Improved Technical Position

February 9, 2022 by Doug Campbell

The surge upward in the Dow on Tuesday improved the technical position of the index as it tested its 50-day average as resistance.  Unfortunately, the SPY, QQQ, and IWM still have a lot of work to do with significant technical and price resistance levels above to test the resiliency of the bulls.  Moreover, expect price volatility to remain high with a jam-packed earnings calendar for the next two days, a possible market-moving CPI before the bell on Thursday. 

Asian markets closed green across the board overnight, with the HSI leaning the way up 2.06%.  This morning, European markets are also in rally mode, with all indexes advancing in the morning session.  Ahead of a big day of earnings data, U.S. futures seem ready to shake off worries of the pending CPI report Thursday morning, pointing to bullish open across the board.  However, watch for whipsaws or the possible pop and drop as we test overhead resistance levels if the hit and miss earnings results continue.

Economic Calendar

Earnings Calendar

We have a busy day on the Wednesday earnings calendar with nearly 170 confirmed reports.  Notable reports include DIS, AFG, NLY, ARCC, BG, CCJ, CHEF, CME, CXW, CVS, DFX, FWRD, FOX, GSK, GBDC, HMC, IIVI, IRBT, LAD, MAT, NESA, MGM, MOH, MSI, NGL, ORLY, PAG, PPC, RDWR, SGEN, SONO, TEVA, TM, TRMB, TWLO, UBER, YUM, & ZNGA.

News and Technicals’

Facebook owner Meta closed with a market cap below $600 billion on Tuesday for the first time since May 2020.  That also happens to be the number House legislators picked as the threshold for a “covered platform” in a package of competition bills aimed at Big Tech.  The milestone points to one of the challenges of crafting laws that target the tech industry.  Gas supplies to Europe will more likely be disrupted because of violence in the region rather than as a result of being weaponized, Dan Yergin told CNBC on Tuesday.  Russia provides more than 30% of Europe’s gas, and Europe’s gas markets are linked by a network of pipelines, some of which pass through Ukraine.  Although OPEC+ has decided to go ahead and return production output to 400,000 barrels per day for March, some producers could struggle to return to previous levels of production, said Yergin.  WHO official Maria Van Kerkhove said the omicron subvariant BA.2 is more transmissible than BA.1, currently the dominant version of omicron worldwide, and will likely become more common.  Dr. Abdi Mahamud, the WHO’s Covid incident manager, said it’s unclear whether BA.2 can reinfect people who previously had BA.1.  Van Kerkhove emphasized that there’s no indication of a difference in illness severity between BA.2 and BA.1, though she noted that research is ongoing.  The House passed a temporary government funding bill to prevent a shutdown later this month.  The Senate plans to approve the plan by a February 18 deadline to avoid a lapse in federal funding.  The bill would extend funding through March 11 and give lawmakers enough time to craft a long-term spending plan.   Treasury Yields relaxed slightly in early Wednesday trading, with the 10-year dipping to 1.9216% and the 30-year declining to 2.2147%.

The Tuesday rally improved the technical position of the Dow, testing its 50-day moving average as resistance.  The SPY has seesawed in a consolidation reversing its direction four days in a row as it consolidated between the technical levels of the 200 and 50-day averages.  Unfortunately, the QQQ remains challenged by the overhead resistance of its 200-day average, and the IWM faces nearly a year’s worth of overhead price resistance.  That said, the bulls are working hard with the help of institutions like JPM, promoting an upside rally.  Earnings results remain mixed, but the next two days will be jam-packed on the earnings calendar so prepare for more price volatility and the possibility of substantial overnight gaps.  Keep in mind as you plan forward, we will get a CPI number Thursday morning that could prove substantially market-moving.  Also, keep an eye on overhead resistance for the entrenched bears and the possible Russian invasion of Ukraine that may upset any bullish sentiment in half a heartbeat.

Trade Wisely,

Doug

Challenging Price Volatility

February 7, 2022 by Doug Campbell

Inflation, rate increases, hit and miss earnings results, and the looming threat of a Russian invasion of Ukraine, the challenging price volatility is likely to continue in the week ahead.  While the bears are fighting to defend the recent lower high and downtrend, the bulls are fighting to hold a higher low after last week’s rally.  As a result, traders will have to remain nimble as we move toward a look at inflation Thursday morning that could push higher given the surging oil prices.  Should Russia invade as the U.S. government suggests, all bets are off, and anything is possible, so plan your risk carefully.

Asian markets traded mixed with Shanghai jumping higher by 2.03% after the holiday break.  European markets trade in a choppy early session but currently show modest gains when writing this report.  U.S. futures are off the overnight lows yet continue to point to a modestly lower open ahead or earnings data a lite economic Monday calendar. 

