Bad news at Boeing and a spreading coronavirus roused the
bears for a 150 point Dow pullback yesterday, but the futures point to gap up
open this morning as the relentless bulls keep buying with no regard to the extended
prices and historically high price to earnings ratios. As we begin our biggest day of earnings
reports this quarter, it looks like the lowered analyst’s estimates could continue
to fuel the markets even higher. However,
a word of caution. With stocks priced well
beyond perfection compared to earnings growth, keep in mind just one stumble
could trigger a quick reversal, so plan your risk carefully.
That is Question?
Asian markets shook off concerns of travel restrictions due
to the spread of the coronavirus to close green across the board
overnight. European markets are however,
muted at this hour showing mixed and cautious trading. US Futures tossed caution to the wind rising
sharply overnight and continue to point to a substantial gap up as ravenous
bulls can’t seem to buy up high priced stocks fast enough.
On the Calendar
On the Hump day earnings calendar, we have the largest
number of reports so far this season, with over 80 companies fessing up to
their quarterly results. Notable reports
include ABT, ALLY, BKR, CTXS, FITB, JNJ, KMI, LVS, RJF, RCI, SLM, STLD, TER, &
TXN.
Action Plan
A bit of nervousness about the coronavirus temporarily woke
up the bears yesterday with concerns that this contagious and very deadly virus
could damage the economy restricting travel around the world. Of course, the news that Boeing expects further
delays before getting approvals to put the 737 Max back in the air aided in the
selling yesterday after the company broke down below a key price support level. After the bell, NFLX posted better than
expected earnings but disappointed on subscriber number particularly in the US
and Canada. The initial price reaction
was lower, but this morning NFLX is indicated modestly higher. IBM, after reporting five straight quarters
of decline, finally found the right stuff to top analysts estimates as their acquisition
of Red Hat helped them turn the corner.
Even with the 152 point decline in the Dow, yesterday index
trends remain intact with no break of price supports in the daily charts. Futures have been in bullish mode all night long
as we head into the biggest round of earnings so far this season. In an interview, the President proclaimed the
Dow would be 10,000 points higher if not for the Fed and indicated he was in pursuit
of another tax cut to help it along even more.
Stay bullish but remember that many stocks are priced well beyond
perfection. Any stumble could create a
quick and substantial pullback so carefully plan your risk carefully and resist
chasing stocks already running.
The bulls bang-out more new records pushing GOOGL into the 1
trillion market cap club and price to earnings growth hits the highest level since
Bank of America started recording the metric in the ‘80s. How much further can you go? That’s anyone guess, but as retail traders,
we must guard ourselves against getting caught up in the exuberance over-trading
or chasing trades already up several days in their bull run. With a 3-day weekend approaching, it may be
wise to take some profits and reducing risk in case sentiment happens to shift over
the weekend.
Asian markets closed the trading week, seeing green across
the board after China reported their economy grew as expected. European markets have also reached out to new
record highs this morning in reaction to the big gains in the US and China
news. This morning US Futures continue
to climb, suggesting a modest gap up open ahead of earnings and economic
reports.
On the Calendar
On the Friday earnings calendar, we have 21 companies
reporting results. Notable reports
include CFG, FAST, JBHUT, KSU, RF, SLB, & STT.
Action Plan
More new records attained as the bulls continue to surge
higher with wild abandon. Bank of America
reported that Price to Earnings Growth is now 1.8 hitting the highest level
since they began recording the number in the ’80s. For reference, a reading 1.0 PEG is considered
an overbought condition. That said,
nothing seems to stop the bulls from stretching this rally that pushed GOOGL to
a 1 Trillion market cap during yesterday’s bullish session. With a three-day weekend approaching, futures
currently suggest another gap up open and more record highs today with no sign
of slowing down just yet.
Trading such an overbought condition requires a strong adherence to your trading rules. It’s very easy with all the bullish exuberance to get caught up, tossing caution to the wind and over-trade. I have no idea when the tide will change, but believe me when it does; you don’t want to be over-invested because the reversal can be swift and extreme. Stick to your rules, size your trades properly, don’t chase stocks well into their run or when they are testing price resistance levels, have an exit plan if you’re wrong and remember to take some profits along the way! I wish you all a wonderful 3-day weekend.
