Although the Wednesday modest relief rally was nice, it, unfortunately, did nothing to improve the technical picture of the index charts. This morning the market will have to digest GDP data that economists expect to increase and that pesky Jobless Claims report. If that were not enough, traders will need to keep an on Congressional decisions to spend a few more trillions and prevent a government shutdown at midnight. That should be enough to keep price volatility high.
Asian market traded mixed overnight as the data showed an unexpected contraction in Chinese factory activity. European market trade with modest gains and losses this morning cautiously attempting to shake of market jitters. However, the premaket pump up is well underway in the U.S., pointing to another gap-up open ahead of critical market data.
Economic Calendar
Earnings Calendar
We have our busiest day of the week on today’s earnings calendar, with 16 companies listed, although about half are unconfirmed. Notable reports include BBBY, ANGO, JEF, MKC, & PAYX.
News & Technicals’
It looks like today is shaping up as a big day of political news. First, Congress has to hammer a deal to avoid a government shutdown at midnight tonight. Then the battle begins on the infrastructure bill and the enormous social programs bill. Next, Fed Chairman Jerome Powell still expects inflation to ease eventually but said he sees the current pressures running into 2022. The central bank leader said the current inflation pressures are “frustrating.” Finally, more than half of restaurant operators surveyed by the National Restaurant Association say that business conditions are worse now than three months ago. The delta variant, understaffed restaurants, and higher food costs are among the issues plaguing the industry. U.S. Treasury yields eased slightly early this morning, with the 10-year falling less than a basis point to 1.531% and the 30-year also drifting lower less than a basis point to trade at 1.078%.
Though yesterday’s modest relief rally was nice, it sadly did nothing to improve the bearish technical issues in the DIA, SPY, and QQQ charts. In truth, the QQQ could not hold early gains making a new low by the close of the day. This morning we face two potential market-moving reports that will likely set the tone for the morning session. According to consensus estimates, the GDP analysts see a slight increase, and the Jobless Claims expect a decline. We will also have to keep an eye on the political developments in Congress as their decisions could have substantial market ramifications. Traders should also keep an eye on bond rates because if they continue to rise, it could be particularly damaging to the tech sector. Volatility is likely to remain high, so remember, if you don’t have an edge, cash is a position!
Though big tech has seemed impervious to all bearish attacks of late, the rapid rise in bonds proved to be their kryptonite. Other worries such as debt ceiling deadlines, rising inflation, fading consumer confidence, and Chinese real estate impacts only added to the selling pressure creating severe technical damage to the index charts. As a result, the DIA, SPY, and QQQ charts now indicate bearish trends, and though bonds pulled back modestly, this morning risk remains high as their rally could soon continue. As a result, expect price volatility to remain very challenging in the days ahead.
Overnight Asian markets traded mixed but mostly lower, with the NIKKEI plunging 2.12% as investors wait to see if Evergande can make Wednesday’s bond payments. European markets trade green across the board, working to recover some of yesterday’s selloff. Ahead of earnings, Pending Home Sales, Petroleum status numbers, and more Congressional testimony from Powell, U.S. futures point to a bullish open hoping to recover some of yesterday’s losses. So buckle up; it could be another wild price action day.
Economic Calendar
Earnings Calendar
On the mid-week earnings calendar, we have eight confirmed reports. Notable reports include CTAS, MLHR, JBL, NG, & WOR.
News & Technicals’
Jamie Dimon said the country’s largest lender has begun scenario-planning how a potential U.S. credit default would affect the repo and money markets, client contracts, and capital ratios. “This is like the third time we’ve had to do this, and it is a potentially catastrophic event,” he said. In a filing to the Hong Kong exchange on Wednesday, Evergrande said it would sell the 1.75 billion shares in Shengjing Bank to the Shenyang Shengjing Finance Investment Group at 5.70 yuan per share. Last week, the property firm already missed one key $83.5 million coupon payment on an offshore March 2022, $2 billion bonds. Markets are closely watching to see if the firm will meet its $47.5 million interest payment due Wednesday. Sen. Elizabeth Warren charged that Fed Chairman Jerome Powell had led an effort to weaken the nation’s banking system, and she would oppose his renomination. In remarks made during a Senate hearing, the Massachusetts Democrat cited several instances where she said the Powell Fed has watered down post-financial crisis bank regulations. U.S Treasuries retreated Wednesday morning, with the 10-year yield falling to 1.496% and the 30-year sliding to 2.04%.
