Squeaked Out a New Record

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Squeaked Out a New Record

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

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Hurry up and Wait

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

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Choppy Consolidating Price Action

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

All-or-Nothing Market

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All-or-Nothing Market

It would appear the all-or-nothing market is back as investors chose the ignore the lowest productivity reading since 1960 as they rushed to buy something.  The Dow has recovered nearly 1800 points since the low of December 1st as we turn our attention to the JOLTS and petroleum data coming out later this morning.  Evergrande has now officially defaulted missing payment within the grace period. Still, the question remains if the impacts will spread to the U.S.  Plan your risk carefully with the indexes in such an extended short-term condition. 

During the night, they continued to bounce lead by the Nikkei up 1.42% shaking off variant worries and ignoring the Evergrande default.  European markets trade mixed this morning after two days of solid recovery.  U.S. trade in a volatile premaket session reacting to the news from Phizer claiming the new variant can be neutralized with three vaccine doses.  Buckle up for another gap higher.

Economic Calendar

Earnings Calendar

We have 27 companies on the hump day earnings calendar, with several unconfirmed reports included in that number.  Notable reports include GME, A LOT, CPB, DTC, KFY, PLAB, RENT, RH, SPWH, THO, UNFI, VRA, & WEBR. 

News and Technicals’

Facebook is again deferring their return to the office for three to five months.  Janelle Gale, Meta’s vice president of human resources, said that Meta recognizes some staff isn’t ready to come back. In addition, Google said last week that it has indefinitely delayed its January return-to-office plan globally.  It’s been two weeks since South Africa reported the omicron Covid variant to the World Health Organization.  The variant is now spreading around the globe and is now in more than 50 countries.  Experts have scrabbled to gain more of an understanding about the new variant, which is a heavily mutated strain of the coronavirus.  Day by day, more information and early data have emerged regarding the spread of the variant.  President Joe Biden’s nominee for comptroller of the currency, Saule Omarova, has withdrawn her name from Senate consideration for the post.  Omarova’s withdrawal came after concerns from Republican senators about her writings as a legal scholar and her background of being raised in the former Soviet Union.  Biden condemned what he called the “inappropriate personal attacks” on Omarova, “that was far beyond the pale.”  Tesla CEO Elon Musk said he’s against President Joe Biden’s social and climate spending bill, pointing to his concerns with the “insane” federal deficit.  “Honestly, I would just can this whole bill,” Musk said late Monday during The Wall Street Journal’s CEO Council Summit. “Don’t pass it; that’s my recommendation.”  The bill would provide subsidies for electric vehicles built by union workers and funding for vehicle-charging stations.  Treasury yields are slightly lower in early Wednesday trading, with the 10-year falling to 1.4614% and the 30-year drifting lower to 1.7857%.

The all-or-nothing market continues as traders and investors rush back in, shaking off the new variant concerns.  In fact, the miss on the trade deficit numbers and lowest productivity since 1960 was ingnored in the rush to buy something.  Evergrande has now officially defaulted, failing to make the payment before the lapse of the grace period.  Other developers could soon follow as Chinese real estate values decline sharply.  The question yet to be answered is, will this contagion spread to the U.S. housing market?  One thing for sure is that a 300 billion default will have substantial ramifications.  With indexes stretched and testing price resistance levels, we will turn our attention to the JOLTS number this morning.  With the Dow having risen nearly 1800 points off the Dec 1st low, a rest or pullback is not out of the question. 

Trade Wisely,

Doug

Strong Rally

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Strong Rally

The bulls maintained the strong rally yesterday and plan to continue this morning with another big gap open.  Be careful chasing this morning gap because we will have gone from oversold to overbought in two trading days!  With overhead resistance and downtrend still in play, today’s gap sets up the possibility of a pop a and drop.  I plan to take advantage of the move by taking profits rather than getting caught up in a fear of missing out buying spree.  Gaps are gifts; take the gift and bank it!

Asian markets surged overnight as the world shook off concerns of China’s variant economic impacts and money easing plans.  European markets are also decidedly bullish this morning as pandemic fears fade.  The U.S. futures point to a considerable upside gap to challenge overhead resistance levels ahead of earnings, trade, and productivity data. However, price volatility remains high, so plan your ricks carefully as Russian and Chinese aggression accelerates.

