Wild Ride of Uncertainty

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The typically dull Black Friday session became a wild ride of uncertainty with the WHO going into an emergency meeting on a new virus variant they see as concerning.  What was remarkable was that before the market had even opened on Friday, a string of talking heads in the financial news were shouting, buy the dip!  Unless you’re a very experienced intraday trader or a buy-and-hold forever investor, that might work.  However, for most retail traders, trading without an edge is nothing more than gambling. So let the institutions and gamblers deal with the wild volatility and save your capital until your edge returns.  There is nothing healthy about a 1000 point drop in a short session and nearly a 300 point gap the following day!

Asian markets closed the day red across the board.  However, European markets are in rally mode after Friday’s rout.  Though there is remains incredible uncertainty about what comes next, U.S. Futures point to a gap up open.  Watch for the possible hefty price swing intraday whipsaws as we sort out all the emotion. 

Economic Calendar

Earnings Calendar

We start this week with just over 20 companies listed on the earnings calendar, with several unconfirmed.  Notable reports include ARCE, GBDC, & LI.

News & Technicals’

Stocks head into the week ahead on shaky footing after swooning in the half-day post-Thanksgiving session, and more selling is possible as investors watch developments related to a new coronavirus variant. In addition, traders are watching to see if stocks can hold critical technical levels or whether they break through them, threatening a year-end rally.  Moderna’s Chief Medical Officer Paul Burton said Sunday the vaccine maker could roll out a reformulated vaccine against the omicron coronavirus variant early next year. However, it’s not clear whether new formulations will be needed or if current Covid vaccinations will provide protection against the new variant that has begun to pop up around the globe.  According to the World Health Organization, the omicron Covid variant is likely to spread further and poses a “very high” global risk.  It warned Monday that surges of Covid infections caused by the variant of concern could have “severe consequences” for some areas.  The WHO issued a technical brief to its 194 member states on Monday.  Treasury Yields climbed in early Monday trading, with the 10-year trading up to 1.5363% and the 30-year rising to 1.8805%.

The fear over a new Covid variant turned the Black Friday short session into a wild ride of uncertainty.  Not typical on a day that is usually very boring and lifeless.  I watched CNBC in my hotel room before the market opened, and it was amazing to see an endless string of talking heads shouting “buy the dip.”  So, okay, the market is bouncing this morning, but I have to ask, do you have an edge trading a collapse of 1000 points and then a gap up of nearly 300?  Volatility like this is dangerous and can heavily damage a retail trader’s account. So I plan to stand aside and let the institutions and gamblers deal with the wild price action that is likely to experience significant whipsaws intraday.  In truth, we don’t know anything yet, so take a breath and wait until your edge returns.  Keep your money safe because swings like this does not a healthy market make!

Trade Wisely,

Doug

Anything is Possible

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Anything is Possible

With a slew of potentially market-moving economic reports, I think it’s fair to say anything is possible as we slide into the Thanksgiving shutdown.  On a typically declining volume getaway day for holiday travel, traders will have to plan considerable price volatility as the data come in rapid succession. So, will it inspire the bulls, or will the bears gain an edge today?  Adding to the worries we have the rising U.S Bonds and a possible German pandemic lockdown, and it’s no wonder the premarket is filled with uncertainty.

Asian markets struggled for direction in a mixed session during the night, with New Zealand’s central bank announcing a rate hike.  European markets traded mixed this morning, with more pandemic concerns as infection numbers hit new records.  U.S. futures reflect the uncertainty currently suggesting a lower open across the board ahead of the data deluge.  So, buckle up; it could be a wild pre-holiday session. 

Economic Calendar

Earnings Calendar

We have a very light day on the Wednesday earnings calendar with just 20 companies listed with several unconfirmed.  Notable reports include DE, CMCM, BAM, KC, FUTU, & HTHT. 

