Massive stimulus bill

Futures had a bit of a temper tantrum last night after the Senate failed to pass the massive stimulus bill.  We can expect significant price sensitivity through-out the day as they legislators scramble to resolve issues and vote again later today.  A passage could trigger a quick rally, but a failure could really bring out the bears, so keep an eye to the news as they wrangle party politics.

Asian markets closed mixed but mostly lower as Hong Kong and Australia saw heavy selling during the night.  European markets continue to tumble with the FTSE down another 3.5% as the coronavirus continues to ravage the euro block.  With tremendous overnight volatility, US futures point to a substantial gap lower this morning that will test the lows of last weeks as support.  Hang on for another wild day of price action.

Economic Calendar

Earnings Calendar

On the Monday earnings calendar, we have over 80 companies stepping up to report quarterly results today.  However, after looking through the list, I don't see any particularly notable or market-moving reports.

Top Stories

After another volatile evening where the futures briefly dropped to limit down, they point to a substantial gap down this morning.  The massive stimulus bill failed to pass last night but will try once again today.  If passed or fails to pass, it's likely to be a market-moving event, so keep an eye to the news as we progress through the day waiting on the vote.  

The Olympic committee is under pressure to postpone or cancel the Summer games hosted in Japan due to the virus concerns.  Canada and Australia are the first countries to announce they will not send athletes should the games move forward as scheduled.

Last evening the President activated the National Guard in New York, Californa, and Washington to expedite the moving of medical supplies and equipment as their outbreaks continue to grow at an exceptional rate. 

Technically Speaking

The QQQ had the best chance of recovering the 500-day average last week, but on Friday left behind a very disappointing bearish engulfing candle.  This morning the four major indexes are set to open at or below recent market lows.  Although most charts paint a pretty grim picture, there was an effort by the bulls to defend the week's lows.  In a surprise and very bold move, Goldman upgrades BA suggesting they have enough cash to get through the crisis and that air travel will return following the crisis.  I assume the Goldman is also anticipating that the government will swoop in with a considerable bailout for the company in an attempt to prevent massive layoffs.

We can continue to expect extreme price volatility and sensitivity to the congressional vote on the stimulus bill.  I would not rule out the possibility of a quick and substantial rally should the bill pass.  However, another failure to pass could easily trigger another sharp selloff that could easily trip circuit breakers.  Keep in mind no matter what happens, holding positions overnight will remain very dangerous due to the overnight swings.  I think a V-bottom recovery is unlikely because we are still weeks if not months away from seeing an improvement in the war against the outbreak.

Trade Wisely,

Doug

A Ray of Sunshine

A Ray of Sunshine

A ray of sunshine begins the market day with the first bullish follow-through open setting up this morning. It's been nearly 2-weeks since we have seen a positive close followed by an optimistic open the next.  That said, expect the wild price volatility to continue as infections here in the US begin to spike heading into another uncertain weekend. 

Asian markets closed mixed but mostly higher as China holds steady on its price rates.  European markets are green across the board this morning, reacting to the massive government stimulus efforts.  The US futures point a positive open ahead of economic and earnings data but expect the price action to remain very challenging.

Economic Calendar

Earnings Calendar

On the Friday economic calendar, we have 59 companies reporting.  Looking through the list about the only notable stock I can find today is HIIB.

Top Stories

After another turbulent evening where the US Futures traded between 350 down and 900 up currently points to positive open of more than 700 points.  However, with such volatility in price, anything is possible by the open. 

With virus infections beginning to rise rapidly, the California Governor ordered that all residents stay home and inside.  The first state to issue such an extreme lockdown order.  Italy now has the distinction of the largest death toll surpassing China as the country calls out the military to move coffins overwhelming the countries cemetery system.  Here in the US, infection estimates could reach more than 30,000 by next week.

