During the morning session on Monday, the bulls tried pushing higher, but the uncertainty of the PPI report inspired the profit-takers to reduce risk heading into the close.  As a result, the indexes whipsawed, leaving behind shooting star patterns near price resistance levels but creating no technical damage to the charts.  However, big-name earnings reports from HD and WMT and the reaction to the producer prices will likely create significant pre-market volatility.  Unfortunately, we’ve yet to discover that it will inspire the bulls or the bears!

While we slept, Asian markets mostly rallied despite disappointing Chinese activity data as Hong King surged 4.11%.  However, European markets are taking a more cautious stance this morning, trading flat as they wait on inflation data.  On the other hand, U.S. futures push for a bullish open in the pre-market pump ahead of the producer price numbers that will likely set the tone for the day. 

Economic Calendar

Earnings Calendar

We have about 20 companies confirmed on the Tuesday earnings calendar.  Notable reports include HD, WMT, ARMK, AAP, ENR, AQUA, HUYA, DNUT, SE, & TME.

News & Technicals’

Americans grew more worried about inflation in October, with fears emanating primarily from an expected burst in gasoline prices.  A New York Fed survey showed inflation expectations for the year ahead rose to 5.9%, while the three-year outlook increased to 3.1%.  Home prices were expected to rise by 2%, tied for the lowest since June 2020.  Home Depot reported third-quarter earnings on Tuesday, beating analyst expectations.  The retailer reported revenue increased by nearly 6% to $38.87 billion.  Wall Street is watching how rising costs and other macroeconomic headwinds affect the retailer. 

Last week, when it filed for Chapter 11 bankruptcy protection, FTX indicated that it had more than 100,000 creditors.  But in an updated filing Tuesday, lawyers for the company said: “In fact, there could be more than one million creditors in these Chapter 11 Cases.”  In addition, over the past 72 hours, the lawyers wrote that FTX has been in contact with “dozens” of regulators in the U.S. and overseas. 

At the 2022 Web Summit tech conference, startup founders and investors warned fellow entrepreneurs it was time to rein in costs and focus on fundamentals.  “The multiples last year are not the same as this year,” said Guillaume Pousaz, CEO of London-based payments firm Checkout.com.  Instead, multibillion-dollar unicorn companies will collapse in “spectacular failures,” Par-Jorgen Parson, partner at venture capital firm Northzone, told CNBC.

Monday’s price action tried to put on a brave face early in the day, but the uncertainty of the PPI report brought out the profit takers.  Although the Dow swung more than 400 points from high to low, leaving behind shooting star patterns on all the index charts.  That said, the move showed respect for overhead resistance, index charts suffered no technical damage despite the volatility.  How things go from here will depend on the reaction to the PPI report and the earnings results from WMT and HD.  We should plan for substantial pre-market gyrations; the results likely set the day’s tone.  Will it be the bulls or the bears that find inspiration?  Buckle up; we are about to find out!

Trade Wisley,

Doug

Clearly, we still have a lot of challenges ahead for the economy, but last week I believe we experienced a substantial shift in institutional sentiment.  Volume has grown in this relief rally, unlike the head-fake of the July/August surge upward with declining volume.  However, the extreme point swings will continue to make this market very dangerous as we still face worldwide economic challenges and substantial geopolitical pressures.  Perhaps a mix of long and short positions may be appropriate to hedge the uncertainty path forward.

Asian markets closed the day mixed but mostly lower, with a very volatile session in Hong Kong tech names.  This morning, European markets trade with modest bullishness as bond yields and currencies continue to fluctuate.  U.S. futures suggest a little rest for the bulls after the last week’s wild run-up that could trigger a bit of profit-taking to begin the week.  Nevertheless, traders should continue planning for challenging price volatility as the bulls and bears duke out near substantial overhead resistance levels.

Economic Calendar

Earnings Calendar

Although we have a lot of companies listed on the Monday earnings calendar, many are unconfirmed or tiny small-cap names.  Notable stocks include ACM, LI, JJSF, OTLY, TSEM, TSN, VVV, & WEBR.

