Nasty Intraday Reversal

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Nasty Intraday Reversal

On Thursday, the index charts suffered some technical damage, producing a nasty intraday reversal at price resistance levels.  The selloff extended into the close, leaving behind concerning candle patterns with the SPY, IWM, and QQQ closing below their 50-averages.  With a lighter day of earings and economic data, will the bears find the inspiration to push on lower, or will the bulls step up to defend as we move toward the weekend?  With a 5/10 and 5/30 bond inversion and a Fed signaling, aggressive rate increases expect the challenging price volatility to continue.

While we slept, Asian markets closed mostly lower, with the Nikkei leading the selling to close down 1.63%.  European markets trade in the red across the board this morning due to the aggressive Fed comments.  U.S. futures work to recover from overnight lows but still point to a slightly bearish open with a light day ahead of earnings and economic data.  So, plan your risk carefully as we head into the uncertainty of the weekend.

Economic Calendar

Earnings Calendar

Friday, we get a little break with fewer companies expected to report.  Notable reports include AXP, CLF, GNTX, HCA, KMB, NEM, RF, SAP, SLB, & VZ.

News & Technicals’

Fed Chairman Jerome Powell on Thursday said the central bank is committed to raising rates “expeditiously” to bring down inflation.  That could mean an interest rate hike of 50 basis points in May as prices rise at their fastest pace in more than 40 years.  “It’s absolutely essential to restore price stability,” he added.  On Thursday, the Florida legislature passed a bill seeking to dissolve a special district that allows the Walt Disney Company to act as its own government within the outer limits of Orange and Osceola counties.  If Gov. Ron DeSantis signs the bill into law, the Reedy Creek special district would be dissolved effective June 1, 2023.  Dissolving the district would mean Reedy Creek employees and infrastructure would be absorbed by the counties, which would then become responsible for all municipal services.  Warner Bros. Discovery has decided to shut down CNN+ just weeks after it launched.  CNBC reported that fewer than 10,000 people were watching CNN+ each day last week.  As a result, CNN+ head Andrew Morse is leaving the company.  Warner Bros. Discovery leaders spoke to hundreds of CNN+ staffers Thursday to explain the decision to shut down the service.  Snap missed Wall Street expectations for profit and sales when it reported first-quarter results on Thursday after the bell.  Shanghai, China’s largest city, has struggled to contain a Covid outbreak and began large-scale lockdowns in late March.  In the last week, authorities announced a whitelist of 666 companies that would get priority for resumption of work.  Foreign business organizations said the list is a step in the right direction, but it’s challenging to get more than half of the workers to factories due to lockdown restrictions.  Treasury yields continue to rise in early Friday trading, with the 5- year rising to 3.01%, inverting over the 10-year trading at 2.93%, and the 30-year pricing at 2.96%.

Thursday was a rough day for the indexes to produce a nasty intraday reversal at price resistance levels.  Investors came to grips with aggressive rate increases likely coming from the FOMC next month.  Unfortunately, the SPY and IWM fell below their 50-day averages again, while the QQQ failed at its 50-day, resulting in a bearish lower low.  However, with defensive sector stocks finding favor in the turmoil, the DIA remained the sole index able to hold above its 50-day.  The question for today is if the bears will have the energy to follow through to the downside or if the bulls will step up to defend as we slide into the weekend.  With a lighter day of earnings and economic data, directional inspiration may be challenging to come by until the big tech earnings events next week.  Another troubling factor investors will have to grapple with today is the 5-year Treasury yields inverting over the ten and thirty-year bonds that often signal a recession may be on the way.  Expect price volatility to remain high and watch closely as we test recent lows for support. 

Trade Wisley,

Doug

Earnings Inspired the Bulls

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Earnings Inspired the Bulls

The QQQ struggled yesterday, with NFLX losing 50 billion in value in a single day, but earnings inspired the bulls to stretch the Dow index toward a test of recent highs.  Today we will hear from Jerome Powell, followed by more comments from James Bullard as the 5-year bonds invert slightly over the 10-year with a 30-year inversion near.  Finally, it will be a busy morning of earrings, Jobless Claims, and Philly Fed Mfg. numbers that consensus expects to decline.  So, plan for an extra dose of volatility and watch for the potential of a pop and drop as the Dow tests the resistance of recent highs.

