China surprised the market at 5:30 AM this morning saying they are willing to negotiate to resolve the trade war sharply reversing the US Futures from overnight lows. Traders holding long positions will feel the sweet relief of a big gap up open. However, traders caught short will suffer and may experience the pain of a short squeeze. Though this is a very positive development, make sure to maintain perspective and not get caught up in the hype. Saying they are willing to negotiate is a long way from signing a binding deal, and there are likely going to be a lot of drama along the way.
Asian markets closed mostly lower overnight as Treasury yields
continued to deteriorate. European markets
reversed early losses after the China news and are currently green across the
board the morning. US Futures leaped dramatically
on the prospect of a China re-engaging in trade talks with the Dow Futures now
pointing to a gap up open of more 250 points.
Price volatility will likely be wild this morning, so stay disciplined
to your trading plan and rules to avoid emotional decisions influenced by the drama
this news has created.
On the Calendar
Sixty-three companies are fessing up to their quarterly earnings
results this Thursday. Notable reports
include DG, ULTA, ANF, ABOC, BBY, BURL, COO, DELL, DLTR, HAIN, TD, and WDAY.
Action Plan
Futures that had been bearish most of the night quickly rallied
about 5:30 AM this morning when China says it willing to resolve the trade war
and return to the negotiations table. Although
agreeing to talk is a long way from agreeing to a binding deal to level the playing
field for trade between the two countries, its certainly a positive step forward. Unfortunately, China has also decided to sent
troops into Hong Kong. Lets’ hope this conciliatory
action is not merely a distraction as they use force to put down the long-running
protests.
Market bulls will, of course, be very happy this morning but
bears caught short are likely to feel the pain of a short squeeze this morning. I would be careful not to get caught up in
the hype, keeping in mind bond yields, Brexit and that an actual signed deal is
still likely months away. Also for the
market to digest is the big morning on both the economic and earnings calendars. Price volatility could be wild this morning, so
plan your approach to the market carefully.
The hits keep on coming!
There is a point in nearly every market selloff when it seems bad news continues
to pile on with one hit after another.
This morning we wake up to a worsening yield curve as the 30-year bonds
hit new record lows. The Sterling
rapidly falls as the Prim Minister confirms he is moving to suspend parliament,
raising the risk of a no-deal Brexit. As
if to add insult to injury, China has yet to confirm they will re-engage in
trade negotiations as the president alluded to Monday morning. Yesterday’s pop and drop that left behind
bearish engulfing patterns on the index charts sure didn’t help the technical’s
or inspire much confidence.
Overnight Asian markets closed flat but mostly lower in
reacting to the declining 30-year bond yields.
European markets mostly lower this morning as Brexit fears rise and the
Sterling falls. US Futures that had held
bullish gains through the night now point to a flat slightly bearish open ahead
of earnings reports. Caution continues
to be warranted as you plan your day ahead.
On the Calendar
Wednesday’s Earnings Calendar has just over 70 companies
reporting quarterly results. Notable
earnings include BOX, COTY, DAKT, EXPR, FIVE, GES, HRB, MOV, PVH, TIF, VRNT,
and WSM.
Action Plan
My goodness, there is a lot going on this morning affecting
the market. The 30-year bond is hitting
new record lows as the yield curve inverts even further. Most negatively are those on a fixed income, which
may force many into higher risk dividend investments to make ends meet. The British Prime Minister Boris Johnson move
to suspend parliament, causing the Sterling to fall and raising the risk of a
no-deal Brexit. US Futures quickly pared
overnight gains after Johnson confirmed the rumor in a speech today.
Yesterday’s pop and drop price action added some technical
damage, leaving behind bearish engulfing candle patterns as another day passes
with China not confirming a resumption of trade negotiations. I think the market must come to grips with
the very likely increase from 25 to 30 percent tariffs. With little on the economic calendar today, there
will little to distract the market from the yield inversion and trade war
uncertainty. Plan your risk carefully.
Although the overnight reversal was a welcome relief from Friday’s
selloff there remains a lingering uncertainty that there will progress made on trade
negotiations. We have been here before
with high hopes only to see the negotiations breakup in a matter of hours. Fool me once shame on you, fool me twice shame
on me seems to be the attitude of the market.
It’s time to see some actual progress rather than platitudes and political
spin. Expect price volatility to
continue as the indexes continue to deal with significant technical damage.
Overnight Asian markets closed mixed but mostly positive,
and traders moved tentatively watching trade developments with caution. This morning European markets trade cautiously
mixed as well this morning as the world waits for some clarity. US Futures have recovered from early losses pointing
to a relatively flat open ahead of earnings and Consumer Confidence
reports.
