No Stopping the Bulls

November 8, 2021 by Doug Campbell

Although the index charts have gone parabolic, there is no stopping the bulls from setting records daily.  Logic would suggest that the odds of a substantial pullback are growing, so watch carefully for the classic pop and drop possibility as the futures point to a gap up open.  That said, it’s also not wise to fight a relentless bull because there is no telling how long it can push higher.  However, avoid extended stocks with the fear of missing out and plan your risk carefully because when the bears do show themselves, the move lower could be swift and painful. 

Asian markets began the week trading mostly lower, and as energy prices and rapidly declining real estate prices worry traders.  European markets trade mixed but mostly lower this morning with muted gains and losses.  However, with earnings fanning the fire, U.S. futures show nothing but green, with the Dow pushing for another record open. 

Economic Calendar

Earnings Calendar

To kick off a new trading week, we have 200 companies listed on the earnings calendar.  Notable reports include PYPL, DDD, ACAD, CBT, CXW, COTY, FWRG, FTK, FRPT, NVTA, LMND, OCN, PSTL, APTS, RBLX, SDC, TME, TSEM, TTD, TRIP, SPCE, WOW, & ZNGA.

News & Technicals’

Since August, Walmart and Silicon Valley start-up Gatik said that they’d operated two autonomous box trucks, without a safety driver, on a 7-mile loop daily for 12 hours.  “Taking the driver out is the holy grail of this technology.” Gatik CEO Gautam Narang, who founded the company in 2017, told CNBC.  In a Twitter poll launched Saturday, Musk said: “Much is made lately of unrealized gains being a means of tax avoidance, so I propose selling 10% of my Tesla stock. Do you support this?”  The billionaire gave people the option to vote “Yes” or “No” and pledged to abide by the poll results, whichever way it went.  Some 3,519,252 people responded, and 57.9% of them voted for “Yes.”  The U.S. on Monday will lift a pandemic travel ban on international visitors from more than 30 countries after 19 months.  New rules will replace the ban, requiring international visitors to show proof of vaccination and a recent negative Covid test.  Exceptions include travelers under age 18 and those traveling from countries with low vaccine availability.  Treasury yields begin the week slightly higher, with the 10-trading up to 1.474% and the 30-year rising to 1.8999% early this morning.

Though the SP-500 current P/E ratio is 99% above the historical average, there is no stopping the bulls at this point.  During the 1999 tech bubble, the same ratio hit 132%, and I guess this record-setting market may also want to take that record.  The T2122 indicator also indicates a short-term overbought condition, so with the futures gapping to new records, be on guard for the possibility of a pop and drop pattern.  That said, avoid fighting a relentless market because there is no way to know when it might finally stop.  However, stay focused because, with this extension, the reversal down could be very punishing.  Remember, market internals indicate the economy is slowing due to the crushing impacts of inflation.  Nationally gas prices are up $1.32 per gallon in just the last 11 months, and I suspect they only go higher as we head into winter.  That adds cost to everything we do or buy, robbing consumers of disposable income every day it’s allowed to continue.

Trade Wisely,

Doug

Going Parabolic

November 5, 2021 by Doug Campbell

As traders rush to buy tech, it’s hard to ignore that the QQQ chart is going parabolic as we look for another gap up in the QQQ this morning.  Analysts expect today’s employment situation number to come in very bullish, so maybe the buying party continues into the weekend.  However, carefully plan your risk and remember to take some profits noting that the economic situation in China continues to worsen.  Odds of a pullback continue to grow, so don’t be the last the last dollar in the door chasing extended stocks.

Overnight Asian markets mostly sold off with the news of another developer default as their real estate crunch continues. However, European markets show modest gains across the board after the BOE maintained rates but began tapering easy money policies.  Ahead of the employment situation report and a lighter day of earnings, the Dow and Sp-500 futures trade muted with the Nasdaq suggesting a gap to new another new record. 