During the night, Asian markets traded mixed, with Shanghai leading the selling, falling 2.26% at the close as lockdowns continue amid surging infection rates.  However, with the war in Ukraine intensifying European markets, trade decidedly bullish this morning.  With a busy day of earnings, economic data, and Fed speeches, U.S. futures point to a substantial gap higher with earnings fueled speculation.

Economic Calendar

Earnings Calendar

We have our busiest day of the week, with about 120 companies listed on the earnings calendar today.  Notable reports include ABB, ALK, AAL, T, AN, BJRI, BX, SAM, DHR, DOW, FCX, GPC, HBAN, ISRG, KEY, MMC, NEE, NEP, NUE, PM, POOL, PPG, DGX, SNAP, SIVB, TSCO, TPH, UNP, & WSO.

News & Technicals’

Melvin Capital, the embattled hedge fund run by its once high-flying founder Gabe Plotkin, has been discussing a novel plan with its investors under which the firm would return their capital while giving them the right to reinvest that capital in what would essentially be a new fund run by Plotkin.  According to people familiar with his plans, Plotkin has committed to keeping his “new” fund at or below $5 billion in capital and returning to a focus on shorting stocks.  Buy with Prime enables third-party retailers to take advantage of Amazon’s vast shipping and fulfillment network for orders placed on their site.  Prime members can order items on other retailers’ websites using payment and shipping information stored in their Amazon accounts.  The service is only available by invitation to some Amazon merchants, but the company plans to make it more widely available in the future.  The rapid rise in the U.S. 10-year Treasury yield to three-year highs has erased its gap with its Chinese counterpart, which hasn’t happened for more than a decade.  Analysts said that the narrowing gap reflects diverging monetary policy between the two countries.  Investors are watching the implications of the narrowing yield gap for the Chinese yuan.  Tesla beat analysts’ expectations on the top and bottom lines for Q1 2022.  For the period ending March 31, 2022, Tesla reported $3.22 earnings per share and revenue of $18.76 billion.  When Russia invaded Ukraine, no one knew how long the ensuing conflict would last or how deep the shockwaves sent through Europe or the rest of the world.  As the war approaches its third month, however, the fallout from the conflict is becoming more apparent, and the outlook does not look good.  Treasury yields climbed in early Thursday trading, with the 10-year rising to 2.871% and the 30-year moving to 2.909%.

Earnings inspired the bulls on Wednesday, with the Dow Surging 249 points while the Nasdaq struggled with NFLX losing 50 billion in value in a single day.  With the strong report out of  TSLA, futures are once again surging in the premarket, rapidly approaching signifiant price resistance levels.  The T2122 indicator may also reach a short-term overbought condition this morning ahead of a Jerome Powell speech followed by more comments from James Bullard.  Before the bell, we have a busy morning of earnings reports, Jobless Claims, and a Philly Fed Mfg. Reports that consensus expects to decline.  Expect another day of volatility as data rolls out.  Watch for the potential of a pop and drop as prices stretch to test index resistance levels with the 5-year bonds slightly inverted over the 10-year and near a 30-year inversion.  Remember, as we stretch higher, pullback risk grows, so be careful not to chase stocks already extended away from support levels. 

Trade Wisely,

Doug

Squeezing Out Short Traders

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The bulls defied the IMF global growth downgrade, the worsening situation in Ukraine squeezing out short traders as they rushed in stocks.  However, one day does not make a trend, and it will be interesting to see if they have the energy to follow through today after the disappointing NFLX report.  Next, we will turn our attention to mortgage data, existing-home sales, and a busy day of earnings and Fed speakers.  Expect price volatility to remain high as the earnings drama continues.

Asian markets closed mixed overnight as China keeps its benchmark lending rate unchanged amid its struggling real estate sector.  European markets had a shaky start to the day but have since turned positive as they watch Ukraine developments.  U.S. futures trade modest and mixed this morning, with the Nasdaq under some pressure with NFLX indicated to open more than 25% lower.

Economic Calendar

Earnings Calendar

We have a busy day with more than 90 companies listed on the Wednesday earnings calendar, though several are unconfirmed.  Notable reports include TSLA, ABT, AA, ANTM, ASML, BKR, BDN, CNS, CMA, CCI, CSX, EFX, GL, KMI, LRCX, LAD, MMLP, NDAQ, PG, SLG, STLD, THC & UAL.

