Bearish Pressure

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Bearish Pressure

Growing trade tensions and expanding Hong Kong protests and China once again lowering the Yuan overnight has the market under some bearish pressure this morning.  Not helping that sentiment is the fact that Golden Sachs lowered economic growth estimates rising fears of a recession.  If the indexes fail, creating a price action lower high, the technical damage of the charts could become severe and officially mark the beginning of a market downtrend.  The bulls must defend Friday’s low or expect the bears to be emboldened pushing the indexes lower once again.

Overnight Asian markets closed mixed but mostly modestly higher as trade war tensions dampen activity.  European markets currently see modest declines across the board ahead of the US Market open.  As of now, US Futures suggest a gap down open between 150 and 200 Dow points.   Fear could quickly turn to panic selling if Friday’s lows fail as support.  We should continue to expect high price volatility, intra-day new driven reversals, and big overnight gaps making the markets very difficult to navigate for swing and position traders. 

On the Calendar

On the Monday earnings calendar, we have just short of 130 companies expected to report earnings today.  Notable reports today include GOLD, SYY, and TME.

Action Plan

Massive protests in Hong Kong continue to grow spilled into the airport, forcing the cancelation of all flights during the night.  The violence is also growing between police and residents asking for greater democracy and a release from Chinese influence.  So as trade tensions between China and the US grow leader XI Jinping is facing his greatest challenge to his power since coming into office.  Also during the night China once again lowered the midpoint of the Yuan slightly setting the currently below Friday’s session lows.

Over the weekend Goldman Sachs cuts their economic growth forecasts citing the lingering trade war and rising fears of a recession.  After a nice afternoon comeback on Friday that saw indexes recovering the moring session selloff, US Futures are under bearish pressure this morning.  A lower high failure near the 50-day moving average is likely to embolden the bears and creates severe technical damage to the index charts.  If the bulls are unable to defend Friday’s price low, panic could trigger a wave strong selling pushing the indexes past last weeks lows where the SPY and QQQ could test their 200-day averages.  Let’s hope the bulls find enough inspiration in earnings reports to fight hard!

Trade Wisely,

Doug

Bond rate inversion?

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inversion

As bond yields inch toward the dreaded inversion and trade war jousting continues, there is certainly plenty of uncertainty to unsettle the markets as we head into the weekend.  With most of this earnings season now behind us, the market will now have to confront its global economic fears directly.  Here in the US jobs numbers remain very strong, and the consumer is still very confident, but as this trade war lingers on and the two superpowers exchange punches anything is possible.

Asian markets finished the week mixed but mostly lower after resetting the midpoint of the Yuan just below the key benchmark of seven.  European markets are seeing red across the board this morning as political turmoil in Italy has bank price plunging.  As we head into the weekend, ahead of earnings reports and the PPI number at 8:30 AM Eastern, US Futures point to bearish threatening to break the 2-day relief rally.  It’s been a wild week, and it looks like the volatility will extend right into the weekend.

On the Calendar

On Friday’s Earnings Calendar we get a little break with just over 100 companies reporting today.  Next week we have just two triple days of reports with the vast majority of reports this quarter now in the rearview mirror.  With mostly small caps reporting today, there are none that I would consider particularly notable.

Action Plan

Trade war fears are once again raising it’s ugly head this morning as China now plans to stop receiving US crude imports as its next punch in the fight.  Oil has already declined sharply as concerns of global growth have spread in recent months if China reduces its imports oil prices will likely remain under pressure.  Another major market concern is the possible yield curve inversion between the 2 & 10-year bonds often as a signal of recession.  With the vast majority of earnings season behind us, the market will directly confront its overall economic fears in the coming weeks.

As a result, there is a lot of uncertainty as we head into the weekend, and traders should carefully consider how much risk they want to carry.  With the market very sensitive to bond and currency fluctuations, anything is possible over the weekend.  After 2-days of a relief rally that moved the indexes up sharply, they will now confront significant price and key moving average resistance.  Currently, US Futures are pointing to a gap down open of more than 100 Dow points to kick off Friday’s volatility.  I wish you all a wonderful weekend.

Trade Wisley,

Doug

Bonds Rates Stabilize

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Stabilize

It was a nice relief to see the markets begin to rally off of morning session lows as bond rates began to stabilize after their wild morning fluctuations.  As great as it was let’s not forget that a bounce off the lows does not make a trend and that there are still significant price resistance levels and technical damage the market must overcome.  Yesterday was a positive beginning, but now we need the price to follow-through with additional bullish price action.  Keep in mind the Bear’s may have retreated yesterday, but we can’t rule out the possibility they are just regrouping for another attack.  They are unlikely to give up easily.

