Bears Roared into Action

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Though traders hoped for another day of bullish relief on Friday, the bears roared into action, defending price resistance levels and reversing indexes to 2022 lows.  As we begin a new trading week chalked full of earnings data, we also have to deal with an FOMC rate decision Wednesday afternoon.  Though the market is overdue for a relief rally, the bulls will have their work cut out, so much overhead resistance and technical damage to repair in the index charts.  Prepare for another week of challenging price action that could easily include wild intraday whipsaws and overnight reversals.

Asian markets traded mixed overnight as Chinese factory activity contracted in April.  European markets trade mixed to mostly lower this morning after the weak China data with the U.K. market closed.  With a big day of data and an FOMC decision Wednesday, the U.S. futures market point to a bullish open, hoping to spur a slight recovery after the punishing Friday selloff. 

Economic Calendar

Earnings Calendar

We have a hectic week of earnings reports to keep traders guessing and high price volatility.  Notable reports include AKR, AGNC, AMKR, AIRC, ANET, CAR, EXP, CBT, CHGG, CC, CLX, CVI, DVN, FANG, FN, GPN, GPRE, GPP, IPI, LEG, MGM, MCO, MOS, NE, NTR, NXPI, OHI, ON, OTTR, PK, SAIA, SIX, SEDG, TTI, RIG, & WMB.

News & Technicals’

Apple CFO Luca Maestri said supply constraints related to Covid-19 could hurt sales by between $4 billion and $8 billion.  Nokia CEO Pekka Lundmark said that the Finnish telco would have grown faster in the last quarter had it not been for supply chain issues.  The lockdowns in China add to short-term uncertainty, Lundmark said, about Nokia’s chip supply chain.  During the Berkshire Hathaway shareholder event, Watten Buffett said inflation swindles almost everybody as he and Charlie Munger railed against bitcoin, a market mania that has turned it into a gambling parlor.  Berkshire’s operating earnings were flat year over year at $7.04 billion.  This comes amid a sharp drop in the company’s insurance underwriting business.  The company’s net earnings came in at $5.46 billion, down more than 53% from $11.71 billion in the year-earlier period.  The slowing U.S. economy impacted the flat operating results, which contracted in the first quarter for the first time since the onset of the Covid-19 pandemic.  For many decades, the Nordic nation has shared an 808-mile land border with Russia and has carefully walked a foreign policy tightrope between Moscow and the West.  During the Cold War, Finland adopted a neutrality policy, meaning it would avoid confrontation with Russia.  But its long-standing neutrality, cherished by many Finns, could end due to Russia’s unprovoked invasion of Ukraine.  Treasury yields start the week higher, with the 5-year rising to 2.95%, which remains slightly inverted over the 10-year pricing a 2.92%, and the 30-year rose to 2.99% in early trading. 

The bears roared into action on Friday, triggering a brutal day of selling and quickly dashing hopes that the relief rally that began on Thursday could follow through a second day.  Futures markets are trying to rebound slightly this morning, but the bulls will have their work cut out with so much technical damage to repair.  Moreover, with a massive week of earnings and an economic calendar with an FOMC rate decision on Wednesday, traders should plan for another hectic week of challenging price action.  To kick things off, we have PMI and ISM Mfg. reports along with Construction spending and three and six-month bond auctions.  The T2122 indicator is back in an extreme short-term oversold condition.  Still, with an aggressive Fed decision just around the corner, the bulls may find it challenging to overcome the bears, especially near resistance levels on the index charts.  Watch for intraday whipsaws and overnight reversals this week with all uncertainty ahead.

Trade Wisely,

Doug

Short Squeeze Relief Rally

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Although the bulls had a slow start, they finally overwhelmed the bears triggering a short squeeze relief rally.  However, with a round of tech giant earnings after the bell that discontinued investors, the bulls will have their work cut out for them if they intend to follow through to the upside on Friday.  As we slide into May with rate increases on the horizon, expect price action to remain challenging and an active group of bears heading into the summer.

Asian markets close green across the board overnight with the hope of more policy support from China as their economy continues to contract.  European markets are green across the board this morning, boosted by earnings even as their inflation hits their 6th straight record inflation reading.  Facing another round of earnings and economic data, U.S. futures point to a bearish open, with the Nasdaq leading the way.

Economic Calendar

Earnings Calendar

We have less drama on the Friday earnings calendar, with about 100 companies fessing up to results.  Notable reports include ABBV, AON, AZN, B, BLMN, BMY, CBOE, CHTR, CVX, CL, COWN, XOM, HON, IMO, LHX, LYB, NWL, NMRK, PSX, SLCA, WPC, WY & WETF.

