Vastly Improved, But

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Vastly Improved

The relief rally of the last two weeks has vastly improved the technicals of the indexes but will it be enough to keep us moving higher.  In the bull’s favor, we have the possibility of the end-of-quarter window dressing as institutions put new investor money to work.   In the bear’s favor, we have a possible risk-off scenario beginning to occur with a bond yield inversion as inflation worries grow.  If that’s not enough to keep traders on edge, then add in a hectic week of possible market-moving economic reports, and we have a recipe for challenging price volatility. 

Asian markets traded mixed and relatively flat as Shanghai went back into partial lockdown.  Across the pond, European markets see green across the board.  However, facing bond inversion fears, International Trade numbers, and a 2-year auction, rising recession fears suggest a mixed open well off the overnight lows.  So, get ready for just about anything as we finish this wildly volatile quarter!

Economic Calendar

Earnings Calendar

To kick off the last four trading days of the 1st quarter, we have more than 30 companies listed on the calendar, with the majority unconfirmed.  Notable reports include AND, AVAH, BITF, PLAY, JEF, TPG & XPEF.

News and Technicals’

The yield on the 5-year Treasury note rose five basis points to 2.6309% at 5:05 a.m.  ET, while the 30-year yield was less than one basis point to 2.5956%.  This is the first time the shorter-dated Treasury yield has risen above the longer-dated U.S. government bond since 2006.  President Joe Biden’s job approval ratings keep falling in his second year in the White House.  Just 40% of Americans approve of the job he is doing, an NBC News survey finds, the lowest rating Biden has seen in his presidency.  Biden’s drop in approval comes as a large majority of Americans continue to say the U.S. is headed in the wrong direction, the poll found.  Since the beginning of March, five cargoes of Russian oil, or about 6 million barrels, have been loaded and are bound for India – set to be discharged in early April, said Matt Smith, lead oil analyst at Kpler.  “This is about half the entire volume discharged last year — a significant uptick,” he told CNBC.  If China also buys oil from Russia – also widely expected to be discounted – it could impact crude prices, analysts said.  “Urals crude from Russia is being offered at record discounts,” the International Energy Agency said on March 17.  Shanghai, a city of 26 million people on the southeastern coast of China, is a hub for finance and international business in the country.  Municipal authorities ordered half of the city to lock down for mass virus testing from Monday to Friday morning.  Shanghai International Port Group, which manages the city’s ports, said in an online statement Monday production units generally maintained 24-hour operations.  President Joe Biden proposed a new 20% minimum billionaire tax.  The “Billionaire Minimum Income Tax” would assess a 20% minimum tax rate on U.S. households worth more than $100 million.  Over half the revenue could come from those worth more than $1 billion.  As the short-term treasury yields begin to invert as investors worry about a recession, the 10-year moved only slightly higher in early Monday trading to trade at 2.5066%, and the 30-year ticked slightly higher to 2.6004%. 

Technically speaking, the last couple week weeks have vastly improved the technicals of the index charts.  However, the sharp rally on meager volume combined with the possible over-extension in the prices in the short-term remains a concern.  On the one hand, due to the end-of-quarter window dressing, we may still see more extension as institutions put new money to work in the market.  But, on the other hand, the yield curve inversion in the 5-and-10 year bonds has the potential to derail bullish plans triggering risk-off conditions in the market.  In addition, we have a hectic week of market-moving economic data to keep traders on edge and price volatility high and challenging to navigate.  Finally, today we have International Trade numbers and the rapidly rising 2-year bond auction to contend with as we slide toward the end of this very volatile first quarter of 2022.

Trade Wisely,

Doug

Durable Goods Orders Decline

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Durable Goods Orders

Though recent market data such as yesterday’s negative durable goods orders hint at a slowing economy, the bulls ignored the data charged forward on Thursday.  Big tech led the way yesterday, surging sharply upward, but new European regulations that may curb their dominance could slow their rally today.  This morning we will get another reading on the already weak Consumer Sentiment and Pending Home Sales.  Plan your risk carefully as we slide into the uncertainty of the weekend with indexes at or near significant price resistance levels.

Asian markets traded mixed overnight, with the volatile HSI leading the selling dropping 2.47% to wrap up their trading week.  After striking a natural gas deal with the U.S, European markets trade with modest gains with monetary policy data pending.  Finally, with a light day of earnings reports, the U.S. futures point to a modestly bullish open hoping to extend the winning streak a second week.  However, expect price volatility to remain challenging in the days ahead as continued geopolitical and inflationary pressures weigh on world markets.

