Finishing last week lower, the market will now turn its attention to inflation and the kick-off to earnings with big bank reports on Friday.  In addition, Jerome begins congressional testimony on Tuesday, CPI Wednesday, PPI Thursday, and retail sale and industrial production on Friday.  All of this with the SPY, QQQ, and IWM in a precarious technical position adding to the uncertainty.  I think we can expect price volatility to remain high, so plan your risk accordingly.

Asina markets traded mixed with the HSI rebounding 1.08% overnight.  Across the pond, European markets trade mostly lower, albeit a choppy trading session.  Facing a big week of market-moving data, U.S. futures have recovered from overnight lows, but with treasury yields continuing to rise, the NASDAQ  remains under pressure this morning.  So trade wisely; it could prove to be a challenging week ahead.

Economic Calendar

Earnings Calendar

We have just eleven companies listed and only six verified reports to kick off the new trading week.  Notable reports include AZZ, CMC, and VOXX.

News & Technicals’

U.S. and Russian officials are in Geneva on Monday to begin a series of high-stakes talks this week.  Tensions remain higher than ever over Ukraine, but both sides have already warned prospects for a resolution are low.  Moreover, Russia has been building up its military presence at its border with Ukraine in recent months, leading to heightened concerns that Russian President Vladimir Putin is planning on invading the country.  Moscow denies such claims, saying it has a right to place troops where it likes within its territory.  Draghi’s government, comprised chiefly of politicians from different parties and some technocrats, has appeased markets due to its parliamentary support and reform plans.  However, analysts at Goldman Sachs said Draghi’s departure would “trigger uncertainty regarding the new government and its policy effectiveness.”  Over 1,000 of the country’s parliament and regional representatives will begin voting on Jan. 24.  North Korea is seeking to build up its missile capability to boost its “bargaining position,” says one political analyst, who pointed to the country’s latest attempt last week to test-fire a hypersonic missile.  On Thursday, state media claimed the country had test-fired a “hypersonic missile” the previous day.  “You start the new year, and North Korea does this type of test that shines the light back on it,” John Park, director of the Korea Project at the Harvard Kennedy School, told CNBC’s “Squawk Box Asia” on Monday.  Treasury yields climbed higher in early Monday trading, with the 10-year rising to 1.7975% and the 30-year trading at 2.1469%.

After finishing the week lower, the market will turn its attention to inflation and the congressional testimony of Jerome Powell.  While the DIA remains in a bullish technical position, the SPY, QQQ, and IWM indexes now have some challenges to overcome if the bulls want to remain in control.  The overhead resistance level is substantial, but I’m guessing there are still some very high hopes that earnings season can provide the inspiration needed.  We kick off the big bank earnings on Friday.  The Fed testifying in congress, inflation data, retail sales numbers, and the beginning of earnings season!  Add in geopolitical tensions with Russia and North Korea chiming in, and we have a week of uncertainty ahead.   What could go wrong with that?  Expect uncertainty and price volatility to remain high so plan your risk accordingly.

Trade Wisely,

Doug

On Wednesday afternoon, the bears came back to work reacting to a more aggressive Fed creating some technical damage in the charts.  With the rapid rise in bond yields, the QQQ and IWM suffered the brunt o the technical damage, while the SPY and DIA had only some price support losses at the close.  So now the question is, with this highly speculative and emotional market environment, will we ignore the Fed and rush back in to buy the dip, or will the bears start to show some teeth?

Asian markets had a rough night, closing mainly in the red, with Japan dropping 2.88%.  European markets see only red this morning, with the DAX and CAC both down more than 1% at the time of this report.  However, U.S. futures point to a mixed open ahead of trade and jobless data.  So, prepare for price volatility to remain high as we sort through yesterday’s damage. 

Economic Calendar

Earnings Calendar

We have our biggest day of reports on the Thursday earnings calendar so far this year.  Notable reports include BBBY, CAG, FC, HELE, KRUS, PSMT, SCHN, & WDFC. 