The Dow closes above 29,000 setting new records amidst a volatile afternoon of price action that required a last-minute rally regain that key psychological level. With the Phase 1 trade deal finally signed skeptics of the deal seem to have inspired the bears to begin probing for weaknesses creating a little price volatility, but so far, the bulls have proved to defend each attack. Although stocks are rising, so many appear very stretched out or testing resistance highs traders, have to be very careful not to over-trade and chase entries.
Good Morning! Do I smell Friday on the way?
Asian markets closed mixed but mostly higher seesawing around the flat-line most of the session. European markets are lower across the board being less than impressed with the partial trade deal with China. However, here in the US, there appears to be no tepidness whatsoever with the Futures pointing to yet another significant gap up that will set new records. Over exuberance like this can sometimes end badly, so plan your risk carefully and have an exit plan ready to go if sentiment reverses.
On the Calendar
On the Thursday earnings calendar, we have 29 companies fessing
up to quarterly results. Notable reports
include BK, SCHW, CSX, MS, PBCT, PPG, & TSM.
Action Plan
For the first time, the Dow closed above 29,000 amidst a volatile afternoon session after the signing of the Phase 1 trade deal. In the deal, China has agreed to buy 200 billion of Ag products based on market conditions over the next two years. As you might imagine, skeptics abound that China intends follow-through on the deal. Next week the Senate begins the impeachment trial of President Trump. Although the Senate is expected to acquit the president of all charges, it’s likely to serve as a major distraction next week with a wall-to-wall media circus.
Index trends continue to remain bullish though the price action
indicates that the bears are probing for weaknesses creating a little volatility. That being said, the bulls seem to have relentless
energy recovering from a late afternoon selloff in the last couple minutes of
the day. Today we have a few potential
market-moving earnings events and a big morning of economic data to inspire the
bulls or bears. I suspect the Retail
Sales figures will be the biggest focus today after TGT reported holiday toy
sales were lower than expected. Ahead of
all this data, the futures once again point to a substantial gap up open. As always, guard yourself against the fear of
missing out emotion by waiting to see if actual buyer follow-through after the gap
before committing to additional risk.
Is the bull weakening or just taking a break hoping to find
inspiration in big bank earnings and the signing of the Phase 1 trade
deal. With a push in very select stocks,
the Dow once again pushed through the 29,000 barrier but was unable to hold it through
the close after being reminded that tariffs will remain in place for the immediate
future. As always, during earnings
season, anything is possible, so set aside bias and focus on the price action
for clues.
Asian markets closed in the red overnight ahead of the
signing of the Phase 1 deal. European
markets are mixed this morning trading very near the flatline, cautiously as
they monitor earnings results. US
Futures traded in the red overnight but have paired most of the losses ahead of
earnings, economic, and the Phase 1 signing ceremony that seems to have lost
its luster among the bulls.
On the Calendar
On the Hump day earnings calendar, we have just 22 companies
reporting today but there are several potential market-moving reports. Among the notable are UNH, AA, BAC, BLK, GS,
KMI, PNC, USB, & PNC.
Action Plan
After a little struggle, the Dow finally found the
inspiration to rally breaking temporarily above 29,000 but was unable to hold
it by the close. While we have the
signing of the Phase 1 deal, later today, tariffs will stay where they are until
there is confirmation of China’s compliance with the agreement, and Phase 2
negotiations begin. Most agree that it will
likely be after the Presidental election.
Although there was a bit of a bull/bear struggle in the price action
yesterday, the bullish trends remain intact.
Today we have several potential market-moving earnings
reports and an economic calendar that includes PPI, Empire State MFG., Petroleum
Status numbers and the Beige Book.
Futures traded lower all night, but the morning pump has already begun now
pointing to a flat open before we get the reports from BAC & GS. As of yesterday, it looked as if the bulls started
running low on energy but perhaps they can be reenergized this morning by strong
bank earnings. Stay focused on price and
guard yourself against over-trading while price deals with resistance while
working to hold trend.