Asian markets saw green across the board at the close after China took further steps to stabilize the Yuan.  European markets are showing modest gains in response to bond rate stabilization.  Ahead of a huge day of earnings reports, the US Futures are currently flat but have leaned to the bullish most of the morning.  I would expect another day of challenging price volatility and would not rule out the possibility of additional bear attacks.

On the Calendar

Today we have the biggest day of earnings reports with more than 500 companies fessing up to results.  Notable reports include AL, AU, CAH, CBS, KHC, MGA, MUR, PRTY, SNH, VIAB, VIRT, YELP, and YPF.

Action Plan

The rally off of yesterday’s lows corresponded directly with the stabilization of the bond rates that moved around erratically during the morning session.  That sweet relief rally recovered all the morning losses and even managed to push into positive territory by the close of the day.  However, let’s not mistake a one-day rally as a recovery.  We need bullish price action following through today to confirm the relief rally is truly underway.  Let’s also keep the markets still have to deal with substantial technical damage creating significant resistance levels in the charts.

Futures have traded in the green during the entire overnight session after China took additional steps to stabilize the Yuan.  Volatility is likely to remain high with more than 500 companies reporting earnings today, so prepare for the challenging price action to continue.  As of now, I’m expecting the relief rally to continue, but we must all be on our toes for the possibility of sharp intra-day reversals particularly if bonds rates experience any aftershocks.  Plan your risk carefully.

Trade Wisely,

Doug

Relief Rally, Maybe?

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Relief Rally Maybe?

It’s always nice after such a strong sell-off when a relief rally begins.  However, with so much technical damage to the charts, I would be carefully finding too much comfort in the rally.  Trader’s should stay vigilant watching for clues of potential price failures at or near price resistance levels and key moving averages.  We should also be on guard for the possibility of overnight reversals as we plan our risk forward.  There can be an opportunity in high volatility times for experienced day-traders, but the path ahead for swing and position traders could be very challenging.

Asian markets closed mixed but mostly lower as China followed-through stabilizing the Yuan at a level slightly lower than expected.  European markets are embracing the calming of the currency fluctuations with their indexes seeing green across the board.  The early evening futures bearish reversed during the night now suggesting a modestly bullish open ahead of a very busy day of earnings reports that may prove to support the relief rally or bring back the bears is the result disappoint.  Plan your risk carefully in this fragile market environment.

On the Calendar

We have another very busy day on the Earnings Calendar with over 430 companies reporting quarterly results.  Among the notable are, LYFT, STMP, DDD, UHAL, AIG, CVNA, CTL, CDE, CVS, FOXA, HL, LAMR, LBYTA, LL, NRG, OMI, PAAS, DOC, RYN, RCII, SFLY, SWKS, TEVA, TRIP, UPWK, and VER.

Action Plan

During the early evening, futures were moving lower after some disappointing earnings results from DIS.  However, things began to improve after the Asian markets opened, and China followed through stabilizing the Yuan.  As a result of the escalating trade war tensions, Morgan Stanley is the first to lower earnings expectations for the next 2-years.  It would seem in the eyes of Morgan Stanley the trade war uncertainty is here to stay.

Although the relief rally that began yesterday appears to be following through with more bullishness ahead to the open, I’m not sure we can gain much comfort in the move due to the tremendous technical damage in the charts.  As the indexes try to recover, we must stay on our toes watching for clues of potential lower high failures at or near price resistance levels or key moving averages.  The huge number of earnings reports, yet this week could help the price recover, but it could also trigger the next wave of selling should the results disappoint.  The high volatility can provide opportunities for adept day-traders; however, swing and position traders are likely to find the price action very challenging.  Remember trading every day is not a requirement, and Cash is a position often underutilized in times of market turmoil such as this.

Trade Wisely,

Doug

Currency Manipulator?

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Currency Manipulator

In the early evening, it looked like we could be in for a very nasty day after the US Commerce Dept. officially labeled China, a currency manipulator.  US Future plunged more than 600 points as it appeared the Trade War had devolved into a very dangerous currency war.  Luckily cooler heads prevailed as China finally took steps to stabilize the Yuan during the night and lifting the US Futures into positive territory.  With 400 companies reporting earnings today and market emotions at a fevered pitch, we should prepare for very the challenging price volatility to continue.

