Bearish Candle Patterns

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Bearish Candle Patterns

In reaction to weekend uncertainty, profit-takers dominated the price action leaving behind some potentially bearish candle patterns on the DIA, SPY, and IWM.  The QQQ held up as the strongest index, while the poor under-loved IWM proved the weakest printing a lower high.  As concerns, economic impacts, and supply chain issues begin to weigh on the market; we have a very big week of earnings reports that continue to provide short-term inspiration to the bulls.  Expect the volatile price action to continues and remain flexible as anything is possible as we sort through the uncertainty.

Asian market closed mixed with China finding the inspiration to rally with the government fronting 10 billion to help virus victims with medical costs.  European markets are modestly lower across the board as the outbreak continues to expand, and the UK reports four new cases.  US futures are trying to put on a brave face but as I write this report, the open appears relatively flat.

On the Calendar

On the Monday earnings calendar, we have just over 100 companies fessing up to results today.  Notable reports include AGN, BIP, ELY, DVA, RE, FRT, JCOM, L, MELI, OMF, PSEC, QSR, STE, & VOYA.

Action Plan

Friday saw a pullback on weekend worries printing evening star patterns no the DIA, & SPY.  The QQQ holds up as the strongest index with help from some big techs like MSFT and AMZN while IWM continues to prove the weakest index leaving behind a lower high on Friday.  Over the weekend, the outbreak death toll rose to 908, with more than 40,000 confirmed cases.  Some businesses will resume work today, but many have extended closures until March 1st raising serious supply chain concerns for may US Business.  However, the market may once again choose to ignore that as traders react to more than 500 earnings reports scheduled for this week.  Tuesday and Wednesday at 10 AM Eastern Jerome Powell speak and of course, could move markets if there is anything new gleaned from his comments.

Instead of the wild futures driven gaps we witnessed last week, the pre-market activity is taking a much more subdued approach this morning as concerns of economic impacts from the outbreak grow.  Technically speaking, there is a reason for traders to be a bit pensive with possible bearish patterns printed on the index charts at or very near price resistance highs.  What comes next is anyone’s guess!  Will we take our queues from the big week of earnings events or will the virus impacts take center stage.  One thing for sure traders should plan for more volatility, remain flexible, and guard against over-trading. 

Trade Wisely,

Doug

Wild Ride

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Wild Ride

What a wild ride the market has delivered this week, recovering to new record highs amid a mixture of earnings results, the Presidents acquittal, and a virus outbreak that continues to expand.  After such a strong rally, we should not be surprised to see some profit-taking as we head into the uncertainty of the weekend.  Let’s hope the very big gaps left behind can hold as support if tested by the bears.  It could make for a very volatile pullback should those gaps start to fill.  If your currently holding gains, it may not be a bad idea to capture at least some of them before the weekend.

Asian markets closed mixed overnight as China’s trade data was delayed, and the outbreak expanded to more than 31,000 confirmed cases.   European are seeing only red this morning but so far, losses are rather moderate.  US Futures currently point to a gap down of nearly 100 points ahead of the Employment Situation number and a lighter day of earnings reports.  Although the bears are indicating some pressure this morning, I would not expect the bulls to give up easily.

On the Calendar

On the Friday earnings calendar, we get a nice break with just over 40 companies reporting results.  Notable reports included ABBV, AVTR, FE, HMC, & MSG.

Action Plan

After the wild week of bullishness, I was expecting to see the Friday morning futures pushing to extend higher to finish the week strong.  However, the delay in China’s trade data seemed to bring some attention back to issues surrounding the outbreak.  Death numbers rose to 636, and confirmed cases grew over 31,000.  Confirmed cases on the quartered cruise ship are now over 40 as testing continues.  I have to image news like this will continue to affect all travel-related stocks negatively.  As of right now, business is scheduled to resume in China on Feb. 10th, but with the outbreak continuing to expand, could we see another extension by the government this weekend?

The sharp recovery rally this week set new record highs in the DIA, SPY, and QQQ, but also left behind some very big gaps which provide weak levels of price support.  If a pullback begins, that could cause some considerable volatility if price slips into the gaps.  With the uncertainty of the weekend ahead, a little selling pressure could quickly bring out profit-takers.  Plan your risk carefully into the weekend, and remember never to allow greed to prevent you from taking a profit.  Have a great weekend, everyone!

Trade Wisely,

Doug

Massive Short Squeeze

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Massive Short Squeeze

With a massive short squeeze, the bulls managed not only managed set new records but chose to ignore the possible outbreak impacts.  With the virus now spread to more than 28,000 and the possibility China will have to extend business closures, it will be interesting to see what comes next.  The President acquitted Chinese tariff cuts, and a huge day of earnings and economic reports would suggest price volatility continues and that anything is possible.

Asian markets rally to close green across the board in reaction to the Chinese tariff cuts overnight.  European markets are also in rally mode this morning with gains across all indexes.  US Futures point to more new record highs with Dow once again set to gap up more than 100 points at the open.  Once again, be very careful chasing the open.  Plan your trading carefully.

On the Calendar

On the Thursday earnings calendar, we have our biggest day this week, with more than 210 companies reporting.  Notable reports include UBER, ATVI, MT, BIDU, BLL, BDX, BMY, CAH, DNKN, EL, EXPO, FCAU, FTNT, HBI, IQ, K, MPW, NYT, NLOK, PENN, PM, PINS, SPGI, SNY, SKX, TTWO, TPR, TMUS, TWTR, TSN, WWE, WYNN, XYL, & YUM.

