200-Day Moving Averages

August 16, 2022 by Doug Campbell

Although Monday’s economic data points to an economic decline, the bulls ignored it pushing up to test 200-day moving averages in the index charts.  Volume was noticeably low yesterday, and internal indicators suggest a short-term overbought condition despite the rush to hurry up and buy something.  Today’s inspiration may come from the report from HD, WMT, Housing Starts and Permits, and Industrial Production numbers.  Continue to ride the bullish was as long as it lasts but keep in mind that exuberant rallies can abruptly turn, so plan carefully.

Asian markets finished the day mixed and relatively flat, with Hong Kong sliding the most, down 1.05%.  However, European markets push higher, showing modest gains across the board this morning.  As we wait for reports from WMT and potential market-moving economic data, U.S. trade flat to slightly bearish but anything is possible by the open of trading.  Buckle up and observe as we test overhead resistance.

Economic Calendar

Earnings Calendar

We have less than 50 companies listed, a large number of those unconfirmed.  Notable reports include HD, WMT, A, LITE, & SE.

News & Technicals’

Home Depot reported quarterly earnings and revenue that beat analyst expectations.  CEO Ted Decker said the results reflect continued strength in demand for home improvement projects.  Shares of Chinese food delivery giant Meituan plunged 9% on Tuesday after Reuters reported that Tencent plans to sell most of its $24 billion stake in the company.  Tencent, which owns 17% of Meituan, is planning to placate domestic regulators and cash in on its eight-year-old investment, Reuters reported, citing four sources with knowledge of the matter.  However, a source told CNBC that Tencent has no plans to sell its Meituan stake.  Moscow is working to recalibrate its economy in the face of a barrage of international sanctions imposed by Western powers in response to the war.  As a result, the Russian economy shrunk by 4% year-on-year over the second quarter, although this was less sharp than the 5% expected by analysts.  Although many economists are focusing on the long-term structural threats to the Russian economy – which the government and central bank are scrambling to counter – the more immediate collapse predicted by some has not come to fruition.  Apple employees who work in Santa Clara County near the company’s California headquarters have been called back to the office starting in September, where they are expected to work three times per week.  The commander of the U.S. Seventh Fleet said on Tuesday that he’d seen an increase in “unsafe” aerial intercepts by Chinese military aircraft in the South China Sea region.  Karl Thomas emphasized the importance of supply chains and the free flow of shipping, adding that keeping sea lanes open is the “first and foremost” mission of the Navy.  Thomas said the vast majority of U.S. and Chinese aerial and naval interactions are professional and safe despite an increase in unsafe aerial interactions.  Walmart has reached an exclusive deal with Paramount+ to offer the streaming service as part of its Walmart+ offering.  Walmart+ subscribers will get an ad-supported Paramount+ subscription included.  Paramount Global CEO Bob Bakish has set a 100 million goal for Paramount+ subscribers by 2024.  Treasury yield traded flat early Tuesday, the 2-year at 3.20%, the 5-year at 2.92%, the 10-year at 2.79%, and the 30-year at 3.09%. 

The bulls found inspiration to rally, testing 200-day moving averages despite the ugly manufacturing data and the downturn of the Housing Market Index.  Volume was, however, noticeably low as the indexes continued to reach out for overhead resistance levels and key moving averages.  At the same time, the T2122 indicator remains unbelievably overbought as traders rush to buy something, hoping not to miss the payday.  Today, we have potential market-moving economic reports with the Housing Starts and Permits and Industrial Production numbers.  Though earnings numbers are dwindling quickly, the reports from HD and WMT could provide substantial inspiration.  Remember, exuberant rallies can turn lower abruptly, so plan your risk carefully and ride the wave as long as it lasts.

Trade Wisely,

Doug

Substantial Exuberance

August 15, 2022 by Doug Campbell

Though Friday morning started slow and choppy, the afternoon was celebrated with substantial exuberance after the House passed a more than 700 billion dollar deficit spending bill.  The tech giants led the rally as they surged higher, extending the index charts until the day’s close.  Today we begin with reports from Empire State Manufacturing, followed by the Housing Market Index, some Fed speak, and short-term bond auctions as earnings inspiration slow.  Expect the market to rest sideways from this extended condition or begin a pullback at any time. 

During the night, Asian markets traded mixed as Chinese economic reports showed their economy continues to slow.  European markets trade flat but mainly bullish this morning, trying to build on the cautions gains of last week.  However, after a four-week winning streak, U.S. futures point to a modest gap down open with manufacturing and housing data pending. 

Economic Calendar

Earnings Calendar

With the bulk of earnings behind us, we will see many more small-cap reports with a few possible market movers mixed in but expect them to continue to decline.   Notable reports include BLND, COMP, FN, TME, TDUP, WEBR, WWE, & ZIP.