Economic Calendar

Earnings Calendar

We get a little break from the breakneck pace of earings this week with just 105 companies listed and a good number of them unconfirmed.  Notable reports include AMCX, CGC, D, DKNG, ELAN, FLR, GCI, GT, GRPN, HMC, JCI, DOC, & PNW.

News & Technicals’

Analysts expect the economy to have added 450,000 jobs in October, according to estimates from Dow Jones. That’s up sharply from 194,000 in September. In addition, they see hourly wages rising by 4.9% on a year-over-year basis. That will be a significant number since the market sees inflation and whether it will continue to run hotter than expected.  The jobs report is back in focus as a critical input for the Fed, which announced plans to start tapering back its bond purchases this month. That opens the door to potential interest rate hikes next year, economists say.  Asad Rehman, a spokesperson for the COP26 coalition, a U.K.-based civil society representing indigenous communities, frontline activists, and grassroots campaigns from the global south, told CNBC that he had been struck by the comparisons between the meeting in Glasgow and previous talks in Copenhagen.  The 2009 summit in Denmark’s capital city is widely regarded as a failure, with a deal many countries criticized for falling short of the action needed to tackle the climate crisis.  The summit continues after pledging $18 billion to end the use of coal. 

The Nasdaq’s surge continues to set records, the chart now going parabolic and looking to gap higher ahead of the employment situation report. However, plan your risk carefully and prepare as we continue to extend because simple logic would suggest the odds of a substantial pullback growing with every tick higher the indexes extend.  At some point, we will hit a point of exhaustion, and when that last dollar is in, look a sideways move at a minimum and more likely a strong profit-taking selloff. 

Trade Wisely,

Doug

105 Billion Per Month

November 4, 2021 by Doug Campbell

The Fed will back off ever so slightly on its easy-money policies but continue to print debit at a rate of 105 billion per month despite the inflationary pressures.  Without a doubt, the market loves all the printing, setting new records on the news with the IWM joining in for the first time this year. So let the party continue but keep in mind this rally is getting long in the tooth, and rest is well overdue.

Asian market rallied with green across the board overnight in reaction to the Fed decision.  This morning, European markets are also in a bullish mood with the easy money policies tapering only slightly. However, with a massive day of earnings and Jobless data ahead, U.S. futures point to a muted open except for the Nasdaq gapping to another record at the open.

Economic Calendar

Earnings Calendar

Today, we have a massive day of reports with more than 350 companies listed on the earnings calendar.  Notable reports include SQ, MRNA, ACIW, WYNN, APD, ABNB, ALL, AIG, ABC, AAOI, APTV, GOLD, BDX, CNQ, CARS, CVNA, CC, LNG, CI, CTXS, CLNE, ED, CS, CUBE, CYBR, DDOG, DPSGY, DIN, DBX, SUK, EGLE, LOCO, ENDP, EOG, EXPE, FSLR, FTNT, FNKO, GOGO, GPRO, GPRE, GPP, HBI, HL, IAC, IHRT, ILMN, K, LITE, MCHP, MNST, NKLA, NTDOY, NLOK, NVAX, NRG, PH, PTON, PENN, PINS, PLNT, REGN, RKT, SHAK, SWKS, SO, SFM, RUN, SSYS, SYNA, TGH, TM, HEAR, UBER, OLED, VIAC, W, WWE, WW, YELP, & ZTS.

News & Technicals’

The Federal Reserve said Wednesday it would begin tapering the pace of its asset purchases later in November.  The reduction will see $10 billion less in Treasurys and $5 billion less in mortgage-backed securities every month.  There also was only a slight change to Fed’s view on inflation. The post-meeting statement kept the word “transitory” to describe price increases running at a 30-year high. However, it qualified the term somewhat by saying pressures are “expected to” be temporary.  Chairman Jerome Powell said he expects conditions pushing inflation to last “well into next year.′  In its shareholder letter, the company said the slowdown results from “global supply chain disruptions that have impacted the U.S. TV market.”  “The pandemic continues to disrupt global supply chains,” CFO Steve Louden told CNBC.  “For the TV industry, you’re having elevated component pricing, inventory availability issues, and supply chain logistics delays,” he said.  Treasury yields traded mixed this morning, with the 10-year dipping to 1.5735% and the 30-year rising slightly to 1.9958%.