Economic Calendar

Earnings Calendar

On the Tuesday earnings calendar, we have 28 companies listed with several unconfirmed.  Notable reports include TOL, AVAV, AZO, CASY, CONN, DBI, PLAY, & SFIX.

News & Technicals’

Intel plans to IPO its self-driving unit in the U.S. by mid-2022.  It acquired Mobileye, an Israeli autonomous driving firm, for $15.3 billion in 2017. As a result, Intel’s share price has fallen from $68 in April to less than $50 in December.  Founded in Jerusalem in 1999, Mobileye is one of Israel’s biggest success stories in tech.  Evergrande plans to forge ahead into a restructuring that would include all of its offshore public bonds and private debt, according to analysts.  The troubled real estate developer, snowed under by $300 billion of liabilities, also said Tuesday that it’s setting up a risk management committee, which will play a role in mitigating and eliminating future risks for the firm.  Analysts say that sentiment has also been buoyed by China’s move towards an emphasis on easing.   President Joe Biden is expected to give Russian President Vladimir Putin a stark warning against attacking Ukraine during Tuesday’s video call.  Experts say time is running out for the U.S. to prevent further hostilities between the neighbors.  The call is expected to take place around 3 p.m. London time.  There are widespread concerns about Russian military troop movements on the border with Ukraine and increasingly aggressive rhetoric towards Kiev from Moscow.  Toyota will build a new $1.29 billion battery plant for electrified vehicles in North Carolina, and the company announced Monday afternoon.  The automaker expects the facility to produce enough lithium-ion batteries for 200,000 vehicles when production begins in 2025.  Treasury Yields rose in early Tuesday trading, with the 10-year edging higher to 1.444% and the 30-year climbing to 1.7784%. 

Yesterday’s strong rally improved technicals, and the futures market suggests another big gap this morning as the recovery continues.  However, I would be a little cautious rushing into this morning’s pop until we see some follow-through buying after the open.  My concern is that we may have moved too far too fast, setting up a possible pop and drop.  Don’t get me wrong, having picked up SPY calls yesterday morning, I love the big gap and will take advantage of it to take profits at the open. However, going from oversold to overbought in just two trading days, with overhead resistance and downtrends still in play, is a good enough reason for caution in my book.  Toss in Russian and Chinese aggression escalating, and I will consider this gap a gift!

Trade Wisely,

Doug

Precarious Technical Condition

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Precarious Technical Condition

With stock, futures mixed, the VIX elevated, we kick off the week with the indexes in a precarious technical condition.  Uncertainty of the spreading new variant economic impacts, a Fed sounding more hawkish, a possible Evergande default close at hand, and more price volatility is likely to us guessing in the week ahead.  While a relief rally seems possible, we can not rule out the possibility of more selling to retest recent lows.  If we do rally, keep a close eye on price resistance levels for entrenched bears that are may not be as willing to give up as quickly as they have in the recent past.

Asian markets traded mixed but mostly lower overnight, with tech shares falling and a possible Evergrande default weighing on investors.  On the other hand, European markets are in relief rally mode this morning, showing green across the board.  With a light day of earnings and economic data, U.S. futures currently suggest a mixed open, but with an elevated VIX head fakes, whipsaws, and overnight reversals are not out of the question.

Economic Calendar

Earnings Calendar

We continue to lighten up the earnings calendar kicking off this week with just 15 companies listed and several unconfirmed.  Notable reports include COUP, DLHC, HQY, MDB, & SAIC.

News and Technicals’

The Fed is likely to decide to double the pace of its taper to $30 billion a month at its December meeting, comments from Fed officials suggest.  Initial discussions could also begin about when to raise interest rates and by how much next year.  Fed Chair Jerome Powell, in testimony last week, supported the idea of a faster taper and made a dramatic shift when he said the big concern with another wave of the virus or new variant was inflation.  Evergrande is back in the news as the shares plunge nearing default.  Having made three 11th-hour coupon payments in the past two months, Evergrande again faces the end of a 30-day grace period on Monday, with dues totaling $82.5 million.  But a statement on Friday saying creditors had demanded $260 million and that it could not guarantee funds for coupon repayment wiped a fifth off its stock’s value on Monday.  Evergrande is grappling with over $300 billion in liabilities, meaning a disorderly collapse could ripple through the property sector and beyond.  The Japanese tech giant’s Alibaba share price fell from 5201 yen ($46) to 5103 yen on the Tokyo stock market.  At one point, shares fell as low as 5,062 yen, which is their lowest level since June 2020.  Portfolio companies, including Alibaba, Arm, and Didi Chuxing, are all experiencing periods of uncertainty that have hit their market value. Treasury yields climb slightly in early Monday trading, with the 10-year trading up to 1.3733% and the 30-year rose to 1.7026%