Economic Calendar

Earnings Calendar

We kick off the new trading week with about 70 companies on the earnings calendar.  Notable reports include ACM, AMGN, ACLS, CRNC, CHGG, ENR, HAS, LEG, L, NUAN, ON, RMBS, SPG, TTWO, THC, TSN, & VRNS.

News and Technicals’

Macron will meet with Putin in an attempt to avoid a Russian invasion.  “It is indispensable to avoid degradation of the situation before we build mechanisms and gestures of reciprocal trust [with Russia], “France’s President Emmanuel Macron said in an interview.  Monday’s meeting in Moscow is crucial for the French president, who has been pushing for a more independent European Union in terms of defense.  In recent weeks, tensions between Russia and the West over Ukraine have ramped up significantly.  As global powers have scrambled to prevent an all-out war between Ukraine and Russia, Germany has been accused of actively failing to help defend Ukraine from a possible attack.  Germany has refused to send military hardware to Ukraine, unlike other countries.  Ukraine is not a member of the EU or NATO, and Germany has a conundrum over its dynamics with Russia when it comes to energy.  Protesters have shut down downtown Ottawa for the past eight days, with some participants waving Confederate or Nazi flags and some saying they wanted to dissolve Canada’s government.  Ottawa police said issued hate crime charges against four people, and they were investigating threats against public figures jointly with the U.S. Federal Bureau of Investigation.  The well-organized blockade, which police say has relied partly on funding from sympathizers in the United States, saw protesters bring in portable saunas on Saturday to combat frigid temperatures.  Treasury yields moved lower in the early Monday trading, with the 10-year dipping to  1.9014% and the 30-year falling to 2.1934%. 

With the looming threat of a Russian invasion of Ukraine, an earnings calendar chalked full of reports, and a rate increase just around the corner, the challenging price volatility is likely to continue.  The bulls and bears are locked in a battle for control, with the bulls fighting to hold a higher low and the bears fighting to enforce the current lower high and downtrend.  Oil continues to surge higher, raising concerns that the CPI number on Thursday morning will show another increase in inflation.  The T2122 indicator indicates we still have room to move down before reaching a short-term oversold condition.  That said, with the futures rising off the overnight lows in the pre-market pump, we should not rule out the possibility of a test lower.  Even with all the selling, the SP-500 P/E ratio remains 82% above the historical average suggesting stock valuations remain high.  Given the hit and miss earnings results this quarter, we have a challenging spring and summer if the rising rates slow the economy as prescribed.  Should Russia invade, all bets are off, and anything is possible, so plan your risk carefully in the week ahead. 

Trade Wisely,

Doug

Considerable Technical Damage

February 4, 2022 by Doug Campbell

Yesterday’s selling created considerable technical damage, with the indexes failing at or below critical averages while setting more lower highs in the current downtrend.  We could see some of that damage quickly repaired in the QQQ with bullish results from AMZN.  However, the bulls will require a significant and sustained effort to repair the overall downtrend.  Today the attention will not turn to the Employment numbers that, unfortunately, could show substantial job losses in January due to the pandemic surge. 

Asian markets closed mostly higher overnight, led by the Hang Seng surging upward 3.24%.  Sadly, that sentiment is not shared by the European indexes seeing a lot of red this morning after bank rate hikes.  Finally, with jobs numbers around the corner, U.S. futures point to a mixed open with Ukraine uncertainty growing as we head into the weekend.  So buckle up; it could be a wild morning session of volatility as traders and investors sort through the data.

Economic Calendar

Earnings Calendar

We get a little break on the Friday earnings calendar with less than 40 confirmed reports.  Notable reports include ADP, AON, BMY, CBOE, ETN, REGN, SNY, & SPB.

News & Technicals’

Amazon shares rallied in extended trading Thursday after the company posted a big earnings beat for the fourth quarter, helped by a gain on its investment in electric vehicle company Rivian.  The company also disclosed revenue from its fast-growing advertising business for the first time.  Conversely, Ford shares slid after reporting fourth-quarter earnings Thursday, which significantly missed Wall Street’s earnings expectations and slightly missed revenue.  By 2022, Ford estimates it will earn between $11.5 billion and $12.5 billion in adjusted pretax profits and generate between $5.5 billion to $6.5 billion in adjusted free cash flow.  Snap reported earnings for the fourth quarter Thursday that beat analyst estimates on earnings, revenue, and user growth.  The report marks Snap’s first profitable quarter on a net income basis as a public company.  The report comes a day after Facebook parent Meta delivered disappointing guidance for the first quarter that dragged down several social media stocks, including its own.  The world’s largest contract chipmaker, TSMC, has committed to investing $100 billion over three years to ramp up production.  Rival Intel announced last March that it plans to spend $20 billion on two new chip plants in Arizona.  In the short term, semiconductor analyst Peter Hanbury expects the recovery from the chip shortage to be “choppy.”  Several other companies in the semiconductor supply chain will benefit from investments made by the chipmakers.  Treasury yields rose in early Friday trading, with the 10-year edging higher to 1.838% and the 30-year slightly higher at 2.157%.