The Senate has proposed a massive spending bill sending direct payments to US citizens of $1200 per adult and $500 per child, including billions and billions for company bailouts.  I doubt this will be the last of the backstop measures that will be required to stabilize the economy. 

Technically Speaking

Although we saw more than a 1200 point swing the in Dow yesterday, it was nice to see a positive close.  As of now, it looks as if we could get our first bullish follow-through open that we have seen in 2 weeks of massive overnight reversals.  Crossing my fingers and hoping it will hold at least to the open, the QQQ could recover its 500-day moving average.  The technical damage in the charts is so extreme that even a hold of this week's lows could lift spirits as we head into another uncertain weekend.

Although there are some fantastic values in stock prices, buying them in the faces of such volatility and extreme uncertainty is not for the faint of heart.  With the VIX holding above a 70 handle options are punishingly expensive, and the slippage in the bid/ask spreads make then nearly impossible to trade except for very quick and very dangerous day-trades.  Let's all hope for the best but prepare for the wild price action to continue in the coming weeks as impacts of the outbreak continue to expand.  Protect your capital, take care of your family, and support your communities as best you can through these troubling times.

Trade Wisely,

Doug

A run to cash.

A run to cash

I had a computer problem this morning, so I apologize, but I will have to keep the blog short this morning.  After another wild night of price action in the futures market, it would appear sellers still have the upper hand this morning.  Even the so-call safe-haven securities sold off yesterday in a rush to raise cash and avoid additional market risk.  During the night, the ECB unveiled a massive stimulus plan of more than 800 billion with the President signed the first stimulus package for the US almost immediately after the Senate passage.  They are now going to work on the second package that could top 1.2 trillion with direct payments to US citizens.  Monday, tradings pits will close, and we will move to a fully electronically traded market.  It's unclear how that might affect price action. 

With infections numbers continuing to grow, we could easily see more than 10,000 cases by the weekend, which would suggest and exceptional expansion is likely to occur over the next 2-weeks.  I know I sound like a broken record but Protect Your Capital because the uncertainty going forward is expected to get much worse before it gets better.  More importantly, protect yourself and your family.  The next few weeks could be difficult, but I'm confident better days lie ahead.

Economic Calendar

Earnings Calendar

We have more than 120 companies reporting earnings today, but in the current situation, it's unlikely many will notice.  Notable reports include DRI, LEN, CAN, CTSAS & OLLI.

Trade Wisely,

Doug

Violent Price Gyrations

As violent price gyrations continue, so does the extreme danger for retail traders.  Although we have had several big one day rallies, we have yet to see the bulls able to follow-through the next day.  Instead was we see is overnight reversal ripping the heart out of traders that tried to hold positions just one more day.  This morning is a repeating that pattern once again with US Futures limit down wiping out most if not all of yesterday's hopefulness. 

Asian markets seesawed back and forth overnight, finally closing the day lower across the board.  European markets are sharply lower this morning with the DAX, FTSE, & CAC, all showing losses fo more than 5%.  Ahead of a Housing Starts number and 60 earings report Dow futures to point to an overnight reversal of more than 800 points, and fear and uncertainty continue to drive extreme price volatility.  Prepare for another wild day.

Economic Calendar

Earnings Calendar

On the hump day earings calendar, we have about 60 companies reporting results.  Notable reports include GIS, FIVE, GES, HABT, TLRD, TCOM, & WSM.

Top Stories

Biden swept three primary elections last night as he doubles the delegate lead over Sanders can drawing closer to clinching the Democratic nomination.  President Trump has now won enough delegates to lead the Republican party in the 2020 election. 

After a day of rally closing the Dow up more than 1000 points, futures now point to an overnight reversal wiping out the gains waiting on yet another government bailout proposal to be passed.  Munchin reportedly warns senators the impacts of the virus could lead to a 20% US unemployment rate as a business shutdown responding to CDC recommendations.