News and Technicals’

Germany will decide on tougher Covid restrictions on Wednesday.  Officials have been considering more Covid rules and even a full or partial lockdown.  Germany sees a daily record of Covid cases and mounting pressure on hospitals as the delta variant takes hold.  Health Minister Jens Spahn has already issued a dire warning to Germans this week. In addition, Samsung plans to build a $17 billion chip plant in Texas.  The factory will aim to help boost the production of advanced logic semiconductors used in phones and computers.  Samsung said it expects building work to commence in the first half of 2022, and it hopes to have the site in operation by the second half of 2024.  The total expected investment of $17 billion will be the most significant investment Samsung has ever made in the U.S.  The Turkish lira has collapsed to previously unfathomable record lows this week.  The country’s central bank, the TCMB, continues to cut interest rates despite rising double-digit inflation.  Since September, the central bank has cut its main policy rate by 300 basis points, sending the already depreciating currency into freefall as investors flee Turkish assets.  Treasury declined modestly in early Wednesday trading, with the 10-year slipping to 1.6462% and the 30-year dipping to 1.9946%.

On the eve of the Thanksgiving market shut down, I think it’s fair to say anything is possible.  Typically volume declines as traders shut down early, heading out holiday travel.  However, with a massive amount of market-moving data coming our way, prepare for some wild volatility this morning as the deluge begins. First, durable goods, GDP, International trade, and Jobless claims all happen before the bell.  Then comes New Home Sales, Personal Income & Outlays, Consumer Sentiment, Petroleum Statis, and the FOMC minutes.  Add to that a possible announcement of more German pandemic lockdown, rising U.S. bonds, and the collapsing Turkish Lira, and we have more than enough data to digest to give investors preholiday indigestion.  The market will be open for a partial day of trading Friday, but it is typically anemic price action to be very careful should you decide to trade.  Right Way Options will be closed both Thursday and Friday as a result.  I wish you and your families the very best on this long Thanksgiving weekend!

Trade Wisely,

Doug

Uncertain Candle Patterns

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Uncertain Candle Patterns

After a Monday morning gap followed by a surge of energetic buying setting new records by the end of the day, some uncertain candle patterns emerged.  The most uncertain of them are the bearish engulfing patterns on the SPY and QQQ that seemingly rejected the index highs. So the question for today is whether the bears will wake up enough to follow through to the downside or will the bulls defend, making this nothing more than a day of price volatility?  One thing for sure is this adds an element of uncertainty with the massive amount of economic data that awaits us Wednesday morning!

During the night, Asian markets mixed as they struggled for direction, with Hong Kong tech selling off strongly.  European markets trade primarily lower this morning due to a Covid surge, and increasing restrictions and lockdowns occur.  U.S. futures also seem to be struggling for the direction as they try to shrug off yesterday’s selling.

Economic Calendar

Earnings Calendar

On the Tuesday earnings calendar, we have 39 companies listed, but of course, a number of them are unconfirmed.  Notable reports include BBY, DLTR, AEO, AMWD, ADI, ADSK, BURL, CBRL, DELL, DKS, ESLT, GPS, HPQ, SJM, JACK, J, MDT, JWN, PSTG, QIWI, TITN, VMW, & XPEV.

News and Technicals’

Zoom exceeded analysts’ estimates for the quarter and issued better-than-expected guidance. In addition, the company called off its planned $14.7 billion Five9 acquisition during the quarter.  On Monday, Germany’s health minister issued a stark warning to the country’s public, telling them that vaccination was the key to their survival.  Outgoing Chancellor Merkel has called on Germany’s federal states to decide upon stricter measures, and another lockdown is a possibility.  Austria’s lockdown began Monday and will last for at most 20 days, with a nationwide vaccine mandate taking effect on Feb. 1. The Netherlands’ launched a partial lockdown on Saturday as well.  Inflation in Turkey is now near 20%, meaning basic goods for Turks — a population of roughly 85 million — have soared in price, and their local currency salaries have become severely devalued.  “Insane where the lira is, but it’s a reflection of the insane monetary policy settings Turkey is currently operating under,” one analyst said.  Treasury Yields fell slightly in early Tuesday trading, with the 10-year slipping to 1.6236% and the 30-year dipping to 1.9699% after digesting the news of the Powell nomination.

