Improved Technical’s, But…

December 22, 2021 by Doug Campbell

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

Rapidly Spreading Variant

December 21, 2021 by Doug Campbell

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

More Technical Damage

December 20, 2021 by Doug Campbell

The selling on Friday created more technical damage as the DIA and QQQ joined the IWM below their 50-day averages.  However, the DIA and SPY still hope they can avoid dipping below the Dec. 1^st low.  Unfortunately, follow-through selling this morning will officially create lower lows in the QQQ and IWM and likely dampen the spirit of the buy-the-dip buyers who will feel the pain of another gap down today.  The highly hyped and hoped-for Santa rally looks to have been stolen by the Grinchy new variant and its possible economic impacts.  Expect volume to drop quickly this week as traders head out for holiday plans.

Asian market closed red across the board as pandemic worries intensified.  European markets are also decidedly bearish, with the FTSE leading the bears down 1.96% this morning as restrictions expand.  Ahead of a light day of earnings and economic data, U.S. futures point to a nasty gap down to begin this holiday-shortened week.  So, buckle up and get ready for a dose of volatility in the open.

Economic Calendar

Earnings Calendar

Kicking off a holiday-shortened week, we have 14 companies listed with a few unconfirmed.  Notable reports include CCL, MU, NIKE, & BLDE.

News & Technicals’

The Netherlands entered full lockdown from Sunday until mid-January, leaving only supermarkets and essential shops open.  In the U.K., government ministers are also refusing to rule out further restrictions over Christmas as cases skyrocket.  President Joe Biden’s Chief Medical Officer Anthony Fauci said on Sunday that it was clear omicron was already “raging through the world.” However, modern said that its currently authorized booster could “boost neutralizing antibody levels 37-fold higher than pre-boost levels,” which it described as reassuring.  However, it also said that a double dose of the booster shot — 100 micrograms, rather than the approved 50 micrograms — was significantly more effective.  Sen. Joe Manchin, a conservative Democrat, said Sunday he won’t support the Biden administration’s “Build Back Better” plan.  Manchin’s decision will likely kill the $1.75 trillion social spendings and climate policy bill as it is now.  Democrats need Manchin’s vote in the 50-50 Senate, plus a tie-breaker from Vice President Kamala Harris.  Treasury Yields traded lower in early Monday trading, with the 10-year slipping to 1.3716% and the 30-year falling to 1.7897%.

The selling on Friday added more technical damage to the index charts, with the QQQ, IWM, and now the DIA trading below their 50-day averages.  Central bank changes and the rapidly spreading pandemic variant may have ended the hope of a Santa Clause rally this year.  Heavy selling in Asia and Europe suggests the short holiday weeks ahead could see challenging price action.  Once again, the buy-the-dip buyers will feel the sting of disappointment with futures pointing to a substantial gap lower.  The QQQ and the IWM look to open lower than the December 1^st lows, but the DIA and SPY still cling to hope a lower low can be avoided.  Keep in mind volume will likely decline throughout the week as traders head out for holiday plans.  Moring price volatility could easily slip quickly into low volume choppy price action unless otherwise inspired by news events. 

Trade Wisely,

Doug

Quadruple Witching

December 17, 2021 by Doug Campbell

Thursday morning’s early bullishness turned to the bear’s favor with yesterday’s pop and drop, leaving behind concerning price patterns on the SPY, QQQ, and IWM.  Today with little inspiration available on the earnings and economic calendars, the quadruple witching could add to the wild price gyrations as we slide into the weekend.  That could make it challenging for the bulls to defend price supports if traders and investors reduce or avoid weekend risk.  Remember, cash is a position!

During the night, Asian markets closed red across the board, with tech stocks sliding south.  This morning, European market trade is mainly in the red market, and infection rates, surges, and tech fall 1.7%.  This morning, U.S. futures point lower across the board as uncertainty raises its ugly head heading into the weekend.  Plan your risk carefully with price gyrations expected due to options expiration.

Economic Calendar

Earnings Calendar

We have a very light day on the Friday earnings calendar with just 12 companies listed but only three confirmed.  Those listed but not particularly notable are DRI, WGO & YCBD.

