Ship Shortage, CPI, and JNJ Vaccine Pause

Markets opened just south of flat on Monday and then proceeded to grind sideways the rest of the day.  This left us with inside day Doji across all 3 major indices.  On the day, SPY gained 0.05% (to a new all-time high close), DIA lost 0.09%, and QQQ fell 0.13%.  The VXX fell to 10.17 and T2122 fell outside of the overbought territory to 72.62.  10-year bond yields gained slightly to 1.671% and Oil (WTI) rose two-thirds of a percent to $59.71/barrel.

In Chip news, at the “Chip Summit” President Biden called for the chip, broadband, and battery technology portions of his Infrastructure plan to be approved.  He read a letter from 23 senators and 42 House members expressing bipartisan support for $50 billion in government spending for semiconductor manufacturing and research.  The 3 major US Auto-makers attended and all decried the loss of earnings and employee hours due to current chip shortages.  For their part, the major chipmakers (TSM, INTC, Samsung, etc.) had all already announced tens of billions of dollars of investment (each, TSM having committed more than $100 billion) in new production capacity over the next 2-3 years.  However, an Auto-Industry association called for new, immediate tax cuts to help automotive chip manufacturers add lines to existing plants now. In other chip news, NVDA announced it will begin making a server processor to compete with INTC and AMD in the highly-profitable data center market.

Less than a day ago, Fed Chair Powell told CBS 60 Minutes that it was “extremely unlikely” that the Fed consider raising rates this year.  However, after-hours Monday, St. Louis Fed President Bullard told Bloomberg that as soon as the US reaches 75%-80% vaccinated, he believes the “tapering debate” will take place.  This comes 12 hours before the CPI number and a slew of other Fed speakers weigh in.  Elsewhere, Treasury Sec. Yellen announced that China will not be labeled a “Currency Manipulator” in her first semi-annual foreign exchange report to Congress.

Related to the virus, US infections are rising again after plateauing at a level above the fall level.  The totals have risen to 31,990,143 confirmed cases and deaths are now at 576,298.  The number of new cases has ticked higher again to an average of 69,926 cases per day. However, deaths are just starting to plateau again, now at 747 per day. Overnight, the FDA and CDC both called for a pause in the use of JNJ vaccine due to clotting issues.  In addition, on Monday CDC Dir. Walensky said that MI should “shut things down” again because vaccinations alone will not stop the overwhelming surge in cases the state is seeing.  On the plus side, the CDC also said that 50% of American adults will have at least one dose of vaccine by the end of this week.

Globally, the numbers rose to 137,340,422 confirmed cases and the confirmed deaths are now at 2,961,423 deaths.  The trends have reversed and are now trending toward trouble again as we have seen significant upticks recently.  The world’s average new cases are rising again (about 17,000 per day increase) and are now at 688,363 per day.  Mortality, which lags, is rising again at 11,270 new deaths per day. The WHO said Monday that the world has seen a seventh straight week of increasing cases.  Today, Germany reported an increase of almost 11,000 cases as the German Health Minister said the country had reached peak ICU capacity.  On a brighter side, a new study published by the journal Lancet says the UK variant is much more transmissible but no more severe than the original virus.

Overnight, Asian markets were mixed.  Thailand (-1.61%) led otherwise modest losses while India (+1.36%) and South Korea (+1.07%) led otherwise modest gainers.  In Europe, markets are mixed on showing only small moves to either side so far Tuesday.  The FTSE is down (-0.13%), DAX up (+0.12%), and CAC up (+0.28%) as of mid-day.  As of 7:30 am, US Futures are all pointing to a modestly red open at this point (before CPI release).  The DIA is implying a -0.38% open, the SPY implying a -0.30% open, and the QQQ implying a -0.11% open.  Bond yields rose slightly overnight to 1.68% and Oil (WTI) is up half a percent to $60/barrel in premarket trading.

The major economic news scheduled for Tuesday is limited to Mar. CPI (8:30 am) and 4 Fed speakers (Daly at noon, George at noon, Harker at noon, and Bostic at 3:15 pm).  Major earnings reports on the day are limited to FAST before the open.  There are no major reports after the close.

The fear of inflation may be heightened today with Bullard's less dovish note last night, CPI numbers this morning, and a slew of other Fed speakers later in the day. However, although we had indecisive moves on Monday, there is no doubting the trend is strongly bullish. With earnings season starting again on Wednesday, we may be in yet another "wait and see" environment.

Don't predict moves or chase trades you have missed. Respect support and resistance as well as the trend. Keep taking your profits off the table when you can and maintain your discipline. Stay on the right side of the market trend and follow those trading rules. As we know, consistency is the key to long-term trading success.

Ed

Swing Trade Ideas for your consideration and watchlist: No trade ideas for Tuesday. You can find Rick's review of tickers on his YouTube Channel here. Trade your plan, take profits along the way, and smart. Also, remember to check for impending earnings reports. Finally, remember that any tickers we mention and talk about in the trading room are not recommendations to buy or sell.

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