Fears of future rate hikes and the weakening economies of China and Europe emboldened hungry bears to bear current uptrends and test price support levels in the index charts.  As a result, the Treasury Yields spiked, and the U.S Dollar reached a multi-year high, further complicating foreign economic conditions.  So who will gain inspiration today with few notable earnings, PMI Composite Flash, and New Home Sales data just around the corner?  With the VIX spiking on the fear of yesterday’s selling, expect some challenging price volatility as we wait for the market-moving economic reports later this week.

With Singapore inflation hitting a 14-year high, Asian markets closed in the red across the board overnight.  European markets trade mixed this morning, with energy prices rising and the Euro at a 20-year low.  Ahead of earnings and economic data, U.S. futures look to bounce slightly after the sharp selloff on Monday that broke the recent trend in the index charts.  Plan carefully with potentially market-moving economic data coming Wednesday and Thursday.

Economic Calendar

Earnings Calendar

We have 30 companies listed on the Tuesday earnings calendar, with more than 20 confirmed to report.  Notable reports include AAP, CAL, DKS, INTU, SJM, JD, JWM, M, MDT, PYCR, TOL, & URBN.

News and Technicals’

The Euro is trading at a two-decade low of 0.9903 against the dollar; with some speculating, it could slide much lower.  However, strategists are “definitely biased towards further euro depreciation,” says a head strategist at Citi Bank.  According to analysts, China’s power cuts this year are not likely to stretch too far beyond summer, as the conditions of this year’s power crunch differ from last year’s.  This year’s crisis is a result of two factors: “abnormally hot weather” and a lack of rainfall.  Last year, power generation plants cut back on production due to high coal costs they could not offset with fixed electricity sales, and provincial governments rationed power usage to meet yearly emissions targets.  The growing risk of a “major financial accident” that causes a market capitulation later in the year could open up opportunities for investors, according to Beat Wittman, chairman, and partner at Zurich-based Porta Advisors.  Wittman argued that until central banks were forced to begin tightening this year, monetary policy and liquidity conditions had been “too loose for too long,” and policymakers, led by the U.S. Federal Reserve, were now scrambling to restore lost credibility.  Zoom’s revenue growth slowed to 8% from 12% in the year-ago quarter, a lesser result than analysts had predicted.  The video-calling software maker blamed the strong revenue miss partly on the U.S. dollar.  Ford Motor is cutting about 3,000 jobs from its global workforce, most of which are in North America.  The cuts will include 2,000 salaried positions and 1,000 agency jobs in the U.S., Canada, and India, Ford Chair Bill Ford and CEO Jim Farley.  Treasury yields drifted slightly lower in early Tuesday trading, with the 12-month at 3.21, the 2-year at 3.33%, the 5-year at 3.17%, the 10-year at 3.02%, and the 30-year at 3.23%.

Hungry bears drove index charts sharply lower Monday, breaking current uptrends and testing price support levels that mostly held.  Additionally, the U.S. Dollar surged upward yesterday as weakening economies in China and Europe spiked treasury yields raising concerns about future rate hikes.  With a few more notable earnings and economic data from PMI Composite Flash & New Home Sales to provide some inspiration, expect price volatility.  The question to be answered will it be the bulls or bears inspired, and will support levels hold or fail?  It would be wise to plan carefully with the Durable Good number Wednesday before the bell and the GDP report out Thursday morning.  As a result, it would not be out of the question to see some choppy price conditions as we wait.

Trade Wisley,

Doug

A bit of profit-taking began with the bear’s more active on Friday as the rising bond yields raised concerns to suggest the Fed may remain aggressive.  However, don’t count out the bulls just yet because by Friday’s close, the bullish trend remained intact, and price supports were not at risk of failing.  Unfortunately, the bears are showing their teeth in the premarket, so expect a bit more price volatility, and the battle to hold at price support begins.  In addition, with little on the earnings and economic calendar to inspire, markets could be more sensitive to the news cycle.