The rapid rise in bonds created an ugly selloff in the tech sector that until now has seemed impervious to bearish activities of late. Moreover, the uncertainty of the debt ceiling battle in Congress likely added some additional energy to the bears in yesterday’s rout. Additionally, comments from Jerome Powel that warned inflationary pressures would continue into the near future didn’t hope the situation. The unfortunate consequence is the severe technical damage created in the index charts. As a result, we will have to keep a close eye on bond rates in the future. Fed operations have kept yields in check, but the Fed could lose control is a growing concern. Legendary investor Jeremy Grantham used the term “magnificent bubble” to describe the current market condition comparing to 1929 and 2000. So be very careful rushing in to buy the dip because yesterday may have signaled a fundamentally different market condition.
Yesterday’s morning surge of buying faded by the end of the day, which left behind a bearish candle pattern and raised concerns about a possible failure pattern at the Dow 50-day average. Though the price action was indecisive, the SPY and QQQ also ended the day back below their 50-day averages suggesting the relief rally momentum has faded. With Powell warning of continued inflationary impacts, the sharp rise in bond yields, coupled with a looming debt ceiling deadline, there is plenty of uncertainty to unsettle markets. Expect price volatility to remain high as we wait.
Asian markets traded mixed as economists cut China’s GDP forecasts and concerns that the Evergrande real estate impacts have spread into Hong Kong. European markets traded decidedly bearish this morning as tech shares leading the way lower. Ahead of earnings, economic data, and Fed testimony in Congress, U.S. Futures point to gap down open.
Economic Calendar
Earnings Calendar
On the Tuesday earnings calendar, we have 18 companies listed, with about half of them unconfirmed. Notable reports include MU, CALM, FDX, INFO, THO, & UNFI.
News & Technicals’
Jerome Powell will testify today in Congress regarding the Fed’s economic response to the pandemic. According to his prepared comments, he will caution that the cause of the recent rise in inflation may last longer than anticipated. “Inflation is elevated and will likely remain so in coming months before moderating.” Wells Fargo is back in the news this morning for defrauding currency customers. The bank allegedly overcharged 771 businesses on foreign exchange transactions from 2010 through 2017, according to the U.S. Justice Department lawsuit filed Monday. Wells Fargo told the commercial customers that they were being charged specific fixed rates but then incentivized salespeople to “overcharge FX customers,” according to the filings. Finally, Goldman Sachs cut its forecasts for China’s economic growth in 2021 as constraints on energy consumption added to headwinds facing the world’s second-largest economy. S&P Global Ratings also lowered its 2021 GDP forecast for China and said uncertainty in the Chinese economy would affect growth prospects across Asia-Pacific. The rise in U.S Treasuries has begun to concern investors, with the 10-year topping 1.54% this morning and the 30-year spiking to 2.0635% in early morning trading.
The morning surge in the Dow tested its 50-day average as resistance but left behind a bearish candle pattern, raising concerns about what happens next. The SPY and the QQQ also closed the day back below their 50-day averages with indecisive price action, while the surge in oil prices lifted IWM for a bullish close. Finally, the VIX ended the day slightly higher, recovering its 50-day and holding onto its upside trend as the relief rally loses momentum. Today we will get readings on International Trade, House Prices, and Consumer Confidence while digesting comments from Powell & Yellen during congressional testimony later this morning. The steep rise in bond yields over the last few days is beginning to worry investors as Jowell warns that the impacts of inflation are likely to continue longer than expected. With the debt ceiling deadline looming, there is ample reason for uncertainty so expect price volatility to remain high.
The tremendous relief rally created a lot of bullish improvement in the index charts, but with overhead price resistance above, we can sound the all-clear just yet. The Dow has the most significant challenge still under its 50-day average despite more than a 1200 point rally from last Monday’s low. As we wait for Congress to deal with the debt ceiling and possible trillion-dollar infrastructure vote, choppy uncertain price action is possible. The results of the Durable Goods number will likely set the tone for the morning session. Economists expect an improvement over the last month’s negative reading.