Markets love money printing rising after the Fed said it would continue printing at the pace of 105 billion per month.  We are a market inflated by massive debit at taxpayer expence, and we can’t seem to get enough of it!  That said, we set new records in all four indexes as the IWM joined in on the party busting through more than a year of price resistance. So stay with the trend but always be on guard because a tumble from these heights could be painful and simple logic would suggest a rest is well overdue. 

Trade Wisely,

Doug

Ravenous Appetite for Risk

November 3, 2021 by Doug Campbell

We continue to set index records with stock, with P/E ratios burgeoning as the bulls continue their ravenous appetite for risk.  The chart technical’s and the price action show no clues that the trend is ready to stop.  However, it would be unwise to assume we will never pull back and chase already extended stocks so late in the rally. So today, expect choppy action ahead of the FOMC decision on taper and prepare for the typically wild volatility directly after the announcement.   

Asian markets traded mixed but mostly lower overnight with modest gains and losses.  European markets also trade flat this morning as they wait on the Fed and the news that the Bank of England may soon raise rates.  With a massive day of earnings data, ADP, and the Fed decision later this afternoon, the U.S. futures point to a mixed open with modest gains and losses as we wait.

Economic Calendar

Earnings Calendar

On the hump day earnings calendar, we have more than 300 expected to report today.  Notable reports include ALG, ALB, AMRN, APA, AAWW, BKNG, BWA, CPRI, CF, CAKE, CLH, CVS, DISCA, ELF, EA, EMR, ET, ETR, ETSY, EXC, FSLY, FSR, FOXA, FDP, GDDY, HR, HFC, HST, TWNK, HUBS, HUM, H, IAG, INFN, IR, KTOS, LCI, LBTYA, LL, MRO, MAR, MAR, MBI, MET, MGM, NCLH, NVO, NUS, OMP, PETQ, PXD, PBI PBPB, QRVO, QCOM, QLYS, RYN, RCII, ROKU, SMG, SBGI, SWN, RGR, SPWR, TTWO, TRUE, WING, & XP. 

New & Technicals’

The Regional Comprehensive Economic Partnership or RCEP will come into force in January 2022.  Australia and New Zealand were the latest to ratify the world’s largest trade agreement.  Other countries that have ratified RCEP include Brunei, Cambodia, Laos, Singapore, Thailand, Vietnam, China, and Japan, according to Australia’s Department of Foreign Affairs and Trade.  Policymakers have intimated that a hike is imminent, but the nine-member MPC will need to determine whether to tighten policy this week or wait until its mid-December meeting. Markets are uncertain about the timing, with analysts suggesting the vote is likely to be split. However, at Monday’s close, market data showed that derivatives traders were pricing in a 64% probability of a 15 basis point rate hike this week, Berenberg highlighted in a note Tuesday.  Zillow said it’s winding down its homebuying unit, called Offers, which competes with Opendoor.  The company said it’s cutting 25% of its workforce in eliminating the unit after reporting disappointing earnings results.  Ahead of the FOMC decision, U.S. Treasurys pulled back in early morning trading, with the 10-year dipping to 1.5243% and the 30-year sliding to 1.9335%.

Another day and more records set in the DIA, SPY, and QQQ as the ravenous appetite for risk appears to have no bounds.  Though the extension in the indexes seems extreme, there is no sign that it’s ready to stop.  The current SP-500 P/E Ratio is more than 96% above the historical average, suggesting a strongly overvalued condition.  The only time this level was higher in history was the 1999 internet bubble when it reached 132%.  So, that would suggest the party may still have plenty of life but let’s not forget the ramifications of such an extension when the party’s over.  Today we will be in wait and see mode until the FOMC decision and the question is answered on a taper.  At the risk of sounding like a broken record, be careful chasing already extended stocks and be ready for the typical Fed volatility whip after the announcement.