The Vegas strip is quiet for the first time since the Kennedy assassination as all gaming in the state was ordered to shut down.  Kansas schools have closed public schools for the rest of the year!  The first such state to make such a drastic decision. 

Technically Speaking

Yesterday's relief rally was a nice change to the extreme selling pressure, but sadly it looks as if a second day of follow-through is too much to ask for amid such wild volatility.  After another wild night of price, action futures reached another limit down trading halt.  The QQQ rally moved up to test the resistance of its 500-day average, but sadly the overnight reversal will wipe out almost all of yesterday's hopeful gains at the open.

With the VIX closing, the day above a 75 handle, and a likely sharp move higher this morning options, prices will remain very dangerous and virtually untradeable.  While there are some tempting values in stock prices, the volatility requires a tremendous tolerance for risk that few retail traders are willing to ride out.  The best course of action for most is to continue to remain disciplined to your trading plan and protect your capital while market prices continue to gyrate violently. 

Trade Wisely,

Doug

Buy our way out?

Buy our way out

It would appear attempting to buy our way out of this current crisis is not going to work after the massive move of the FOMC did little to dissuade the bears in the face of such uncertainty.  I would like to assume the worst is over, but with the US just now beginning the process of a shutdown, the path forward is more uncertain than ever.  Long and short trader getting involved in this will volatility with have to have considerable tolerance for risk with the VIX now above the 2008 high.  It would seem the best course of action for most retail traders is to remain on the sidelines protecting their capital until we begin to see some improvement.

Asian markets closed mixed with Australia surging nearly 6% overnight.  Unfortunately, European markets are still feeling some selling pressure this morning as they are modestly lower across the board.  After a wild night of volatility in the futures markets, point to a little bullishness at the open.  With a big day of earnings, economic data, and uncertainty, anything remains possible.

Economic Calendar

Earnings Calendar

On the Tuesday earnings calendar, we have 60 companies reporting quarterly results.  Notable reports include FDX, FLR, HDS, LE, & MIK.

Top Stories

With more than 4200 confirmed cases and over 70 deaths, the CDC has recommended restricting gatherings to less than ten people in an attempt to slow the spread.  Many states have now recommended closing bars, restaurants, night clubs, fitness facilities, and schools until further notice.  Small business impacts are tremendous.

The Feds surprise rate cut and massive cash injection increased the fear of the unknown lifting the VIX-X above the 2008 highs and creating the worst one-day selloff since 1987.  All 11 sectors of the S&P were down on the day, but there were some bright spots amongst the carnage, such as KR and CLX.

Airlines have already asked the government for a 50 billion dollar bailout, and I’m guessing there will be many more industries to follow as the impacts on business grows.  The virus is now impacting the Presidential election, with Ohio closing its primary polls.

Overnight futures came close to a limit up rally, but during the night gave back most of the move in another display of incredibly dangerous price volatility.

Technically Speaking

When looking at the charts, there is very little to see but tremendous technical damage.  One would hope that yesterday was the final capitulation, but with much of the country right at the beginning of its shutdown, the path forward seems more uncertain than ever.  With such incredible price volatility, stock traders attempting to pick up the deeply discounted stocks will have a substantial tolerance to risk and willing to hold through the huge overnight reversal and steep intra-day swings.  With implied volatility so high option traders face incredibly inflated contract prices, as well as punishing bid/, ask spreads making it extremely dangerous to trade.  Until there is some improvement, it is hazardous to consider being long or short.  Staying in cash on the sidelines, protecting your capital continues to be the most reasonable course of action the majority of traders consider. 

Trade Wisely,

Doug

Market highs to Bailout Conditions

Bailout Conditions
Illustration and Painting

From record market highs to bailout conditions in less than a month!  Oh, how the tables have turned by a microscopic virus wreaking havoc around the world.  A punishing day that saw heaving selling in every sector of the market, and a barrage of bad news that points massive economic impacts in the weeks and months to come.  With so much uncertainty facing the market, anything is possible, and it seems government money can't buy back investor confidence facing a pandemic.

