Overhead Resistance

August 2, 2022 by Doug Campbell

The earnings results fueled bulls continued to push higher yesterday, but the overhead resistance seemed to slow their progress yesterday.  Could this become the battle line between the bulls and Bears?  Adding to the price action challenges, Pelosi’s visit to Taiwan is creating market repercussions around the world, rising tensions between the U.S. and China.  So, the question for today is whether earnings results can overcome the political drama and the overhead resistance.  Only time will tell but plan your risk carefully, keeping a close on the trend and support levels if the bears gain the upper hand. 

Overnight Asian markets closed mostly lower, with Hong Kong leading the Pelosi-driven tension selloff, falling 2.36%.  The mood is much the same across the pond this morning, with European markets reacting bearishly to the global risk.  Likewise, the U.S. futures point to a bearish gap down at the open even as earnings roll out as the China saber-rattling spotlights their growing aggression toward the free people of Taiwan! 

Economic Calendar

Earnings Calendar

The number of earnings reports ramped up today with around 160 companies listed, and the majority confirmed.  Notable reports include AMD, ABNB, ARNC, AIZ, CAT, CZR, CWH, CNP, CRUS, CMI, CXW, DD, EA, AQUA, EXAS, FMC, GILD, HLF, HSIC, HUN, INCY, JBLU, LEA, LDOS, MPC, MAR, TAP, MTCH, MCHP, MSTR, OXY, PYPL, PRU, SEDG, SWI, SBUX, TRUE, UBER, WYNN, & ZBRA.

News & Technicals’

California’s declaration comes after Illinois declared a public health emergency earlier Monday.  New York declared a state disaster emergency in response to the outbreak late Friday.  The U.S. has reported nearly 6,000 cases of monkeypox across 48 states, Washington D.C., and Puerto Rico, according to the CDC.  California, Illinois, and New York – home to the nation’s three largest cities – have reported 47% of all confirmed monkeypox infections in the U.S.  The Biden White House has tried for weeks to convince Beijing and the world that House Speaker Nancy Pelosi’s expected visit to Taiwan says nothing about U.S. policy toward China or Taiwan.  Yet experts say that effort misses the point because intra-party schisms in Washington are effectively meaningless to the rest of the world.  The fact that U.S. policy toward Taiwan is deliberately ambiguous has only made it more difficult for the White House to distinguish between what Pelosi is doing and what Biden is saying.  According to senior administration officials, President Biden has yet to decide on the options his advisors have presented on the tariffs.  Ambassador Katherine Tai, as U.S. Trade Representative, holds the leading role on the tariffs and has suggested they have strategic value in maintaining leverage in negotiations with China.  The world’s largest oil and gas companies have shattered profit records in recent months following a surge in commodity prices prompted by Russia’s invasion of Ukraine.  Environmental campaigners and union groups have condemned Big Oil’s surging profits and called on the U.K. government to impose meaningful measures to bring down the cost of rising energy bills.  The International Monetary Fund last week upgraded Russia’s GDP estimate for 2022 by 2.5 percentage points, meaning the economy is now projected to contract by 6% this year.  However, many economists see long-lasting costs to the Russian economy from the exit of foreign firms, the loss of its long-term oil and gas markets, and its diminished access to critical imports of technology and inputs.  Pinterest posted disappointing financial results and guidance that missed Wall Street expectations, but user numbers were better than expected.  The company blamed a weak advertising market for its revenue miss, following similar comments from Meta, Twitter, and Snap.  Elliott Management confirmed that its Pinterest’s biggest investor and said it has “conviction” in the company.

Although the bulls gave it a solid effort, the overhead resistance slowed their advance and could be the short-term line of defense for the bears.  The Pelosi visit to Taiwan is raising tensions will China and having a negative effect on markets around the world.  According to reports, China’s warplanes are buzzing the line that divides the Taiwan Strait, once again proving they are no friend to the United States.  Today is a busy day for earnings, vehicle sales data, and the JOLTS report with some Fed speak tossed in for good measure.  It will be interesting to see if the earnings results can overcome the significant price resistance and the Chinese saber-rattling.  After such a strong rally, a little rest or consolidation would be healthy for the market as long as price supports and trends hold. 

Trade Wisely.

Doug

Unstoppable Buying Enthusiasm

August 1, 2022 by Doug Campbell

Earnings results continued to fuel an unstoppable buying enthusiasm as the bulls pushed the indexes higher right into the weekend.  Adverse economic data such as rising rates, a negative GDP, and a PCE number that continued to show inflationary pressure was no deterrent to the rally’s energy.  But, with many of the big tech reports now in the rearview, can the upcoming reports push the indexes through the significant overhead resistance?  Keep an eye on the PMI, ISM, and Construction spending reports later this morning. 

Asian markets closed green across the board with modest gains after a private survey showed Chinese factory activity grew.  European market trade cautiously bullish this morning with modest gains across most indexes.  As we kick off August, trading U.S. futures recovered from overnight losses suggesting a flat open at the time of this report.  Ride the bullish wave as long as it lasts but keep an eye on the overhead resistance for the possibility of entrenched bears.

