The violence of the last weeks selling and bounce likely left traders and investors a bit shell-shocked and rightfully concerned about what comes next!  Markets hate uncertainty, and with rising inflation, the Fed’s following action certainly raises the bar on uncertainty.  Toss in the growing instability in Israel, cybersecurity threats, higher taxes as just a few of the pending concerns, the stage is set for some very challenging price action.  For now, calmer price action can be found in stocks sectors XLF, XLE, XOP, XLB & XLP. 

Overnight Asian market trade mixed with the NIKKEI lower by nearly 1%.  European markets trade lower across the board this morning with modest losses.  Ahead of manufacturing and housing numbers, the U.S. futures point to a lower open and the uncomfortable possibility that the QQQ could fail at its 50-day average.  Stay focused and flexible, ready to fast price action and intraday whipsaws.

Economic Calendar

Earnings Calendar

On the Monday earnings calendar, we have more than 190 companies listed on the calendar, but the vast majority listed are unconfirmed.  Notable reports include TWNK, IBIO, RIDE, RYAAY, TME.

News & Technicals’

After bouncing back from last week’s sell-off is now facing a morning with futures suggesting a lower open and price resistance levels above, leaving behind a bit of uncertainty.  According to a U.S Trade Representative and an EU Commission official, the European Union and the U.S. have started talks to end steel tariffs.   The efforts to get Iran back on track with its nuclear deal could undercut the efforts to end the conflict between Israel and Palestinian militants.  Reviving the deal means that Iran would receive Billions of dollars in sanctions relief that Tehran could use to fund Hamas.  Treasury yields are pulling back slightly this morning, with the 10-year dipping to 1.617% and the 30-year slipping to 2.336%.  I suspect today’s speech from Richard Clarida, Vice-Chair of the Fed, will have lots of eyes looking for future clues as investors try to balance an overheating market and the possibility of rising interest rates.  Investors will also closely inspect the FOMC minutes released Wednesday afternoon.

Last week’s volatility likely left traders and investors a bit shell-shocked with the speed and violence of the selling.  It also left behind some serious technical questions to be answered in the week ahead.  The NASDAQ suffered the worst of the technical damage confirming a downtrend and now having to deal with its 50-day average as price resistance.  The Russel suffered similar technical damage.  The SPY successfully held at its 50-day average, bouncing strongly to end the week but now has price resistance above that could block the path higher.  With inflation worries and the real possibility of Fed rate action, we should expect the wild price volatility to continue.  Stay focused and plan your risk carefully.

Trade Wisely,

Doug