Trade Wisley,

Doug

Bulls Continue Higher

November 2, 2021 by Doug Campbell

The bulls continue higher with a mighty shove, setting new records despite declining ISM and Construction Spending numbers.  I guess the message is don’t bother me with the details of the economy because I want to buy, buy, buy no matter what!  Now the market will have to grapple with the FOMC and the possibility of a taper in the easy money policies and jobs data the rest of the week.  With emotional speculation running very high, expect challenging volatility, particularly if this bull run stumbles.  So plan your risk carefully as we continue to stretch the indexes.

Asian markets traded mostly lower as real estate stocks retreated with growing default fears and China slipping into stagflation.  European markets trade mainly higher as they wait on the decision from the FOMC.  The U.S. futures indicate an uncharacteristically flat open this morning, facing a big day of earnings events and the beginning of the central bank meeting. 

Economic Calendar

Earnings Calendar

On the Tuesday earnings calendar, we have a busy day with 190 companies listed, but a large number are unconfirmed.  Notable reports include PFE, ATVI, AKAM, AFG, AWK, AMGN, APO, ARNC, BHC, BLMN, BP, CZR, CRK, COP, COUR, CMI, DVN, APPS, DD, ETN, EIX, EL, EXAS, EXPD, RACE, GRNC, GNW, GRBK, HSIC, HLF, IEP, IDDXX, KKR, LEA, LPSN, LPX, LYFY, MMP, MPC, MLM, MTCH, MDLZ, PACB, RL, SEE, SEDG, SRC, SMCI, TMUS, UAA, UNM, WU, XPO, & Z.

News & Technicals’

ON MONDAY NIGHT, Tesla CEO Elon Musk said that his electric vehicle company has yet to sign a contract with rental car company Hertz.  Tesla hit a $1 trillion market cap for the first time a week ago after Hertz announced it would grow its fleet of battery-electric vehicles with “an initial order of 100,000 Tesla’s by the end of 2022.” In addition, the EPA will propose rules to plug methane gas leaks at hundreds of thousands of oil and gas wells in the U.S.  The agency’s measures will strengthen current regulations on new oil and gas wells and impose new requirements for existing wells that previously escaped methane regulations.  According to senior Biden administration officials, President Joe Biden will formally announce the proposals during the second day of the COP26 climate summit in Glasgow, Scotland.  According to its amended prospectus filed Monday, electric vehicle start-up Rivian Automotive is seeking a market valuation of as much as $54.6 billion in its upcoming initial public offering.  Rivian said it is offering 135 million shares priced between $57 and $62, with an option for underwriters to purchase up to 20.25 million additional shares.  Amazon and Ford back Rivian. Treasury yield trade mixed this morning before the beginning of the FOMC meeting, with the 10-year falling to 1.5611% and the 30-year up slightly to 1.9770% in early trading. 

The bulls continue higher, setting records in the DIA, SPY, and QQQ, with the IWM surging but finishing just short of a breakout.  The T2122 indicator was nearly pegged at the top of the range heading into the close on Monday, suggesting a short-term extreme overbought condition.  The VIX ended the day slightly higher, which is odd considering the wild-eyed bullishness displayed in the indexes despite the decline in the ISM and construction spending numbers.  The market will now turn its attention to the beginning of the FOMC meeting and the possibility of easy money policies tapering at the announcement Wednesday afternoon.  The market will also begin digesting a slew of jobs data with the ADP Wednesday morning, Jobless Claims Thursday, and the Employment Situation number Friday.  Combined with a considerable number of earnings reports, expect price volatility in this highly emotional and speculative bull run.

Trade Wisely,

Doug

New Records

November 1, 2021 by Doug Campbell

The bulls powered through to set more new records to end October after disappointing tech earnings results due to supply chain disruptions.  Not to be outdone, the bulls are pushing for yet another gap up open November trading on a high note.  Index charts remain quite extended, but at this point, nothing seems to dissuade this relentless bull.  However, when gapping to new records, we can not rule out the possibility of a pop and dorp pattern, so be careful chasing in at the open, making sure we see some follow-through buying. 

