A Reminder that Bears STILL Exist

July 20, 2021 by Doug Campbell

Yesterday’s selloff was a reminder that bears still exist and how quickly sentiment can shift with these lofty company valuations.  Though the SPY and the QQQ experienced substantial selling, there is no significant technical damage.  However, that is not the case with DIA, as it joined the IWM below the 50-day average.  We now have overhead price resistance in all the index charts, and with the VIX above a 22 handle, expect volatile price action to challenge even the most experienced traders.  With valuations so high, inflationary pressures on the rise amid earnings season, the threat of a Covid rebound will be a lot for the market to sort out. 

Asian markets closed overnight red across the board as China keeps the benchmark lending rate unchanged.  European markets are trying to rebound this morning, but so far, the gains are modest as traders worry about more Covid impacts.  As earnings events ramp up, U.S. futures point to a substantial gap up as we bounce back.  The question is, will it be a sustained relief rally or a short-lived dead cat bounce.  Buckle up the road ahead could be pretty challenging.

Economic Calendar

Earnings Calendar

The number of earnings ramp-up with more than 30 companies listed stepping up to report quarterly results.  Notable reports include NFLX, ALLY, CMG, CNI, HCA, CFG, HAL, ISRG, KEY, OMC, PM, UAL, TRV, UBS, & SYF. 

New & Technicals’

Bitcoin holders are squealing from the feeling as the popular crypto drops below $30,000, wiping away about $100 billion in valuation.  Another billionaire is making a quick trip to space today as Jeff Bezos prepares for launch in a flight expected to take about 11 minutes to complete.  The United States is asking folks to avoid travel to the UK due to the rising covid numbers.  Warnings from the CDC and the State Department reached Level 4, which is the highest warning level. 

Yesterday was a painful reminder that bears still exist and that complacency can damage retail trader’s accounts.  The DIA joined the IWM below their 50-day moving average, suffering the brunt of the technical damage.  The SPY tested its 50-day but found buyers by the end of the day to hold it as support.  Though the selling was painful for big tech, the QQQ remains significantly elevated its 50-day averages maintaining the title of the strongest of the indexes.  However, as the market works for a bounce this morning, we have created substantial overhead price resistance levels.  With earnings numbers on the rise and the VIX elevated above a 22 handle, expect price action to be challenging and volatile. Significant morning gaps, quick intraday whipsaws, and full-on reversals are likely as the market struggles to balance high valuations and inflationary pressures as Covid increases threaten the recovery.  Plan your risk carefully and remain alert and agile as the market tries to sort out the details.

Trade Wisely,

Doug

Rapidly Rising Inflation

July 16, 2021 by Doug Campbell

Yellen says we should expect several months of rapidly rising inflation. At the same time, Powell defends the FOMC easy money policies, and the bond king, Jeffery Gundlach, says the U.S. Dollar is doomed in the long term due to deficits in budget and trade.  That said, the trends in the DIA, SPY, and QQQ remain bullish, while the Absolute Breadth Index bounces along the bottom.  Retail sales numbers will be in focus this morning and remember we have an FOMC rate decision next week as earnings ramp up.

Asian markets traded mixed but mostly lower to end their trading week as the Bank of Japan holds a steady monetary policy.  European market trade cautiously mixed this morning while U.S. rally off overnight lows suggesting a bullish open across the board ahead of retail sale data.  I wish you all a great day of trading profits and a wonderful weekend!

Economic Calendar

Economic Calendar

We have just nine verified reports on the Friday earnings calendar.  Notable reports include SCHW, KSU, & STT.

News & Technicals’

Janet Yellen says she expects the U.S. economy will see several more months of rapidly rising inflation.  However, she goes on to say it will ultimately fall back to more normal levels.  Some analysts now suggest we will enter a longer-term deflationary market cycle after the inflationary surge.  That sentiment would seem to support Jeffrey Gundlach’s ideas, the so-called bond king, which yesterday said the U.S. dollar is “doomed” over the long term.  The Doubleline Capital CEO went on to say,” the dollar is going to fall pretty substantially” due to increasing U.S. trade and budget deficits.  Treasury yields rose Friday morning, with the 10-year up three basis points to 1.329% and the 30-year climbing 3.9 basis points to 1.958%.