On the Calendar
On the Tuesday Earnings Calendar, we have just 37 companies
reporting results. Notable earnings
reports today include ADSK, BMO, BNS, BNED, EV, FRO, HPE, SJM, and VEEV.
Action Plan
Yesterday’s relief rally on hopes of US and China re-engaging
in negotiations was very nice but technically speaking very little changed. While it’s encouraging that the indexes held
Friday’s lows as support the overall downtrend of the indexes remains intact
with significant price and moving-average resistance above. While the President talks favorably about China’s
desire to make a deal, there is a palpable uncertainty by the market.
That uncertainty is justified because we have been here before
only to be disappointed with negotiations attempts breaking up just hours after
restarting last time. That appears to be
making the US Futures a bit tentative this morning pointing to a flat open. Expect volatile price action to continue as
the market continues to hope for but still waits for clarity.
A massive overnight reversal of market sentiment after China announces its willingness to return to the negotiation table and the President speaks favorably of a future deal. Indeed very encouraging but I would expect the market to remain very news-driven as they attempt to hammer out the details. There is obviously a lot at stake here for both countries so I would guess a completed deal could still be months away.
Overnight the Yuan slid to an 11-year low, and Asian markets experienced an ugly selloff across the board. This morning European markets are mixed but have recovered from the lows after signaling the resumption of US-China negotiations. US Futures, although fluctuating wildly, point to a substantial gap open ahead of earnings reports and a Durable Good number that consensus estimates expect will decline at 8:30 AM Eastern. Hang on tight; the price volatility is likely to remain quite high this morning as the market reacts.
On the Calendar
On the Monday Economic Calendar, we have 30 companies reporting
results with none that are particularly notable.
Action Plan
As China and US lobbed tariff bombs back and forth on Friday,
it was looking pretty grim with the US Futures declining 300 points at the open
yesterday. However, during the night China
trade officials called the US, interested in re-engaging in negotiations. The future responded in kind not only
recovering losses but as of now point to a positive open. I’m not exactly sure how an agreement to talk
warrants such a big change in sentiment, but I’ll take it and happy to see the
change this morning.
Unfortunately, even with the big overnight reversal significant
technical damage was created in the index charts with Friday’s selloff. News of a trade deal could quickly correct the
damage, but I doubt a return to the negotiation table will do the trick. Both countries have a lot at stake, and I
would expect a lot of tough talk in the near future as they try to hammer out
their differences. Expect more drama as
this battle continues to unfold.
FOMC Chairman Jerome Powell’s tightrope walk begins at 10:00
AM Eastern from the Jackson Hole economic policy symposium. The entire financial world will be watching
hoping to gain some clarity as to the committee’s future rate plans. If the market perceives dovishness, we could end
this choppy week with a nice rally. Hints
of hawkishness and can expect the very sensitive bonds to react negatively and
emboldening the bears triggering an attack.
No matter what you want, the Fed to do, it would be wise to remain flexible
and stay focused on the price action likely to become volatile.
Asian markets finished up their week positively even as tensions
grow between Japan and South Korea and the Yuan dipped to new lows. European indexes are cautiously higher this morning
as they wait for Powell’s address. As a
result, US Futures have held positive all night long indicating a modestly
bullish open with the hopefulness of a dovish FOMC. How today ends up is anyone guesses but
consider your risk carefully as we head into the weekend.
On the Calendar
On the Earnings Calendar, we get a little break with only 28 companies reporting this Friday. Among the notables are FL, and BKE.
Action Plan
Today the market with turn all of its attention to Jackson Hole and the Chairman Powell’s address at 10:00 AM Eastern. The market is seeking clarity of FOMC’s plans for rate cuts later this month and into the future. If his speech comes off with a dovish tone, the market will likely react quickly with a bullish move to end a week of otherwise choppy and frustrating price action. However it there is even a hint of hawkishness in his speech the bears could quickly attack, and bond yields could once again invert. Indeed a difficult tightrope to walk for the chairman as the entire financial world watches.
Yesterday the market chopped in lockstep with the bond rates. Early in yesterday session bond yields inverted
but later recovered as did the market. This
morning there is a slight improvement in yields with the hopefulness of an FOMC
action. The indexes are still facing the
challenge of overhead price resistance and their respective 50-day moving averages. Prepare for volatility as Powell speaks and
consider your risk carefully as we head into the uncertainty of the weekend.
I think the best description for the price action of late is Pop & Chop. An exciting gap up market open followed by sheer boredom as uncertain bulls and bears milling about waiting for the next tidbit of news hoping for clarity. The FOMC minutes provided no clarity, and now it looks like the best hope for inspiration is the Powell address at 10:00 AM Eastern from Jackson Hole. I would not be at all surprised is we see more of the choppy price action today as we wait.