Overnight with the threat of stagflation, Asian markets traded mixed as the Nikkei soared 2.61%.  Across the pond, European markets kick off the month decidedly bullish across the board.  Ahead of earnings and manufacturing data, the bulls seem unstoppable this morning, pointing to a substantial gap and new records at the open. 

Economic Calendar

Earnings Calendar

On the Monday earnings calendar, we have 87 companies listed with several unconfirmed reports.  Notable reports include ADTN, ALX, ANET, CAR, BCC, CRUS, CLX, CVI, FANG, FN, BEN, GAIA, GXO, IPI, L, MCK, MOS, NXPI, ON, OTTR, PCG, PSA< O, RYAAY, SBAC, SPG, SKT, TTM, RIG, VNO, WFRD, & WMB.

News & Technicals’

Barclays CEO Jes Staley will stand down following an investigation into his relationship with Jeffrey Epstein.  C.S. Venkatakrishnan (known as Venkat), currently head of global markets at Barclays, is set to take over as chief executive immediately.  The bank said the investigation had not found that Staley “saw, or was aware of, any of Mr. Epstein’s alleged crimes.”  In October, China’s factory activity contracted more than expected, shrinking for a second month, an official survey released on Sunday showed.  The latest October manufacturing data shows low production and high price inflation, economists say.  “A worrying sign is the passthrough of inflation from input prices to output prices. The input price inflation has been high for many months by now, driven by the rising commodity prices,” Zhang Zhiwei, chief economist at Pinpoint Asset Management, wrote.  Treasury yields begin November higher, with the 10-year trading at 1.5938% and the 30-year rising to 1.9638% in early trading Monday morning.

Although the DIA, SPY, and QQQ continue to appear extended, the disappointing tech earnings only fanned the flames of buying, setting new record highs on Friday.  With another busy of earnings and the whispers of FOMC taper in the air, can we expect more of the same?  Futures this morning suggest yes with a gap up to more records!  That said, we can’t rule out the possibility of a pop and drop coming into play.  According to analyst’s estimates, ISM may decline slightly with the report at 10 AM Eastern.  However, with the decline in durable goods, GDP, and personal incomes not slowing the buying frenzy, a manufacturing decline might just easily get shrugged off.  We can be sure that the price action will likely remain challenging with lots of earnings-fueled gaps and whipsaws.

Trade Wisely,

Doug

Treasury Yield Su

October 29, 2021 by Doug Campbell

AMZN and APPL disappoint, Eurozone inflation spikes to a 13 year high, and U.S. Treasury yield surged in early Friday trading, providing the first twinge of uncertainty in this robust earnings fueled rally.  Though signs are emerging of a global economic slowdown, I would not expect the bulls to give up easily.  I would not be surprised to see some end of window dressing to close the October strong.  Next week could bring uncertainty as we wait for the FOMC taper decision and find out if they will begin fighting inflation.  Should the bears gain control today, look for a test of price support levels that are unfortunately painfully lower.

Asian markets close the day mixed as Apple supplier stocks suffered losses after earnings.  European markets trade red across the board this morning, with inflation hitting the highest level since 2008.  U.S. futures point to modest declines this morning ahead of earnings data and a reading on Personal incomes and Consumer Sentiment. 

Economic Calendar

Earnings Calendar

We get a little break in the rapid pace of earnings this week with 100 companies listed on the calendar.  Notable reports include ABBV, AON, B, BAH, CHTR, CVX, FTS, LHX, LYB, NWL, PSX, RCL, SJR, WPC, GWW, WY, & WETF.