Asian markets traded mostly lower during the night as China once again surprised the market with another rate decrease just one week after the last cut.  European markets also trade in the red this morning as rate hikes fears grow with the Euro at parity with the dollar again.  With a light day of earnings and economic news, the bears seem hungry, with futures pointing to a gap-down open testing trend and price support levels.  Plan for an extra dose of price volatility this morning.

Economic Calendar

Earnings Calendar

To begin the week, we have over 30 companies listed but only 20 or so confirmed, most of them coming from small-cap names.  Notable reports include NDSN, PANW, & ZM.

News & Technicals’

China trimmed its key lending rates again on Monday, one week after it cut two interest rates in a surprise move.  The People’s bank of China trimmed its five-year loan prime rate to 4.30% from 4.45% and its one-year- prime loan rate to 3.65% from 3.70% on Monday.  Last week, the Chinese central bank lowered the one-year medium-term lending facility (MLF) loan rate for some financial institutions by ten basis points.  The U.K. faces substantial energy bill increases.  As a result, a cap on annual energy prices is set to rise to more than £3,500 this fall and over £4,000 next year, a level considered unaffordable for most households.  The current package of government support is widely viewed as inadequate, but further plans look set to be delayed until a new prime minister is elected on Sept. 5^th.  Proposals include an increase in windfall taxes on energy companies, tax cuts, a commercial bank financing package for suppliers, and the temporary nationalization of some firms.  Alibaba and Tencent executives have been focusing on cutting costs across the business, from headcount to exiting non-core businesses.  It comes after both Alibaba and Tencent posted a set of second-quarter results confirming that these once free-wheeling and high-flying behemoths are not growing anymore.  Alibaba and Tencent have felt the effects of a Covid-induced economic slowdown in China which is hitting areas from consumer spending to advertising budgets.  Officials said that South Korea and the United States began their largest joint military drills in years on Monday with a resumption of field training as the allies seek to tighten readiness over North Korea’s potential weapons tests.  The annual summertime exercises, renamed Ulchi Freedom Shield this year and scheduled to end on Sept. 1st, came after South Korean President Yoon Suk-yeol, who took office in May, vowed to “normalize” the combined exercises and boost deterrence against the North.  South Korea launched the four-day Ulchi civil defense drills on Monday, designed to boost government readiness, for the first time since the pandemic’s start.  Treasury yields ticked slightly lower early Monday, with the 12-month at 3.18%, the 2-year at 3.29%, the 5-year at 3.11%, the 10-year at 2.98%, and the 30-year at 3.22%.

Friday saw the bear’s more active, with the indexes pulling back with a morning gap down with only a modest selling pressure through the rest of the day.  However, by the close bullish trends and price supports remained intact.  Bond yields rose throughout the day on Friday, suggesting the Fed will continue to remain hawkish while the yield inversion points to a deepening recession possibility.  In addition, the rising rate of auto repossessions remains worrisome as consumers struggle with rising housing and food prices.  With a very light day on the earrings and economic calendar, the bears are showing some aggression in the premarket that may break uptrends and test support levels at the open.  As a result, expect an extra dose of price volatility but don’t expect the bulls to give up easily.  A bounce back to resistance is not out of the question.

Trade Wisley,

Doug

The bulls worked hard on Thursday amid a bit more bearish activity due to economic data supporting a hawkish Fed at the next meeting.  With a light day on both the earnings and economic calendar today, the growing inflationary issues in Europe may drive the price action.  Though the bullish trend remains intact, we may want to keep an eye on support levels if the bears start showing their teeth.  I would not expect the bulls to give up easily, but if trends or support begin to falter, it could inspire a sharper profit-taking sell-off due to the extreme index extension.  As this bull/bear battle at price resistance grows, expect price volatility to become more challenging.