The Thursday selloff left behind considerable technical damage in the index charts.  The DIA not only failed its 50-day average, and the SPY reversed while still below this critical psychological level.  At the same time, the QQQ failed its 200-day average, with Facebook losing $237.6 billion with a record stock market single-day loss.  That said, the selling seemed relatively controlled without a significant spike in fear showing up on the VIX.  With the positive results from AMZN after the bell, some of yesterday’s damage may quickly repair, but it will likely take much more to improve the bearish look of the index charts.  This morning the focus will be the Employment Situation number that the government suggests could be a shocking disappointment.  Not surprisingly, the overnight price action in the futures remains volatile as we wait on the data.  Keep in mind with the tensions continuing to grow at the Ukraine border, the uncertainty of what happens next may prove difficult for the bulls to overcome as we head into the weekend. 

Trade Wisley,

Doug

Facebook Stubbed its Toe

February 3, 2022 by Doug Campbell

On Wednesday, the relief rally extended, but the sentiment reversed after Facebook stubbed its toe, triggering a substantial-tech selloff after the bell.  It is interesting to note that although indexes gained yesterday, we had more declining issues than advancing issues.  Traders ignored the negative economic data yesterday, but now we turn our attention to jobless claims and the pending Employment Situation number on Friday.  Expect some wild price volatility as the market reacts to a nasty earnings-driven overnight reversal. 

Asian markets traded mixed but mostly lower overnight as economic data, and geopolitical tension weigh on investors.  This morning, European markets see red across the board reacting to earnings as they wait for an ECB decision.  U.S. futures point to an overnight reversal ahead of a busy day of earnings and economic reports.

Economic Calendar

Earnings Calendar

We have the busiest day of the week on the earnings calendar this Thursday, with nearly 200 companies listed.  Notable reports include F, ABB, ABMD, ATVI, ALL, AMZN, APTV, BDX, BIIB, BYD, CTLP, CAH, CI, CLX, COP, CTVA, CMI, DECK, LLY, EL, GPRO, HAIN, HBI, HIG, HSY, HON, ICE, LAZ, LITE, MRK, MTOR, MCPH, NWS, NTDOY, NOK, NLOK, PH, PENN, PINS, POST, PRU, DGX, RL, RHHBY, SKX, SWKS, SNAP, SU, SYNA, TAK, U, GWW, WRK, & WWE.

News & Technicals’

Facebook earnings came in below expectations for the fourth quarter, and the company said numerous challenges are ahead in the first quarter.  Inflation, supply chain disruptions at advertisers, and users shifting to products that “monetize at lower rates” are among the company’s key issues.  Revenue in the first quarter will be between $27 billion and $29 billion, while analysts were looking for that number to top $30 billion.  In addition, Facebook said on Wednesday that Apple’s App Tracking Transparency feature would decrease the company’s 2022 sales by about $10 billion.  Facebook’s admission is the most concrete data point so far on the impact to the advertising industry from Apple’s privacy change introduced last year.  The privacy feature disrupts the behind-the-scenes mechanics of mobile ads, especially those that confirm whether a purchase or download was made.  Nintendo has sold 103.54 million Switch units since its release in early 2017.  In comparison, the company has sold 101.63 million units of the Wii since its release in 2006.  It’s a big milestone for the Switch, as the Wii was one of Nintendo’s most popular consoles.  Like many other consumer electronics companies, Nintendo has been grappling with a shortage of components, particularly semiconductors that power its devices.  Wormhole, one of the most popular bridges linking the Ethereum and Solana blockchains, lost about $320 million in an apparent hack Wednesday afternoon.  The two blockchains are popular in the world of Defi, where programmable contracts can replace lawyers and bankers in some transactions and NFTs.  But few users stick with one blockchain exclusively, so bridges like Wormhole are a necessary go-between.  Treasury yields moved slightly higher in early Thursday trading, with the 10-year rising to 1.7788% and the 30-year edging higher to 2.1156%.