News & Technicals’

Shares of Netflix cratered more than 25% on Tuesday after the company reported a loss of 200,000 subscribers during the first quarter.  It’s the first time the streamer has reported a subscriber loss in more than a decade.  Netflix blamed increased competition, password sharing, inflation, and the ongoing Russian invasion of Ukraine for the stagnant subscriber growth.  Netflix said more than 100 million global households use a shared password, with more than 30 million in the U.S. and Canada.  As a result, Netflix suggested it will begin to make accounts that share passwords pay up.  Netflix has long ignored password sharing because it has been growing without cracking down on it, but it announced it lost subscribers in the first quarter for the first time in more than a decade.  IBM beat consensus on the top and bottom lines.  The technology services company offloaded Watson’s healthcare assets to a private-equity firm in the quarter.  The stock has outperformed the S&P 500 so far this year.  Russia’s war with Ukraine entered a new phase this week, with Moscow focusing its war machine on eastern Ukraine.  The move is seen as a bid for Russia to cement its grip on the Donbas — an area that includes two breakaway, pro-Russian self-proclaimed “republics” — and try to annex it.  Analysts warn how Russia’s latest offensive goes in the Donbas region could prove extraordinarily significant and decisive in the war against Ukraine.  It could determine how Ukraine’s territorial boundaries look in weeks and years.  Treasury yields dipped slightly early Wednesday, with the 10-year one basis point to 2.9034% and the 30-year down two basis points to trade at 2.9643%.

Bulls rushed into stocks yesterday, squeezing out short traders defying the IMF global growth downgrade and mixed earnings results.  Now the question is can they follow through on that rally after the very disappointing results from NFLX after the bell.  Surprisingly, the market seems to have chosen to ignore the rising commodities and inflation or that the Fed will begin to act more aggressively next month.  Add to that list the war in Ukraine, the weakening economy in China, and lockdowns that will likley create supply chain challenges.  Today, we will have another big round of earnings to supply price volatility, Mortage App data, Existing Home Sales, Petroleum Status, Fed Speakers, and a 20-year bond auction.  Remember that one day does not make a trend that we still have significant resistance levels above in the index charts.  So, plan your risk carefully and watch whipsaws and overnight reversals as earnings events continue to ramp up. 

Trade Wisley,

Doug

Frustrating day of Multiple Whipsaws

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The bulls and bears battled for control all day on Monday, becoming a frustrating day of multiple whipsaws.  Volume remains notable anemic, but with another surge in the last minutes of the day, the DIA held its 50-average while the other indexes chopped below theirs.  As earnings ramp up, there is a lot of hope that consumers will keep spending habits high despite the impacts of inflation.  As a result, expect challenging price action in the weeks ahead with big moves, depending on the outcome.  Remember, the war in Ukraine and rising interest rates could still poison the well of enthusiasm at a moment’s notice, so plan your risk carefully.

Asian market closed mixed overnight as currency fluctuations inspired the HSI to sell off 2.28%.  European markets trade in the red across the board this morning as the war in Ukraine enters the next phase.  With a busy day of earnings and housing data on the way, U.S. futures reversed early bullishness, pointing to a modestly lower open as Russian aggression worries investors.

Economic Calendar

Earnings Calendar

We have just short of 60 companies listed on the Tuesday earnings calendar.  Notable reports include JNJ, NFLX, CFG, FITB, FHN, FULT, HAL, HAS, IBKR, IBM, LMT, MAN, PACW, PLD, SBNY, TRV, TFC, WTFC.

News & Technicals’

On Monday, a federal judge in Florida ruled that the CDC had overstepped its authority when it issued a mask mandate for planes and other forms of public transportation.  As a result, the CDC mandate is no longer in effect, and the TSA will not enforce it, a Biden administration official said.  According to press secretary Jen Psaki, the White House is reviewing the court’s ruling, and the Justice Department will decide whether it will appeal.  The court’s ruling comes less than a week after the CDC extended the mandate for 15 days, amid a rise in Covid infections nationwide due to the more contagious omicron BA.2 subvariant.  Private equity firm Apollo Global Management would consider providing financing for a Twitter buyout in preferred equity, sources say.  But Apollo isn’t interested in joining a private equity consortium to acquire the social media company.  Elon Musk, the CEO of Tesla and SpaceX and the world’s wealthiest person, offered to buy Twitter for $43 billion last week.  As inflation soars to record highs, pensions feel the pinch, making it even more important to make sure yours is working for you.  U.S. inflation hit a fresh 40-year high in March, rising 8.5% year-on-year, while U.K. consumer prices shot up 7% over the same period, as the war in Ukraine pushed up energy prices.  “The blistering inflation rate we have been seeing for a year now will ravage those living on a pension, and the pension fund itself,” Dan North, senior economist at Allianz Trade North America, told CNBC.  While the first quarter ended with more than $20 billion in net inflows to mainland Chinese stocks, the bulk occurred in January, and the pace of buying dropped sharply as the quarter progressed, data from EPFR Global showed.  Anything that relates to China we can find in causality and reasoning from either Russia or [the] U.S. right now,” said Steven Shen, manager of quantitative strategies at EPFR.  There’s been “sizeable outflows from China equities since last year, reflecting a notable de-risking on China,” according to Max Luo, director of China asset allocation at UBS Asset Management.  Treasury yields moved higher in early Tuesday trading, with the 10-year briefly reaching 2.91% and the 30-year slipping slightly to 2.9512%.