Economic Calendar

Earnings Calendar

As we wrap up the week, we have a light day on the earnings calendar with about 30 companies listed, with the vast majority unconfirmed.  Notable reports include DOOO, DCTH, MOV, PNT, & TRUHY.

News & Technicals’

U.S. President Joe Biden and European Commission President Ursula von der Leyen announced the formation of a joint task force to bolster energy security for Ukraine and the EU for next winter and the following one.  The primary goals of the task force, the U.S. and EU said in a joint statement, would be to diversify LNG supplies in alignment with climate objectives and reduce demand for natural gas.  It comes amid heightened concern that energy-importing countries continue to top up President Vladimir Putin’s war chest with oil and gas revenue on a daily basis.  In addition, the European Parliament and EU member states reached a historic deal on the Digital Markets Act.  The reforms aim to prevent tech giants from abusing their market position to harm smaller rivals.  So-called “gatekeepers” that violate the DMA face potential fines of up to 10% of their global revenues.  Neon is required for the lasers used in a chip production process known as lithography, where machines carve patterns onto tiny pieces of silicon made by the likes of Samsung, Intel, and TSMC.  These machines are produced by Dutch firm ASML.  According to Peter Hanbury, a semiconductor analyst at research firm Bain & Co, more than half of the world’s neon is produced by a handful of companies in Ukraine.  This marks the first high-level visit between the two sides since bloody clashes on their contested border led to the deaths of 20 Indian and 4 Chinese soldiers in June 2020.  Both governments are mum on the agenda and expectations from the visit, which remained cloaked in unusual secrecy.  As the host of the annual BRICS summit later this year,  China is also believed to be seeking India’s presence at the forum, putting India, China, and Russia at the same table.  Treasury yields tick higher in the early Friday trading, with the 10-year rising to 2.3630% and the 30-year pricing up to 2.5182%.

The bulls ignored the worse-than-expected Durable Goods orders as they worked hard to rally the tech giants on Thursday.  Unfortunately, new European regulations targeting the tech giants may hamper their efforts a little today.  Nevertheless, index chart technicals continue to improve as the bulls work to hold higher lows and finish the week strong.  This morning we will turn our attention to the Consumer Sentiment reading and the Pending Home sales.  Finally, with earnings winding down and only four days next week to wrap up the 1st quarter of trading, watch for the possible end-of-quarter window dressing.  Price volatility is likely to remain high, with the world seemingly becoming a more and more dangerous place filled with uncertainty.  So, plan your risk carefully as we move toward the weekend. 

Trade Wisely,

Doug

Bears Reemerged

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Bears Reemerged

The bears reemerged yesterday, snapping the six-day winning streak and pushing the DIA below its 50- day average.  However, the bulls held the SPY, QQQ, and IWM above the critical technical level.  This morning we will turn our attention to Durable Goods, Jobless Claims, PMI, and the news coming out of the NATO meeting.  As commodities prices continue to rise, so does inflation and the chances that the Fed will be forced to act more aggressively in May, keeping traders on edge and price action challenging.  Plan your risk carefully.

During the night Asian market closed, mixed easing Covid restrictions but concerned about rising energy prices.  European markets trade near the flatline this morning, focusing on the NATO meeting results today.  U.S. futures markets are doing the standard premarket pump up ahead of economic data that could bring an extra dose of volatility should the durable goods number disappoint. 

Economic Calendar

Earnings Calendar

As usual, Thursday is the biggest earnings day of the week, with about 80 companies listed with several unconfirmed.  Notable reports include AMPS, CODX, DRI, FDS, MCW, NEOG, NIO, SGLB, SMRT, TITN, TMDI, & UFAB.

News and Technicals’

Russian President Vladimir Putin has been in power for more than two decades and, during that time, has carefully cultivated an image of himself as an authoritarian, strongman leader.  Now, analysts say his decision to invade Ukraine is the biggest mistake of his political career and has weakened Russia for years to come.  As a result, both economically and geopolitically, Russia’s position looks increasingly isolated and vulnerable.  Three pressing threats loom large over the summit, requiring the alliance to determine its response and whether military intervention would be needed.  That includes mistaken fire on an allied nation, cyberattacks on a NATO member state, and the possibility of chemical or biological warfare within Ukraine.   NATO leaders are also expected to announce more humanitarian aid to Ukraine, particularly the embattled port city of Mariupol, a fresh round of sanctions and new pressure on Moscow’s energy sector.  In addition, it is the first suspected launch of an ICBM since November 2017 during heightened tensions between North Korea’s Kim Jong Un and former U.S. President Donald Trump.  While North Korea has conducted a flurry of ballistic missile tests in recent months, Thursday’s suspected launch of an ICBM represents a significant escalation.  Clean energy and low-carbon-emitting companies would stand to benefit.  Fossil fuel production companies stand to lose.  Higher carbon footprint companies such as heavy manufacturing and industrial chemical companies will not be expected to decarbonize overnight, but they will need to disclose their emissions data.  Compliance and auditing service companies will see a surge in demand, as will software companies that automate the processes.  Treasury yields are back on the rise again this morning, with the 10-year trading up to 2.39% early Thursday morning and the 30-year rose slightly to 2.5313%.