News & Technicals’

Retail sales grew by 2.7% in July from a year ago, the National Bureau of Statistics said Monday.  That’s well below the 5% growth forecast by a Reuters poll and down from growth of 3.1% in  June.   Likewise, industrial production rose by 3.8%, missing expectations for 4.6% growth and a drop from the prior month’s 3.9% increase.  In addition, investment in real estate fell at a faster pace in July than in June, while investment in manufacturing slowed its pace of growth.  Medicare is gaining the power to negotiate prices for certain drugs and punish pharmaceutical companies that don’t play by the rules.  The legislation represents a historic expansion of Medicare’s power that was fiercely opposed by the pharmaceutical industry.  But the negotiation powers are limited in scope, and some lawmakers argue that legislation doesn’t go far enough.  The fourth quarter will be “the challenge” for Malaysia’s economy if global headwinds such as Russia’s war on Ukraine and China’s zero-Covid policy persist, said Finance Minister Zafrul Aziz.   Growth momentum for July to September should be strong, but this could result from an unfavorable base effect from the same time in the previous year, Zafrul said.  On Friday, Malaysia’s central bank announced that the country’s economy grew 8.9% from April to June from a year earlier.  Starbucks, Kraft Heinz and Mondelez, are among the companies focusing on premium products during the cost-of-living crisis.  By “beefing up their premium proposition” as well as value products, companies can capture and retain trade-down audiences, says Paul Martin, KPMG’s head of retail.  Tesla has made over three million cars, CEO Elon Musk tweeted on Sunday.  “Congrats, Giga Shanghai, on making the millionth car!  Total Teslas made now over 3M,” Musk tweeted.  Treasury yields trade with little changed early Monday, with the 2-year at 3.25%, the 5-year at 2.96%, the 10-year at 2.83%, and the 30-year at 3.10%.

Trading on Friday started slow but picked up strongly in the afternoon, stretching the extended index charts with substantial exuberance.  Big tech names surged upward after the news that another more than 700 billion dollar spending bill had passed in the House.  The market loves deficit spending, while the T2122 indicator and bond inversions suggest a pullback could begin at any time.  Of course, Fed members warn that inflation is still unacceptably high and rate increases will continue, but the excitement of the rally has allowed traders to ignore that inconvenient truth.  Today we get a reading from Empire State Manufacturing, the Housing Market Index, some Fed speak, and short-term bond auctions. 

Trade Wisely,

Doug

Significant Morning Gaps

August 12, 2022 by Doug Campbell

The improved CPI and PPI reports produced significant morning gaps but produced little to no buying follow-through momentumless low-volume chop.  However, there is no question that the bulls are in control and own the current uptrend.  Yesterday’s bearish topping candle patterns may be of no consequence because they also lacked conviction, and the overnight futures are already pumping for another gap up open.  With a light day for earnings, inspiration traders may look to the Import/Export and Consumer Sentiment reports to keep the party going into the weekend.

Asian markets closed Friday mixed through the Nikkei bounced back up 2.62% by the end of trading.  European markets trade with modest gains, cautious about future monetary policy and global growth concerns.  However, with a light day of earnings U.S. point to another gap up ahead of economic reports.  So, expect a push to close the week bullish but don’t rule out another pop and drop if the reports cannot generate some follow-though momentum in this short-term extended condition. 

Economic Calendar

Earnings Calendar

Though we have about 60 companies listed on the earnings calendar for today, many of them are very small-cap or unconfirmed.  Notable reports include BR, HNST & SPB.

News & Technicals’

According to market strategists, the Federal Reserve is unlikely to pivot from its hawkish interest rate hikes despite positive signs this week that inflation in the U.S. could be easing.  As CPI and PPI soften, markets have started to moderate their expectations for Fed rate hikes.  But that doesn’t mean it is “mission complete” for the Fed, said Ben Emons, managing director of global macro strategy at Medley Global Advisors.  Victoria Fernandez, the chief market strategist at Crossmark Global Investments, said the Fed is nowhere near putting the brakes and turning dovish on rate hikes, given the current data.  The chief financial officer of German energy firm RWE said it would burn more coal in the short term — but insists its plans to be carbon neutral in the future remain in place.  Greenpeace has described coal as “the dirtiest, most polluting way of producing energy.”  “To be very clear, it doesn’t change our strategy,” Michael Muller told CNBC of its carbon neutral plans.  Retailers rushed to enter the subscription space, curating boxes of clothing and other items.  But consumers are showing signs they’re no longer interested.  Trunk Club, which Nordstrom acquired for an undisclosed amount in 2014, no longer exists.  Stitch Fix, launched in San Francisco in 2011, is struggling to be profitable.  Electric vehicle maker Rivian Automotive maintained its full-year guidance for deliveries Thursday.  The automaker reported second-quarter revenue that was higher than Wall Street expected.  But it trimmed its full-year financial outlook, saying investors should now expect a wider loss and lower capital expenditures than it had previously forecast.  Treasury yields edge lower in early Friday trading, with the 2-year at 3.19%, the 5-year at 2.96%, the 10-year at 2.86%, and the 30-year at 3.13%.  The 12-month bond remains inverted over the 2, 5,10,30-year bonds trading at 3.20%.