Economic Calendar

Earnings Calendar

Notable earnings include AFL, AMKR, AMRC, ANET, ATVI, CAR, BLDR, CF, CHKP, DVA, FANG, GNW, GBT, GPN, J, LEG, MOS, ON, OTTR, PINS, SBAC, SPG, YNO, & WWE.

News & Technicals’

Home price gains are cooling fast as demand wanes and supply builds.  As a result, the annual rate of price appreciation fell two percentage points from 19.3% to 17.3%.  However, price gains are still otherwise strong because of an imbalance between supply and demand.  The housing market has had a severe shortage for years.  Google CEO Sundar Pichai announced to employees Wednesday a new effort called “Simplicity Sprint,” which will solicit ideas from its more than 174,000 employees on where to focus and improve efficiency.  Pichai said Google’s productivity as a company isn’t where it needs to be given the headcount it is and warned of a toughening economy.  HR chief Fiona Cicconi also acknowledged industry-wide concerns about layoffs and said the company is “not currently looking to reduce Google’s overall workforce” but reiterated the need for greater efficiency and focus.  Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, told CBS’ “Face the Nation” that inflation poses a larger threat than a potential recession.  “We’re going to do everything we can to avoid a recession, but we are committed to bringing inflation down, and we are going to do what we need to do,” Kashkari said.  Chinese e-commerce giant Alibaba said it would comply with U.S. regulators and work to maintain its listings in New York and Hong Kong.  “Alibaba will continue to monitor market developments, comply with applicable laws and regulations and strive to maintain its listing status on both the NYSE and the Hong Kong Stock Exchange,” it said in a statement to the Hong Kong bourse on Monday.  Last week, supplies via Nord Stream 1 were reduced to 20%, with Gazprom citing technical issues.  There are renewed price pressures every time Russia decreases its supplies to Europe, given how important the commodity is for several sectors.  With supplies reduced and prices higher, the gas crisis is shaking Europe’s economic prospects.  Treasury yields traded higher in early Monday trading, with the 2-year at 2.89%, the 5-year at 2.68%, the 10-year at 2.65%, and the 30-year holding at 3.02%.

Last week the buying enthusiasm was unstoppable as earnings beat lowered expectations.  Rising interest rates, a negative GDP, and a rising PCE (the Fed’s preferred inflation indicator) could not deter the bulls hungry for risk.  With the indexes not facing significant overhead resistance and a T2122 continuing to signal an over-extended condition, can the earnings supply enough bullish inspiration to keep the rally going?  We now seem to have the ability to ignore adverse economic reports, so maybe the PMI, ISM, and Construction numbers won’t matter all that much, but it would be wise to keep an eye on them for a potential reaction.  Ride the wave as long as it lasts but observe for clues from bears at or near overhead resistance levels. 

Trade Wisley,

Doug

Hurry up and Buy Something

July 29, 2022 by Doug Campbell

Despite the rising rates and the U.S. officially entering a recession, earnings results continued to fuel a hurry up and buy something bullish exuberance.  With the indexes showing a very extended short-term condition, can they keep it going into the weekend, or will we see some profit taking?  As the indexes approach a substantial overhead resistance level, be careful with the urge to rush into already extended stocks.  Though there is a lot of bullish energy, remember the Fed is actively working to slow the economy.

Asian markets had a rough session, with the Hang Seng falling 2.26% as tech came under selling pressure.  However, European indexes see green across the board ahead of economic data fueled by earnings excitement.  With the breakneck pace of earnings slowing a bit with pending economic data, U.S. futures continue the buying spree after AMZN and AAPL earnings results.  As we head toward the weekend, it should be another wild day of price action.

Economic Calendar

Earnings Calendar

We have a little lighter day on the earnings calendar with under 100 companies listed.  Notable reports include ABBV, AON, B, BLMN, BAH, CBOE, GTLS, CHTR, CVX, CHD, CL, XOM, IMGN, MTD, NWL, PSX, PG, GWW, & WY.

News & Technicals’

