Relived Selling Pressure

February 28, 2022 by Doug Campbell

Although the 2-day short squeeze rally relieved selling pressure to end the week, it did little to improve the technical picture of the index charts, with substantial overhead resistance and downtrends still in force.  The QQQ looks to join the IWM with the 50-day average ready to cross its 200-day to the downside.  With Ukrainian and Russian officials meeting in hopes of finding some common ground and a hectic week of market-moving, economic reports expect the wild price gyrations to continue.  Intraday whipsaws and complete overnight reversals are likely as the drama of this week unfolds.

Overnight, Asia began their trading week mixed but mostly bullish in a muted session as oil prices surged 4%.   However, this morning, European markets are decidedly bearish, with red across the board as new sanctions against Russia impact investor sentiment.  Ahead of International Trade figures and a slew of earnings reports, U.S. futures point to a substantial gap down at the open.  Keep in mind overnight futures lows could easily receive a test during the day.

Economic Calendar

Earnings Calendar

We have about 200 companies listed on the earnings calendar to kick off the new trading week.  Notable reports include DDD, AAON, ACAD, AMBA, BLNK, BRMK, CIVI, CWEN, DNMR, DVAX, ENDP, FRPT, GDPN, HPQ, KD, RIDE, LCID, LAZR, MBI, NVAX, OKE, PRTY, PDCE, PUBM, SBAC, SDC, & WDAY.

News & Technicals’

The ruble was trading as low as 119 per dollar as offshore trading started on Monday morning during Asia hours, from nearly 84 per dollar the previous day, according to Factset data.  Russian President Vladimir Putin put his country’s nuclear deterrence forces on high alert Sunday.  Last week, President Joe Biden responded to Russia’s unprovoked attack on Ukraine by announcing several rounds of sanctions on Russian banks, on the country’s sovereign debt, and Putin and Foreign Minister Sergey Lavrov.   Ukraine’s President Volodymyr Zelenskyy believes the next 24 hours will be a “crucial period” for his country.  Ukrainian troops, and citizens that have taken up arms, continue to fight to invade Russian forces.  As a result, Russia has been hit with a massive round of sanctions isolating its economy and financial system.  In addition, the start-up announced Monday that U.S.-listed Chinese electric car company Nio is set to offer its shares for trading in Hong Kong on March 10.  The move comes as regulatory risks grow in the U.S. and China for Chinese companies listed in New York, adding compliance challenges for businesses and investors.  “Based on the foregoing and as advised by our PRC Legal Adviser [Han Kun Law Offices], we are of the view that the Cybersecurity Review Measures will not have a material adverse effect on our business, financial condition, operating results, and prospects,” the electric car company said in a filing with the Hong Kong stock exchange.  Treasury yields fell sharply in early  Monday trading, with the 10-year sliding to 1.9004% and the 30-year declining to 2.2270%.

The massive 2-day rally to wrap up last week’s volatility relived selling pressure as it tested some overhead resistance levels but unfortunately did little to improve the price and technical damage in the index charts.  Increasing sanctions against Russia created currency fluctuations, with the ruble sharply declining to cause their central bank to impose 20% interest rates.  According to reports, the next 24 hours will be critical as the Russian and Ukrainian officials meet to find common ground and begin a cease-fire.  However, Putin put his nuclear facilities on high alert, heading into talks.  Expect the uncertainty to matain the wild price volatility and respect overhead resistance levels with overall market downtrends holding despite the big 2-day rally.  We have more inflation reports coming out on Tuesday, with Powell testifying in congress Wednesday and Thursday to add market stress, then ending the week with the Employment situation numbers.  So buckle up for another uncertain week where volatile is likely to remain high and where daytraders have the upper hand. 

Trade Wisely,

Doug

Oversold yet Fragile Condition

February 23, 2022 by Doug Campbell

With Putin seemingly pushing for a regime change in Ukraine, the indexes charts are at or near a short-term oversold yet fragile condition.  As a result, a relief rally of significance may be challenging for the bulls with the market surrounded by uncertainty.  Likely sensitive to any new developments in the conflict, overnight reversal and substantial intraday whipsaws seem likely giving day traders the upper hand and keeping swing and positions traders off balance with little to no edge.  Expect volatility to remain high with GDP and Durable Goods reports later this week.

Overnight Asian markets closed mixed with the Nikkei falling 1.71%, while Hong Kong saw some relief rising 0.60%.  European markets trade with modest gains, with pensive investors waiting on Ukrainian invasion developments.  U.S. futures are also pricing in a bullish open amid the uncertainty with a big earnings day and a light economic calendar. 