Although we saw a little selling in the tech sector pulling back, we experienced no technical damage across the DIA, SPY, and QQQ indexes. Unfortunately, the same can not be said about the IWM creating a lower low after failing at its 50-day average.  Futures we slightly lower overnight after Yellen’s comments that she expects several more months of rapid inflation.  That being the case, Jerome Powell defended the easy money policies of the FOMC and planned to keep the pedal to the metal pumping $120 Billion per month.  As you plan forward, keep in mind an FOMC rate decision is on for next Wednesday.  Until then, let the good times roll, staying with the uptrend while avoiding complacency. 

Trade Wisely,

Doug

Cost of Living

July 15, 2021 by Doug Campbell

Powell calms the waters with more transitory inflation talk in Congress while at the same time the Social Security Office prepares for the highest cost of living adjustment in decades due to inflation.  Hmm, you can’t make this stuff up, folks!  Beginning today, up to 36 million families will begin receiving more stimulus checks from the IRS each month through the end of the year, and the FOMC will continue to print $120 billion per month to keep the party going.  Markets will have a lot to digest this morning, with several economic reports as the number of earnings events ramp up.

Overnight Asian markets closed the day mixed with the NIKKEI down 1.15%, while the SHANGHAI rose 1.02% after China reports its economy grew in the second quarter.  However, across the pond, European markets see red across the board this morning.  Ahead of a big day of earnings and economic data, U.S. futures currently point to mixed open with the Dow looking lower and Tech Sector trying to hold on to some green. So buckle up; it could be a bumpy ride as we react to all the data from this extended market condition.

Economic Calendar

Earnings Calendar

On the Thursday earnings calendar, we have our biggest day of the week of reports with 35 companies listed.  Notable reports include AA, AOUT, BK, CTAS, MS, PBCT, PGR, TSM, THC, USB, UNH, & WIT. 

News & Technicals’

Seniors could receive the highest cost of living adjustment in decades.  Based on estimates from the Consumer Price index data, the increase could be as high as 6.1%.  Hmm, how can that be when Jerome Powell told us yesterday that inflation is transitory and that the Fed will continue printing $120 billion per month.  About 36 million families will start receiving monthly IRS checks starting today through the end of 2021!  The Biden Rescue Plan increases the payments up to $3600 per child.  General Motors warns Bolt EV owners not to park the vehicle inside or to charge them unattended overnight due to a fire risk.  Approximately 69,000 Bolt’s between 2017-2019 are involved in the recall.  Treasury yields fell this morning after the Jerome Powell testimony in Congress yesterday.  The 10-year fell to 1.317% this morning, with the 30-year sliding 1.94%

Markets bulls surged in early morning trading yesterday but could not hold onto the early gains pulling back by the close. As a result, the QQQ squeaked out a 0.16 cent gain while the DIA, SPY & QQQ ended the day with modest losses.  However, the only index suffering technical damage was the IWM after failing its 50-day average, creating a lower high within a downtrend pattern.  This morning we will get the latest reading on the Jobless Claims, Philly Fed MFG, Empire State MFG, Import/Export Prices, Industrial Production, and more Jerome Powell talk in Congress.  If that’s not enough, we will also have a busy morning of potential market-moving earnings reports.  So buckle up and expect anything to occur as the market sorts through the data in a very extended condition.

Trade Wisely,

Doug

Mild Selling

July 14, 2021 by Doug Campbell

With the CPI coming in at its highest level since 1981, markets experienced some mild selling contrary to the frantic buying of late, leaving behind a bit of caution in the candle patterns.  The most prominent being the potential shooting star pattern on the QQQ.  I say possible because to be valid, the QQQ price must follow through to the downside today to confirm the signal, which may be a tall order with the recent big tech buying enthusiasm.  That said, stay on your toes, avoiding complacency with another key inflation data point on its way this morning.

Asian markets traded mixed but mostly lower overnight due to inflation jitters of hot CPI numbers in the U.S.  European markets trade modestly lower this morning as they cautiously monitor inflationary data.  Ahead of the PPI numbers and big bank earnings, the U.S. futures are trying to put on a brave face pointing to flat to modest gains at the open.  However, the PPI could easily inspire the bulls or bears, depending on the report. So stay focused and flexible and be ready for price volatility as the market reacts.