The bears reemerged yesterday to relieve the recent rally’s short-term overextension slightly.  While the DIA closed the day back below its 50-day average, the bulls were able to defend this critical technical level in the SPY, QQQ, and IWM.  With no significant market-moving earnings report this morning, we will turn our attention to the Durable Goods number that analysts expect to come in with a negative reading.  Nevertheless, it may give us some insight into the inflationary impacts on consumers and if it suggests a slowing of our economy is underway.  Commodities prices continue to surge, with Brent crude topping 121 a barrel yesterday, but the national average gas prices stood firm at $4.24 and diesel at $5.14.  We may also be sensitive to today’s NATO meeting with the U.S. sending more troops and leveling more sanctions against Russia with fears of chemical weapons rising.  So, expect price volatility to remain challenging and keep an eye on the bond yields as they inch closer and closer toward inversion. 

Trade Wisley,

Doug

Sixth Day of Gains

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Sixth Day of Gains

With another mighty push, the bulls managed the sixth day of gains, testing resistance levels even as traders now price in a 50 basis point rate increase for May.   Inflation continues to impact consumer activity, with Mortgage Applications falling by -8.1% while Brent Crude passed 118 a barrel this morning.  Jerome Powell will be speaking again before today’s open, with housing and petroleum numbers coming out during the morning session.  So, be careful chasing already extended stocks even though we may still experience some end-of-quarter window dressing. 

Asian markets closed green across the board led by the Nikkei surging 3.00% higher.  European markets trade mixed but mostly lower this morning with U.K. inflation hitting multi-decade highs and Ukraine war pressures.  U.S. futures point to lower open as they assess the impacts of inflation and more hawkish Fed willing to sacrifice growth to fight the rapidly rising consumer prices. 

Economic Calendar

Earnings Calendar

We have less than 50 companies listed on the Wednesday earnings calendar.  Notable reports include AWH, CTAS, CRBLF, FWRG, GIS, FUL, JKS, KBH, OLLI, SOL, SIEN, SCS, TCEHY, COOK, TCOM, WGO, & WOR.

News & Technicals’

Transportation Secretary Pete Buttigieg on Wednesday announced $2.9 billion for new competitive grants designed to improve U.S. transportation infrastructure.  The sum, part of the bipartisan $1 trillion infrastructure law President Joe Biden signed into law, is intended to bankroll highway, bridge, and freight projects.  State, regional and local governments will be able to contend for the grant funding through three separate programs with a single application.  As a result, Tencent reported its slowest quarterly revenue growth on record in the fourth quarter of 2021.  Revenue came in at 144.18 billion yuan ($22.62 billion), up 8% year-on-year.  The Chinese technology giant continues to feel the impact of Beijing’s regulatory tightening on the domestic technology sector.  The delisting of U.S.-listed Chinese stocks may come in the next two to three years, according to Jamie Allen of the Asian Corporate Governance Association.  Dual-listed Chinese stocks were recently in the spotlight after delisting fears reemerged following a U.S. Securities and Exchange Commission announced that U.S.-listed securities for five Chinese companies are at risk of delisting.  Following an initial plunge, the shares later saw a sharp reversal after Chinese state media reported that the U.S. and China regulators are progressing toward a cooperation plan on U.S.-listed Chinese stocks.  CNBC’s Jim Cramer on Tuesday warned investors against buying unprofitable stocks due to unwarranted optimism about the stock market.  “Right now, we need to bow down to the Fed and the forces of inflation,” the “Mad Money” host said.  Treasury yields turned slightly lower in early Wednesday trading, with the 10-year dipping less than a basis point to 2.3753%, while the 30-year moved slightly higher to 2.932%.