News & Technicals’

The Consumer Financial Protection Bureau is seeking information from Affirm, Afterpay, Klarna, PayPal, and Zip on the risks and benefits of their products. For example, “Buy now, pay later” services let shoppers defer payment for items, typically throughout monthly installments and with no interest attached.  Affirm’s shares closed down by 11% Thursday, while Australian companies Afterpay, Zip, and Sezzle on Friday dropped 8%, 6%, and 10%, respectively.  Rivian said it expects to fall “a few hundred vehicles short” of its 2021 production target of 1,200 vehicles.  The company said it faced supply chain issues and challenges ramping up production of the complex batteries that power the vehicles.  The updates come alongside Rivian’s first quarterly report as a public company and confirmation of plans for a new $5 billion plant in Georgia that’s expected to come online in 2024.  Adobe’s guidance for its fiscal first-quarter badly missed analysts’ estimates.  The stock plummeted 10%, its second-worst day in the past decade.  In December, it’s the third time that Adobe shares have plunged, putting the stock on pace for its steepest monthly drop since June 2010.  Treasury yields dip slightly in early Friday trading, with the 10-year sliding down to 1.4208% and the 30-year declining to 1.8538%.

Yesterday’s pop and drop increased uncertainty, with the QQQ leaving behind a bearish engulfing candle and opening the door for a possible reversal.  Today is a quadruple witching day, so the market may experience odd price gyrations as the institutions and investors adjust positions.  Unfortunately, we have little to nothing on earnings and economic calendars to inspire direction.  That said, with the uncertainty displayed in the charts heading into the weekend, the bulls may have a tough time defending price support levels.  Sadly, the hoped-for Santa rally may well succumb to the Grinch’s shenanigans.  I wish you all a safe and restful weekend!

Trade Wisley,

Doug

Aggressive Taper

December 16, 2021 by Doug Campbell

With the Fed announcing an aggressive taper and three possible rate increases next year, the market surged, triggering a short squeeze that is now looking to gap setting new record highs in the SPY!  Go figure?  I guess it tells us just how problematic inflation had become! Of course, with a big gap up comes the risk of a pop and drop, so watch carefully for follow-through buying before diving into risk.  We have a quadruple witching this Friday so expect price gyrations to remain challenging.

Asian traded chiefly higher led by Japan surging 2.13%, seemingly celebrating the more hawkish Fed.  European markets are also surging higher after digesting the FOMC decision to taper aggressively.  Ahead of earnings and a slew of possible market-moving reports, Dow futures point to a gap up open or nearly 300 points, and the SP-500 is set for new record highs at the bell.  Remember, big moves like this increase trading risk dramatically, so plan carefully and trade wisely.

Economic Calendar

Earnings Calendar

On the Thursday earnings calendar, we have 15 companies listed with several unconfirmed.  Notable reports include ADBE, FDX, CAN, GTIM, JBL, SCS, & WOR.

News & Technicals’

As Sen. Joe Manchin withholds his support, Democrats are unlikely to meet their goal of passing President Joe Biden’s Build Back Better Act this year.  The delay will have immediate implications, as the enhanced child tax credit is set to expire, and Democrats could instead turn their focus to voting-rights legislation. However, failure to pass the plan could have broader long-term implications, not only on the country’s social and climate policy but also in next year’s midterm elections.  According to the Statens Serum Institut in Copenhagen, omicron cases are doubling every two days in Denmark, with variant expected to overtake delta in the next week.  The rapid spread of omicron in Denmark, where 80% of the population is vaccinated, is an ominous sign for the U.S.  Dr. James Lawler, an infectious disease expert at the University of Nebraska, said the U.S. has just weeks to take action to stem omicron.  House Speaker Nancy Pelosi scoffed at the idea of banning congressional lawmakers and their spouses from owning stock shares of individual companies.  “We’re a free-market economy,” Pelosi said. “They should be able to participate in that.”  Since the beginning of the Covid pandemic, stock purchases by some senators have sparked investigations.  Treasury yields traded mixed in early Thursday trading, with the 10-year dipping slightly to 1.4582% and the 30-year rising to 1.8627%.