Yesterday’s selling left behind some uncertain candle patterns after the extremely extended tech sector sold off quickly as we headed into the close.  Both the QQQ and the Spy printed some nasty bearish engulfing patterns after stretching to new records in early trading.  However, one candle does not make a trend, and the question on everyone’s mind was it just a one-off event, or is it the first signal of a top?  The first test will require a follow-through to the downside, and that may be a tall order considering the wild-eyed speculation we have experienced in the past couple of months.  With volume likely to start declining over the next couple of days as traders head out for holiday plans, we will have to stay focused on price action and be ready for just about anything considering the massive amount of data coming your way Wednesday morning.

Trade Wisley,

Doug

Holiday Week

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Holiday Week

Holiday week trading is typically challenging due to the rapid decline in volume as traders shut down for travel.  However, this week could be different with all the news hype about the beginning of a Santa Claus rally and an economic calendar full of market-moving data.  Then don’t forget the possible market volatility that could happen should Biden change with the Fed Chair!  With so much data coming our way, expect significant price volatility even as we pump the tech giants to new records and incredible P/E ratios.  Remember to take some profits along the way.

Asian markets traded mixed overnight after the central bank kept loan rates steady.  European markets trade mixed and flat this morning due to rising pandemic restrictions and protests that have erupted as a result.  We don’t seem to have the same concerns with the U.S. futures, pointing to a bullish open that includes fresh new records as the tech giants continue to surge higher.

Economic Calendar

Earnings Calendar

We have 36 companies listed on the earnings calendar to kick off the shortened holiday week, with several unconfirmed.  Notable reports include A, ARWR, IBEX, KEYS, NIU, URBN, & ZM.

News & Technicals’

The People’s Bank of China deleted several phrases in its latest monetary policy report, a move that economists say signals a shift toward easier policy.  Despite signs of a growing slowdown in the economy, the phrases had signaled a level of restraint in central bank policy.  However, the PBoC maintained a tough stance on the property market, which has struggled in the wake of Beijing’s crackdown on real estate developers’ high debt levels. In addition, Illinois legislators agreed to spend up to $694 million over the next five years to keep a handful of nuclear power plants open.  The operator of the plants, Exelon, said they were losing hundreds of millions of dollars and that nuclear can’t compete with cheap natural gas and subsidized wind and solar.  Critics say that Exelon had the state over a barrel and that longer-term solutions are necessary to make clean energy cheaper and more accessible.  Protests against fresh Covid restrictions have continued to rock Europe over the weekend.  There were demonstrations in Vienna, Brussels, and Amsterdam against new Covid rules. In addition, new coronavirus cases continue to surge across the continent.  Treasury yields rose in early Monday trading, with the 10-year climbing to 1.5583% and the 30-year advancing to 1.9107% as we wait on the Biden Fed Chair appointment. 

Holiday trading is always a hit-and-miss scenario when it comes to volume. That said, the news has laid it on thick over the weekend that we have the perfect setup for the so-called Santa Clause Rally to begin.  Now toss in possible uncertainty with a Fed Chair appointment, inflation data, and Durable goods, GDP, and Personal incomes combined with likely declining volume throughout the shortened week, and anything is possible!  However, the weekend hype seems to be working with the future, suggesting nothing but blue skies as we continue to extend the tech giants to phenomenal P/E ratios. So stay with the trend, but please remember to take some profits along the way just in case a scare or two comes along that engages the bears and price volatility. 

Trade Wisely,

Doug

A Mighty Shove

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A mighty Shove

A mightly shove in the tech giants got the job done for new records in the QQQ and SPY while at the same time, the number of stocks falling below their 50 and 200-day moving averages grew.  That’s awesome, but it also begs the question, what happens if big tech buying reaches an exhaustion point?  With parts of Europe re-entering pandemic lockdowns, very little earings inspiration, and only Fed speak on the economic calendar, price action could become very choppy if the bears remain lethargic. In addition, next week, heading into the Thanksgiving holiday, may see declining volumes as travel picks up, so plan your risk carefully.

Asian markets close trading mostly higher, with Hong Kong shedding 1.07% after disappointing results from Alibaba.  European markets see nothing but red this morning as sentiment declines due to more pandemic lockdowns and restrictions grow. Finally, with a very light day on the earnings and economic calendar, U.S. futures suggest a mixed open industrial’s declining sharply while the tech sector continues to surge.

