Uncertain Mixed Bag

March 9, 2021 by Doug Campbell

Yesterday’s price action was exciting but left behind an uncertain mixed bag of results.  While industrials and consumer defensive stocks enjoyed a bullish stampede, the bears had their way in the NASDAQ pushing it into the correction zone.  Adding more confusion, we have 1.9 trillion in stimulus on the way, coupled with rising concerns about inflation and a plethora of shooting star patterns left behind at or near resistance levels tossed in for an extra dose of uncertainty.  With the Dow up more than 1200 points in just 3-trading days, the futures are once again pumping the fear of missing out and trying to encourage traders to chase.  Plan your risk very carefully.

Asian markets closed mixed but mostly higher as SHANGHAI struggled to find buyers.  European markets trade green across the board this morning, keeping a close eye on bond rates.  U.S. futures once again surge higher with the House planning to pass the massive stimulus bill within the next 48 hours.  Be careful chasing already extended stocks and keep an eye on bond rates with a 10-year auction scheduled for Wednesday afternoon.

Economic Calendar

Earnings Calendar

We have about 70 companies reporting quarterly results this Tuesday.  Notable reports include AVAV, BNED, PLCE, DQ, DKS, HRB, NAV, & THO.

News & Technicals’

Yesterday was a rather odd day in the market with the bulls stampeding into industrials and consumer defensive sector stocks while the Nasdaq suffered significant losses.  The bulls seem focused on the pending 1.9 trillion dollar stimulus bill, with the House planning to complete its work in the next 24 hours.  Unfortuntually, the 10-year treasury yields continue to raise inflation concerns with all newly printed money about to enter circulation.  It may be wise to watch the 10-year note auction scheduled for Wednesday afternoon, keeping your fingers crossed that it goes much better than the prior.  The CDC announced yesterday that people fully vaccinated against Covid could return to meeting indoors without masks, but the government continues to caution about removing mask requirements too soon.

Technically we have an uncertain mixed bag in the indexes.  The DIA reached out to a new record high yesterday but lost more than half of its gains, with sellers taking profits into the close.  Simultaneously, the QQQ remained under significant selling pressure dipping a full 10% from its recent highs.  Toss in the shooting star patterns at or near resistance levels left behind in the SPY and IWM, and the path forward becomes even more uncertain.  However, once again, the premarket pump tries to encourage traders to chase, dredging up the fear of missing out emotion.  Be very careful remembering that the Dow is already more than 1200 points above its low in just 3-days of trading.  With long-bonds holding at higher rates, there is a lot of risk should the bears decide to defend resistance.  Plan carefully, avoid over-trading, and chasing already extended stocks.

Trade Wisely,

Doug

Stimulus on the way.

March 8, 2021 by Doug Campbell

Friday brought a welcome relief raising hopes and leaving behind bullish engulfing patterns all over the place.  Remember, hammer patterns must be validated with follow-through bullish price action.  Soon money will begin to flow from the 1.9 trillion stimulus bill. Still, the question to be answered is can all the newly printed money overcome the consequences of rising inflation concerns as bond yields surge upward.  Keep in mind the VIX remains elevated, so expect challenging price action so plan carefully.

Asian markets had a rough overnight session, with the HIS leading the declines closing down 1.92%.  Across the pond, European markets trade modestly higher this morning, and the U.S. point to a flat open as investors monitor rising bond rates.  Plan for choppy price action as the bulls and bears battle for control.

Economic Calendar

Earnings Calendar

On the Monday earnings calendar, we have 65 companies stepping up to report quarterly results.  Notable reports include BNFT, CASY, TACO, NCMI, NIU, PVAC & SFIX.

News & Technicals’

Over the weekend, the Senate pass the 1.9 Trillion stimulus bills, and after another vote from the House, the money will begin to flow.  While one would expect the market to celebrate, the newly printed money futures seem to be struggling a bit this morning.  It turns out the massive printing continues to worry the market about inflation, with the 10-year Treasury yield topping 1.6%.  Yemen’s Houthis attacked Saudi oil facilities this weekend, once again raising tensions in the region and pushing crude prices above $70 per barrel.  The defense department stated the U.S. would hold accountable those responsible for the rocket attacks against the Iraqi base that hosts American troops. 