European officials have become increasingly concerned about the possibility of a shutdown of gas supplies.  Gazprom, Russia’s majority state-owned energy giant, reduced gas supplies to Europe via the Nord Stream 1 pipeline to 20% of full capacity this week.  A growing number of economists expect the eurozone to slide into a recession next year.  Apple’s services business posted the lowest growth rate since the fourth quarter of 2015.  A continuing slowdown could prompt investors to take a closer look at Apple’s valuation.  The unit had a gross margin of 71.5% in the latest quarter, compared to Apple’s overall margin of 43.3%.  Apple’s services business posted the lowest growth rate since the fourth quarter of 2015.  A continuing slowdown could prompt investors to take a closer look at Apple’s valuation.  The unit had a gross margin of 71.5% in the latest quarter, compared to Apple’s overall margin of 43.3%.  Roku shares plummeted more than 25% in extended trading.  The company missed on the top and bottom for its second quarter.  Intel slashed its full-year guidance and turned in worse-than-expected quarterly results.  The company launched new chips that compete with Nvidia’s graphics cards during the quarter.  On Tuesday, the U.S. House approved legislation Intel requested that would subsidize microprocessor manufacturing in the country.  McDonald’s said it had concluded the U.S. test of its McPlant burger as planned.  Analyst research reported lackluster demand for the meatless burger made using Beyond Meat patties.  McDonald’s sells the McPlant burger in several European markets but hasn’t announced a nationwide launch for the menu item in its home market.  Amazon executives said consumer spending remains strong despite decades of high inflation.  The optimistic commentary is a stark difference from warnings issued earlier in the week by Walmart and Best Buy.  Rival retailers have cut their profit outlook after observing consumer spending shifts.  Treasury yields moved slightly lower in early Friday trading, with the 2-year at 2.89%, the 5-year at 2.73%, the 10-year at 2.72%, and the 30-year at 3.08%. 

Though the U.S. economy officially fell into recession with the GDP at -0.09%, the energy around big tech earnings keeps the bulls buying with a hurry up and buy something mentality.  Could the party continue Friday?  Of course!  However, we could also see some profit taking heading into the weekend, with the T2122 showing a very extended condition.  As the market rallies, so do energy and food prices, even as the U.S. dollar remains strong due to the rising interest rates.  An interesting situation as we also enter a tax raising cycle on the biggest companies during a worldwide economic slowdown.  Today we get the latest reading on Personal Incomes & Outlays, Employment Cost Index, Chicago PMI, and Consumer Sentiment.  As we pump up the premarket, watch overhead resistance level and be careful chasing already extended stocks because a consolidation and rest could begin anytime.

Trade Wisely,

Doug

The Bulls Partied

July 28, 2022 by Doug Campbell

The FOMC raised rates as expected and reiterated its commitment to a 2% inflation target, and the bulls partied hard as a result.  However, Mike Wilson from Morgan Stanely warned the jump is a trap expecting more market pain on the way, and the T2122 indicator surged back into a short-term extended condition.  Price action will likely remain very erratic with a massive day of earnings results that includes AAPL and AMZN with a GDP and Jobless Claims numbers to begin the day!  Significant overhead resistance levels are near, so plan your risk carefully.

Asian markets closed mostly higher overnight with modest gains after a choppy session.  European markets trade mixed with muted results after the Fed rate decision.  As earnings roll out, U.S. futures currently point to modest declines ahead of the GDP report and the mega earnings results from AAPL and AMZN later today.  Plan your risk carefully as overhead resistance approaches and the bulls try to keep the party going.

Economic Calendar

Earnings Calendar

Today is the busiest day on the earnings calendar so far, with about 225 companies listed.  Notable reports include AAPL, AMZN, AOS, AGCO, MO, AMT, ARES, ABG, BAX, BZH, CPT, CE, CC, COHU, CLR, DECK, DXCM, DSX, DLR, EW, EGO, FHI, FSLR, FTS, BEN, GLPI, HOG, HIG, HSY, HTZ, INTC, KLAC, KDP, LH, MDC, MMP, MLM, MA, MRK, MHK, NOC, OLN, OSK, OSTK, PCG, BTU, PFE, PBI, ROKU, SGEN, SIRI, SO, LUV, SWK, TROW, X, VFC, VLO, VRSN, WFRD, WING, & ZEN.

News & Technicals’

Morgan Stanley’s Mike Wilson believes stocks are on a collision course with more pain due to the economic slowdown.  The firm’s chief U.S. equity strategist and chief investment officer said on CNBC’s “Fast Money” that investors should resist putting their money to work in stocks despite the market’s post-Fed-decision jump.  Meta missed on the top and bottom lines and gave a troubling forecast for the third quarter.  As marketers pull back on ad spending, the shares have lost about half their value this year.  The company said its guidance reflects the “continuation of the weak advertising demand environment.”  The British bank reported a £1.071 billion ($1.30 billion) net profit attributable to shareholders for the second quarter — down 48% from the same period in 2021.  The bank announced earlier this year that it had sold $15.2 billion more in U.S. investment products — known as structured notes — than it was permitted to.  The related £1.3 billion in litigation and conduct charges booked in the second quarter were “substantially offset,” according to the bank, by a hedge that generated an income of £758 million.  Ford reported second-quarter results that beat Wall Street’s estimates.  The company’s adjusted operating income more than tripled from a year ago, when its production was hit hard by a global shortage of semiconductor chips.  Ford reiterated its previous guidance for the full year and said it would raise its dividend but wouldn’t comment on reports that it’s planning layoffs.  On Wednesday, Senate Majority Leader Chuck Schumer, D-N.Y., and Sen. Joe Manchin, D-W.V. unveiled a long-anticipated reconciliation package that would invest hundreds of billions of dollars to combat climate change and advance clean energy programs.  The legislation, called the “Inflation Reduction Act of 2022,” provides $369 billion for climate and clean energy provisions, the most aggressive climate investment ever taken by Congress.  The package would curb the country’s carbon emissions by roughly 40% by 2030, according to a summary of the deal. 