The market surged, triggering a short squeeze after the Fed begins an aggressive taper and sees three rate increases next year.  Though this is the opposite of how the market would generally react to a hawkish Fed but may suggest the impacts of inflation is the greatest evil.  Yesterday’s rally didn’t break price resistance levels, but this morning, ahead of potential market-moving reports, the futures point to a considerable gap up that will set new record highs in the SPY and put the QQQ within striking distance.  That said, a big gap sets up a possible pop and drop at the open, so be careful.  Wait until you see some follow-through before diving in headlong.  Expect price volatility to remain challenging as we head into the quadruple witching Friday.

Trade Wisely,

Doug

Highest PPI on Record

December 15, 2021 by Doug Campbell

The highest PPI on record kept the bear engaged yesterday, but surprisingly, the bull worked pretty hard, trying to convince us that inflation doesn’t matter.  Today we turn out attention to retail sales figures and the FOMC decision. Finally, we will learn how big the Taper will be and when the U.S. could expect interest rate increases as the Fed finally moves to fight inflation.  Expect price volatility!  Keep in mind we have several potentially market-moving events Thursday and a quadruple witching on Friday to keep us guessing.

Asian markets traded mixed overnight as investors digested a slew of economic data.  European markets trade mostly bullish this morning as they monitor the Fed decision with modest gains and losses.  Facing a big day of market-moving data U.S. Futures trade flat to mixed as we wait. So let’s get ready to rumble.

Economic Calendar

Earnings Calendar

This Wednesday, we have a bit more activity on the earnings calendar, with 20 companies listed through several remaining unconfirmed.  Notable reports include ABM, BLBD, HEI, LEN, NDSN, REVG, & TTC.

News & Technicals’

Congressional Democrats voted to raise the debt ceiling just before the deadline to mark the first U.S. default.  The Senate passed a borrowing cap increase late Tuesday afternoon, and then the House followed suit early Wednesday.  The bill headed to President Joe Biden’s desk when the Treasury Department estimated the U.S. could run out of tools to pay its bills.  The Biden infrastructure bill included $65 billion to build broadband internet access.  Commerce Secretary Gina Raimondo told CNBC she is confident that every household will have a connection by the end of the decade – if not sooner.  But some experts believe it will cost much more to close the broadband gap. In addition, Chinese companies listed on Wall Street will likely be cut off from U.S. capital markets in the next three years as tensions between Beijing and Washington persist, according to David Loevinger from the TCW Group.  He predicted that by 2024, most Chinese companies listed on U.S. exchanges would no longer be listed in the United States.  Many of China’s top internet companies listed in the U.S. have already undertaken dual listings in Hong Kong. Some high-profile names include e-commerce giant Alibaba, its rival JD.com, search engine giant Baidu, gaming firm NetEase and social media giant Weibo.  Treasury yields rose slightly in early morning trading, with the 10-year climbing to 1.4445% and the 30-year moving up to 1.8301%.

The highest PPI on record kept the bears active yesterday, raising the stakes for the big day of data today.  Before the bell, we have a significant economic data dump, including the highly watched holiday retail sales figures.  Will, the Santa Clause rally make an appearance this year, or will the Grinch sneak in to steal all the goodies?  We will soon find out.  After that, everyone will brace for the uncertainty of the FOMC decision on Taper, future rate decisions, and the chairman’s press conference.  I think it’s fair to say anything is possible, so prepare for more price volatility.  With the VIX elevated and index chart price patterns showing uncertainty, there is a reason for caution as traders and investors digest the data.  As you plan forward, notice several potential market moving reports Thursday morning and a Quadruple Witching this Friday that typically creates unusual price gyrations. 

Trade Wisely,

Doug

Bears Returned to Work

December 14, 2021 by Doug Campbell

The SPY could not hold onto Friday’s record as the bears returned to work, creating minor technical damage in the QQQ and raising uncertainty with bearish candle patterns left behind. In addition, concerns of economic impacts from the rapidly spreading variant dinted investor sentiment.  Today we will turn our attention to the pending PPI report and the beginning of the FOMC meeting.  If the inflation numbers come in hot will, we again choose to ignore?  If we don’t get a significant reaction from the PPI, then look for choppy market conditions as we wait on the FOMC decision Wednesday afternoon.