News & Technicals’

Germany is open to strengthening ties with China but is not “stupid,” according to the country’s Economy Minister and Vice-Chancellor.  The comments come after German Chancellor Olaf Scholz made a controversial solo trip to China to meet President Xi Jinping.  A stronger dollar over the year has weighed heavily on many emerging market currencies.  CNBC spotlights the performance of Ghana’s cedi, the Cuban peso, the Zimbabwean dollar, and more.  The Zimbabwean dollar has lost a staggering 76.74% of its value against the dollar since January. 

The investment cases for America’s largest automakers are increasingly diverging around electric and autonomous vehicles.  For example, GM is diversifying as much as possible around its emerging battery and self-driving vehicle businesses while expanding to offer electric vehicles by 2035.  Ford recently disbanded its autonomous vehicle business to concentrate on nearer-term technologies and EVs. 

According to a source, Alameda Research, a trading firm founded by Sam Bankman-Fried, was trading billions of dollars from FTX accounts and leveraging the exchange’s native token as collateral.  The source says that many employees and outside auditors were unaware that FTX did not have enough money to match customer withdrawals.  Three sources familiar with the company told CNBC that FTX’s missteps blindsided them and that only a small cohort knew about the potential misuse of customer deposits.

Though we still have many challenges ahead for the economy, we experienced a substantial shift in sentiment to the buy side last week.  The July/August rally suffered from a lack of volume, but this time volume continues to grow to suggest a promising institutional change.  That said, we still have a lot of work to do, and the price action volatility will continue to make swing trading challenging as we face layoffs, worldwide recessionary economic impacts, and geopolitical tensions.  As a result, a mix of long and short positions may be appropriate but plan carefully for sudden large point swings that will challenge even the most experienced trader. 

Trade Wisely,

Doug

Midterm uncertainty and rising layoffs brought the bears back to work on Wednesday ahead of today’s CPI reading.  Unfortunately, failures of 50-day moving averages and lower highs in the SPY, QQQ, and IWM raise additional concerns technically.  That said, the damage could quickly reverse or worsen this morning depending on the reaction to the CPI and Jobless numbers coming out before the bell.  Plan for another opening gap and considerable price volatility as the market reacts.

Asian markets traded lower across the board overnight as Chinese producer prices declined.  European markets trade flat in a choppy cautious morning session as they wait on U.S. inflation data.  However, in the usual fashion of late, U.S. futures try to pump up a positive open ahead of the CPI despite the uncertainty of what it may reveal about the path forward.  So, buckle up for another wild morning where anything is possible.

Economic Calendar

Earnings Calendar

Our most hectic day of the week on the earnings calendar, with nearly 200 verified companies reporting quarterly results; however, many of them are little small-cap names.  Notable reports include MT, AXN, BZH, BDX, BAM, COMP, DDS, FLO, HNST, IAA, LZ, MTTR, NIO, POSH, RL, RYAN, SBH, SIX, SSYS, SWHC, TRP, TOST, UTZ, WRBY, WB, WRK, WE, & YETI.

News & Technicals’

Binance is backing out of its plans to acquire FTX, the company said Wednesday.  “The issues are beyond our control or ability to help,” Binance said in a tweet.  FTX, valued at $32 billion earlier this year, is now in jeopardy of collapsing.  As possibilities of bankruptcy loom, venture capital firm Sequoia Capital will mark down to zero its investment of over $210 million in the cryptocurrency exchange FTX.  “Based on our understanding, we are marking our investment down to $0,” the Silicon Valley-based firm said Wednesday. 

New York-based Citigroup let go of roughly 50 trading personnel this week, according to people with knowledge of the moves who declined to be identified speaking about layoffs.  Bloomberg reported Tuesday that the firm also cut dozens of banking roles amid a slump in deal-making activity.  In addition, London-based Barclays cut about 200 positions across its banking and trading desks this week, according to a person with knowledge of the decision.  Underperformers may also be at risk at JPMorgan Chase, which will use selective end-of-year cuts, attrition, and smaller bonuses to rein in expenses, according to a person with knowledge of the bank’s plans.