On the technical front, last Friday’s relief rally left behind a lot of bullish hammer patterns lifting hopes that a market recovery had begun.  Although buying the dip has been a good strategy in the past, I’m not sure it will work this time.  Keep in mind a hammer pattern requires the price to follow-though to be valid.  With rising bond rates spooking investors, can all the government stimulus still overcome the concerns of if it just made it worse?  Then we still have the challenge of downtrends as well as overhead price resistance levels yet to overcome.  With the VIX still elevated, I expect price action to remain challenging in the week ahead.  Watch for overnight reversal and intraday whipsaws as the bulls and bears battle for control.  Keep an eye on bonds, as I suspect it will be difficult for the tech sector to bounce back should they continue to rise. 

Trade Wisely,

Doug

Inflation

March 5, 2021 by Doug Campbell

Jerome Powell stepped on a landmine with his inflation comments that raised some uncertainty about future interest rates.  Long-term bond yields surged bring out the bears and creating substantial technical damage to the SPY and QQQ index charts.  Although it was painful, the DIA and IWM holding at their 50-day averages could be a silver lining, not to mention the massive stimulus bill that’s moving through the Senate.  Expect price volatility to continue as we face potential market-moving reports before the bell. 

Asian markets had a rough night of volatility but ended the session only modestly lower.  European market trade cautiously this morning as they monitor the inflation-sensitive long bonds.  U.S. futures recovered from overnight losses, currently pointing to a flat or ever so slight bullish open ahead of the Employment Situation report.  With the VIX elevated cinch up your big boy pants for another day of volatility. 

Economic Calendar

Earnings Calendar

As we slide toward the weekend, we have a lighter day on the Friday earnings calendar with just 24 companies reporting.  Notable reports include BIG, HIBB, & RUTH.

News & Technicals’

Reacting to Jerome Powells inflation comments where he stated the committee would ‘probably’ not raise interest rates, the market plunged sharply.  The bears also gained energy as the longer-term treasuries rallied sharply as worried investors ran for the doors.  The Senate cleared a hurdle yesterday, paving the way for the next round of stimulus.  The hope is to have it completed by mid-March.  Before the bell today, we will get the latest reading on the Employment Situation.  Economists expect 210,000 jobs were created in February, up from the 49,000 last month but warn we have a long way to go before seeing a substantial employment recovery.

There is no doubt that yesterday’s price action was painful as it reacted to the Powell inflation comments.  The majority of the technical damage focused on the tech sector, while the DIA and IWM managed to hold their 50-day averages.  With the SPY so heavily weighted with tech giants, it also suffered substantial technical damage closing below its 50-average that now become overhead price resistance.  With the VIX closing above 28 handles and turbulent overnight futures trading, expect another rough day price action.  Keep an eye on the 10, 20, & 30-year treasury bonds.  Should they continue to rise, the bears will likely remain in control.  With market-moving economic news before the open, futures are trying to put on a positive face but stay on your toes and be ready for just about anything.  Have a wonderful weekend, everyone!

Trade Wisely,

Doug

Jobs Roadblock

March 4, 2021 by Doug Campbell

Although the bulls tried to in the premarket to lift bullish spirits, they ran into a roadblock with declining mortgage applications and a substantial miss on Private Payroll’s.  Also, those pesky long-term bonds seem to hang in there stubbornly, adding uncertainty.  The tech sector suffered the most significant technical damage failing its 50-day average and closing with a lower low that signals a downtrend. With the VIX rising sharply into yesterday’s close, expect price action to remain quite challenging.

Overnight Asian markets sold off strongly across the board, with tech leading the way.  European market trade in the red this morning as they closely monitor the long-term bonds.  Ahead of more jobless data, the U.S. futures currently suggest a lower open. Still, as we have seen, anything is possible depending on the investor’s reaction as they digest new data.  Hold on tight it could be a wild ride.

Economic Calendar

Earnings Calendar

As usual, the number of earning reports ramp-up on Thursday, with a total of more than 100 companies revealing quarterly results.  Notable reports include COST, BALY, BJ, AVGO, BURL, CNQ, CHUY, CIEN, FRGI, GPS, GWRE, KR, MIK, SDC, SWBI, & TTC.