The rally continued Wednesday, but interestingly, we had more declining issues than advancing issues.  Then, however, Facebook stubbed its toe, triggering a tech selloff after the bell that sets the stage for an overnight reversal.  The huge miss on the ADP jobs numbers was largely ignored yesterday, but we will now focus on the weekly Jobless claims and the pending Employment Situation number Friday morning.  Expect price action volatility to remain high with nearly 200 earnings reports today to keep traders on edge and emotions high.   AMZN will be the big hitter after the bell today that can move the market substantially.

Trade Wisely,

Doug

Significant Overhead Resistance

February 2, 2022 by Doug Campbell

After the bell, a group of positive earnings continue to inspire the bulls but stay focused as the indexes slam into significant overhead resistance and declining 50-day averages.  Next, our attention will turn toward job numbers culminating with the Employment Situation report Friday morning.  Last week, the government began warning that the infection rates likely hurt jobs growth.  So, plan your risk carefully, watching for whipsaw or reversals as we test resistance levels.

The Nikkei rose sharply overnight, with many Asian markets still closed for the Lunar New Year.  European markets see green across the board this morning as the rebound continues.  Fueled by a group of positive earnings, U.S. futures point to a bullish open with jobs data and earnings results to keep price volatility high.

Economic Calendar

Earnings Calendar

We have nearly 130 companies listed on the Wednesday earnings calendar, with a few unconfirmed.  Notable reports include ABBV, ADTN, AFL, ALGN, ATI, ALGT, ABC, AVB, AVY, BSX, EAT, CHRW, CPRI, CTSH, DHI, ELF, EMR, RACE, GHL, HI, HOLX, HUM, IDXX, JCI, KLIC, LNC, MHO, MMP, MPC, MCK, FB, MET, MTG, NYT, NVO, ODFL, OHI, QRVO, QCOM, RYN, SPOT, TMUS, TMO, & WM. 

News & Technicals’

Ukraine’s President Volodymyr Zelenskyy warned any military confrontation with its neighbor Russia would amount to “a full-scale” war in Europe.  Russia has amassed troops along its border with Ukraine and within its ally Belarus.  However, Ukraine has played down confrontation concerns and warned of the possible consequences of a conflict on Europe’s doorstep.  PayPal reported mixed Q4 2021 earnings Tuesday and guided for the next quarter that fell short of analyst estimates.  The company expects Q1 non-GAAP earnings per share of 87 cents, short of the $1.16 analysts anticipated.  It also reported weak full-year revenue growth guidance for 2022.  AMD reported fourth-quarter earnings after the bell on Tuesday.  AMD expected $21.5 billion in sales in 2022, higher than analyst expectations.  Starbucks earnings fell short of Wall Street’s expectations, but the company’s quarterly revenue topped estimates.  The company saw higher-than-expected costs throughout its supply chain, and a resurgence of Covid-19 meant paying more employees sick leave.  China’s same-store sales fell 14% in the quarter as the country reimposed travel restrictions on some areas.  GM said it expects to generate an operating profit this year of between $13 billion and $15 billion as a semiconductor shortage shows signs of improving.  The forecast is in line with many Wall Street analysts’ expectations and the company’s record $14.3 billion pretax adjusted earnings in 2021.  In addition to the guidance, GM reported fourth-quarter earnings Tuesday that beat Wall Street’s expectations despite slightly missing revenue.  LAST YEAR, the U.S. economy grew at its fastest pace since 1984, but that momentum isn’t carrying into 2022.  An inventory build fueled most of the second-half growth that put annualized GDP up 5.7% for the year.  In the first quarter, the economy may not show any gain and possibly show a loss in GDP.  The pandemic, along with declining help from fiscal and monetary policy, will keep growth in check.  Treasury yields declined slightly early Wednesday, with the 10-year dipping to 1.7769% and the 30-year moving down to 2.0988%.

The index charts have dramatically improved, with Dow more than 2200 points off the low just eight days ago.  However, now face the challenge of significant overhead resistance and the declining 50-day moving averages across all indexes.  After the bell, a group of positive earnings should provide the bulls more inspiration to rally, but can they overcome the technical challenges above?  That will be the question to answer with FB, AMZN earnings, and a slew of jobs data coming our way the rest of the week.  In addition, the T2122 indicator is quickly nearly a short-term overbought condition, so a rest or profit-taking pullback cannot be ruled out in the days ahead.  Finally, the significant point rally has relieved a lot of pressure and kept the market emotionally charged, setting the stage for additional price volatility.  So stay focused and remember to take some profits as prices slam headlong into resistance levels.