According to filings published Tuesday, Elon Musk sold nearly $4 billion of Tesla shares.  That follows his sale of billions of dollars in stock last year and earlier this year.  Tesla’s stock price has been sinking for much of 2022 due to economic concerns and Musk’s purchase of Twitter, which closed in late October.  In addition, rocket Lab delivered quarterly results on Wednesday that boasted record revenue, with the space company tacking on additional contract wins across its business.  The company reported third-quarter revenue of $63.1 million, up 14% from the second quarter.  The spacecraft and components business also won several contracts during the third quarter.

The bears showed their teeth on Wednesday due to midterm uncertainty and rising layoff announcements.  Technically, the DIA suffered no damage from its extended condition, but the lower highs in the SPY, QQQ, and IWM raise some concerns of more trouble ahead.  In addition, the SPY and IWM dipping below their 50-day averages may signal that the earnings rally has run its course.  Of course, today’s reading on CPI has the potential to reverse or confirm those concerns quickly.  As a result, we should prepare for another market gap at the open and expect considerable price volatility as the market reacts. 

Trade Wisely,

Doug

With some steady low-volume buying, the Dow 30 eventually pulled the other indexes out of their intraday consolidation as the dollar fell and bond yield inversion continued to extend.  The Dow closed more than 1000 points off the low in just three trading days making for a high-risk situation if a pullback were to occur.  The QQQ lags way behind as the most vulnerable index while the DIA continues to extend.  With a big day of earnings data and the midterm results just around the corner, anything is possible Wednesday morning, so plan carefully.

While we slept, Asian markets finished the day mixed and cautious, waiting on the U.S. election results.  Likewise, European markets trade flat to modestly bullish in a choppy session as the midterm results raise investor caution.  However, in the norm of late, U.S. futures are pumping up the premarket, suggesting a bullish open with a deluge of earnings data on the horizon.  Watch the significant overhead resistance levels, price volatility, and intraday whipsaws as the day unfolds.

Economic Calendar

Earnings Calendar

Election day will be busy with earnings results, with over 160 companies confirmed to report results.  Notable reports include DIS, DDD, AFRM, AKAM, BIRD, AMC, BLNK, BLDR, CEG, COTY, DD, ELAN, EXPD, GFS, GDRX, GO, GXO, HAIN, HALO, IAC, LMND, RIDE, LCID, LITE, MNKD, NEO, NWSA, NCLH, NVAX, OXY, OPK, PLNT, PLUG, SRG, SFM, SPWR, UPST, & WYNN.

News and Technicals’

Take-Two stock dropped more than 15% in extended trading on Monday after the company said its outlook in the current quarter and early 2023 would be significantly lower than expected.  In addition, shares of Palantir fell Monday after the company released third-quarter earnings before the bell that missed analyst estimates for earnings but beat on revenue.  Palantir’s revenue for the quarter increased 22% year over year, and its US commercial revenue grew 53%. 

The German Port of Bremerhaven, Europe’s fourth largest auto hub, is seeing so much congestion due to driver shortages and overall trade volume that cars are piling up on land and at sea.  As a result, Tesla, Chrysler, and Jeep parent companies Stellantis, Renault, BMW, and Volvo are all impacted.  Leading vehicle carrier Wallenius Wilhelmsen has refused auto exports for October, November, and possibly into December. 

Steady low-volume buying in the Dow eventually lifted the SPY and QQQ out of an intraday consolidation producing a bullish Monday even as bond yields continued to rise.  Commodities had a good day, with oil and precious metals rallying as the dollar’s value declined.  The SPY peaked above its 50-day average, but the QQQ lags significantly behind.  The T2122 indicator is once again nearing an overbought condition, with the DIA the most extended with significant overhead resistance showing in all indexes.  Today we will be subject to midterm election news and a blizzard of earnings data with a tranquil day on the economic calendar.  Plan your risk carefully as election results are revealed this evening; anything is possible Wednesday morning in reaction. 

Trade Wisely,

Doug

Is it too much to ask for just one week of stable price action devoid of the enormous intraday whipsaws and the institutionally generated daily market gaps?  Unfortunately, I would not expect it to calm down with a massive week of earnings, midterm elections, worldwide economic uncertainty, and a pending inflation report.  Nevertheless, expectations for a holiday rally could undoubtedly happen as earnings help to drive high speculation despite the declining economic conditions.  Therefore, expect the big price swings and challenging price action to continue in the week ahead.