With a choppy overnight futures session and very high price-to-earnings multiples, the first earnings season of a new decade officially begins today! Yesterday the bull run continued with new record highs in the SPY and QQQ even as analysts expect sub-par year-over-year earnings performance. The question on everyone’s mind is, will it matter or will the tenacious bulls continue to lower their head and push even higher. Only time will tell. In such a strong bull market, it’s very easy to become complacent and over-trade. Plan your risk carefully, and even though the trend remains strong, make sure you have an exit plan and understand the risks you are taking in case the bears come out of hiding and begin to impose their will.
Asian markets overnight closed mixed but mostly lower as the
Yuan rose ahead of the Phase 1 deal signing.
As I write this report, European markets are trading modestly lower
across the board. US Futures markets have
been choppy ahead of the big bank earnings that will likely set the stage for
today’s market.
On the Calendar
Today is the official beginning of the 1st
quarter earnings season, which seems to extend almost all the way into the 2nd
quarter. Make sure your checking when a
company reports before making a trading decision as part of your trade planning
to avoid possible unfortunate surprises.
We have 20 companies reporting today, with the most notable being DAL,
C, JPM, SPHA, INFO, WFC, & WIT.
Action Plan
We have seen rather choppy futures overnight heading into the
official beginning of 2020 earnings.
Trends have been incredibly bullish ahead of a week outlook for earnings
results, but the big question is, will it matter? Year over year, comparisons show that companies
are making less; consequently analysts lower the expectations bar making it
easier for the company to leap over the target.
With price-to-earnings multiples going higher and higher as stocks
continue to race higher, we have to question how long this condition can
continue.
Analysts seem to suggest a market pullback is likely, but
the very strong bullish trend would seem to suggest the bulls don’t care what
the analysts think. Another imbalance we
currently see in the market is that only 5-companies, AAPL, GOOGL, AMZN, MSFT, and
FB make up 18% of the total market cap of the entire S&P-500. According to Morgan Stanley, this is
unprecedented dominance, while Bank of America is warning the “rising correlation
and concentration risks’ for the market.
So what is the retail trade to do?
Set aside your bias, focusing on the price action on the indexes and the
stocks you choose to trade. Plan your
trades, understand the risks before entering and trade your plan with the
knowledge that Price is King!
After briefly breaching 29,000 with a very narrow large-cap
leadership, Friday’s price action ultimately left behind bearish engulfing candle
patterns while still solidly holding onto bullish trends. With earnings season kicking off on Tuesday
with big bank reports, the expected signing of the Phase 1 trade deal on
Wednesday, and a busy economic calendar, traders will have to be ready for
almost anything. In such a strong
bullish run, it’s easy to become complacent, but with stocks trading at such
high multiples, that would be unwise. Plan careful, and never forget the market can
quickly shift direction.
Asian markets closed green across the board last night as
they await the signing of the Phase 1 trade deal. European markets, however, are trading
cautiously this morning with indexes flat to mostly lower focused on developing
geopolitical tensions with Iran. US
Future this morning seems to be tossing caution to the wind pointing to a gap
open. With Friday’s bearish engulfing
pattern, be very careful chasing into this morning gap.
On the Calendar
On the Earnings Calendar, we have just 12 companies reporting
results but there is only company SJR that’s particularly notable today. However, keep in mind 1st quarter
earnings season kicks off on Tuesday with several big bank reports.
Action Plan
There was a very interesting weekend of news with talking
heads issuing very contradictory predictions of the future direction of the
market. Protestors hit the streets in Iran
after the government admitted to downing the Ukrainian 737 passenger plane. The President has come out in support of the
Iranian protestors noting their courage is inspiring. At the same time, the Iranian leadership continues
to threaten additional retaliation. Scheduled
for Wednesday this week is the expected signing of the Phase 1 trade deal with
China, that’s to provide some protection for US intellectual property as well
as large Ag purchase commitments from China.