Trade Wisely,

Doug

A Sweet Relief Rally

February 1, 2022 by Doug Campbell

Seven days after the Monday selloff that dropped the Dow more than 1000 points, we finally caught a sweet relief rally following through from the bounce that began Friday.  However, with significant overhead resistance and substantial technical damage to the index charts, the bulls still have a lot of work ahead of them.  With a full plate of earnings and economic data, we can’t rule out the possibility of a whipsaw to test the overnight lows in the futures market.  Remember, we will get the possible market-moving earnings from GOOGL after the bell.

Asian markets rallied overnight, with Shanghai for the Lunar New Year after Australia held steady cash rates.  European markets trade decidedly bullish this morning, seeing green across the board.  U.S. futures rebounded off overnight lows but pointed to muted open ahead of earnings and economic data.

Economic Calendar

Earnings Calendar

We have more than 90 companies listed on the Tuesday earnings calendar though some are not confirmed.  Notable reports include GOOGL, PYPL, AMD, AMCR, ASH, CTLT, CB, EA, EHC, EPD, XOM, BEN, GM, GNW, GILD, HP, IMO, LII, LSXMA, MDC, MTCH, MSTR, NMR, PBI, PHM, SMG, SIRI, SWK, SBUX, SXC, SMCI, UBS, UPS & UNM.

News & Technicals’

The Swiss bank UBS posted a net profit attributable to shareholders of $1.35 billion for the fourth quarter.  This was down from $1.64 billion a year earlier and lower than the $2.28 billion reported the previous quarter.  However, UBS’ bottom line was hit by an increase of $740 million in litigation provisions for a French cross-border tax case.  Danish scientists found the BA.2 subvariant, which has rapidly become dominant in Denmark, spread more easily across all groups regardless of sex, age, household size, and vaccination status.  However, only unvaccinated people demonstrated higher transmissibility of BA.2 compared to the BA.1 omicron strain, which could be due to their higher viral load.  The study found that the probability of spreading within a household was 39% for BA.2 versus 29% for BA.1.  According to internal documents obtained by CNBC, Peloton has slashed 2022 sales projections for its apparel business.  Momentum in the unit, which is run by Chief Executive Officer John Foley’s wife, seems to be fading heading into the following year after apparel revenue more than doubled to over $100 million from 2020 to 2021.  Though the division is a small fraction of the overall business, this internal look at Peloton’s apparel arm gives another glimpse into how the connected fitness company rode a wave of heightened demand amid the Covid-19 pandemic.  But that demand has started to normalize, and Peloton has to reset.  Tensions remain high between Russia and the West, with a possible military confrontation still a concern.  Russia wants to maintain its sphere of influence over former Soviet states, including Ukraine, which aspires to join the EU and NATO.  Western officials await Russia’s response to the U.S.′ refusal to cede to its demands over Ukraine and NATO operations in eastern Europe.  Treasury yields edged higher in early Thursday trading, with the 10-year rising to 1.7893% and the 30-year climbing slightly to 2.1148%. 

A sweet relief rally began rather slowly after an initial selling to begin the day but surged strongly upward headed into the close.  During the last push of the day, the DIA squeaked above its 200-day average to join the SPY that closed solidly above the key average.  However, the QQQ and IWM could not reclaim their 200-day averages, and all the indexes remain under substantial overhead resistance levels.  This morning we will turn our attention to manufacturing data that may give us insight into the impact of inflation.  According to the Econoday consensus, the Mfg. could see a slight decline from the prior month.  We will also get construction spending and job openings data.  Later today, we get the earnings results from the tech giants GOOGL and GOOG along with AMD and others after the bell.  Futures have rallied off of overnight lows, but traders will have to stay on their toes with the high price volatility, watching for the potential whipsaw to test the overnight lows.  It was very nice to get a relief rally, but with so much overhead resistance and technical damage to the index charts, it would be unwise to assume the all-clear has sounded. 

Trade Wisely,

Doug

Energetic end-of-day Rally

January 31, 2022 by Doug Campbell

The bulls raised the hope of a relief rally with an energetic end-of-day rally that was likely more short covering to take profits than actual buying.  The question now is, can the bulls follow through to the upside as we complete the last trading day of this challenging January volatility.  With all the indexes still below their 200-day averages, the bulls still have a lot of work to repair the technical damage.  Adding to the challenge, we face a big week of uncertain earnings reports, inflation, and a slew of jobs data to keep us guessing.  That said, traders will have to watch out for whipsaws as well as overnight gaps and reversals as the market reacts.

Overnight Asian markets traded mixed with China closed for the Lunar New Year holiday.  This morning, European markets trade mixed but mostly bullish as they try to relieve the recent selloff.  U.S. futures suggest a mixed open on this last trading day of January as we face a busy week of market-moving earnings and economic data.