News & Technicals’

Minutes from the Fed’s December meeting indicated that officials were ready to dial back policy help aggressively.  One key aspect, the central bank’s balance sheet, was the subject of extended discussion, with policymakers pointing to a reduction in bond holdings in the coming months.  Members expressed concern about inflation and said the jobs market is nearing full employment.  Stocks slid following the release while government bond yields rose.  Scammers around the world took home a record $14 billion in cryptocurrency in 2021, thanks in large part to the rise of DeFi.  Losses from crypto-related crime rose 79% from 2020.  Cryptocurrency theft rose 516% from 2020 to $3.2 billion worth of cryptocurrency.  Of this total, 72% of stolen funds were taken from DeFi protocols.  New Covid-19 variants are likely to keep emerging until the whole world is vaccinated against the virus, experts warn.  According to data, in low-income countries, only 8.5% of people have received at least one dose of a vaccine.  Experts note that the sharing of vaccinations is not just an altruistic act but a pragmatic one.  Treasury yields moved slightly higher in early Thursday trading, with the 10-year rising to 1.7281% and the 30-year trading up to 2.1210%.

Yesterday’s selloff created some technical damage due to a more aggressive Fed and the rapidly rising bonds.  QQQ took the most damaging hit, with the index cutting right through the psychological support of its 50-day average as well as losing some key price supports.  IWM also had a damaging day, failing at its 50-day and dropping straight through the 200-day.  That said, the selling may have been painful for those that chased into the DIA and SPY indexes this week, but by in large, there was minor price action damage.  However, the SPY fell very close to its 50-day average, and with bond yields continuing to rise in early Thursday trading, I would not rule out a test of that level soon.  Expect volatility to remain high as this highly speculative and emotional market decides to shake off the Fed and rush back in to buy up the dip.  Today we will turn our attention to the trade and jobless numbers as we prepare for the Employment Situation number coming before the bell Friday morning. 

Trade Wisely,

Doug

Big tech names suffered some selling yesterday, with the QQQ leaving behind a bearish engulfing candle at price resistance, and bond yields rose at their fastest new year pace in 20-years!  However, the DIA set another consecutive daily record as rotation into consumer defensive names continues.  Later today, we may get more insight from the Fed minutes as concerns of a more aggressively hawkish committee may raise rates as soon as the March meeting.  Don’t be surprised to see more of a choppy market condition today as we wait.

Asian markets finished the day mixed but mostly lower, with tech stock falling amid rising bond yield pressures.  However, when writing this report, European indexes continue to extend with modest gains across the board.   Ahead of ADP, Petroleum Statis, and the Fed minutes, U.S. futures trade muted with mostly modest declines indicated at the open.

Big tech names suffered some selling yesterday, with the QQQ leaving behind a bearish engulfing candle at price resistance, and bond yields rose at their fastest new year pace in 20-years!  However, the DIA set another consecutive daily record as rotation into consumer defensive names continues.  Later today, we may get more insight from the Fed minutes as concerns of a more aggressively hawkish committee may raise rates as soon as the March meeting.  Don’t be surprised to see more of a choppy market condition today as we wait.

Asian markets finished the day mixed but mostly lower, with tech stock falling amid rising bond yield pressures.  However, when writing this report, European indexes continue to extend with modest gains across the board.   Ahead of ADP, Petroleum Statis, and the Fed minutes, U.S. futures trade muted with mostly modest declines indicated at the open.

Economic Calendar

Earnings Calendar

We have another light day on the hump day earnings calendar with 15 companies listed and only four verified.  Notable reports include RPM, SMPL, & UNF.

News & Technicals’

The updated guidance comes after the CDC faced criticism last week for shortening its recommended isolation period without asking for people to get tested.  The CDC said people are most contagious two days before symptom onset and three days afterward.  Dr. Rochelle Walensky, the CDC’s director, said during a White House Covid update last week that up to 90% of transmission happens during that period.  The company announced that once-prominent Chrysler plans to reinvent itself as an all-electric vehicle brand by 2028.  Those plans begin with Chrysler Airflow and a crossover concept unveiled online for the CES consumer technology show in Las Vegas.  The concept is a preview of an upcoming production vehicle slated for 2025.  Walmart announced Wednesday that it would expand the availability of its InHome delivery service from six million to 30 million households.  InHome allows employees wearing cameras to enter a customer’s home to deliver groceries and other purchases or to pick up returns, even when the customer is not there.  Walmart also said it would hire 3,000 employees to support the service’s expansion.  Treasury yields declined slightly in early Wednesday after surging upward the last two days.  The 10-year dipped to 1.6438%, and the 30-year declined to 2.047%.