Economic Calendar

Earnings Calendar

We have a busy day with more than 250 companies listed on the Wednesday earnings calendar.  Notable reports include LOW, AEM, ANSS, AVA, BBWI, BCO, BCS, BHC, BIRD, BKNG, BRMN, CHDN, CLH, CPK, DOC, EBAY, EXR, GBT, HEI, HFC, HLF, HTZ, IHRT, IR, JACK, JMIA, LL, LMND, NDLS, NTAP, OLED, OSTK, PAAS, PBR, RCII, RGR, SBGI, SSYS, STLA, STOR, TAP, TJX, VICI, VIPS, & WWW.

News & Technicals’

New omicron infections in the U.S. have plummeted 90% from a pandemic high in a little over a month.  The U.S. is reporting about 84,000 new cases per day on average, according to data compiled by Johns Hopkins University, down from a pandemic high of more than 800,000 daily cases on Jan. 15^th.  As the nation emerges from the omicron wave, the states and the federal government are trying to move past the crisis mentality that gripped the nation two years ago.  Russia is also the world’s top wheat exporter.  Together with Ukraine, both account for roughly 29% of the global wheat export market.  “China is also a big recipient of Ukrainian corn — in fact, Ukraine replaced the U.S. as China’s top corn supplier in 2021,” said Dawn Tiura, president at Sourcing Industry Group.  Analysts said that Russia and Ukraine are also big suppliers of metals and other commodities.  While the European Union would be affected by the escalating crisis, Germany would be especially hit.  The outcome of Russia’s incursion into two breakaway regions of Ukraine is uncertain, but it has already caused commodities prices to shoot higher.  Economists say the price of oil matters most because crude prices can drive up inflation and slow down the global economy.  What happens to oil could also determine whether the Fed continues a brisk hiking pace after it raises interest rates in March or ultimately slows the pace due to growth concerns.  Russian President Vladimir Putin is seeking “regime change” and will likely go all the way and invade the rest of Ukraine, according to Jeffrey Edmonds, a former director for Russia at the National Security Council.  On Tuesday, the U.S. and U.K. announced fresh sanctions targeting Russian financial institutions, individuals, and sovereign debt after Putin ordered troops into two pro-Moscow regions in eastern Ukraine.  It doesn’t make sense for Putin to just hold on to the separatist territories, Edmonds said.  “He’s had these territories since 2014, so just moving more troops in there, I don’t think it gets him what he wants.”  Treasury yields were back on in Wednesday trading, with the 10-year rising to 1.9807% and the 30-year slightly higher at 2.2716%.

Technically speaking, the indexes are at or near a short-term oversold yet fragile condition.  However, the market’s uncertainty could make it difficult for the bulls to mount a substantial relief rally.  If you listened to the Putin speech yesterday, it seemed pretty clear he is pushing for regime change in Ukraine, and the conflict seems likely to intensify.  Oil continues to be the pressure inflation, and as we saw in the Case-Shiller number yesterday, home prices continue to rise.  Although we have a big day on the earnings calendar, we don’t have much for significant market-moving reports.  The economic calendar has a lull before the GDP and Durable Goods, Thursday and Friday, respectively.  No matter what happens in the price action today, traders will have to keep in mind that the market will remain sensitive to Ukrainian developments.  Anything is possible, so plan carefully and be prepared for overnight reversal and intraday whipsaws to continue as the conflict rolls out.  Day traders will likely continue to have the upper hand, so taking gains faster than usual may be wise considering the volatility.

Trade Wisely,

Doug

Russia Invading Ukraine

February 22, 2022 by Doug Campbell

The guessing is over, and now the market has the increased uncertainty of what comes next with Russia invading Ukraine.  So it should be no surprise that oil prices are surging while currency, crypto, world markets, and U.S. futures experienced some extreme price volatility overnight.  Add in a big day of earnings events possible market-moving economic data, and it’s fair to say anything possible.  So plan carefully and expect substantial point whipsaws that could quickly test overnight futures lows as the uncertainty unfolds.

Asian markets experienced a very volatile session, with Hong Kong leading the selling down 2.69%.  Somewhat surprisingly, European markets chop around the flatline, trying to shake off the invasion concerns.  As earnings roll out, U.S. futures are well off the overnight lows, with Case-Shiller, PMI Flash, and Consumer Confidence numbers just ahead.  Be ready for anything with the market likely susceptible to the geopolitical news cycle.