News & Technicals’

Yesterday’s premarket bullish ran into a roadblock after learning that mortgage applications stalled and Private Payrolls registered a substantial decline.  We spent the rest of the day with whipsawing price action that ultimately left behind bearish price patterns.  The biggest concern is the QQQ failure of its day moving average and making a lower low, signaling a downtrend.  Apple is now the target of a government antitrust probe in the U.K., adding to the suffering tech sector’s woes.  SpaceX made headlines yesterday after a successful rocket landing of a high-altitude test flight.  However, after landing, the rocket exploded.

The technical troubles we now see in the tech sector could make it very difficult for the DIA and SPY to gain headway due to the massive weighting that these tech giants hold in the indexes.  While the SPY managed to hold at price support, if the QQQ remains under pressure, the big tech has the weight to pull it under.  After failing the 50-day average, we can’t rule out the possibility of a 200-day average could be tested, which means another 10% could be shaved off of the QQQ.  Today we face another job number with the Weekly Jobless claims and will follow that up with the Employment Situation number before the bell on Friday.  With VIX elevated above 26 handles, be prepared for more gaps and whipsaws to challenge a trader’s skill.

Trade Wisley,

Doug

Overhead resistance.

March 3, 2021 by Doug Campbell

The bears found the energy to defend overhead resistance yesterday, leaving behind some dark cloud cover and bearish engulfing patterns overnight.  That said, it now looks as if the institutions were setting a bear trap as they began pumping up the futures moments after the closing bell rang.  Unfortunately those pesky bond rates are not retreating this morning, and the mortgage applications have stalled as a result.  Perhaps like the 21 million unemployed, higher long-term rates no longer matter as long as the government continues to flood the economy with newly printed money. 

Asian markets surged higher overnight, with Hong Kong leading the way closing up 2.70%.  European markets also have on their bullish caps this morning as they await U.K. budget plans.  U.S. futures point to a strong overnight reversal that could create another short squeeze with ADP numbers just around the corner.

Economic Calendar

Earnings Calendar

The number of earnings reports bump up slightly today, with 59 companies expected to fess up to quarterly results.  Notable reports include AEO, DLTR, MRVL, OKTA, PDCO, RRGB, SNOW, SPLK, & TCOM, WEN.

News & Technicals’

Although the bulls made several attempts to break overhead resistance levels in the index charts, the bears sustained enough energy to defend and repel each push.  However, almost immediately after the close, institutions went to work pumping the futures to trap remaining short sellers this morning with a substantial gap up in play this morning.  Twenty and thirty-year bonds retreated ever so slightly yesterday, but this morning yields don’t appear to be cooperating with the bullish sentiment tenaciously holding strong.  Perhaps, like the 21 million Americans unemployed, we can add the rising bond rate to the list of things we can ignore and no longer matter as long the government continues to flood the economy with money skyrocketing the debt.  The White House says the U.S. will have enough vaccine for all adults by the end of May and has ordered all educators to receive at least one shot by the end of March to get schools reopened. 

ON the technical front, resistance levels held yesterday, leaving behind concerning darkcloud cover patterns and even a bearish engulfing pattern on the QQQ closing once again below its 50-day average.  Look closely, and the QQQ has the hint of a head and shoulder pattern beginning to develop.  That said, it now looks as if the institutions set a bear trap going to work immediately after yesterday’s close, pumping up the futures.  Mortgage applications demand number in this morning indicate demand has stalled due to the rising rates, and I would suspect also playing a role is the rapidly rising housing costs.  Don’t worry about that, though, because the Fed says there is no inflation.  Okay, sorry for the sarcasm.  With the ADP report, ISM Services, Petroleum Status, Beige Book, and those pesky bond rates stay on your toes as they try to fire off another morning short-squeeze.

Trade Wisely,

Doug

Questions?

