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

Disappointing tech reports served only to inspire the bulls on Wednesday as they charged forward, led by the Dow surging toward its 200-day average.  However, with bears attacking the QQQ by mid-afternoon, the indexes whipsawed, leaving behind possible failure patterns below the 50-day averages of the SPY and QQQ.  After the economic reports of Durable Goods, GDP, and Jobless Claims that may well be ignored, all eyes will be on the reports from AAPL and AMZN.  Emotions are as high, so be prepared for just about anything!

Asian market closed mixed overnight as South Korea GDP grew at its slowest pace in a year.  European markets trade mostly lower this morning as investors ponder the possible ECB decision and huge earnings miss more Credit Suisse.  With a massive day of data ahead, U.S. futures indicate a mixed open, with the Dow suggesting a gap-up open as the Nasdaq indicates lower after the META miss.

Economic Calendar

Earnings Calendar

We have our biggest day of reports this season, with nearly 190 companies listed on the earnings calendar.  Notable reports include AMZN, AAPL, MO, AMT, BUD, ARES, AN, BWA, CAT, COF, COHU, CMCSA, CUBE, DECK, DXCM, EMN, FSLR, FISV, GLPI, GILD, HTZ, HON, INTC, IP, KDP, LH, LIN, MA, MCD, MRK, NOC, OSK, OSTK, PINS, RCL, SPGI, SHOP, SO, LUV, SWK, TROW, TWTR, TMUS, X, VRSN, WY, WDC, WTW, & AUY.

News & Technicals’

Meta CEO Mark Zuckerberg sounded flabbergasted at times during a call with analysts explaining his company’s long-term bets.  The company said, “Reality Labs operating losses in 2023 will grow significantly year-over-year.”  “I think we’re going to resolve each of these things over different periods of time, and I appreciate the patience, and I think that those who are patient and invest with us will end up being rewarded,” Zuckerberg said.  The stock plunged in extended trading after losing two-thirds of its value this year. 

Sluggish investment banking revenues have plagued Credit Suisse, losses relating to its business in Russia and litigation costs following a host of legacy compliance and risk management failures, most notably the Archegos hedge fund scandal.   As a result, the embattled lender posted a third-quarter net loss of 4.034 billion Swiss francs ($4.09 billion), compared with analyst expectations for a loss of 567.93 million.  The figure is also well below the 434 million Swiss franc profit posted for the same quarter last year. 

The U.K.’s Rishi Sunak faces the challenging task of uniting his deeply divided Conservative Party if he is to succeed in his new role as prime minister.  The party has grown increasingly fractured since the 2016 Brexit vote, but it stared into the precipice of oblivion in recent weeks after Liz Truss’ mini-budget led to a plummet in opinion polls.  Sunak’s appointment of a “unity cabinet” gives the first glimpse of his attempts to revive the party. 

The oil giant on Thursday announced a new share buyback program.  It also revealed plans to increase its dividend per share by around 15% for the fourth quarter of 2022.  The group’s results come soon after it was announced that CEO Ben van Beurden will step down at the end of the year after nearly a decade at the helm.  Ford Motor recorded a net loss of $827 million during the third quarter.  The automaker narrowly beat Wall Street’s subdued expectations for the period and guided to the lowest end of its previously forecasted earnings for the year.  Ford attributed the lower-than-expected results to parts shortages affecting 40,000 to 50,000 vehicles and an extra $1 billion in unexpected supplier costs.

Led by the Dow, the indexes continued to rally Wednesday despite the disappointing performance of big tech but reversed those gains by the end of the day as the bears attacked QQQ.   As a result, we see shooting star patterns left behind on index charts.  The SPY and QQQ show price patterns of possible failure at their 50-day averages while the DOW continues to extend toward its 200-day, up more than 1600 points in just four trading days.  Although the T2122 indicator suggests a short-term overbought condition, there is still tremendous excitement and speculation for the AAPL report after today’s bell.  However, before that, we will have to deal with Durable Goods, GDP, and Jobless Claims data through economic reports have mostly been ignored this week.  Plan for more volatility as the wild emotion continues.

Trade Wisley,

Doug

The bulls ran hard Tuesday with the dollar pulling back and the anticipation of strong earnings results from the titans, but unfortunately, big tech disappointed and delivered weak forward guidance.  However, the norm of late is for significant pre-market recovery from overnight lows, and today that pattern is repeating.  Although the market has primarily ignored bearish economic reports this week, we should still take note of the Mortage Apps, International Trade, Inventories, New Home Sales, and Petroleum numbers out this morning.  Though technical conditions have improved, watch overhead resistance levels and plan for the challenging price action to continue.