Overnight Asian markets saw red across the board at the close though they recovered substantially from early session lows.  European markets have turned modestly bullish this morning in reaction to the stabilized Yuan slightly eased trade war tensions.  Ahead a big day of earnings reports, the US Futures point to a bullish open, with the Dow currently suggesting a gap up near 200 points at the open.  With such wild volatility, we should not rule out the possibility of a pop and drop pattern, so stay on your toes and remain focused on price action for clues.  Anything is possible when emotions are so high.

On the Calendar

We have a big day on the Tuesday earnings calendar with 400 companies set to report results.  Some of the notables include ANDE, AINV, WT, ADM, BDX, APRN, CRCM, DIS, DISCA, DUK, ENR, STAY, FLT, FTR, HST, HUBS, NDLS, NUS, OIH, PBI, PAA, RHP, SSTK, SWN, VOYA, WYNN & ZAGG.

Action Plan

There was a lot of futures turmoil after the bell yesterday when the US Commerce Department officially labeled China, a currency manipulator after devaluing the Yuan.  At one point the Dow Futures indicated a gap down of more than 650 points during the early evening as it appeared the trade war had evolved into a very dangerous currency war.  Fortunately, during the night, China took measures to stabilize its currency, and the US Futures breathed a sigh of relief not only recovering the losses but moving back into the green.  Whew, that could have been ugly!

As I write this, the US Futures are pointing to a bullish gap up around 200 points ahead of a huge day of earnings reports.  Although I think the odds of testing the overnight futures lows have declined significantly over the last few hours, we can’t completely rule out the possibility considering the harsh volatility the market is currently experiencing.  Emotions are high, so prepare for challenging price volatility fueled by news and earnings reports to test the metal of even the most experienced traders.

Trade Wisely,

Doug

Steep Declines

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Steep Declines

The Chinese Yuan declined sharply against the dollar as Asian markets experienced steep declines as markets continue to react to the threat of additional tariffs and a trade war that looks tp persist well into the future.  European markets are also seeing red across the board this morning as traders and investors react to mounting trade tensions.  After a grizzly weekend of senseless shootings, the US Futures are in a very bearish mood this morning that could open the Dow more than 300 points lower.

After two straight months of bullish price action, the steep selloff comes as quite a shock wiping out nearly have of those gains in just 4-days. Unfortunately, along with the selling comes substantial technical damage with the DIA, SPY, and QQQ gapping below their 50-day averages this morning.  With more than 1500 companies reporting earnings this week and the VIX rising sharply, we should expect and plan for very challenging and volatile price action to continue.  Protect your capital and remember during times like this that cash is a position often underutilized.

On the Calendar

On the Morning Earnings Calendar, we have more than 230 companies reporting results.  Notable reports include TTWO, APLE, CZR, LIN, L, MAR, MOS, O, and SHAK.

Action Plan

We are looking at a punishing market open this morning as markets continue to react to the threat of additional tariffs and a grizzly weekend of senseless shootings.  The Chinese Yuan declined sharply against the US dollar overnight as Asian markets closed with substantial losses overnight.  The steep rally that began in early June will give back about 50% of Dow gains on the 4th day of declines as the market gaps down at the open.

Substantial technical damage is occurring in the charts with the DIA, SPT, and QQQ gapping below their respective 50-day averages.  Adding insult to injury, it looks like the IWM will open below its 200-day average.  In my opinion, this correction was overdue, and the harsh reaction is partially due to the complacency seen in the VIX.  However, that doesn’t make this sudden pullback any less painful or palatable to trader and investors caught in the turmoil.  With a huge number of earnings reports this week, we should expect volatility to remain high and challenging price action to continue.  Prepare for a very bumpy week ahead.

Trade Wisely,

Doug

Tariff Threat

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Tariff Threat

As the markets recovered from its FOMC temper tantrum a new 10% tariff threat created a quick 180 sending the market sharply lower breaking trends and slicing through key price supports.  If you listen to the new spin, you would think the world is coming to an end.  Yes, it was very painful, but let’s keep in mind the market had rallied more than 10% in just 2-months, and a pullback was bound to happen.  The tariff threat just kicked it into high gear.  August is typically a difficult month for the market, but this to shall pass.  Keep it in perspective, stay focused on price action, and remember price volatility is likely to remain quite high.