We begin the week with indexes in a precarious technical condition as the Fed begins sounding more hawkish and the uncertainty of the new variant impacts as it spreads across the county.  While the T2122 indicator continues to suggest a relief rally may soon occur, we can not rule out the possibility of more selling.  With the VIX closing above a 30 handle on Friday, price volatility will likely remain high, making head fakes, whipsaws, and overnight reversals possible.  Remember, resistance levels can harbor bear defensive lines, and it’s unlikely they will be willing to give up as quickly as they have in the recent past.  Also, keep in mind the punishing price action of the last couple of weeks has stripped a lot of money from the buy-the-dip buyer’s accounts and likely diminished their tolerance for risk in the process. Finally, the possible default from Evergrande and the uncertainty of Chinese issued stocks adds another layer of uncertainty traders will have to grapple with this week.

Trade Wisely,

Doug

Employment Situation

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Employment Situation

As new cases of the variant come in from around the country, the market now appears willing to shrug off some of the uncertainty. Therefore, we will not turn our attention to the monthly Employment  Situation number that expect a solid number according to several reports.  If so, it should inspire the bulls to continue the relief rally.  However, if the hype misses expectations, the bears might find inspiration.  Whatever occurs, it will be interesting to see if there is a willingness to hold positions through the weekend due to the uncertainty.

Asian markets struggled for direction overnight, trading mixed with modest gains and losses though seemed to celebrate the delisting of Didi in the United States.  This morning European markets edge higher as investors closely monitor economic data and news on the new variant.  With jobs numbers just around the corner and a light day of earnings, U.S. futures have rallied off of overnight lows, currently suggesting a flat open.  However, the results of the employment number could change things quickly and dramatically before trading begins.  So, buckle up for move volatility!

Economic Calendar

Earnings Calendar

On the Friday earnings calendar, we have a light day with just 12 companies listed on the calendar, and several of them are unconfirmed.  Notable reports include BIG, GCO, & HIBB.

News and Technicals’

Minnesota, Colorado, New York, and Hawaii confirmed new cases of the omicron variant on Thursday.  New York City Health Commissioner Dr. Dave Chokshi said the Empire State cases indicate community spread of the variant. In addition, the first U.S. case of the virus was confirmed in California on Wednesday.  The House and Senate passed a bill to prevent a government shutdown.  The president plans to sign the measure before the end of Friday and prevent a lapse in federal funding. The legislation will keep the government running through Feb. 18.  Shares of Didi soared as much as 14% in U.S. premarket trading Friday.  Didi says it plans to delist from the New York Stock Exchange “immediately.”  The Chinese ride-hailing firm plans to pursue a listing in Hong Kong instead.  Tesla Chief Executive Elon Musk has sold another 934,091 shares of the electric vehicle maker worth $1.01 billion to meet his tax obligations related to the exercise of options to buy 2.1 million shares, and regulatory filings showed on Thursday.  Following a flurry of options exercise, Musk still has an option to buy about 10 million more shares at $6.24 each, which expires in August next year.  Treasury yields pulled back slightly in early Friday trading, with the 10-year dipping to 1.4444% and the 30-year trading at 1.7644%.

Yesterday was a nice relief rally that avoided the emotional swings even as more confirmed cases of the new variant across the country. So now we turn our attention to the monthly Employment Situation number, which many expect to come in with solid results.  With the uncertainty of the government shutdown kicked down the road until the 18th of February, a good employment number may set the stage for more relief rallies.  However, if the highly anticipated number misses expectations, look out for more price volatility.  If we do rally today, it will be interesting to see if the bullishness will hold as we slide into the weekend.  With the new variant’s high volatility and considerable uncertainty, willingness to hold risk through the weekend could bring on a wave of profit-taking into the close.