Indexes surged higher with the SPY and QQQ making it the sixth day of gains in the relief rally even as volume continued to decline.  However, with traders now pricing in a 50 basis point increase in May, the bulls may find it challenging to keep the pace.  Before the bell, Jerome Powell delivers another speech, but it seems unlikely he will change his hawkish tough talk in light of the rapidly rising commodity prices.  Then we will turn our attention to New Home Sales figures and the Petroleum status report before the 20-year bond auction at 1:00 PM Eastern.   Consumers worldwide are feeling the pinch of inflation, and more and more, we hear about the possibility of a recession, so be very careful chasing already extended stocks.  Though we could see a more bullish end-of-quarter window dressing, it is hard to imagine 2nd a vigorous round of 2nd quarter earnings with food and energy prices restricting consumer activity.

Trade Wisley.

Doug

Pause and Pullback

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Pause and Pullback

After the dramatic surge in the indexes last week, yesterday’s pause and pullback at technical and price resistance levels should not have been a big surprise.  However, with another light day on the earnings and economic calendars, the rally in overnight futures suggests a willingness to continue to test those resistance levels’ strength.  So, the question is, can we shake off the sharp rally in commodity prices, bond yields, and the tough talk from the Fed, or could it set up another pop and drop at resistance?  We will soon find out.

Asian markets saw green across the board during the night, with Alibaba shares surging 11%.  European markets are also trying to resume the relief rally showing green across the board this morning though somewhat muted as Ukraine weighs on investors.  U.S. futures reversed overnight losses suggesting a bullish open testing overhead price resistance levels. 

Economic Calendar

Earnings Calendar

As we head for the end of the quarter, the number of earnings continues to diminish.  As a result, we have just short of 40 companies listed on the Tuesday calendar, with several unconfirmed.  Notable reports include ADB, ACH BZFD, CCL, RAIL, GAN, HQY, HUYA, JILL, PAYS, POSH, STRR, & SUNL.

News & Technicals’

Russia’s purported use of hypersonic missiles in Ukraine shows that the military could be resorting to using more destructive weaponry.  It has developed hypersonic missiles over several years, unveiling a handful of them in 2018.  The country’s defense ministry said it had deployed “Kinzhal” (“Dagger”) hypersonic aeroballistic missiles in two attacks in Ukraine.  Fed Chairman Jerome Powell vowed tough action on inflation, which he said jeopardizes the recovery.  Powell said the Fed would continue to hike rates until inflation comes under control and could get even more aggressive than last week’s increase, which was the first in more than three years.  He noted those rate rises could go from the traditional 25 basis point moves to more aggressive 50 basis point increases if necessary.  A slew of Chinese real estate developers this week said they cannot release their financial results on time or have yet to set board meetings.  Among them was troubled property developer Evergrande, which hit markets last year with its debt crisis.  In a filing to the Hong Kong exchange on Tuesday, Evergrande said that due to the “drastic changes” in its operational environment since the second half of 2021, its auditor added “a large number of additional audit procedures” this year.  According to Japanese bank Nomura, other developers cited the resignation of auditors for failing to issue their financial year 2021 earnings on time.  Thanks to robust North America demand, Nike’s fiscal third-quarter results to analysts’ estimates.  But with lingering uncertainties around inflation, a war overseas, and clogged supply chains, Nike is holding off on giving an outlook for the upcoming year.  “We are focused on what we can control,” said Chief Financial Officer Matthew Friend on a post-earnings conference call.  “Several new dynamics are creating higher levels of volatility.”  Treasury yields continued to rise in early Tuesday trading, with the 10-year moving up to 2.3478% and the 30-year trading higher at 2.5672% after the tough talk from Jerome Powel yesterday. 

After the dramatic surge in index prices last week, the pause and pullback at technical and price resistance levels was not a big surprise.  However, with little to inspire on both the earings and economic calendar, futures have decided to try and press higher in the premarket despite the rising commodities prices.  Average gas prices moderated slightly last week, now at $4.24 per gallon for gasoline and $5.14 for diesel.  Food prices are also pressuring the consumers as ag inputs continue to surge and questions of future food shortages the possible result.  That said, the bulls seem intent on shaking off the consumer woes and tough talk coming from Jerome Powell yesterday that would not rule out 50 basis point increases to curb inflation.  As a result, traders will have to keep a close eye on overhead resistance levels that may conceal entrenched bears.  In addition, I think it would be wise to keep in mind we have more talk coming from the Fed Chair on Wednesday morning with a Durable Goods number Thursday that consensus estimates suggest a negative number is possible. 