Though the CPI and the PPI generated significant morning gaps, the rest of Wednesday and Thursday lacked momentum in low-volume-chop.  Yesterday produced a pop and drop but of very little significance as volume ruled the day, and the T2122 indicator barely budged from its extreme overbought condition.  The premarket pump is already working for another morning gap up, so the bearish topping candle patterns left behind on Thursday may mean nothing with the bullish desire to hold this run into the weekend.  Today we get readings on Import/Export prices and will take the temperature of the consumer with a look at their sentiment.  With the bulk of the earnings season behind us, traders will have to weigh the overall results within a rising rate environment with weakening world economic conditions as we slide into fall.

Trade Wisely,

Doug

Market Celebrated

August 11, 2022 by Doug Campbell

With the month-over-month inflation rate decline, the market celebrated, but traders should keep things in perspective.  An 8.5% inflation rate is still unacceptably high, and the Fed’s 2% target means we are still in a rate-increasing cycle, and the balance sheet reductions will continue.  Today we will find out if the Producer Prices also enjoyed an inflationary reduction and get the latest reading on Jobless claims.  The pace of market-moving earnings reports will quickly decline during the next couple of weeks, removing some of the current wild speculation risks.  Watch for clues of a pullback should the bears find inspiration from these elevated levels.

Asian markets mostly rallied overnight after the better-than-expected U.S. inflation, with Hong Kong up 2.40% at the close.  However, European markets don’t seem to share in the excitement of the 8.5% inflation rate trading flat to slightly lower this morning.  U.S. futures look to continue the celebration pointing to a gap up open ahead of PPI and Jobless Claims.  It seems odd, but the market loves the consumer punishing 8.5% inflation.  Buy, Buy, Buy!

Economic Calendar

Earnings Calendar

Notable reports include AER, BIDU, BAM, GOOS, CAH, DDS, FLO, ILMN, LZ, MLCO, NIO, POSH, RIVN, RYAN, SIX, SOLO, TOST, UTZ, WRBY, WTI, & WPM.

News & Technicals’

Disney plans to raise streaming prices after the service posts a significant operating loss.  The no ads service is increasing $3 per month to $10.99, with the ads service priced at $7.99 per month.  A bundle of Disney+ and Hulu, both with ads, will be $9.99 per month.  Analysis by CNBC shows Beijing’s new trade blocks against Taiwan affect only about 0.04% of their two-way trade.  Beijing’s retaliations against U.S. House Speaker Nancy Pelosi’s visit to Taiwan earlier this month include suspensions of imports of Taiwanese citrus, frozen fish, sweets, and biscuits and exports of natural sands to Taiwan.   While mainland China and Taiwan’s trade should be largely unaffected by the new measures, heightened military drills in the Taiwan Strait may delay shipments, analysts say.   Deliveries of Boeing 787 Dreamliners had been paused for much of the past two years.  American Airlines said it received one of its 787 planes from Boeing’s South Carolina factory.  Ethereum is moving closer to adopting a proof-of-stake model for its network, which is less energy intensive than the existing proof-of-work method.  The network ran its last dress rehearsal before the major upgrade, which is expected to take place next month.  Treasury yields traded mixed early Thursday, with the 2-year at 3.17%, the 5-year at 2.89%, the 10-year at 2.76%, and the 30-year at 3.03%.

With inflation declining to 8.5%, the market celebrated though Fed member Evens stated rate increases would continue.  While it’s good news that inflation declined month over month, the Fed’s 2% target is still a long way off though it may give the committee some breathing room to decrease their aggressive pace.  Today we get the latest read on jobless claims and will find out if the PPI also enjoyed a decline in inflationary produce costs.  Volume remains strangely low, so watch for clues of a pullback if the bears happen to find some inspiration. 