Economic Calendar

Earnings Calendar

On the Wednesday earnings calendar, we have about 20 companies listed that expect to report today.  Notable reports include BAC, BLK, C, DAL, INFY, PNC, & WFC.

News & Technicals’

The CPI came in at the highest level since 1981 and slightly dampened buying enthusiasm with the worry the Fed may have to act sooner than expected.  Today we will hear for BAC, C, WFC as the big investment banks report results.  According to reports, hospitalizations are once again on the rise as the delta variant spreads throughout the country. In addition, Apple is reportedly ramping up production in anticipation of a big wave of phone upgrades to take advantage of 5g.  Norwegian Cures Line is suing the Florida surgeon general to end the vaccine passport ban because they say it will force them to cancel cruises with its first sailing scheduled for August 15^th. 

Yesterday’s mild selling didn’t create much technical damage to the index charts, but it did offer a little caution by leaving behind some concerning candle patterns.  The QQQ left behind a shooting star pattern that can sometimes signal a top, but it would require a bearish follow-through today for that to be valid.  With the recent wild enthusiasm to buy big tech no matter the price, we will need a bit more proof of bearish price action to become worried.  However, the IWM failing at its 50-day average creates some technical damage if it tries to lead the markets lower.  We will get another reading on inflation this morning with the Producer Price Index, and if that were to come in higher than expected, it could overshadow the big bank earnings rolling out this morning.  On the other hand, if the PPI comes in less than expected, I would not be surprised to see the market shrug-off inflation worries.  Stay focused and flexible, prepared for price volatility as the market reacts to the data.

Trade Wisely,

Doug

3rd Quarter Earnings

July 13, 2021 by Doug Campbell

First out of the gate early this morning, PepsiCo kicked off the 3^rd quarter earnings season by crushing the estimates and raising forecasts.  Soon to follow will be the possible market-movers JPM & GS setting new high records in the DIA, SPY, and QQQ  in anticipation.  Let’s hope companies can produce the results that support these very lofty valuations!  Except for considerable price volatility and possible morning gaps as traders and investors react to the data.

Overnight Asian markets mostly higher, with the HIS leading the way, advancing 1.63%.  Europe markets are taking more of a wait-and-see stance with mixed and muted results this morning.  Ahead of big bank reports and the latest reading on CPI, U.S. Futures trade mixed but primarily flat.  There is a lot at stake this earnings season due to the high valuations so consider your risk carefully as the fireworks begin.

Economic Calendar

Earnings Calendar

Today we kick off the 3^rd Quarter earnings season with 12 companies listed to report.  Notable reports include CAG, FAST, GS, JPM, KRUS, & PEP.

News & Technicals’

Kicking off the 3rd quarter PepsiCo crushes estimates, and the company raises forecasts seeing a return of demand from foodservice customers.  We will hear earnings results from both major market movers JPM and GS this morning.  France, the Netherlands, Greece, and Spain all announced new restrictions on Monday in a bid to curb the rise in Covid infections.  At the same time, the U.K. confirmed that it would lift its remaining restrictions on July 19^th despite its infection rate remaining high.  According to Husein Kanji, a partner at Hoxton Ventures, ‘this feels a  lot like 1999,’ with tech venture investors writing bigger checks than ever before.  A record 249 firms achieved $1 billion “unicorn” valuations in just the first half of 2021, doubling those produced last year.  Treasury yields moved higher this morning, with the 10-year up four basis points to 1.368% and the 30-year climbing just one basis point to 1.994%.

The DIA, SPY, and QQQ continue to surge to higher highs with little regard to the inflated valuations as the frenzy of buying continues.  New record highs have become so commonplace this year it’s barely newsworthy. However, the 3^rd quarter earnings expectation energy is palpable with the big question can companies produce enough to support these lofty prices?  Technically the T2122 4-week new high/new low ratio signals a possible over-bought condition, while the Absolute Breadth Index points to an extreme divergence with the index leaders.  Though it’s become very redundant, I will continue to suggest we stay with the trend as long as it lasts but avoid over-trading and guard against complacency.  We can expect some wild earnings fueled price volatility with substantial morning gaps, so plan your risk accordingly.