Asian markets closed mixed overnight as manufacturing data showed a decline putting pressure on the Nikkei. Across the pond European indexes are seeing modest declines across the board in reaction to another US bond yield inversion. Here in the US, futures also point to modestly bearish open ahead of morning earnings reports and the weekly Jobless Claims.
On the Calendar
We have more than 50 companies reporting earnings this Thursday. Among the notable reports are CRM, VMW, GPS,
HPQ, INTU, ROST, DKS, FLWS & CM.
Action Plan
After great earnings results from LOW and TGT gaping the market
higher at the open the price action once again went flat and chopped sideways
the rest of the day. The FOMC minutes release
was a non-event providing no further clarity as to interest rate path forward. Perhaps, Powell’s address in Jackson Hole
Friday morning will provide enough inspiration the shake loose of the summer doldrums.
Once again the US 10-year bond rates have slightly inverted with
the 2-year bond rates, but the market seems to be taking it in stride this morning
lifting off the overnight lows slightly while still pointing to a modestly bearish
open. However, that could easily change
a earnings result roll in, and we get the latest reading on Jobless Claims. Overhead resistance of price and moving-averages
continues to challenge the index charts clearly defining the battlefield of the
bulls and bears. Although price action
has been very challenging, let’s keep in mind the Dow is less than 5% below its
record highs in July, which is a pretty mild correction at this point. Nonetheless its have still been very frustrating,
and I would expect more chop today amid so much uncertainty.
August is traditionally a very challenging month for the market, and so far, AUG19 has certainly lived up to its reputation. Erratic even violent price swings with big overnight gaps have tortured traders trying to make some sense of the uncertainty. Today, markets are hopeful the FOMC minutes will provide some clues as to the thinking of the committee and their next possible rate decision. What we know now is there were three dissenting votes for the rate cut we received last month. The question is, what has changed? Perhaps, we will not get any clarity until Powell speaks in Jackson Hole Friday morning.
Asian markets were mixed and mostly flat overnight as they
also wait for central bank guidance. European
seem much more confident this morning solid bullish price action and green
across the board. US Futures are also
pointing to a bullish open in response to strong earnings results from LOW and
TGT this morning. Be careful not to
chase the opening gap keeping in mind we could easily slip back into consolidation
as we wait for the 2:00 PM minutes release.
On the Calendar
On the Wednesday Earnings Calendar, we have just short of 40 companies
reporting. Notable reports include LOW,
TGT, JWM, SMAR, SNPS & ADI.
Action Plan
After two days of very choppy price action, the market today
is hopeful it can find some clarity as to the thinking fo the FOMC with the
release of last months minutes at 2:00 PM Eastern today. Positive early morning earnings result from
LOW, and TGT has the early morning futures pushing higher to once again challenge
price resistance in the index charts. President
Trump is discussing payroll tax reductions and is pushing with all his might attempting
to pressure the FOMC into a 100 basis point rate cut this month to avoid recession
fears.
We will also have to keep an eye on the Existing Home Sales
number at 10:00 AM Eastern this morning.
The consensus expects housing sales to increase, but this is a potential
market-moving report, particularly if the actual results miss estimates. After the morning rush gap, I would not be at
all surprised to see the market slip back into consolidation as we wait for the
2:00 PM minutes release. After the release
expect an explosion of volatility so be prepared for about anything to occur.
Yesterday’s huge morning gap failed to find follow-through buyers as volatility weary traders choose to sit on their hands searching for clarity to the big issues clouding the path forward. While we could hear of new developments in the trade war at anytime resolution of its uncertainty is likely weeks if months away. Fed Chairman Powell may provide some clarity on the FOMC’s thoughts on interest rates when he speaks on Friday, but until then the market will stay focused on fluctuating bond rates, earnings, and economic reports to try and find inspiration.
Asian markets traded flat but mostly lower as China set new
loan prime rates in an attempt to stimulate economic growth. This morning European markets are trading cautiously
and mostly flat as recession fears continue to linger. US Futures also point to a flat but slightly
lower open this morning as we wait and search for clarity. What comes next is anyone’s guess.
On the Calendar
On the Tuesday Earnings Calendar, we have less than 50
companies reporting today. Notable
reports include CREE, TOL, URBN, HD, KSS, MDT, and TJX.
Action Plan
With markets responding to improving bond rates, the market
gapped strongly higher yesterday but failed to find follow-through buyers as
the market chopped sideways the rest of the day. Traders are finding it difficult to trust the
recent price action with so much uncertainty clouding the path forward. Perhaps yesterday’s price action was a prelude
to a resting consolidation relieving some of the intense volatility of late as
we wait for clarity.