Overnight Asian markets closed in the red across the board in reaction to the tariff threat and the ongoing trade war.  European markets are also seeing red this morning as a result.  US Futures currently point to a modest gap down open ahead of the Employment Situation number at 8:30 AM Eastern today.  Remember, just one day ago we were rallying back toward record highs with 25% tariffs in place, and no one seemed to care that negotiations had stalled.  An additional 10% threat is just that, a threat that is still a month away from implementation.  Be careful not to get caught up in the drama.   

On the Calendar

We get a little break on the Friday Earnings Calendar with just short of 100 companies reporting today.  Among the notable reports, ARNC, CVX, XOM, HMC, LYB, NWL, QSR, STX & WPC.

Action Plan

Markets had largely recovered from the FOMC disappointment when the President issued a threat of an additional 10% tariffs on 300 Billion Chinese products.  The market did violent 180 in reaction to the threat.  The news spin on this threat would make you think the world is coming to an end.  Let’s keep in mind that the market just recently hit new record highs with 25% tariffs on Chinese goods and that just one day ago no one was concerned about the failing negotiations.  The fact is the market had largely overextended having rallied more than 10% in just 2-months.  A pullback was due, and the tariff threat was merely the catalyst.

According to the Trader,’s Almanac August has been one of the toughest trading months since 1987.  We certainly kicked it off in style yesterday as the selling created significant technical damage in the charts as it broke trends and important price support levels.  The complacency that I have been warning about for the last couple weeks suddenly turned to fear quickly spiking the VIX above a 17 handle.  Expect a lost of price volatility as we head into Friday as earnings roll out and the market reacts to the Employment Situation number at 8:30 AM Eastern.  If you’re emotional about the market, consider taking the day off and protecting your capital.  Have a relaxing weekend and come back Monday, putting all this into perspective focused and ready for the next chapter of the market to be revealed.

Trade Wisley,

Doug

Powell Disappoints the Market

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Powell Disappoints the Market.  The FOMC cut the rate by 25 basis points but provided the market no clarity to the future rate cuts the market has been pricing in the last couple months, creating a strong bearish reaction yesterday afternoon.  Their action drew sharp criticism from the President, who has been trying to influence a bigger step from the committee.  None the less, yesterdays violent selloff left behind a bearish engulfing pattern on the DIA, SPY, and QQQ while also setting a strong resistance level in the market that may be difficult to breach.

Asian markets closed mixed but mostly lower overnight after July numbers showed their manufacturing has contracted.  European are currently mixed as well but have largely revered early losses due to better than expected earnings results.  US Futures are pointing to a modestly bullish open ahead of busy earnings and economic calendars.  Perhaps cooler heads will prevail, and the bulls will find enough inspiration in the earnings to hold index price supports, but I would not rule out the possibility of a bearish follow-through so keep a close eye on price action for clues.

On the Calendar

On the Thursday Earnings Calendar, we have the biggest day of the week with more than 460 reports.  Some of the notable reports include, ABC, MT, AMD, AVP, CC, CI, CLX, ED, CROX, DVA, DISH, DNKN, DD, ETSY, EXC, FLSR, GM, GPRO, HBI, HFC, IRM, K, LM, NNN, PINS, RMAX, RDFN, SHOP, SQ, STOR, X, VZ, W, WU, WING, WYNN, XTL, YETI, and YUM.

Action Plan

Today the market has to come to grips with the possibility that yesterday’s quarter-point rate cut could be a one and done event.  That’s much different then what the market had been pricing in over the last couple months.  Powell, in fact, provided very little clarity to the futures actions of the FOMC which of course drew sharp criticism from the President.  Traders focus will once again turn to a huge day of earnings reports, which is likely to continue offering up challenging and volatile price action.

Unfortunately, the strong down reaction yesterday broke the uptrends in the DIA, SPY, and QQQ, leaving behind large bearish engulfing patterns.  While this may have put in place a difficult to breach price resistance, let’s keep in mind that a bearish engulfing candle must follow-through to the downside.  As of now, the US Futures indicate a modestly bullish open as earnings reports roll in and ahead of the Jobless Claims, PMI, ISM, Construction Spending economic reports.  Having said that, as long as current support hold and prices don’t follow-through lower yesterdays steep decline could prove to be a one-off event.

Trade Wisely,

Doug

FOMC Rate Decision

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FOMC Rate Decision

Although we have more than 350 companies reporting, all eyes will be on the FOMC rate decision at 2:00 PM Eastern today.  In anticipation of a rate cut, the Dow and SP-500 have rallied more than 10% since the discussion began in early June.  One has to wonder after such a huge anticipation run what might occur if the FOMC disappoints the market.  One thing for sure is that the entire world is watching and we should expect considerable volatility as a result.  Trade negotiations with China ended very sharply after just half a day of conversation, but that’s likely to get lost in the shadow of the FOMC today.