Asian markets struggled to find direction overnight, closing mixed as investors search for clarity and the impacts of the Evergrande default. European markets trade mixed with modest gains and losses as they sorted out the details of the German election results. U.S. futures also point to a mixed open with Durable Goods numbers ahead of the open and the political uncertainty of the debt ceiling vote later this week.
Economic Calendar
Earnings Calendar
To kick off the week, we have 11 companies listed on the earnings calendar, but most are unconfirmed. Notable reports include CNXC and ACB.
News & Technicals”
We have an interesting political news week that could move markets. First, U.S. House of Representatives Speaker Nancy Pelosi reiterated Sunday that she expects the $1 trillion bipartisan infrastructure bill to pass this week now set for Oct. 1st. However, many from her party oppose the bill saying they will not pass it until the 3.5 trillion social programs bill is passed. Congress is also against a debt ceiling deadline that could shut down the government if not completed in time. We also have a big week of Fed conversation with Powell testifying to Congress and FOMC committee members speaking throughout the week. Finally, preliminary results on Monday morning showed the center-left Social Democratic Party gaining 25.8% of the vote, according to the country’s Federal Returning Officer. The election is significant because it heralds the departure of Angela Merkel, who is preparing to leave office after 16 years in power.
There was a lot of bullish improvement last in the index charts, hoping that we could zoom right back to set new record highs. However, with overhead price resistance, debit ceiling uncertainty, as well as a possible trillion-dollar infrastructure bill, passing we could see an uneasy market gyration as we wait. Durable Goods number this morning will likely set the stage for the morning session. Economists expect an improvement from last month -0.1 reading to a 0.6%. The DIA has the most significant challenge still below its 50-day average after rallying 4% off last Monday’s low.
Yesterday’s booming recovery rally repaired a lot of the technical damage in the index charts, but traders will still have to watch overhead resistance levels closely. Pricing pressures, product shortages, debt ceiling politics are just a few of the uncertainties on the path forward. So expect the price volatility to remain challenging in the days ahead. With the Dow nearly 1200 points off the Monday low, I would not rule out a possible risk-off day heading into the weekend despite the bullish momentum.
Asian markets traded mostly lower as Evergrande continues to concern investors and China crackdown prohibiting all cryptocurrency exchanges. This morning, European markets trade in the red across the board as they monitor the German election and Evergrande impacts. Ahead of housing data and more Fed speak, the U.S futures currently point to a bit of profit-taking after yesterday’s energetic rally.
Economic Calendar
Earnings Calendar
On the Friday earnings calendar, we only have six verified reports. Notable reports include CCL & JOBS.
News & Technicals’
The People’s Bank of China said services offering trading, order matching, token issuance, and derivatives for virtual currencies are strictly prohibited, vowing a harsh crackdown. An American short-seller banned from trading in Hong Kong for a damning report he wrote on Evergrande, Andrew Left says the Chinese property developer’s debt crisis was “a long time coming.” Evergrande was due to pay $83 million of interest on Thursday for a dollar-denominated bond set to mature in March 2022. Foreign investors typically hold dollar bonds. So even if no payment is made on Thursday, the company will not technically default unless it fails to make that payment within 30 days. The White House on Thursday began to advise federal agencies to prepare for the first government shutdown of the Covid-19 era. The administration’s Office of Management and Budget is alerting federal agencies that they are expected to execute shutdown plans next week, barring a new appropriations bill. Meanwhile, House Speaker Nancy Pelosi and Senate Majority Leader Chuck Schumer announced “an agreement on a framework” with the White House over taxes to pay for the $3.5 trillion reconciliation package. U.S. Treasury yields rose sharply this morning, with the 10-year rising 30 basis points to 1.4406% and the 30-year trading 32 basis points higher at 1.9563%.
