Challenging Day of Price Action

August 20, 2021 by Doug Campbell

Looking at the daily index charts, one could quickly think the relief rally looks underway but look deeper, and you will see another challenging day of price action.  The bears have gained some confidence, much more willing to fight for dominance than we have seen recently.  With a light day of earnings and economic data to provide inspiration and markets around the world experiencing selling pressure, the bulls have a challenging task ahead to defend price support heading into the weekend.  Plan your risk carefully!

With more Chinese regulatory scrutiny in tech and now real estate, Asian markets sold off strongly led by Hong Kong, with the HSI dipping into bear territory.  European markets currently see red across the board, and the weekend nears. Finally, with a light day of earnings and economic data, U.S. futures point to a bearish open that may test the bull’s willingness to defend yesterday’s low in the Dow.  Expect volatility as the bulls and bears fight for dominance.

Economic Calendar

Earnings Calendar

We have a light day on the earnings calendar to round out the trading week with only 7-verified reports.  Notable reports include BKE, DE, and FL.

News & Technicals’

Another challenging day of price action with buying in big tech, health care, and defensive stocks proving some safe-haven spots for traders.  However, the divide between winners and losers continues to grow as more and more stocks fall below their 200-day averages.  The VIX pulled back from its intraday high but ended the day above a 20 handle, suggesting more price volatility in the days ahead.  Although the DIA, SPY, and QQQ  experienced a bit of a relief rally, the 4-week new high/new low ratio surprisingly remained in a short-term oversold condition.  China passed new tech regulations and looked to expand its crackdown to real estate.  As a result, Hong Kong markets fall into bear territory to close out the week.

Yesterday’s rally was nice, but it was not nearly enough to recover broken support levels. Moreover, with the premarket action threatening a bearish open, the risk of severe technical damage is growing.  Should the bears find the energy to push prices below yesterday’s lows, we could experience a very rough day of a pile on selling into the weekend.  With a very light day of earnings and economic data, the bulls will have to work hard to find enough inspiration to encourage buy the dip traders to take the weekend risk.  That’s a big ask, with Asian markets closing decidedly bearish and European markets seeing red across the board in the worst week of trading since February.  As the bulls and bears battle for dominance, expect the price action to remain challenging with the VIX elevated.

Trade Wisely,

Doug

Tapering Easy Money Policies

August 19, 2021 by Doug Campbell

The thought that the Fed is considering tapering easy money policies brought out the bears yesterday afternoon.  The selling is starting to create some technical damage in the DIA, SPY, and QQQ and likely shake the uber bulls’ confidence.  With Jobless Claims and Philly Fed numbers before the bell, we could have a challenging price action open depending on the results.  However, with the overall market, so helplessly addicted to money printing, I would not be too surprised if the taper tantrum withdrawal symptoms create more challenges on the path forward.

Asian markets traded in the red across the board last night, with Hong Kong leading the way as it plunged 2.13%.   European markets also see nothing but red across the board due to the taper talk and falling oil prices.  U.S. Futures continue to fall as earnings roll out with potential market-moving data before the bell that worsen or significantly improve the open depending on the results.  So, buckle up; it could be a wild ride this morning. 

Economic Calendar

Earnings Calendar

The Thursday earnings calendar has indicates 46 companies expected to report, with about half of them unconfirmed.  Notable reports include AMAT, BZUN, BILI, BJ, EL, GFI, KSS, M, MSGS, NCMYGY, WOFF, QIWI, ROST, SDRLF, TPR,& VSCO.

News & Technicals’

We learned from the FOMC minutes that the committee is talking about tapering easy money policies this year. But, with the market so incredibly addicted to money printing, the bearish reaction pushed all the indexes lower with selling into the close.  Treasury yields, surprisingly, traded lower this morning despite the taper talk.  The 10-year fell four basis points to 1.233%, with the 30-year also dropping four basis points to 1.87%.  Tesla is apparently struggling with vehicle delivery as customers are told they will have to wait for weeks or even months as delivery dates keep slipping.  According to sales staff, they are not being told what is causing the delays and cannot answer customer’s questions.  However, Toyota says it will cut global production by 40% due to the pandemic impacts of semiconductors and other parts shortages. 