Economic Calendar

Earnings Calendar

Kicking off a short trading week, we have a busy earnings calendar with more than 200 companies listed.  Notable reports include CZR, A, AU, CDNS, CNP, CBRL, CVI, FANG, EXAS, EXPD, FLR, HALO, HR, HL, HD, KTOS, DNUT, LPX, M, MDT, MELI, MOS, NXST, NU, PANW, PSA, RXT, RDN, RRC, O, RNG, TDOC, PTX, TXRH, TOL, RIG, & SPCE.

News & Technicals’

Home Depot on Tuesday said sales grew 11% in the fiscal fourth quarter, as the retailer topped Wall Street’s expectations and said it sees sales growth ahead for 2022.  The home improvement retailer said it expects earnings per share growth to be in the low single-digits and sales growth to be “slightly positive” in the coming fiscal year.  The company recently named chief operating officer Ted Decker its new CEO, as of March 1.  The world is waiting to see what happens next in Ukraine after Russian President Vladimir Putin ordered Russian forces to move into breakaway regions of the eastern part of the country.  Putin said Russia would recognize the independence of two self-proclaimed and pro-Russian republics in eastern Ukraine.  He said he would send Russian troops to the region on a “peacekeeping” mission.  Global financial markets were rattled by the latest developments in the Ukraine-Russia crisis, with European stocks falling at the open.  On Monday evening, Russian President Vladimir Putin ordered forces into two breakaway regions of eastern Ukraine and said he would recognize the independence of Donetsk and Luhansk.  Rising tensions have sent jitters through markets, driving oil prices higher.  Treasury yields fell in early Tuesday trading, with the 10-year falling to 1.9009% and the 30-year dipping to 2.2185%.

With Russia invading Ukraine, currencies, crypto, and U.S. futures markets experienced extreme price volatility with wild swings that saw the Dow futures down more than 700 points before rallying to near even by 6 AM eastern.  Overnight prices swing this rough sets up a day where anything is possible.  As a result, markets will likely be susceptible to substantial point whipsaws that could include a restest of overnight lows.  However, experienced day traders could have the upper hand with uncertainty so high due to geopolitical pressures, inflation concerns, and the pending Fed tightening.  As a result, swing and position traders may find it very difficult to nearly impossible to have an edge in this market environment.  Remember, Cash Is A Position is often underutilized in times of such wild price volatility.  This morning we have a significant number of earnings events and Case-Shiller, PMI Flash, and Consumer Confidence numbers to keep markets guessing.  Plan your risk carefully!

Trade Wisely,

Doug

Index Technicals Suffer

February 18, 2022 by Doug Campbell

Ahead of a three-day weekend filled with uncertainty, index technicals suffered more damage creating lower lows at price resistance and failing at or near their 200-day averages.  Rising inflation, indications of a slowing economy, a hawkish Fed, and geopolitical issues have created a perfect storm of uncertainty.  Markets hate uncertainty, and as we move toward a long weekend, it is understandable that the bulls face a difficult task in defending recent lows.  So expect another day of volatility.

Asian markets finished the week mixed with Hong Kong leading the selling down 1.88%.  However, this morning, European markets are trying to put on a brave face with modest gains as cautious traders weigh the Russia-Ukraine tensions.  Ahead of a light day of earnings and economic reports, the U.S. futures point to a modest recovery from yesterday’s selling with an uncertain 3-day weekend ahead.  

Economic Calendar

Earnings Calendar

As we wrap up the week, we have a light day on the earnings calendar with just 27 companies listed, several unconfirmed.  Notable reports include DKNG, ABR, B, BLMN, DE, & PPL.

News & Technicals’

The Ukrainian government and Russian state-controlled media exchanged fresh accusations of ceasefire violations near the country’s eastern border on Friday.  U.S. Secretary of State Antony Blinken warned at the U.N. Security Council meeting on Thursday that Russia plans to “manufacture a pretext for its attack” on Ukraine.  St. Louis Federal Reserve President James Bullard cautioned that inflation could become an even more severe problem without action on interest rates.  “We’re at more risk now than we’ve been in a generation that this could get out of control,” he said during a panel talk at Columbia University.  Bullard has called for a full percentage point in rate hikes by July.  Roku’s revenue growth slowed to a lower rate than analysts had expected.  However, the company said during the quarter that it would be able to keep YouTube and YouTube T.V. on its streaming service.  Finally, the Senate passed a short-term government spending bill, sending it to President Joe Biden’s desk and preventing a government shutdown.  The legislation will keep the government running through March 11.  Lawmakers hope to reach a long-term spending agreement during those three weeks.  Treasury Yields moved slightly lower in early Friday morning trading, with the 10-year dipping to 1.9685 and the 30-year falling to 2.2941%. 