Technically the indexes remain in a downtrend with price
challenged by overhead resistance as well as moving average resistance. Unfortunately, we are unlikely to get much
clarity this week in the trade war, but perhaps the Fed Chairman will help clarify
the FOMC’s next move when he speaks on Friday.
With earnings season winding down the market will turn to economic reports
to try and find inspiration and will likely continue to be very sensitive to
the political spin as it searches for answers.
Choppy consolidating price action, though very boring, maybe just what we
need calm the nerves of traders after a will couple weeks of trading.
With bond yields bouncing and the market suggesting a huge
gap up, open traders face difficult decisions this morning. If the current futures bullishness holds the
DIA, SPY, QQQ, and IWM will gap directly into the price and moving average
resistance. Do you trust price action enough
to risk your capital and hoping for follow-through buying or even a short
squeeze to be triggered? Do you wait to
see if this is a bull trap with the bears ready to defend resistance creating pop
and drop pattern? Or could the morning
gap get no follow-through commitment from the bulls or bears and we to consolidate
the big gap the rest of the day?
Whatever you decide given the wild volatility we have
experienced the last couple of weeks, it will require considerable skills to
navigate the price action successfully. Before
leaping ask yourself these questions. Are
you following your rules? What is your plan if your wrong? Do you have and edge
or are you just gambling your hard-earned money? Do your skills match the current market condition? There are no easy answers in a market full of
news-driven uncertainty and emotion.
There are only difficult decisions to make with such high
volatility. What will you decide?
On the Calendar
On the Earnings Calendar, we have nearly 60 companies reporting on Monday. Notable earnings include WB, EL, & BIDU.
Action Plan
The relief rally that began last Thursday afternoon is
betting a big boost of energy this morning as bond yields bounce and inversion
fears subside. Unfortunately, with the
Dow currently pointing to a gap of more than 200 points, retail traders have a
tough decision to make. A big pop like
this can certainly trigger a short squeeze, but it can also create a nasty pop
and drop if it finds no followthrough buyers.
Indeed a difficult decision with such high price volatility that has
proven to punish both bulls and bears with news-driven reversals.
Even with the big gap up this morning the DIA, SPY, QQQ
& IWM will still be under the Price resistance of the last high and their
respective 50-day moving averages. If
the big morning gap holds throughout the morning, the T2122 will likely signal a
short-term overbought condition at the open.
Make no mistake that does not mean immediate bearishness will resume,
but it does suggest caution and that we should avoid chasing with the fear of
missing out. Buyers could follow-through
to squeezing out short traders, bears could be ready to defend the resistance levels
creating a pop and drop pattern, or we might gap with no commitment from bulls
or bears consolidating the rest of the day.
Your difficult decision awaits.
Lots of questions with very few answers created a very frustrating
day of price action on Thursday. As bond
yields finally began to moderate late afternoon, the market picked a direction
and provided a least a modest relief rally into the close. A good round of earnings reports after the
bell and a bit of bond market stabilization during the night lifted spirits
around the world. The big question for
traders this morning, can we trust this mornings bullishness amidst all the volatility
enough to add risk heading into the weekend still full of uncertainty?
Overnight Asian market closed modestly bullish across the board as bond yield slightly improved. European markets are moving higher this morning after a technical issue delayed the open in the UK. US Futures are solidly bullish this morning with the Dow pointing to a gap up of more than 200 points. Be careful not to chase the open in-case this wildly volatile decides to pop and drop. Also, consider carefully the amount of risk your willing to carry into the weekend.
On the Calendar
We get a little break on the Friday Earnings Calendar with
just 68 companies reporting earnings today with DE as the most notable.
Action Plan
Will, there be real progress on trade negotiations or not? Will the FOMC reduce the rates or not? Will, the Bond Rates, invert and remain
inverted or not? Will China send troops
into Hong Kong to put down the protests or not?
Will the global economic slow down effect the US economy or not? That uncertainty created another very volatile
session on Thursday, and until we get some clarity is likely to continue to create
very difficult price action for traders to navigate.
Yesterday T2122 signaled an oversold condition, but with so
much uncertainty the market struggled until late afternoon when it finally
managed to put together a little relief rally.
A round of good earnings reports after the bell also lifted spirits, and
treasury yields somewhat stabilizing during the night has futures pointing to a
significant gap up this Friday morning.
The question is, can we trust it, or could it produce a pop and drop
pattern or even worse another lower high within the downtrend? Secondly, how
much risk will traders be willing to hold into an uncertain weekend? Nonetheless, any relief rally is a welcome
sight after a week of heavy selling.
