Netflix disappointed investors

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Netflix disappointed investors

The substantial point decline yesterday added insult to injury after the bell as Netflix disappointed investors with the substantial decline in subscriber growth.  However, consumer staples, utilities, and packaged food-related stocks surged as investors moved to more defensive positions.  Technically the QQQ suffered the most damage falling below the price support of the February high.  With the sharp NFLX decline, the NASDAQ is vulnerable to more selling as the index seeks price support. 

Asian markets had a rough night, with Japan declining another 2%, with Hong Kong not far behind, falling 1.76%.  Despite that, the European indexes see green across the board this morning with modest gains.  With a big day of earnings and a petroleum number later this morning, U.S. futures have recovered from overnight lows, currently pointing to a flat to a slightly positive open.  Prepare for more price volatility as the market reacts to earnings data.

Economic Calendar

Earnings Calendar

On the hump day earnings calendar, we have 66 companies listed to report, but many are unconfirmed.  Notable reports include CMG, ANTM, BKR, CP, CHDN, DFS, EFX, GL, HAL, KMI, LRCX, LVS, LAD, NDAQ, NEE, NEP, RHI, RCI, SNBR, VZ, & WHR.

News & Technicals’

After the bell yesterday, Netflix disappointed investors as subscriber growth declined sharply, and adding insult to injury, the company projects that next quarter the trend is likely to continue.  A challenging beginning to the big tech reports.  After a record of 109 SPAC (Special Purpose Acquisition Company) deals in March, the SEC shut off the pipeline with new accounting guidance.  SPAC’s warrants will now receive the classification of liabilities instead of equity instruments.  Amazon plans to connect your credit card to a palm print scan payment system in their Whole Foods stores.  According to the company, they have already signed up thousands of users to the new technology.  The debut of new Apple tech upgrades unimpressed investors yesterday, leaving behind a bearish engulfing pattern on the chart.

Although yesterday’s selling looks relatively benign on the index charts, I suspect it was painful for those not prepared for the substantial point decline.  However, as we head into another big day of earnings data, the premarket futures try to put on a brave face recovering from overnight lows despite the big NFLX disappointment.  Energy and financial sectors continued to show weakness yesterday as consumer staple and utilities sector stocks surged higher.  Also, keep an eye on packaged food and farm-related commodities as California drought concerns and inflation worries push the stocks upward.  With only petroleum numbers later this morning on the economic calendar, be prepared for the typically wild earnings price volatility as the market reacts.

Trade Wisely,

Doug

Big Tech News Events

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Big Tech News Events

It’s time to buckle up and get ready for the volatility that big tech news events can inspire.  Apple will reveal its new products later today, and after the bell, Netflix will be the first tech giant to report quarterly results.  With indexes so elevated, they will need to report near perfection to support current valuations.  With lowered analyst expectations, it’s certainly possible, but traders should prepare for the possibility of substantial morning gaps as the market reacts.  Market emotion is high, so plan your risk carefully.

Overnight Asian markets struggled as Japan dropped nearly 2% as China leaves lending rates unchanged.  European markets display red across the board this morning, with global markets showing weakening sentiment.  Ahead of earnings and the kick-off to big tech reports later today, U.S. futures currently point to a lower open as treasury yields rise. 

Economic Calendar

Earnings Calendar

On the Tuesday earnings calendar, we have 35 companies listed, ready to report quarterly results.  Notable reports include ABT, AN, CMA, CSX, DOW, EW, FITB, HOG, IBKR, ISRG, JNJ, KEY, LMT, MAN, NFLX, PM, PG, TRV, & XRX.