Overnight Asian markets worried about potential impacts of the new variant closed in the red across the board with led by Hong Kong falling 1.33%.  This morning, European markets trade mixed and muted, keeping an eye on rising pandemic infection rates and central bank decisions.  With a light day of earnings and key inflation data just around the corner, U.S. futures point to mixed open with a notable gap down forming in tech before the data.

Economic Calendar

Earnings Calendar

We have just 15 companies listed on the Tuesday earnings calendar, with several unconfirmed.  Notable reports include ASPU & CLSK.

News & Technicals’

The report said that the recovery to be affected by a new surge in Covid-19 cases, with jet fuel getting hit hard. In addition, its authors noted that the emergence of the new omicron variant had already brought about new restrictions on international travel. Toyota, one of the world’s largest automakers, is planning to invest 4 trillion yen ($35 billion) to build a full lineup of 30 battery-powered electric vehicles by 2030.  It aims to increase global sales of battery electric vehicles by 3.5 million units a year by 2030.  Most of Toyota’s current electric vehicle sales are hybrid EVs powered by an internal combustion engine and battery-operated electric motors.  ACCORDING TO FINANCIAL FILINGS OUT LATE MONDAY, Tesla CEO Elon Musk sold another 934,091 shares of his electric car company, which are worth around $906.49 million.  Musk also exercised options to buy 2.134 million shares of Tesla at the strike price of $6.24 per share granted to him via a 2012 compensation package.  Musk, the wealthiest person globally and was just named Time Magazine’s 2021 Person of the Year, still has millions of stock options that he needs to exercise by August 2022.  Treasury yields tick higher in early Tuesday trading, with the 10-year trading up to 1.4326% and the 30-year inching higher to 1.8145%. 

The bears returned to work on Monday; the rapidly spreading variant fears of economic impacts grow.  Adding to the uncertainty, another key inflation PPI report and the beginning of the FOMC meeting may double the amount of taper and signal rate increases possible in 2022.  The DIA left behind an evening star pattern at price resistance but managed to hold current support levels.  The SPY could not hold onto Friday’s record falling back into a consolidation zone holding just above support. Finally, the QQQ suffered technical damage in the Monday selling, breaking support and falling into the huge gap left behind on December 7^th.  IWM remains the weakest of the indexes nearing a retest of the December 1^st low.  The question for today is, will the bulls find the energy or inspiration to defend, or will the bears gain the edge?  Last Friday, the market chose to ignore the surging inflation. Can they do the same today if the PPI number comes in hot?  We will soon find out.  So, buckle up and prepare for another dose of price volatility.

Trade Wisely,

Doug

Squeaked Out a New Record

December 13, 2021 by Doug Campbell

In defiance of surging inflation, the bulls took it as a buying battle cry and squeaked out a new record high close on the SPY Friday.  Although the premarket is pushing for more with a gap open, it would be wise to remember the Fed may double the taper rate on Wednesday as the committee appears to learn more hawkish going forward.  That said, we can’t rule out price volatility, so watch for the possibility of a pop and drop, whipsaws, and overnight reversals as we wait.

Asian markets began the week trading mixed, pondering the outcome of central bank meetings.  This morning, European markets trade mixed but mostly green with monetary policy decisions in focus.  With a light day of earnings and economic data, the U.S. tries to follow through on Friday’s record, pushing for a bullish gap up open.

Economic Calendar

Earnings Calendar

Kicking off a new week, we have a very light day with 15 companies listed, but several are unconfirmed.  Notable reports include JILL, PHX & REPX. 

