Twilight Zone

June 1, 2020 by Doug Campbell

With protests growing violent over the weekend and many businesses closing such as WMT, TGT, & AAPL, I feel like we have entered the Twilight Zone seeing the US Futures pointing to a gap up open.  Tensions continue to rise between the US/China, a historic unemployment rate, and negative earnings growth, but the indexes charts currently suggest a bullish V-shaped bottom. 

Asian markets closed in the green across the board overnight after reporting better than expected factory activity.  European markets are mixed but mostly higher this morning, and the US Futures currently point to a bullish open ahead of earnings and economic reports.  Expect another wild and crazy week capped off by the Employment Situation report.

Economic Calendar

Earnings Calendar

On the Morning Earnings Calendar, we have just over 30 companies reporting quarterly results.  Notable reports include ERJ and ENS.

Technically Speaking

Stocks finished the week on a mixed day of trading after the President announced that Hong Kong no longer enjoys the US special trade status.  He also mentioned that Chinese companies traded in the US would come under scrutiny for there accounting practices to protect US investors.  During the same press conference, we learned that the US has withdrawn from the World Health Organization.  Hundreds of WMT, TGT, AAPL, and other stores have once again closed, but this time it’s self-inflicted due to rioting and violent protests.  According to a new survey, global CFO’s have grown more negative on the economy, giving its worst rating in history.   They see companies taking another coronavirus big hit in 2020.  Virus blamed deaths in the US now top 106,000. 

With tensions between China and the US rising, widespread protesting closing down businesses, and lingering virus impacts, US Futures seem to be ignoring the situation pointing to a modest gap up at the open.  Analysts are beginning to suggest investors are dangerously downplaying the possible impacts as the US and China once again lock horns.  Today we will get the latest readings on PMI Manufacturing, ISM Mfg Index, and construction spending as if there was not enough for traders to digest this morning.  On Friday is the Employment Situation number that may well show 20% of American workers are unemployed, which would be a post WW2 high.  Hold on tight a stay focused on price action that could be as volatile as this weekend’s protests.

Trade Wisely,

Doug

News Conference “on China.”

May 29, 2020 by Doug Campbell

After a bit of morning price volatility, the bulls resumed there march higher despite the jobless number that now affects 1 in 4 working Americans.  Then late in the day, the President announced a news conference “on China,” and the bears suddenly woke up, swinging the markets sharply lower into the close.  There are very little to no details on what will or will not be said or done in this new conference, so not surprisingly, the market is a bit apprehensive waiting for the next shoe to drop.  Also, facing another big day of economic data, traders have a lot to grapple with as we head into the weekend.

Asian markets closed mixed but mostly lower with Hong Kong not surprisingly have the most significant bearish reaction to the new China law.  European markets are modestly lower across the board in response to the rising US-China tensions.  US Futures point to slightly lower open ahead of several economic reports and more comments from Jerome Powell.  Anything is possible, so plan carefully with an uncertain weekend approaching.

Economic Calendar

Earnings Calendar

On the Friday earnings calendar, we have 60 companies reporting results today, but looking through the list, we only CGC is particularly notable.

Technically Speaking

After a rather quick pop and drop crating some morning price volatility, the bulls regained control and began a steady climb.  After yesterday’s jobless number, we have nearly ¼ of working Americans standing in unemployment lines. However, the market seems to have absolutely no concern about unemployment choosing to focus on the hopes of recovery.  Then at the end of the day, the President announced a new conference on China, and suddenly the bears woke up, worried about the uncertainty of what happens next.  Countries around the world have including have joined in to chastise China’s new security law.  That may be the straw that broke the back of the recent cautious US approach to China.  At this time, there are very few details about what may or may not occur during this new conference, so naturally, the market is a bit on edge, making about anything is possible in the day ahead.