News and Technicals’

Treasury Secretary Janet Yellen told CNBC on Friday that the administration’s infrastructure spending proposal will lower inflation when it is increasing rapidly.  Speaking from Rome, she insisted that “what this package will do is lower some of the most important costs, what they pay for health care, for child care. So it’s anti-inflationary in that sense as well.”  Her remarks come with growth slowing and inflation rising, mainly due to major supply chain issues that she expects to be resolved.  However, President Joe Biden unveiled a $1.75 trillion framework for his signature climate and social spending bill.  Initial signs indicate that neither progressives in the House nor three key senators are ready to commit to backing the plan in its current form. Initial signs indicate that neither progressives in the House nor three key senators are ready to commit to backing the plan in its current form.  The name change, which was announced at the Facebook Connect augmented and virtual reality conference, reflects the company’s growing ambitions beyond social media.  The name change, which was announced at the Facebook Connect augmented and virtual reality conference, reflects the company’s growing ambitions beyond social media.  Headline inflation on Friday came in at 4.1% for this month, according to preliminary data from Europe’s statistics office Eurostat. This was the highest level since July 2008, according to Reuters data, and was ahead of a consensus forecast of 3.7%. September’s figure had come in at 3.4%.

The 10-year Treasury yield surged three basis points to 1.6049%, and the 30-year jumped more than four basis points to 2.0076% in early Friday trading.  Disappointing results from AMZN and APPL seem to have dampened the earnings session euphoria slightly, but with today being the last trading day of October, I would not expect the bulls to give up this bull run easily.  I would not be surprised to see a little end-of-month window dressing to close the month strong.  However, should the bears gain the upper hand, selling could come in strong with price support levels painfully lower.  Next week we will turn our attention to inflation and what the FOMC plans to combat the impacts.  To taper or not to taper is the question and how the market might react to that news.  With the Eurozone facing its highest inflationary rate since 2008 and the Chinese economy struggling, clues are developing a global market slowdown. Again, I’m not predicting a selloff is coming, but we should prepare for the possibility after the extreme rally.

Trade Wisely,

Doug

GDP Report

October 28, 2021 by Doug Campbell

With a massive day of earnings, Treasury yields are rebounding slightly ahead of the GDP report that economists expect to decline sharply over the prior month. In addition, China’s real estate crisis seems to be getting worse with a 4^th developer default and reports that their economy could slide into stagflation.  However, with the palpable anticipation of AAPL and AMZN earnings after the bell, we could easily shrug all that off as the bulls keep running.  The party was incredible, but let’s hope theirs not a hangover just around the corner!

Asian markets had a bearish night closing in the red across the board, with the Nikkei leading the way after the Bank of Japan holds steady on monetary policy.  European markets trade mixed this morning as they wait on a rate decision from the ECB.  However, U.S. futures press for a bullish open ahead of significant tech earnings, GDP, and Jobless data.  So prepare for another hectic day of silly season speculation.

Economic Calendar

Earnings Calendar

Thursday is our busiest day of the week, with nearly 225 companies reporting.  Notable reports include AMZN, AAPL, FLWS, MO, ABEV, AMT, BUD, BAX, CARR, CAT, CMCSA, DVA, DXCM, EGO, FE, GLPI, GILD, HSY, HTZZ, ITW, ICE, KDP, LH, TREE, LEN, MA, MPW, MRK, MDP, MSTR, TAP, NEM, NOK, NOC, ORI, OSTK, PBR, RLGY, RSG, SNY, SGEN, SHOP, SIRI, STAG, SBUX, TROW, TAK, TXRH, X, VALE, VRSN, WST, WDC, YUM, & ZEN.

New & Technicals’

Ford nearly doubled Wall Street’s earnings expectations and slightly beat revenue projections for the third quarter.  The results led the automaker to increase its annual guidance for the second time this year.  Ford said increased availability of semiconductor chips and higher vehicle shipments in the third quarter enabled it to post higher-than-expected results.  The Anglo-Dutch company posted adjusted earnings of $4.1 billion for the three months through to the end of September. Compared with $955 million over the same period a year earlier and $5.5 billion for the second quarter of 2021.  Analysts had expected third-quarter adjusted earnings to come in at almost $6 billion, according to Refinitiv.  President Joe Biden has made last-minute plans to attend a House Democratic caucus meeting on Thursday morning, CNBC confirmed late Wednesday.  Biden plans to personally appeal to the party’s progressives to vote for the stalled infrastructure bill already passed the Senate.  The risk of stagflation is “very real” in China over the next few quarters, said Charlene Chu, senior analyst for China macro-financial at Autonomous Research.  A high producer price index and power crunch have made it difficult for Beijing to stimulate the economy aggressively, said Chu. In addition, the slowdown in the real estate sector has “very severely” hit China’s economic growth, but confidence in the primary property market is not yet collapsing, she said.