Monday proved to be a frustrating day of multiple whipsaws ending with another end-of-day dark pool surge holding the DIA at its 50-day average.  With the Fed’s James Bullard suggesting a 75 basis point interest rate increase and Russia advancing in Ukraine, futures have pulled back from overnight highs.  We have a busy day of earnings to focus on with our first big tech report from NFLX after the bell to get a glimpse of consumer spending habits.  This morning we will also get a reading on the Housing Starts and Permits, where the consensus suggests only a modest decline.  With so many forces pushing and pulling on the market, expect the price volatility to remain challenging.  There is so much hope that consumers came through with spending despite the high inflation that good reports could move stocks with enthusiasm.  However, if they miss, I suspect they could also get severely punished, with many suggesting that a recession is on the way.   As a result, it would be wise to plan for a bumpy ride in the weeks ahead.

Trade Wisely,

Doug

Bears Gained Ground Last Week

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The bears gained ground slightly last week as investors weighed the impacts of rapidly rising inflation and the Fed talking aggressively hawkish.  In addition, as investors continue to deal with the uncertainties in Ukraine, the likely supply chain issues due to China’s lockdowns earnings season ramps up.  Can companies continue to perform with the rising costs and consumers forced to make spending habit changes?  Prepare for intraday whipsaws and overnight reversals as the data rolls out.

Asian markets closed mixed overnight, with Chinese economic data raising concerns about a slowing economy with lockdowns entering another week.  However, European markets trade with modest gains across the board after the ECB confirms the end of bond-buying to address their punishing inflation.  Though well off the overnight lows, U.S. futures point to a slightly bearish open as earnings season shifts into high gear.

Economic Calendar

Earnings Calendar

We have about 60 companies listed but less than 20 confirmed reports to kick off the new trading week.  Notable reports include JNJ, NFLX, BAC, IBM, BK, SCHW, ELS, FNB, JBHT, PNFP & SYF.

News and Technicals’

American’s new CEO Robert Isom said the airline is adequately staffed for the summer travel season.  However, airline passengers have at times faced thousands of flight cancellations and delays due to understaffing over the past year.  Earlier this month, American’s partner, JetBlue, said it would trim summer flying by as much as 10%.  A court filing out late Friday said a judge ruled Tesla CEO Elon Musk knowingly made false statements when he tweeted about a take-private deal for the company in 2018.  Shareholders are suing Tesla and Musk to recover the money they lost after Musk tweeted that he was considering taking the automaker private at $420 a share and had “funding secured” to do so.  After those tweets, the SEC charged Musk with civil securities fraud.  They struck a revised settlement agreement in 2019, but Musk is trying to terminate that agreement now.  Finally, Twitter adopted a limited duration shareholder rights plan, often called a “poison pill,” a day after billionaire Elon Musk offered to buy the company for $43 billion, the company announced Friday.  Such a move is a common way to fend off a potential hostile takeover by diluting the entity’s stake eying the takeover.  The board voted unanimously to adopt the plan.  The city said that three people have died as of Sunday, attributing the deaths to preexisting health conditions.  The official announcement noted all three people were elderly and were not vaccinated against Covid-19.  The city also said it would begin another round of mass virus testing, set to end Thursday.  Treasury yields traded higher in early Monday trading, with the 10-year rising to 2.866% and the 30-year trading at 2.942%.

