Future Direction?

Future Direction

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  According to a court document, Celsius has withdrawn its motion to bring back ex-CFO Rod Bolger at $92,000 a month, prorated over a period of at least six weeks.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

Employment Situation

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?

Over-exuberance

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

China’s Threats

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

Overhead Resistance

Overhead Resistance

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

Buying Enthusiasm

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

Hurry up and Buy Something

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

The Bulls Partied

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

Tech Giants

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

Speculation and Trepidation

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

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