After the late afternoon selloff yesterday, some technical damage is beginning to show in the index charts.  The DIA, SPY, and QQQ closed below support levels. With the premarket activity currently pushing lower, the damage could worsen this morning unless the bulls go to work and defend. Nevertheless, a little ray of sunshine with the 4-week new low/ new high ratio suggests we are near a short-term oversold condition and could bounce soon.  However, that will likely depend on the Jobless claims results, which will come out before today’s open.  Economists estimate 365,000 claims filed, which would be a modest improvement over last week’s reading.  Please keep your fingers crossed because should it miss, the bears could keep going selling pressure. 

Trade Wisely,

Doug

Bears Woke Up

August 18, 2021 by Doug Campbell

After a disappointing retail sales number, the bears woke from their summer hibernation to reverse the previous rally that set new records.  Though the whippy price action likely shook trader confidence at the end of the day, the bullish trends in the DIA, SPY, and QQQ remain. However, with housing number before the open and the FOMC minutes later this afternoon, prepare for another day of volatile price action that likely favors quick intraday traders. 

Asian markets mostly rallied overnight after the reserve bank of New Zealand keeps rates unchanged.  However, European markets trade mixed but mostly lower as they monitor inflation data.  The U.S. futures point to mixed open ahead of economic and earnings data, but that could quickly change depending on the housing numbers. So hang on tight; the ride is about to take another lap.

Economic Calendar

Earnings Calendar

We have 35 companies listed to report on the Wednesday earnings calendar, with many of them as unconfirmed.  Notable reports include CSCO, ADI, BBWI, EAT, PLCE, NVDA, LITE, LOW, KEYS, RRGB, SNPS, TGT, TJX, VIPX, & ZTO.

News & Technicals’

Lowe’s beat on the top and bottom line this morning, and the stock is priced higher this morning, trying to recover some of yesterday’s losses.  Target also topped earnings targets and raised forecasts, but the retailer is trading lower in the premarket.  After the bell, CSCO, NVDA, and HOOD will report their results.  Treasury yields rose this morning as we wait on the FOCM minutes later this afternoon.  The 10-year gain nearly two basis points to 1.275%, and the 30-year rose to 1.933%.  Europe is scrambling to formulate an Afghanistan refugee plan, trying to avoid repeating the 2015 crisis.  An emergency meeting of the most affected countries did not invite the United States after the Taliban seized control of the country.

The bears woke from their summer hibernation yesterday after the very disappointing retail sales number.  The pullback included some violent intraday whipsaws that ended the day printing bullish hammer patterns with the afternoon rally.  Please remember that hammer patterns required a bullish follow-through to be valid, so be careful rushing in to buy the dip.  Before the bell, we have another potential market-moving report with the Housing Starts and Permits, expecting a minor pullback in the consensus. Finally, after some moring price volatility, we could see price action become light and choppy as we wait for the release of the last FOMC minutes.  I think it’s unlikely that we will learn anything more about the possibility of a Fed taper, but if we do, there could be another shot of wild price swings in reaction.  That said, after yesterday’s selloff, the DIA, SPY, and QQQ bullish trend suffered little to no damage though I can’t say the same for trader confidence. 

Trade Wisely,

Doug

Massive Intraday Whipsaw

August 17, 2021 by Doug Campbell

The early selloff triggered a massive intraday whipsaw that set new records in the DIA and SPY as buy the dip buyers rushed back in with a fear of missing out.  Unfortunately, this morning, many may feel pain with an overnight gap down, threatening to take all or yesterday’s gains back in one fell swoop.  Keep your fingers crossed that the Retail Sale numbers come in better than expected, or this could prove to be a rough day.

The seeing began overnight as Asian markets sold off across the board on fears of more Chinese internet regulations.  European markets trade primarily lower this morning, keeping an eye on the economic data and the Afghanistan crisis. In addition, as earnings roll out U.S. futures, currently suggest an overnight reversal gap down ahead of a vital retail sales number that could improve or worsen the market open.  So, tighten your seatbelt and get ready for a bumpy ride!

Economic Calendar

Earnings Calendar

The number of earnings events drop off today with just 37 companies listed, and nearly half are unconfirmed.  Notable reports include HD, WMT, A, AMCR, CRMT, CREE, DNUT, LZB, PANDY, QUIK, & SE.