We finished last week with the bears gained ground with a slight advantage as investors grappled with pricing stock amid rapidly rising inflation.  This week traders turn their attention to a big week of earnings reports with uncertain about gains due to producer inflationary impacts.  Unfortunately, we also have to deal with Russia gaining ground in Ukraine and the China lockdowns expected to affect supply chains substantially.  As a result, price volatility in the week ahead is likely to continue as the bulls try to defend the 50-day averages in DIA, currently the only index able to hold this crucial psychological level last week.  As bond yields continue to rise, QQQ could struggle the most if tech earnings begin to slow as strained consumers change buying habits.  So get ready for just about anything as silly season kicks into high gear. 

Trade Wisey,

Doug

Highest PPI Reading on Record

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Highest PPI Reading on Record

The bulls shrugged off the highest PPI reading on record yesterday, choosing to react bullishly in the travel sector after DAL reported a smaller than expected loss.  As we wait for a busy morning of big bank earnings and economic reports, Europe waits for an ECB rate decision to fight its inflation battle.  It would not be a surprise to see a morning of wild price volatility and an afternoon of uncertainty as we slide into a 3-day weekend as Russia increases its threatening rhetoric. 

Asian markets closed green across the board as South Korea tightened its monetary policy.  European stocks trade mixed and muted as they wait on the ECB decision.  With a big day of data and a pending 3-day weekend ahead, U.S. futures tiptoe around the flatline, pensive about what comes next.

Economic Calendar

Earnings Calendar

We have about 60 companies listed on the Thursday earnings calendar, with many unconfirmed.  Notable reports include UNH, ALLY, C, GS, LAKE, MS, PNC, RAD, STT, SNDL, TSM, ERIC, USB & WFC.

News & Technicals’

Russia says a nuclear-free Baltic region would no longer be possible if Finland and Sweden join NATO, alluding to additional nuclear deployments in Europe.  The comments come a day after Finland and Sweden said their decision on whether to apply for NATO membership would come within a matter of weeks.  Finland and Sweden are members of the EU but not NATO, and the latter shares an 830-mile border with Russia.  The risk that the Federal Reserve accidentally tips the U.S. economy into recession as it combats inflation is rising, according to JPMorgan Chase CEO Jamie Dimon.  “I’m simply pointing out that those are storm clouds on the horizon that may disappear, they may not,” Dimon said.  In the event that a recession does develop, the bank would “have to put up a lot more” for loan loss reserves, Dimon told reporters.  A huge leak of internal documents — thought to be an act of revenge over Conti’s pro-Russia stance — revealed details about the notorious hacker group’s size, leadership, and operations.  The messages show that Conti operates much like a regular company, with salaried workers, bonuses, performance reviews, and even “employees of the month.”  However, cybersecurity experts say some workers were told they were working for an ad company and likely were unaware of who was employing them.  Israeli historian and bestselling author Yuval Noah Harari says the growing risk that Russia may turn to nuclear weapons poses an existential threat to humanity.  Still, Harari warned that it is not for Western allies to try to preempt such action by seeking regime change in Russia.  Federal Reserve board member Christopher Waller said Wednesday that he expects interest rates to rise considerably over the next several months.  In a CNBC interview, Waller said current data on inflation and the general strength of the economy justify half-percentage-point increases ahead.  The Fed normally increases in 25-basis-point increments.  Treasury yields declined slightly in early Thursday trading, with the 10-year dipping to 2.6787 and the 30-year slipping less than a basis point to 2.791%.

The bulls went to work defying the highest PPI reading on record and disappointing results from JPM and BLK.  A smaller than expected loss from DAL inspired travel stocks to surge yesterday, with investors seeing a hopeful glimmer the industry is recovering despite the rising inflation.  Today the market is bracing for multiple big bank reports and a busy morning of possible market-moving economic data.  Markets could also react to an ECB rate decision expected this morning to fight the punishing effects of inflation.  Traders should prepare for price volatility as the date rolls out and consider their risk carefully as we slide into a 3-day weekend.  With Russia stepping up its threatening rhetoric of shutting off gas supplies to Europe and nuclear action if Finland and Sweden join NATO, the long weekend of uncertainty could make the afternoon session challenging.  Buckle up for a possibly bumpy ride.

Trade Wisely,

Doug

Inflation Highest Level Since 1981

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Highest Level Since 1981

The bulls tried hard to convince us that inflation hitting the highest level since 1981 didn’t matter as the Dow surged 330 points in early trading.  That all changed when the second in command at the Fed reiterated, they would aggressively raise interest rates to fight the rapidly rising prices.  Today we get a reading on PPI and toss in the beginning of 2nd quarter earnings to fuel the fire’s volatility.  With geopolitical tensions rising and China going into lockdown, the second quarter could prove as challenging as the first, with wild price gyrations and uncertainty.