March 2, 2021 by Doug Campbell

Although yesterday’s short squeeze was a welcome relief, the bullishness left behind overhead price resistance questions to be addressed.  Unfortunately, the long-term treasuries are once again raising some caution that the bears could once again attack.  Reports suggest that the rising long-term bonds could soon bring a Fed policy change in an attempt to address the turmoil.  Expect challenging price action to continue as the market grapples with bond uncertainty and a big round of retail earnings reports.

Overnight Asian markets saw modest declines across the board after the RBA leaves the cash rate unchanged.  However, European markets trade modestly higher with the hope U.S. Bond yields are stabilizing.  With a wave of retail earnings reports, a light economic calendar, and an eye on rising bonds, futures currently point to a flat to a modestly lower open. 

Economic Calendar

Earnings Calendar

On the Tuesday earnings calendar, we have a big round of retail reporting quarterly results.  Notable reports include TGT, AZO, KSS, JWN, ROST, ANF, AER, BGS, BGFV, CHS, DIN, FUBO, HPE, KTB, LL, SE, URBN, & VEEV.

News & Technicals’

Yesterday’s rally was very encouraging, but we still have some resistance above in the indexes charts, and questions yet to answer.  According to reports, Fed policy changes could be on the way in an attempt to calm the nerves in the recent bond market rate surge.  Apparently, one operation under consideration will dust off the so-called ‘operation twist,’ which would involve the Fed selling short-term bonds and buying up long-term treasuries.  That said, 20 and 30-year treasuries are trading higher this morning.  President Biden’s first foreign policy challenge may be slipping through his fingers with a former U.S. ambassador saying an Iran nuclear deal is unlikely to happen this year.  Tensions continue to escalate amid the recent Syrian airstrikes against Iranian-funded facilities.  Elizabeth Warren and Bernie Sanders are now proposing a 3% wealth tax on billionaires that have dubbed the Ultra-Millionaire Tax Act.

After yesterday’s short squeeze rally, the index charts still have the inconvenience of overhead resistance levels blocking the path to new highs.  After such a huge short-squeeze rally, a pullback directly after is not a big surprise, but rising long-term treasuries could add a significant complication for the bulls.  Though recovering from overnight lows in the morning, pump-up futures indicate a little weakness this morning.  So the big question to be answered in the light of stimulus checks just around the corner will the pressure on interest rates bring the bears for another attack?  We have a light day on the economic calendar with a significant focus on retail earnings today.  Be prepared for the challenging price action to continue.

Trade Wisely,

Doug

Bond Rates Softening

March 1, 2021 by Doug Campbell

With bond rates softening, the bulls seem ready to come back to work this morning.  The big premarket pump-up could fire off a bit of a short squeeze with those that held short positions over the weekend.  However, with significant overhead price resistance levels and the NASDAQ needed to recover its 50-day average, I would not expect the bears to give up as quickly as they have in the recent past.  Keep a close eye on those bond yields and stay focused as we approach price resistance levels in the index charts.

Asian markets surged higher overnight, led by the NIKKEI closing up nearly 2.5%.  European markets are also decidedly bullish this morning, taking Qs from declining treasury yields.  U.S. futures point to a substantial gap up open ahead of earnings, economic reports that may prove market-moving.  Expect significant price volatility at the open as the bulls and bears battle for control.

Economic Calendar

Earnings Calendar

To kick off the first trading day of March, we have more than 100 companies fessing up to quarterly reports.  Notable reports include DDD, AI, CWEN, CLOV, XRAY, EVTC, HGV, IPAR, LMND, NIO, NVAX, NRG, PRGO, APTS, SGMS, SWCH, TGNA, UNIT, WKHS, & ZM.

News and Technicals’

Fear of rising bond rates created significant price volatility last week, waking up some aggressive bears.  This morning bond rates are retreating, and bulls are stampeding back with U.S. Futures suggesting a strongly bullish open.  The U.S. House passed the 1.9 Trillion stimulus bill and extended unemployment benefits by five months, paying an extra $400 in benefits per week.  The new one does the J&J vaccine gained emergency approval this weekend, and shipments have already started.  GM announced the all-electric Bolt hatchback and crossover vehicles will price under $34,000 as the race for the EV market share heats up. 