It has been a rough week for the index technicals, new lower highs created at price resistance, and failures at or near 200-day moving averages.  Yesterday’s economic data continues to confirm a slowing economy as the Fed moves becomes more aggressive in fighting inflation.  A combination that could easily trigger a recession as we head toward spring and summer.  Add in the geopolitical tensions rising just before a 3-day weekend only intensifies market uncertainty.  With a light day on earnings and only the Existing Home Sales report to inspire the bulls or bears, I suspect the sensitivity to the Ukrainian border news cycle will play a substantial role as the long weekend approaches.  So plan your risk carefully because anything is possible.

Trade Wisely,

Doug

Retail Sales Better than Expected

February 17, 2022 by Doug Campbell

Wednesday traded like an opposite day with better than expected retail sales numbers bringing out the bears, and then the bulls went to work when the FOMC confirmed a more hawkish Fed ready to raise rates.  However, par for the course in this down-trending volatile price action still has significant overhead resistance despite the recent relief rally.  Expect more of the same today with a bevy of earnings reports, with economic data including housing starts, jobless claims, and the Philly Fed. 

During the night, Asian markets closed mixed but mainly higher though gains were relatively modest.  European markets traded mixed this morning, weighing the geopolitical tensions as Russia adds more troops to the Ukraine border.  Ahead of a busy day of data, U.S. futures point to a lower open after a mixed after the bell reaction to tech earnings.

Economic Calendar

Earnings Calendar

We have another busy Thursday with nearly 200 companies listed on the earnings calendar.  Notable reports include WMT, AFLYY, EADSY, AAWW, AN, BAX, BJRI, BRC, CIM, CHUY, ED, DLR, GPC, GMED, IDCC, KEYS, LBTYA, LKQ, MATX, MERC, OGN, PLTR, PK, POOL, RDFN, ROKU, SEE, SHAK, SWI, SO, RUN, SKT, TSEM, UEIC, WFRD, WST, AUY, & YETI.

News & Technicals’

Nvidia reported fiscal fourth-quarter earnings on Wednesday.  Datacenter sales rose 71%.  Nvidia has boosted as cloud providers and enterprises turn to graphics processors the company makes for artificial intelligence applications.  The U.S. government’s “dithering” has left the country “well behind” China in the race to build out 5G technology, former Google CEO Eric Schmidt said in a Wall Street Journal op-ed.  Schmidt and co-author Graham Allison, a Harvard professor, urged the Biden administration to make 5G a “national priority”; otherwise, “China will own the 5G future.”  The authors said 5G development is key as applications could “advantage a country’s intelligence agencies and enhance its military capabilities.”  Amazon and Visa agree to end the global dispute over credit card fees.  The deal means Amazon customers in the U.K. can continue using Visa credit cards, as previously announced by the two companies.  Amazon will also drop a 0.5% surcharge on Visa credit card transactions in Singapore and Australia, introduced last year.  Amazon has been piling pressure on Visa to lower its fees, signaling growing frustration from retailers over the costs associated with major card networks.  Treasury yields declined Thursday morning, with the 10-year falling to 2.0015% and the 30-year declining to 2.3211%. 

Wednesday traded began with slightly more robust than expected retail sales, but the bears continued to apply pressure until the FOMC minutes confirmed rates are going up next month.  The bulls took that as a reason to rally, recovering early losses closing the indexes essentially flat on the day.   Tech earnings after the bell had some mixed reviews from investors with CSCO indicated higher at the open, but NVDA is indicated slightly lower despite its upbeat report.  Geopolitical concerns continue to hang a dark cloud over the market, with NATO reporting that Russia has added more troops to their Ukraine border activities, keeping uncertainty high.  Today we will turn our attention to housing numbers, jobless claims, and the Philly Fed numbers, along with another busy day of earnings data to keep the price volatility challenges.  Also, keep an eye on the comments from Jame Bullard today as one of the most hawkish Fed members; his words could move the market at 11 AM eastern today.  Although we have seen a slight relief in the selling, technically, not much has changed in the charts, so keep a close eye on the overhead resistance levels for entrenched bears. 