Asian markets finished the week in the red, with Japan closing more than 6% lower on the day.  European markets are in bounce mode this morning, rallying more than 5%.  After a very turbulent night, US Future now points to a Dow gap up of more than 1000 points as this will price action rollercoaster ride heads into the uncertainty of the weekend.  Plan your risk carefully because anythings possible by Monday morning!

Economic Calendar

Earnings Calendar

On the Friday earnings calendar, we have just short of 70 companies reporting quarterly results.  Notable reports include BKE & GOGO.

Top Stories

Another rough market day triggering circuit breakers with the Dow suffering the worst one day plunge since 1987 even as the Fed stepped up with half a trillion dollars.  A barrage of virus news with professional sporting teams suspending seasons and large venue closures in an attempt to control the virus spread.

Although its Friday the 13th, there is a favorable breeze blowing in the pre-market after a wild night of price volatility in the futures markets.  Japan sold off sharply last night, dropping as much as 10% at one point, pushing Dow futures down as much at 700 points.  However, the bulls have come roaring back with a substantial gap up in prices at the open today.  Cross your fingers that it can hold heading into a weekend that's not likely to provide better news on the virus front.

Technically Speaking

Index charts, as well as most stock charts, are in an ugly technical condition.  The Dow dropped like a hot knife through butter closing well below the 2018 low nearly 19% below its 500-day average.  The SP-500 finished the day just short of 14% below its 500-day with the Nasdaq composite 8.5% below.  The failure in the Russel is epic, closing more than 28% below its 500-day average.  What happens next is anyone's guess, as the economic impacts of the outbreak continue to compound.  Some analysts are suggesting the market could lose half of its value by the time this is over, and the full measure of damages totaled.  Congress is working on some kind of relief package, but according to reports, it will be next week before a vote occurs.  The silver lining to all of this is that great stocks are reaching bargain prices for those willing to hold through what is likely going a very turbulent market for weeks or even months to come.  As we head into an uncertain weekend, plan your risk carefully because anything is possible by Monday morning.

Trade Wisely,

Doug

Travel Restrictions

With the longest bull run in market history officially over and unprecedented travel restrictions going into place, investors continue to run for the doors.  As the markets continue to tumble, expect more forced selling as mutual fund, 401K redemption's and margin calls grow.  We are in uncharted waters as the now official pandemic personal, business, and economic impacts create an uncertain path forward.  Protect your capital!

Asian markets closed lower across the board as Japan falls into bear a bear market.  European markets just one day after a central bank rate cut sees losses of more than 5% this morning.  Ahead of a huge day of earnings and economic reports, the US Futures have to trigger their second circuit breaker in a week.  Halting trading but pointing to a morning gap down of more than 1200 points.  Hold on tight; this will be a bumpy ride today!

Economic Calendar

Earnings Calendar

On the Thursday earnings calendar, we have our biggest day this week, with more than 250 companies reporting.  Notable reports include DG, AVGO, WORK, ADBE, CRON, GPS, JBL, ORCL, TLYS, TUP, ULTA, & ZUMZ.

Top Stories

Yesterday the WHO declared a global pandemic as the virus continues to spread around the world.  The White House bans travel from most European countries for 30 days in an attempt a slow the spread of the virus. 

The NBA suspends the season, and March Madness will happen with no spectators allowed.

The longest bull run in market history is now officially over as US markets slump into bear market territory and continuing to slide south.

Technically

What’s there to say other than the charts are a mess and continue to worsen as virus panic grips the market.  Although it seemed nearly implausible just a few days ago that the market would test the 2018 lows this morning that looks very likely with the Dow pointing to more than 1000 points lower at the open.  While the virus situation could get much worse, there is a silver lining if we can get past the emotion of the selloff.  Eventually, this will be over, and great stocks will be at bargain-basement prices.  The massive price volatility is currently very dangerous, but given time it will get better, so protect your capital and be patient.