News & Technicals’

According to filings with the Securities and Exchange Commission, Elon Musk sold roughly $4 billion worth of Tesla shares in the days following his bid to take Twitter private.  The bulk of the CEO’s sales were made on Tuesday, the filings showed.  As a result, Tesla shares fell 12% that day but edged higher on Wednesday by less than one percentage point.  As the filings became public Thursday evening, Musk wrote on Twitter, “No further TSLA sales planned after today.”  Apple’s revenue grew nearly 9% year over year during the quarter ended in March.  But shares fell nearly 4% in extended trading after Apple CFO Luca Maestri warned of challenges in the current quarter, including supply constraints that could hurt sales by up to $8 billion.  In addition, the tech giant authorized $90 billion in share buybacks.  Amazon on Thursday gave a revenue forecast that trailed analysts’ estimates.  Growth rates are at their slowest since the dot-com bust in 2001.  In addition, the company recorded a $7.6 billion loss on its investment in electric vehicle maker Rivian.  Tensions between Russia and the West appear to have risen dramatically over the last week.  In the last few days alone, Russia stopped gas supplies to two European countries and has warned the West several times that the risk of a nuclear war is very “real.”  Russian President Vladimir Putin said that any foreign intervention in Ukraine would provoke what he called a “lightning-fast” response from Moscow.  Treasury yields fell slightly in early Friday trading, with the 10-year dipping to 2.8386% and the 30-year slipping to 2.9145%.

The bulls had a slow start yesterday, but they ultimately overcame those feisty bears to trigger a short-covering relief rally.  At the end of the day, the question on everyone’s mind is, can we get at least one more day of follow-through to the upside?  Sadly after a round of disappointing big tech earnings, the bulls may find that very challenging on the last trading day of April.  With the Fed planning rate increases beginning next month and the sharply contracting GDP to a negative 1.4, thoughts of a coming recession could make the bears very active this summer.  Expect volatility to remain high in the weeks ahead as investors grapple with all the uncertainty. 

Trade Wisely,

Doug

Ugly Pop and Drop

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Ugly Pop and Drop

On Tuesday, the bears went to work with the uncertainty of inflation and rate increases, producing an ugly pop and drop that ultimately tested 2022 market lows.  However, this morning’s futures suggest an overnight reversal and relief rally ahead of more uncertain earnings and economic data.  Traders should keep a close eye on overhead resistance levels as we rally the possibility of entrenched bears willing to hold the downtrend with the FOMC rate decision coming soon.   Expect another day of very challenging price action that could include more pops and drops, intraday whipsaws as well as continued overnight reversals.

During the night, Asian markets traded mixed, with Shanghai surging upward while worries of a collapsing Japan sent the Nikkei lower.  This morning, European markets are in rally mode despite Russia shutting off gas supplies to Poland and Bulgaria.  With a big day of earning and economic data ahead, U.S. futures point to a substantial gap up open.  So, buckle up for another wild day of price action!

Economic Calendar

Earnings Calendar

With nearly 200 companies listed on the earnings calendar, plan for another hectic price action day.  Notable reports include FB, AFL, ALGN, AMT, AWK, AMGN, NLY, ADP, AVB, AVNT, BMRN, BA, BSX, BG, CHRW, CP, CHKP, CAKE, CME, CLB, COUR, CS, DFS, EHC, EQT, EQIX, FISV, GRMN, GD, GSK, HOG, HTZ, HES, HESM, HOLX, HUM, IQV, KHC, LC, MHO, MAT, MTH, MOH, NSC, ORLY, ODFL, OSK, OC, PYPL, PPC, PINS, QCOM, RJF, R, STX, NOW, SPOT, STM, TMUS, TEL, TECK, TDOC, URI, UPWK, VALE, & AUY.