Trade Wisely’

Doug

CPI

August 10, 2022 by Doug Campbell

The hurry up and wait low volume chop we’ve seen this week will be over once the CPI number is revealed.  So, plan for premarket price volatility, likely creating an opening gap.  After that, what happens next is anyone’s guess.  The bulls hope this data will finally break the overhead resistance clearing the path for more upside.  On the other hand, the bears hope for inspiration to defend the resistance with hopes for more market lows.  Let’s hope we finally get some better volume providing directional conviction no matter what happens!  Buckle up the drama is about to begin.

While we slept, Asian markets sold off as China’s inflation rose, with the Hong Kong tech selling off nearly 2%.  European markets trade mixed and primarily flat, waiting on the U.S. inflation data and what it means for future FOMC actions.  However, U.S. futures show the standard premarket pump-up we have seen during this relief rally, pointing to a bullish open ahead of the CPI report.  Of course, after the reveal, anything is possible as traders and investors react. 

Economic Calendar

Earnings Calendar

On this hump day, we have more than 170 companies listed but less than 100 confirmed, as is usual when small-cap reports ramp up.  Notable reports include AAP, BMBL, COHR, CPNG, CYBER, BROS, DIS, FOXA, FNV, JACK, MFC, MTTR, PAAS, RRGB, SONO, COOK, WEN, & WWW.

News & Technicals’

Earlier this year, the Tesla and SpaceX CEO said on social media that he had “no further TSLA sales planned” after April 28.  However, after Musk’s latest stock sales were revealed, Tesla fans and promoters asked the celebrity CEO if he was done selling shares in the electric vehicle business and if he might repurchase shares in the future.  Asked if he was done selling Tesla shares, Musk replied: “Yes.  In the (hopefully unlikely) event that Twitter forces this deal to close and some equity partners don’t come through, it is important to avoid an emergency sale of Tesla stock.”  There have been mixed messages this quarter about streaming’s growth potential.  If Disney+ meets or exceeds 10 million net adds, investors bullish on streaming will sigh relief.  If it falls short, investors will question if CEO Bob Chapek can hit his target of 230 million to 260 million subscribers by 2024.  Coinbase’s revenue declined almost 64% in the quarter as cryptocurrency prices fell.  The exchange operator lowered its full-year forecast for transacting users.  Coinbase said it was trimming 18% of its headcount during the quarter.  Legal and General’s CEO Nigel Wilson described the UK’s cost-of-living crisis as “a tragedy for many, many people.”  The typical household is expected to spend the equivalent of £4,266 on energy each year from January.  Prime Minister Boris Johnson’s spokesperson said it would be up to his successor to make decisions on the matter.  Sweetgreen lowered its 2022 forecast, citing weaker sales that began around Memorial Day.  The chain said it laid off 5% of its support center workforce and will downsize to a smaller office building to lower its operating expenses.  Shares of the company fell about 20% after hours.  Deliveroo reported a pretax loss of £147.3 million in the first six months of the year, up 54% from the same period a year ago.  The U.K., food delivery firm, said it is consulting on plans to exit the Netherlands, the latest withdrawal from a major European market following its retreat from Spain and Germany.  Deliveroo said it would initiate its first-ever stock buyback program, purchasing up to £75 million in shares from investors.  After President Biden ratified Finland and Sweden’s NATO membership, Russia halted U.S. nuclear inspections.  Treasury yields moved slightly lower in early Wednesday trading, with 2-year at 3.26%, the 5-year at 2.96%, the 10-year at 2.78%, and the 30-year at 3.00%.  However, the 6-month and the 12-month bonds are now inverted over the 5,10, and 30-year bonds painting a troubling picture of recession.

Markets chopped in a narrow range Tuesday as traders and investors waited for the CPI number that could inspire the bulls or the bears, depending on the result.  However, the wait is almost over, and with indexes pressed against significant overhead resistance, expect considerable premarket price volatility likely to create an opening gap.  In addition, depending on the outcome, we should expect considerable movement in the U.S. dollar and bond markets, adding some volatility to commodity prices after the report.  After that, a Petroleum report, a Fed Speaker, a 10-year bond auction, and a Treasury Statement round out the day.  Anything is possible, so buckle up and get ready for the show!

Trade Wisley,

Doug

Low Volume Sideways Chop

August 9, 2022 by Doug Campbell

A low volume sideways chop won the day after an energic early rally that eventually found some cautions sellers likely considering the ramifications of the pending inflation data.  Unfortunately, with the CPI on Wednesday morning, we still have another day to hurry up and wait, with the future direction of the indexes on the line.  With the indexes tucked tightly against resistance, the stage is set for a possible significant move, but the direction is anyone’s guess.  So, consider the risk and plan carefully as we head into the close of the day.