Economic Calendar

Earnings Calendar

We have nearly 70 companies listed on the Monday earnings calendar, with several unconfirmed.  Notable reports include  AGNC, AXTA, CBT, CRUS, FN, HLIT, NXPI, PCH, RYAAY, SANM, TTM, TT, & WWD.

News & Technicals’

Defense analysts have said that Russia is willing to risk “real financial harm” and all-out war to achieve its political objectives over Ukraine.  However, Moscow has denied that it plans to invade neighboring Ukraine, a former part of the Soviet Union, despite having assembled around 100,000 troops at the border.  On Sunday, Bob Menendez, chair of the U.S. Senate Committee on Foreign Relations, told CNN lawmakers were devising the “mother of all sanctions” against Russia.  In addition, the White House warned that the spike in Covid-19 cases in early January could skew the data in next week’s jobs report.  Brian Deese, President Joe Biden’s top economic advisor, said the way the Labor Department collects data may have a pronounced effect on next week’s January 2022 jobs report.  A recent report from the Census Bureau showed that more than 14 million Americans did not work at some point between Dec. 29 and Jan. 10 due to Covid-19 or related impacts.  According to the head of shipping at HSBC, China’s zero-Covid restrictions will impact global supply chain recovery as any small disruption in the country will likely lead to “ripple effects” across the world.  The pandemic has revealed “how lean the supply chain has become.  And there is little margin of error,” said Parash Jain, global head of shipping and ports equity research at HSBC.  Monday’s missile launch is the third attack by the Houthis this month.  The first, on Jan. 17, killed three people, while the second attack the following Monday was thwarted.  The Bank fired the starting gun on rate rises in December, hiking its main interest rate to 0.25% from its historic low of 0.1%.  Since then, data has shown U.K. inflation soared to a 30-year high in December as higher energy costs, resurgent demand and supply chain issues continued to drive up consumer prices.  Economists expect the Monetary Policy Committee to announce a 25 basis point hike on Thursday, taking the Bank Rate to 0.5%.  Treasury yields trade in early Monday traded with the 10-year pricing at 1.7802%, and the 30-year struggled for direction at 2.30842%.

An energetic end-of-day rally raised hope of a relief rally Friday afternoon, but the question is can it follow through higher on the last trading day of January.  Although the welcomed relief from the oversold condition was nice to see, it did little to repair the technical damage as the indexes remained under their 200-day averages at the close of the day.  Moreover, geopolitical tension continued to rise over the weekend with another missile attack on the UAE, another Noth Korean missile launch, and Russia threatening an invasion of Ukraine.  Finally, as the number of earnings reports continues to ramp up this week, we also have readings on PMI & ISM inflation, Job openings, ADP, and Employment reports to keep traders and their toes and volatility high.  With so much data coming our way, stay focused on price action watching for whipsaws as well as overnight gaps and reversals.

Trade Wisely,

Doug

Where’s the Relief Rally?

January 28, 2022 by Doug Campbell

The Thursday gap up raised the hope that a relief rally may finally begin once again disappointed with a bearish reversal that now threatens a test of Monday’s low.  After the solid earnings performance from APPL, overnight futures rallied, but they have also reversed, suggesting a lower open this morning.  Though internals suggest a short-term oversold condition, a relief rally may be tough to come by with mixed earnings results, a hawkish Fed, and the growing concerns of a Russian invasion as we head toward the weekend.  Moreover, earnings numbers intensify next week so expect the volatility to keep traders on edge as February approaches.

Asian markets ended the trading week with a volatile session as the real estate crisis intensified in China.  This morning, European markets trade decidedly bearish, seeing red across the board lead by the DAX down more than 2%.  Likewise, U.S. futures reversed overnight bullish to suggest a bearish open with Personal Income and Consumer Sentiment data on the horizon. 

Economic Calendar

Earnings Calendar

We get a little break on the number of earnings on Friday with less than 60 companies listed and a good number of them unconfirmed.  Notable reports include CVX, ALV, BAH, CAT, CHTR, CHD, CL, RDY, GNTX, LYB, PSX, SYF, WY, & WETF.