Yesterday’s sharp recovery rally repaired a lot of technical damage, but we’re not out of the danger zone just yet. The indexes still have significant overhead resistance, a possible government shutdown, high inflation squeezing consumers, growing product shortages, and those pesky rising Jobless Claims. Toss in tax hikes on the way and a possible Fed taper, and the path forward is understandingly uncertain. With the Dow closing nearly 1200 points above the Monday low, the current momentum favors the bulls. However, the T2122 indicator has quickly recovered to a short-term overbought condition. As we head into the weekend, we can’t rule out the possibility of profit-taking and risk reduction due to the uncertainties. Volatility remains high with housing numbers later this morning and a slew of Fed speakers, including Jerome Powell. So plan your risk carefully and have a wonderful weekend!
The relief rally is underway, but unfortunately, a lot more work is still needed to repair the technical damage in the index charts. Though they gave no beginning date, the Fed says tapering is on the way. China has smoothed the waters in the Evergrande default by essentially nationalizing the company, but there are still questions if the contagion has spread to other companies. So keep an eye on overhead and technical resistance in the index charts as the bears could mount their defense there. With Jobless Claim and PMI ahead, stay focused as it could improve or even reverse the open.
Asian markets traded mixed overnight, with the HSI recovering some of its recent losses, rising 1.19%. However, European markets see modest gains across the board this morning, apparently pleased with the Fed’s actions. U.S. futures point to a bullish gap-up open with an overhead resistance challenge above ahead of earnings and economic data. Relief rallies are fantastic but remember, they can also be quite volatile, so trade wisely.
Economic Calendar
Earnings Calendar
We have the biggest day on the earnings calendar this week, with 23 companies listed. Notable reports include DRI, NKE, AIR, CAN, CAMP, COST, PRGS, RAD, TCOM, & MTN.
New & Technicals’
The FDA authorized Covid vaccine booster shots for people 65 and older. Those 18 through 64 years old who are at high risk of developing severe Covid are eligible. Individuals 18 through 64 years of age who are frequently exposed to Covid either through their work or “institutional” exposure to the virus are also eligible. The ongoing semiconductor chip shortage is expected to cost the global automotive industry $210 billion in revenue in 2021, according to consulting firm AlixPartners. The forecast is up by 91% from an updated forecast of $110 billion in May. The Fed kept benchmark interest rates anchored near zero. Officials indicated they expect to reduce monthly asset purchases “soon” but did not say when. Economic projections pointed to slower overall growth this year but higher inflation than previously projected. Evergarnde surged overnight when China essentially nationalized the company.
We had a great rally yesterday, but a lot more work is necessary to repair the technical damage in the index charts. All four indexes may soon test overhead resistance levels and downtrend, which will likely be the battlezone for the bulls and bears. Remember, we still have the battle ahead in the Senate over the debt ceiling as the House scrambles to pass nearly 5 trillion in additional spending. So expect some political bumps ahead. Speaking of bumps, we have Jobless Claims and PMI numbers this morning that could improve the bullish open futures currently suggest or bring out bears depending on the result. Stay focused and flexible because relief rallies can often have volatile price action that can even include retests of recent lows.
Last night the U.S. House passed a bill to suspend the debt limit and fund the government through early December. Futures markets responded with a sharp reversal from overnight lows despite the bill’s steep challenge in the Senate. Consider that carefully as you approach today’s opening gap up ahead of an FOMC decision. The pop and drop has become a regular occurrence the last couple of weeks, so stay focused and avoid chasing into the gap. After the morning rush of energy, don’t be surprised if the price becomes choppy while we wait on the Fed.
Overnight Asian markets traded mixed but mostly higher as investors watch the fallout of the Evergrande default. However, European markets have a relief rally in mind seeing green across the board. The U.S. points to a bullish gap-up open after a debt ceiling suspension and ahead of the Federal Reserve decision on a taper. So, let’s hurry up and wait!
Economic Calendar
Earnings Calendar
On the Wednesday earnings calendar, we have just nine companies listed. Notable reports include BB, GIS, FUL, KBH, & SCS.