Even though there was an annual drop in Chain’s exports, Asian markets were green across the board, with Hong Kong leading the buying up 2.69%.  European though a bit more cautious, are also primarily bullish this morning.  With midterm elections beginning Tuesday, a massive week of earnings, and a CPI read on Thursday, U.S. futures point to a gap-up open to being the week.  Plan for the wild volatility to continue as the week unfolds.

Economic Calendar

Earnings Calendar

We have another crazy week of earnings with more than 700 companies on the calendar.   Notable reports include ATVI, ADTN, ASH, BNTX, CHH, FANG, FN, GRPN, LYFT, MOS, NRG, PLTR, SEDG, TTWO, TRIP, VECO, & WELL.

News & Technicals’

Lidar makers Ouster and Velodyne have agreed to merge, combining roughly $400 million in market value.  Under the deal, signed on Friday, Velodyne shareholders will receive 0.8204 shares of Ouster for each Velodyne share they hold – a premium of about 7.8% based on Friday’s market close.  Intense investor interest in the potential of self-driving vehicles led many lidar startups to go public over the last few years.  But valuations are now a fraction of what they were.  According to a report from the Wall Street Journal, meta could begin to carry out large-scale layoffs as soon as Wednesday.  The layoffs are expected to impact thousands of employees, the report said. 

Berkshire’s operating earnings totaled $7.761 billion in the third quarter, up 20% from the year-earlier period.  In addition, the conglomerate spent $1.05 billion in share repurchases, bringing the nine-month total to $5.25 billion.  However, the Omaha-based company suffered a $10.1 billion loss on its investments during the third quarter’s market turmoil.  China’s exports and imports fell in October in U.S.-dollar terms, according to customs data released Monday.  That decline missed Reuter’s expectations for growth in both categories.  China’s exports to the U.S. fell in October for a third-straight month.  iPhone 14 production has been temporarily reduced because of Covid-19 restrictions at its primary iPhone 14 Pro and iPhone 14 Pro Max assembly plant in Zhengzhou, China.  The factory, operated by Foxconn, is operating at “significantly reduced capacity,” Apple said.  “The actual reopening is still months away as elderly vaccination rates remain low and case fatality rates appear high among those unvaccinated based on Hong Kong official data,” Goldman Sachs said in a note.  The firm estimates that a full reopening could bring a 20% rally in the Chinese equity market, a separate note said. 

It would sure be nice to have a week of stable price action, but with another crazy week of earnings and a CPI report later in the week, the challenging volatility will likely continue.  Toss in the uncertainty of the midterm elections, and traders should be ready for just about anything!  China’s annual exports declined for the first time since 2020, and with more pandemic lockdowns underway, Apple is warn’s of production losses.  While next year does not look promising, we can not rule out the possibility of a holiday rally, especially with all the earnings enthusiasm generated this quarter.  However, as worldwide economic activity continues to decline, plan for big intraday whipsaws and overnight reversals. 

Trade Wisely,

Doug

All the hype and speculation around what the FOMC would do was unleashed yesterday in a dangerous display of price action turbulence as the Dow swung about 900 points from high to low.  The massive intraday whipsaw created technical damage in SPY and QQQ  as bond yields spiked and the dollar surged higher.  Today we face our biggest earnings day this week, as well as several economic reports adding to the uncertainty of the day.  Plan for the wild price action to continue as traders and investors sort through the details.

Asian markets had a rough session will selling across the board in reaction to the FOMC decision.  In addition, European markets declined across the board this morning, with an ECB rate decision pending.  Finally, U.S. futures point to a bearish open ahead of a huge day of earnings and economic data likely to keep emotions and volatility high.

Economic Calendar

Earnings Calendar

Thursday is a hectic day on the earnings calendar, with morning 325 companies listed.  Notable reports include ADT, ABC, AMGN, AAWW, GOLD, BCH, SQ, CVNA, LNG, CI, COIN, COP, CROX, CMI, DASH, DBX, LOCO, EOG, EXPE, GPRO, HBI, K, KTOS, MAR, MELI, MRNA, NRG, PZZA, PYPL, PTON, PLNT, SWKS, SBUX, TWLO, W, WWE, & WELP.