Treasury yields are edging slightly higher this morning ahead of the GDP report that analysts suggest could decline sharply to 2.7% vs. the 6.7% reading just one month ago. As a result, the 10-year rose to 1.55%, and the 30-year rallied to 1.9527%.  The Nasdaq rallied strongly yesterday to briefly touch a new record pulling back to leave the second shooting star pattern behind in as many days.  However, we have a massive day of earnings that is likely to keep the bull’s fire burning with the highly anticipated reports from AAPL and AMZN after the bell.  That said, we first have to make it through GDP, and Jobless Claims data, but with the wild earnings fervor going on this season, we could just ignore them like the declining Durable Goods from yesterday.  Once again, be careful chasing extended stocks and don’t rule out a continued pullback in the DIA and IWM. 

Trade Wisely,

Doug

New Records

October 27, 2021 by Doug Campbell

In anticipation of strong big tech earnings, the DIA and SPY set new records yesterday before pulling back as we approached the close.  That left behind possible topping candle patterns, but with all the earnings energy coming our way in the next couple of days, anything is possible.  That said, a rest or minor profit-taking pullback to test price support seems to grow in probability from this extended condition in the indexes.  Traders will also have to grapple with the Durable Good data before the open that analysts suggest may come in negative. 

Overnight Asian markets closed the day mostly lower, with Hong Kong leading the way down 1.57%.  This morning, European markets trade in the red across the board with modest losses keeping an eye on the UK budget debate.  Facing another massive day of earnings and economic data, U.S. futures currently point to modest declines.  So buckle up; it could be another wild earnings season adventure.

Economic Calendar

Earnings Calendar

On the Wednesday earnings calendar, we have a busy day with 194 companies listed.  Notable reports include AFL, AEM, ALGT, NLY, ADP, AVB, BA, BOOT, BSX, BMY< BG, CINF, KO, CDE, DB, DRE, EBAY, EXR, FISV, F, GRMN, GD, GM, GSX, HOG, HLT, IP, KHC, LC, MAS, ORLY, PPC, RJF, R, NOW, STX, SF, TDOC, TWLO, VICI, WH, XLNX, YNDX, & YUMC. 

News & Technicals’

Alphabet topped analysts’ expectations on the top and bottom lines. However, CFO Ruth Porat said Apple’s privacy changes had a “modest impact on YouTube revenues.” As a result, the company’s shares were little changed after reporting.  Microsoft’s Azure revenue growth slowed slightly in the quarter, although it accelerated from the prior quarter on a constant-currency basis. In addition, PC supply constraints cut into sales of Windows to device makers.  Third-quarter transaction-based revenue totaled $267 million, with only $51 million coming from cryptocurrency trading. Revenue from crypto trading totaled $233 million in the second quarter.  Robinhood said that, barring any change in the market environment, the headwinds that dragged down last quarter would persist into the end of the year.  Senate Democrats on Wednesday unveiled a new billionaires’ tax proposal, an entirely new entry in the tax code designed to help pay for President Joe Biden’s sweeping domestic policy package and edge his party closer to a comprehensive agreement.  The proposed tax would hit the gains of those with more than $1 billion in assets or incomes of more than $100 million a year, and it could begin to shore up the big social services and climate change plan Biden is racing to finish before departing this week for global summits.