The bulls partied hard after the FOMC rate decision as the committee reiterated its commitment to bring inflation back to its 2% target.  However, Morgan Stanley’s Mike Wilson warned the market jump is a trap suggesting more pain is coming due to the economic slowdown.  One thing for sure is that the T2122 indicator points to a short-term overbought condition after the rally, so chasing the move up may be unwise.  Expect the price volatility to continue today with a reading on GDP, Jobless Claims, and the mega reports from AAPL and AMZN after the bell.  Though the bulls remain in party mode, it would be wise to remember the significant overhead resistance and macroeconomic details that point to a slowing U.S. economy. 

Trade Wisely,

Doug

Tech Giants Missed

July 27, 2022 by Doug Campbell

Though the tech giants missed expectations, the market appears willing to forgive and continue to buy with high hopes the worst of the 2022 bear market is over.  Unfortunately, we still have plenty of uncertainty today, considering the slew of earnings and economic reports culminating in an FOMC rate decision, keeping price action extremely challenging.  We should continue to watch for the possibility of pop and drop this morning, so be careful rushing into risk at the open.  We have a lot of data coming our way, and anything is possible as the details roll out.  So, prepare for another wild day of hurry up and wait.

Asian markets traded mixed overnight as Hong Kong slipped 1.13% due to rising inflation in Australia.  European markets trade cautiously higher this morning, focusing on the Fed decision ahead.  Despite the mixed earnings results and pending economic reports, U.S. futures point to a bullish open, but a lot could change as data rolls out.  The pop and drop is possible but be ready for just about anything as the market reacts.

Economic Calendar

Earnings Calendar

Again we ramp up the number of earnings reports today with more than 170 companies listed.  Notable reports include META, ASGN, AEM, ALGN, AMED, AEP, AWK, ADP, AVY, BA, BOOT, BSX, BMY, BG< CHRW, CAKE, CHDN, CTSH, COLM, CYH, ETSY, EVR, FLEX, F, GD, GPC, HLT, KHC, LC, MHO, NSC, ORLY, ODFL, OC, PPC, QCOM, RJF, R, NOW, SHW, SHOP, SPOT, STAG, SHOO, TMUS, TDOC, URI, UPWK, VICI, WM, & WFG.

News & Technicals’

Alphabet reported earnings per share of $1.21 vs. $1.28 expected.  The company also fell short of revenue expectations for advertising and Google Cloud.  Alphabet shares have lost about a quarter of their value this year.  Alphabet’s second quarter showed the slowest growth in YouTube ad revenue since the company first began reporting those numbers in the fourth quarter of 2019.  Executives said a combination of tougher year-over-year comparisons and economic headwinds were primarily to blame.  “Time will get us through the lapping,” CFO Ruth Porat said on the earnings call.  Microsoft’s revenue and income fell short, as did the company’s revenue from Azure and other cloud services.  Changing exchange rates and challenges in advertising and the PC markets brought down revenue in the quarter.  Germany, the region’s largest economy and traditional growth driver, has a particular reason to worry.  It’s largely reliant on Russian gas and is sliding toward a recession.  The possibility of a recession in Europe now seems “clear-cut,” Citi economists and strategists said in a note Tuesday.  “Time will get us through the lapping,” CFO Ruth Porat said on the earnings call.  In a phone interview on Wednesday, such a drop would be worse than in 2008 when sales fell by roughly 20%, Esther Liu, director at S&P Global Ratings.  She said the latest developments had delayed a recovery in China’s real estate sector to next year.  Chipotle reported weaker-than-expected sales for its second quarter, although higher prices drove strong profit growth.  Facing higher food, packaging, and labor costs, Chipotle also said it would hike prices again in August.  “Fortunately for Chipotle, you know, most of our customers are a higher household income consumer,” CEO Brian Niccol said on the company’s earnings call.  The Federal Reserve is expected to raise interest rates by three-quarters of a point Wednesday afternoon, its second hike in a row of that size.  Investors will seek guidance from Fed Chairman Jerome Powell on what the central bank may do at its September meeting, but he is likely to be vague and leave options open.  “I think they’re going to lean a little bit more hawkish on September,” said one strategist.  “They’re just not seeing the progress on inflation.”  Treasury yields traded nearly flat in early Wednesday trading as they wait on the FOMC decision.  The 2-year priced at 3.05%, the 5-year is at 2.88%, the 10-year traded at 2.79%, and the 30-year slipped to 3.02%. 