News & Technicals’

Pilots and other airline workers are asking for higher pay in new labor deals.  However, some recent attempts at deals by the most significant U.S. carriers have fallen flat.  As a result, airlines are under pressure to combat a pilot shortage while keeping a lid on costs.  Twitter insiders expect a 50% overall reduction in force, representing about 3,700 employees, after Tesla and SpaceX CEO Elon Musk, bought the company last week.  According to Bloomberg, musk is expected to require employees once authorized to work remotely to now work out of Twitter offices in and beyond San Francisco.  Advisors were planning to meet with Musk on Wednesday night to solidify plans for a major reduction in force.  Qualcomm shares fell in extended trading on Wednesday after the chipmaker reported in-line fourth-quarter earnings and a small revenue beat but offered poor first-quarter guidance.  According to a statement, the overall revenue grew 22% year over year in the quarter that ended Sept. 25.  The company also said it implemented a hiring freeze at the start of the current quarter.

According to official figures, inflation in Turkey rose 85.5% year-on-year in October for the 17th consecutive month as food and energy prices continued to climb.  The dramatic rise in living costs for the country of 85 million has continued unabated for nearly two years.  Food prices were 99% higher than last year’s period, housing rose by 85%, and transport was up 117%, the Turkish Statistical Institute reported Thursday.  A hawkish Fed Chairman, Jerome Powell, vowed to beat inflation and said the central bank might have to raise rates more than expected.  That sent stocks lower and bond yields higher, as traders bet the Fed could raise rates above 5% before stopping.  However, the Federal Reserve left the door open to reducing the size of rate hikes, as expected.

As suspected, with a highly anticipated FOMC announcement, the price action turbulence was dangerous, with the Dow swinging from nearly 400 up to closing more than 500 points down.  Market speculation and emotion are clearly at an extreme level which may make high-frequency trading firms and very experienced day traders happy.  Still, it’s a very dangerous market condition for most traders and investors.  Moreover, yesterday’s massive intraday whipsaw created technical damage in the SPY and QQQ index charts as price supports failed below their 50-day averages.  Though still quite extended, the DIA and IWM were minimal, but the point moves possible to reach a price support could be substantial.  If that’s not enough, we have our biggest day of earnings and economic reports this week about to trigger more emotion and uncertainty.  Traders should plan for another day of challenging volatility as we head for the Employment Situation number Friday before the bell.

Trade Wisely,

Doug

The Tuesday market served a classic pump and dump, gapping up at the open, then reversing after the JOLTS number came in hot, adding uncertainty and pressure to the pending Fed decision.  The big question is, with the FOMC pause or reduce the speed of increases despite the rising Core PCE number?  With the current rally at stake, buckle up for a wild afternoon after the decision is released and the press conference.  Adding to the challenging volatility, we have several economic reports and a busy day of earnings reports to keep emotions high.  Anything is possible, so plan your risk carefully!

Overnight Asian markets traded mostly higher, led by  Hong Kong, which halted trading early due to typhoon warnings.  European markets trade mixed and choppy, waiting on the FOMC decision and the Thursday ECB decision that could deliver the most significant trade increase in their history.  Facing a big day of market-moving data, the U.S. futures suggest a mixed open as we hurry up and wait on the Fed.  Plan for another day of wild price action as the drama unfolds.

Economic Calendar

Earnings Calendar

Along with the FOMC, we have a big day of earnings reports.  Notable reports include ACIW, ALB, ALGT, APO, BKNG, EAT, CHRW, GOOS, CVS, DIN, EBAY, ETR, EL, ETSY, FSLY, RACE, FSR, FTNT, GNRC, TWNK, HUM, IRBT, LL, MRO, MLM, MTTR, MET, MGM, NCLH, NTR, QCOM, O, HOOD, ROKU, RGR, RIG, UAA, & Z.

News & Technicals’

Vice President Kamala Harris plans to announce the new initiative while visiting a sheet metal workers’ training facility and union hall in Boston later Wednesday.  HHS will release $4.5 billion in Low Income Home Energy Assistance Program funding, which helps pay energy bills and energy-related home repairs for families.  The Biden administration will also provide roughly $9 billion to help low- and moderate-income families lower energy costs by making energy-efficient home upgrades. 