Asian market closed Friday mixed and primarily flat as a heat wave in China complicates an already challenged economy.  European markets see red across the board this morning after economic data shows a worsening inflation problem.  Finally, with a light day of earnings and economic reports, U.S. futures point to a bearish open in reaction to the deteriorating world economic conditions.

Economic Calendar

Earnings Calendar

We have a very light day on the Friday calendar with less than 15 companies confirmed, most of which are small caps.  Notable reports include BKE, DE, FL, & VIPS.

News & Technicals’

After a sudden sell-off, Bitcoin is trading under $22,000, a more than three-week low.  Ether, Binance Coin, Cardano, and Solana all fell simultaneously.  The reason for the drop was not immediately apparent.  The filing shows that Cohen’s RC Ventures dumped its stock on Tuesday and Wednesday at a range of prices between $18.68 per share and $29.22 per share.  The firm also sold its call options.  Cohen originally purchased his Bed Bath & Beyond shares at an average of roughly $15.34 per share.  U.K. inflation jumped to a 40-year high of 10.1% in July as food and energy costs continued to soar, exacerbating the country’s cost of living crisis.  The Bank of England expects consumer price inflation to top 13.3% in October.  The country’s average energy bills (set via a price cap) are expected to rise sharply in the fourth quarter to eventually exceed an annual £4,266 ($5,170) in early 2023.  Germany’s economy stagnated in the second quarter as soaring energy prices and the pandemic and supply disruptions caused a gloomy outlook for Europe’s largest economy, according to its finance ministry.  The office said that energy prices were up 105% compared with July 2021, due mainly to higher prices for natural gas and electricity.   China is caught in a devastating heatwave that could seriously impact its economy, according to a chief economist at Hang Seng Bank China.  The heatwave “is a quite dire situation,” Dan Wang told CNBC’s “Squawk Box Asia” on Thursday, adding it probably could last for the next “two to three months easily.”   “It will affect those big energy-intensive industries, and it will have[a] knock-on effect throughout the economy and even the global supply chain,” she said.  Starbucks Chief Operating Officer John Culver is departing the company after two decades with the coffee chain.  His exit comes in the middle of a broader executive reshuffling at Starbucks.  The company will eliminate the role of the COO, instead shifting many of its responsibilities to its head of strategy and transformation.  Morgan Stanley cuts Meta price target, citing declining engagement and lower monetization from reels.  Treasury yields were little changed in early Friday trading, with the 12-month at 3.21%, the 2-year at 3.25%, the 5-year at 3.07%, the 10-year at 2.92%, and the 30-year at 3.17%.

Though the bears showed a little activity on Thursday, the bulls work hard to hold their ground, ignoring the economic reports likely to keep the Fed aggressively hawkish.  However, the details of the slowing world economy have bears showing their teeth this morning.  The ECB was slow to react to the rising inflation and, consequently, produced the highest PPI number on record while the U.K. had a 10.1% inflation rate!  Perhaps we need to embrace the aggressiveness of the Fed, considering the deficit spending from Congress, lest we may suffer similar consequences here in the United States.  With a very light day on the earnings and economic calendars, the compounding world economic issue could drive the days’ price action.   The bullish trends continue to hold but watch for the possibility of aggressive bear attacks if supports begin to fail.  However, don’t expect the bulls to give up easily, so plan for some price volatility as the battle at resistance ensues.

Trade Wisley,

Doug

***Sorry everyone the YouTube is being very slow this morning and I don’t know when or/if the daily video will be active for viewing. Its out of my control! 🤬

Yesterday’s price action may have hinted at a slowing in the current rally; the bulls are clearly in control, and traders have zero concern about the 8.5% inflation and a hawkish Fed.  However, with significant overhead resistance and slowing housing and manufacturing sectors as a persistent bond inversion continues, there are still willing buyers that could keep the rally going through the rest of the week.  Inspiration for buyers or sellers will come from potentially market-moving economic reports and a handful of notable earnings. 