Another day of records for the DIA, but with big tech selling off in reaction to surging bond yields, the SPY could not hold onto a new record.  Bond yields rose at their fastest new year pace in 20 years as the market turned its attention to a more aggressively hawkish Fed.  As a result, worries are growing that an interest rate increase may be on the way as early as the March meeting.  Today we may get some insight into the thinking of the Fed with the release of the last meeting minutes later this afternoon.  The bearish engulfing candle left behind on the QQQ index adds a little uncertainty and is beginning to confirm the intuitional rotation we identified into defensive consumer staple names.  If big tech were to see follow-through selling, a break of the 50-day average could signal some uncertainty ahead. 

Trade Wisley,

Doug

We kicked off the new year with a substantial dose of price volatility with a nasty whipsaw that covered more than 200 Dow points from high to low.  However, the bulls won the day shaking off the volatility and powering higher to set new records in the DIA and SPY.  In addition, Apple became the first three trillion market cap company and is now 7% of the SP-500 with a P/E ratio a full 10 points above its 5-year average!  That said, no price seems too high with the bulls pushing for yet another gap up open this morning.  Go bulls.

Asian markets traded mixed but mostly higher during the night, with the NIKKEI surging 1.77%.  European markets are also setting new records today, with the FTSE and CAC both up more than 1.30% at writing this report.  Not to be outdone, U.S. futures point to another gap up open, setting more records ahead of ISM and the job openings report.  So, let’s get ready to rumble!

Economic Calendar

Earnings Calendar

We have just four confirmed reports on the Tuesday earnings calendar.  They include ANIX, MLHR, MLKN, and the only notable being SGH.

News and Technicals’

The U.S. reported a record number of new Covid cases on Monday, with over one million new infections.  In addition, a total of 1,082,549 new coronavirus cases were reported on Monday, according to data from Johns Hopkins University, as the highly infectious omicron variant continues to spread throughout the country and beyond.  On Feb. 15, China will implement new rules that require internet companies holding the data of more than 1 million users to undergo a network security review before listing overseas.  The regulator said that the rules aimed at companies that carry out data processing activities affect national security.  Beijing has introduced a slew of new regulations on the tech sector over the past year as it looks to reign in the power of the country’s giants and stamp out anti-competitive behavior.  Ford’s shares jumped by roughly 140% last year, making it the top-performing auto stock.  Morgan Stanley analyst Adam Jonas said it was “truly a breakthrough year for Ford … easily the most important year strategically for the company since the financial crisis.”  Since auto veteran Jim Farley took the CEO helm more than 15 months ago, the stock is up by more than 200%.  Treasury yields climbed sharply yesterday and continued higher in early Tuesday trading.  The 10-year traded up to 1.6385%, while the 30-year advanced to 2.0304%.

Though we started the day with a nasty whipsaw that coved move that 200 points from the high to the low, the bulls won the day setting new records in the DIA and SPY indexes.  Internals also improved but remain remarkably low considering the valuation of the market.  For example, by the close yesterday, 55% of all stocks remained under their 200-moving averages as we set new records.  The stock leading the way is Apple becoming the first company to top 3 Trillion in valuation.  Despite the stated supply chain issues, Apple has more than tripled its price since the 2020 pandemic.  All on its own, Apple is now 7% of the entire SP-500 and carries a whopping 31.61 P/E ratio, a full 10-points above its 5-year average.  A fantastic feat, but one has to wonder what happens if the company were to stumble in the upcoming earnings?  This morning the DIA, SPY, and QQQ all show bullish patterns, with the futures pushing for another gap up open.

Trade Wisely,

Doug

Though volume was incredibly light in the last week of 2021, the strong price action set the stage for a solid start to the new year.  But, unfortunately, the big gap up open greatly increases the risk to retail traders trying to capitalize on the move.  Remember, strong bullish moves premarket also create the possibility of a pop and drop pattern, so make sure you see some follow-through buying before jumping into the fray.  That said, I want to wish you all a very successful 2022, and let us begin the new year with profits and wise trading decisions.

During the night, Asian markets traded mixed with Evergrande shares halted preparing to release information about the most indebted developer.  This morning, European markets trade is mostly bullish, with only the FTSE showing a modest decline when writing this report.  With reading on PMI and Construction Spending just around the corner, U.S. futures point to s substantial gap open that may set new record highs to begin the new year.

