw $89 billion of inflows for the week ending Oct 7, the largest weekly injection into cash since April 2020, according to Goldman Sachs’ trading desk data.  Meanwhile, the data said that mutual fund managers also hold a record amount of cash.

The Office for National Statistics estimated Wednesday the U.K. economy shrank by 0.3% in August, potentially beginning what economists expect will be a lengthy recession through the winter.  In addition, postal workers, rail workers, and public barristers have all carried out strikes recently to protest pay and conditions, as wages fail to keep up with inflation running at around 10%.  A worst-case scenario laid out by national electricity system operator the National Grid warned that households and businesses might face three-hour power outages over winter.  Asia’s biggest economic problems next year will stem from rising interest rates.  These will put increasing pressure on debt servicing in Asia and heighten capital flight from the region: IMF  The U.K. bond crisis will have limited impact on Asian markets, although “anything that creates financial market turbulence will find a way” to upset other economies: IMF.  As many Asian economies, such as Japan and Hong Kong, open up, increased human mobility will generate economic activity and stall a slowdown.

The wait is over, so let the volatility begin.  After the disappointing PPI number, the dollar rose, the bond yields surged, and the FOMC minutes say the hawkishness is not yet over!  That made for a choppy Wednesday as traders pondered the CPI, Jobless Claims, and what earnings reports might reveal.  Once again, the overnight futures are working to pump up a bullish open but will it be just another pop and drop to punish those rushing in hoping to pick the bottom?  We sure could use a rally with the indexes in a short-term oversold condition, but it may not be a tough sell if inflation remains resilient.  As earnings number ramp up, expect wild speculation and price volatility to do the same.  I think the company’s guidance and stock buyback levels will be more important this season than hitting the substantially lowered estimates.  So be careful jumping in too soon and wait for the conference call before making your decision.  Likely challenging times lie ahead, so plan your risk carefully.

Trade Wisley,

Doug

The bulls tried to get upside price action going, but all at once, the bears returned with a vengeance producing a nasty whipsaw to punish the dip buyers.  As a result, the QQQ closed at a new 2022 low, while the other indexes managed to hold Monday’s low.  Before the bell today, we will get the Producer price report and then deal with the FOMC minutes this afternoon.  In addition, we will have to keep a close on rising bond yields and fluctuating currency after the BOE deadline warning to pension plans.  Finally, no matter the market reaction, keep in mind the CPI numbers come out before the bell Thursday, so plan your risk carefully!

Asian markets traded mixed as the Yen continued to weaken to 146 to 1 against the dollar.  European market trade mixed in a choppy session, waiting for U.S. inflation data.  However, the U.S. futures push for a bullish open ahead of the PPI number.  How the market reacts after the number is anyone’s guess.  Perhaps the futures premarket pump will signal a relief rally, or perhaps they are just trying to put lipstick on a pig.

Economic Calendar

Earnings Calendar

With the official kickoff of 4^th quarter earnings beginning tomorrow, we have another light day of reports.  Notable reports include PEP & DCT.

News & Technicals’

Tobias Adrian, director of monetary and capital markets at the International Monetary Fund, told CNBC Jamie Diamon’s call that U.S. stocks could tumble another 20% was “certainly possible.”  He said sentiment had so far held up relatively well, but a shift in this could spark a further downturn.  Adrian also warned financial stability risks are very elevated, with the global economy in a “very, very stressed moment.”  Sridhar Ramaswamy, who led Google’s advertising business from 2013 to 2018, has launched a Web3 company called nxyz.  Nxyz trawls blockchains and their associated applications for data on things like NFTs and crypto wallets and then streams it to developers in real time.  The company raised $40 million in a funding round led by crypto-focused venture fund Paradigm, with additional backing from Coinbase, Sequoia, and Greylock. 

The U.S. Department of Commerce introduced sweeping rules to prevent China from obtaining or manufacturing key chips and components for supercomputers.  Analysts said that this is likely to hobble China’s domestic chip industry.  In addition, Washington’s export rules could touch other parts of the supply chain that use American technology, highlighting the wide-ranging nature of the latest restrictions. 

Unbelievable

“I don’t think there will be a recession.  If it is, it’ll be a very slight recession.  That is, we’ll move down slightly,” Biden told CNN’s Jake Tapper in a Tuesday interview.  On Monday, JPMorgan Chase CEO Jamie Dimon told CNBC there would likely be a recession in six to nine months.  In September, the U.S. central bank raised benchmark interest rates by three-quarters of a percentage point —the Fed’s third consecutive hike.  Treasury Secretary Janet Yellen said the U.S. is doing well amid global economic uncertainty.  Yellen said the U.S. economy has slowed after a strong recovery, but job reports indicate a resilient economy.  The Treasury Secretary reiterated that lowering inflation is a priority of the Biden administration.

Yesterday proved to be another choppy day as the bulls finally pushed off the lows only to have the bears produce a nasty whipsaw, driving indexes down in a quick move.  The QQQ made a fresh 2022 low after the BOE set a deadline for pension plans to make adjustments as central bank interventions end.  Today we face the latest reading on Producer Prices, more Fed speak, and we will get the minutes of the last FOMC meeting.  I think the market is looking for any hope to relieve the short-term oversold condition of the indexes.  Still, traders must remain aware of the currency liquidity issues and bond yield gyrations.  As you make trading decisions, remember we get the CPI number before the bell on Thursday and begin the 4^th quarter earnings with the big bank reports.  Plan for a heavy dose of price volatility.

Trade Wisely,

Doug

Though the semiconductor sector attracted the majority of the bearish activity on Monday, the overall market experienced a chop fest as we waited for the uncertainty of inflation numbers and the earnings season kick-off.  Unfortunately, we see bond yields surging higher this morning with little else in the earnings or economic calendars to inspire as we again wait.  Watch for sensitivity to the news cycle as geopolitical tensions grow, and earnings warnings are seemingly on the rise.