News & Technicals’

A new study says that the commercial real estate industry faces an intensifying threat from flooding, likely leading to billions of dollars in increased costs.  Approximately 730,000 retail, office, and multi-unit residential properties face an annualized risk of flood damage in the United States.  The structural damage from flooding is projected to cost $13.5 billion in 2022, according to First Street Foundation, a nonprofit group, and global commercial engineering firm Arup.  The research incorporated sea-level rise but focused more on flash floods, also known as pluvial flooding.  Chinese President Xi Jinping is set to meet virtually with Russian President Vladimir Putin on Wednesday, China’s Ministry of Foreign Affairs said Monday.  The U.S. and other G-7 leaders issued a statement Sunday condemning “Russia’s military build-up and aggressive rhetoric towards Ukraine.”  The lira was trading at 14.33 to the dollar at 1:25 p.m. in Istanbul, a slight recovery from the record low of 14.99 earlier in the day.  Turkey’s central bank has subsequently announced it will intervene directly in the foreign exchange market, selling dollars to prop up the lira.  MotorTrend named the all-electric Rivian R1T the publication’s 2022 truck of the year, beating out other pickups from Ford, General Motors, and Hyundai.  MotorTrend called the R1T “the most remarkable pickup truck we’ve ever driven” in a release announcing the award.  Treasury yields trade slightly lower in early Monday trading, with the 10-year dipping to 1.4735% and the 30-year sliding to 1.8627%. 

With the SPY squeaking out a new record high close on Friday, it could do the job of attracting more money to the market as we move toward the end of the year.  The SP-500 PE ratio is 96% above the historical average, and the Buffet Indicator puts the composite market values to GDP 213% above the historical trend.  That said, the bulls are in control, and bad jobs data, soaring inflation, low productivity numbers will not stand in the way of more buying!  U.S futures point to more records at the open but be careful chasing until you see some follow-through buying.  We can not rule out the possibility of pop and drop with the investors eyeing a Fed taper on Wednesday. 

Trade Wisely,

Doug

Hurry and Wait

December 10, 2021 by Doug Campbell

By the end of Thursday, we had an interesting mix with tech shares sliding south and the defensive names holding their ground. So the question is that a sign of trouble or just another choppy session as we hurry up and wait on the CPI number?  If estimates are correct, we could see an inflation rate at nearly a 40 year high!  If true, will it inspire the bears, or will the market choose to ignore as it did with the big miss on job data last week?  Expect some volatility price action as we react and follow up with a reading on consumer sentiment.

Asian markets finished the week with selling across the board during the night. Likewise, European markets are taking a wait-and-see approach with muted price action and modest gains and losses as they wait.  Here in the U.S., however, the morning pump has begun pointing to a gap up open ahead of the CPI. So the wait is about over, but will it inspire the bulls or the bears?

Economic Calendar

Earnings Calendar

We have a very light day on the Friday earnings calendar with 14 companies listed, but only two confirmed.  Notable reports include ASO and JOUT.

News and Technicals’

Elon Musk sold 934,091 Tesla shares, according to filings with the Securities and Exchange Commission published Thursday.  Musk sold a total of $9.85 billion in Tesla stock last month.  Some of the shares were sold in part to satisfy tax obligations related to an exercise of stock options.  Last week, Chinese ride-hailing app Didi announced that it would delist from the New York Stock Exchange and pursue a listing in Hong Kong.  Delisting means a Chinese company traded on an exchange — like the Nasdaq or New York Stork Exchange — would lose access to a broad pool of buyers, sellers, and intermediaries. In addition, rising political pressure in the U.S. and China is increasing the chance that Chinese stocks listed in New York might be forced off exchanges there.  While the Chinese government has yet to ban foreign listings outright, new rules announced this summer have discouraged what was once a rush of Chinese IPOs in the U.S.  Late Thursday; Fitch Ratings said Evergrande had not confirmed payment of its latest debt obligation, triggering a default. As of Friday afternoon, S&P Global Ratings did not have a statement and referred CNBC to its report Tuesday that said: “default looks inevitable for Evergrande.” Moody’s, another rating agency, did not respond to a request for comment.  “We should have been calling this a technical default for a long time already, but nobody dared,” Alicia Garcia-Herrero, Natixis’ chief economist for Asia-Pacific, said Friday.  Treasury yields moved slightly higher in early Friday trading, with the 10-year rising to 1.5145% and the 30-year moving up slightly to 1.8811%.