Action Plan

A soaring day in the market as bulls stage a relentless push once again breaking records.  After the bell, the Senate voted to acquit the President of all charges and this distraction is now in the rearview.  During the night, China announced it would cut tariffs on hundreds of US goods by half a gesture they say is an attempt to improve the trade relations between the two countries.  Numbers on the Coronavirus continue to grow rapidly with now more than 28,000 confirmed cases and 563 deaths.  Japan reported ten more people on the quarantined cruise ship have tested positive bring the total to 20 cases.  Over the last 3-days, the market has done a good job of ignoring the potential economic impacts of the outbreak; one has to wonder how much longer that can continue. 

Tariff cuts, earnings and economic reports will provide plenty of opportunities for price volatility to continue today.  The T2122 indicator went from oversold or overbought in just 3-days of trading, indicating just how emotionally charged and volatile price action has become.  After such a strong run, it might be wise to consider taking some profits rather than chasing stocks that appear very extended or pushed up against resistance levels.  Futures this morning are once again pointing to a gap up open, and it’s very easy to feel the fear of missing out and find yourself wanting to chase.  Consider your risks carefully as the bulls continue to stretch stocks far from support levels.

Trade Wisely,

Doug

Ravenous Bulls

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Ravenous Bulls

A mixed bag of earnings results and a growing outbreak now approaching 25,000 infected is no deterrent for the ravenous bulls as the QQQ leaps to new record highs yesterday and is once again gaping sharply higher this morning.  Let’s party like it’s 1999, but be careful chasing stocks already extended.  Plan your trades carefully at or near price support levels with a logical stop in place in case the music suddenly ends.  No one knows when that might be so follow your rules, avoiding those emotional mistakes that can prove very costly when we get caught up in the chase.

Asian markets were once again green across the board overnight, with China regaining another 1.25% after selling off 7% on Monday.  European markets and US Futures both turn higher after and unconfirmed Chinese TV report of a dug break-though for the corona outbreak.  Anything is possible with a big day of earnings and economic reports, so expect the wild price action to continue.

On the Calendar

On the hump day earnings calendar, we have a busy day with more than 160 companies stepping up to report.  Notable reports include ABB, AVB, BSX, ELY, CINF, COTY, ELF, ENR, FEYE, FLO, GM, GPRO, GRUB, HUM, IAC, IRBT, MRK, MET, OHI, ORLY, QCOM, RGLD, SAVE, SPOT, TWLO, YUMC, & ZNGA.

Action Plan

An early morning rally in the US Futures rally after a Chinese TV report of drug breakthrough for the coronavirus.  Even though the story is unconfirmed, this emotional market lept up nearly 300 points in early morning trading.  As of last night, there are nearly 25,000 confirmed cases and more than 490 deaths.  American and United announced overnight they are stopping flights to Hong Kong and Princess Cruise Line quarantines 3700 passengers after confirming 10 cases of the virus on board.  Disney reported is expects a 175 million impact for the closing of its parks in China, and analysts have started to adjust next quarter expectations on companies exposed to the virus outbreak.  NKE reported possible production delays due to their material supply chain from China is experiencing significant delays.

Despite the pending impacts, the US markets continue to rip higher with the QQQ setting a new record high yesterday.  If fact, it would seem that the ravenous appetite to buy already extended stock prices has increased.  Even stocks that appear to be in parabolic patterns such as TSLA continues to attract buyers with seemingly no concerns about price.  I am not saying the conditions are the same but the relentless buying is reminiscent of the tech run-up in 1999.  Though I risk sounding like a broken record, traders should guard themselves against chasing stock prices without regard to the last price support.  You don’t want to be the last person looking for a chair when the music stops.

Trade Wisely,

Doug

Bullish Charge!

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Bullish Charge

A GOOGL revenue miss, an outbreak continuing to expand, and a sputtering conclusion to the Iowa caucuses remarkably and somewhat confusingly inspires a bullish charge this morning.  We have a very big day of earnings and this huge gap up is likely to trigger a painful short squeeze for traders caught short.  As we seemly shake off any concerns of the outbreak economic impacts focus on the price action and the fact we are gaping right into price resistance levels.  Chasing this creates a large risk to support levels if, like yesterday virus new spoils the bullish party.

Asian markets close in the green overnight with the Shanghai composite bouncing 1.34% after yesterday’s plunge.  European markets also advance this morning, reacting to earnings and shaking off virus concerns.  As we approach the open US Futures, continue to climb ahead of a big day of earnings and economic news.  Hang on today would be a wild ride!

On the Calendar

On Tuesday earnings calendar we have a big day with 153 companies reporting quarterly results,  Notable reports include CMG, DIS, AFL, AGN, ALL, ATO, BOOT, BP, CNC, CB, CLX, COP, CMI, EMR, FISV, F, GILD, LHX, LII, MTCH, MCK, PBI, PAA, RL, RCL, SBH, STX, SPG, SIRI, SNAP & SNE.

Action Plan

Futures created a big gap and steep rally, and then virus fears once again brought in the bears after a report that a cruise ship passenger contracted the disease 6-days after departing the ship maybe infecting other passengers.  After the bell, yesterday GOOGL somewhat disappointed investors beating earnings estimates but missing on revenues falling about $45 a share.  Despite the disappointment and the virus deaths reaching 425 with nearly 20,500 infected futures are flying high this morning as markets choose to shake off and ignore previous concerns.  

As I write this report, US Futures point to a 300 point gap!  I can’t find anything in the news that justifies such a gap, but clearly the institutions what a return to bullishness.  This mornings gap could easily trigger a short squeeze rally forcing the markets higher still.  I don’t understand where the bullishness is coming from but the good news is I don’t have too.  My job is not to understand the wild emotional swings this market makes.  My responsibility is to maintain focus & discipline to my rules and my trade plan.  Unfortunately, a gap of 300 points is likely to create increased risks that may prevent me from entering trades.  I will not chase with a fear of missing out as the market gaps into price resistance. 

Trade Wisely,

Doug

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