Asian markets traded mixed but mainly bullish overnight as China’s exports rose more than expected.  European markets, however, trade mixed but mainly in the red with an ECB decision on the horizon amid rising inflation.  Once again, the futures point to a gap open with PPI just around the corner as JPM earnings disappoint. 

Economic Calendar

Earnings Calendar

Today we officially kick off the second quarter earnings season that begins with the big banks.  Notable reports include JPM, DAL, BBBY, BLK, FAST, FRC, INFY, RENT, & SJR.

News & Technicals’

The China lockdowns have the potential to trigger supply chains issues that could dwarf 2020 and 2021 challenges.   Many goods are stuck in China now, and a “big problem looms” for the global economy, says IMA Asia’s Richard Martin.  In the last few weeks, China has been battling its most severe Covid outbreak on the mainland since the initial shock of the pandemic in early 2020.  A trade rupture between Germany and Russia could dent German manufacturing – one of three global manufacturing centers besides the U.S. and China, S&P Global’s Chief Economist Paul Gruenwald told CNBC’s “Squawk Box Asia.”  According to Germany’s Federal Statistical Office, trade between Germany and Russia jumped significantly in 2021, with the value of goods surging 34.1% to 59.8 billion euros ($65 billion).  Research and consultancy firm Wood Mackenzie also warned that the global economy could undergo “more permanent changes” with global trade possibly altered by the crisis.  Fewer than 10,000 people are using CNN+ on a daily basis two weeks into its existence, sources said.  The paltry audience casts doubt on the future of the application following the recently completed combination of Discovery and WarnerMedia into Warner Bros. Discovery.  Warner Bros. Discovery CEO David Zaslav hasn’t commented publicly on CNN+’s long-term future.  He told CNBC in February he’d need to see how the application performed before deciding on any next moves.  Treasury yields were back on the rise in early Wednesday trading, with the 10-year advancing to 2.7786% and the 30-year rising to 2.8632%.

With inflation hitting the highest level since 1981, the market briefly tried to make us believe it didn’t matter as the Dow surged 330 points.  However, when Brainard reiterated that the Fed would aggressively raise rates to fight the rapidly rising prices, the bears took over, winning the day.  Today we face the beginning of the 2nd quarter earnings season, and a PPI number expected to also come in hot.   The willingness of the market to ignore the critical internals in favor of wild speculation will continue to fuel the dangerous price volatility creating huge point whipsaws and reversals.  As a result, Inexperienced retail traders are likely to suffer the most when the Fed finally pops this speculation bubble.  Adding in the significant emotional gyrations of the earnings season will only add to the volatility.  Toss in a China lockdown and the geopolitical complications, and the path forward looks very challenging. 

Trade Wisley,

Doug

Hot Inflation

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hot inflation

Uncertainty brought out the bears yesterday as the market braces for the impacts of a hot inflation reading and the possible impacts of another China lockdown.  Bond yields continue to increase, adding selling pressure to the tech sector, with the DIA, SPY, QQQ, and IWM pushing below their 50-day averages.  Can we continue to ignore the impacts of rising rates and insidious tax of rapidly rising inflation on the consumer?  We will soon find out but prepare for some wild price volatility that may include head fakes, whipsaws, and reversals as the market reacts. 

Asian markets closed mixed as investors tried to measure the impacts of another widespread lockdown in China.   European markets see red across the board as a significant undisclosed investor sells German banks tanking Deutsche bank by 9.5%.  With a light day of earnings and pending CPI reading, the U.S. futures point to a flat open in the premarket, but anything is possible after the number comes out.  So, prepare for just about anything.

Economic Calendar

Earnings Calendar

We have 15 companies listed on the earnings calendar, most of them unconfirmed.  Notable reports include ACI & KMX.