Asian markets traded mixed overnight with a 7% drop in SoftBank with the Nikkei leading the declines.  European markets traded in the red across the board this morning focused on U.S. inflation and the outlook of the FOMC.  Ahead of a busy earnings day, U.S. futures reversed early gains pointing to a flat open with the uncertainty of the CPI data looming.  Watch for intraday whipsaws as prices chop while we wait on data that could secure or disrupt the relief rally in the blink of an eye. 

Economic Calendar

Earnings Calendar

We ramp up the number of earnings today with over 250 companies listed with a large group unconfirmed.  Notable reports include AKAM, ARMK, ARWR, BHC, BE, COIN, CPRI, CG, CRON, DIN, EBIX, EMR, GFS, GO, HRB, HGV, H, IAC, IRBT, MAXR, NCLH, PRGO, PLNT, RXT, RL, RBLX, SAVE, SMCI, SYY, TTD, TTEC, U, WMG, WWE, & WYNN.

News & Technicals’

Spirit Airlines reported a second-quarter loss after costs surged despite a jump in revenue.  The airline agreed to sell itself to JetBlue for $3.8 billion late last month.  Spirit executives are scheduled to discuss results with analysts on Wednesday morning.  Trump said that the FBI raided Mar-a-Lago, former President Donald Trump’s resort home in Palm Beach, Florida.  In a lengthy statement, Trump said his residence was “currently under siege, raided, and occupied by a large group of FBI agents.”  The raid came after months of questions about whether Attorney General Merrick Garland was planning to pursue investigations into the former president.  Novavax cut its 2022 sales outlook by about 50% and now expects to generate $2 billion to $2.3 billion in revenue.  Novavax previously forecasts $4 billion to $5 billion in revenue.  CEO Stanley Erck said Novavax expects no new sales in the U.S. market or from Covax, an international vaccine alliance, in 2022.  Ezra Miller, who portrays Barry Allen, aka the Flash, as part of the DC Extended Universe, has been charged with felony burglary in Stamford, VT.  The felony burglary charge against Miller comes almost a year before Warner Bros. is slated to release “The Flash,” a $100 million film that is part of the studio’s DC franchise.  The news comes just days after Warner Bros. Discovery’s CEO praised the film during an earnings call.  Bed Bath & Beyond and AMC Entertainment surged as meme traders were betting on the stock despite the lack of apparent catalyst.  The heavily shorted stocks have been a part of the meme stock craze that has recently hit Wall Street.  Allbirds cut its financial forecast for the year, citing a slowdown in consumer spending.  The sustainable shoemaker said it was slowing hiring as part of its efforts to cut costs.  For the second quarter ended June 30, Allbirds said its revenue rose 15% from a year ago.  The U.S. Treasury’s blacklisting of Tornado Cash on Monday will do more than take down criminals.  Many ordinary crypto investors are likely to be hurt, experts say.  Treasury yields ticked higher in early Tuesday trading, with the 2-year at 3.22%, the 5-year at 2.94%, the 10-year at 2.79%, and the 30-year at 2.88%.  Most surprisingly, the 12-month are currently inverted over the 2,5,10, and 30-year bonds, trading at 3.26%.

Yesterday’s early pop in the indexes met with caution, bringing in some sellers at price resistance and spending the rest of the day in a low volume sideways chop.  However, no technical damage occurred, and the bulls remained in control of the relief rally despite the low volume and loss of momentum.  Earnings continue to come in mixed, and the bond yields rise as the market waits in anticipation of the CPI and PPI inflation data.  I would not rule out another day of choppy price action while waiting for the data.  Speculation is high as meme stocks rose sharply yesterday without an apparent catalyst illustrating the high emotion around the recent run.  There is a chance we are building up for a big move.  Your guess in direction is as good as mine, so plan your risk carefully!

Trade Wisely,

Doug

Future Direction?

August 8, 2022 by Doug Campbell

With the indexes stuck in consolidation at significant overhead resistance, the battle for the market’s future direction could be a bit choppy as we wait on the Wednesday CPI and Thursday PPI reports.  Of course, we will also have to deal with another busy week of earnings reports keeping market emotion high.  In light of the hot jobs numbers, the talking head narrative that inflation topped last month is now in question, so plan for another hectic week as the data rolls out.  It would not be unreasonable to expect some wide-ranging choppy price action as we hurry up and wait.

As we slept, Asian markets trading in a muted, choppy session with Hong Kong tech stocks slid lower with Chinese expanded military drills around Taiwan.  However, European markets trade modestly green across the board this morning.  With a busy earnings calendar, U.S. futures have recovered from overnight losses pointing to a bullish open as the battle continues at resistance for the future direction of the market with inflation data waiting in the wings.