Maersk, the Danish shipping giant, is widely seen as a barometer for global trade, reported earnings before interest, tax, depreciation, and amortization (EBITDA) of $10.9 billion for the quarter.  CEO Søren Skou said the “exceptional results” were driven by a continued rise in ocean freight rates but said it was clear that these have peaked and will begin to normalize in the fourth quarter.

AMD issued fiscal third-quarter results that missed expectations.  In addition, the chipmaker warned about weakening PC sales affecting this quarter’s results in October.  Results from all four of AMD’s business segments were better than the company had called in the October announcement.  With U.K. inflation running at a 40-year high of 10.1% in September, the Bank is seen hiking its main lending rate for the eighth consecutive time.  However, weaker growth momentum and a more conservative fiscal policy are expected to ease the pressure for more aggressive monetary tightening.  Goldman Sachs economists lowered their 2023 U.K. growth projections on Monday and expected a split vote in favor of the 75-basis-point hike on Thursday. 

Tuesday began with the classic pump and dump, spending the rest of the day in chop as investors pondered the economic conditions with the JOLTS number coming in hot.  Although it’s widely expected that the FOMC will raise rates by 75 basis points, the uncertainty is what they will do next!  The narrative push around is that they will pause or ease going forward despite the increase seen in the Core PCE.  We will find out with the statement at 2 PM Eastern and the chairman’s press conference thirty minutes later.  Expect some whippy price action to follow.  However, before that, we have Motor Vehicle Sales, Mortgage Applications, ADP, and the EIA numbers with a big day of earnings reports to keep emotion high and price action challenging.  So, buckle up for another day where anything is possible!

Trade Wisely,

Doug

Although the indexes whipsawed the day in a wide-ranging chop, the market showed no fear of inflation, rate increases, and slowing worldwide economic growth.  On the contrary,  lowered earnings estimates inspire buyers even as indexes stretch in overbought conditions.  Declining economic growth reports go primarily ignored as the rally extends with the fear of missing out.  Risks remain high over substantial overnight reversals and big point intraday whipsaws, so plan your risk carefully in this emotionally charged condition.  With a massive number of earnings reports, the remainder of this week, be prepared for just about anything.

While we slept, Asian markets rallied, led by Hong Kong, which surged upward by 5.23%.  Unphased by record-high inflation, European markets are also in rally mode this morning, trading higher across the board.  However, ahead of economic reports and a big day of earnings, U.S. futures point to a substantial gap as the relief rally extends.  Keep an eye on overhead resistance levels for possible bear attacks as the wild ride earnings enthusiasm continues.

Economic Calendar

Earnings Calendar

On the earnings calendar, Tuesday is a busy day, with more than 160 listed and nearly 110 confirmed to report.  Notable reports include AFL, AMD, ARNB, AIG, ARNC, CZR, CWH, CAKE, CHK, CRUS, CLX, CXW, DENN, DVN, ETN, EA, LLY, EXR, FOXA, BEN, HSIC, MPC, MTCH, MKC, MSTR, TAP, MDLZ, PFE, PSX, PSA, SEE, SPG, SIRI, SOFI, SMCI, SYY & UBER.

News & Technicals’

The British energy major posted underlying replacement cost profit, used as a proxy for net profit, of $8.2 billion for the three months through to the end of September.  The world’s largest oil and gas majors have reported bumper earnings in recent months, leading to renewed calls for higher taxes on record oil company profits.  “Our job is to pay our taxes; our job is to invest,” BP CEO Bernard Looney told CNBC Monday.  For this winter, Europe’s gas storage is more than 90% full, according to the International Energy Agency, providing some assurance against a major shortage.  But a large proportion of that is made up of Russian gas imported in previous months, which likely won’t be available by the winter of 2023.  This could lead to significant social unrest — already, small to medium-sized protests have cropped up around Europe. 