Trade Wisely,

Doug

The bears are still around and hungry.

July 7, 2021 by Doug Campbell

Yesterday we were reminded that bears are still around and hungry.  It was all big tech holding up the market yesterday as most everything else slipped sideways or south.  Their market dominance is clear, but one must wonder how much longer tech can maintain this buying pressure as valuations soar and P/E ratios hit new record highs.  If nothing else occurred yesterday, the bears gave us a warning not to become complacent.  Stay with the trend but stay focused and flexible because bear attacks and price volatility could signal a top is near.

Asian markets closed mixed overnight in a choppy market session.  European markets are primarily bullish this morning, keeping an eye on the muted global sentiment.  Ahead of the JOLTS number and the FOMC minutes, U.S. futures are trying to shake off yesterdays selling as the QQQ gaps to yet another record high as the big tech party continues. 

Economic Calendar

Earnings Calendar

On the Wednesday earnings calendar, we have just eight companies listed and only four verified reports. Notable reports include MSM, SAR & WDFC.

News & Technicals’

With mass pandemic vaccinations continuing across the country, health officials warn we could see a harsh flu season this winter due to the minor season in 2020.  Biden is now suggesting door-to-door efforts to increase the number of vaccinations in areas where there are low acceptance rates.  At the same time, France is preparing a new law to make the Covid vaccination compulsory for those in the health care industry.  The European Central Bank is now raising its forecast to a 4.8% growth rate this year with 4.5% in 2022, raising some inflationary concerns.  China’s crypto-crackdown called for the shutdown of a company “suspected” of providing software services for virtual currency transactions.  With the FOMC minutes just around the corner, the 10-year Treasury yield dipped this morning to 1.338%, and the 30-year fell to 1.967%.

The bears reminded us yesterday that they are still around and hungry, with the IWM testing its 50-day average and the DIA suggesting a possible test.  However, trends remain bullish, and the rally back yesterday afternoon raises the question if the bears have the energy to follow through on yesterday’s threat.  That said, the VIX indicated a modest increase in fear, and the Absolute Market Breadth Index saw its first increase in days on the selling wave. So there may be a reason some caution but no reason to run for the door just yet. Instead, consider this a warning shot over the bow not to overtrade or become complacent with valuations so elevated.  We know a correction is way overdue and could begin at any time but stay with the trend until then.

Trade Wisely,

Doug

DIA in Striking Distance

July 6, 2021 by Doug Campbell

With the DIA in striking distance of new highs and the SPY and QQQ closing at new records, there was a lot to celebrate this weekend as the economy recovers.  Unfortunately, as the old saying goes, what goes up must come down.  Maybe not today, this week, or even this month, but it’s tough to ignore the extraordinary valuations with the SP-500 P/E Ratio’s 93% above the historical 10-year average.  Stay with the trend but avoid overtrading and have a plan to protect your capital should the bears come roaring back.

Overnight Asian markets closed mixed but mostly lower as Australia holds rates unchanged.  European markets trade flat to slightly lower this morning as oil prices surge to a six-year high after OPEC talks fail to reach a production deal.  After a week of daily record highs, U.S. futures are a bit muted this morning, suggesting a mixed to a flat open.  Keep in mind volume could be light as traders extend their vacation.

Economic Calendar

Earnings Calendar

As we begin a short week of trading, we have 13 companies listed on the calendar with only three verified reports.  The only notable report for the day is the earnings from SGH. 

News & Technicals’

After a very bullish run, the SPY and the QQQ begin the week at new record highs, but according to Chris Harvey from Wells Fargo Securities, a ‘day of reckoning is coming for high flying tech stocks.  The reasoning for his call is the very high multiples for growth stocks in an inflationary environment.  Oil prices jumped to a six-year high after a contentious OPEC meeting that yielded no production deal.  Former U.S. Energy Secretary Dan Brouillette, “you could easily see oil hitting $100 a barrel and potentially even higher.’  As we wait for the FOMC minutes coming out on Wednesday afternoon, Treasury Yields moved slightly higher in early morning trading.  The 10-year ticked higher to 1.434%, and the 30-year advanced to 2.055%. 

