1.3 Trillion Yuan Injected

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1.3 Trillion Yuan

Although it likely helped significantly, the freshly printed 1.3 Trillion yuan injected into the Chinese market last night did not stop the Shenzhen from falling more than 7% by the close of the session.  Other Asian markets saw their 8th straight day of declines with the outbreak reaching more than 17,000 infections and 361 deaths.  With the Iowa caucuses set to begin and a big week on the earnings and economic calendar, the stage is set for continued volatility and challenging price action for traders to navigate.  Plan your risk carefully as big daily gaps and overnight reversals are likely to continue as the uncertainty continues to unfold.

Asian markets had a rough night with the reopening of the Shanghai composite but the HSI managed a modest gain of 0.17% by the close.  European markets are cautiously and modestly higher across the board this morning as they track Brexit & virus outbreak developments.  US Futures are putting on a brave face this morning, indicating a Dow gap up of more than 100 points ahead of earnings and economic reports.  Be careful not to chase into price resistance levels.

On the Calendar

On the Monday earnings calendar, we have 64 companies set to report quarterly results.  Notable reports include ACM, GOOGL, HIG, HP, LEG, NXPI, ON, SYY, & VVV.

Action Plan

Fear and uncertainty brought out the bears on Friday, wiping out all gains year-to-date.  Let’s hope the old saying, ss January goes, the year.  As the virus outbreak continues to weigh on the on investors, my major concern was how the reopening of trading in Shanghai would affect today’s open.  It’s not a big surprise that the index fell more than 7% but it could have been much worse without the 1.3 trillion yuan they injected into the economy.  Dumping all that cash all at once into the system also sent the yuan sharply lower against the greenback during the night.  Over the weekend, the confirmed cases of infection grew to more than 17,200 with 361 deaths creating the 8th straight day of selling in some Asian markets.

With Iowa caucuses just around the corner, the market could react to the outcome depending upon the strength of the results and the candidates that emerge on top.  We also have a very big week of earnings to keep us on our toes as if we didn’t already have enough factors injecting price volatility.  This morning the US Futures are pointing to a gap up open of more than 100 Dow points.  Perhaps recognizing Friday’s price action was an overreaction, and of course, the market loves freshly printed money no matter where the injection originates.  Just keep in mind this morning’s gap up will not be challenged by price resistance levels above.  Be careful chasing.

Trade Wisely,

Doug

Emotional Price Fluctuations

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Emotional Price Fluctuations

The coronavirus is a flu virus, but the market’s emotional price fluctuations due to the uncertainty is instead making feel seasick.  Rallying strongly after the WHO declared a global health emergency, the US Futures appears ready to strip all back as the confirmed cases near 10K.  With the Shanghai market scheduled to reopen Sunday night, traders must carefully consider the risk they carry into the weekend.  Later tonight, the UK will leave the EU and begin a year-long trade negotiation.  Just another thing to weigh as the weekend approaches.

Asian markets closed mixed overnight as manufacturing numbers met expectations, but virus impacts continue to grow.  European markets are modestly red across the board ahead of the UK exit and the virus uncertainty continues to weigh on investor’s minds.  Here in the US, futures point to a gap down reversing yesterday’s end of day rally, ahead of earnings & economic reports. 

On the Calendar

On the Friday earnings calendar, we have just 60 companies reporting but there is no time to relax as we will hear from several potential market-moving companies.  Notable reports include BAH, CAT, CVX, CHD, CL, XOM, HON, ITW, KKR, LYB, PSX & WY.

Action Plan

If your beginning to get a little seasick with the wild price action of the index as the uncertainty of the virus outbreak continues to effect the emotions of the market.  At the end of the day, we had an incredibly bullish rally after the WHO declared a world health emergency.  However, the news of the death toll rising to 213 and the confirmed cases climbing above 9800 the futures market appears ready to take it all back with a nasty gap down.  It will be very interesting to see the impact when China begins resumes trading Sunday night.  Consider your risk carefully as we head into the weekend.

https://goo.gl/kkuu9T

On the impeachment front, the left wants to call more witnesses extending the trial another week but the right is pushing to wrap it and put it behind them today.  Extending another week could have a minor market affect to keep us on our toes.  Later tonight the UK is signing the divorce papers with the EU but will begin and year-long transition period where they will attempt to work out a trade agreement.  Though there could be some currency fluctuations, how this decision will impact the overall market is anyone’s guess.  One thing for sure is there is a lot to consider heading into the weekend.