Trade Wisely,

Doug

Punishing Price Action

After an excellent one day rally, it seems the bears have come back this morning to punish anyone that held long positions overnight with the US futures another substantial overnight reversal.  With the central bank's actions ineffective and federal government stimulus likely months away, the path forward for the market is clouded with uncertainty.  With US infections jumping to more than 1000, its evident this outbreak will get much worse before it gets better, so expect the wild market volatility to continue.

Asian markets close red across the board overnight, but European markets see only green this morning after the bank of England cut rates by 25 basis points.  Ahead of the CPI report and more than 100 earnings reports Dow futures to point to substantial gap down wiping out about half of yesterday rally in one fell swoop.  Prepare for another wild day of price volatility!

Economic Calendar

On the Hump day earnings calendar, we have nearly 120 companies reporting results.  Notable results include TACO, EXPR, HABT, LK, UNFI, VRA, & ZAGG.

Top Stories

Joe Biden takes a commanding lead in the Democratic race for the President wining in 4 more states last evening.

Italy's infection number cross over 10,000 as the country mulls the idea of a full country shutdown.  According to the CDC, the US confirmed infections jump over 1000, with the virus spreading to 30 states.  The President pitched an idea of cutting payroll taxes to 0% for the rest of the year but didn't hold your breath because stimulus packages commonly take more than 6-months. 

Technically Speaking

The rally yesterday was great to get a little relief in the selling.  Unfortunately, there is a lot of work to do before there we will see a significant improvement to the massive technical damage suffered by stocks and indexes.  With the coronavirus numbers growing, federal stimulus actions having little to no effect, and health officials struggling to slow the spread of the outbreak, investors remain very uncertain about the path forward.  This morning we face another overnight reversal with the Dow pointing to gap down of more than 500 points as this frustrating volatility continues to challenge even the most experienced traders.  Sadly, it seems this problem is far from over, and traders should prepare for another day of wild price action.

Trade Wisely,

Doug

Blood in the Street

Blood in the Street

There is blood in the street this morning with the virus news not getting any better and plunge in oil prices that's shaking up currency markets around the world.  During the night, US futures trading halted as the 5% circuit breaker tripped.  Suffice it to say we face a very rough day in the markets with a huge gap down and the real possibility that more circuit breakers could trip during the day as investors run for the doors.  Expect extreme price volatility and hazardous market condition in the days ahead.

Asian markets plunged during the night, with Japan falling over 5% by the close.  European markets are sharply lower this morning with the DAX, FTSE, and CAC all down by more than 6%.  US Futures point to a gap of more than 1200 points down as the market grapples with plunging oil prices, currency fluctuations, and an outbreak continuing to spread uncertainty of economic impacts.  Expect a very rough day!

Economic Calendar

We have a very light day on the economic calendar with a 3 & 6-month bond auction as well as the TD Ameritrade IMX report at 12:30 PM eastern time.

Earnings Calendar

Monday begins with just short of 100 companies fessing up to quarterly results.  Notable reports include CASY, SOHU, SFIX, & MTN.

Top Stories

With OPEC failing to cut a deal with Russia, they have decided to dump a glut of oil onto the market, driving the prices sharply lower, punishing Russia for not joining their attempt at price controls.  At the opening of the futures market on Sunday evening, oil price plunged, pulling the overall market down as it fell.  The plunge in oil prices is also creating substantial currency fluctuations putting central banks between a rock and a hard place.  Cut rates to stimulate the economy or raise rates to support currency valuation.  What a tangled web this has suddenly become.  Even the cryptocurrencies are feeling the pain with $26 billion wiped away in the last 24 hours.