Economic Calendar

Earnings Calendar

We kick off a new trading week with more than 200 companies listed, but many of them are unconfirmed.  Notable reports include DDD, ACAD, BIRD, AIG, GOLD, BNTX, BLNK, CBT, CARG, APPS, D, ELAN, ENR, FRPT, GBT, GDRX, GRPN, IFF, LMND, VAC, NWSA, NE, NVAX, OKE, PLTR, PUBM, QLYS, RDRW, SDC, SWCH, TTWO, SKT, TSN, UPST, & VRM.

News & Technicals’

SoftBank posted one of its biggest losses at its Vision Fund investment unit for its fiscal first quarter, as technology stocks continue to get hammered amid rising interest rates.  As a result, the Japanese giant’s Vision Fund posted a 2.93 trillion Japanese yen ($21.68 billion) loss for the June quarter.  This is the second-largest quarterly loss for the Vision Fund.  According to a court document, Celsius has withdrawn its motion to bring back ex-CFO Rod Bolger at $92,000 a month, prorated over a period of at least six weeks.  The notice of withdrawal came just ahead of a hearing scheduled for Aug. 8 to review it.  The decision to dismiss the motion came three days after CNBC first reported on the request to enlist the help of Bolger as a consultant during the bankruptcy process.  China’s Eastern Theatre Command said it would conduct joint drills focusing on anti-submarine and sea assault operations — confirming the fears of some security analysts and diplomats that Beijing would continue to maintain pressure on Taiwan’s defenses.  Pelosi’s visit to Taiwan last week infuriated China, which regards the self-ruled island as its own, and responded with test launches of ballistic missiles over Taipei for the first time and ditched some lines of dialogue with Washington.  The duration and location of the latest drills are unknown, but Taiwan has already eased flight restrictions near the six earlier Chinese exercise areas surrounding the island.  Fed Governor Michelle Bowman said she supports the central bank’s recent 0.75 percentage point rate increases and believes they should continue until inflation is subdued.  “I think similarly sized increases should be on the table until we see inflation declining in a consistent, meaningful, and lasting way,” she added in a Saturday speech.  Markets anticipate a third big increase when the central bank meets again in September.  Treasury yields declined slightly in early Monday trading, with the 2-year at 3.21%, the 5-year at 2.93%, the 10-year at 2.80%, and the 30-year at 3.03%.

As we begin a new trading week, the indexes remain in consolidation at significant as the bulls and bears battle for the future direction of the market.  We have another big week of earnings to keep the price action volatile, but all eyes will likely be on the CPI and PPI later in the week.  In addition, last Friday’s hot jobs number raised questions about the overall inflation narrative having topped.  The Senate passage of another massive spending bill that levies taxes on companies and shareholders may have some adverse side effects in the fight against inflation.  Only time will tell but expect some positive and negative reactions in targeted market sectors.  With a two-day wait for the CPI report, it would not be surprising to see some wide-ranging chop due to the uncertainty.   Plan carefully and avoid overtrading as we wait.

Trade Wisely,

Doug

Employment Situation

August 5, 2022 by Doug Campbell

With jobless claims rising, Thursday was a choppy session as we waited for the Employment Situation report before today’s bell.  Predictions range from solid job growth to a rather sharp decline over the last month, 372,000.  With fewer market-moving earnings reports and the indexes tucked snugly against overhead resistance, today could be the bulls or bears decide breakthrough or pullback from this critical area.  As we slide into the weekend, keep in mind that next week get to find out if inflation has topped with CPI and PPI reports. 

Asian closed the Friday session green across the board as Taiwan stocks shook off the intimidation of China’s military drills off their coast.  However, European markets trade slightly bearish this morning, waiting on U.S. jobs numbers.  With the pending Employment Situation report and a much lighter day on the earnings calendar, futures trade mixed, but anything is possible by the open.  Will the overhead resistance break or hold?  We will soon find out!

Economic Calendar

Earnings Calendar

We get to take a breath and slow the pace of reports today with about 100 companies listed and quite a few not confirmed.  Notable reports include AAWW, BEP, CGC, DKNG, GOG, GT, WDC, & WOW.