Trade Wisely,

Doug

Hot PPI Number

February 16, 2022 by Doug Campbell

The hot PPI number didn’t dissuade the bulls from holding the morning gap, feeling the relief of the Russian troop pullback.  But, unfortunately, according to NATO, the news of a withdrawal was nothing more than a ruse.  Yesterday’s relief rally was nice, but the overhead price resistance levels remain, as does the overall downtrend in the indexes.  Expect price action to remain challenging with a hectic day of economic and earnings data coming our way.  So plan your risk carefully with the vast uncertainty ahead.

While we slept, Asian markets rebounded, led by the Nikkei up 2.22% even as China’s inflation came in hotter than expected.  However, with Russia-Ukraine tensions rising, European markets traded mixed and cautious.  With critical economic data and earnings reports before the bell, U.S. futures point to flat open when writing this report.  However, traders should prepare for just about anything at the open.

Economic Calendar

Earnings Calendar

We have a busy Wednesday with about 170 companies listed on the earnings calendar.  Notable reports include SHOP, ALB, ALKS, ATUS, AMCK, CRMT, AIG, AWK, ADI, AMAT, GOLD, SAM, CAKE, CSCO, CDE, COWN, CROX, DASH, ET, EQIX, FSLY, FSR, GRMN, GRNC, HLT, HST, H, INFN, KHC, MGY, MRO, MMLP, NE, NUS, NTR, NVDA, OC, PXD, R, SBLK, SUN, SNPS, TTD, TRIP, VECO, VMC, & WING.

News & Technicals’

NATO has accused Russia of increasing its troop count at the Ukrainian border a day after Moscow claimed it had begun withdrawing some of its military units.  NATO chief Jens Stoltenberg said Wednesday, “it appears that Russia continues their military buildup” at the border.  U.K. Prime Minister Boris Johnson said Wednesday that the Kremlin is sending the West “mixed signals.”  Many energy analysts say that Brent surpassing $100 a barrel is almost a given at this point.  An increasing number of forecasters predict the commodity surpassing $125 a barrel and even higher.   Money is pouring into investments in oil-related stocks, and international oil companies are raking in record profits.  The Energy Information Administration lowered its OPEC capacity estimates by 300,000 barrels per day in February.  The role of PR companies in preventing climate action has typically been overlooked, in large part because communications firms have sought to remain in keeping with the PR adage that “the best PR is invisible PR.”  However, comprehensive academic research quantifying the PR industry’s role in climate politics has been followed by pressure from external campaign groups, scientists, and environmental activists.  Now, the prospect of U.S. congressional hearings is likely to turn up the heat even further.  Airbnb beat Wall Street estimates on earnings and revenue in its fourth quarter.  The company reported 73.4 million nights and experiences booked in the fourth quarter, down nearly 8% from the prior quarter and missing estimates.  Airbnb expects its first-quarter 2022 nights and experiences booked to exceed Q1 2019 levels significantly.  Treasury Yields trade mixed in early Wednesday trading with the 10-year trading at 2.0469% and the 30-year declining slightly to t2.3550%.

Although it looks as if the Russian pullback of troops was misinformation and a hot PPI number continued to show rising inflation, the bulls were able to matain the gap throughout the day.  Today will turn our attention to Retail Sales figures, Import-Export Prices, Industrial  Production, Petroleum Statis and the FOMC minutes.  We also have a big day of earnings to keep the volatility high and traders guessing with AMAT, CSCO, and NVDA reporting after the bell.  Although the relief rally was nice little, if anything changed in the technical picture of the indexes with significant overhead price resistance and downtrends holding.  I suspect there will be a lot of eyes on the Retail numbers this morning with consumer sentiment at such low levels.  Again, prepare for volatile price action and respect price resistance with the downtrend market conditions.

Trade Wisely,

Doug

Rumors and Speculation

February 15, 2022 by Doug Campbell

On Monday, index price action surged and fell violently as rumors and speculation swirled over a Russian invasion.  However, after hearing that Russia is sending some troops back home, futures point to another overnight reversal.  So could we see a short squeeze, a big whipsaw, or a pop and drop this morning with another PPI reports expected to come in hot.  Your guess is as good as mine as this emotional market swings wildly.  So, plan your risk carefully and keep a close eye on overhead price resistance.

Asian markets traded mixed but mainly lower overnight due to geopolitical tensions.  However, hearing the news of a partial troop drawdown, European markets trade decidedly bullish this morning.  U.S. future also points to a substantial overnight reversal ahead of PPI data and a busy earnings day.  So prepare for another day of wild price action from this emotionally charged market.