News & Technicals’

Alphabet reports a weak earnings quarter and revenue mix due to a sharp decline in YouTube.  As a result, GOOGL missed on the top and bottom lines for the first quarter.  On the other hand, other Bets, which includes self-driving car unit Waymo, nearly doubled its revenue compared to the year prior.  Microsoft beat expectations on the top and bottom lines.  In addition, fourth-quarter revenue guidance for each of the company’s three business segments surpassed analysts’ expectations surveyed by StreetAccount.  The company announced plans to buy Activision Blizzard for almost $69 billion in the quarter.  On Wednesday, Russia’s gas supplies to Eastern Europe are looking highly uncertain after Poland and Bulgaria were told their supplies would stop.  The move comes after both countries refused Moscow’s recent demand to pay for gas supplies in rubles.  It also coincides with a sharp rise in tensions between Western allies and Russia as the war in Ukraine continues into the third month.  Cheaper gas is one of Walmart’s perks to get customers to sign up for Walmart+.  The membership program already included a gas discount, but Walmart has doubled the savings per gallon and expanded the number of gas stations to more than 14,000.  The big-box retailer is flexing its low prices as a competitive advantage, with inflation driving up the price of food and fuel.  Robinhood announced laying off 9% of full-time employees in a blog post made by CEO Vlad Tenev Tuesday afternoon.  Robinhood reported 3,800 full-time employees as of Dec. 31.  Amid rising costs and supply chain instability, General Motors reaffirmed its earnings expectations for 2022 despite reporting a lower net profit and margin than a year ago.  GM reaffirmed its pretax adjusted earnings forecast of between $13 billion and $15 billion for the year while raising its net income expectations to $9.6 billion and $11.2 billion.  GM also reaffirmed plans to produce 25% to 30% more vehicles than last year.  Treasury yield traded nearly flat early Wednesday morning, with the 5-year at 2.80%, the 10-year trading at 2.77%, and the 30-year ticking higher to 2.86%.

Tuesday produced an ugly pop and drop as worries over rate changes and earnings disappointments inspired the bears.  The DIA and SPY held the 2022 market lows, but unfortunately, the QQQ and IWM created new lows for the year.  After the bell, mixed results in earnings added to the uncertainty, but this morning futures look ready to begin a relief rally.  The T2122 indicator supports a relief rally showing a substantial short-term oversold condition.  That said, we have a long way to go before the index charts can develop bullish patterns.  Remember, we have significant overhead resistance and downtrends that can harbor entrenched bears ready to attack, so plan your risk carefully.  Expect price volatility to remain challenging with another big day of earnings and economic data. 

Trade Wisley,

Doug

Bulls Won the Day

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Bulls Won the Day

After a turbulent morning session dominated by bears, the bull won the day, triggering a relief rally to squeeze out short traders as they took profits.  However, anything is possible with a jam-packed day of market-moving earnings and economic reports.  So, keep a close eye on overhead resistance and support levels as the market react to all the data and prepare for possible gappy market opens the rest of the week as the tech giants report.   Price action will likely be challenging as the drama unfolds with so much at stake.  Plan your risk carefully!

Asian markets trading mixed during the night as many of the big banks downgraded the growth potential of China as the lockdown continues.  However, European markets see green across the board this morning despite a Russian nuclear threat.  U.S. futures point to a bearish open with the uncertainty of earnings and economic data ahead.

Economic Calendar

Earnings Calendar

Big Tech will highlight the earnings reports on Tuesday, with nearly 200 companies listed on the Tuesday calendar.  Notable reports include GOOGL, MSFT, MMM, ADM, ARCC, AVY, BYD, CNI, CAI, COF, CNC, CMG, CB, GLW, DHI, ENPH, EQR, EXAS, FFIV, FANUY, GE, GM, HUBB, JBLU, JNPR, MDLZ, MSCI, NAVI, NTRS, NVS, PEP, RRC, RTX, SHW, SSTK, SKX, TER, TXN, TRU, TZOO, UBS, UPS, VLO, V, WM, & WH.

News & Technicals’

According to the top Russian official, “ the threat of nuclear war is real after the U.S. expressed the desire to see Moscow weakened.   On Monday, the Twitter board agreed to a $44 billion buyout from Tesla CEO Elon Musk.  However, few additional details are known, leaving users and employees uncertain about the future.  In addition, the Tesla CEO has shared little about how he plans to improve Twitter, though he’s offered many criticisms.  As a result, it’s unclear who will lead the company under Musk’s ownership or what is ahead for the company’s workforce.  Twitter Chief Executive Parag Agrawal told employees on Monday that the future of the social media firm is uncertain after the deal to be taken private under billionaire Elon Musk closes.  He was speaking at a town hall meeting that Reuters heard.  “Once the deal closes, we don’t know which direction the platform will go,” Agrawal said.  Donald Trump said he wouldn’t return to Twitter on Monday even if Elon Musk reversed the former president’s ban.  “I was disappointed by the way Twitter treated me.  I won’t be going back on Twitter,” the former president told CNBC’s, Joe Kernen.  Twitter permanently suspended Trump from the platform in January 2021 following the attack by his supporters on the U.S. Capitol.  Several economists at major investment banks have cut their China growth expectations in just about a week.  The new median forecast among nine financial firms tracked by CNBC expects 4.5% China GDP growth for the full year.  Nomura had the lowest forecast, while UBS cut its estimates the most.  Treasury yields continued to dip slightly in early Tuesday trading, with the 5-year trading at 2.82%, inverted over the 10-year at 2.78%, and the 30-year pricing at 2.86%.