News & Technicals’

Economists expect inflation to rise 1.1% in March from the prior month, but the year-over-year gain is 8.4%, the highest since December 1981.  The consumer price index will be reported Tuesday at 8:30 a.m. ET.  The main culprits behind the jump in headline inflation were food and energy, but the cost of housing has continued to rise.  “It’s going to be ugly,” said one economist of the March report.  “It’s a perfect storm.”  Japan’s health ministry said Monday that the new XE variant, first detected in the U.K., was found in a woman in her 30s who arrived at Narita Airport.  The XE subvariant is a so-called recombinant, or mix, of two earlier omicron strains, BA.1 and BA.2.  According to the latest statistics from the U.K, one hundred twenty-five cases of XE have been detected in the U.K., almost double the previous count.  Health Security Agency.  President Joe Biden is visiting corn-rich Iowa on Tuesday to announce he’ll suspend a federal rule preventing the sale of higher ethanol blend gasoline this summer as his administration tries to tamp down prices at the pump that have spiked during Russia’s war with Ukraine.  The Environmental Protection Agency will issue an emergency waiver to allow the widespread sale of 15% ethanol blend, usually prohibited between June 1 and Sept. 15 because of concerns that it adds to smog in high temperatures.  Senior Biden administration officials said the move would save drivers an average of 10 cents per gallon at 2,300 gas stations.  Members of Congress from both parties, as well as industry groups, had urged Biden to grant the E15 waiver.  Treasury Yields continued to rise in early Tuesday trading, with the 10-year trading up to 2.8250% and the 30-year slightly higher at 2.8353%.

A rapidly rising infection rate in China and fears of a hot inflation reading pushing bond yields higher kept the bears active on Monday, fearing economic impacts.  Add in the intensifying war in Ukraine, and uncertainty ruled the day though the fear registered by the VIX remained relatively modest.  This morning, investors will turn attention to the CPI, which could come in at levels not seen since 1981.  Overall the market has had an amazing ability to ignore the impacts of inflation, but the Fed, now willing to sacrifice market growth to fight rising costs, adds a new wrinkle for investors.  As a result, anything is possible, and traders will have to stay focused on price action with the possibility of intraday whipsaws or full-on reversals as the uncertainty unfolds.  So, fasten those seatbelts tightly as it could be a bumpy ride!

Trade Wisely,

Doug

QQQ Remained Under Pressure

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QQQ Remained Under Pressure

With bond rates risking, the QQQ remained under pressure from the bears while the bulls focused their efforts on the DIA.  So far, the DIA and SPY have successfully held their 50-day averages though the IWM failed to hold, and QQQ looks to violet this crucial technical level at the open today.  This week’s theme will be inflation as we get readings for CPI and PPI, which are both expected to come in hot, clearing a path for an aggressive rate hike by the Fed.  We can hope for the best, but traders should prepare for more challenging volatility in this holiday-shortened week.

Overnight Asian markets closed in the red, with Hong Kong leading the selling down over 3% after the release of surging producer price numbers.  European markets traded mixed this morning with worries about inflation and the intensifying war in Ukraine.  With bond rates rising, inverted U.S. futures point to a flat, slightly bearish open with inflation data just around the corner. 

Economic Calendar

Earnings Calendar

We have just over 20 companies to kick off the short week of trading.  However, there is only PCYO confirmed.

News & Technicals’

Elon Musk informed Twitter on Saturday morning that he would not take the board seat.  However, CEO Parag Agrawal announced publicly on Sunday that Musk remains the largest shareholder of Twitter, and the company will remain open to his input.  Musk’s appointment would have started on April 9, contingent on a background check and formal acceptance.  Nio announced Sunday it would raise the prices for its three SUVs — the ES8, ES6, and EC6 — by 10,000 yuan ($1,572), effective May 10.  A day earlier, on Saturday, Nio said it suspended production due to Covid-related restrictions in the last several weeks that halted production at suppliers’ factories.  Many other electric car companies, from Tesla to Xpeng, have raised prices in the last several weeks.  French leader Emmanuel Macron and his far-right rival, Marine Le Pen, face off in the final vote on April 24.  A flurry of early projections and exit polls showed the incumbent.  Macron came first with 28.1-29.5% of the vote, followed by Le Pen with 23.3-24.4%.  The rising cost of living and the Russia-Ukraine war has been front and center.  Support for Macron had jumped following Russia’s unprovoked invasion of Ukraine and his mediation efforts earlier this year.  Federal Reserve policymakers will try to slow down the economy and subdue inflation.  Higher rates make money costlier and borrowing less appealing.  That, in turn, slows demand to catch up with supply, which has lagged badly throughout the pandemic.  Fed officials also have talked tough on inflation to dampen future expectations.  Potential effects include lower wages, a halt or even a drop in home prices, and a decline in stock market valuations.  Treasury yields continue to be a concern, with the 5-year trading at 2.8154%, the 10-year climbing to 2.7629%, and the 30-year pricing at 2.7629% in early Monday trading.