News & Technicals’
The House passed a bill last night that would temporarily fund the government and suspend the debt limit. However, the legislation will face a challenge in the Senate, as Minority Leader Mitch McConnell says Republicans will vote against raising the debt ceiling. If not approved, the government would shut down on Oct. 1, and the U.S. would be unable to pay its bills sometime in October if Congress does not pass legislation addressing both issues. The Fed’s September meeting has been widely anticipated since the central bank is expected to signal that it’s close to announcing the taper of its bond purchase program. But the focus of markets will be squarely on what the Fed now forecasts for interest rates and inflation. According to Jamie Dimon, the top uncertainty for the Fed is the path of inflation. Dimon said that if those hot inflation figures continue into December, U.S. policymakers may have to admit that at least part of the price increases are here to stay. Treasury yields are again falling this morning, with the 10-year dropping 8 basis points to 1.3328% and the 30-year falling 11.5 basis points to 1.8685%.
Another gap up open that closed the day lower kept the VIX elevated into the Tuesday close. However, after the House suspended the debt ceiling and temporarily funded the government until early December, the futures rallied off of overnight lows, pointing to another attempt to pump the market this morning. With the debit suspension facing a substantial challenge in the Senate and facing an FOMC decision on taper, one has to wonder if we’re setting up another pop and drop this morning. The index chart technicals showed little to no improvement yesterday, and I suspect after a morning burst of energy, prices will become choppy as they wait for the Fed. We never know how the market will react to their decision, so remain focused and flexible, prepared for whatever comes our way.
With worries, the Evergrande default contagion could spread significant technical damage to the index charts yesterday. Although the significant overnight reversal certainly relives yesterday afternoon’s short-term oversold condition, it does not relieve the extremely high price volatility danger. Consider the overhead resistance and the very real possibility of substantial intraday whipsaws. The Evergrande problem is just beginning, not over, and we have an FOMC meeting just around the corner. Emotions are high, so trade wisely.
With China markets still closed for a holiday, the NIKKEI sold off 2.17%, monitoring Evergreade developments. This morning, European markets are in relief rally mode, seeing green across the board trying to overcome some of yesterday’s selloff. Ahead of Housing numbers and an FOMC meeting decision just around the corner, the U.S. futures point to a substantial gap up, this time punishing those that held short positions overnight. Stay focused as substantial intraday whipsaws are possible, making for very high-risk trading.
Economic Calendar
Earnings Calendar
We have just 11 companies listed on the earnings calendar, with most of several unconfirmed reports. Notable reports include FDX, ADBE, ACB, AZO, CBRL, NEOG, SFIX.
News & Technicals’
With government funding expiring at the end of September, Treasury Secretary Janet Yellen has said the U.S. would likely not be able to pay its bills sometime in October if Congress does not suspend the debt limit. As a result, Congress will attempt to include a debt ceiling suspension that will kick the can down the road funding the government through December. Economists expect Chinese officials to stem the spillover from liquidity issues at Evergrande, the country’s largest property developer, before it slams the banking system and bleeds into foreign financial centers. But strategists also say Beijing needs to act quickly to restructure Evergrande because markets are becoming nervous and hurting sentiment. Early this morning, the yield on the 10-year Treasury notes dropped 17 basis points to 1.3220%, while the 30-year fell 15 basis points to 1.8625%.
Yesterday created significant technical damage in the index charts, and likely shook investor confidence to the core. However, a substantial overnight reversal is underway to punish any short traders who chose not to take profits during yesterday’s rout. The T2122 indicator was signaling a short-term oversold condition and with a hopefulness that Beijing will step in to curb the credit crisis in the aftermath of the Evergrande default watch for a robust short-squeeze relief rally. That said, be very careful as we approach resistance levels and watch for possible whipsaws because the bear may not give up so easily this time around. The big emotional gap up this morning makes for high-risk long entries, especially when you consider the very high implied volatility and FOMC decision just around the corner. I suspect the rollercoaster ride is not over, considering the considerable decline in bond yields this morning.
The next shoe drops as the liquidity issues of the Evergrande default create shock waves around the world. The dip buyers on Friday will feel considerable pain this morning due to the weekend reversal, and the technical damage to the index charts signals tremendous uncertainty ahead. Finally, with an FOMC meeting just around the corner, will bulls defend the or will the bears continue to push lower at the open of today trading?
Asian markets traded mixed overnight, with the Hong Kong plunging 3.30% and ASX dropping 2.10%. Additionally, this morning, European markets are decidedly bearish, with the DAX, CAC, and FTSE indexes down more than 2%. Finally, U.S. futures point to a mean and punishing weekend reversal, with the Dow signaling a gapping down more than 500 points. So get ready for a wild ride.