Trade Wisely,

Doug

Significant Improvement

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Significant Improvement

Last week, bulls created significant improvement in the indexes as they found reason to rally with falling mortgage applications, rising producer prices, declining retail sales, and more hawkish fed willing to sacrifice growth to fight the out-of-control inflation.  As a result, downtrends breached, but now comes the tricky part, can the bulls hold a higher low to confirm an uptrend?  With commodities rising again, the uncertainty is likely to keep price action volatile and challenging.  So, focus on price action, watching for head-fakes, whipsaws, and reversals.

Overnight Asian markets traded mixed as oil once again surges higher.  European markets trade mixed and muted as the fighting in Ukraine intensifies.  U.S. futures are well off the overnight highs as surging commodity prices dampen bullish sentiment and again raise the ugly head of economic uncertainty.   With oil up more than 4.50% this morning, prepare for another wild price action day.

Earnings Calendar

Economic Calendar

On the Monday earnings calendar, we have about 72 companies listed, but many of them are unconfirmed.  Notable reports include KERN, HRT, JAGGF, MRNS, NKE, PDD, & TME. 

News & Technicals’

Berkshire Hathaway said Monday morning it agreed to buy insurance company Alleghany for $11.6 billion, or $848.02 per share, in cash.  The conglomerate said the deal “represents a multiple of 1.26 times Alleghany’s book value at December 31, 2021,” as well as a 16% premium to Alleghany’s average stock price in the past 30 days.  A Boeing 737 has crashed in China with 132 people on board.  The authority said that contact was lost with the flight over Wuzhou in the Guangxi region.  It was scheduled to fly from Kunming to Guangzhou in the country’s southeast.  The number of casualties is currently unknown.  China’s Civil Aviation Administration said it had “activated the emergency mechanism and dispatched a working group to the scene,” according to a translation.  Crude futures were up more than 3% on Monday morning during Asia trading — international benchmark Brent crude was at  $111.46, and U.S. futures at $108.25.  Oil prices have been volatile in recent weeks – soaring to record highs in March before tumbling more than 20% last week to touch below $100.  They jumped again in the latter half of last week.  Ukrainian and Russian officials have met intermittently for peace talks, which have failed to progress to key concessions.  Tight supply continued to worry markets, sparking the International Energy Agency (IEA) call on Friday for “emergency measures” to reduce oil usage.   The price hit $31,380 a metric ton of nickel as it opened for trade on the London Metal Exchange, according to Refinitiv data.  The 145-year-old exchange, which still has some open outcry trading, has had a wild couple of weeks of nickel trading, with price surges, technical glitches, and trading suspensions.  Treasury yields rose in early Monday trading, with the 10-year trading at 2.888% and the 30-year moving up slightly to 2.4429%.

Last week, there was a significant improvement in the indexes as the bulls used the falling mortgage applications, rising producer prices, declining retail sales, and a hawlkish Fed as a reason to rally.  Although the bulls breached the downtrends, now comes the most critical test, can they hold a higher low?  With commodities again surging higher as the fighting intensifies in Ukraine, nothing has changed regarding the economic uncertainty on consumers.  The rally pushed the T2122 indicator into a short-term overbought condition, so traders should watch closely for the potential of a pullback that could begin at any time.  That said, it’s nice to see the substantial relaxation in the VIX, but keep in mind that emotions are high, and consumer sentiment remains very low.  Not exactly an ideal situation as we wind down the first quarter of the year wondering how the consumer impacts will play out in the second-quarter earnings.  It would not be surprising to see some end-of-quarter window dressing, but we should continue to expect significant price volatility.  So watch carefully for head-fakes, whipsaws, and overnight reversals in the days and weeks ahead.

Trade Wisely,

Doug

Inflation Rate Hit 7.9%

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Inflation Rate Hit 7.9%

Although the inflation rate hit 7.9% and the prices at the pump continued to rise, the bulls decided the conditions were right to buy in another light volume day.  But, as Russian forces advance on the Ukrainian capital city, the question is, can the bulls follow through another day with the uncertainty of the weekend?  In addition, with a light day of earnings, the Consumer Sentiment report could be market-moving if it reflects the impacts of rising prices and the likely constriction of consumer activity.  Expect choppy conditions to continue and plan carefully with the FOMC decision next week.

Asian markets traded mixed but mostly lower overnight, with the Nikkei declining 2.05%.  However, despite the advancing Russian invasion, European markets are in rally mode this morning, seeing nothing but green across the board.  U.S. futures point to a considerable gap as they try to shake off inflation impacts on the economy.  Watch for those whipsaws and the dreaded pop and drop as we test price resistance levels with the uncertainty of the weekend pending.