Although index trends remained bullish yesterday, price action left behind candle patterns raising the need for a little caution.  We also have a busy economic calendar today with International Trade, Personal Income and Outlays, Chicago PMI, Consumer Sentiment, and another speech from Jerome Powell.  Consider your risk carefully as we approach a weekend that may include new China-related uncertainties.

Trade Wisely,

Doug

Bulls Surge

May 28, 2020 by Doug Campbell

The bulls surge at the end of the day with the financial and retail sectors sharply gaining ground as wall street hopes grow as business across the country begins to reopen.  Sadly the Beige Book report cited a different story with business leaders pessimistic about recovery and workers reluctant to return to their jobs.  Before the open today, we have a big data dump, including jobless claims with consensus suggesting more than two million joined the historic number of unemployed.

Asian markets closed mixed with Hong Kong moving lower after China pass new security measures cracking down on the country.  European markets see green across the board as the monitor escalating tensions between the US and China.  US Futures point to another bullish gap up open ahead of a busy day of earnings and economic data.  An extra dose of price volatility is likely this morning as we react to data.

Economic Calendar

Earnings Calendar

On the Thursday earnings calendar, we have 87 companies reporting quarterly results.  Notable reports include DG, COST, ULTA, ANF, BURL, CM, CSIQ, DLTR, MOMO, NIO, JWN, OLLI, CRM, SAFM, SHOO, TD, & VMW.

Technically Speaking

For the 3^rd day this week, the bulls charged forward on hopes of the country reopening its economy.  Interestingly, the Fed Beige Book said economic activity declined across the country, falling sharply in most regions.  It also cited that workers are reluctant to go back to their jobs due to safety concerns, child care, and the very generous unemployment benefits provided by the government.  The report also stated that business leaders were pessimistic about the potential pace of the recovery.  Tensions between the US and China are growing.  Last night Chana approved the new security measures for Hong Kong, although many countries have come out against the law as limiting free speech.  The US House yesterday sent a bill to the president’s desk to sanction China for human rights violations.  Hong Kong may lose its special status with the US, which could have ramifications for investors in the coming weeks.  Today we have big data dump on the economic calendar with Durable Goods, GDP, Jobless Claims, Home Sales & Petroleum Status.  Consensus suggests that more than 2-million Americans applied for unemployment last week even as the business tries to reopen across the country.   Boeing announced layoffs for nearly 7000 employees yesterday, and American Airlines plans a 30% reduction of management and administrative staff as the industry continues to struggle.

The Financial and Retail sectors had a very good day yesterday, pushing the indexes higher will in a late-day surge of buying.  The Dow has rallied more than 1000 points in just two trading days, and the SP-500 closed above its 200-day average for the first time since early March.  US Futures once again indicate a bullish open the suggesting a Dow gap up of more than 100 points ahead a big day of economic data.  I would not be surprised to see an extra dose of price volatility ahead of the market open.  The T2122 indicator continues to warn of an extreme overextended condition in the indexes. Still, the bulls seem to be in a relentless buying mood no matter what the numbers suggest about the economy.  Hang on tight anything is possible and be prepared for the possibility of profit-taking that could begin at any time.

Trade Wisely,

Doug

Breached Benchmarks

May 27, 2020 by Doug Campbell

In Tuesday’s session, the SP-500 briefly breached the 3000 benchmark and the Dow topped 25,000.  However, at the close of the day, there was a bit of uncertainty as to the bears defend these levels, and the tech sector left behind a bearish dark cloud cover pattern.  The bulls squelched those closing concerns suggesting yet another overnight gap bringing the 2-day rally in Dow of more than 850 points just in the morning gaps!  The question now is will there be follow-through buying or will it attract profit-takers and bears?

Asian markets closed mixed as US/China tensions grow.  European markets, however, don’t seem at all concerned this morning with their indexes approaching 2% increases this morning.  US futures point another substantial gap up open reaching well above yesterday’s high prints ahead of a light day on the economic calendar and earnings reports.  Buckle up for another wild day in the market.