News & Technicals’

Later today, we have a couple of big tech news events that could have a market effect.  First, Apple will roll out new versions of their high-end iPads and maybe even some new tech devices.  After the bell, we will get our first tech giant earnings report when Netflix reveals its results.  Keep in mind this sets the stage for possible market gaps on Wednesday’s open, which will likely continue as we progress through the tech titan reports.  This morning the 10-year Treasury yields perked up to 1.619%, and the 30-year climbed to 2.315%, reacting to the latest earnings results that hint of rising inflation.   India reports over 200,000 daily Covid cases for the 6th consecutive day topping over 15 million as hospitals struggle under the increasing pressure.  According to the IEA, energy-related carbon emissions will surge by nearly 5% this year as the world Covid recovery begins.  The organization is sounding a warning that this surge is unstainable for our climate. 

Futures attempted a bounce in overnight trading, but we see a bit of bearishness as we begin another day of potential market-moving earnings reports so far this morning.  The SPY and the QQQ look to be the most vulnerable, leaving behind evening star-type candle patterns in very extended market conditions.  With price and moving average supports significantly lower, it could be a painful pullback should the bears find inspiration to attack.  Thus far, earnings reports have come in glowing positive, but that could negatively affect inflation hawks watch rising treasury yields this morning.  Expect the challenging price volatility to continue and even intensify as the risk of significant morning gaps increase as the tech giants begin to report.  Stay focused and flexible as anything is possible during earnings season. 

Trade Wisely,

Doug

SP-500 P-E ratio hit 37.5

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SP-500 P-E ratio hit 37.5

With last week’s bullish run, the SP-500 P-E ratio hit 37.5 as earnings top analysts lowered expectations by as much as 22%.  Coca-Cola reported this morning topping analysts’ targets as the futures try to rise off of overnight lows.  Keep in mind if the bears were to find inspiration, the price support levels in the SPY and QQQ are painfully lower due to their extended condition.  Plan your risk carefully and avoid complacency remembering anything is possible as 2nd quarter earnings ramp up over the next couple of weeks. Significant morning gaps are possible.

Asian markets mostly rallied through the India markets plunged as pandemic infection rates continue to surge to severe levels.   European markets trade mixed around the flatline as they monitor earnings and global sentiment.  As the premarket earnings roll out, the U.S. futures rise off overnight lows but still point to a modestly lower open.  Prepare for price volatility to remain challenging in this elevated market condition.

Economic Calendar

Earnings Calendar

We will have a busy week on the earnings calendar as the 2nd quarter earnings season ramps up.  Notable reports include ACC, KO, HXL, Ibm, MTB, PLC, STLD, UAL, & ZION.

News and Technicals’

After another very bullish week in trading, the SP-500 P-E ratio hit 37.5, 89% above the historical 10-year average.  However, there seems to very little concern about inflation, with the 10-year Treasury yields start the week modestly lower.  Trip.com surged more than 4% from their issue price in its Hong Kong debut.  According to reports, we reached a pandemic milestone with half of U.S. adults vaccinated with at least one shot.  It occurred just one day after the U.S. reported the Covid death toll topping 3 million Americans.  China’s CanSino Bilogicis will start clinical trials for a Covid vaccine administered through inhalation though the efficiency rates of China vaccines have much lower effective rates. 

The DIA, SPY, and QQQ charts appear highly extended on the technical front, and though the futures indicate a lower open, they are well off of overnight lows as earings roll out.  Logically one would expect a significant pullback to begin, but with the lowered analyst expectations, companies thus far have been able to top these targets by nearly 22%.  Though many companies are not earning more than they were one year ago, the low expectations and the frenzy of buying something no matter the price could easily continue.  However, should the market find a reason to stumble, the pullback could be very painful, so at the risk of sounding like a broken record, avoid overtrading but stay with the bullish trends as long as this party continues to rage. 

Trade Wisely,

Doug

Dow Topped 34,000

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Dow Topped 34,000

The Dow topped 34,000 for the first time, and the SPY and QQQ followed with new record highs, and the indexes continue to stretch out.  Though 10-year treasuries fell yesterday, they have rebounded slightly this morning, but with no bond auctions until next week, we will have to wait to see the direction of follow-through.  Index trends are extraordinarily bullish, but as we extend, the danger of reversal grows, so don’t become complacent or overtrade because the pullback could be rather punishing.