Trade Wisely,

Doug

Viral Economic Impacts Grow

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Viral Economic Impacts

We have our biggest day of earnings reports this week, but the market’s attention seems to have shifted this morning the viral economic impacts that continue to grow.  As more and more companies close their doors, food shortages have spiked prices, and supply chains are breaking down.  The numbers of infected continue to grow and markets around the world are reacting to the potential impacts of the outbreak.  Volatility and uncertainty make for a challenging trading environment so plan your risk carefully.

Overnight Asian markets not closed due the extended lunar holiday fell sharply during the night with Taiwan dropping nearly 4%.  This morning European are decidedly bearish across the board in reaction to the rising death toll from the virus.  Ahead of the huge round of earning reports and GDP numbers, US Futures point to a nasty gap down at the open. 

On the Calendar

On the Thursday earnings calendar, we have our biggest day of reports this week with over 190 companies reporting.  Notable earnings include but are not limited to AMZN, MO, AMGN, ABC, BIIB, BX, KO, DHR, DOV, DD, EA, LLY, EPD, BEN, GWW, HSY, LEVI, NOC, DGX, RTN, SHW, UPS, X, VLO, VZ, V, WDC, & WYNN.

Action Plan

After gaping up into price resistance, the bears eventually won the day, producing a pop and drop pattern and raising concerns of a possible lower high in the indexes.   The FOMC made no changes to the interest rates and said that business investment is declining.  Of course, the President continues to say the rates should be zero as continues to berate them on in the press.  MSFT extended its gains after the bell, producing solid earnings and growth in its cloud business.  TSLA beat analysts estimate also rising even though the company lost 861 million last year but better than the more than 900 million loss the year before.

New virus fears are creeping back into the market this morning as deaths rise to 170, and the confirmed cases continue to expand.  Food shortages in China are causing prices to spike with producers closed as more and more businesses close.  Asian markets that are open fell sharply overnight, adding pressure to markets around the world.  With a big day of earnings that includes an after the bell report from AMZN, anything is possible and traders should expect volatile price action to continue.  As of the time of writing this report, the Dow Futures point to a substantial gap down of nearly 200 points but that could change substantially as morning earning roll out.  Remember, Price is King, remain focused on that set-aside bias and trade the chart.

Trade Wisely,

Doug

Big day of Earnings and Economic Reports.

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Big Day

Today brings another big day of earnings and economic reports punctuated by the FOMC rate decision at 2:00 PM Eastern.  AAPL reported strong earnings results yesterday, but by in large the yesterday’s round of earnings was rather disappointing with PFE, MMM, SBUX, AMD, & EBAY moving lower after reporting.  Even with the virus outbreak cases rising above 6000, futures markets are still pushing for a bullish open on the back of the AAPL result and in hopeful anticipation of better reports today.  Anything is possible, so plan your risk carefully.

With the extended lunar holiday, China’s market remains closed but Hong Kong fell as much as 3% overnight in reaction to the virus economic impacts.  European markets are cautiously shaking off the coronavirus concerns sporting modest gains across the board this morning.  US Futures opened trading positive last night and has managed to maintain the bullishness all night.  Futures point to a gap up open ahead of earnings reports and economic news and the FOMC.

On the Calendar

On the hump day earnings calendar, we have 150 companies fessing up to quarterly results.  Notable reports today include but not limited to TSLA, ANTM, ADM, ADP, AVY, APRN, BA, EAT, CP, CRUS, GLW, DOW, DRE, ESS, FB, GD, GE, ILMN, LRCX, LVS, MPC, MKTX, MA, MCD, MSFT, MAA, MDLZ, NSC, NVS, PYPL, PGR, ROK, RCL, NOW, SWK, & TROW.

Action Plan

Although yesterday’s round of earnings was a bit disappointing, AAPL’s beat seems to be enough to inspire the bulls in the future markets higher.  There also seems to be a lot of bullish anticipation for the huge round of earnings today.  The coronavirus outbreak has now surpassed the 2003 SARS outbreak, with now more than 6000 confirmed cases with 132 deaths as this health crisis continues.  The President has now stopped all flights between the US and China, and SBUX was the first company to admit the outbreak will negatively affect future earnings.  Interestingly enough, the market appears unconcerned with the futures currently pointing to modest gap up open.

The market will also have plenty to digest on the economic calendar with International Trade in Goods, Pending Home Sales, Petroleum Status, and of course, the FOMC rate decision at 2:00 PM eastern.  With yesterday’s rally, the indexes are testing or near price resistance levels.  As I looked through my watchlists yesterday, the majority of the stocks were also pushing up into resistance levels providing relatively high-risk trades.  Traders should guard themselves against overtrading at price resistance and avoid chasing with the fear of missing out guiding your decision making.