Economic Calendar

Earnings Calendar

Our Friday earnings calendar is very light, with just nine confirmed reports.  Notable reports include BKE & FL.

New & Technicals

Democrats moved toward a vote on President Joe Biden’s social safety net and climate plan.  A Congressional Budget Office estimate said the Build Back Better Act would add $367 billion to budget deficits over a decade but did not account in the topline for revenue raised by increased IRS enforcement of tax laws.  Five Democratic holdouts wanted to see a CBO score before they voted for the bill.  If the House passes the legislation, the Senate will likely approve a different version of it.  Thursday evening President Biden suspends enforcement of business vaccine mandate due to court mandate and escalating legal challenges companies and states.  Austria announced this morning they would re-enter a total national lockdown while Germany added more restrictions on Thursday.  Treasury yields declined in early Friday trading, with the 10-year dipping to 1.5565% and 30-year falling to 1.9405%.

With a mightly shove by the tech giants, the Nasdaq closed at a new record high, and the SP-500 squeaked out a new closing high in the process.  Unfortuntually, at the same time, the number of stocks slipping below their 50 and 200-day averages grew.  With parts of Europe re-entering Covid lockdowns, futures that were bullish during the night have taken a bearish turn.  With little on the earnings calendar to provide inspiration and nothing but Fed speak on the economic calendar, it could be an interesting day if the bears start to show some interest.  If the bulls find the energy to defend, I would expect a choppy price action day as we slide into the weekend.  Keep in mind as you plan forward that next week, we could see light volumes as traders get some post-Covid restriction family time travel for Thanksgiving. 

Trade Wisley,

Doug

Bulls Held Strong

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Bulls Held Strong

Though the Dow continued to pull back yesterday, the bulls held strong defending recent lows and prevented a lower low’s technical damage.  Though the S&P is now suggesting that Evergrande is likely to default is suspect we will ignore the possible U.S. impacts in favor of new record highs in the Nasdaq and SP-500.  However, this push higher seems to be struggling with momentum, so make sure you have a plan if the tide starts to go out.

Overnight Asian markets were mostly lower, led by tech shares and developer concerns, as Hong Kong fell 1.29%.  European markets trade flat and mixed, worrying about the implications of the slipping consumer sentiment due to inflation impacts.  However, U.S. futures don’t appear to have any concerns pointing to a bullish open and possible new record high. 

Economic Calendar

Earnings Calendar

On the Thursday earnings calendar, we have 35 companies listed with a few unconfirmed.  Notable reports include BABA, AMAT, ATKR, AHM, BECN, BRBR, BJ, CAL, CSIQ, FTCH, HP, INTU, JD, KSS, M, NUAN, PANW, WOOF, POST, ROST, VIPS, WWD, & WDAY.

News & Technicals’

Saule Omarova, President Joe Biden’s choice to lead one of the nation’s top bank regulators, is set for a fiery nomination hearing.  While Republicans have warned against recommending a candidate whose academic work calls to “end banking as we know it,” skepticism has also come from a Democrat, Sen. Jon Tester.  Just one Democratic defection on a committee vote to recommend her to the broader Senate would likely end her nomination to head the Office of the Comptroller of the Currency.  “I know that difference between the job of an academic … and the job of a regulator, which is very circumscribed,” Omarova said in an interview Tuesday.  N26′s American customers will no longer be able to use its app from Jan. 11, 2022.  The Berlin-based fintech said the move aimed at shifting focus to its core European business.  It’s a reminder of how difficult it has been for European fintech to expand its services in the U.S.  Evergrande default is highly likely, according to the S&P.  “We still believe an Evergrande default is highly likely,” S&P Global Rating analysts said in a report Thursday.  The firm has lost the capacity to sell new homes, which means its main business model is effectively defunct,” the report said.  Treasury Yields pulled back slightly yesterday and continued to relax in early Thursday trading.  The 10-year declined to 1.5838%, and the 30-year fell to 1.9713%.