Asian markets closed the day green across the board as China reported economic growth of 18.3% last quarter.  European markets are also bullish across the board this morning as earnings inspire the bulls.  U.S. futures have recovered from overnight lows, pointing to a modestly bullish open ahead of earnings and housing data.  Expect price volatility to remain high, and keep an eye out for possible intraday whipsaws or even reversals if profit-taking picks up heading into the weekend.

Economic Calendar

Earnings Calendar

We have 20 companies listed on the Friday Earnings calendar, but several are unconfirmed.  Notable reports include ALLY, BK, CFG, KSU, MS, PNC, & STT.

News & Technicals’

According to the WHO, the Covid infection rate is approaching the highest level so far worldwide.  The agency says they will continue to assess the crisis and adjust advice accordingly.  Pfizer’s CEO said yesterday that a third Covid vaccine dose within 12 months is likely needed and went on to say it’s possible people will need to get vaccinated annually.  Daily U.S. Covid cases remain above 70,000 new infections daily.  China says its economy grew 18.3% but was below an expectation of 19%, and their GDP numbers suggest the recovery has already begun to slow down.  The 10-year treasury help yesterday’s sharp rally as it pulled back but is slightly rebounding this morning.  With on bond auctions today, we will have to wait until next week to see if the slide and follow through.

It has become an almost monotonous phrase in the last year of the U.S. Stock market, but we made new record highs in the DIA, SPY & QQQ yesterday while the IWM lagged.  The Dow topped 34,000 for the first time as the indexes continue to stretch in nearly parabolic chart patterns.  The bulls found energy as companies blew past expectations and economic data came in much more robust than expected.  Analysts have lowered expectations so much that so far this season, reports have topped them by more than 20%.  Some might call that manipulation!  That said, the trends remain extraordinarily bullish, and there is no reason to believe it can’t continue, so don’t fight the tape.  However, traders should avoid overtrading and remain vigilant because as this market continues to extend, the danger of a punishing reversal grows.

Trade Wisely,

Doug

New Record Highs

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Record highs

Big bank earnings lifted indexes to new record highs, but the intraday whipsaw left behind some concerning candle patterns as the news-driven price volatility challenges traders.  Emotions are very high, and with the flood of inexperienced money that entered the market over the last several months, that is likely to continue.  Institutions say this the economic growth in this quarter could rival that of 1984 as we ride the tidal wave deficit fueled stimulus spending.  Stay with the trend and enjoy the party as long as it lasts but be warned, the risk is high as the indexes continue to stretch beyond logical limits.

Asian markets traded mixed but mostly lower, struggling for direction.  European markets surge to new records as they monitor earnings this morning.  U.S. futures point to a substantial gap higher after yesterday’s volatile whipsaw, likely setting new records at the open.  I suspect wild price volatility will be with us for several weeks, so plan your risk wisely.

Economic Calendar

Earnings Calendar

We ramp up slightly today on the earnings calendar, with more than 50 companies stepping up to report quarterly results.  Notable reports include TSM, AA, BAC, BLK, SCHW, C, DAL, JBHT, PEP, PPG, RAD, USB, UNH, & WIT.

News & Technicals’

The beginning of earings fueled new record highs as the big banks topped expectations, and that trend continues today, with BAC already beating estimates.  Besides a busy earnings day, we have an economic calendar chalked full of potential market-moving reports to keep traders and investors busy.  Instructions say this could be the strongest quarter of economic growth since 1984, and it would seem that no price is too high as in this stimulus-fueled buying frenzy.  President Biden announced that U.S. troops will leave Afghanistan by September 11th though some suggest this action will only worsen the situation. 