News & Technicals’

Home Depot shares decline this morning after a sold beat on estimates after the company reported that the do-it-yourself trends have weakened.  The U.S. sets new records as pandemic infections rise, but less than 11% of hospital beds are used nationwide.  Oregon has 56.8% of its residents fully vaccinated but has seen an increase of 11.4% in infections.  Hawaii is 54.3% vaccinated with infections up 12.3%, Florida  50.3% vs. 28.2 and Missippi 35.8% vs. 18.7% increase.  Flights have resumed from the Kabul Airport as people scramble to leave Afghanistan, with the U.K. foreign secretary see’s the situation stabilizing.  Treasury yields moved slightly lower this morning, with the 10-year trading at 1.23% and the 30-year falling to 1.898%. 

So what is a trader to do with a market producing a massive intraday whipsaw that set new record highs with traders rushing in near the close?  Well, if you’re anything like me, you either stand aside, seeing no edge as a swing trader or chose to do a little day trading to take advantage of the wild price volatility.  Traders that bought up stocks yesterday could experience a little pain this morning with an overnight whipsaw down.  The selling began overnight as with China internet shares falling as regulatory fears rise.  Traders now face a retail sales number before the open that consensus suggests may decline, and that sentiment seems to have been confirmed in the Home Depot guiding sales lower in their earnings report.  I said yesterday to prepare for price volatility, but holy cow, this is ridiculous!  Unless you’re an experienced day-trader, you may find it nearly impossible to matain a trading edge.  The song’s lyrics, The Gambler says it best, Know when to hold em’, know when to fold em,’ know when to walk away, and know when to run! So buckle up it could be another wild ride today.

Trade Wisely,

Doug

Talk Fed Tapering

August 16, 2021 by Doug Campbell

The images of fleeing diplomats and the hints of Fed tapering seem to have a few bears milling about this morning pondering the uncertainty.  Could their summer hibernation come to an end as we wind down the bulk of earnings season inspiration?  Perhaps but with new records in the DIA and SPY, trends remain very bullish.  Only the IWM has a hint of bearishness as it continues to languish below its 50-day average. So prepare for the possibility of price turbulence as the markets work through the details of the uncertainty. 

Asian markets closed mostly lower overnight, lead by the Nikkei falling 1.62% after China’s economic data disappoints.  Geopolitical concerns have European markets seeing red across the board this morning as investors monitor the fast-changing events.  Ahead of earnings and a light day of market-moving economic news, U.S. futures suggest a modestly bearish open within bullish trends amid tapering uncertainty. 

Economic Calendar

Earnings Calendar

To kick off the new trading week, we have around 190 companies listed, but a large number of them are small-cap unconfirmed events.  Notable reports include PLNT, DDD, APD, AMC, GOLD, BNTX, CBT, ELY, CF, CHGG, CXW, APPS, DISH, ELAN, ENR, GLNG, KNDI, QLYS, SGMS, SDC, TTD, TSN, & WKHS.

News & Technicals’

President Biden experiences his Saigon moment as the Taliban seize Kabul as diplomats flee.  After taking over the presidential palace, the Taliban has taken over the entire country in about 30 days.  Reports suggest that there is growing support to announce tapering its debit asset purchase program in September.  It will be interesting to see how a market addicted to money flowing from the Fed will react when and if it does come to an end.  This morning Treasury yields decline with the 10-year falling to 1.263% and the 30-year dipping to 1.921%, with the Fed minutes expected Wednesday afternoon.  With turmoil in Haiti, Afganistan, and Malaysia, markets worldwide are experiencing a little bearish pressure due to the uncertainty.

Coming off a week of fresh record highs in the DIA and SPY, the images of fleeing diplomats and the talk of Fed tapering have the bears stirring about this morning.  Earnings season provided a good deal of bullish energy, but as the season winds down, the bulls will have to begin looking elsewhere for inspiration.  Trends is in the DIA, SPY, and QQQ are very bullish, but they also appear somewhat overextended.  The big question is, do the bears have any teeth, and will the geopolitical along with the taper talk wake them from the summer hibernation.  Only time will tell but be ready for some price turbulence as the market grapples with the uncertainty.

