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.
After a very exuberant Thursday rally, a US airstrike in
retaliation for the embassy attack is sending shock waves through the world
markets this morning. What a difference
a day makes as uncertainty once again raises its ugly head as we move toward
the weekend. As traders face an
uncertain weekend, it could easily trigger some profit-taking and increase the
overall price action volatility. Watch closely
if index price supports can stave off this initial knee-jerk reaction. If they begin to fail, profit-taking could
quickly increase.
Asian markets closed the day lower across the board but rather
subdued overall. European markets are
all in the red this morning in reaction to the Iranian tensions. US Futures point to a sharply lower open this
morning with the Dow indicating a gap down of more than 250. Buckle up; it could be a bumpy ride.
On the Calendar
On the Friday Earnings Calendar, we have 18 companies listed
as reporting, but just one confirmed report from LW and it happens to be the
only one that’s noteworthy on the day.
Action Plan
A day after an exuberant rally that set new records, the
market has a very different attitude this morning. During the evening in response to the invasion
of the US Embassy in Iran, a strategic killed one of Iran’s top generals
sending shock waves throughout the middle east and possibly escalating the
conflict. Qasem Soleimani is tied directly
to the deaths of over 600 Americans and was a very popular military leader in
Iran. What comes next is anyone’s guess,
and that uncertainty is evident with a quick look at the futures market.
Lettering design poster, banner.
The strong bullish trend over the last three months may
still hold after this morning’s knee jerk reaction, but overall, the market
hates uncertainty, and we can expect the VIX will respond to show some
fear. Keep a close eye on price supports
within the index trends. Failure of
supports heading into an uncertain weekend could set off a wave of
profit-taking. Remember, we have the
ISM, Petroleum Status and the FOMC minutes on the economic calendar along with
a parade of Fed speakers.
Friday’s close saw a little selling coming into the market with
the VIX bouncing up 6% by the close, but overall, the index trends remain bullish. Heading into another mid-week holiday with a
nasty winter storm spreading across the east coast low volume algo-driven chop
could be the bulk of price action after the opening rush. Trade and Housing numbers could provide some short-lived
inspiration, but our time may be better spent reviewing this year’s results and
preparing goals & plans for 2020.
Happy New Year
Asian markets closed the day mixed but mostly higher waiting
on November Hong Kong data. European markets
this morning are trading lower across the board but on light holiday volumes. US Futures suggest a flat to ever so slightly
bullish open ahead of the International Trade in Goods and Pending Home Sales November
results.
On the Calendar
On the 2nd to last trading day of 2019, the Earnings
Calendar indicates there are just eight companies reporting today but seven of
the report are unconfirmed and I don’t see a single notable report among them.
Action Plan
A New Beginning with Right Way Options in 2020
With a nasty winter storm spreading across the east coast
and another mid-week holiday facing the market trading volume is likely to diminish
quickly after the morning rush. We have little
to nothing on the earnings calendar for the market to react to, so it will likely
look to the economic calendar for some inspiration. Consensus expects a widening of the gap in November’s
reading on International Trade in Goods number at 8:30 AM Eastern and an
increase in the 10:00 AM Pending Home Sales report. Of course, news events could temporarily fire
up some price action, but most likely, the next couple of days will see a lot
of algo-driven chop.
There is always the possibility of a little end of month
window dressing but there is also the chance we could see some end of year
profit-taking. Last Friday saw a slight
increase in the VIX, but so far this morning the US Futures are suggesting a
flat to ever so slightly bullish open.
Rather than trading, the next few days may be better spent reviewing
this year’s results looking for improvements to trading rules and plans. Perhaps, start by setting goals for 2020 and building
watchlists so that you can jump-start the New Year as a better, more prepared
trader.
Although Santa has returned to the North Pole and his jolly
Ho, Ho, Ho, has faded into memory, the big guys’ influence continues as the strong
retail numbers continue to inspire the bulls.
Lead by AMZN’s record-breaking sales results, there were new record
highs achieved in the DIA, SPY and QQQ on relatively low holiday volume. As we head into the weekend and the New Year,
the bulls seem to have plenty of momentum on their side, but be careful not to become
too complacent.
The count down has begun.
Asian markets finished the week mixed but mostly lower. European markets this morning see only green following
the optimistic lead of Wall Street. US
Futures point to a gap up open on this last Friday of 2019, fulled by momentum
with very little on the earnings or economic calendar to provide inspiration.
On the Calendar
On the Earnings Calendar, we have 18 companies reporting but
none are particularly notable.
Action Plan
Strong holiday retail sales continued to inspire markets
higher yesterday as it seems Santa’s influence remains strong this year. Once again, the DIA, SPY and QQQ reached out
for new record highs yesterday on low holiday volume. There is no doubt this has been an amazing
quarter to top off a truly remarkable decade for the market. As we slide into the weekend with just three
trading days left in 2019, the momentum is certainly with the bulls and there are
no indications in the price action they are ready to stop just yet.
Finish Strong!
However, we all know that what goes up must eventually come
down, so we must not get complacent and be ready to act if and when the bears
decide to reassert themselves. Futures
this morning point currently point to a mixed open with the Dow suggesting a
substantial gap up at the open. Gap up
opens at new market highs make me watchful of the dreaded pop and drop possibility
so be careful not to chase the open, wait to see if there are buyers that
follow-through. With such a strong trend
and momentum, follow-through may not be much of a wait even though there will
be very little inspiration in the earnings and economic calendar today.
Santa always seems to have some influence over the market during
this time of year but this year we have experienced an exceptional Santa Claus rally. A better than expected quarter of earnings, a
dovish FOMC, strong employment, and the Phase One tariff relief has made it pretty
easy for the jolly old man and reindeer to pull out record highs day after
day. With China now in the news
following through on tariffs cuts, the bullish trend shows no clues of stopping
just yet.
An RWO Membership is a great last minute Gift!
Asian markets closed mixed but with very modest gains and losses overall. European markets are trading mixed and mostly flat as traders seem to be taking profits and cutting risks heading into the holiday. US Futures point to modest gains this morning ahead of Durable Goods and New Home Sales numbers. After the morning rush, it would not be a surprise to light and choppy price action as traders head out for holiday plans. I would not rule out the possibility of some profit-taking at some point in the day.
On the Calendar
On the Earnings Calendar, we have just 13 companies
reporting on Monday. Ten scheduled on Tuesday
and with the market closed for Christmas on Wednesday, there will be no earnings
reports. Of the companies reporting, their none that are particularly notable the
entire week!
Action Plan
Santa’s Coming to Town!
With Santa’s reindeer pulling hard, the markets continue to rally
setting new records nearly every day. News
that China is cutting tariffs as part of the Phase One trade deal may allow
this Santa rally to continue on this eve of Christmas Eve. Today may be the best day of volume this week,
but traders should carefully consider the risks of the typical very low volume
that could easily continue right into the New Year. I would not be too surprised to see volumes
drop quickly after the morning rush of activity as traders head for their
holiday plans.
With nothing much to react to the earnings calendar, the market
will likely turn to the economic reports to find some inspiration. Keep an and eye on the Durable Goods report
at 8:30 AM Eastern and the New Home Sales numbers at 10:00 AM. As a reminder, Right Way Options trading room
will be open Tuesday and Thursday for chat only; there will not be a moderator. Of course, on Christmas day, the room is
closed. As a result, there will be no morning blog
post or Morning Market Prep Video until Friday.
I wish you and your family a very Merry Christmas!