With markets already at very high multiples and expectations
of slower earnings growth, reports indicate that GS, BAC and other large
investment banks are advising their clients to move assets to a more passive
dividend collection strategy as they expect only a 2% market growth in the coming
year. At the same time, others are
suggesting 2020 could be a solid earnings growth year and projecting substantial
market growth. I think all the contradiction
would suggest that no one can predict the future and the best we can do as
retail traders is to setaide our bias, focus on the charts, and price action
within. Up, down or sideways price action
will lead the way to a profit.
The bulls are running with wild abandon breaking records in
what seems an insatiable desire to buy up stocks. Closing at a new record high and only a few
points away for 29,000, the only stumbling block ahead is the Employment Situation
number that consensus estimates suggest a possible decline. Next week begins the 1st quarter
earnings season and the current rally seems to suggest tremendous confidence in
strong earnings outcome. Companies will
need to produce some impressive results to support current prices. Consider your rick carefully as we head into
the weekend.
Overnight Asian markets closed the week mixed but mostly
higher. This morning European markets
are mostly bullish across the board as they continue to monitor US-Iran tensions. US Futures have been bullish throughout the
night and suggest a modest gap up open ahead of the Employment Situation
number. With the weekend quickly approaching
and the beginning of earnings season just around the corner, it may be a really
good time to take some profits and reduce some risk.
On the Calendar
On the Friday earnings calendar, we have just six companies fessing
up to quarterly results. However, the only
notable report today comes from INFY before the bell.
Action Plan
Another big day a rally yesterday as the bulls seems to have
an insatiable desire to buy up stocks. The
market gapped up to new record highs and continued to find more buyers throughout
the day. Futures this morning continue
to reach out for new highs ahead of the Employment Situation number at 8:30 AM
eastern. Such an exuberant rally ahead of earnings suggests the market believes
we will see substantial earnings growth this quarter. Analysts, however, are suggesting negative
growth is possible, which could create an interesting situation when earnings
season kicks off next week.
According to analysts, the price to earnings ratio is near a
20 year high. That could put a lot of
pressure on companies to perform nearly perfectly or suffer the result of disappointing
investors. It’s looking more and more likely
that Iran shot down the 737 with a Russian made missile. Iran has threatened additional retaliation. Amidst this uncertainty, the House passed a
resolution attempting to limit the Presidents’ power to take action with Iran. With the Dow, just a few points from reaching 29,000
for the first time ever, I’m guessing the institutions will do as much as
possible to get that headline. The only
possible stumbling block to that goal is the Employment number that consensus
suggests may decline today.
After an evening of missiles, turmoil, and rising tensions that
sent markets tumbling around the world, the message from the President that All
Is Well, restored frayed nerves and market prices. Shortly after the news of the attack, the Dow
Futures plunged more than 400 as a sobering reminder just how quickly geopolitical
events can affect the path forward for the market. Traders should carefully consider this and
plan their risk accordingly to protect themselves as tensions between the
countries remain very high.
Asian markets closed seeing only red overnight as oil and
gold prices spike after the Iranian missile attack. European markets have, however, recovered overnight
losses currently holding modest gains while closely monitoring developments. US Futures ahead of earnings and economic
reports now suggest a flat to slightly bullish open. Market jitters have subsided for now keep one
ear to the news as massive price volatility could be just one report away.
On the Calendar
On the hump day earnings calendar, we have 24 companies reporting
quarterly results. Notable reports
include STZ, BBBY, LEN, MSM & WBA.
Action Plan
After Iran fired more than a dozen missiles at Iraqi airbases
that house US troops. According to
reports, there were no lives lost in the attack but came with a warning from Iran
to withdraw forces from the area to avoid additional actions. Markets around the world quickly reacted with
the US Dow Futures sinking more than 400 points while gold and oil prices
spiked. However, after the President
issued a statement last night that all was okay, markets have recovered, but it
is a sobering reminder of how quickly geopolitical events can affect market
prices.
As tensions continue, traders should plan their risk
accordingly and always have a plan to protect your capital if this conflict
continues to escalate. As of yesterday,
the bullish trends remained intact, although the price action was choppy, reflecting
the uncertainty of the day. US Futures
now indicate a flat to slightly bullish open ahead of some notable earnings and
economic report. In times of turmoil, we
naturally first think of how the situation effect our money and ourselves. May I suggest we all take a minute to
remember our troops standing in harm’s way and their families undoubtedly
stressed and worried about their loved ones.