During the night, Asian markets closed in the red across the board, with Goldman and Nomura again cutting China’s GDP outlook.  European markets traded with choppy caution after a 50 basis point increase from the bank of Finland.  U.S. futures trade cautiously bullish ahead of jobless claims, manufacturing, and housing data.  Will the data inspire the bulls or the bears?  We will soon get the answer.

Economic Calendar

Earnings Calendar

We have just over 40 companies listed on the Thursday earnings calendar, with around 20 confirmed reports.  Notable reports include AMAT, BILI, BJ, CSIQ, EL, KSS, MLCO, NTES, NIO, ROST, TPR, and WB.

News & Technicals’

According to the July minutes, the Fed sees interest rate hikes continuing until inflation eases substantially but did not provide specific guidance.  Tensions between the U.S. and China are not helping President Joe Biden’s efforts to control inflation; economist Jeffrey Sachs told CNBC’s “Street Signs Asia.”  He said inflationary pressures would likely persist for the foreseeable future.  Norway’s central bank hikes rates by 50 basis points in a fight to control surging inflation.  The increase takes the Norges Bank’s sight deposit rate to 1.75% from 1.25%, exceeding its prior forecast in June.  Norwegian inflation hit an annual 4.5% in July, up from 3.6% in June and well ahead of consensus projections for 3.8%.  CNBC’s Jim Cramer on Wednesday said the market could continue to stall out after Wednesday’s slump and urged investors to trim some of their positions.  “Things can still go right.  I don’t want to freak you out.  I think stocks need a cooling-off period after this miraculous run, and we’re getting one for certain,” he said.  Iranian negotiating team adviser Mohammad Marandi said on Monday that “we’re closer than we’ve been before” to securing a deal and that the “remaining issues are not very difficult to resolve.”  The Biden administration says it’s ready to sign a deal quickly if Iran accepts it.  Three major sticking points remain, however.  According to Oxford Economics ‘ lead economist, Tommy Wu, developer cash flows through July are down 24% year-on-year on an annualized basis.  The data showed a sharp slowdown from growth for nearly every year since at least 2009.  In addition, recent homebuyers’ refusal to pay mortgages has worsened real estate developers’ funding situation.  Despite multiple reports of government plans to keep developers funded, the central government has yet to announce broader support for real estate officially.  Goldman Sachs downgrades its 2022 forecast for China to 3% from 3.3%.  Nomura cuts its full-year growth outlook to 2.8% from 3.3%.  Both cite weak demand, uncertainties over China’s zero-Covid policy, property woes, and an energy supply crunch.  Cisco gave better-than-expected guidance for its full 2023 fiscal year.  Management touted strong demand despite a volatile backdrop.  Treasury yields ticked slightly lower in early Thursday trading, with the 2-year at 3.27%, the 5-year at 3.04%, the 10-year at 2.88%, and the 30-year at 3.13%.

Though yesterday’s selling may hint at slowing the current bull run, the 8.5% inflation and hawkish Fed seem to be of zero concern to traders willing to buy near overhead resistance.  Moreover, index chart technicals and trends remain bullish though housing and manufacturing are slowing.  Finally, rising bond yields point to a troubling and deepening recession possibility as the rate inversion persists, but the overall market seems unconcerned.  Thursday brings a busy economic calendar of potential market-moving reports with a handful of notable earnings to inspire.  Of course, we will soon find out if all the data inspires the bulls or bears, so buckle up and plan your risk carefully.

Trade Wisely,

Doug

Though market internals point to short-term extreme extended condition, the bulls show no signs of stopping as they pressed the SPY to its 200-day average on Tuesday.  A sharp but brief reversal late in the day took some of the shine off the Tuesday push higher, but the daily index charts remain very bullish.  Earnings from LOW, TGT, and CSCO, with Retail Sales figures and the FOMC minutes, will likely keep traders on edge and price action volatile.  Watch for clues of a rest or market pullback as it could begin swiftly at any time after such a long bullish run.

