We kicked off Monday with a big gap up that turned out to be a disappointing pop and drop for traders that rushed in buy at the open.  This morning with the futures suggesting a gap down, could we see another intraday reversal after testing the price support of the wide-rangeing chop zone?  Your guess is as good as mine!  With the national average gas price hitting a new record high of $4.92, the insidious tax of inflation naturally dominates the majority of the market conversation.  Friday’s CPI will likely keep traders guessing and price action challenging as we wait.

During the night, Australia announced a 50 basis rate hike which was more than forecast, creating mixed results for Asian markets.  European markets trade mainly lower this morning as inflation worries keep the bear active.  Ahead of trade numbers and earnings results, the U.S. futures point to a lower open to test the support of the chop zone.  The big question is will the bulls find the energy to defend, or will the bears fight to resume control?

Economic Calendar

Earnings Calendar

The Tuesday earnings calendar has just under 20 companies listed, with only about a dozen confirmed reports.  Notable reports include ASO, CASY, CHS, CBRL, PLAY, GIII, SJM, SOL, UNFI & VRNT.

News & Technical’s

Sens. Cynthia Lummis and Kirsten Gillibrand said Tuesday that they are ready to debut the first major attempt from Capitol Hill to create a regulatory framework for crypto.  The Lummis-Gillibrand bill, the product of months of Capitol Hill collaboration, amounts to a regulatory overhaul that would classify the vast majority of digital assets as commodities.  The Responsible Financial Innovation Act would empower the Commodity Futures Trading Commission to regulate most existing digital assets.  Tech companies including Amazon, Google, Salesforce, and Uber are urging the Department of Homeland Security to revise its aging out policies for children of high-skilled visa holders.  They point to the more than 200,000 children who have grown up in the U.S. while their parents held visas, including the high-skilled H1-B visa that’s particularly common in the tech industry.  Once those children turn 21, they must apply for a green card, a process that can drag on and even force some to leave in the interim.  Kohl’s said it has entered into exclusive negotiations with retail holding company Franchise Group, proposing to buy the retailer for $60 per share.  Such a price tag would value Kohls at roughly $8 billion.  According to a person familiar with the matter, Franchise Group is working with Oak Street Real Estate Capital to finance the deal mostly through real estate.  Monday’s vote saw Johnson win the backing of most of his Conservative lawmakers, but by a much slimmer margin than his supporters had hoped.  The vote — triggered by his lawmakers amid increasing dissatisfaction with his leadership — resulted in 211 Tory MPs voting in favor of the prime minister while 148 voted against him.  His days are “numbered,” according to Kallum Pickering, a senior economist at Berenberg Bank.  Treasury yields moved slightly lower in early Tuesday trading, with the 10-year slipping to 3.02% and the 30-year dipping to 3.17%.

In the Morning Prep Video, I suggested the possibility of a pop and drop due to the overhead resistance and the short-term overbought condition indicated in the T2122 indicator.  Unfortunately, that turned out to be correct as the wide-ranging choppy consolidation continues.  If you’re a bull, you should note that yesterday’s selling did nothing to relieve the overbought condition, and the VIX continues to hover near 25 handles.  Today we have the International Trade in Goods report before the bell, but the entire world is mainly concerned about the pending read on inflation Friday morning.  In a move to battle inflation, Australia announced a rate hike of 50 basis points, which was higher than their previous forecast.  I suspect the price action will remain challenging as we wait and fret over what comes next. 

Trade Wisley,

Doug