Economic Calendar

Earnings Calendar

The Tuesday earnings calendar ramps up the reports, with around 130 companies fessing up to quarterly results.  Notable reports include AKR, ABNB, AKAM, ANDE, ANGI, BWA, CEVA, CF, CINF, CRK, DENN, DVN, FELE, GXO, HSIC, HUN, IAC, IQV, LZB, MAR, PACB, QSR, RSLX, SEDG, UPST, VIAC, WH, WYNN, & ZTS.

New & Technicals’

The Russian government has announced that Moscow is beginning to return troops at the Ukrainian border to their bases.  Igor Konashenkov, a spokesman for the Russian Ministry of Defense, said troops recently posted along the border with Ukraine had begun moving back to their military garrisons.  Timothy Ash, the emerging markets senior sovereign strategist at BlueBay Asset Management, said the move could signal a significant defeat for Putin.  As a result, global attention is focused on Russia and whether President Vladimir Putin will order an invasion of Ukraine.  Until earlier this month, China had been mostly silent as tensions have risen between NATO and Russia.  In 2021, global semiconductor industry sales reached a record $555.9 billion, up 26.2% year on year, the U.S.-based Semiconductor Industry Association (SIA) said.  In addition, the SIA said that they expect demand to “rise significantly” in the coming years.  China remained the biggest market, with sales totaling $192.5 billion in 2021.  St. Louis Fed President James Bullard told CNBC on Monday that he thinks the Fed needs to push interest rates up quickly.  “Our credibility is on the line here,” he said as he advocated for a rapid interest rate increase of a full percentage point.  This year, markets have begun pricing in seven rate hikes since Bullard first made his hawkish position known last week.  Treasury Yields moved higher in early Tuesday trading, with the 10-year rising to 2.0294% and the 30-year moving up to 2.3277%. 

As rumors and speculation swirled around about a Russian invasion, index prices proved to be very volatile on Monday.  The wild price moves continued overnight, with some troops leaving the border, raising hopes of a de-escalation of tensions.  The next hurdle for the market to cross is the PPI report that many suspect will come in hot, adding to inflationary concerns and pressuring Fed to act aggressively.  Along with the big day of inflation data, we have a large group of earnings reports adding to the potential price volatility.  The significant overnight reversal could trigger a short squeeze this morning, but with so much data coming our way, traders will have to also watch for the possible pop and drop or large point whipsaws.  Market emotion is high, so be prepared for almost anything and remember the Retail Sales figures could add to the wild price gyrations with low consumer sentiment.

Trade Wisely,

Doug

Consumer Sentiment Falls

February 14, 2022 by Doug Campbell

As if the hotter than expected inflation was not enough, the sharply declining consumer sentiment report came along to kick the market while it was down on Friday morning.  The threat of Russian invasion only adds to the uncertainty keeping the price volatility high waiting for the next shoe to drop.  The PPI report on Tuesday, Retail Sales, and FOMC minutes Wednesday, with housing data later in the week, also clouds this week’s path forward.  We have a few potential market-moving as we progress through the week to add to the highly emotional price action likely in the week ahead.

Asian markets closed mostly lower, with the Nikkei leading the selling down 616.49 points or -2.23%.  This morning, European markets trade decidedly bearish with red across the board and the DAX and CAC down 3% or more.  In addition, U.S. futures that opened traded last night trying to put on a brave face now point to a gap down open with Russia-Ukraine tensions and Fed rate hikes, worrying both traders and investors.  As a result, expect price volatility to remain challenging throughout the week.

Economic Calendar

Earnings Calendar

We have around 100 companies listed, with many unconfirmed to begin the new trading week.  Notable reports include AAP, ALX, AMKR, ANET, CAR, CLR, KRG, OTTR, SRG, VNO, WEBR.

News & Technicals’

On Sunday evening, Ukrainian Foreign Minister Dmytro Kuleba said that Ukraine had requested a meeting with Russia within 48 hours.  German Chancellor Olaf Scholz will hold talks with the presidents of Ukraine and Russia on Monday and Tuesday.  U.S. national security advisor Jake Sullivan told CNN on Sunday that a Russian attack on Ukraine could happen this week.  Every indication suggests that Putin continues to build up troops at the border Russia shares with Ukraine, said Michael McFaul, a former U.S. ambassador.  “There’s no indication at all that Putin has stopped his march towards war, his preparedness towards war,” said McFaul, who is now a director at the Freeman Spogli Institute for International Studies.  However, there remains a lot of uncertainty over what will happen with Ukraine because Putin is “isolated” and rarely speaks to his advisors.  The Federal Reserve should be measured in its path to raise interest rates, San Francisco Fed President Mary Daly said Sunday.  “History tells us with Fed policy, that abrupt and aggressive action can actually have a destabilizing effect on the very growth and price stability we’re trying to achieve,” Daly said.  Daly supports the Fed raising rates in March and said “it’s too early to call” how many times the central bank will hike rates this year.  Treasury Yields moved slightly lower in early Monday trading, with the 10-year pricing at 1.9371% and the 30-year dipping slightly to 2.2399%.