Trade Wisley,

Doug

Nasty Intraday Whipsaw

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Nasty Intraday Whipsaw

News of the first confirmed case of the omicron variant in the U.S. brought out the bears and produced nasty intraday whipsaw.  Those following the talking head dip-buying mantra were likely punished severely on the news-driven reversal.  With the VIX closing above a 31 handle, we should expect price action to remain very challenging even if a relief rally begins.  If and when we begin to recover, keep a close eye on the overhead resistance levels because this kind of move will encourage the bears to stay aggressive.  Plan your risk carefully!

Overnight Asian markets closed mixed as the uncertainty of the path forward concerns investors.  European markets trade decidedly bearish this morning, seeing nothing but red across the board.  However, U.S. markets once again point to a gap open, but plan carefully because price action could include some nasty whipsaws throughout the day. 

Economic Calendar

Earnings Calendar

We have 28 companies listed on the earnings calendar this Thursday, but a number of them are unconfirmed.  Notable reports include COO, DG, DLTH, EXPR, JOAN, KIRK, KR, LE, MRVL, OLLI, SIG, SWBI, TLYS, ULTA, VRNT, & ZIMZ.

News and Technicals’

The Biden administration tightens travel rules to and within the U.S., requiring all in-bound international passengers to test for Covid within 24 hours of departure.  It’s also extending its mask requirement on all domestic flights and public transportation through March 18.  The changes are part of a broader plan to bolster its arsenal of tools in the nation’s fight against the virus as the world enters its third year of the pandemic.  “Frankly, omicron will dominate and overwhelm the whole world in three to six months,” Singapore doctor Leong Hoe Nam told CNBC’s “Street Signs Asia.”  New vaccines targeting omicron are a “nice idea” but won’t be practical because of the transmissibility of the strain, he said.  Experts don’t know precisely how contagious the highly mutated omicron variant is, but the virus’ spike protein — which binds to human cells — has mutations associated with higher transmission and decreased antibody protection.  Treasury yields traded mixed early Thursday, with the 10-year ticking higher to 1.4392%, and the 30-year slipped lower to 1.7718%.

The first confirmed case of the omicron variant created a nasty intraday reversal increasing the technical damage in the index charts.  The DIA dropped below its 200-day average, and the SPY dipped below its 50-day average.  Yesterday saw the first substantial selling in the QQQ since the market pullback began dropping through its 34EMA-average.  As the selling intensified, moving toward the close, the VIX spiked above recent highs, closing above a 31 handle.  Not that big of a surprise considering the more than 900 point travel in the Dow during the day.  Options traders will have the additional challenges of high-priced options due to the implied volatility spike.  Although the T2122 indicator suggests an extreme short-term oversold condition, traders should continue to plan for very challenging price volatility even if a relief rally begins. 

Trade Wisely,

Doug

Significant Technical Damage

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Significant Technical Damage

Although Nasdaq has held firm in the recent selloff, the DIA and the IWM have suffered significant technical damage. Moreover, with only 35% of stocks holding above their 200-day averages, it is truly amazing that the QQQ has held solely on the back of just a handful of tech giants.  That said we the T2122 indicator now suggests a short-term oversold condition.  However, with so much uncertainty, including a looming debt ceiling and budget battle along with a Fed taper, there is still a lot of uncertainty to keep the price action very challenging.

Asian markets rebounded with modest gains overnight, with oil prices surging higher.  European markets are decidedly bullish this morning, attempting to recover amid the wild uncertainty.  Ahead of ADP and ISM data, U.S. futures point to a substantial gap up at the open but expect volatility to remain challenging as the Fed testimony continues in Congress.

Economic Calendar

Earnings Calendar

On the Wednesday earnings calendar, we have 26 companies listed, with several of them unconfirmed.  Notable reports include CRWD, DAKT, FIVE, PDCO, PVH, RY, SMTC, SNOW, SPLK, SNPS, & VEEV.

News and Technicals’