Though we pulled back in Dow, creating lower high patterns, the bulls held strong preventing a lower low from occurring and avoiding technical damage. Unfortunately, the Russell was not so lucky with the price creating a lower low while holding substantial price support and the bullish trend.  Though there may be some reason for uncertainty in the industrials, the tech sector continues to surge within striking distance of a new record high and lifting the SP-500 as well.  That said, overall market momentum is slowing as inflation impacts curtail consumer activities.  With jobless claims and manufacturing data on the horizon, the bulls are back on the job in the premarket.

Trade Wisely,

Doug

Momentum Struggled

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Momentum Struggled

Although the tech enjoyed sustained buying yesterday, bullish momentum struggled with the Dow giving back most of its gains to leave behind an uncertain shooting star pattern. So the question for today can retail continue to inspire enough bullish momentum to keep the indexes rising?  The rising dollar and increasing bond yields might signal a risk-off scenario, so keep a close eye on them if they continue marching higher. 

Overnight Asian markets closed the day mostly lower, with only China posting a modest gain of 0.44%.  European markets appear to have a more bullish outlook, but current gains hover near the flatline as they wait on earnings results.  U.S. futures point to a flat to mixed open ahead of retail earnings and housing data. 

Economic Calendar

Earnings Calendar

We have 44 companies listed on the earnings calendar with another day of focus on retail.  Notable reports include TGT, NVDA, CRMT, BIDU, BBWI, BILI, CSCO, DSX, HI, IQ, LOW, MTOR, MBT, QUIK, SCVL, SONO, TTEK, TJX, UTI, VSCO, VINP, VTRU, XIM, ZTO.

News & Technicals’

Lowe’s beat expectations for fiscal third-quarter earnings, as it got a boost from online sales and business from home professionals.  Despite analysts predicting a decline, the home improvement retailer’s same-store sales rose by 2.2% in the three months. In addition, CEO Marvin Ellison said sales to home pros, such as electricians and contractors, rose 16% in the third quarter.  Amazon has told some customers that, from Jan. 19 onward, the company will no longer accept Visa credit cards issued in Britain.  The e-commerce giant cited high fees charged by the payment processor.  Visa said it was “very disappointed that Amazon is threatening to restrict consumer choice in the future.”  The U.S. Justice Department will sell off $56 million worth of cryptocurrency it seized as part of a massive Ponzi scheme case against a man who promoted the crypto lending program BitConnect.  The BitConnect scam has swindled thousands of people in the U.S. and abroad out of more than $2 billion worth of bitcoin.  In September, the Securities and Exchange Commission sued BitConnect, its founder Satish Kumbhani and Glenn Arcaro, who was the lead promoter of BitConnect in the United States.  Treasury yields dip just slightly in early Wednesday, with the 10-year trading at 1.625% and the 30-year edging lower to 2.0157%.

Substantial retail numbers brought out the bulls on Tuesday but curiously, the momentum struggled to stay on course into the close.  While tech faired much better, the Dow gave up most of the day’s gains leaving behind the uncertainty of a shooting star pattern near price resistance.  Perhaps the rising dollar with the ten, twenty, and thirty-year bonds rising are beginning to show signs of risk-off that I mentioned yesterday.  However, with another round of retail with LOW and TGT this morning followed by results from NVDA after the bell, the bulls can reignite momentum.  That said, I still believe it wise to wise to watch closely for a possible pullback to test support levels. 

Trade Wisely,

Doug

Retail Sales

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Retail Sales

With the uncertainty of retail sales numbers out this morning, the market struggled to find direction yesterday.  The pop and drop pattern left behind would raise the possibility of a lower high at resistance if the bears were to happen to find some inspiration.  However, with analysts suggesting a solid retail sales number is likely yesterday may prove only to be a rest before stretching to new highs.  That said, anything is possible, and with earnings, inspiration to fuel the bulls market momentum could suffer.

Asian markets traded mixed during the night as the investors reacted to Biden-Xi talks with China selling slightly and Hong Kong surged higher.  Across the pond, European markets sport modest gains across the board.  U.S. futures began the morning in the red, but the bulls went to work pumping the premarket, which has become all too typical of late. Of course, anything is possible with the dollar showing strength, so buckle up the ride is about to begin.