Economic Calendar

Earnings Calendar

We have a light day to wrap up the earnings reports for this week.  The calendar lists 57 companies, but most of those are not confirmed.  Notable reports include BKE, FUTU, GENI, PLXP, RGF, & SPNE.

News & Technicals’

Satellite images show that Russian armored units have fanned out through the towns close to Antonov airport.  Artillery howitzers are thought to be situated in firing positions nearby.  The latest images come as Russia’s onslaught of Ukraine enters its 16th day, invading troops seeking to maintain pressure on Kyiv and Mariupol.  Supply-side risks arising from the war have stoked extreme volatility across global commodity markets, with oil, nickel, and wheat also surging alongside natural gas in recent weeks.  Natural gas is once again front and center after Russian Deputy Prime Minister Alexander Novak warned that Moscow could halt its exports to Germany via the Nord Stream 1 pipeline.  The Senate passed a bill to fund the government through September, preventing a shutdown.  The legislation also includes $13.6 billion for humanitarian and military assistance for Ukraine as it fights off a Russian invasion.  However, lawmakers scrapped $15.6 billion in supplemental coronavirus relief from the plan.  Rivian missed Wall Street’s fourth-quarter earnings expectations and forecast a modest increase in vehicle production for 2022.  Rivian said it expects to produce 25,000 vehicles this year, as the electric vehicle start-up battles through supply chain constraints and internal production snags.  T said reservations for its vehicles had reached about 83,000 as of March 8, up from 71,000 in December.  Treasury Secretary Janet Yellen said Thursday that Americans would likely see another year of “very uncomfortably high” inflation.  “We have seen a significant increase in gas prices, and I guess that next month, we’ll see further evidence of an impact on U.S. inflation of Putin’s war on Ukraine,” Yellen said.  The Treasury secretary’s comments came just hours after the Labor Department said consumer prices rose 7.9% in February, the fastest pace since 1982.  Treasury yields pulled back slightly in early Friday trading, with the 10-year slipping to 1.9864% and the 30-year dipping to 2.3641%.

After learning that the inflation rate hit 7.9%, the bulls decided that it was a reason to buy in another light volume day.  The question is, can they follow through another day as Russia closes in on the Ukrainian capital city and faces the uncertainty of the weekend.  As a result, prices at the pump inched higher once again at the national gas price at $4.33 a gallon, and diesel surged to $5.13, adding pressure to shippers and consumers alike.  We have a very light day on the earnings and economic calendar; however, the reading on Consumer Sentiment will be an important measure of the inflationary impacts.  Technically we have substantial price resistance above, and downtrends continue in all four indexes.  That said, we can’t rule out an attempt to test those resistance levels, but in the same breath, new lows are possible as the wild price gyrations continue.   As you plan forward, keep in mind the FOMC decision is forthcoming. 

Trade Wisely,

Doug

Low-Volume Rally

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Although it was nice to get a relief rally yesterday, the low-volume move was likely more short covering than actual buying.  Sadly, the big point rally did little to nothing in repairing the technical damage in the index charts.  So today, we will turn our attention back to the rising inflation and the ugly impacts for the consumers as the national average price of gasoline rises to $4.31, up from $4.17 just one day ago.  Plan for some wild price volatility as traders react to the CPI number revealed before the bell. 

Asian markets followed the U.S. markets with a sharp overnight rally, with the Nikkei leading the way, rising 3.94%.  Unfortunately, the relief rally may be short-lived, with European markets decidedly bearish this morning.  U.S. futures also point to a nasty gap down as we wait on the CPI numbers. 

Economic Calendar

Earnings Calendar

We have more than 250 companies listed on the Thursday earnings calendar, but a large number of them are unconfirmed.  Notable reports include ORCL, RIVN, ACRX, BZUN, BLNK, DLTH, LOCO, AG, GCO, HGBL, JD, LZ, MLNK, NEON, PSTL, RRGB, TLYS, UTLA WPM, & ZUMZ.

News & Technicals’