Economic Calendar

Earnings Calendar

On the Hump Day earnings calendar, we have 64 companies fessing up to quarterly results.  Notable reports include UHAL, ADSK, BMO, BGFV, BOX, HPQ, NTAP, NTNX, RL, RY, TOL, VIPS & WDAY.

Technically Speaking

Yesterday’s gap up and run pulled back, leaving behind some concerning candle patterns; however, the futures once again point to a substantial gap up.  The bullishness pushed the indexes through 3000, and the Dow breached 25,000 during the day.  Although they failed to hold these levels into the close, today’s morning gap will recover the benchmark levels with a substantial cushion.  According to the news reports, the bullishness is due to optimism about the economy reopening.  Once again, it would seem possible the largest price move of the day may occur in the overnight session.  Reports that COVID-19 related hospitalizations on the rise in several states continue to raise concerns about the second wave of infections.  Yesterday’ the US death toll topped 100,000, but the only thing the market seems to be in infected with is a ravenous desire to buy risk overnight.  Hum?  The T2122 indicator continues to signal an over-extended condition, but on a positive, the Absolute Breadth Index finally broke through the downtrend.  That would suggest we finally see a broader-based rally.

At the close yesterday, the QQQ left behind a bearish dark cloud cover pattern creating a little uncertainty as the trading day wound down.  However, this morning the morning gap suggests a test of all-time highs in the tech sector remains viable.  The SPY found itself unable to hold the 200-day moving average at the close yesterday, yet this morning we are gapping above yesterday’s high.  Once again, traders could easily find themselves influenced to chase into the morning gap with the fear of missing out.  Remember, big gaps can, at times, attract profit-takers and bring out the bears.  Watch the price action closely after the open to make sure you see follow-though buying before jumping.  Look before you leap, so to speak.  If you have long positions with nice gains as I currently hold, it may be wise to bank some of the gains consider the Dow 2-day rally of about 850 points at the open today. 

Trade Wisely,

Doug

Hopeful Vaccine

May 26, 2020 by Doug Campbell

The majority of price action over the last week of trading occurred in the overnight gap, and it appears that it will continue this morning as the market reacts to a hopeful vaccine beginning a Phase 1 clinical trial.  The Covid-19 death toll here in the US is likely to top 100,000 today, and health officials continue to warn of fall resurgence.  Be careful chasing such a huge gap and remember tensions continue to grow between the US and China.

Asian markets closed the day higher across the board on vaccine hopes, and European markets are bullish this morning with travel stock surging over 5%.  Ahead of earnings and several economic reports, the price resistance that has held the indexes down for more than a month looks to break with the overnight futures gap.  The question remains, will there be follow-through buying at the open?

Economic Calendar

Earnings Calendar

As we begin a short trading week, the Tuesday earnings calendar has 69 companies reporting results today.  Notable reports include BNS, BAH, HEI. HIBB, OOMA, STNE, & VSAT.

Technically Speaking

The overall market closed little changed on Friday with very light volume as we moved into the long weekend.  There was, however, some slight selling pressure as China issues new crackdown rules on Hong Kong restricting freedoms.  Not surprisingly, tensions between the US and China continue to grow a may present more of a market threat than the coronavirus in the long-term.  This morning US Futures are leaping higher on hopes of a vaccine from Novavax that is beginning a Phase 1 Trial with plans to begin Phase 2 as early as July depending on results.  Today the US is likely to reach a grim milestone with Covid-19 related deaths topping 100,000.  As the country tries getting back to normal health officials, warn of a possible resurgence of the virus this fall.

The big push in the overnight futures will finally breach the resistance that has held the indexes.  Amazingly the biggest part of price movement over the last week of trading has occurred in the overnight session with little to no price action during the typical retail session.  If you have ever needed proof that its institutions that move the market, take note of the 500 point gap this morning with rental unable to participate.   As always, be careful, chasing a vast opening gap.  Moves such as this easily create the fear of missing out, but let us make sure we see some follow-through buying remembering the possibility of a pop and drop if profit-takers take advantage of the price surge.  Although earnings season is winding down, there are still notable reports to be aware of this week as well as a busy economic calendar.