Trade Wisely,

Doug

Outbreak Fears

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The virus outbreak fears sent investors running for cover yesterday wiping out this year gains in the biggest point decline since October last year.  A parade of talking heads hit the financial news yesterday, trying to convince the reaction was overblown and some even talked up the idea of buying the pullback.   Although very self-serving as they talked up their book, the most certainly could be right even though the confirmed cases more than doubled to 4500 overnight.  Set that aside, and we still have to deal with broken trends and price supports, which now place some resistance above.  Stay focused on price for clues.

Asian markets not closed for the holiday struggled last night with South Korea stocks falling 3% as the virus deaths climbed over 100.  European markets are modestly green across the board as cautious investors monitor earnings and virus news.  US Futures, on the other hand, point to a gap up open with Dow suggesting about a 100 point gain ahead of several market-moving earnings and economic reports.  Be careful chasing the gap and consider your risk carefully when we reach up to test price resistance.

On the Calendar

On the Tuesday earnings calendar, we have a big day with nearly 100 companies reporting their profit or loss results.  Notable reports include AAPL, MMM, AMD, ALK, AOS, BXP, CNI, CIT, EBAY, EQR, HOG, HCA, LEA, LMT, MKC, NUE, NVR, PNR, PFE, PII, PHM, SBUX, UTX, XRX, & XLNX.

Action Plan

Fears around the coronavirus outbreak put substantial pressure on the major averages wiping out the year’s gains in one fell swoop.  The question is it justified or has virus fear lept over common sense?  That’s hard to tell with the number of individuals with the illness more than doubling overnight to 4515 confirmed cases.  With just five confirmed cases in the US and the CDC monitoring possibilities in 26 states, it seems to pretty contained at least at the moment.  The industry sent a string of talking heads out yesterday trying to convince the investors there is no need to panic with several trying to convince folks this is a buying opportunity.  While appearing very self-serving talking up their book of business, they most certainly could be current.

Although the drama of the Trump impeachment trial continues to grow, the market itself seems to have very little concern about the proceedings at this point.  Focus today will be on the big round of earnings reports punctuated by the APPL results coming after the bell today.   Durable Good’s, Case-Shiller, and Consumer Confidence numbers will also have some influence on the sentiment of the day as the FOMC meeting begins.  Technically speaking, index trends and price support levels broke with yesterday’s selloff.  That means as the buy the dip crowd rushes back in, it would be wise to remember, we now have price resistance levels above that must be recovered before moving higher.  Certainly doable but never forget that is also the place to watch for potential failures if virus fears remerge or key earnings reports happen to disappoint.

Trade Wisely,

Doug

The perfect storm for Price Volatility

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A spreading virus threat, a big week of earnings, economic data including an FOMC rate decision as well as an ongoing impeachment trial, could prove to be the perfect storm for price volatility.  Markets around the world are reacting to the quickly spreading threat of the coronavirus that’s injecting a huge economic uncertainty to its potential impacts.  Markets hate uncertainty and not much that creates more fear than a spreading contagion with no cure. Plan your risk very carefully as quick news-driven reversals and large morning gaps are possible during this uncertainty.

Japan traded lower in response to the virus, while most Asian markets remain closed for the lunar holiday.  European markets are falling sharply this morning as virus fears grow, and US Futures are reacting sharply lower this morning as well.  At one point, Dow futures fell 500 points but have recovered slightly this morning now suggesting a gap down around 400 points at the open.  Hold on for a bumpy ride!

On the Calendar

On the Monday earnings calendar, we have over 70 companies reporting.  Notable earnings include ARNC, CR, DHI, GGG, HMST, JNPR, & WHR.

Action Plan

We all knew there was an overextended condition in the market, but who could have guessed it would be a microscopic virus that would bring out the bears.  With now five confirmed cases here in the US, nearly 2900 cases worldwide and over 450 people now listed as critical worries of severe economic impacts rose dramatically over the weekend.  Oil prices dropped into the low 50’s as travelers are choosing to reduce their movements.  In China, more than 25 million people are locked down in cities where public travel has stopped operating and many businesses have closed during their biggest holiday session.  During the evening, the Dow futures dropped 500 points as markets around the world react to the quickly spreading virus.

