Though reports sparked recession fears that reversed Friday’s rally, the bullish buyers in big tech-inspired defense of the recent market lows.  However, one day does not make a trend, so the question is, can they find some follow-through bullish energy today?  Facing a possible 2/10 bond yield inversion and reading on Factory Orders later this morning with substantial overhead resistance and downtrends adding to the uncertainty of the day.  Traders should also consider the possibility of a choppy range-bound environment as we wait for the earnings season to begin. 

Asian markets struggled while we slept as China pandemic concerns reemerged, triggering selling across the board.  However, European markets are in rally mode this morning, with the FTSE leading the way, up 1.72%.  Interestingly the U.S. futures seem to be taking a wait-and-see approach this morning, currently flat to slightly bearish ahead of the Factory Orders report and watching for a possible bond yield inversion.

Economic Calendar

Earnings Calendar

We are currently in a slow period of earnings waiting on the 3^rd quarter earnings season to begin later next week.  Notables for today include SAR and SLP.

News & Technicals’

On Tuesday, Voyager commenced bankruptcy proceedings in the U.S. Bankruptcy Court of the Southern District of New York.  The company suffered huge losses from its exposure to crypto hedge fund Three Arrows Capital, which went bust last week.  Sam Bankman-Fried’s Alameda Research is listed as Voyager’s largest creditor, with an unsecured claim of $75 million.  U.K. Prime Minister Boris Johnson’s leadership is hanging by a thread after resigning two of his most high-profile ministers and several other top officials and ministerial aides in the last 24 hours.  British Finance Minister Rishi Sunak and Health Secretary Sajid Javid resigned Tuesday in protest against Johnson’s leadership.  But despite calls to resign, the prime minister shows no signs of being ready to stand down.  Instead, he reshuffled his ministerial team last night to fill the vacancies created by the shock resignations.  Sales contracts for Manhattan apartments plunged by nearly a third in June as the city’s scorching real-estate market started to cool.  “The gradually slowing sales market manifests in all boroughs and at all price points throughout the city,” one industry figure said.  Prices haven’t started falling yet — at least not broadly.  But brokers say buyer attendance at open houses and multiple bids have all but evaporated.  Washington leaders on both sides of the aisle acknowledge Social Security needs to be fixed before it cannot pay full benefits in 13 years.  While Democrats want to raise taxes on high earners, Republicans are staunchly opposed to those proposals.  “To get real progress, it’s going to require people sitting across the table from each other,” one expert says.  Treasury yields increased in early Wednesday trading, with the 2-year at 2.83%, the 10-year at 2.83%, and the 30-year trading at 3.06%.  Economists closely watch the 2/10 inversion. 

Traders that picked up long positions on last Friday’s rally felt the sting of a punishing reversal as trading resumed on Tuesday with recession fears growing.  After that, however, the bulls went to work defending recent lows, with buyers of big tech stocks leading the way.  But, because one day does not make a trend, can the bulls find the energy to follow through with another day of bullishness to test downtrends and overhead resistance levels?  Today we will get the latest read on the Factory Orders and expect the possible 2/10 bond yield inversion also to be a subject of uncertainty for the day.  As we wait on the beginning of 3^rd quarter earnings, be prepared for possible downward earnings revisions and a choppy consolidation that could occur in the index charts as we wait. 

Trade Wisely,

Doug