Economic Calendar

Earnings Calendar

To begin trading in the new year, we have just three unconfirmed reports on the earnings calendar with no notable events. 

News & Technicals’

Airlines have canceled more than 15,000 U.S. flights since Christmas Eve.  Bad weather worsened flight disruptions on the first day of the year.  In addition, Omicron infections among crews have thinned staffing at some carriers.  China Evergrande Group shares have been suspended from trading on Monday pending the release of “inside information,” the embattled property developer said without elaborating.  Evergrande, the world’s most indebted developer, struggles to repay more than $300 billion in liabilities.  These include nearly $20 billion of international market bonds deemed to be in cross-default by rating firms last month after they missed payments.  China tightened its monetary policy, embarking on “aggressive deleveraging” as it sought to slash debt in the property sector.  But China’s economy appears to be bouncing from a “mini-downturn” into an upswing as the country eases policy, says investment bank, Morgan Stanley.  As a result, the bank is “more bullish than the consensus” and says it sees GDP growth in China accelerating to 5.5% in 2022.  Finally, Tesla just published its fourth-quarter vehicle production and deliveries report for 2021, and it handily beat analysts’ expectations.  In the fourth quarter, Tesla deliveries amounted to 308,600 electric cars, and full-year deliveries amounted to 936,172 vehicles.  According to a consensus compiled by FactSet, Wall Street analysts had anticipated Tesla deliveries of 267,000 in the fourth quarter and 897,000 for all of 2021.

Although the indexes took a little rest last couple of trading days of the year, they maintained bullish technical patterns that set the stage for a solid start to the new year.  The futures surged during the night, suggesting a substantial gap up at the open on the first trading day of 2022.  That said, we still have to be careful remembering that stock valuations are exceptionally high, with bloated P/E ratios and market internals showing that 56% of stocks remain below their 200-day averages.  The fact remains that the big price swings of late and big gap open market adds significant risk for the retail trader jumping into new positions.  Trade with the upside trend but guard against overtrading and avoid complacency.  We have several potential market moving reports coming our way this week, so plan your risk carefully.  I wish you all a very successful 2022!

Trade Wisely,

Doug

Another day another new record as the bulls extended the year-end run, but they stumbled slightly, failing to hold it into the close. Indeed, the indexes are very extended in the short term, but the DIA, SPY, and QQQ held above new support levels. Unfortunately, volume was again anemic as the index stretched out; traders should keep in mind that it will likely diminish more as we head toward the holiday weekend as they plan forward. Nevertheless, it may be wise to capture some gains if the bears suddenly appear. 

Asian markets traded mixed but mostly lower overnight as pandemic developments tempered investors’ moods. European markets traded mixed this morning but mostly lower at the time of writing this report. However, here in the U.S., the bulls keep trying to hold bullishness in the futures, looking to extend for a sixth straight day.

Economic Calendar

Earnings Calendar

We have eight companies listed on the Wednesday calendar, with only one confirmed report coming from FCEL.

News & Technicals’

According to financial filings published late Tuesday, Tesla and SpaceX CEO Elon Musk has sold another 934,090 shares, or about $1.02 billion worth of his holdings, in his electric car company. Since Nov. 8, Musk has been on a selling spree. The Tesla CEO has said he is partly selling shares to pay a massive tax bill that he anticipates will amount to at least $11 billion. Musk also exercised options to buy nearly 1.6 million Tesla shares at a strike price of $6.24 per share, granted to him via a 2012 compensation package. In addition, batter rivel Northvolt said it’s the first battery of its kind to have been fully designed, developed, and assembled by a homegrown European battery company. The battery cell came off the production line on Dec. 28. Most of the world’s electric car batteries are currently made in the U.S. and Asia, but Northvolt hopes to change this. Finally, there was a little market reaction to the central bank’s 2022 policy document. It said it would monitor risks related to the foreign exchange market and do what is necessary to ensure it runs smoothly. The lira slipped as far as 12.11 against the dollar and traded at 12.03 by 0742 GMT. Despite surging more than 50% last week following state-backed market interventions, it has lost 39% of its value this year. “The CBRT has no commitment to any exchange rate level and will not conduct FX buying or selling transactions to determine the level or direction of the exchange rates,” the bank said. Treasury yields inch lower in early Wednesday trading, with the 10-year declining to 1.4739 and the 30-year trading down to 1.8942%. 