After a nasty whipsaw yesterday that left behind some concerning daily candle patterns, the bulls are back on the job this morning.  Traders will have many data points to track this morning with earnings and a jam-packed economic calendar.  I think it would be wise to plan for significant price volatility in the weeks ahead as the index charts continue to extend.  Logic would suggest a market pullback could begin at any time, but there is little logic in this buying frenzy pushed by a tidal wave of deficit spending.  Although market conditions like this typically end in a punishing selloff trying to fight it is unwise.  Remember, a market can remain irrational much longer than we can remain liquid.  Don’t chase; avoid overtrading, resist complacency but stay with the trend riding this wave as long as it lasts. 

Trade Wisely,

Doug

Big bank reports and Coinbase IPO

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big bank reports

The choppy dull days of the last couple of weeks could be over as the market reacts to big bank reports and Coinbase IPO.  I worry that we have pushed prices so high that companies will have to report near perfection to support their current valuations.  I wonder if the massively hyped Coinbase IPO will disrupt the market as traders pull funds from other stocks as they rush to fund their IPO purchase, fearing they will miss out.  Fasten those seatbelts it may prove to be a very wild ride in the days and weeks ahead.

Asian markets traded mixed but mostly higher overnight, with Hong Kong surging 1.44%.  European markets seem to be taking a wait-and-see approach this morning, trading hovering near the flatline.  As earnings roll out, U.S. futures are trying to hold on to a positive open, but gains at this point look to be very modest.  However, anything is possible, so stay on your toes as we react to the news.

Economic Calendar

Earnings Calendar

We officially kick off the 2nd quarter earnings today with 17 companies listed on the calendar ready to fess up to quarterly results.  Notable reports include BBBY, JPM, GS, HOFT, INFY, LOVE, SJR, & WFC.

News & Technicals’

Today we have the potential for wild price volatility with big bank reports and the IPO of Coinbase.  On the earnings front the due to the substantial rally we have experienced in anticipation, companies will need to report very near perfection to support current prices.  With so much hype surrounding the Coinbase IPO, it could prove a significant market distraction disrupting stock prices as traders pull money out of other stocks to fund their purchase of this record-setting new issue.  I obviously don’t know what happens next, but we may soon long for the dull choppy days of the last week as price volatility ramps up in news-driven reports. 

With the SPY and QQQ setting new record highs, their charts appear significantly extended and almost parabolic over the last three weeks of trading.  Clearly, the rising infection rate and the pulling of the JNJ vaccine are of no concern to this market.  The hotter than expected CPI also proved to be of no consequence as traders chase into stocks with no price too high apparently.  I have to admit this makes me very nervous that the market could be running at full speed toward a very steep cliff.  However, I have seen many times in my trading career that an overly exuberant market can last much longer than anyone would expect.  That said, as retail traders, the best we can do is stay with the trend being careful not to chase already extended stocks and guard against overtrading and complacency. 

Trade Wisely,

Doug

CPI in Focus

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CPI

All eyes will be on the CPI report coming out before the bell.  Will it continue to inspire the bulls, or will it inspire the bears with worries of inflation?  Ahead of the number, the 10-year treasuries rose to 1.69%, suggesting how critical this number could be in defining the path forward.  The FDA came out this morning with a recommendation to pause the use of the J&J vaccine due to blood clotting worries.  The futures markets have taken a turn for the worse as a result.

Overnight Asian markets traded mixed but mostly higher as Alibaba share surge for the second straight day.  European markets trade with modest results this morning, with earnings and inflation data in focus.  Ahead of the CPI report, U.S. futures point to a lower open on the eve of the 2nd quarter earnings kickoff.

Economic Calendar

Earnings Calendar

On the Tuesday earnings calendar, we have just 14 companies stepping up to report quarterly results.  Notable reports include FAST & KRUS.

News & Technicals’

Critical economic data on the inflation front is on tap before the market opens with the CPI.  The consensus projects the number to come in at 0.5%; however, markets could inspire the bears if it tops expectations.  Conversely, should the number come in lower than the consensus, look for bullish inspiration to occur.  Directly related to our possible inflation issues is the massive stimulus spending that pushed the U.S. budget deficit to a new record of $1.7 trillion this year.  The 10-year Treasury yield moves back up this morning, topping 1.69% as we wait on the CPI numbers.  On the pandemic front, the U.S. hit a new daily vaccination record, but unfortunately, infection rates are rising, with the country reporting 70,000 cases per day. 