The hotter than expected inflation coupled with the sharply declining consumer sentiment brought out the bears Friday, creating lower highs and breaking support levels in the index chart.  Unfortunately, the Russian / Ukraine tensions only add to the uncertainty of the path forward in the market.  In this week’s economic calendar, we have PPI, Retail Sales, FOMC minutes, and housing data that will likely keep price volatility high and uneasy traders guessing.  At this point, we can not rule out a retest of the January low intraday whipsaws and overnight reversals.  We still have a few potential market-moving earnings reports this week that could inspire the bulls, but if Russia invades, all bets are off, and anything is possible.  A dangerous market condition may be an understatement, so if you plan to trade, plan carefully and be willing to take any profits quickly because they could easily evaporate in the subsequent price gyration.  Having an edge as a swing or position trader could be slim to none, while experienced day traders could have the upper hand as the market searched for clarity.

Trade Wisely,

Doug

50 Basis Point?

February 11, 2022 by Doug Campbell

After the very disappointing read on inflation, the market is facing the very real possibility of a 50 basis point rate increase at the March FOMC meeting.  This morning we will get the Consumer Sentiment number after the open, with a lighter day of earnings events to supply some levity.   Today, the bulls will have a tough job as they try to defend the recent higher lows in the indexes as we head toward the weekend with tensions rising on the Ukrainian border.  The technical picture took substantial damage yesterday, but it could worsen quickly if we lose this critical support level.

Asian markets closed their Friday session mixed, but mostly lower, and European markets see red across the board as the world reacts to the likely consequences of rising inflation.  Likewise, U.S. Futures point to a lower open ahead of a lighter day of earnings events and a temperature reading on consumer sentiment.  Plan your risk wisely as we head into the weekend with tensions rising on the Ukrainian border.

Economic Calendar

Earnings Calendar

As usual, the Friday earnings calendar gives us a little break with less than 60 companies listed, and a number of those are unconfirmed.  Notable reports include AXL, APO, ARES, CLF, D, ENB, FTS, GPRE, GPP, MGA, NWL, UAA, & WPC.

News and Technicals’

The latest U.S. January inflation data came in like a “punch in the stomach” for the Federal Reserve, said the chief global economist of Citi Research, Nathan Sheets, adding that means the next rate hike could be as aggressive as 50 basis points.  According to the labor department, the U.S. consumer price index for January surged to 7.5% year-over-year.  In addition, both headline and core CPI rose 0.6%, compared to estimates for a 0.4% increase by both measures.  “These inflation data today came like a punch in the stomach for Jay Powell and his colleagues,” Nathan Sheets told CNBC’s “Squawk Box Asia” on Friday.  Adding to the market pressure, President Joe Biden has issued a warning that U.S. citizens should leave Ukraine immediately as tensions with Russia over its military activity intensify.  Secretary of State Antony Blinken also urged Americans to leave Ukraine on Friday, warning “an invasion could begin at any time.”  Meanwhile, British Prime Minister Boris Johnson warned on Thursday: “Things are as dangerous as I have seen them in Europe for a very, very long time.”  CEO Steve Cahillane told CNBC on Thursday that Kellogg may cover higher input costs due to skyrocketing inflation with higher prices and productivity.  “We don’t want prices to get too high, but we’re in an environment where it’s broad-based, it’s across everything, but we’ve been able to cover it.  Our pricing performance has been very solid,” he said.  Cahillane said that price elasticity has been at historic lows, but Kellogg still plans to be cautious about raising prices this year.  California’s Department of Fair Employment and Housing says it conducted a three-year-long investigation and received hundreds of complaints from Tesla workers.  The agency says it found evidence that Tesla routinely kept Black workers in lower-level roles, assigned them more physically demanding work, and retaliated against them when they complained about racist slurs on the assembly line.  The agency is seeking unspecified damages and for the company to reinstate workers who were unfairly terminated.