The bulls continued to extend the year-end run on Tuesday but stumbled slightly, pulling back from record territory. However, there was no technical damage as the DIA, SPY, and QQQ held above new support levels by the close of trading. That said, the IWM did leave behind a rather ominous shooting star candle pattern looking like a possible failure below its 50-day-average. The question now is the direction of today’s follow-through. After such a  strong upside performance on low volume, a consolidation or a pullback is not out of the question. However, the bulls seem quite resolute that nothing will stand in their way. Pandemic worries and stretched valuations don’t matter in pushing for another record. As you plan, keep in mind the risk and don’t forget to take some profits just in case the bears make a sudden appearance and expect to volumes to continue to decline as we slide into the New Year.

Trade Wisely,

Doug

With a hefty dose of financial press hype, the Santa Claus rally is underway despite noticeably low volume.  Big tech did the majority of the work, with nearly 60% of stocks still below their 200-day averages.  That said, it looks like we go higher no matter the price or the very bloated P/E ratios.  Stay with the trend but watch closely for bears as we press to the upside with overhead resistance levels above.  The focus is clearly on buy, buy, buy, but we still can’t rule out the possibility of a pop and drop or rejection of new highs like we’ve seen in the recent past.  Trade wisely.

Overnight Asian markets closed decidedly bullish, with the NIKKEI leading the way up 1.37%.   On the other hand, European markets are more cautious on the holiday-thinned session.  With little on the earnings and economic calendar, futures have rallied off of overnight lows, with the premarket pump pointing to more records at the open.  An all too familiar occurrence of 2021!

Economic Calendar

Earnings Calendar

We have a very light day on the Tuesday earnings calendar with only one confirmed somewhat notable report from CALM. 

News & Technicals’

CDC officials said the guidance is in keeping with growing evidence that people with the coronavirus are most infectious two days before and three days after symptoms develop.  The decision also was driven by a recent surge in Covid-19 cases, propelled by the omicron variant.  In addition, the change aimed at people who are not experiencing symptoms.  People with symptoms during isolation or who develop symptoms during quarantine are encouraged to stay home.  President Joe Biden pledged to aid governors struggling with the omicron variant of Covid-19  but acknowledged the states would need to take the lead in controlling the pandemic.  Speaking just before a meeting Monday with some of the nation’s governors, Biden said: “There is no federal solution.  This gets solved at a state level.” However, Biden reiterated some of the promises he made last week, including the federal government’s purchase of 500 million rapid coronavirus tests.  Some of America’s best-known VC firms have difficulty recruiting people to lead their new European outposts.  U.S. VC heavyweights, including Sequoia, Bessemer Venture Partners, Lightspeed, and General Atlantic, have opened new offices or started notable expansions in the last 12 months.  Apple closed its stores in New York City to indoor traffic due to a sharp rise in Covid-19 cases.  Customers ordering online aren’t restricted from picking up products outside retail locations.  The move, which affects its locations in Manhattan, Brooklyn, the Bronx, and Staten Island, isn’t a complete shuttering of stores like the company has done in the past to slow the spread of the virus.  Treasury Yields dipped slightly in early Tuesday trading, with the 10-year dipping to 1.472% and the 30-year declining to 1.88%.

Yesterday’s rally set more new records as the financial press turned up the hype of the Santa Clause rally.  Interestingly, this occurred with low volume and many stocks still trading below their 200-day moving averages.  So once again, a select few tech names were able to do the majority of the lifting as the gap between the have and the have-not stocks grows.  That said, it seems a forgone conclusion that the bulls will continue to push upward no matter the price and the strongly overvalued P/E ratios.  However, be careful to chase already extended stocks as we approach overhead resistance levels that harbor bears. 

Trade Wisely,

Doug

The SPY managed another headline-grabbing record before Christmas with a low volume push.  The DIA recovered more than 1200 points on declining volume in just four trading days, with the NASDAQ surging nearly 800 points.  The question to be answered is whether they can hold and prove a higher level of support.  With price resistance levels above, will the bulls have the energy with spiking pandemic worries, or will we find entrenched bears ready to go back to work?  Plan carefully because low-volume markets add an extra element of risk.