The SPY and DIA found themselves trading at new records yesterday but struggled to hold intraday highs as we moved toward the close and heavily anticipated giant tech reports.  The pullback slightly relieved the short-term overbought condition in the T2122 indicator as the VIX rose slightly off intraday lows.  Today, we ramp up the number of earnings reports and have the potential market-moving Durable Goods report to digest.  Analysts expect a -0.9 reading falling from the prior report of 1.8%.  International Trade data will follow that as well as the Petroleum Status.  Indexes remain in a very extended condition adding danger to those entering positions, so plan your risk carefully.  Remember, healthy price action commonly tests price supports, and the current rally has left little support behind and lots of open gaps in the process. 

Trade Wisely,

Doug

Gravity-Defying Winning Streak

October 26, 2021 by Doug Campbell

The gravity-defying winning streak continues as the fear of missing out intensives, so does the real risk to traders trying to enter with indexes so extended in the short term.  Fed taper, inflation, energy prices, supply chain impacts, P/E ratios, market internals, and even the chart technicals seem to be of no concern at the moment. However, the more we extend, the greater the risk of a substantial pullback, so be prepared.  I challenge you to take off those rose-colored glasses and assess the risks before entering new positions.   

Asian markets traded mixed overnight even as the Nikkei surged 1.77% as worries of property taxes pushed Hong Kong lower.  However, European markets see nothing but green this morning, fueled by earnings optimism.  Ahead of a huge day of earnings, housing, and consumer confidence data U. S. futures point to new record highs in the SPY and DIA at the open. 

Economic Calendar

Earnings Calendar

On the Tuesday earnings calendar, we step up tech earnings with nearly 100 companies expected to report.   Notable reports include AMD, GOOGL, TWTR, MSFT, MMM, AAN, AMP, ADM, ARCC, BYD, CAJ, COF, CNC, CB, CIT, GLW, CLR, ECL, LLY, EQR, ESS, FFIV, GE, HAS, IVZ, JBLU, JNPR, LOGI, NAVI, PNR, PHM, RTX, HOOD, SPGI, SHW, SSTK, TER, TXN, TRU, UBS, UPS, V, WM, & XRX.

News & Technicals’

Facebook shares rose in extended trading Monday after the company reported better-than-expected third-quarter earnings while revenue missed estimates. In addition, the company announced its plans to break out its Facebook Reality Labs into its reporting segment starting in the fourth quarter. As a result, Facebook said it expects fourth-quarter revenue of $31.5 billion to $34 billion.  Democrats are making some hard choices about their signature spending plan to satisfy key moderates in the Senate, slashing the topline cost from $3.5 trillion to between $1.5 and $2 trillion.  Several of Biden’s campaign promises have been abandoned altogether, such as providing free community college and instituting a clean electricity standard with penalties for utilities that don’t comply.  Other programs that were initially permanent will instead be set to expire in a year or two, like the expanded Child Tax Credit and expanded Medicaid.  According to economists, shipping backups at big U.S. ports are not likely to resolve themselves until well into 2022.  Goldman Sachs said that the problems should lessen after the holidays and Lunar New Year as container traffic backs off.  Companies have been left to find ways to keep their products moving amid the supply chain disruptions.  Treasury yields dipped slightly in early Tuesday trading, with the 10-year trading at 1.63.17% and the 30-year falling to 2.0783%.

The bulls continue to run higher in a gravity-defying winning streak that at this point shows no signs of stopping.  Inflation and supply chain issues seem to be of no concern.  A Fed taper and now the prospect of 2 potential interest rate increases next year of no consequence as traders rush to add risk. A rapidly deteriorating China economy and a growing number of foreclosures in the U.S. we ignore. The fear of missing out is so intense that even the charts’ technicals and the internal indicators are rendered essentially useless.  What does that mean?  Could this be the preamble to the classic blowoff top forming?  It is very reminiscent of the last rush into stocks in late 1999, where just like today, P/E ratios were wholly ignored.  How long can this last?  Your guess is as good as mine but enjoy the ride as long as it lasts because there could be a reckoning at the end of it.  At the risk of sounding like a broken record, I will once again caution traders to be cautious chasing already stocks.  That said, whatever you trade, make sure you have considered the risk carefully because this kind of rally can produce some painful reversals overnight and big intraday whipsaws. 

Trade Wisley,

Doug