Overnight, Asian market closed in the red across the board, but European markets trade mixed, however, mostly higher ahead of the FOMC decision.  US Futures are pointing to a bullish open fueled by the earnings that have come in largely better than expected this quarter.  Expect a flurry of price volatility during the morning rush as the market reacts to a big round of earnings reports but don’t be surprised if that quickly fades into choppy light action as we wait for the Fed.  Fasten your seat-belt and prepare for a wild news-driven day.

On the Calendar

On the Wednesday Earnings calendar, we reach the half-way point for this season.  We have more than 350 companies stepping up to report.  Among the notable today are, ABC, mt, ADM, AVP, CC, CI, CLX, ED, CROC, DVA, DISH, DNKN, DD, ETSY, EXC, FSLR, GM, GPRO, HBI, HFC, IRM, K, LM, NNN, PINS, RMAX, RDFN, SHOP, SQ, STOR, X, VZ, W, WU, WING, WYNN, XYL, YETI, and YUM.

Action Plan

After a choppy day of price action that left the DIA, SPY, and QQQ slightly lower on the day the big round of earnings after the bell seems to have lifted the spirit fo the bulls this morning.  AAPL beat analysts estimates and guided positively forward although iPhone sales slumped.  Today at 2 PM Eastern we will finally get the decision from the FOMC on interest rates.  However, before that occurs, we will get word on the ADP Employment numbers, Employment Cost Index, and the Petroleum Statis Report along with a very large group of earnings reports.

It’s going to be a very busy day of data, but as of now, the Futures are pointing to a bullish open.  Expect volatility to during the morning rush as trader react to earnings reports but don’t be surprised if price action becomes very light and choppy leading into the rate decision.  There has been so much news spin around this rate decision that the entire world is waiting in anticipation so expect an explosion of the volatility after the release and during the Chairmans press conference.  Buckle up it may prove to be a very bumpy ride today.

Trade Wisely,

Doug

Wavering Confidence

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As the market waits for the FOMC rate decision, fed fund futures seem to display wavering confidence on the possible outcome.  Currently, it suggests a 73% chance of a 25 basis cut with a 50 basis cut slipping back to just 27%.  Clouding the water just a bit more a CNBC story suggests there could be up to 3 members voting against a rate cut due to stronger than expected economic indicators.  One thing for sure all we can do as traders is to wait for their decision and manage the price volatility it creates the best we can or stand aside.

Asian markets saw green across the board at the close of trading last night after the Bank of Japan decided to hold rates steady.  European, markets are currently mixed but mostly lower as they deal with some disappointing earnings results this morning.  US Futures currently point to a slightly bearish open this morning ahead of a big round of earnings reports and a busy economic calendar.  With another round of market-moving reports after the bell, today prepare for the possibility of a substantial gap Wednesday morning.

On the Calander

On the Tuesday Earnings Calendar, we have more than 290 companies expected to report results today.  Some of the notable earnings include, AAPL, AMD, AOS, AKAM, MO, ARCC, BIDU, BYD, CINF, COP, GLW, CMI, DLR, DHI, ETN, ECL, EA, LLY, EXR, FEYE, GILD, GRUB, IR, LDOS, MA, MRK, MDLZ, OKE, PAYC, PFE, PG, PAS, RL, SIRI, SNE, STAG, UAA, YUM, and XRX. 

Action Plan

Another very big day of earnings and economic data for the market to digest today as we wait for the FOMC rate decision Wednesday at 2 PM Eastern.  Today there is even more uncertainty about what the Fed might do with a story released on CNBC that there could be as many as three members voting in decent of cutting rates.  Fed fund futures now suggest a 73% chance of a 25 basis point cut and just a 27% chance of a 50 basis rate reduction. 

Futures currently suggest a slightly bearish open as earnings begin to roll out and ahead of the Personal Income, S&P Corelogic, Consumer Confidence, and Pending Home Sales economic reports.  After the bell today we have some big reports from the likes of AAPL, AMD, and many other possible market-moving events.  As a result, there is a possibility of a substantial market gap Wednesday morning.  Plan your risk carefully and expect the challenging price volatility to continue.  Although we saw a small dose of selling pressure yesterday morning, index trends remain bullish.

Trade Wisely,

Doug