News & Technicals’

Apple reported its largest single quarter in revenue ever, with sales growing over 11% despite supply challenges and the lingering effects of the pandemic.  In addition, Apple beat analyst estimates for sales in every product category except iPads.  Apple CEO Tim Cook said that the company’s supply issues were improving.  Apple CEO Tim Cook said the company is seeing inflationary pressure in an interview with CNBC’s Julia Boorstin on Thursday.  The observation from the Apple CEO comes as the Biden administration and Federal Reserve grapple with questions about how to tame elevated inflation.  Robinhood anticipates first-quarter revenue of less than $340 million, down 35% compared with 2021.  According to FactSet, Wall Street expected $448.2 million in revenue for Q1.  Monthly active users fell to 17.3 million last quarter from 18.9 million in the third quarter.  Robinhood is about to face its toughest comps in the first and second quarters of 2022, following its record year in 2021 from events like the GameStop short squeeze.  According to CB Insights, tech start-ups raised a record $621 billion in venture capital funding globally in 2021.  However, some VC investors worry the boom times may not last much longer as tech stocks fall amid talk of higher interest rates.  VCs say they’re already hearing about deals renegotiated at lower valuations and even withdrawal of term sheets.  Treasury yields rose slightly in early Friday trading, with the 10-year trading at 1.8266% and the 30-year climbing to 2.1126%. 

On Thursday, the wild week continued with another huge point bearish reversal that provided early hope that a relief rally might begin.  Now, rather than a relief rally, the selling poses the possibility that the low on Monday could receive another test.  As we chop around near the recent lows, the index 50-day moving averages have turned lower, technical overhead resistance levels and hinting of a possible death cross in the weeks ahead if the selling pressure continues.  Market internals continue to suggest and shot-term oversold condition, but with a hawkish Fed and the growing concern of a Russian invasion, that’s a big question as we slide toward the weekend.  Although we have a lighter day on the earnings calendar, we have economic reports that could provide early session volatility.  So as you plan for next week, keep in mind that earnings numbers continue to intensify and will likely keep us guessing with overnight reversals and intraday whipsaws.

Trade Wisely,

Doug

FOMC Turns Hawkish

January 27, 2022 by Doug Campbell

After the Dow swings more than 800 points from high to low, traders and investors remain on edge after learning the FOMC’s hawkish intentions.  As a result, the wild price action continued in the overnight futures even after the better than expected reports from INTC and TSLA.  Today we have another big day of market-moving economic and earnings reports that could easily inspire more whipsaws and reversals.  The path forward remains very dangerous, so plan your risk carefully as the Fed attempts to fight inflation without slowing the economy.

Asian markets had a rough night reacting to the Fed as the Nikkei fell more than 3%, closing indexes in the red across the board.  European markets gyrate in a volatile session this morning with a mix of gains and losses as they try to find direction.  U.S. futures rallied off of overnight lows, suggesting a tentative open with a slew of market-moving reports ahead to keep traders on high alert.

Economic Calendar

Earnings Calendar

Thursday will be our busiest day on the earnings calendar this week.  Notable reports include AAPL, AOS, ALK, MO, TEAM, BZH, BX, BOOT, CP, CE, CNX, CMCSA, DHR, DB, DOW, EMN, HCA, IP, JBLU, JNPR, KLAC, MMC, MA, MKC, MCD, MDLZ, MSCI, NOC, NUE, OLN, HOOD, ROK, LUV, STM, SYK, TROW, TXT, TSCO, X, VLO, V, & WDC.

News & Technicals’

Tesla beat on the top and bottom lines.  CEO Elon Musk gave a “product road map” update saying the company would not release any new model vehicles in 2022.  Instead, Tesla focuses on developing autonomous vehicle tech and scaling up production at its new factories in Austin, Texas, and outside of Berlin.  Intel reported fourth-quarter earnings on Wednesday.  Intel’s largest business, its Client Computing Group, was down 7% year-over-year to $10.1 billion, though it still beat analysts’ estimates.  Gelsinger said that the company’s next-generation server chip, Sapphire Rapids, remained on schedule to start shipping this quarter and for production to ramp up in the second quarter.  According to investment bank Morgan Stanley, the economic costs of China’s zero-Covid policy are increasingly expected to outweigh its benefits.  As a result, the bank has now cut its forecast for the first-quarter GDP to 4.5%.  “At this point, we think investors are still being too bullish with their expectation about corporate earnings,” said Laura Wang, chief China equity strategist at the firm.  Germany has provoked outrage in some quarters after it offered to supply 5,000 military helmets to Ukraine to help it defend itself against a possible Russian invasion.  The U.S. and U.K. have sent military hardware to Ukraine, as 100,000 Russian troops are believed to be located along the border with Ukraine.  However, Germany has been conspicuously reluctant to send equipment to the country.  Apple hit a record 23% market share in China in the fourth quarter of 2021, with the iPhone maker reclaiming the number one player for the first time in six years, Counterpoint Research said.  That was driven by the “relatively lower starting price” of its iPhone 13, which had a strong camera and 5G features.  Meanwhile, China’s smartphone market declined in 2021 due to component shortages and sluggish consumer spending, Counterpoint Research said.  Treasury yields traded mixed early Thursday, with the 10-year rising to 1.8495% and the 30-year declining to 2.1413%.