While the DIA found some bullish price action, the QQQ remained under pressure, with bond rates rising while inverted.  Though the bulls have defended the 50-day support of the DIA and SPY, IWM failed this fundamental psychological level, and the QQQ is likely to follow suit at open today.  Moreover, with news that the war in Ukraine intensified over the weekend, the uncertainty could keep the market on edge in this holiday-shortened week.  Though we have several Fed speakers today, there is not much else providing inspiration today.  However, with hot numbers expected in the CPI on Tuesday and the PPI on Wednesday, traders will should expect considerable volatility in the days ahead.  If that’s not enough to deal with, we will have Retail Sales on Thursday before closing for the Good Friday holiday.  I hope you are rested from the weekend because it could be a challenging 4-days ahead!

Trade Wisely,

Doug

Fed To Fight Inflation

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Fight Inflation

The Fed minutes confirmed the Fed plans to fight inflation aggressively, creating a bit of Wednesday volatility.  The question is, will this prick the bubble of high stock valuations and home prices inflated by all the money printing?  Only time will tell, but one thing seems inevitable, the Fed may have to sacrifice the market growth they have long defended to get the job done.  Today we will hear from James Bullard, that pointed to Fed credibility when asking for a one-point increase in rates last month!  Could we see another dose of price volatility this morning as a result? 

Overnight Asian markets struggled to close the session with red across the board.  However, this morning, European markets are cautiously higher as they monitor the hawkish Fed and Russian aggression.  With Jobless claims and more Fed speak pending, U.S. futures point to modest gains at the open. 

Economic Calendar

Earnings Calendar

The Thursday earnings calendar lists about 40 companies, but many of them remain unconfirmed.  Notable reports include ANGO, APOG, CAG, STZ, NTIC, PSMT & WDFC.

News & Technicals’

Members of the NATO military alliance have been supplying Kyiv with weapons since Russia’s unprovoked invasion of Ukraine in February.  However, this is not enough for Ukraine’s Foreign Affairs Minister, Dmytro Kuleba.  NATO Secretary-General Jens Stoltenberg said Wednesday: “We need to be prepared for the long haul.”  Shell has announced that it will write off between $4 and $5 billion in the value of its assets after pulling out of Russia.  The announcement offers a first glimpse at the potential financial impact to Western oil majors of exiting Russia.  Shell was forced to apologize on March 8 for buying a heavily discounted consignment of Russian oil.  It subsequently announced that it was withdrawing from Russia.  China warned on Thursday it would take strong measures if U.S. House of Representatives Speaker Nancy Pelosi visited Taiwan and said such a visit would severely impact Chinese-U.S. relations, following media reports she would go next week.  The possible visit has not been confirmed by Pelosi’s office or Taiwan’s government, but some Japanese and Taiwanese media reported it would take place after she visits Japan this weekend.  Chinese Foreign Ministry spokesperson Zhao Lijian told reporters that Beijing firmly opposed all forms of official interactions between the United States and Taiwan, and Washington should cancel the trip.  Denim retailer Levi Strauss reported fiscal first-quarter earnings, and revenue topped analysts’ estimates.  The company sold more jeans and T-shirts at higher price points, often directly to customers.  Levi reaffirmed its forecast for fiscal 2022, assuming no significant worsening of inflationary pressures or closures of global economies.  Levi CEO Chip Bergh told CNBC that consumers have yet to trade down for less expensive apparel.  Treasury yields fell slightly in early Thursday trading, with the 5-year dropping to 2.6381%, the 10-year dipping to 2.5659%, and the 30-year slightly lower to 2.6046%.

The confirmation that the Fed plans to fight inflation aggressively in the minutes provides some volatility in an overall bearish day that created lower lows to follow the lower high made on Tuesday.  The good news is the DIA, SPY, and QQQ held above their 50-day averages at the end of the day, providing hope of a bullish defense.  However, with the most hawkish Fed member, James Bullard, set to speak at 9:00 AM this morning, another dose of volatility could be on the way.  Remember the last meeting Bullard was calling for a full 1 point increase in rates, calling it a matter of Fed credibility.  The bond yield inversion also weighs on investors’ minds as Janet Yellen warns of energy and food shortages continuing to pressure inflation.  That said, I would not be surprised to see a bit of a relief rally by the end of the week unless more geopolitical issues arise.

Trade Wisley,

Doug