Economic Calendar
Earnings Calendar
To kick off the new trading week, we have 17 companies listed on the earnings calendar, but many of them are unconfirmed. So the only notable report today would be from LEN.
News & Technicals’
Evergrande, the Shenzhen-based company, faces a default on its debt burden of roughly $300 billion. The crisis has echoes of the Lehman Brothers bankruptcy, which marked its 13-year anniversary last week, a development that at the time sent shockwaves through global markets. So the question is it a so-called too big to fail, and the government comes in to save the business? In addition, the U.S. is tiring to smooth the tensions with France after they recalled its ambassadors, creating another geopolitical crisis. On Sunday, Treasury Secretary Janet Yellen asked Congress to raise the federal debt ceiling as the risk of default draws near. Remarkably as the debt ceiling looms, the U.S. dollar is on the rise this morning due to the liquidity crisis in China. As a result, bonds are falling hard this morning, with the 10-year dropping to 1.3633% and the 30-year falling to 19030%.
It would seem the liquidity issues of the Evergande default did make its way into the U.S. markets with a big over the weekend reversal. This morning, traders will wake to the SPY well below its 50-day average and the QQQ gapping down to test its 50-day as support. In one fell swoop, the DIA will wipe out nearly two months of gains, and the IWM will gap below its 200-day average. Ouch! The question is, will the bulls defend, or will the bears continue to push the indexes lower. If that were enough uncertainty to deal with, we have an FOMC meeting and the possibility of tapering easy money policies on the lips of the committee. With so much uncertainty, price volatility is likely to become very challenging. Experienced day traders will likely have the edge, and the buy the Friday dip buyers get severely punished. So fasten your seatbelt tightly; it’s likely to be a very bumpy ride today.
Even after the surprise increase in retail sales, the price action produced another punishing whipsaw to test recent lows after gaping up at the open. The wild volatility favors the experienced day traders but has likely left everyone else with little to no trading edge due to the extreme whips. I wish I could say it’s over, but honestly, I think there is more uncertainty to come with the FOMC meeting scheduled for next week. That said, plan your risk carefully as we slide into the weekend.
Asian markets finished the week with a bit of relief rally overnight, facing the enormous uncertainty of an Evergrande default. This morning, European markets trade in the red across the board with modest losses as UK retail sales fall. With a very light day of earnings data and a reading on Consumer Sentiment later this morning, U.S. futures are uncharacteristically muted, pointing to a modestly lower open.
Economic Calendar
Earnings Calendar
We have just 13 companies listed on the Friday earnings calendar, with only two verified. So the only somewhat notable report for today is that from MANU.
News & Technicals’
A key FDA panel meets Friday to debate and vote on Pfizer and BioNTech’s application to offer booster shots to the general public. The meeting comes as some scientists, including at least two at the FDA, say they aren’t entirely convinced every American who has received the Pfizer vaccine needs extra doses at this time. French officials in Washington canceled a gala at their compound over frustration with the new security partnership between the U.S., U.K., and Australia. The development comes after France expressed outrage over a new partnership that, in part, ends a long-standing submarine contract between Australia and France. Snowed under its crushing debt of $300 billion, Evergrande is so huge that the fallout from any failure could hurt not just China’s economy. Contagion could spread to markets beyond China. The U.S. Treasury’s are moving opposite of each other this morning, with the 10-year advancing to 1.334% and the 30-year declining to 1.877%.
After a disappointing Jobless claims report and a surprise increase in the retail sales number, the market once again opened with a gap up but quickly found sellers producing another punishing whipsaw. However, as the day wore on, the bulls buckled down and went to work defending recent price lows in the indexes. Unforunintly, by the end of the day, the price action left us with more questions than answers, with the DIA remaining under its 50-day while the SPY and QQQ held their bullish trends. Additionally, today we will get the latest reading on the Consumer Sentiment at 10 AM Eastern that could create some price volatility. Finally, as we slide into the weekend, the question we all need to answer for ourselves is, do I feel I have an edge? Intraday traders could answer that question, yes, but swing and position traders may feel much more uncertain about the path forward.