We have a huge week of earnings with some of the biggest companies reporting this week along with and FOMC rate decision and a big week of economic reports.  Combine all of that with virus jitters and ongoing impeachment trial, we have the conditions for the perfect storm of price volatility.  Plan your risk very carefully!  Inexperienced traders might want to consider sitting this out and protecting your capital until this uncertainty passes.  Expect quick news generated price reversals and large morning gaps that could be up or down, and the market reacts to the unknown.

Trade Wisely,

Doug

Coronavirus roused the sleeping bears.

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Coronavirus roused the sleeping bears

The worry over the spreading coronavirus roused the sleeping bears temporarily but calming words from the World Health Organization allowed them to drift back into dreamland.  By the end close of the day, the bulls were solidly back in control and with the big earnings beat out of INTC new records in the NASDAQ are likely at the open today.  During the night, the WHO held off on declaring a global health emergency for now but it will be interesting to see how the market deals with that pending possibility as we head into the weekend. 

Asian market rallied from early lows to close the week mixed but mostly bullish after the WHO decision.  European markets are decidedly bullish this morning in reaction to the WHO holding off on a global declaration.  US Futures also saw a strong bullish reaction during the night, now pointing to a solid gap higher ahead of morning earnings reports and the latest reading of the PMI number at 9:45 AM Eastern.

On the Calendar

On the Friday earnings calendar, we get a little break with just 36 companies stepping up to fess up to their results.  Among the notable for the day are NEE, APD, AXP, SYF, & SNV.

Action Plan

After a rather volatile day of price action, while the market expressed its concern for the spreading coronavirus, those tenacious bulls came charging back.  During the early evening, the futures traded positively but with rather modest gains until the WHO decided to hold off on declaring a global health emergency at least for now.  After their decision, Asian markets found their footing climbing out of the negative with following European indexes following suit and US futures extending their bullishness.  The big earnings beat from INTC after the bell looks to not only recover yesterday’s modest selling but open at new record highs this morning.

Now with 25 lives claimed by the virus and those infected expanding to over 800, it will be interesting to see how the market responds heading into the weekend.  Next week some of the biggest tech companies report such as MSFT, AAPL, FB, and AMZN.  At current prices, there will be a lot of pressure to perform, so let’s hope none of them stumble and that the health officials begin to win the fight against corona and we can avoid the major economic impacts of travel restrictions.  As normal, I will be looking to reduce my risk heading into the weekend, tucking in gains for a restful and relaxing weekend.

Trade Wisley,

Doug

Wild-eyed bullish charge slowed.

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bullish charge slowed

The wild-eyed bullish charge slowed the last couple days as early rally’s struggled to hold onto the highs.  However, the bears seem to be in hibernation with little to no willingness to even test index price supports.  Trends remain bullish as we head into the biggest day earnings reports this week.  The impeachment trial in the Senate seem to be little more than a distraction during the spreading coronavirus is stealing the media attention from the political drama.  As earnings roll out anything is possible so stay focused on price and plan your risk carefully.

Asian markets closed seeing only red as China locked down two cities attempting to slow the spread of the virus that has now infected nearly 600.  European markets keeping an eye out for an ECB decision and new worries about trade with the US currently have their indexed mixed but mostly lower this morning.  Even the US Futures are displaying caution this morning with mixed but slightly bearish results ahead of a big day of earnings reports.

On the Calendar

We have our biggest day of earnings reports this week and the 1st quarter reports with more than 100 companies in the hot seat today.  Some of the notables include AAL, CMCSA, DFS, ETFC, FCX, INTC, ISRG, JBLU, KEY, KMB, MTB, ORI, SWKS, LUV, TRV, UNP & VFC.

Action Plan

The little rally yesterday ended the day little changed with the Dow closing down less than 10 points.  Although the indexes appear overbought and stretched away from key moving averages, the bears seem to be hibernating with little to no interest in attacking at the moment.  During the night, China put 2 of its cities on lockdown as the coronavirus continues to spread with nearly 600 confirmed cases and 17 deaths so far.  As a result, Asian markets were red across the board as the fear spread amongst investors.  European markets are trading flat to slightly bearish this morning as they wait and ECB decision and the worry of trade issues rising after tough Presidential talk.

Overall index trends remain bullish and thus far, no daily price support levels have breached.  To find anything remotely bearish in the indexes, you have to look at 15 min. charts to see downtrends possibly developing.  With a big of earnings reports, anything is possible but futures are trading mixed to slightly lower this morning choosing a little caution rather than the wild-eyed bullishness we have experienced the last several weeks.  I would not be at all surprised to see a surge of volatility this morning as earnings roll out.