Economic Calendar

Earnings Calendar

We have a much lighter day on the earnings calendar with just 44 companies listed, and several are unconfirmed.  Notable reports include HD, ARMK, DLB, DAVA, AQUA, JMIA, LZB, NTES, SE, SBLK, STNE, TDG, VREX, WMT, ZENV, ZEPP. 

News & Technicals’

October retail sales are expected to increase by 1.5%, boosted by early holiday shopping and higher gasoline prices.  Economists say the report will be essential to examine whether consumers are willing to spend, even as sentiment has weakened. In addition, the report should show that the effects of the Covid delta variant are fading, as parts of the economy are rebounding.  Home Depot topped Wall Street’s estimates for its third-quarter earnings and revenue.  Consumers were spending more when they visited, raising the average ticket by 12.9% to $82.38.  President Joe Biden signed the more than $1 trillion bipartisan infrastructure plan into law Monday.  The plan will put $550 billion in new money into transportation, broadband, and utilities. In addition, Biden made a case for Democrats’ $1.75 trillion proposals to invest in the social safety net and climate policy. Finally, Tesla CEO Elon Musk faces a potential tax bill of more than $10 billion on stock options granted in 2012.  Musk started exercising the options Monday, exercising $2.5 billion in shares and selling $1.1 billion of those exercised options to pay the taxes.  But he continued to sell the additional stock, and it’s likely those sales were unrelated to the stock option exercises he must complete by August. This means future stock sales are likely.  Treasury yield fell in early Tuesday trading, with the 10-year slipping to 1.6094% and the 30 pulling back to 1.9790%. 

The indexes struggled for direction yesterday, challenged by overhead resistance and facing the uncertainty of retail sales figures coming out before the bell this morning.  We will also hear from HD and WMT before the bell, the only likely market-moving earnings reports today.  Yesterday’s pop and drop in all four indexes set up possible lower highs, but with economists suggesting a solid retail sales number, it could be nothing more than a rest before reaching out for more new records.  However, with the decline in earnings inspiration and seeing a rising dollar, there is a concern of fading momentum and a possible risk-off scenario forming. As a result, a noticeable shift of energy into traditional defensive sector stocks, hinting at a possible rotation toward safety.  Stay with the overall trend but never forget how elevated this market has become.  A longer-term consolidation or a pullback is not out of the question, so have a plan to protect your capital because it can begin with breakneck speed!

Trade Wisley,

Doug

Consumer Sentiment

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Consumer Sentiment

The worst consumer sentiment reading in more than ten years didn’t dissuade the bulls at all as they worked a nice Friday rally.  Retail will be in focus this week, with earnings from WMT, TGT, and HD, as well as last month’s retail sales figures coming our way Tuesday morning.  It will be interesting to see if inflation and supply chain issues hampered the early holiday sales events.  With consumer debt hitting record highs, my guess is no, but we will soon find out.  Although the indexes remain very elevated, stay with the trend because the bulls seem to have no inflation concerns and want the party to continue. 

Overnight Asian markets closed with modest gains through China fell slightly even as their retail sales topped expectations.  European markets currently trade with modest gains and losses, as if searching for inspiration.  However, U.S. futures point to a bullish open, with the Dow suggesting a 100 point gap. Nevertheless, with new price resistance above, don’t rule out the possibility of a lower high or even a pop and drop pattern to occur if the bears find a reason to fight.

Economic Calendar

Earnings Calendar

We have a busy day on the Monday earnings calendar with nearly 300 companies listed, but many of them unconfirmed.  Notable reports include AAP, AND, AXON, SCPR, IBIO, JJSF, LCID, MGIC, OTLY, PLBY, RXT, STAF, COOK, TSN, WMG, STAF, COOK, TSN, WMG, XSPA.