Trade Wisely,

Doug

China cracks down!

May 22, 2020 by Doug Campbell

China cracks down on Hong Kong with new security laws causing a nasty selloff of more than 5.5% overnight.  Tensions between the US and China appear to be growing with the US Senate passing legislation the could restrict Chinese companies from listing and raising money in the US.  As we slide into a 3-day weekend, plan your risk carefully and expect lighter volume as investors pack up early to take advantage of the time off.

Asian markets close in the red across the board as they reacted to a sharp selloff in Hong Kong due to a China crackdown.  European markets are also seeing red this morning as they monitor the rising US-China tensions.  US Futures point to modest declines this morning with ahead of light earnings and an economic calendar.  Plan your risk carefully as we slide into what could be a news-driven weekend.

Economic Calendar

Earnings Calendar

On the Friday earnings calendar, we have a light day with just 29 companies reporting.  Notable reports include BKE, DE, and FL.

Technically Speaking

Yesterday turned out to be just another day of choppy price action near price resistance levels with a slightly bearish lean.  Tensions appear to be once again in the rise between the US and China.  The Senate passed legislation on Wednesday to could restrict Chinese companies from listing on US exchanges.  They will also find themselves restricted in raising money from US investors unless they conform to regulatory and audit standards.  Hong Kong had big selloff overnight falling more than 5.5% because Beijing is planning a crackdown that many say take away freedoms, personal safety, and the rule of law.  China calls the new security law “highly necessary” to prohibit secession, subversion of state power, terrorism activities, and foreign interference. 

As we slide into a 3-day weekend, the bulls may find it challenging to continue to press for a resistance breakout as traders are likely packing up to head out early to enjoy the holiday.  We may, in fact, experience a bit of profit-taking to reduce risk and avoid the uncertainty of the long weekend.  I, for one, will we heading out to start my weekend early shortly after today’s open.  I wish you all a great day of trading and a wonderful weekend.  Stay safe, my friends.

Trade Wisely,

Doug

Overnight Gaps & Chop

May 21, 2020 by Doug Campbell

The market price action this week has been mostly contained in the overnight gaps with choppy, directionless chop throughout the day as we continue to test price resistance.  This morning the futures suggest another gap, but this morning it’s the bears doing the pushing as we head into a busy morning of economic data.  Jobless estimates expect another 2.5 million Americans applied for unemployment, but with nearly 35 million already without work, the market has mostly ignored these historic numbers.  Perhaps they will do the same today.

Asian markets closed the day with modest declines across the board, and European markets are lower by about 1% reacting to Euro Zone economic data.  US Futures are choppy this morning but point to a lower open ahead of earnings and financial data as we slide toward a 3-day weekend.  Stay focused on price as anything is possible as markets react to news and challenged by overhead price resistance.

Economic Calendar

Earnings Calendar

On the Thursday earnings calendar, we have 77 companies fessing up to quarterly results.  Notable reports include A, AINV, BBY, BJ, DECK, HPE, HRL, INTU, NVDA, PANW, ROST, SDRL, SPLK, TK, and TJX.

Technically Speaking

So far, the majority of the index price action has occurred on the morning gap, with the remainder of the day filled in choppy sideways trading.  Keeping with the tradition, the futures point to another substantial gap heading into a big day of earnings and economic data.  Global virus cases reached 5-million, with the US sadly holding the record of the largest number of infections and a death toll of nearly 95,000.  However, according to the news, all 50 states are in the process of reopening the least part of their economies.  Let’s hope we don’t see another surge of infections as a result, and we can on with the business of recovery. 