On Monday, the bears dominated the early trading session to test 2022 lows, but bulls won the day, triggering a nice relief rally as short traders took profits.  We have a jam-packed economic calendar today coupled with the massive anticipation of the big tech earnings from MSFT and GOOGL after the bell.   The tech giants will continue to report throughout the week, keeping traders guessing and the price action volatile.  Significant point gap up or gap down opens could occur as a result, so plan your risk carefully as the drama unfolds.  As we rally, respect overhead resistance levels and avoid the fear of missing and the desire to chase stocks that could gap substantially, vastly increasing the risk.  Disappointing reports could also create huge point intraday whipsaws, so plan your risk carefully and be careful not to overtrade. 

Trade Wisley,

Doug

Significant Technical Damage

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Significant Technical Damage

On Friday, the bears showed up with lots of reinforcements, and the carnage created significant technical damage to all four index charts.  Asia and Europe have joined the selling as economies slow amid the punishing inflation and the soon to be aggressive FOMC rate increases.  As the indexes test the low’s 2022, we have a big week of earnings and economic data that could save or sink the market into a complete bear condition.  With so much at stake, expect very challenging price action in the days ahead that could easily cause substantial point whipsaws and overnight market reversals. 

As we slept, Asian markets suffered significant selling, with Shanghai falling 5.13% as pandemic impacts extended.  European markets trade decidedly bearish this morning as global sentiment declines.  With U.S. futures suggesting a gap down open to test the market lows of 2022, there is a palpable uncertainty as we face a substantial week of earnings and economic data. 

Economic Calendar

Earnings Calendar

We have a hectic week of earnings ahead, with more than 100 companies listed on the Monday calendar.  Notable reports include ATVI, ARE, AXTA, BOH, CDNS, KO, CR, LII, OI, OTIS, PKG, PHC, SBAC, WRB, WHR, & ZION.

News & Technicals’

Twitter’s board met Sunday to discuss Elon Musk’s takeover bid after the billionaire disclosed he had secured $46.5 billion in the financing, a source close to the situation told CNBC.  The person said the board is looking for other offers, and the company could provide an update by the time it reports its latest financial results Thursday, if not before.  Centrist Macron obtained 58.54% of the votes on Sunday, whereas his nationalist and far-right rival Le Pen got 41.46%.  Back in 2017, when the two politicians also disputed the second round of the French presidential vote, Macron won with 66.1% of the support, versus Le Pen’s 33.9%.  Addressing her supporters in Paris Sunday night, Le Pen conceded defeat but said: “We have nevertheless been victorious.”  China’s capital city of Beijing reported a spike in Covid cases over the weekend and warned more would be found since the virus had spread undetected in the city for a week.  The city’s business district of Chaoyang began three days of mass testing on Monday for anyone living or working in the region.  The increase in cases in Beijing comes as mainland China faces its worst Covid outbreak since early 2020, and most of Shanghai, China’s largest city, remains under prolonged lockdown.  European stocks opened sharply lower on Monday as investors digested the projected result of the French presidential election and monitored the latest developments in Ukraine.  France’s Emmanuel Macron has comfortably beaten his rival Marine Le Pen in Sunday’s election, securing a second term as president on his pro-business and pro-EU agenda.  Treasury yields pulled back in early Monday trading, with the 5-year declining to 2.85%, the 10-year slipping to 2.82%, and the 30-year falling to 2.88%.

Friday’s selling created significant technical damage, with all four indexes closing below their 50-day averages.  With the Asian and European markets joining in on the selling, U.S. markets look to open lower to begin a hectic week of earnings.  With rising inflation and an aggressive Fed, will earnings be able to hold us at 2022 market lows, or will the results push into a complete bear market condition?  On the hopeful side, the T2122 indicator suggests a short-term oversold condition that could bring about a relief rally anytime.  However, if this week’s earnings disappoint, the path ahead might be filled with hungry bears.  If that’s not enough drama, we have a big week of market-moving economic data to keep us guessing.  Expect a challenging week of wild price action that could easily include huge point whipsaws and overnight market reversals as the drama unfolds. 

Trade Wisely,

Doug

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