Trade Wisely,

Doug

Producer Prices Surge

August 13, 2021 by Doug Campbell

After hearing that the producer prices surged well past inflation expectations, the bulls ignored the news and pushed the SP-500 to its 47^th record high for the year, with Dow leading the charge.  I suspect there will be a time when we will suddenly care about inflation, but for now, stick with the bullish trends and enjoy the party as long as it lasts.  With volume below average and a very week, Absolute Breadth Index may suggest market complacency is growing, so guard against overtrading and avoid chasing already extend stocks.

Asian markets struggled overnight, closing the session mostly lower with only ASX squeaking out a positive close.  However, the Europiean markets see nothing but green this morning fueled on solid earnings data.  With earnings numbers dwindling and U.S. futures trade mixed ahead import/export numbers and consumer sentiment.

Economic Calendar

Earnings Calendar

We have a lighter day on the Friday earnings calendar with just 71 companies listed, but a significant number are unconfirmed.  Notable reports include ARHVF, DSEY, FUJIY, SDPI, & VSTA.

New & Technicals’

The pandemic numbers back on the rise; the FDA recommends booster shots for people with compromised immune systems hoping to shield the most vulnerable.  According to Fauci, everyone will likely need booster shots in the near future. In addition, pandemic restrictions are again on the rise, with indoor masking requirements and vaccine passports entering public buildings.  A new black market business has emerged producing fake vaccination cards.  As the U.S. withdraws troops, Al-Qaeda quickly regains power as they march across the country, taking city after city.  The expectation is that Kabul will soon be recaptured, and the U.S. is now deploying 3000 American troops to help with the evacuation of Americans at the U.S. Embassy. 

After hearing that Producer Prices came in much hotter than expected, the bulls quickly decided they don’t care, setting the 47^th new record high in the SP-500 this year.  The Dow also surged to new records while the QQQ recovered from early selling as the tech giants lifted the index.  The VIX continues to march lower, nearing the June lows.  It is, however, a bit concerning that volume remains below average as the market surges higher and the Absolute Breadth Index remains shocking low.  That said, the bullish trends in the DIA, SPY, and QQQ are unmistakable, and the technicals show no signs the direction is about to change.  Stay with the trends as long as this bullish party continues, but plan to protect your capital should the sentiment suddenly change.

Trade Wisely,

Doug

Shrugged off Inflation

August 12, 2021 by Doug Campbell

Traders shrugged off inflation numbers as they once again pushed the Dow and SP-500 to new records.  When good news is a reason to buy, and bad news is a reason to keep buying, it makes me concerned about the damaging effects of complacency in the longer term.  There is no doubt the DIA, SPY, and QQQ trends are bullish.  So stay with them as long as they last, but never forget this wild bullishness will not last forever.  Avoid chasing already extended stocks and guard against overtrading as this bull party continues.

Overnight Asian markets traded lower as currencies due to the weaker dollar.  European markets trade mixed with modest gains or losses as pandemic concerns weighs on investors.  Ahead of a dwindling number of earnings reports and the latest reading on Jobless Claims and PPI U.S. currently point to modest gains but new records at the open. 

Economic Calendar

Earnings Calendar

On the Thursday earnings calendar, we have a busy day with more than 260 companies listed, but a significant number of them have not confirmed.  Notable reports include DIS, ABNB, BIDU, BAM, CSIQ, TAST, BAP, CYBR, DASH, FRGI, GDRX, IQ< LZ, LAZR, MDP, MIDD, PLTR, PTE, & WPM.

News & Technicals’

The Competition and Markets Authority said it the purchase of Giphy by Facebook will harm competition.  They warned the deal would remove a potential challenger in the display advertising market. In addition, a U.S. bipartisan bill aims to shake up how Apple and Google run their mobile app stores in similar news.  App developers have claimed unfair practices from the tech giants, and the bill hopes to allow more competition into the app markets. According to Professor Sir Andrew Pollard, the head of the Oxford Vaccine Group said with the highly infectious delta variant achieving herd immunity is not possible. 

Traders and investors shrugged off inflation numbers yesterday, pushing the Dow and SP-500 up, setting more new records.  When bad news becomes a reason to buy up the market, and good news inflates it, even more, we must become concerned about market complacency.  That said, the trends are very bullish in the DIA, SPY, and QQQ, and the premarket pump suggests more records at the open.  We have one potential stumbling block with the weekly jobless claims, but we have seen missing on that number can also be ignored.  So stay with the trend and party like its 1999 as long as it lasts but, please guard yourself against complacency and the desire to overtrade these very lofty valuations. 