News and Technicals’

China sanctions Pelosi over her trip to Taiwan, calling it an egregious provocation.  In addition, political analysts have warned that Pelosi’s decision to visit Taiwan could undermine U.S.-China relations.  At the 2022 Tesla shareholder’s meeting, CEO Elon Musk touched on various topics, including macroeconomics and the possibility of share buybacks.  He also said Tesla aims to produce 20 million vehicles annually by 2030 and thinks this will take approximately a dozen factories, each producing 1.5 million to 2 million units annually.  Musk said that the Cybertruck is still slated for next year but won’t have the same specifications and pricing that were originally given when the company unveiled the experimental pickup in 2019.  AMC on Thursday said it plans to issue a dividend to all common shareholders in the form of preferred shares.  The company has applied to list these preferred equity units on the New York Stock Exchange under the symbol “APE.”  The company said that the new class of shares carries the same voting rights as the existing common shares.  Oil prices have fallen sharply from their recent peaks, but there’s still a case for buying oil stocks, according to Bill Smead, chief investment officer at Smead Capital Management.  That’s because energy prices are likely to stay high or even increase further, he told CNBC’s “Street Signs Asia” on Thursday.  A reopening of China’s economy would lead to a spike in demand for energy, and supply remains tight, Smead said.  India’s central bank raised key rate by 50 bps to 5.40%, with inflation above 7%  and over the RBI tolerance level in Q2 and Q3, and economists see more hikes in the coming months.  Treasury yields ticked slightly higher in early Friday trading Witht eh 2-year at 3.06%, the 5-year at 2.80% the 10-year at 2.70% and the 30-year at 2.97%.

The pending Employment Situation report made for an uncertain choppy Thursday session, with index prices holding against overhead resistance levels.  As a result, anything is possible through the open of Friday trading.  The Econoday consensus suggests a decline, but an early CNBC report said the number could be strong this month and weakening in the future.   Needless to say, all the predictions are meaningless its how the market reacts to the data that matters!  Plan your risk carefully as we slide into the week with CPI and PPI inflation data coming next week.

Trade Wisely,

Doug

Over-exuberance?

August 4, 2022 by Doug Campbell

Earnings continued to fuel the bulls on Wednesday, and Thursday may be much the same with a hectic earnings calendar but be careful with over-exuberance and complacency.  We still have a tough road to recovery, and in a rising rate environment and a strained consumer, we should expect challenges ahead.  So, enjoy the bullish ride but remember to take some profits and after such a long bull run, be careful not to overtrade!   Also, with layoff headlines in the news lately, keep an eye on the Jobless claims before the bell that has started to creep up.   

Asian markets traded mostly higher overnight, with the Hong Kong tech sector up 2.06% at the close.  While waiting on a significant U.K. rate increase, European markets trade cautiously bullish this morning.  What’s become all too common during this earnings season U.S. futures point to another gap up open ahead of a jam-packed calendar of reports.  Buckle up for another busy day!

Economic Calendar

Earnings Calendar

Thursday is usually our most hectic day on the earnings calendar, and today is no different, with more than 350 companies listed.  Notable reports include SQ, ABMD, ALB, APD, AMC, BABA, AMGN, AAOI, BDX, BYND, BRCX, CABO, CVNA, CHH, CHUY, CLNE, COP, CROX, CUBE, DUK, DVAX, EXPE, FIS, FNKO, GPRO, IHRT, IPI, IRWD, ITT, K, KTOS, LLY, LNG, LOCO, LYFT, LYV, NKLA, NUS, PZZA, PCTY, PH, DOC, PSA, SEAS, SHAK, SWKS, TRIP, TWLO, OLED, VMC, W, WW, XPO, YELP, YETI, & ZTS.

News & Technicals’

The companies that hired most aggressively during the pandemic are now overstaffed and forced to cut back or impose hiring freezes.  Meanwhile, airlines and hospitality companies are desperately trying to staff up after Covid-19 lockdowns led them to downsize.  “The pandemic created very unique, once-in-a-lifetime conditions in many different industries that caused a dramatic reallocation of capital,” said Julia Pollak, ZipRecruiter’s chief economist.  In addition, Walmart confirmed on Wednesday that it has begun to lay off corporate employees.  The news comes about a week after the company slashed its profit outlook and warned that consumers had pulled back on discretionary spending due to inflation.  Pay cuts are expected across wide swaths of the financial industry as bonus season approaches, according to a report released Thursday by compensation consultancy Johnson Associates.  “There are going to be a lot of people who are down 50%,” Alan Johnson, managing director of the namesake firm, said in an interview.  IPO issuance has plunged 95% to $4.9 billion through July, while total equity issuance has fallen 80% to $57.7 billion, according to SIFMA.  DBS Group CEO Piyush Gupta said the bank’s wealth management and capital markets businesses continue to see “headwinds” despite the bank reporting robust second-quarter earnings.  “Business momentum is a bit mixed.  Our corporate lending activities are actually doing quite well.  And so the balance sheets continue to grow,” Gupta told CNBC’s “Capital Connection” following the release of the bank’s results Thursday.  “Private banking customers have been reluctant to put money to work, that obviously is a challenge.  The headwinds on wealth management and capital markets mean that the overall fee incomes are down year-on-year,” he added.  The Indian rupee has come under intense selling pressure in recent weeks due to a perfect storm of global headwinds, which analysts say will continue to pummel the currency in the months ahead.  It has already tested record lows falling more than 80 to the dollar level twice in July, only recovering after the Reserve Bank of India stepped in to stem the slide.  Finance Minister Nirmala Sitharaman attributed the rupee’s depreciation to external reasons in a written statement to parliament recently.  Treasury yields moved lower in early Thursday trading, with the 2-year trading at 3.10%, the 5-year at 2.85%, the 10-year 2.73%, and the 30-year at 2.97%.