After a choppy of waiting, the tech giants MSFT and GOOGL reported a miss on expectations, but traders didn’t seem to care, buying up the stocks anyway, apparently thinking the worst of the bear 2022 bear market is over.  However, the uncertainty is not over with Durable Goods, International Trade, Pending Home Sales, Petroleum Status, an FOMC rate decision, and a hectic day of earnings reports that includes META.  With futures pointing to a bullish open, the T2122 indicator still elevated the pop, and drop remains a possibility considering all the uncertainty of the data ahead.  That said, there seems to be an incredible willingness to buy up risk despite the weak economic data, so anything is possible over the short term.  Personally, I think the market will see new lows in 2022 once the relief rally has run its course, and it may be the hawkishness of the FOMC that sets that in motion. 

Trade Wisely,

Doug

Speculation and Trepidation

July 26, 2022 by Doug Campbell

It would seem rather obvious that the next several days of this earnings silly season will be ruled by tremendous speculation and trepidation.  Perhaps the market could do better with a psychological analyst than a technical analyst due to the emotional reactions we will likely see the rest of the week.  Today we have housing data, consumer confidence numbers, and a large group of earnings reports that will reach a feared pitch when GOOGL and MSFT report after the bell.  As the market reacts, expect very challenging price action with whipsaws and significant morning gaps. 

Asia market finished the day with primarily bullish results, led by Hong Kong, up 1.67% at the close.  Unfortunately, European markets look mostly lower this morning as they wait on earnings results and the FOMC decision Wednesday afternoon.  Likewise, U.S. futures point lower this morning after some early disappointing earnings results, but anything is possible by the open as data continues to roll out.  Experienced day traders will likely have the upper hand as the market reacts to the tech giant reports throughout the week. 

Economic Calendar

Earnings Calendar

Tech Giant reports begin after the bell today with a busy morning to set the stage for volatility.  Notable reports include GOOGL, MSFT, MMM, AGYS, ACI, ADM, BXP, BYD, CNC, CMG, CB, KO, GLW, ENPH, FE, FISV, GE, GM, IEX, JNPR, KMB, MSCI, MCD, MDLZ, NAVI, PCAR, PII, PHM, RTX, SSTK, SKK, SAVE, SYK, TER, TXN, TRU, UBS, UPS, V, VIST, WH, XRX, YNDX, & ZION.

News & Technicals’

A late Monday announcement from WMT, which cut quarterly and full-year profit estimates citing rising food inflation.  WMT plunged nearly 9% in extended trading, dragging down other retail stocks, TGT fell 4,7%, AMZN dropped 3%, M & DG declined 4.3% & 3.3% respectively.  CEO Doug McMillon said aggressive markdowns on items such as clothing are also hurting margins.  General Motors reported second-quarter earnings that fell short of Wall Street’s estimates after supply chain issues led it to ship fewer vehicles than expected.  GM also confirmed that it had secured the battery materials needed to build 1 million EVs annually by 2025.  The company maintained its previous earnings guidance for the full year and expected to ramp up production in the second half.  With second-quarter GDP data due Thursday, the question of whether the economy is in recession will be on everyone’s mind.  The economy stands at least a fair chance of hitting the rule-of-thumb recession definition of two consecutive quarters with negative GDP readings.  Should inflation stay at high levels, that will trigger the biggest recession catalyst, namely Federal Reserve interest rate hikes.  Treasury Secretary Janet Yellen said “we just don’t have” conditions consistent with a recession.  Major U.S. and European banks should be prosecuted for “committing war crimes” over their financing of the Russian regime, according to a top aide to Ukraine president Volodymyr Zelenskyy.  Oleg Ustenko, an economic advisor to Zelenskyy, said the Ukrainian government believes banks, such as JPMorgan, HSBC, and Citi, are aiding the Kremlin’s war efforts in Ukraine.  “Everybody who is financing these war criminals, who are doing these terrible things in Ukraine, are also committing war crimes in our logic,” he told CNBC’s Hadley Gamble on “Capital Connection” on Tuesday.  UBS posted a net profit attributable to shareholders of $2.108 billion, below analyst expectations aggregated by the Swiss bank.  As market declines accelerated across equity and fixed income in the second quarter, the bank’s wealth management division took a hit.  However, CEO Ralph Hamers told CNBC that this had been largely offset by rising interest rates, with the U.S. Federal Reserve embarking on an aggressive hiking cycle to reel in inflation.  Treasury yields moved slightly lower in early Tuesday trading, with the 2-year pricing at 3.00%, the 5-year at 2.84%, the 10-year at 2.75%, and the 30-year dipping to 2.98%. 

The silly season will hit its stride today with tremendous speculation and trepidation as we wait on the tech giants GOOGL and MSFT to report after the bell today.  Toss in the busy morning slate of earnings reports, a reading on Consumer Confidence and housing with Case-Shiller & New Home Sales, and we have the recipe for wild price action.  Then, of course, the market will also have to deal with the anxiety of the pending FOMC rate decision Wednesday afternoon.  I think it goes with saying that anything is possible, and even the best technical analysis likely won’t be of much use as the emotion spill out in reaction to the data.  Protect your capital and prepare for intraday whipsaws and possible significant morning gaps the rest of the week. 