Trade Wisely,

Doug

Consumer Inflation

August 11, 2021 by Doug Campbell

Focus this morning will turn to the consumer inflation numbers that economists expect to come once again come in hot.  However, the hope is prices have peaked, and the increases will be temporary, as the Fed has suggested.  I must admit to skepticism on that point, but time will tell.  As earnings continue to roll out positively, the DIA and SPY printed more new records while, at the same time, the absolute breadth index fell near a 2-year low.  The 10-year Treasury yields rose three basis points, and the 30-year rallied close to 3 basis points in year morning trading ahead of the CPI report.

Asian markets ended the day with modest gains after a choppy session of trading.  European markets trade green across the board this morning, but gains are modest ahead of the U.S. opening bell.  With a substantial consumer inflation number pending, the U.S. futures suggest a flat mixed open, but that is likely to change dramatically market reacts to the CPI number before the bell. So expect an extra dose of price volatility at the open as traders and investors digest the results.

Economic Calendar

Earnings Calendar

We have 140 companies listed on the Wednesday earnings calendar, with quite a few that are unconfirmed.  Notable reports include AIT, ARRY, BLNK, BMBL, CLOV, EBAY, XONE, FOSL, RIDE, MNKD, NGMS, NIO, PRGO, RXT, RGLD, RPRX, STAF, VRM, & WEN.

News and Technicals’

After passing a 1.2 trillion dollar plan on infrastructure, the Senate passed the framework for another 3.5 trillion spending plan before leaving on summer break.  However, both plans could take weeks, if not months, to make their way through the house. Then, in what is likely the largest cryptocurrency thefts to date, more than $600 million was stolen by hackers.  According to reports, Poly Network disclosed the attack on Twitter, asking them to return the hacked assets.  Yeah, that should work, LOL.  Poly Network is a platform that looks to connect different blockchains so that they work together. Finally, as gas prices rise, the White House will call on OPEC to raise its oil production.  The national average is up about a dollar per gallon on Tuesday at $3.18. 

Today the market will turn its focus to consumer inflation with the latest CPI reading before the bell.  Economists expect the number to come in hot, climbing 0.5% for the month and 5.3% yearly.  Although they expect the prices to have peaked, the big question is whether it’s elevated temporarily as the Fed has suggested.  Unfortunately, economists expect to see continued increases.  While setting new records in the DIA and SPY yesterday, the absolute breadth index registered its lowest low in nearly 2-years.  That said, the index trends remain strongly bullish, with futures mixed as we wait on the CPI number.

Trade Wisely,

Doug

Wait-and-See

August 10, 2021 by Doug Campbell

While bullish trends dominate in the DIA, SPY, & QQQ, traders and investors appear to be taking a wait-and-see approach. As a result, there is a noticeable decline in volume, and the absolute breadth index continues to diverge, yet the VIX is in decline. So are we waiting on the massive congressional spending bills, or could it be a wait to see if the CPI number on Wednesday is inflationary?  We seem to be building up for a substantial move, but the question is will it be bullish or bearish? So plan your risk carefully as we wait for the decision.

Asian markets mostly rallied overnight, led by the HIS gaining 1.23% even as more pandemic restrictions occur in China.  European markets trade mostly higher with modest gains as pandemic caution lingers and worries of tapering grow. Finally, as earnings results roll out, U.S. futures trade mixed and relatively flat as bulls and bears look for inspiration to break the index consolidation. 

Economic Calendar

Earnings Calendar

We have about 140 companies listed on the Tuesday earnings calendar, but there is a considerable number unconfirmed.  Notable reports include COIN, ARMK, XAIR, CSPR, FTEK, GO, JMIA, MCFE, PAAS, POSH, PSTL, PUBM, SIEN, SGFY, SMCI, SYY, TDG, U, UPST, & WW.