There is no question that bulls are in control but has this turned into over-exuberance considering the economy’s overall condition?  While I would expect a pullback or consolidation to begin at any time, earnings inspire retail buying while volume lags behind.  Ride the bullish wave as long as it lasts but be careful with complacency because the bull run may be getting a bit long in the tooth.  Try to avoid overtrading, and don’t let greed prevent you come taking some profits if the tide begins to go out.  Today we get a reading on  International Trade, and with the recent layoff notices, keep a close eye on the Jobless Claims coming out before the bell. 

Trade Wisely,

Doug

China’s Threats

August 3, 2022 by Doug Campbell

The Pelosi visit made for a choppy price action day as China’s threats become more aggressive and worries about what their retaliation might mean for the markets and future relations with the country.  However, though earnings results remain mixed, the bulls found enough inspiration to keep the relief rally intact with no technical damage in the index charts.  The next challenge is the resistance of the long-term downtrend and significant price resistance levels above.  With the next two days chocked full earnings reports, the battle at resistance is likely to create substantial price volatility, so plan carefully.

While we slept, Asian markets traded mixed, watching the development of the Pelosi visit to Taiwan closely.  European markets also trade mixed with the U.K. expected to raise rates to combat the 40-year high 9.4% inflation rate.  However, the premaket pump is underway in the U.S., fueled by the hope of two huge days of earnings reports.  So, who wins the battle at price resistance?  The next couple of days could tell the tale!

Economic Calendar

Earnings Calendar

More than 300 companies are listed on the earnings calendar for Wednesday though some are not confirmed.  Notable reports include ABC, ALGT, ALL, BKNG, BRMN, BWA, CARS, CIVI, CLX, CVS, ELF, FATE, FSLY, FTNT, FUN, GDDY, GNK, GNRC, TWNK, HOOD, HST, MCK, MELI, MET, MGM, MRNA, MRO, MBI, MNST, NYT, NVAX, O, PACB, PDCE, QRVO, RGR, RUN, SSTS, STOR, UAA, WU, & YUM.

News & Technicals’

Pelosi’s visit to Taiwan makes her the highest-ranking U.S. official to visit Taiwan in 25 years, drawing the ire of China, which has called the move a breach of the one-China policy and interference in China’s internal affairs.  However, Tsai said she was committed to working with the U.S. over security in the Taiwan straits and the wider Indo-Pacific region and vowed to deepen economic cooperation and supply chain resilience with the U.S.  Tsai thanked U.S. House Speaker Nancy Pelosi for her support of democratic values.  The Fed has a good chance of not tanking the economy and achieving a soft landing, St. Louis Fed President James Bullard said.  Markets lately have been making the opposite bet, namely that a hawkish Fed will hike rates so much that an economy will fall into a recession.  The Bank of England is expected to rise by 50 basis points, the largest increase in 27 years.  Inflation hit a 40-year high of 9.4%, deepening a historical cost of cost-of-living crisis.  Some of the 1.7 million Celsius customers ensnared by the alleged fraud are now directly pleading with the Southern District of New York to help them get their money back.  It is the latest sign that the bankruptcy court has become the de facto arbiter of crypto policy in the U.S.  Treasury yields dipped in early Wednesday trading, with the 2-year at 3.09%, the 5-year at 2.88%, the 10-year at 2.78% and the 30-year at 3.03%.  Keep an eye on the 12-month bonds at 3.06%, which now show an inversion over the two, five, ten, and thirty-year bonds. 

Concerns over China’s threats and potential reaction to the Pelosi visit to Taiwan made for a choppy day that had lost some ground by the close.  However, the mixed earnings results helped the bulls hold on, producing no technical damage to the relief rally trend.   Nevertheless, with the four major indexes challenging the longer-term downtrend and price action overhead resistance, the massive number of reports today and tomorrow could tell the tale.  Will it inspire the bulls to break through, or will the bears be inspired to defend resistance levels?  The T2122 indicator caught a little break yesterday but remains overbought as the bulls and bears prepare to battle at resistance.  Expect price volatility to continue, and keep an eye out for the potential China retaliation and what it might mean for the markets and our future relations with the country.

Trade Wisley,

Doug