Trade Wisely,

Doug

Substantial Earnings Speculation

July 25, 2022 by Doug Campbell

Though this week’s uncertainty created some profit-taking in Friday’s market, the substantial earnings speculation continued despite the lowered expectations as the talking heads hyped the possibilities.  Trader’s have one more day before the FOMC meeting begins; the fireworks show ignites with MSFT reporting after Tuesday’s bell.  Plan for wild price gyrations and prepare for substantial morning gaps as the market reacts to the data.  This week could be the make-or-break point for a bullish rally, so plan carefully and avoid overtrading due to the massive risks.

Asian markets closed mostly lower overnight as tech stocks slipped, and the China banking and real estate pressures created downgrades.  However, European markets see nothing but green this morning as they wait on the big week of data.  U.S. futures reversed early selling, pointing to a bullish gap open with high hopes of good giant tech earnings results and a less aggressive FOMC rate increase.  Be careful to ingest too much hoipum while we wait!

Economic Calendar

Earnings Calendar

We have a very busy earnings week highlighted by market-moving tech giant reports.  Notable reports include AGNC, BOH, BRO, CDNS, CVLG, CR, DX, WIRE, FFIV, PHG, NEM, NXPI, PKG, PETS, PCH, SMBK, SCCO, SQSP, SUI, &  WHR.

News & Technicals’

According to a report published late Thursday, Goldman Sachs slashed its earnings outlook for the MSCI China stock index to zero growth for the year, down from 4%.  China’s property market has come under renewed pressure in the last several weeks as many homebuyers stopped mortgage payments.  The property market might take five years to recover from oversupply in China’s smaller cities, according to Henry Chin, head of research for Asia-Pacific at CBRE.  China’s securities regulator told CNBC in a statement it has not researched a plan for a three-tiered system to help Chinese companies avoid U.S. delisting.  The China Securities Regulatory Commission added that companies should comply with data security and listing rules, regardless of whether they were going public on the mainland or abroad.  The regulator said other information about ongoing discussions with U.S. regulators should come from official announcements.  For example, the WHO declared monkeypox a global health emergency.  The rare designation means the WHO now views the outbreak as a significant enough threat to global health that a coordinated international response is needed.  The WHO last issued a global health emergency in January 2020 in response to the Covid-19 outbreak.  Europe is the epicenter of the outbreak.  Right now, men who have sex with men are the community at the highest risk.  The WHO chief said the global risk is moderate, but the threat is high in Europe.  The WHO chief said that monkeypox is unlikely to disrupt international trade or travel right now.  World leaders swiftly condemned Russian missile strikes on a Ukrainian port.  The dramatic revelation comes from a U.N.-brokered deal that secured a sea corridor for grains and other foodstuff exports.  The strike on Odesa, Ukraine’s largest port, illustrates yet another anxious turn in fruitless efforts to mitigate a mounting global food crisis.  Treasury yields moved slightly higher in early Monday trading, with the 2-year trading at 2.99%, the 5-year at 2.88%, the 10-year at 2.80%, and the 30-year trading at 3.04%.

The miss on the PMI and the uncertainty of tech giant earnings ahead created some profit taking on Friday though substantial earnings speculation remained high.  Overnight futures traded negative as Asian markets sold off, but the premarket pump recovered loss despite the uncertainty of all the market-moving data coming our way this week.  However, today we have one more day for the talking heads, analysts, and traders to pontificate, predict, and gamble on what comes next.  It all begins on Tuesday with the beginning of the FOMC meeting and the MSFT report after the bell.  We should expect wild price volatility and the potential of significant morning gaps as the market gaps.  Anything is possible, so plan your risk carefully and remember one of the primary jobs of a trader is to protect your capital! 

Trade Wisely,

Doug

Tech Earnings Speculation

July 22, 2022 by Doug Campbell

Although the economic data was surprisingly bearish, the tech earnings speculation outweighed everything else, providing another good day for the relief rally.  The T2122 indicator continues in a short-term overbought condition for the indexes, but the bulls appear more than willing to buy up risk ahead of the GDP report and FOMC rate increase betting big on tech giant earnings results next week.  The miss and the nearly 30% decline indicated after the SNAP earnings disappointment was shaken off this morning as the premarket pump recovered early losses.

Asian markets traded mixed overnight as Japan continues to report rising inflation.  European markets trade with modest gains across the board in a choppy session after the ECB rate increase.  U.S. futures recovered much of the overnight losses pointing to a flat open as I write this report ahead of earnings results and PMI data.  Plan your risk carefully, heading into next week’s significant market-moving reports.

Economic Calendar

Earnings Calendar

We have just over 20 confirmed reports this morning as we wind down this trading week.  Notable reports include AXP, ALV, CLF, GNTS, HCA, NEE, NEP, RF, SLB, & VZ.