With the bulls rushing into the futures this morning, expect a somewhat volatile open.  I suspect there will be an attempt to trigger a short squeeze, particularly in the DIA catching a large number of bears holding short positions over the weekend.  Bond yields have softened, but the question is, will it be enough to back off the bears as we approach overhead resistance levels.  Having both held their respective 50-day averages as support, the SPY and DIA are the best positioned to recover.  However, the QQQ has the challenge of recovering its 50-day average, downtrend, and substantial overhead price resistance.  Facing a big round of earnings with PMI, ISM, and Construction Spending numbers to digest the first day of March could be a wild one.

Trade Wisely,

Doug

Rising Treasury Yields

February 26, 2021 by Doug Campbell

The bears became very feisty yesterday as sharply rising treasury yields shook investor confidence.  Unfortunately significant technical damage occurred in the NASDAQ, with the index closing below its 50-day average.   With bearish reversal patterns left behind in yesterday’s price action and the VIX, very elevated trades should prepare for a challenging day of price volatility.  As we slide into the weekend, the buy the dip confidence may be a bit gun-shy to rush back into the turbulence.

Overnight Asian markets joined in on the selloff, with the NIKKEI dropping a whopping 3.99%.  European markets trade red across the board this morning.  The U.S. futures point to a missed open after a choppy overnight session.  With potential market-moving reports on the economic calendar, anything is possible in the open.  Expect considerable price volatility. 

Economic Calendar

Earnings Calendar

On the Friday earnings calendar, we get a little break with just 58 companies reporting quarterly results.  Notable reports include AMCX, CNK, CRON, DKNG, SSP, FL, IEP, LAMR, LBDRA, & RHP.

News & Technicals’

Rising treasury yields brought out the bears yesterday, leaving behind concerning bearish engulfing candles in the indexes.  The DIA finished the day above a critical price support level, but SPY and QQQ broke support levels.  On the bright side, the SPY held above its 50-day average, but unfortunately, the QQQ significantly dropped through this significant psychological level.  Tensions between the U.S. Iran reached a new level after Iranian-backed militia facilities in Syria as the U.S. carried out airstrikes.  The attempt to include a mandatory $15 an hour minimum wage in the stimulus bill hit a roadblock.  According to the House parliamentarian, it can’t be included in the 1.9 trillion dollar stimulus bill planned for passage today.  However, Speaker Pelosi defiantly stated it would stay in the bill for today’s vote. 

The confidently bullish market trend suffered considerable damage yesterday.  With the VIX closing the day above 28 handles, traders should expect considerable price volatility today.  Be prepared for gaps and challenging intraday whipsaws.  As of late, any selloff has met with a strong surge of bullishness.  I suspect a good deal of that extreme confidence was shaken to the core yesterday.  However, with massive stimulus just around the corner, the bears will have their work cutout if they intend to defend price resistance levels.  Buckle up it could be a rough day.

Trade Wisley,

Doug

Foot on the Gas!

February 25, 2021 by Doug Campbell

In testimony to the Senate banking committee, Powell reiterated low-interest rates, and they plan to keep their foot on the gas with monetary operations.  With a very dovish Fed and House planning to pass the 1.9 Trillion dollar stimulus bill, the bulls stampeded the Dow to new record highs.  The Spy and the QQQ also enjoyed substantial rally though they still have overhead price resistance to clear.  With a huge day of earnings and economic data coming our way, anything is possible.  Buckle up for additional volatility.

Aian markets rallied strongly overnight, with the NIKKEI surging 1.67%.  European markets trade mixed this morning with modest gains and losses after yesterday’s strong rally.  U.S. future point to a mixed open with a massive day of data to digest. 

Economic Calendar

Earnings Calendar

We have a huge day on the Thursday earnings calendar with more than 230 companies reporting quarterly results.  Notable reports include ADT, ABNB, ALRM, ABEV, AEP, AMT, BUD, ADSK, BBY, BYND, CZR, CWH, CM, CARS, CVNA, CNP, CLF, CUBE, DPZ, DASH, ETSY, STAY, FTCH, FSLR, FSR, GCI, GIL, HPQ, IHRT, SJM, KDP, KTOS, TREE, LYV, MAIN, MRNA, NTES, NLSN, NKLA, NCLH, PZZA, PCG, PLUG, RMAX, RKT, CRM, SEAS, SRE, SHAK, SHOO, STOR, RUN, TK, TD, VALE, SPCE, VMW, W, & ZS.