Technically speaking, we begin the holiday-shortened trading week in pretty good shape.  The DIA is within striking distance of a breakout to a new all-time high while the SPY and the QQQ rest confidently at new records.  However, after such a massive 3-week rally, it may not be all sunshine and roses.  Valuations are incredibly high, with the SP-500 sitting at a P/E ratio 93% above the historical 10-year average.  Big tech-led this rally, and perhaps there is an argument that due to all the money, printing companies can support these lofty valuations.  However, it is also easy to argue that a substantial correction is overdue and that the recent rally is nothing more than a blowoff top.  My suggestion is to stay with the trend but be very careful not to overtrade because drinking too much of this Kool-aid could be costly should sentiment shift.  Don’t become complacent and have a plan to protect your capital should the bears come roaring back.

Trade Wisely,

Doug

Employment Situation

July 2, 2021 by Doug Campbell

After setting the 35^th record high in the SP-500 this year, all eyes will turn their attention to the Employment Situation number released an hour before today’s open.  Analysts estimates target 702,000 new jobs and a 5.6% unemployment rate as companies rush to fill open positions.  After the reaction to the data, don’t be surprised if the volume quickly declines and price action becomes light and choppy as computers shut down and fireworks begin to light up for the 3-day weekend.

Overnight Asian markets traded mixed with Hong Kong falling 1.80% by the close.  Across the pond, European indexes cautiously inch higher this morning, waiting on the U.S jobs data.  With bullish anticipation, U.S. futures try to inspire more buying as they trade with modest gains across the board.  I wish you all a safe and wonderful weekend as we celebrate Independence Day.  Let’s all take a moment to reflect on the sacrifices of those that came before us to win our freedom and those standing in harm’s way today protecting us and ensuring that blessing!

Economic Calendar

Earnings Calendar

The Friday calendar is a light one with just five listed companies and only one verified report coming from WTER, which is not particularly notable unless you happen to own the small-cap stock.

News & Technicals’

According to reports, a new Tesla Model S Plaid caught fire while operating with the driver behind the wheel.  Apparently, the driver noticed smoke coming from the rear of the car and had to force his way out of the vehicle because the locks malfunctioned.  The fire required two firefighter crews more than three hours to put the fire out.  Billions of venture capital dollars flowed into online grocery start-ups in 2021, attempting rapid delivery services.  With more than $10 billion invested in all the start-ups, some suggest the sector is now overcrowded.  We have a new space race underway with Richard Branson aiming to beat Jeff Bezos to space with plans to launch his own Blue Origin rocket on July 20^th with himself aboard.  Micron CEO sees immense growth ahead for semiconductors as electric vehicles become what he called ‘data centers on wheels.’

Today is all about the Employment Situation report with analysts targets of 702,000 new jobs and the unemployment rate falling to 5.6%.  The question to be answered is if that will keep the bulls engaged, or will the bears see that as a sign of an overheating economy?  There is no doubt that the bulls are in control, with the SP-500 setting its 35^th record high this year!  With the FOMC continuing to print, the melt-up continues even as the Absolute Breadth Index continues to decline.  A growing number of analysts and large investors warn of a substantial correction, so don’t become complacent but stay with the trend as long as it lasts.  After we get past today’s reaction to the jobs, data volume is likely to drop like a rock as everyone’s attention will turn toward the 3-day weekend.  I wish you all a safe and happy 4^th of July!

Trade Wisley,

Doug

DIA Technical Picture Improves

July 1, 2021 by Doug Campbell

Though the DIA has struggled as the weakest index of late, the bulls went to work yesterday defending its 50-day average, and the technical picture improves. Big tech continues to dominate with the SPY, closing at its 34^th record high of the year.  The Absolute Breadth Index shows a substantial divergence from the indexes and suggests we stay focused and avoid complacency.  However, stay with the bullish trend as long as this buying frenzy continues.

Asian markets traded in the red across the board overnight as a private survey shows Chinese factory activity slowed in June.  European markets trade mixed but near the flatline this morning as they wait on the jobs data.  U.S. futures are trying to kick off the second have of the year bullishly as we wait on Jobless Claims, PMI, ISM, & Construction Spending numbers. 