Yesterday we had another choppy morning session, but tech shares began to slide later in the day while defensive names held their ground.   However, it was nothing more than a hurry up and wait for the CPI number coming out before the bell today.  Economists expect the index to climb 0.7% from the previous month bringing the number up to a 6.7% inflation rate.  To put that in perspective, if estimates are correct, it will be the highest reading in nearly 40 years!  We will then check the temperature of the consumer with a reading on the sentiment, which estimates suggest declined slightly.  The numbers, of course, are important, but to traders, the only thing that matters is how the market reacts to the data.  On that measure, your guess is a good as mine. Of course, we have been able to ignore bad data lately, so who knows, we could set new records as we head into the weekend.

Trade Wisely,

Doug

Choppy Consolidating Price Action

December 9, 2021 by Doug Campbell

Although yesterday mainly saw choppy consolidating price action, it was a win for the bulls allowing volatility and fear to contract as if the market paused to catch its breath.  Though the SPY is within striking distance of new records, the DIA, QQQ, and IWM still have substantial overhead resistance overcome.  This morning we will turn our attention to the Jobless Claims but don’t be too surprised if price action remains a bit choppy as we wait on inflation details in the Friday CPI report.

During the night, Asian markets traded mixed with talk of U.S. delisting and pandemic risks.  European markets trade primarily in the red this morning, with U.K. officials concerned about infection rates that appear to be doubling every 2 to 3 days.  U.S. futures point to a lower open as investors monitor Chinese delisting risks and the new variant potential impacts ahead of jobs data.

Economic Calendar

Earnings Calendar

On the Thursday earnings calendar, we have 24 companies listed with a few unconfirmed reports.  Notable reports include COST, AVGO, CHWY, CIEN, HRL, FIZZ, KSPN, LAKE, LESL, LULU, MESA, & MTN.

News & Technicals’

The Fed expects to say it will double the pace of its bond purchase taper next week while also likely hinting at more aggressive rate hikes in 2022.  If it meets those expectations, it will mark at least the fourth significant policy change under Chairman Jerome Powell’s leadership. However, with their policy so unpredictable and forecasts proving often unreliable, the Fed could be facing a substantial credibility challenge.  As regulatory risks rise in China, investors should reduce their exposure to Chinese stocks listed in the U.S., according to Jack Siu, chief investment officer for Greater China at Credit Suisse.  “We think it’s prudent for holders of these stocks to … diversify, hedge their exposure, maybe switching to some of the Hong Kong-listed stocks where there’s a dual listing to hedge against this delisting risk,” Siu said.  Many companies targeted by Chinese regulators have ADR listings in the U.S. At the same time, the Securities and Exchange Commission finalized rules that allow it to delist foreign stocks if they don’t meet audit requirements.  The increase in omicron cases in the U.K. is on such a steep trajectory that the country’s health security agency has issued a stark warning.  Omicron cases are doubling every 2-3 days in the country.  “The omicron data is enormously worrying,” immunologist Danny Altmann told CNBC, pointing to the U.K’s 2.5-day doubling time of cases.  Italy’s antitrust regulators fined Amazon $1.28 billion, saying the company harmed competing operators in the eCommerce logistics service.  Regulators around the world are clamping down on Big Tech platforms.  Treasury yields dipped in early Thursday trading, with the 10-year edging down to 1.5024% and the 30-year slipping slightly to 1.8722%. 

Wednesday’s mostly choppy consolidating price action helped the VIX pullback as market fears diminished.  That said, the bulls maintained control throughout the day while still challenged by overhead resistance levels in the index charts.  The SPY is easily within striking distance of a new record, but the DIA and QQQ continue to lag, with more substantial resistance levels yet to recover.  IWM remains the weakest indexes, still struggling to reclaim its 50-day average.  Yesterday we learned that job openings topped 11 million, and this morning we will get the latest reading on the jobless claims. Unfortunately, we will have to wait until after the bell for the most consequential earnings of the day.  As you plan forward, remember we will get a reading on inflation with the CPI report before the bell on Friday.  It will not be a big surprise if the market continues in light choppy price action as we wait. 

Trade Wisely,

Doug