We risk only money, and they risk their lives to protect us!
Geopolitical fears proved to be no match for the relentless
march of the bulls yesterday. By the
close of the day, not only had they rejected the fear of the gap down but left
behind bullish engulfing candle patterns that held support and trend. However, the substantial rise in gold and oil
prices seems to be a huge contradiction to this exuberant bull run. As Iran promises retaliation and the US warns
waterway shippers of possible attacks, traders should plan their risk carefully
keeping a close on the developments in the middle east.
Overnight Asian markets also set aside retaliation fears
closing the day green across the board.
European markets are also rebounding this morning as fears seem to has
subsided. As I write this report US
Futures that boldly continued to rally overnight seem a bit more subdued ahead
of economic reports on International Trade, Factory Orders and the ISM.
On the Calendar
On the Tuesday earnings calendar, we have 10 companies
reporting with none that particularly notable.
Action Plan
The bulls shook off the fear of potential retaliation from
Iran yesterday rejecting the gap down lows of the last two trading days. To be honest, I’m not sure where the overall
confidence is coming from with Iranian generals publicly speaking about
retaliation and US warnings; they are concerned about waterway attacks. Nonetheless, the bulls remain relentlessly in
control of the trend that left behind bullish engulfing candle patterns on the
DIA, SPY, and QQQ.
Bullish is a good thing but over-exuberant blind bullishness
and become very dangerous so let’s hope it’s not the later. With the recent pullback, the T2122 indicator
has relaxed, allowing more room for the indexes to extend more to the
upside. However, there is a contradiction
in the VIX, which shows little to no fear while gold, (GLD) has gone nearly
parabolic in its rally over the last few days.
Overnight futures continued to push boldly higher as have oil prices
that at one point topped $70 a barrel yesterday. With little on the earnings calendar, the
market will look to the economic reports on International Trade, Factory Orders
and ISM numbers for inspiration. Also,
remember geopolitical news could create substantial reversals and price volatility,
so plan your risk accordingly.
Increased saber-rattling over the weekend as Iran and the US
exchange threats and tensions grow between the countries. Not surprisingly, markets around the world
are reacting negatively to the growing uncertainty. With little on earnings or economic calendar
to provide market inspiration, the news spin cycle will affect market sentiment
and price action volatility. Traders
will have to stay nimble and focused carefully on price action for clues. As of the close on Friday, index trends and
support held as the bulls stepped up to defend after the morning gap down. Unfortunately, we face a similar bearish gap
this morning.
Don’t forget me, I’m a tough guy too!
Asian markets closed in the red across the board as oil
prices jumped more than 2%. European indexes
are also trading negatively this morning as they monitor the growing tensions
between Iran and the US. Futures this morning
here in the US point to a substantial gap down open this morning to begin our
first full trading week this year.
Geopolitical events can create extreme shifts in sentiment as news comes
out. Plan your risk accordingly.
On the Calendar
On the Monday earnings calendar, we have just 4 companies
reporting, but none are notable and unlikely to any overall market effect.
Action Plan
With little on the economic and earnings calendar today, the
market will likely focus on the Iranian tensions and any news developments on
the subject. Over the weekend, Iran
voted to expel the US from the country and threats were made against the US
troops to be removed by force. The President
responded, saying the troops would remain right where they are unless Iran pays
back the American people for the expensive and newly created base. He also threatened sanctions like the country
had never seen before.
In response to the Iranian threat of retaliation, the
President said the US has picked out 52 targets if they do. Now the House, which is upset they were not
briefed on the Iranian airstrike, are trying to move forward a bill this week that
would attempt to limit Presidental powers.
As you might imagine, markets around the world continue to react negatively
to the saber-rattling and the uncertainty it creates. As of
the close on Friday, the bullish trend remained in tack and bulls had successfully
defended price support levels. Futures
this morning reflect the worry of the market pointing to a substantial gap down
at the open to begin our first full week of trading in 2020.