Yesterday proved to be a choppy sideways day for the indexes, and as we wait for the 2nd quarter earning kickoff, it’s very likely we could see more of the same assuming the CPI comes in as expected.  Index trends remain very bullish even though the SPY and QQQ charts appear pretty extended in the short term.  Plan your risk carefully as we head into earnings season.  With all the big investment institutions singing in a chorus that a market boom is ready to begin, one has to wonder if they have factored in the possible inflation impacts that may result.  Hmm?  Stay with the trend but guard against complacency if the market should stumble for this very elevated position.

Trade Wisley,

Doug

Highly unlikely to raise rates.

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Raise Rates

In a Sunday interview, Jerome Powell said the extremely dovish policies would continue and that it is the Fed is highly unlikely to raise rates this year.  With the last hour buying surge Friday, the DIA, SPY, and QQQ all set new closing records by the close.  Last week was overall a frustratingly choppy price action punctuated by the Monday gap and Friday late-day surge.  This week we kick off 2nd quarter earnings with the indexes in a short-term, very extended condition adding significant danger for retail traders.  Anything is possible, so buckle up it could be a wild ride this week.

Overnight Asian markets saw red across the board even as shares of BABA rose 6.5% after being fined.  European markets trade mixed but primarily flat this morning.  With a light day of earnings and economic reports, U.S. futures have rallied well off overnight lows as the premarket pump begins.  Prices could remain light and choppy until we get the big bank reports beginning on Wednesday.  Plan your risk carefully.

Economic Calendar

Earnings Calendar

We have 12 companies listed on the Monday earnings calendar coming forward with their quarterly results.  Notable reports include APHA & MIND.

News & Technicals’

On the news program 60 Minutes, Jerome Powell reaffirmed the Fed’s commitment to loose monetary policy.  He went on to say, “it’s highly unlikely we would raise rates anything like this year.”  According to reports, MSFT could announce a deal as early as today, the acquisition of NUAN.  NUAN stock is indicated sharply higher this morning as a result.  Despite a $2.8 billion anti-monopoly fine leveled by Chinese regulators, shares of BABA are popping 6% this morning following a 6.5% rally in Hong Kong overnight.  On the pandemic front, Regeneron to request FDA clearance on an antibody-drug as a preventative treatment, Britain’s Pub drinkers return as lockdown eases, and Chinese vaccines don’t have very high protection, according to a top health official. 

Last week’s price action started with a considerable gap on Monday and ended with a buying surge in the last hour of trading on Friday.  However, the price action between those sharp moves was frustratingly light and choppy.  Although the DIA. SPY and IWM show extreme bullishness; the charts also display an extremely extended condition after nearly 2-weeks of buying, creating a parabolic move that’s a long way from good price support levels.  That said, with the Fed standing on the gas peddle and the 2nd quarter earnings season kicking off on Wednesday, there is no reason to believe that the market will not continue to extend.  Until then, choppy price action is likely to continue.

Trade Wisely,

Doug

Chip Shortages

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Chip Shortages

Chip shortages are forcing General Motors and Ford to temporarily shut down some American production plants ranging from weeks to several additional weeks in already idle facilities.  The Amazon union vote at an Alabama warehouse looks as if it is failing as the vote count widened to deny unionization.  Keep an eye on those Treasury yields that are once again pushing higher this morning as inflation worries linger. 

Overnight Asian closed the week mixed but mostly lower as the volatile whips continue in Hong Kong slipping more than 1%.  European markets trade mixed with modest gains and loss with German health minister calling for a nationwide lockdown due to the third wave surge in infections.  However, after a few days of choppy consolidation, U.S. futures currently point toward a bullish open and more record highs ahead of PPI numbers. 