Asian markets closed mixed overnight, with regional markets closed for Christmas.  European market edge higher incautious and thinned holiday trading environment as pandemic restrictions increase across Europe.  However, the U.S. markets have pre-market pump engaged with a substantial gap up at the open signaled. 

Economic Calendar

Earnings Calendar

To begin the last week trading week of the year, we have a very light day on the earnings calendar with just five listed and only two confirmed.  Not particularly notable reports include QIPT and AEY.

News & Technicals’

U.S. airlines have canceled hundreds of flights over the Christmas holiday, citing increased Covid cases among crews.  Airlines offered flight crews extra pay to pick up trips.  Carriers have asked the CDC to lower its recommended quarantine period for fully vaccinated staff.  Scotland, Wales, and Northern Ireland have already started new curbs to help stop the spread of the omicron variant, mainly focusing on indoor mixing.  But England has held off on adding to current stay-at-home orders and increased mask-wearing.  Johnson will reportedly digest new data on Monday looking at case rates, hospitalizations, ICU figures, and deaths.  The Christmas holiday has meant official figures have paused over the weekend, but the U.K. reported a new record of 122,186 infections over 24 hours on Friday.  Cases of Covid-19 are likely going to keep surging as the rapidly spreading omicron variant continues to tick up across the globe,  U.S. infectious disease expert Dr. Anthony Fauci said Sunday.  Every day it goes up and up.  The last weekly average was about 150,000, and it likely will go much higher,” Fauci said on ABC’s “This Week.”   Chinese authorities will allow full foreign ownership of passenger car manufacturing beginning Jan. 1, 2022.  According to a release Monday from the Ministry of Commerce and the National Development and Reform Commission, the top economic planning agency.  Treasury yields slide lower in early Monday trading, with the 10-year dipping to 1.4807% and the 30-year ticking lower to 1.880%.

Stretching out last Thursday on light holiday volume, the SPY managed to squeak out another headline-grabbing record before Christmas.  The question for today can they hold these price levels with pandemic infection numbers spiking around the world, making for some challenging holiday travel. Nevertheless, index technicals have improved, with only the IWM languishing below the 50 and 200-day averages.  However, getting above the averages is just the first step, and now we need to see some proof they can find some price support and hold above them.  Expect volume to be lighter than usual this week due to the holiday unless the bears get active, increasing fear.  As we challenge resistance levels in the DIA and QQQ, and IWM, we can’t rule out the possibility of entrenched bears.  After such a huge point gain in just 4-days the long risk is high, so plan your risk carefully as we make our way toward the new year.

Trade Wisely,

Doug

Yesterday’s significant reversal move improved technical’s for the SPY and QQQ indexes as they recovered 50-day morning averages, but overhead resistance remains a concern. So, on the one hand, the recovery was nice to see; on the other hand, it significantly increased the risk of additional whipsaws or reversals as we slide toward the uncertainty of the Christmas shutdown.  We turn our attention to potential market-moving economic reports with market emotion high.  Anyone’s guess how we react, but remember, the volume may quickly decline as traders take off for holiday plans.  Plan your risk carefully!

During the night, Asian market trade mixed but mostly higher, with travel stocks suffering the uncertainty of rising infection rates.  Across the pond, European markets trade flat to slightly positive, keeping a close eye on possible pandemic impacts.  U.S. futures currently suggest moderate gains and losses at the open, facing a morning of market-moving economic data.  Expect price volatility as we react and then choppy conditions due to holiday travel.

Economic Calendar

Earnings Calendar

We have just 12 companies listed on the Tuesday earnings calendar, with several unconfirmed.  Notable reports include KMX, CTAS, PAYX.

