On Friday the producer price data failed to reassure investors concerning the Fed’s next rate move creating a choppy low-volume session that produce mixed results in the index charts.  The struggling Chinese economy with a worsening real estate crisis added to the uncertainty as the tech titans continued to slide south.  With a very light day on both the earnings and economic calendar expect more choppy price action as we wait for the Tuesday Retail Sales figures.  The wide range between the support and resistance levels suggests big point swings are possible so plan your risk carefully.

Asian markets continued moving lower as the real estate giant Country Garden dropped 17% as China’s real estate crisis worsens.  However, European markets trade mixed but mostly higher this morning trying to relieve last week’s selling.  U.S. futures continue the practice of pumping higher in the premarket despite the growing economic uncertainties.   

Economic Calendar

Earnings Calendar

Notable reports for Monday include ALC, HRTX, JKS, & MNDY.

News & Technicals’

The Russian currency is facing a sharp decline as it reached a new low against the U.S. dollar on Monday. The ruble traded at more than 100 per dollar, the weakest level since March 2020, when the coronavirus pandemic and an oil price war triggered a massive sell-off. The ruble has lost about 30% of its value since January, as Russia’s economy suffers from lower oil revenues, Western sanctions, and rising inflation. President Vladimir Putin’s economic advisor, Andrey Belousov, blamed the central bank for the ruble’s woes, saying that its loose monetary policy and high-interest rates have discouraged investment and growth. However, the Bank of Russia has defended its stance, saying that it is necessary to curb inflation and support financial stability. The bank has also attributed the ruble’s depreciation to the shrinking balance of trade, as Russia’s current account surplus fell 85% year-on-year from January to July.

China’s credit and economic activity data for July showed signs of a slowdown in the world’s second-largest economy, as businesses and households faced tighter liquidity conditions and regulatory pressures. The demand for new loans fell sharply in July, as the central bank kept its policy stance unchanged and cracked down on risky lending practices. The total social financing, a broad measure of credit and liquidity in the economy, dropped to 1.06 trillion yuan ($163.5 billion) in July, down 63% from June and well below market expectations. The money supply growth also slowed to a record low of 8.3% year-on-year. On Tuesday, China is expected to release other economic indicators for July, such as industrial production and fixed asset investment, which are forecasted to remain unchanged from June at 8.8% and 12.6% year-on-year, respectively. However, some analysts warn that the actual figures could be lower than expected, as power shortages, floods, and Covid-19 outbreaks have disrupted the economic activity in some regions. Meanwhile, the Chinese property sector, a key driver of growth and demand, is facing increasing challenges as the government tightens its grip on the industry. Over the weekend, one of the largest developers in China, Country Garden, announced that it was suspending trading in at least 10 of its mainland-China traded yuan bonds, citing “abnormal price fluctuations” and “recent market conditions”. The move sparked concerns over the financial health of the company and the sector as a whole, as many developers are struggling with high debt levels and regulatory curbs.

The combination of consumer and producer price data failed to reassure investors about the Fed’s next move creating mixed results on Friday with another choppy low volume session. Record short taking on the 10-year bond continued to pressure the security higher pushing the dollar higher while the VIX oddly declined as uncertainty appears to be on the rise. We begin this week with a very light day on the earnings and economic calendar so don’t be surprised if we see another choppy day of price action as we wait to see the strength of the consumer with Retail Sales figures Tuesday morning.  With speculation so high be careful not to overtrade as big point up or down moves remain likely.

Trade Wisely,

Doug