Economic Calendar

Earnings Calendar

We have a very light day as we wrap up the 1st quarter earnings with just 12-companies listed on the calendar with most unconfirmed.  The only notable report I see is JKS.

News & Technicals’

Due to chip shortages, GM and F are cutting production at several American plants.  The temporary plant closures range from a week to several additional weeks for plants currently idled.  In Germany, the health minister is calling for a nationwide lockdown after reporting over 30,000 new infections on Wednesday and 26,000 on Thursday.  According to reports, Biden’s China policy is tougher on financial firms than President Trump’s policies.  The Cowen Washington Research Group analyst Haret Seiberg says delisting of Chinese companies will happen because Beijing is unwilling to allow the U.S. to inspect company audits.  Treasury Yields are bumping higher this morning to 1.666% on the 10-year, with the 30-year rising to 2.343 as inflation concerns linger. 

The index charts remain very bullish with no clues in the price action that the bears have any teeth at all.  However, traders should note the very extended condition of the current rally and the possible danger if the market were to stumble.  That said, it seems every big institution is singing in a chorus that the market boom will continue despite the incredibly high P/E ratios.  As for me, I will stay with the trend, but I will also guard myself against complacency and avoid the urge to overtrade due to this very extended market condition.  Let’s enjoy the ride while it lasts, but always remember what goes up will eventually come down and likely in a swift and very painful correction.  Have a fantastic weekend, everyone!

Trade Wisely,

Doug

Infrastructure

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Infrastructure

According to President Biden, he is now willing to negotiate the corporate tax increase that funds the $2.3 trillion infrastructure bill as the battle in Congress heats up.  The IMF is at the same time trying to praise the U.S. for the stimulus spending while also warning the massive debit overhang threatens economic recovery.  However, the FED appears unconcerned as they stand fast on their extremely dovish QE policies.  As the market searches for inspiration, keep in mind we might have to wait until the kickoff of earnings next Wednesday to break this resting consolidation. 

Asian markets mostly rallied overnight, with Hong Kong continuing its volatile swings, closing up more than 1% reversing the day before.  European markets are mostly higher this morning, but the gains are pretty modest.  Ahead of earnings, Jobless Claims, and another Jerome Powell speech, the U.S. futures currently suggest a flat to modestly bullish open. 

Economic Calendar

Earnings Calendar

The Thursday earnings calendar has just ten companies stepping up to report quarterly results.  Notable reports include CAG, STZ, LEVI, PSMT, & WDFC.

News & Technicals’

As the battle for the $2.3 trillion infrastructure bill, President Biden says he is now willing to negotiate on the corporate tax increase.  The CDC is tracking a Covid variant that is spiking severe cases in younger adults.  There are now 52 jurisdictions across the country with and more than 16,000 of the B1.1.7 variant.  Fed officials are willing to stand fast on their extremely dovish policies, according to the minutes of the last FOMC committee meeting.  Officials indicated that the unemployment rate could fall to 2.2% by year-end, and inflation could run to 2.2% in the process.  That said, the ECB says it may begin to reduce its bond-buying in the third quarter of this year.  The IMF is now warning the U.S. that the debit overhang and financial vulnerabilities pose a significant threat to the economic recovery while at the same time trying to praise the stimulus efforts.  Hmm?

Another day of choppy price action as the market seems to be waiting for some inspiration.  I suspect we could have to wait until next Wednesday and the official kickoff of 2nd quarter earnings.  However, with Jermone Powell speaking today, it is possible he could get things moving.  The question is in which direction?  The index trends remain bullish, and there is the apparent desire of the FED and the federal government to keep the new record highs coming.  The problem traders face is the challenging price volatility that accompanies these all-or-nothing price swings.  Remain vigilant to your trading rules, don’t chase or overtrade but stay with the bullish trend as long as it continues.

Trade Wisely,

Doug