Russia – Ukraine fails to reach a cease-fire deal, sending U.S. futures lower and Wednesday’s substantial gains.  Brent crude futures were up $3.10, or 2.8%, at $114.24 a barrel at 0419 GMT after trading in a more than $5 range.  In nearly two years, the benchmark contract slumped 13% in the previous session in its biggest one-day drop.  U.S. West Texas Intermediate (WTI) crude futures were up $1.58, or 1.5%, at $110.28 a barrel, after trading in a more than $4 range.  The contract had tumbled 12.5% in the most significant daily decline in the previous session since November.  On Thursday, Bitcoin and other cryptocurrencies fell as some of the initial excitement around U.S. President Joe Biden’s executive order on digital assets faded.  Bitcoin was down more than 6% at $39,086 at 3:38 a.m.  ET on Thursday, according to data from CoinDesk.  Some high-profile cryptocurrency industry players praised the president’s executive order, while others called the move “defensive.”  Amazon’s 20-to-1 split makes it more palatable to the price-weighted Dow Industrials.  Perhaps the Dow index committee may consider giving Walgreens the boot from the index as that company reevaluates its Boots unit.  On top of Amazon and Alphabet, which had its 20-to-1 split back in February, Nvidia could also be waiting in the wings.  According to Dow Jones, economists expect consumer inflation will hit a new 40-year high of 7.8%.  The consumer price index is the last big inflation release before the Federal Reserve meets next Tuesday and Wednesday.  CPI was expected to peak in March, but now economists say it could do so later in the spring, depending on what happens with oil prices.  Treasury yields declined slightly in early Thursday trading, with the 10-year slightly lower at 1.9270% and the 30-year dipping to 2.3022%.

With a sizeable overnight gap and a  low-volume move, the indexes managed to trigger a short-covering squeeze pushing the indexes up to test overhead resistance.  Although the rally relieved the recient selling pressure, it, unfortunately, did nothing to improve the overall bearish technical picture of the indexes.  Helping the rally was the commodity selling, but I fear that will be very short-lived with the pending CPI number before the bell today.  Though bent crude declined, the average national price of gasoline moved higher to $4.31 a gallon.  Some areas of California are approaching $8.00 a gallon while diesel prices around the county top $5.00 a gallon.  The rapidly rising prices create long lines at stations as consumers rush to fill their tanks before the subsequent price increase.  So buckle up for another round of volatility as the market comes to grip with the rising inflation and the massive impacts to the consumer. 

Trade Wisely,

Doug

U.S. Embargo of Russian Oil

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The U.S. embargo of Russian oil spiked prices, pushing the national average of gasoline to $4.17 a gallon.  However, with the CPI just around the corner, U.S. futures suggest a considerable gap up pressing short traders and likely inspiring the fear of missing out in retail traders.  So before you jump emotionally, consider the risk carefully and remember the big point whipsaws of late.  There is no doubt we all want some relief in the selling but chasing a big gap at the open only adds tremendous risk.  So plan your next move bucause carefully; in truth, nothing has changed, and the uncertainty of the path forward continues.

Overnight Asian markets traded mostly lower as the threat of global recession raises its ugly head.   However, European markets are green across the board this morning, with the DAX and CAC spiking up more than 4%.  U.S. futures also point to a significant gap up at the open, trying to shake off the consumer demand destruction, high energy prices, and inflation uncertainties. 

Economic Calendar

Earnings Calendar

We have nearly 150 companies listed on the earnings calendar, but there is a good number of unconfirmed.  Notable reports include ACOR, ADDYY, AMPY, BGSF, CVGW, CPB, PLCE, EXPR, FOSL, KFY, MQ, LCUT, NGMS, OTLY, REVG, THO, VRA, VERX, VIVHY, & ZIM.

News & Technicals’

If Russia retaliates by refusing to supply Europe with oil, that could “easily” send oil prices another $20 to $30 per barrel, said Andy Lipow, president of Lipow Oil Associates president.  “My greatest fear is that these prices have risen so fast that you cause a recession in Europe and Latin America that rolls on into the United States that ultimately affects China’s ability to sell consumer goods to the rest of the world,” he told CNBC’s “Squawk Box Asia” on Wednesday.  A complete ban on Russian energy imports in all significant consuming countries would “severely reduce and disrupt energy supply” and prices could soar further into “uncharted territory,” wrote Caroline Bain, chief commodities economist at Capital Economics.  A Chinese state-sponsored hacking group successfully compromised the computer networks of at least six U.S. state governments, according to research published by Mandiant.  APT41, which Mandiant claims carries out state-sponsored espionage on behalf of China, took advantage of software flaws and quickly exploited security vulnerabilities made public by researchers.  Mandiant said Tuesday that APT41 appeared to be “undeterred” by the indictment and its goals remain “unknown.”  For China, the speed and severity with which the U.S. and its allies sanctioned Russia is a warning sign that could guide future economic and foreign policy.  “This is a very multilateral moment,” said Reva Goujon, senior manager for the China corporate advisory team at Rhodium Group.  Beijing has refused to call Russia’s attack on Ukraine an invasion.  Instead, China has focused on promoting negotiations between Russia and Ukraine, and it opposes the economic measures that have been taken against Russia.  Treasury yields moved slightly higher in early Wednesday trading, with the 10-year up to 1.8992% and the 30-year pricing at 2.2622%.