News & Technicals’

Uncle Powell reiterated in the Senate that the Fed would continue to hold rates low and keep their foot on the gas, pumping money out through continued operations.  The dovish comments set a fire under the bulls lifting the Dow to new record highs as the so-called recovery stocks continued to extend.  According to reports, the JNJ one-dose vaccine will soon help in the battle against the pandemic.  Unfortunately, in a statement yesterday afternoon, the CDC director said the new Covid Variants could undermine all our efforts.  Ugg!  GameStop shares are once again surging as the Reddit crowd continues to play games with a company that is drawing attention to regulators.  This week Congress proposed a 5% per trade tax, which will affect all traders.  Charlie Munger, in an interview yesterday, explained that novice investors are being lured into a bubble.  The 1.9 Trillion stimulus bills is expected to pass the House on Friday, and President Biden will extend the national emergency declaration.

Technically speaking, the DIA is once again showing tremendous bullishness, and through the SPY rallied strongly off of support, they still have overhead resistance to overcome.  The T2122 indicator is again warning that markets are overextended but with an extremely dovish Fed and Congress ready to pump another 1.9 trillion into the economy, I’m not sure it matters.  That said, be very careful overtrading and remember to take profits because if this market stumbles, the pullback could be very damaging to your accounts.  With a huge day of earnings and several potential market-moving economic reports, price volatility could be very challenging.

Trade Wisely,

Doug

Powell Calmed Market Fears

February 24, 2021 by Doug Campbell

Though a challenging and rough day of price action, Jerome Powell calmed market fears ensuring their accommodative policy will continue for the foreseeable future.  The DIA roared back, holding onto the current bullish trend, but the SPY and QQQ still needs to clear overhead resistance and broken trends.  With a big day of earings and another round of Powell testimony, anything is possible, and volatility is likely to remain high.  However, with the House moving forward with the 1.9 trillion stimulus bill, it may be challenging the bears to garner the energy to defend market highs.

Overnight Asian markets sold-off strongly, with Hong Kong leading the way down nearly 3%.  European markets are bouncing back this morning in response to the FED outlook, and U.S. futures point to modest gains ahead of a busy earnings calendar and petroleum status numbers.  Keep a close eye on resistance levels just in case the bear attempt to mount a defense.

Economic Calendar

Earnings Calendar

We have a big day on the earnings calendar with more than 170 companies fessing up to quarterly results.  Notable reports include DDD, APA, BHC, BILI, BKNG, CSPR, LNG, EV, ELAN, ETR, EPR, EXC, FDP, GGB, LAND, GNL, HFC, HZNP, TWNK, IRM, KW, KL, LB, LOW, NTAP, NTNX, NVDA, OSTK, OMI, PBR, PSA, RDFN, RCII, RY, SIX, TDOC, TJX, UPLD, VER, & VIAC.

News & Technicals’

Jerome Powell calmed market fears saying that inflation is still soft and the Fed will stay on the gas with their current accommodation policies.  The Chairman will offer more testimony today at 10 AM eastern, but we will unlikely learn anything new.  Lowe’s earnings top estimates with store sale surging 28% but also warned that the trend of DIY’ers would likely fade.  We have a big day on the earnings calendar, but other than the Powell testimony, a light day on the economic calendar with the Petroleum number at 10:30 AM Eastern.

After a rough day of price action, U.S. futures point to modestly bullish open when writing this report.  However, with a slew of premarket earnings reports, anything is possible.  The bullish trend in the DIA remains intact, but SPY and QQQ remain challenged by overhead price resistance.  Will the bulls have the mettle recovering the trend, or do the bears have what it takes to defend the resistance?  A question yet to be answered.  As the House moving forward with the 1.9 trillion stimulus package moving lower could be difficult unless it’s already priced into the market.  Stay vigilant as the price volatility adds challenge and uncertainty on the path forward.

Trade Wisley,

Doug