News & Technicals’

On Thursday, Amazon said it would buy primary-care provider One Medical for $3.9 billion.  Amazon’s three most significant acquisitions are a grocery chain, a movie studio, and a health company.  These deals show the company’s willingness to spend big to grow fast in new businesse areas identified as strategic growth opportunities.  The office vacancy rate in San Francisco rose to 24.2% in the second quarter from 23.8% in the prior period, according to CBRE research.  Big tech employers like Salesforce and Google are staying flexible when it comes to bringing people back.  Small businesses that count on tech workers struggle to stay afloat if they haven’t already closed their doors.  Convenience store chain 7-Eleven has slashed roughly 880 corporate jobs in the United States.  The eliminations come roughly a year after it completed its $21 billion acquisition of rival C-store business Speedway.  According to a spokesperson, the cuts were of certain jobs in the company’s Irving, Texas, and Enon, Ohio, support centers, as well as field support roles.  The average price for a used car is $33,341, which is $172 below the peak in March, according to CoPilot research.  Nearly new vehicles (1 to 3 years old) have an average listing price of $13,145 more than if typical depreciation had occurred over the past two years.  A separate report shows that high used-car prices have pushed the average trade-in value above $10,000 for the first time.  Snap missed on the top and bottom lines in its second-quarter earnings report.  The company authorized a stock repurchasing program of up to $500 million.  Snap said it plans to “substantially slow our hiring rate, as well as the rate of operating expense growth.”  Treasury yields declined sharply in early Friday trading in response to ECB action.  The 2-year declined to 3.03%, the 5-year dipped to 2.93%, the 10-year fell to 2.82%, and the 30-year dropped to 3.02%.

Despite the rise in jobless claims and the Philly Fed MFG Index’s substantial decline, the bulls had another good day on Friday, choosing to favor tech earnings speculation over economic data.  The after-the-bell earnings miss from SNAP has the stock indicated to decline nearly 30% at the open, but as I write this report, the premarket pump has also shaken off that disapointment.  Indexes remain in a short-term oversold condition, and volume remains noticeably low as the relief rally extends.  Today we get the latest reading on the PMI Flash, and then we wait on next week’s GDP and FOMC rate decision, along with a hectic schedule of tech giant earnings.  Though a pullback could occur at any time, the remarkable willingness to rush into risk ahead could keep the bulls in charge heading into the weekend.

Trade Wisely,

Doug

Extended Condition

July 21, 2022 by Doug Campbell

Disappointing home sales and mortgage data produced a bullish but choppy price action as the indexes remained in a short-term extended condition.  Traders and investors will have to grapple with our most significant day of earnings so far this quarter, as well as Jobless Claims and the Philly Fed MFG data.  We may also see a market reaction to the pending ECB rate decision as they begin fighting record inflation.  Bullish earnings speculation remains strong but be careful not to overtrade and take some profits with the FOMC and GDP coming our way next week.

Asian markets traded mixed overnight as the Bank of Japan held trades steady.  European markets trade mixed with muted results as they wait on the ECB rate decision.  With a big day of market-moving data ahead, U.S. futures suggest a mixed open as I write this report but prepare for about anything as the market reacts to the results.  Market emotion is high, so don’t rule out the possibility of some significant point swings. 

Economic Calendar

Earnings Calendar

We have our most hectic day of the week on the earnings calendar, with more than 70 companies listed.  Notable reports include ABB, ALK, AAL, T, AN, DHI, DHR, DPZ, DOV, FITB, ISRG, KB, NOK, NUE, PM, SAP, & TRV.

News & Technicals’

According to reports, the European Central Bank could go big on its first rate hike in 11 years.  A new anti-fragmentation tool and a sizeable rate hike would come as the ECB deals with its primary mandate: price stability.  The eurozone inflation print for June came in at 8.6%, up from 8.1% in May, and German producer prices in June were 32.7% higher than a year earlier.  There had been concerns across the region that there could be a complete shutdown of gas supplies via the pipeline after it was closed earlier this month for maintenance.  However, data on operator Nord Stream’s website showed that flows increased from zero to 29,284,591 kWh/h for 0600-0700 Central European Time Thursday.  On July 10, the last day of operations before the maintenance work began, flows were roughly the same level, just above the 29,000,000 kWh/h.  Speaking to Parliament, Draghi said he was going to speak to President Sergio Mattarella and inform him of his intentions after failing to unite his fragile coalition government.  Last week, Mattarella rejected Draghi’s first resignation and asked him to lead more negotiations with lawmakers in the hope of avoiding snap elections.  United Airlines on Wednesday notched a key profit milestone in its pandemic recovery.  However, it said it will scale back its growth plans through 2023.  Airlines have reported strong demand as well as high costs for fuel and other expenses.  Microsoft eases hiring as economic concerns affect more of the tech industry but declined to specify which divisions will slow the hiring pace.  The company lowered its quarterly earnings guidance in June but attributed the move to changing exchange rates.  The Asian Development Bank has cut the growth forecast for China due to concerns over the country’s zero-Covid approach and strict lockdowns, which have also impacted its troubled property market.  As a result, gross domestic product growth for the world’s second-largest economy is expected to be at 4% in 2022, down from an earlier estimate of 5%, ADB said in a report published Thursday.  China’s continued “adherence to a zero-covid strategy in response to renewed outbreaks early in 2022 has triggered the reimposition of strict lockdowns,” the bank wrote in its report.  Treasury yields rose slightly in early Thursday trading, with the 2-year inverted trading at 3.23%, the 5-year at 3.18%, the 10-year at 3.04%, and the 30-year at 3.17%.