Economic Calendar

Earnings Calendar

We have a light day on the earnings calendar as we begin the 3^rd quarter with just 11 companies listed on the earnings calendar with several unconfirmed. Notable reports include WBA, AYI, &MKC.

News and Technicals’

As China celebrates the anniversary of its Communist regime, it will not accept sanctimonious preaching from others.  FINRA said it fined Robinhood $57 million and ordered the stock trading app to pay nearly $13 million in restitution to thousands of clients.  FINRA considered the widespread and significant harm suffered by customers, including millions of customers who received false or misleading information from the firm.  Due to semiconductor shortages, analysts estimate automakers sold about 4.5 million vehicles in the second quarter as signs of a slowdown continue.  Treasury yields are slightly higher this morning ahead of the Jobless claims, with the 10-year trading up to 1.475% and the 30-year advancing to 2.101% early this morning.

The technical picture of the indexes continues to improve, with the bulls defending the 50-day average as support on the DIA.  Although the QQQ suffered a little selling, the index remains exceeding strong, as is the SPY, with the tech giants leading the way.  That said, momentum continues to be a bit of a concern, with more stocks stuck slipping sideways down than those moving bullishly as the Absolute Breadth Index declines as the indexes push upward.  This glaring divergence may mean nothing, but it should serve as a warning not to overtrade or become complacent if the bulls stumble or simply run out of energy.  However, until that occurs, stay with the trend and ride this buying frenzy as long as it lasts.  Remember, as you plan forward, we have a three-day weekend ahead, and volumes could become light, and price action could become choppy rather quickly after economic data releases as traders hit the road to celebrate the 4^th.

Trade Wisely,

Doug

33rd Time this Year!

June 30, 2021 by Doug Campbell

With a mighty shove by the tech giants, the SP-500 solidified a new record high for the 33^rd time this year, with the QQQ set new closing records as well. Unfortunately, most of the move was again encapsulated in the morning gap as we spent the rest of the day choppy sideways in a narrow range.  As the 2^nd quarter comes to an end, watch for the possible end-of quarter-window dressing with jobs data in focus for the rest of the week.

Overnight Asian markets traded mixed in a choppy session.  European markets trade with modest declines across the board this morning as inflation and the rising delta variant become widespread on the continent.  Ahead of earnings and economic data, futures point to a modestly lower open as we wait on private payroll data.  As you plan forward, keep in mind the Employment Situation number Friday morning and the upcoming 3-day holiday weekend that could see declining volumes.

Economic Calendar

Earnings Calendar

As we finish up the 2^nd quarter, we have 11 companies listed on the earnings calendar, with a few that are not verified.  Notable reports include BBBY, MU, STX, FC, GIS, and SJR.

News & Technicals’

On this last trading day of June and the end of the 2^nd quarter jobs, data will come into focus for the rest of the week.  Warren Buffett is one of the only big investors to recognize the highly uneven impact on small businesses during the pandemic.  Bailouts and massive amounts of federal money flowed to big businesses while the small on-street business was primarily ignored as regulators forced their closure.  There have been calls to ban British visitors into the U.K. in order to stop the spread of the delta variant that is already widespread on the continent.  HSBC says Asia faces a‘ bumpy road’ ahead as Covid cases remain high. Still, vaccine rollouts offer hope as countries like India, Indonesia, Malaysia, and Nepal continue to deal with elevated infection rates.  Treasury yields are moving lower this morning, with the 10-year down slightly to 1.475% and the 30-year dipping to 2.087%. 

For the 33^rd time this year, the SP-500 closed at a new record high, with tech giants proving the majority of the lift. But, of course, the QQQ also set a new record while the DIA and IWM turned slightly lower but holding on to crucial technical support levels.  The next three days’ jobs data will keep traders and investors on their toes and guess if the results will continue to support these high prices.  The SP-500 P/E ratio is now 89% above its historical 10-year average, and one has to wonder just how high can we go with the Fed keeping the stimulus pipeline continuing to pump out 120 billion per month.  Futures trade slightly lower this morning with ADP, Chicago PMI, Pending Home Sales, and Petroleum Status number on deck.  Please don’t rule out the possibility of the end-of-quarter window dressing and plan your risk carefully as we slide toward the Employment Situation number and the holiday shutdown.

Trade Wisely,

Doug