I guess it’s no surprise the FOMC decision to raise rates beginning in March created wild price gyrations that first shot the Dow up more than 500 but faded, selling off over 800 points in just over an hour.  The volatility continued in the overnight futures, dropping some 300 additional points to rally back near falt this morning.  Internals still indicate a short-term oversold condition, but another day of market-moving economic and earnings reports includes the behemoth APPL after the bell.  Both INTC and TSLA beat earnings estimates after the bell on Wednesday; however, the stocks are indicated slightly lower at the open today.  We should not rule out the possibility of testing the overnight futures lows, but we should also prepare for a relief rally should the day’s data inspire the bulls.  That said, we will have to keep a close eye on overhead resistance levels and expect price volatility to remain very challenging in the weeks ahead. 

Trade Wisely,

Doug

Upbeat Guidance from MSFT

January 26, 2022 by Doug Campbell

Upbeat guidance from MSFT reversed early selling and sparked a substantial rally in overnight futures, but it would be wise to remember it will take a lot of work to repair the technical damage.  Moreover, the significant gap raises the danger level of another punishing whipsaw or pop and drop with so much market-moving data around the corner.  A relief rally is overdue but don’t get caught up in the morning hype and drama it creates.  Instead, stay focused on price action and carefully consider the risk of every position before jumping back into the fire ahead of an FOMC rate decision.

Asian markets traded mixed overnight as investors wait for the Fed decision and how aggressively they intend to fight inflation.   However, European markets trade decidedly bullish this morning with hopes of a relief rally high while bracing for the possible volitility the FOMC can create.  Ahead of market-moving earnings and economic reports, U.S. futures suggest a considerable gap up at the open and a continuation of the wild overnight price volatility.  Watch for the possibility of big point whipsaws or even the dreaded pop and drop as traders react to all the data. 

Economic Calendar

Earnings Calendar

We have a busy day with more than 120 companies listed on the earnings calendar.  Notable reports include INTC, TSLA, ABT, ANTM, AZPN, T, ADP, BA, CACI, GLW, CCI, DRE, EW, FANUY, FCX, GD, HES, HESM, KMB, KNX, LRCX, LVS, LC, LEVI, MTH, NDAQ, NSC, NG, PKG, PLXS, PTC, RJF, STX, NOW, SIMO, SLG, SLM, TER< URI, VRTX, WHR, & XLNX.

News & Technicals’

Microsoft surpassed estimates on the top and bottom lines, but Azure cloud revenue merely matched analysts’ expectations.  In addition, the company’s gaming business is in the spotlight after Microsoft said it would acquire Call of Duty publisher Activision Blizzard for $68.7 billion.  Bentley Motors plans to spend £2.5 billion (about $3.4 billion) over the next decade to become a fully electric luxury brand by 2030.  The investment will include significant upgrades to Bentley’s historic plant manufacturing campus in England.  Bentley’s first all-electric vehicle is scheduled to roll off the production line in 2025.  Agreements from technology companies and betting firms helped the NFL lure a record $1.8 billion in sponsorship revenue, a 12% increase year-over-year from the 2020 season.  Team sponsorship revenue only increased 4%, but the NFL is now allowing teams to sell intellectual property rights overseas.  However, the NFL is still sitting on the sidelines regarding crypto sponsorships.  The US has sent the clearest message yet that Russia, its key personnel and economic sectors, and its leader Vladimir Putin could face the severest sanctions it has ever faced.  US President Joe Biden intimated that President Putin’s Russian counterpart could face personal sanctions on Tuesday.  In addition, the US has outlined new sanctions and targets that it could impose if there is an invasion.  The Kremlin has said any personal sanctions on Putin would be politically destructive.  Treasury yields traded with little movement in early Wednesday trading with the 10- pricing at 1.7851% and the 30-year standing at 2.1309%.

Technically the index charts have a lot of work to repair the damage created by the selling uncertainty this month.  The wild price volitility continued on Tuesday with substantial point swings as we face market-moving earnings reports and economic data that include a rate decision from the FOMC at 2:00 PM Eastern this afternoon.  Upbeat guidance from MSFT reversed early selling and dramatically shifted overnight futures markets in hopes that a relief rally would begin.  However, internal indicators continue to suggest a short-term oversold condition.  Still, the big gap-up suggested this morning could easily create another painful pop and drop with so much data coming your way today.  That said, keep your wits about your today and stay focused on the price action remembering the wild volatility is likely to continue with the FOMC decision and reports from INTC and TSLA this afternoon.  Watch overhead resistance levels as areas where the bears could set up defensive positions. 

Trade Wisely,

Doug