The short-term extended condition of the market, disappointing housing data, and some mixed earnings results produced a choppy day of price action, but overall the bulls won the day.  However, today will be our biggest day of earnings results so far this quarter which means anything is possible as traders react.  We also face a pending ECB rate decision; Jobless Claims that have recently experienced a slow creep upward as well as Philly Fed MFG data.  Unfortunately, the rising bond yields and 2/10 inversion continue to suggest a recession adding an element of uncertainty despite the hopeful bullishness of the recent relief rally.  So continue to expect challenging price action with overnight gaps and reversals in the days and weeks ahead.

Trade Wisely,

Doug

Bulls had a Really Good Day

July 20, 2022 by Doug Campbell

Price resistance levels cut like butter as the bulls had a really good day following through from the overnight reversal with the Dow more than 1700 points off the low just four trading days ago.  There suddenly seems to be no concern that bond yields point toward a recession, and with the coming rate hike, the desire to hurry up and buy something is taking over.  However, be careful not to chase or overtrade, with the T2122 indicator suggesting a short-term overbought condition. 

Asia markets rallied strongly overnight in reaction to the U.S. buying surge, with the Nikkei leading the buying, up 2.67%.  However, European markets have reversed early bullishness after their inflation hit a 40-year high of 9.4%, worrying that Russia will shut down energy supplies.  U.S. futures have also reversed from early bullishness after mortgage demand dropped to a 22-year low as inflation-driven rate hikes damage home buying demand.  That said, don’t rule out the power of earnings and the fear of missing out as the wild volatility in price action continues.

Economic Calendar

Earnings Calendar

The Wednesday calendar has about 30 confirmed earnings reports.  Notable reports include ABT, ASML, BKR, BIIB, CMA, CCI, CSX, KMI, NDAQ, NTTRS, PACW, TSLA, & UAL.

News & Technicals’

Netflix lost nearly 1 million subscribers in the quarter after forecasting a dip of 2 million.  The company forecast 1 million net adds for the third quarter, below Wall Street estimates of 1.8 million.  Netflix is counting on changes, such as cracking down on password sharing and adding an advertising tier, to start in 2023.  Bitcoin surged as high as $23,800 Wednesday, up 8% in 24 hours and trading at levels not seen since mid-June.  Traders took comfort from the prospect of a rate hike from the Federal Reserve that is less aggressive than feared.  Ether climbed above $1,500 amid optimism over a highly anticipated upgrade to its network known as the “Merge.”  According to U.S. intelligence, Russia is laying the groundwork to annex parts of Ukraine.  “We’re seeing ample evidence and intelligence and in the public domain that Russia intends to try to annex additional Ukrainian territory,” National Security Council spokesman John Kirby told reporters at the White House.  Kirby that the U.S. observed a similar Russian playbook in 2014 ahead of the Kremlin’s annexation of Crimea, a Ukrainian peninsula on the Black Sea.  Citing supply chain challenges due to Russia’s war in Ukraine, Gupta said the two countries capture a large part of the market share.  Russia and Ukraine are the largest exporters of krypton — a gas used in chip production.  Semiconductors are used in everything, from mobile phones and computers to cars and home appliances.  Rising inflation and expectations of more monetary tightening are already causing a “consumer-led slowdown,” said Gupta.  Last week, a spike in reported numbers of homebuyers halting mortgage payments prompted many banks to announce their low exposure to such loans.  Across banks covered by Goldman Sachs, average exposure to property, including mortgages, was just 17%.  If more homebuyers refuse to pay their mortgages, the poor sentiment would reduce demand — and theoretically, prices — in a vicious cycle.  “It is critical for policymakers to restore confidence in the market quickly and to circuit-break a potential negative feedback loop,” Goldman Sachs chief China economist Hui Shan and a team said in a report Sunday.  Treasury yields dipped slightly in early Wednesday trading, with the 2-year inverted at 3.13%, the 5-year at 3.11%, the 10-year at 2.98%, and the 30-year trading at 3.15%. 

The bulls had a really good day on Tuesday, with the Dow closing up more than 1700 points from the low just four trading days ago.  The buying party continued after the bell, with NFLX jumping more than 6% despite losing nearly 1 million subscribers and declining revenue.   European inflation hit a 40-year high of 9.4%, with the risk of Russia shutting off the energy supply, yet the bulls push for a positive open fuelled by tremendous earnings speculation.  The T2122 indicator suggests a short-term overbought condition, but that does not mean we can’t go higher, as the fear of missing out is a powerful motivator.  That said, don’t allow greed to prevent you from taking some profits in case of a sudden reversal of sentiment comes into play.

Trade Wisely,

Doug