Trade Wisely,

Doug

Bulls Bang-out more New Records!

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New Records
Quietly Waiting in the wings.

The bulls bang-out more new records pushing GOOGL into the 1 trillion market cap club and price to earnings growth hits the highest level since Bank of America started recording the metric in the ‘80s.  How much further can you go?  That’s anyone guess, but as retail traders, we must guard ourselves against getting caught up in the exuberance over-trading or chasing trades already up several days in their bull run.  With a 3-day weekend approaching, it may be wise to take some profits and reducing risk in case sentiment happens to shift over the weekend.

Asian markets closed the trading week, seeing green across the board after China reported their economy grew as expected.  European markets have also reached out to new record highs this morning in reaction to the big gains in the US and China news.  This morning US Futures continue to climb, suggesting a modest gap up open ahead of earnings and economic reports. 

On the Calendar

On the Friday earnings calendar, we have 21 companies reporting results.  Notable reports include CFG, FAST, JBHUT, KSU, RF, SLB, & STT.

Action Plan

More new records attained as the bulls continue to surge higher with wild abandon.  Bank of America reported that Price to Earnings Growth is now 1.8 hitting the highest level since they began recording the number in the ’80s.  For reference, a reading 1.0 PEG is considered an overbought condition.  That said, nothing seems to stop the bulls from stretching this rally that pushed GOOGL to a 1 Trillion market cap during yesterday’s bullish session.  With a three-day weekend approaching, futures currently suggest another gap up open and more record highs today with no sign of slowing down just yet.

Trading such an overbought condition requires a strong adherence to your trading rules.  It’s very easy with all the bullish exuberance to get caught up, tossing caution to the wind and over-trade.  I have no idea when the tide will change, but believe me when it does; you don’t want to be over-invested because the reversal can be swift and extreme.  Stick to your rules, size your trades properly, don’t chase stocks well into their run or when they are testing price resistance levels, have an exit plan if you’re wrong and remember to take some profits along the way!  I wish you all a wonderful 3-day weekend.

Trade Wisely,

Doug

Relentless Bulls

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Relentless Bulls

Bad news at Boeing and a spreading coronavirus roused the bears for a 150 point Dow pullback yesterday, but the futures point to gap up open this morning as the relentless bulls keep buying with no regard to the extended prices and historically high price to earnings ratios.  As we begin our biggest day of earnings reports this quarter, it looks like the lowered analyst’s estimates could continue to fuel the markets even higher.  However, a word of caution.  With stocks priced well beyond perfection compared to earnings growth, keep in mind just one stumble could trigger a quick reversal, so plan your risk carefully.

That is Question?

Asian markets shook off concerns of travel restrictions due to the spread of the coronavirus to close green across the board overnight.  European markets are however, muted at this hour showing mixed and cautious trading.  US Futures tossed caution to the wind rising sharply overnight and continue to point to a substantial gap up as ravenous bulls can’t seem to buy up high priced stocks fast enough. 

On the Calendar

On the Hump day earnings calendar, we have the largest number of reports so far this season, with over 80 companies fessing up to their quarterly results.  Notable reports include ABT, ALLY, BKR, CTXS, FITB, JNJ, KMI, LVS, RJF, RCI, SLM, STLD, TER, & TXN.

Action Plan

A bit of nervousness about the coronavirus temporarily woke up the bears yesterday with concerns that this contagious and very deadly virus could damage the economy restricting travel around the world.  Of course, the news that Boeing expects further delays before getting approvals to put the 737 Max back in the air aided in the selling yesterday after the company broke down below a key price support level.  After the bell, NFLX posted better than expected earnings but disappointed on subscriber number particularly in the US and Canada.  The initial price reaction was lower, but this morning NFLX is indicated modestly higher.  IBM, after reporting five straight quarters of decline, finally found the right stuff to top analysts estimates as their acquisition of Red Hat helped them turn the corner.

Even with the 152 point decline in the Dow, yesterday index trends remain intact with no break of price supports in the daily charts.  Futures have been in bullish mode all night long as we head into the biggest round of earnings so far this season.  In an interview, the President proclaimed the Dow would be 10,000 points higher if not for the Fed and indicated he was in pursuit of another tax cut to help it along even more.  Stay bullish but remember that many stocks are priced well beyond perfection.  Any stumble could create a quick and substantial pullback so carefully plan your risk carefully and resist chasing stocks already running.

Trade Wisely,

Doug