The 10-year dipped just one basis point in early Friday trading holding at 2.0119% as the market now anticipates an FOMC rate increase of 50 basis points at the March meeting.  After the disappointing read on inflation, the 2-year Treasury yield surged 26 basis points, the biggest single-day move in since 2009.  The report also showed the 4^th straight decline in real incomes to add insult to injury.  The resulting market selloff created technical damage as the Dow, for the second time, failed its 50-day average.  The SPY reversed with still under its 50-day, and the QQQ failed below its 200-day, further complicating the technical picture.  However, there is still hope that the recent higher low in the indexes could hold as support if the bulls can find the energy to defend.  Let’s hope the reading on Consumer Sentiment at 10 AM Eastern today doesn’t kick us while we’re down with another decline.  With the Whitehouse calling for all Americans to leave Ukraine due to rising tensions, the bulls will have their work cut out for them as we head toward the weekend.

Trade Wisely,

Doug

CPI Report

February 10, 2022 by Doug Campbell

Although the Wednesday rally was nice this morning, traders and investors now hold their breath for the CPI report.  Consensus estimates suggest inflation increased in January and may come in at more than a 40-year high!  If true, will that push the FOMC to act more aggressively in the March meeting, raising the interest rate by 50 basis points?  Toss in a slew of earnings reports, and the stage is set for another day of challenging price action.

Overnight Asian markets closed green across the board with relatively modest gains waiting on the inflation data.  European trade mixed but mostly higher with all eyes on the U.S. ahead of the CPI report.  U.S. futures traded mixed ahead of critical inflation data and a bevy of earnings reports likely to keep traders guessing and price volatility high on Thursday.   So, let’s get ready to rumble.

Economic Calendar

Earnings Calendar

We have another big Thursday on the earnings calendar, with about 210 companies expected to report throughout the day.  Notable reports include KO, AFRM, MT, AZN, BE, APRN, CC, NET, CIGI, COUR, CS, CYBR, DDOG, DVA, DXCM, DUK, EB, EXPE, FLO, GDDY, HUBS, HII, ILMN, K, LH, MLM, MHK, MCO, PTEN, PEP, PCG, PM, PIPR, QLYS, SSTK, TEX, TTE, TWTR, UPWK, VRSN, WU, YELP, ZBRA, ZEN, & Z.

News & Technicals’

This week, the Biden administration rolled out a plan to allocate $5 billion to states to fund electric vehicle chargers over five years as part of the bipartisan infrastructure package.  The historic investment is part of the administration’s broader plan to combat human-caused climate change and advance the clean energy transition.  Despite a rise in EV sales in the U.S. in recent years, the transportation sector is still one of the largest contributors to U.S. greenhouse gas emissions.  Disney reported earnings for the fiscal first quarter that beat analyst estimates.  In addition, disney+ subscriptions beat estimates, adding nearly 12 million subscribers in the quarter.  Disney’s parks, experiences, and consumer products division saw revenues reach $7.2 billion during the quarter, double the $3.6 billion it generated in the prior-year quarter.  According to people with knowledge of the matter, Salesforce co-CEOs Marc Benioff and Bret Taylor spoke about the company’s vision for an NFT cloud service.  The discussion came during an online sales kickoff on Wednesday.  In a December blog post, a director of the market strategy at Salesforce predicted that 2022 would be a big year for NFTs.  Shares of Delivery Hero plummeted around 29% Thursday.  Analysts pointed to Delivery Hero’s 2022 guidance as to the reason behind the negative market reaction.  The Germany-based food delivery firm forecast core profit margins between 1% and 1.2%.  Unilever’s CEO has ruled out any “transformational” acquisitions after its failed £50 billion GSK bid.  Alan Jope told CNBC said major deals were “off the table” after receiving pushback from investors.  Instead, the company pointed to further price risings in 2022 as it reported its results Thursday.  Treasury yields moved slightly higher in early Thursday trading, with the 10-year inching higher to 1.9406% and the 30-year rising to 2.2465%. 

After a nice rally Wednesday, the market will now turn its attention to inflation as we wait for the CPI report.  Some suggest the number will come in hot with inflation running at the highest level in more than 40 years.  If that is the case, it will pressure the FOMC to act more aggressively in the March meeting.  It’s hard to know how the market will react to the CPI reading.  However, if the market sees the chances of a 50 basis point rate increase rising, we should not rule out the possibility of an adverse reaction.  Though the DIA broke through its 50-day average yesterday, the SPY, QQQ, and IWM remain in a precarious technical position if the bears happen to reengage.  Toss in a huge day of earings, and the recipe for another day of volatile price is complete. 

Trade Wisely,

Doug