With the futures pointing to massive losses during the night, a 5% down circuit breaker tripped halting futures trading to prevent them from falling further.  If the selling resumes during the day, we could trigger more circuit breaker trading halts as investors run for the doors.  A drop of 7% in the SP-500 halts trading for 15 minutes, a decline of 13% will once again stop trading for 15 minutes.  A decline of 20% will stop trading for the rest of the day.

When it comes to the outbreak news, the spread continues around the world, and here in the United States as the governor of New York said, it's like trying to stop air.  Long story short, it will likely get worse in the days and weeks ahead, and the uncertainty of the economic impacts will continue to worry investors and make the price very volatile and trading very dangerous in the near term.

Technically

The charts are simply a mess due to the very high emotion and uncertainty the market faces.  If circuit breakers begin to trigger the panic could much worse.  You can just imagine the phones ringing off the hook at mutual funds, 401K plans, and brokerage firms as investors pull the plug to stop the pain.  With the market gaping the DIA and SPY below their 500-day averages and the QQQ open below its 200-day where this panic selling end is anyone's guess.  Hold on tight this could be a very wild week.

Trade Wisely,

Doug

The market hates uncertainty!

The market hates uncertainty

The market hates uncertainty, and holy cow do we have a basket full of the unknown with a spreading outbreak heading into a weekend.  After giving up the Wednesday rally, markets around the world are selling off this morning as worries of the mounting economic impacts continue to grow.  To say the price action volatility is challenging is a gross understatement of the danger this market presents.  Unless the wave bad virus news suddenly shifts this weekend, we should plan for more wild and unpredictable price swings next week.

Asian markets closed the week in the red across the board.  European markets are down more than 3% this morning as traders run for the door leading into the weekend.  Ahead of expected bullish Employment Report, US Futures point to dismal gap down of more than 600 points as worries virus economic impacts continue to inspire the bears. 

On the Calendar

Earnings Calendar

On the Friday earings calendar, we have our lightest day this week with just 29 companies reporting.  Looking through the list, I see particularly notable reports.

Top Stories

As the virus fears continue to grow the 10-year Treasury yield, hit a new record low of 0.7% as investors run to safety.  On the bright side and 30-year mortgage rates dip to 3.3% that may help home sales and inspire a round of refinancing to keep banks busy.

On the Virus front, South Korea infections have grown to 6600.  In Iran, there were more than 1000 new infections, and their death toll has risen to 124.  Australia shut down its first school the Netherlands confirms its first death, Vatican City reported its first case of the virus as confirmed infections in Italy rise above 3000.  China invokes 'force majeure,' a provision that exempts business form contractual obligations.  According to reports, the government has issued nearly 5000 such certificates as of March 3 due to the epidemic. 

As oil demand continues to drop, OPEC is trying to get approval for the most significant oil supply cut since the 2008 banking crisis.  Russia, to this point, has not endorsed the proposal. 

Technically Speaking

The DIA managed to hold on to its 500- day average at the close yesterday, but the SPY once again failed to hold on to its 200-day.  After yesterday's overnight reversal, Wednesday's big rally was wiped out as the spreading virus continues to worry investors.  Now the concern is, will the indexes retest last week's lows, and if so, will the lows hold as support?  Only time will tell, but one thing for sure is that is is a hazardous market condition as it tries to come to grips with such uncertainty.

Action Plan

As we head into an uncertain weekend, US Futures point to another huge gap down as the extreme volatility makes it very challenging and dangerous to trade.  Although analysts expect to get a good jobs number this morning virus fears are likely to rule the day.  As confirmed cases grow around the world, fear of what comes next here is the US will likely get much worse before it gets better.  No matter your level of trading experience, it will be tough to protect your capital if you choose to hold positions into the weekend.  With that in mind, we should not be surprised to see another rough day of selling as traders go into weekend protection mode.  With the bad news on the virus continuing to increase next week could easily be more of the same with very volatile price action.  Remember, cash is a position, and protecting your capital during times like this may prove the very best decision you can make amidst all this uncertainty.

Trade Wisely,

Doug

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