While we slept, Asian markets mostly declined, with Taiwan stocks down 4% as TSMC plunged 8%.  European markets see only red this morning as the dollar’s strength and weakening global growth worries persist.  With another day of waiting ahead and bond yields surging, U.S. futures suggest a bearish open, with the QQQ leading the selling. 

Economic Calendar

Earnings Calendar

We have five verified reports on Tuesday, but only two qualify as somewhat notable.  They are AZZ and PNFP.

News & Technicals’

The Bank of England intervenes in the bond market again today.  “Dysfunction in this market and the prospect of self-reinforcing ‘fire sale’ dynamics pose a material risk to UK financial stability,” the Bank of England warned.  The move marks the second expansion of the central bank’s extraordinary rescue package in as many days after it increased the limit for its daily gilt purchases on Monday ahead of the planned end of the purchase scheme.  Israel and Lebanon reached a historic agreement to resolve a long-running maritime border dispute following months of negotiations guided by the United States.  “This is a historic achievement that will strengthen Israel’s security, inject billions into Israel’s economy, and ensure the stability of our northern border,” Israel’s Prime Minister Yair Lapid said in a statement.  His comments came after Lebanon received the final draft of the U.S.-brokered agreement with Israel. 

“I hope Musk cleans up Twitter,” JPMorgan CEO Jamie Dimon said in a CNBC interview.  The remarks are Dimon’s first on the Musk-Twitter deal, revived last week after a fresh bid from Musk to buy the company.  Dimon echoed Musk’s concerns about spam accounts and said Twitter should give users more control over its recommendation algorithms.  Delta will have an exclusive five-year partnership with Joby operating electric vertical takeoff and landing aircraft, or eVTOLs, as part of the Delta network.  As a result, Delta CEO Ed Bastian envisions moving passengers to and from airports quicker and with less hassle. 

Two subsea pipelines connecting Russia to Germany are at the center of international intrigue after a series of blasts caused what might be the single largest release of methane in history.  Many in Europe suspect the incident resulted from an attack, particularly during a bitter energy standoff between the European Union and Russia.  However, the Kremlin has repeatedly dismissed claims it destroyed the pipelines, calling such allegations “stupid” and “absurd.” 

As mentioned in Monday’s report, the hurry-up and wait in the market evolved into a chop fest as we ponder on inflation data and the beginning of the earnings season.  The semiconductor attracted the most bear activity due to the new U.S. chip regulations temporally pushing the QQQ to a new 2022 low.  Though we saw a  reprieve from bond yield worries, they are back with a vengeance this morning, with the 2-year climbing to 4.32% in early Tuesday.  In addition, the national average gas price continues to rise at $3.92, adding worries that the core inflation rate could rise despite the rapid rate-increasing efforts of the FOMC.  Unfortunately, we face another day of waiting with little on the earnings and economic calendars to inspire.  Plan for markets to be sensitive to early earnings warnings and geopolitical events and keep a close eye on support challenges as the bears continue to drive sentiment.

Trade Wisely,

Doug

Today the market may breathe a sigh of relief with the bond market closed for Columbus Day, providing a break from the rising yields.  Unfortunately, with no earnings or economic reports today, we could see a choppy day as we wait for the inflation reports and the kick-off of the 4^th quarter silly season.  The hopefulness of the so-called Fed pivot fell apart on Friday with the strong jobs report suggesting another 75 basis point increase is possible.  Watch for earnings warnings and possible downgrades as the economic challenges continue.

Asian markets fell across the board during the night, with tech stocks taking the biggest hit due to the new U.S. chip regulations.  European markets traded in a choppy session this morning with flat to slightly bearish results.  U. S. futures recovered substantially from overnight losses, but at the time of this report suggests an uncertain and flat open.  Expect choppy price action and a sensitivity to the news cycle as we hurry up and wait.

Economic Calendar

Earnings Calendar

Although we have eight companies listed on the Monday earnings calendar, there are no confirmed reports today.

News & Technicals’

The U.S. announced Friday that new U.S. rules require companies to apply for a license if they want to sell certain advanced computing semiconductors or related manufacturing equipment to China.  Notably, the changes also mean foreign companies will need a license if they use American tools to produce specific high-end chips for sale to China.  “The U.S. has been abusing export control measures to block and hobble Chinese enterprises wantonly,” the Chinese Ministry of Foreign Affairs Spokesperson said. 

Allianz Chief Economic Adviser Mohamed El-Erian said he predicts headline inflation “will probably come down to about 8%,” but that core inflation “is still going up.”  El-Erian said an increase in core inflation means “we still have an inflation issue.”  On Monday, the Bank of England announced that it would introduce further measures to ensure an “orderly end” to its purchase scheme on October 14.  Following last month’s unprecedented spike in gilt yields, LDIs — which hold substantial quantities of gilts and are owned predominantly by final salary pension schemes — were receiving margin calls from lenders. 

The bears could breathe a sigh of relief today because the bond market is closed for Columbus Day, which aided the Friday selling as yields surged.  However, the challenging price volatility will remain due to the uncertainty of the 4th quarter earnings season beginning Thursday, FOMC minutes, a CPI, PPI, and retail sale report.  Moreover, the narrative of a Fed pivot that created last week’s nasty whipsaw hurt a lot of speculation retail bounce traders.  It may soon usher in a capitulation event if earnings begin to disappoint and fear turns to panic.  That said, be ready for big price swings but stay focused and follow the trend because there will be plenty of opportunities to profit.   

Trade Wisely,

Doug