Failure to get the first dose of a coronavirus shot by Jan. 16 in Greece for anyone aged 60 and above will result in a monthly fine of 100 euros ($114).  As of Tuesday, about 62% of the Greek population is vaccinated against the virus.  Greece’s announcement comes at a time when other European nations are also considering compulsory vaccination. In addition, oil prices have the scope to move “a lot higher” from current levels given the world’s deep reliance on fossil fuels, says Jefferies’ Christopher Wood.  Last year, Wood said fossil fuels met 84% of the world’s energy demand. That’s despite the “political attack” in recent years that has removed the incentive to invest in fossil fuels.  Moreover, oil saw its worst day of 2021 on Friday amid a global market rout triggered by the World Health Organization’s Thursday warning about the omicron variant.  In related news, the White House is considering stricter international travel testing requirements to slow the spread. Finally, Elon Musk described a dire situation with SpaceX’s development of Raptor rocket engines the day after Thanksgiving in a companywide email, a copy of which was obtained by CNBC.  The Raptor production crisis is much worse than it seemed a few weeks ago,” Musk wrote.  Raptor engines power the company’s Starship rocket, with Musk adding that SpaceX faces “genuine risk of bankruptcy if we cannot achieve a Starship flight rate of at least once every two weeks next year.”  In early Wednesday trading, Treasury Yields surged, with the 10-year climbing to 1.5005% and the 30-year rising to 1.8363%. 

The last few days of selling have created significant technical damage in the DIA and IWM charts.  Yet, at the same time, the SPY and the QQQ have suffered little to no damage other than breaking elevated support levels.  In truth, other than the price volatility, the Nasdaq held up remarkably strong based almost solely on the back of the tech giants.  The T2122 indicator finally reached an extreme short-term oversold condition yesterday and does suggest a relief rally could soon begin.  However, with the debt ceiling and budget deadlines fast approaching, the Fed moving toward taper and the new variant uncertainty expect the volatility to remain high.  So, be prepared for substantial intraday whipsaw, head fakes, and news-driven overnight reversals as we learn more about broad economic impacts. 

Trade Wisely,

Doug

Buy the dip?

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Buy the Dip

The talking heads continue to sing in chorus to buy the dip, but It would seem their wide-eyed speculation will punish them this morning with a significant overnight reversal.  Emotions are very high, and the truth is we still don’t know anything about the new variant and if it will have economic impacts!  However, we do know that markets hate uncertainty!  Uncertainty increases price volatility and, at the same time, removes a trader’s edge. Therefore, I continue to suggest caution.  Avoid gambling, watch, wait, protect your capital until your edge returns. 

Asian markets struggled for direction overnight mixed results, with the Nikkei down 1.63% followed by Hong Kong down 1.58%.  European markets trade decidedly lower across the board this morning as traders grapple with the sharply declining global sentiment.  U.S Futures have bounced off of overnight lows but continue to suggest a substantial reversal at the open, with Powell and Yellen headed to the hill to testify. So buckle up for another day of uncertainty.

Economic Calendar

Earnings Calendar

We have a bit more earnings activity today, with 31 companies listed with several unconfirmed.  Notable reports include AMBA, BNED, BOX, CHS, CTRN, FRO, GFS, MOMO, HPE, NTAP, CRM, & ZS. 

News & Technicals’

Moderna CEO Stephane Bancel told the Financial Times that he expects vaccines to be less effective against the new strain. As a result, Asia and European stocks fell on Tuesday; U.S. futures were also in the red.  The moves lower come after European and U.S. stocks attempted a relief rally on Monday.  Many unknowns surround the new omicron Covid variant; early signs indicate it’s more transmissible, but we don’t yet know what risks it poses to public health. However, global market sentiment nosedived on Tuesday morning amid fears that the Covid-19 vaccine currently in use could be less effective against the new omicron variant.  Fed Chair Jerome Powell believes that the omicron variant of Covid-19 and a recent rise in coronavirus cases pose a threat to the U.S. economy.  Worries over the new variant could “reduce people’s willingness to work in person, which would slow progress in the labor market and intensify supply-chain disruptions,” he said in prepared remarks.  Treasury Secretary Janet Yellen will join Powell on Tuesday in testifying before the Senate Banking Committee on Tuesday.  Treasury Yields declined sharply in early morning trading, with the 10-year falling nine basis points to 1.4324%nd the 30-year declining six basis points to 1.8139%.

Although we saw a nice bounce yesterday as the traders tried to shrug off the possible impacts of the new variant.  Though there is a chorus of talking heads suggesting buy the dip, I continue to be cautious because we don’t really know anything at this point.  Currently, markets are highly speculative and combine that emotional energy with significant uncertainties, and anything is possible.  The current price volatility favors intraday traders can prove t be very damaging to swing trading accounts.  This morning we look to open with a significant overnight reversal that will be proof positive there is no edge in buying the dip in wide-eyed speculation.  Gamble if you must, but as for me, I will stand aside, protect my capital and wait for my edge to return.

Trade Wisely,

Doug