News & Technicals’

China has tightened measures the rapidly increasing infection rates, further dampening investor sentiment toward Chinese stocks. In addition, disruptions in the Chinese economy could also affect global growth.  The Senate plans to vote on the 2700 page trillion-dollar infrastructure bill today and immediately begin efforts to pass another 3.5 trillion dollar package with no Republican support.  The popular by now pay later offerings for online shopping is causing consumer debit and credit card balances to spike, especially for younger consumers.  Analysts warn this trend could be the next hidden source of consumer debt.  While the embattled Governor of New York fights to stay in office, Governor Newsome of Calfornia faces an upcoming Sept. 14^th recall election.  The rollout of new pandemic health orders and the massive exodus from to state may pose a real threat to Newsom’s chances of survival.  All the political disruptions could have substantial market impacts as the political theater plays out.

Though trends in the DIA, SPY, and QQQ are very bullish, there seems to be a building uncertainty and a wait-and-see attitude among investors and traders.  Perhaps they are waiting to see if the massive spending bill will pass through congress?  Or maybe, it’s a wait on the inflationary reading on CPI coming out on Wednesday? As a result, the volume has become noticeably lighter, and the Absolute Breadth Index continues to diverge rather dramatically from the index charts.  Technically speaking, the bullish trends look solid, yet a growing number of talking heads warn of a 10 to 20 percent pullback on the way. In addition, the VIX suggests fear is in decline, yet one must wonder if it is displaying some complacency?  As for me, I will stay with the trend, but I continue to reduce my bullish aggressiveness and am ready to act should prices begin to slide south. 

Tread Wisely,

Doug

Infrastructure Bill

August 9, 2021 by Doug Campbell

After setting new records on Friday, we look to have mixed open as we wait for a vote in the Senate on the trillion-dollar infrastructure bill.  Volume on Friday was below average, and the absolute breadth index decline to recent lows, but the VIX indicated declining fear falling below its 50-day average.  With another busy week of earnings and a CPI reading on Wednesday, the recent price volatility will likely stick around, so plan your risk carefully.  Though the IWM remains weak, the trends in the DIA, SPY, and QQQ are very bullish.  So stay with the trend but have a plan should the bears decide to attack due to the lofty valuations. 

Asian market kicked off the week with modest gains as oil prices fell 3%.  European markets trade primarily in the red this morning, keeping an eye on earnings results.  With more than 200 companies reporting and a JOLTS report later this morning, the U.S. futures suggest a mixed open with the Dow in retreat and the Nasdaq pointing to modest gains.  Let the wild earnings rollercoaster ride continue!

Economic Calendar

Earnings Calendar

Although the bulk of market-moving reports are behind us, we still have a busy week of reports with more than 200 listed on the calendar.  DDD, PLNT, APD, AMC, GOLD, BNTX, CBT, ELY, CF, CHGG, CXW, APPS, DISH, EBIX, ELAN, ENR, GLNG, KNDI, QLYS, SGMS, SDC, TTD, TSN, & WKHS.

News & Technicals’

According to reports, the Senate is inching closer to passing the trillion-dollar infrastructure bill.  Debate is now closed, and there is the hopefulness that a vote is forthcoming.  With more hyped-up deals turning into flops, lawsuits against the once-popular SPAC are running into suspect dealmaking questions.  On Sunday, Larry Brilliant, a famed epidemiologist, said that the world is nowhere near the end of the pandemic, with only a small proportion of the world’s population vaccinated.  He suggested that vaccinated people aged 65 with a weakened immune system should get a booster shot right away.  If that’s not gloomy enough, a U.K. report delivered a stark warning on climate change, calling it a code red for humanity.  Treasury yields start the week higher, with the 10-year trading up to 1.292% and 30-year rising to 1.942%

After gapping higher and setting new records in the DIA & SPY, the market mostly chopped the rest of the day as if most traders left for an early weekend after the jobs report. As a result, volume came in lower than average, and the Absolute Breadth Index fell to recent lows to close the week.  However, on a positive note, the VIX finally broke down below its 50-day average.  The bulls remain in control with positive trends in the DIA, SPY, and QQQ, with the IWM remaining the outlier still below its 50-day average.  Though we’re over the hump with market-moving reports, we still have a busy week of earnings to keep the price volatility high.  That said, stay with the trend but have a plan to protect your capital should the bears find a reason to attack.  From these loft valuations, any pullback could be swift and painful. 

Trade Wisely,

Doug