During the night, Asian markets rallied despite the Australian inflation rate hitting a 32-year high.  However, European markets trade flat to slightly lower in a volatile session.  With a big day of earnings hope and several potential market-moving economic reports, U.S. futures are well off their overnight lows after the disappointment of big tech results.  Watch for the possibility of a pop-and-drop or big-point whipsaw, keeping in mind the Durable Goods, GDP, and Jobless Claims figures before the bell Thursday.

Economic Calendar

Earnings Calendar

The ramp-up continues with nearly 150 companies listed on the Wednesday earnings calendar.  Notable reports include AEM, ADP, BA, BOOT, BSX, BMY, CHDN, COUR, DLR, F, GRMN, F, GRMN, GD, HOG, HLT, KLAC, KHC, LC, MAS, META, NSC, OLN, ORLY, OC, PTEN, PPC, R, STX, NOW, SAVE, TMO, UPWK, VFC, WM, & WING.

Sorry everyone has some internet trouble this morning, so I only had time for a short blog this morning. 

Trade Wisely,

Doug

The bulls maintained control on Monday through the huge-point morning whipsaw, highlighting the danger of highly emotionally charged price volatility.  The PMI number, though ignored, provided context to the relief rally uncertainty as the U.S. economic growth declined.  All eyes will be on the tech giants GOOGL and MSFT earnings results after the bell though we will have to deal with Case-Shiller and Consumer Confidence numbers during the morning session.  Expect the wild price gyrations to continue, and plan for substantial morning pops or drops depending on the big tech reports.

While we slept, Asian markets whipsawed in a volatile session to close mixed on the day.  With HSBC down 6% this morning, European markets trade mixed with eyes on earnings results.  However, U.S. futures point to a modest pullback at the open as they wait in hopeful anticipation of the GOOGL and MSFT reports while dealing with those pesky economic reports that continue to suggest an economic slowing is underway.  Anything is possible, so plan carefully in this hyper-emotional market condition.

Economic Calendar

Earnings Calendar

We have nearly 90 companies listed on the Tuesday earnings calendar with the kickoff of big tech reports after the bell today.  Notable reports include MMM, AGYS, AMD, AXTA, BYD, BIIB, CLF, CC, CMG, CB, KO, GOOGL, GLW, ENPH, FFIV, GE, GM, HAL, ITW, JBLU, JNPR, KMB, MAT, MSFT, NVR, PHM, RTX, SHW, SKK, SPOT, TXN, UPS, VLO, V, WH, &XRX.

News & Technicals’

UPS reported revenue that fell below analyst expectations and earnings per share that beat them.  The United Parcel Service said declines came from its supply chain solutions division, which includes freight forwarding.  However, the company reaffirmed its full-year guidance of $102 billion in revenue and adjusted operating margin of 13.7%.  Ford Motor is updating its popular Escape as part of a two-pronged sales strategy alongside the newer, more rugged Bronco Sport.  The starting price for the 2023 Escape ranges from roughly $29,000 for an entry-level model to $40,000 for a plug-in hybrid electric vehicle.  The goal is to differentiate the mainstream Escape from the more rugged Bronco Sport, allowing each vehicle to form a niche in the compact vehicle segment.

Britain’s new Prime Minister Rishi Sunak set to take office Tuesday, assuming with it one of the most daunting political inboxes in modern British history.  The former finance minister will be tasked with remedying multiple crises, including soaring inflation, higher energy costs, industrial unrest, and a battered economy.  Sunak has warned that the U.K. faces a “profound economic challenge” and pledged to instill “stability and unity.” 

UBS aims to improve its Asia-Pacific business, and CEO Hamers said he sees “some opportunities to grow” in China.  The investment banking division saw revenues down by 19%, with the lower performance in equity derivatives, cash equities, and financing revenue offset by foreign exchange revenues.  The Global Wealth Management division also reported lower revenues, down by 4% year-on-year.

Although we experienced a large morning gap and whipsaw, the bulls maintained control into the close as prices stretched into resistance levels as the Dow surged through its 50-day average.  Today we will have to deal with Case-Shiller, Consumer Confidence numbers, and a bevy of earnings results that will include the market-moving reports from MSFT and GOOGL.  Perhaps that will fix the imbalance of the indexes, with the SPY and QQQ lagging behind the surging DIA.  With the hype and emotion of earnings, the markets can undoubtedly move higher but keep a close eye on the substantial overhead resistance levels for possible entrenched bear attacks.  As a result, price volatility will likely remain highly challenging, giving experienced day traders the advantage.  With all eyes on the giant tech results, we should also plan for big-point morning pops or drops that could extend the relief rally or quickly reverse the direction.  Plan your risk accordingly.

Trade Wisely,

Doug

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