As of the close Wednesday the all the major indexes continued to struggle with price resistance levels.  Both bulls and bears seem equally matched after yesterday’s morning gap.  Interestingly, the Absolute Breadth Index rose yesterday during the chop, although it remains in an overall downtrend.  T2122 continues to signal in the bearish reversal zone suggesting a short-term overbought condition.  As we head into a busy morning of economic data and wait for reports from tech giants like NVDA and INTU, the futures point to a gap down open.  Keep in mind volumes could begin to drop off quickly if traders wind down their week early heading into the 3-day Memorial Day holiday.  Plan your risk carefully heading into the long weekend and continue to expect overnight price volatility to remain challenging.

Trade Wisely,

Doug

Whipsaw

May 20, 2020 by Doug Campbell

Very volatile price action at yesterday’s close and on overnight whipsaw that’s once again challenging price resistance levels is likely has traders scratching their heads wondering what comes next?  I suspect there were many traders stopped out by the selloff at the end of the day, and there will short traders also seeing losses this morning with the overnight reversal.  Could we see a short squeeze this morning big enough to break through resistance, or will the bears continue to hold the line?  Your guess is as good as mine.

Asian markets closed mixed but mostly flat on the day.  European markets are dancing around the flat-line this morning cautiously, monitoring economic recovery efforts.  US Futures are boldly gaping up once again ahead of earnings and economic reports that include the FOMC minutes at 2 PM eastern today.  Buckle up for another bull/bear battle at price resistance and plan for price volatility to remain challenging.

Economic Calendar

Earnings Calendar

On the Wednesday earnings calendar, we have 65 companies stepping up to report.  Notable reports include ADI, RDY, EXPE, HUYA, LB, LOW, MCK, SCVL, TTWO, TGT, VER & ZTO.

Technically Speaking

After yet another overnight gap, the market spent the rest of the day chopping sideways struggling to find the energy to break through resistance.  Then at the end of the day, a report suggesting the release of a virus treatment way too soon as critical testing metrics were still missing created a sharp market selloff.  The volatile price action continued through the evening as overnight futures rebounded, adding insult to injury for those stopped out in yesterday’s whipsaw.   Those putting on short positions will also fell the pain this morning as futures push for another gap up opening that may create a bit of short squeeze this morning. 

The DIA, SPY, and IWM left behind bearish engulfing patterns at price resistance levels yesterday with the SPY showing the 3^rd failure at price resistance.  However, the overnight whipsaw is once again challenging price resistance, and the possibility of a short morning squeeze may be just enough to push prices through this level.   Of course, a lot will depend on today’s earnings and economic reports that include the FOMC minutes.  Even with the late day selling, T2122 suggests a short-term extended condition, and the Absolute Breadth Indicator continues to downtrend, making for a very confusing market condition.  Coupled with chart resistance and wild price volatility, what comes next is anyone’s guess!  Be careful not to chase the morning gap, getting caught up in fear of missing out.  Stay focused on price waiting for proof that gap up can find buyers this morning.

Trade Wisely,

Doug

Hopeful Clinical Trial

May 19, 2020 by Doug Campbell

After learning of a small but hopeful clinical trial of a Covid-19 treatment, the market lept higher yesterday to challenge the upper range of resistance of the DIA, SPY, and IWM.  The big move left a big gap below, and unfortunately, the Absolute Breadth Index declined as the big-4, AAPL, AMZN, MSFT, and GOOG continue to dominate the indexes.  Perhaps today the bulls will find the energy to push through the resistance, but it would not be out of the question to see some profit-takers come in after a one day move of more than 900 Dow points.

Asian markets rallied overnight on hopes of a virus treatment.  European markets are trading cautiously flat this morning, and the US futures have recovered early losses to indicate a flat open ahead of earnings and the congressional testimony of Jerome Powell. 

Economic Calendar

Earnings Calendar

Retail in focusing the Tuesday earnings calendar with less than 50 companies reporting results today.  Notable reports include HD, WMT, AAP, NTES, SINA, URNB & WB.