News & Technicals’

Consumers will be a big focus for markets in the week ahead, with government retail sales data Tuesday and earnings from Walmart, Target, and Home Depot, among others. In addition, investors are watching the meeting between President Joe Biden and China President Xi Jinping Monday night for signs of any warming of relations on trade and other issues. According to contracts signed by four states, Apple requires states to maintain the systems needed to issue and service credentials at taxpayer expense.  The agreement, obtained through public record requests from CNBC and other sources, mainly portrays Apple as having a high degree of control over the government agencies responsible for issuing identification cards.  Apple has “sole discretion” for critical aspects of the program.  Last week, the European Commission, the executive arm of the EU, projected a GDP rise of 5% for both the EU and the euro area this year.  Some EU nations have started to see a high number of Covid-19 infections recently, mainly in countries where vaccination rates are still relatively low.  Austria and the Netherlands have imposed new social restrictions in the last few days.  Treasury yields look lower this morning, with the 10-year falling to 1.546% and the 30-year dipping to 1.9232% in early morning trading.

The indexes enjoyed a Friday rally choosing to ignore the worst consumer sentiment reading in more than ten years.  However, the VIX declined, and big tech rallied strongly to end a volatile week of price action.  This week we have a big focus on retail with earnings from WMT, TGT, and HD with a reading on Retail Sales figures Tuesday morning.  The SP-500 P/E Ratio eased slightly with last week’s selling but remained strongly overvalued at 98% above the historical average.  The Buffett Indicator is a whopping 215% market value ratio to GDP, holding 72% above the historical average.  That said, the bulls seem to have no concern with the premarket activity working to inspire prices higher.  So stay with the trend and enjoy the party as long as it lasts!

Trade Wisley,

Doug

Tech Stocks Remained the Bright Spot

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Tech Stocks Remained the Bright Spot

Although we saw modest selling yesterday, tech stocks remained the bright spot posting a gain while the industrials continued to slide lower.  However, the moves showed no fear, with VIX pulling back during the choppy light day of price action.  This morning, we will turn our attention to Consumer Sentiment and the JOLTS reports with a light day of notable earnings reports as the silly season begins to wind down.  Will the data inspire the bulls to close the week positively, or will it bring out the bears, adding to the inflationary worries?

Asian markets closed Friday, trading green across the board during the night, inspired by record Singles Day shoppers.  However, European markets trade mixed this morning with modest gains and losses.  With a lighter day of earnings inspiration and economic data coming later this morning, the U.S. futures point to a positive as they try to shake off inflation concerns.

Economic Calendar

Earnings Calendar

We have a much lighter day on the earnings calendar with 85 companies, but many of them remain unconfirmed.  Notable reports include AZN, DTEGY, VIVO, MFG, NGD, SPB, TOELY, & WRBY. 

News & Technicals’

During a politically significant press conference Friday, a top Chinese official gave a rare criticism of the U.S. and Western democracy.  The night before, Chinese President Xi Jinping joined the ranks of Mao Zedong and Deng Xiaoping in becoming the country’s third leader to oversee the adoption of a “historical resolution.”  While criticizing Western political systems, Chinese officials promoted their country’s agenda and emphasized new development models under Xi.  Alibaba and JD.com racked up around $139 billion of sales across their platforms on China’s Singles Day shopping event, setting a new record.  The record sales come despite worries about the strength of the Chinese consumer and the impact of Beijing’s crackdown on technology companies.  Singles Day was a slightly more muted affair as Chinese technology companies continue to face scrutiny from regulators and President Xi Jinping pushes for so-called “common prosperity.”  Treasury yields traded mixed early Friday morning, with the 10-year rising slightly to 1.5716% while the 30-year moved slightly lower to 1.9183%.

Yesterday proved to be a choppy day, but tech stock remained the bright spot for the market with a modest gain while the Dow slowly ground lower.  Worries of inflation elevated treasury bonds on Wednesday, and as of this morning, they continue to hold on to gains.  However, the gains in gold and silver have softened overnight while still holding essential support levels.  With earnings season beginning to wind down, we may turn more attention to economic data for inspiration.  Today, we will test the Consumer Sentiment report’s temperature and see if we are making progress with the JOLTS numbers.  Today could be interesting with the institutions wanting to close the week on a strong note, while the bears may still want to test price support levels in the index charts that remain below current prices. 

Trade Wisely,

Doug