President Joe Biden threatened to pursue higher taxes on oil companies if they don’t try to lower gas prices.  However, any new proposed taxes on the businesses could run into opposition in Congress.  Biden has highlighted efforts to reduce consumer costs as voters worry about inflation ahead of the November 8 midterm elections.  State oil giant Saudi Aramco reported a 39% rise in net income for the third quarter year-on-year, on the back of higher crude prices and tightening global supply.  Net income rose to $42.4 billion for the quarter, up from $30.4 billion the previous year and just above expectations.  The Saudi state oil giant also reported a record $45 billion in free cash flow. 

Despite declining economies, rising bond yields, and a pending rate increase, the market showed no fear on Monday.  Though the price action whipsawed in a rage the entire day, the bulls and bears appeared comfortable even with the extreme extension in the Dow.  The T2122 indicator suggests an overbought condition, while bearish economic reports go ignored as earnings speculation inspires buyers.  Enjoy the rally but be careful overtrading with prices so extended in the short term because a reversal could begin anytime.  Expect the wild morning gaps and intraday whipsaws to continue.  Keep an eye out for bear attacks at or near price resistance levels and around economic data should the market suddenly decide to care that our economy is slowing.

Trade Wisely,

Doug

A narrative that the FOMC could begin slowing its roll in interest rates may have run into some uncertainty this morning after the Eurozone posted a new record high in inflation.  Although we will continue to deal with the wild hops and drops in earnings reports, the intensifying geopolitical situation and the reality of the worldwide economic issues may return to front and center this week.  So as we wait on the FOMC Wednesday decision, plan for considerable volatility in the days ahead.  The news cycle seems to have taken a turn toward the bears this morning, so don’t be surprised if they attack at even a hint of bullish weakness.

Asian markets traded mixed, with Japan surging upward even as China’s factory activity contracts and more pandemic lockdowns occur.  European markets trade flat to slightly bullish after posting a weak GDP and record high inflation.  U.S. futures suggest a modestly bearish open while rising off overnight lows as bond yields increase, with an FOMC decision pending Wednesday.  Buckle up for another wild week of price action, as earnings and economic data will likely keep the price action challenging.

Economic Calendar

Earnings Calendar

We have more than 60 companies on the earnings calendar to begin a new trading week, but just over  40 are confirmed.  Notable reports include AWK, CAR, CINF, FN, GPN, GT, HLF, LEG, VAC, NXPI, ON, PCG, SAIA, SBAC, VRNS, XPO, & WMB.

News & Technicals’

Kyiv is struggling for power and water after a wave of missile strikes, and an intense fight occurred around Avdiivka and the strategically important town of Bakhmut.  In addition, Russia announced Saturday that it was suspending its involvement in the Black Sea Grain Initiative brokered in July. 

Preliminary data on Monday from Europe’s statistics office showed headline inflation came in at an annual 10.7% last month.  This represents the highest-ever monthly reading since the euro zone’s formation.  The 19-member bloc has faced higher prices, particularly on energy and food, for the past 12 months.  However, the increases have been accentuated by Russia’s invasion of Ukraine in late February. 

Diesel prices have increased 33% for November deliveries and are expected to go higher.  In addition, diesel supply in the Northeast, the drought-stricken Mississippi River, and a potential rail strike are contributing to higher fuel demand with calls for federal government intervention to increase supply.  Furthermore, diesel reserves have not been this low since 1951, and a ban on Russian products set for next year will intensify competition for the fuel.

The official purchasing managers’ index for manufacturing fell to 49.2 this month, down from 50.1 in September, China’s National Bureau of Statistics said Monday.  According to analysts polled by Reuters, economists had expected a print of 50.  Sub-indicators on factory employment, production, new orders, and supplier delivery time all showed a contraction in October from September.  In addition, Shanghai’s Disney Resort abruptly suspended operations on Monday to comply with Covid-19 prevention measures, with all visitors at the time of the announcement directed to stay in the park until they returned a negative test for the virus.  The report said at 11:39 a.m. local time (03:39 GMT) would immediately shut the main theme park and surrounding areas, including its shopping street, until further notice to comply with virus curbs.