Technically Speaking

The day after a massive surge in the indexes on the back of warm and fuzzy Powell comments as well hopeful virus treatment news.  President Trump reviled yesterday that he has been taking hydroxychloroquine as a preventative virus treatment for the last couple of weeks.  Health officials quickly discouraged that course of action, suggesting possible harmful side effects.  After an investigation of the WHO, the President is threatening to cut off funding the organization permanently.  He has given the WHO 30 days to make substantive improvements accusing them of being China-centric.  Home Depot, HD reported sales jumped 7% last quarter, but costs associated with the coronavirus weighed down profits for the quarter, sending the stock down by 3% early this morning.  WMT will also report before the bell this morning, shedding light on pandemic impacts on retail.

The DIA, SPY, and IWM tested the upper range of the consolidation yesterday as the bulls raced in reacting to hopeful news.  The SPY briefly popped above recent resistance but by the close slid back just enough to leave questions in trader’s minds.  Early this morning, futures were pointing to a pullback of more than 100 points, but as the morning progresses, the tenacious bulls have clawed back the decline.  The T2122 indicator jumped into the bearish reversal zone on the big rally; sadly, the Absolute Breadth Index declined to suggest fewer and fewer stocks are responsible for lifting the indexes. Will the bulls find the inspiration to break the current resistance, or will the bears find the energy to continue their defense?  Perhaps, we will find out today.  Plan your risk carefully, staying focused on price action as the battle begins. 

Trade Wisely,

Doug

More Stimulus?

May 18, 2020 by Doug Campbell

Friday evening, the House passed a 3-trillion dollar stimulus bill, but it’s unlikely to pass the Senate and if it should the President has vowed to veto.  Jerome Powell sees the possibility that the US GDP could shrink by as much as 30% in comments made this weekend.  However, as states begin to reopen the US Futures only see bullishness this morning even as the Covid-19 death toll tops 90,000 with more than 1000 American dying almost every day of the last 2-weeks.

Asian markets closed in the green overnight even as Japan slips into recession.  European markets are bullish this morning as Euro-zone continues to lift lock-down restrictions.  US Futures point to a gap up of nearly 400-points ahead of earnings and a light day of economic news. Let’s party with the bulls but keep a close eye on the overhead resistance of this wide-range consolidation on the DIA, SPY, and IWM.

Economic Calendar

Economic Calendar

On the Monday earnings calendar, we have 120 companies reporting their quarterly results.  Notable reports include BIDU, APLE, BILI, IQ, SFTBY, TRVG.

Technically Speaking

US Futures are surging this morning as investors weighed comment by Chairman Jerome Powell suggesting the GDP could shrink more than 30%.  He said, struggling retail will continue to struggle even as the country reopens, suggesting that businesses will have to deal with sales volumes 25 to 50 percent of normal.  Rather grim statements, but the bulls don’t seem to care, choosing instead to rally hard in the pre-market action.  Apple has plans on reopening 25 stores this week, requiring mandatory masks and temperature checks.  Several states are opening health clubs and restaurants with new social distancing requirements.  New US rules requiring special licensing to sell chips to Huawei will be a big blow to the Chinese 5G tech giant and may also stir trade tensions between the US and China.  Friday evening, the US House passed a 3 Trillion dollar stimulus package that would send another $1200 to American taxpayers.  However, the package has little chance of passage I the Senate, and the President has vowed to veto the bill should it reach his desk. 

As the county reopens, only 3% of the population has been tested, with 1.4 million cases recorded thus far.  More than 1000 Americans have died from Covid-19 almost every day this past week, as the death toll tops 90,000.  To say the reopening will be challenging my be the understatement of the year.  Last week’s hold of the 50-day moving averages is a technically positive signal.  However, traders should also note that we remain in a large consolidation range in the DIA, SPY, and IWM.  At the end of the last week, the absolute breadth of the overall market continues in a downtrend as the big-4 does most of the heavy lifting.  With the futures pointing to a considerable gap up open this morning, keep an eye on overhead resistance levels as the T2122 indicator is likely to reach an overextended condition.

Trade Wisely,

Doug