Asian markets closed mostly higher, with the Nikkei surging 1.23% as the Bank of New Zealand hikes rates.  However, European markets see red across the board, with U.K. inflation soaring to 10.1% due to food and energy costs.  U.S. futures suggest a little profit-taking could occur this morning, but more than enough data is coming our way that could inspire the bulls.  I would not expect the bulls to give up easily but remember, the last buyer in the door gets the worst of the pullback, so plan your risk carefully!

Economic Calendar

Earnings Calendar

On the hump day earnings calendar, we have around 30 companies listed with less than 20 confirmed.  Notable reports include AMCR, ADI, BBWI, CSCO, DNUT, LOW, PFGC, SNPS, TGT, PLCE, TGX, & WOLF.

News & Technicals’

Lowe’s reported mixed second-quarter earnings Wednesday morning.  Its earnings per share surpassed analyst expectations while revenue fell short.  Economists expect July’s retail sales report to show that consumers increased spending by just 0.1% in the month.  Retail sales data will be released Wednesday at 8:30 a.m.  ET should show the impact of rising inflation and high gasoline prices on the consumer.  Online sales are expected to have improved due to Amazon’s Prime Day on July 12 and 13 and rival sales at other retailers.  New OPEC Secretary-General Haitham Al Ghais said Wednesday that the influential producer group is not to blame for soaring inflation.  “There are other factors beyond OPEC that are behind the spike we have seen in gas [and] oil.  And again, I think in a nutshell, it is underinvestment — chronic underinvestment,” Al Ghais told CNBC’s, Hadley Gamble.  On OPEC’s ties with Russia, Al Ghais said the group has a “solid” relationship with Moscow and always seeks to separate politics from its market stabilizing objectives.  Tencent posted its first-ever quarterly year-on-year revenue decline as stricter regulations around gaming in China, and a resurgence of Covid-19 in the world’s second-largest economy hit the technology giant.  Tencent posted revenue of 134.03 billion Chinese yuan ($19.78 billion) in the second quarter vs. 134.6 billion yuan expected, a decline of 3% year-on-year.  The consumer price index rose 10.1% annually, according to estimates published by the Office for National Statistics on Wednesday, above a consensus forecast of 9.8% and up from 9.4% in June.  Rising food prices made the largest upward contribution to annual inflation rates between June and July, the ONS said in its report.  The Bank of England expects inflation to top out at 13.3% in October.  Around two hours after the publication of the red-hot consumer price index reading, the yield on the 2-year Gilt was up more than 29 basis points to reach 2.441% before moderating slightly.  The annual rise in consumer prices outpaced consensus expectations of 9.8% as food and energy prices continued to soar, exacerbating the country’s cost of living crisis.  Treasury yields rise in early Wednesday trading, with the 2-year at 3.29%, the 5-year at 3.01%, the 10-year at 2.87%, and the 30-year at 3.13%.  The 12-month bonds at 3.25% inverted over the 5,10, and 30-year remain a concern for recession. 

With yesterday’s push, the SPY finally kissed its 200-day moving average with indexes in an extreme extended condition as the FOMO inspires the chase higher.  A sharp but brief intraday reversal took some of the shine off the day’s bullish efforts, but daily charts remain technically very bullish.  Our heavy hitters in earnings this morning are LOW and TGT, with CSCO the most likely to inspire after the bell.  On the Economic Calendar, we face the Retail Sales, Petroleum Status, a 20-year bond auction, and the FOMC minutes with Fed member Michelle Bowman peaking a couple of times today tossed in for good measure.  With inflation continuing to increase globally and signs of global growth slowing, there may be some tough market times ahead but for now, enjoy the bull run while watching for clues of rest or pullback that could begin at any time. 

Trade Wisley,

Doug

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

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

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

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

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