Fueled on earnings hype and a narrative that once again gave hope to the FOMC, slowing its roll-on interest rates allowed the bulls to run wild last week.  But, unfortunately, with inflation hitting a new record in Europe, U.S. Treasury yields are back on the rise as we wait for the FOMC decision Wednesday afternoon.  Though the relief rally provided us a nice break from the bearishness, the news cycle seems to have suddenly turned toward the bears this morning.  Of course, earnings hype will continue to create a lot of emotion with big hops and drops, but the worldwide economic realities and geopolitical consequences could return to front center of invertor’s minds.  Plan carefully; I suspect this will be another very challenging week to navigate.

Trade Wisely,

Doug

Though the relief rally has proved impressive, the shooting star patterns left behind in many charts warrant some extra caution that a profit-taking pullback may be just around the corner.  Unfortunately, the tech giant reports have created possible failure patterns in the SPY and QQQ under their 50-day moving averages, adding to the uncertainty.  Nevertheless, with a busy morning of economic data and earnings and another 75 basis point rate increase expected next week, it may be wise to capture some profits should the bears find some inspiration heading into the weekend.

Asia markets had a rough session, with Hong Kong stocks falling to 2009 lows as the BOJ holds rates steady.  European markets trade lower across the board due to ECB rate increases and disappointing earnings results.  With the big tech disappointments, the Nasdaq futures point to a bearish open pulling the other indexes lower as we wait on a flurry of earnings and potentially market-moving economic reports.  It has been a wild week of price action, and I suspect it will continue today as the market begins to focus on the pending rate increase next week.

Economic Calendar

Earnings Calendar

We get a little break on Friday; though more than 80 companies are listed, many are unconfirmed.  Notable reports include ABBV, AB, AON, ABR, BLUM, GTLS, CL, XOM, GWW, LYB, NWL, NEE, NEP, & SNY.

News and Technicals’

Amazon reported third-quarter results on Thursday that missed analysts’ estimates.  It also gave a disappointing sales forecast for the fourth quarter.  The stock sunk in extended trading.  Apple reported fiscal fourth-quarter earnings on Thursday that beat Wall Street expectations on revenue and earnings per share.   However, Apple came up short versus revenue expectations in core product categories, including the company’s iPhone business and services.   Intel plans up to $10 billion in cost reductions and efficiency improvements in the next three years.  In addition, the chipmaker said in the quarter that it would make chips for MediaTek.

CNBC’s David Faber reported that Tesla CEO Elon Musk is now in charge of Twitter.  As a result, Twitter CEO Parag Agrawal and finance chief Ned Segal have left the company’s San Francisco headquarters.  However, the CEO of Bank of America, one of the financiers of Elon Musk’s Twitter takeover, doesn’t appear worried about the deal.  When asked if he would lose sleep over it, he said: “I’ve got experts that handle the clients, and I don’t lose sleep on them.  Of course, I lose sleep for many other things, but not for that.”  Musk secured equity financing from an array of investors, including technology firms, and debt financing from several investment banks.  But with the rout in technology stocks this year and investors cautious about risky assets, that debt could be hard to sell to investors. 

Russia’s invasion of Ukraine pushed natural gas prices to trade at historic levels back in August.  However, these have significantly come down since then.  “With gas storage near full, LNG inflows in oversupply, and favorable mild autumn weather, prices are doing the work to keep the system balanced as commodities trade in the present,” Ehsan Khoman, head of commodities research at MUFG Bank, told CNBC via email.  But Europe’s energy crisis isn’t over, and analysts warn European policymakers against complacency.

The considerable bull run has been impressive, but the last couple of days of price action hints at an overextended condition with topping shooting star patterns in many charts.  Of course, the trouble in the tech giant reports is to blame for the uncertainty, and the AMZN miss yesterday afternoon didn’t help the situation.  Before the bell, we get the Feds favored Core PCE numbers in the Personal Income and Outlays report.  The consensus estimate is the year-over-year increase despite the historic rate increases of late.  Should the actual number come in hot, the bears could be encouraged to attack, so expect some pre-market price volatility.  We will also have to deal with the Employment Cost Index, Consumer Sentiment, and Pending Home Sales reports as the QQQ struggles to hold the recent uptrend.  Finally, while the DIA and IWM enjoy the benefit of their 50-day averages as price support, the SPY and QQQ show potential failure patterns below their 50-day, making for some uncertainty as we head into the weekend with an FOMC rate increase expected next week.

Trade Wisely,

Doug