Yesterday proved to be another rough day, with oil prices rising sharply after the U.S. embargo of Russian oil.  As a result, the National average gas prices spiked to $4.17 per gallon, pressuring an already stretched consumer and fanning the flames of inflation.  However, with a worrisome CPI number just around the corner, the U.S. futures point to a substantial overnight gap up, with Brent crude prices pulling back to $123.00 a barrel at the time of this report.  That said, the U.S. consumer can expect much higher energy prices going forward unless the administration restores domestic production.  Sadly this big gap puts the retail trader at high risk of an intraday whipsaw if they chase the gap while also being left behind if this is the beginning of a relief rally.  So pay close attention to overhead resistance for entrenched bears and keep in mind that nothing has changed.  The war is still in progress, inflation is impacting consumer habits, inflation is rising with the rapidly increasing food and energy prices, and the indexes remain in a downtrend.  Don’t allow the emotion of the day or the fear of missing out to dictate your trading decisions, as that will often take money right out of your accounts!

Trade Wisely,

Doug

Fears of Higher Inflation

by
Fears of Higher Inflation

It was not only the higher oil prices that kept the bears active on Monday but the fears of higher inflation and the uncomfortable impacts to the consumer.  Though the indexes appear in a short-term oversold condition, the pending CPI number will likely keep the bears active on the uncertain path forward.  In addition, this morning, we will briefly turn our attention to the trade deficit that continues to expand.  So plan your rick carefully and continue to respect overhead resistance levels as long as the downtrend remains in effect.

Asian markets closed in the red across the board during the night, with Shanghai leading the selling down 2.35% at the close.  European markets trade mixed but mostly higher this morning as they keep a close eye on invasion developments.  Ahead of earnings and economic data, the U.S. futures point to a gap up open, hoping to trigger a little relief in the selling.

Economic Calendar

Earnings Calendar

The number of earnings events ramps on this Tuesday, with more than 130 companies listed though we have a large number of them unconfirmed.  Notable reports include DKS, ABM, AVD, CDMO, BNED, BKEP, BMBL, CASY, CIVI, FTEK, GLRE, NVEI, WOOF, PCT, SFIX, VTNR, & WTI.

News & Technicals’

“It is absolutely clear that a rejection of Russian oil would lead to catastrophic consequences for the global market,” Russian Deputy Prime Minister Alexander Novak said Monday in an address on state television.  “The surge in prices would be unpredictable.  It would be $300 per barrel if not more.”  His comments come with Russia’s onslaught of Ukraine well into its second week, with the already dire humanitarian crisis expected to worsen as the Kremlin continues its invasion.  “It is absolutely clear that a rejection of Russian oil would lead to catastrophic consequences for the global market,” Russian Deputy Prime Minister Alexander Novak said Monday in an address on state television.  “The surge in prices would be unpredictable.  It would be $300 per barrel if not more.”  His comments come with Russia’s onslaught of Ukraine well into its second week, with the already dire humanitarian crisis expected to worsen as the Kremlin continues its invasion.  Tensions are rising in Europe’s ex-Soviet Baltic nations that President Vladimir Putin might not stop at invading Ukraine and could have his sights set on them.  Baltic states in north-eastern Europe, which are now members of the EU and NATO, were invaded and occupied in June 1940 by the Soviet Union.  They remained within the USSR until its collapse in 1991.  “Clearly, Putin is now in some kind of aggressive war mood,” European Commission Vice President Valdis Dombrovskis said.  Treasury yields rally in early Tuesday trading as inflation worries grow.  The 10-year surged 9-basis points to 1.8421%, and the 30year rose to 2.2334%.

The rising oil prices and the fears of higher inflation reading when CPI numbers come out Thursday morning kept the bears working hard Monday.  As a result, the Nasdaq officially fell into bear territory closing down 20% from January highs.  Although the indexes appear to be in a short-term oversold condition, the rising prices will make it difficult for a consumer-based economy to find much footing.  So if a relief rally can get started, it would be wise it respects overhead resistance levels as long as the index downtrends continue.  In addition, it would appear the geopolitical fallout of the Russian invasion is far from over, so expect price volatility to remain uncomfortably high.  Finally, with earnings beginning to wind down and inflation numbers on the horizon, the path forward is uncertain.  Large intraday whipsaws and significant overnight gaps are likely to continue as the uncertainty unfolds.  So plan your risk carefully and avoid overtrading.

Trade Wisley,

Doug