News & Technicals’

CES, which serves as an annual showcase of new trends and gadgets in the technology industry, has attracted more than 180,000 people from around the world to a sprawling array of casinos and convention spaces in the past. However, Amazon and its smart-home unit Ring said they would not be onsite at next month’s event due to the “quickly shifting situation and uncertainty around the Omicron variant” of coronavirus.  U.S. wireless carrier and conference sponsor T-Mobile also said the vast majority of its contingent would no longer be going. In addition, its chief executive would not deliver a keynote speech.  The CDC currently recommends isolation for 10-days after a positive Covid test. Delta wants to cut that in half to five days.  The call comes as Covid cases spike and the heavily mutated omicron variant spreads rapidly, straining testing supplies.  The head of Germany’s navy said China’s rapid naval buildup underlines a desire by leaders in Beijing to project strength.  Vice Adm. Kay-Achim Schonbachsaid China is increasing the size of its navy by the equivalent of the entire French navy every four years.  Schonbach commented that the German frigate Bayern is docked in Singapore as part of an effort to safeguard security and stability in the region.  Treasury yields ticked lower on Wednesday morning, with the 10-year trading down to 1.463% and the 30-year dipping to 1.876%. 

Yesterday’s significant reversal improved technicals, with the SPY and QQQ reclaiming their 50-day averages.  However, there remain questions about overhead resistance levels, and the sharp rally just increased the risk considerably for those jumping back into long positions heading into the long weekend.  Today we turn our attention to the economic reports of GDP before the bell and Consumer Confidence, Existing Home Sales, & Petroleum Status during the morning session.  Hopefully, price action can calm down with these potentially market-moving reports and the high emotion shown in the price action; anything is possible!  When considering positions, it would be wise to remember that volume is likely to decline as traders shut down for holiday plans putting them at risk during Christmas closure.

Trade Wisley,

Doug

The rapidly spreading variant engaged the bears yesterday with a nasty gap down that created new lows in the QQQ and IWM while the DIA and SPY held above early December lows.  This morning the futures point to another big overnight gap putting traders willing to rush back in at high risk. However, plan your risk carefully, with volumes likely to decline heading into the Christmas shutdown and the pandemic economic uncertainty.  Expect the whipsaws and overnight reversals to continue as we approach the significant overhead resistance levels.

Asian markets closed green across the board last night, led by the Nikkei surging 2.08%.  European markets also want to shake off the pandemic concerns showing green across the board this morning.  With another light day of earnings and economic reports, U.S. futures point to another big overnight gap keeping the risk high for those willing to rush back into the fray.  Don’t rule out the possibility of a pop and drop at the open and watch for head fakes and intraday whipsaws as volume contracts due to holiday travel.

Economic Calendar

Earnings Calendar

We have 15 companies listed on the earnings calendar as we head toward the holiday shutdown.  Notable reports include AIR, APOG, BB, CAMP, FDS, GIS, NEOG, & RAD.

News & Technicals’

The Biden administration will deploy 1,000 medical personnel from the military to back up hospitals if they face a wave of omicron patients in January and February.  The White House also purchases 500 million at-home Covid tests that Americans can order for free through a website starting in January.  On Monday, the Centers for Disease Control and Prevention reported that omicron is rapidly spreading and is now the dominant variant representing 73% of U.S. cases.  In January, the Senate will vote on the Build Back Better Act despite Sen. Joe Manchin’s opposition to the bill, Majority Leader Chuck Schumer announced.  Manchin dealt a crushing blow to President Joe Biden’s top domestic priority, which would invest in the social safety net and green-energy programs.  It is unclear if Democrats will try to pass a smaller bill that includes only the Build Back Better Act.  The enhanced child tax credit, which the bill would renew, expires at the end of the year.  According to data published Monday by the Centers for Disease Control and Prevention, the rapidly spreading omicron variant is now the dominant Covid strain in the U.S., representing 73% of sequenced cases.  Omicron has displaced the previously dominant delta variant, which CDC data shows is now an estimated 26.6% of sequenced cases for the week ending December 18.  Treasury Yields edged higher in Tuesday morning trading, with the 10-year trading up to 1.420% and the 30-year rising to 1.849%.

Fear of possible economic impacts from the rapidly spreading variant brought the bears yesterday, creating new lows in the QQQ and IWM.  However, DIA and SPY held at lows higher than the beginning of December, providing some hope that a relief rally could soon occur.  Unfortunately, the technical damage has left significant price resistance levels above that may now harbor entrenched bears willing to defend.  As volume begins to contract due to the Christmas travel, the question to be answered is wheather traders weary of the wild volatility will be as willing to take the high risk of rushing back into risk.  This morning futures are attempting to inspire buyers with another big overnight gap.  Will it trigger a short squeeze, or could it be just another pop-and-drop trap?  The risk is high so plan your risk carefully, my friends.

Trade Wisley,

Doug