Although the bulls enthusiastically started the day with a relief rally in mind, the shrinking global PMI figures quickly took the wind out of their sails.  As a result, the indexes remain in a short-term oversold condition with price support levels failing and the technical damage piling on insult to injury.  Though we are overdue for some relief, we face a wave of Fed speakers today and an ECB rate decision tomorrow, followed by Jerome Powell.  Will the bulls find inspiration there, or will the rate increase fears continue to fuel the bears?  We will soon find out but expect the price action to remain challenging and volatile.

Asia markets traded mostly lower overnight as China’s trade data missed expectations.  With an ECB rate decision in sight and growing fears of recession, European markets trade in the red across the board this morning.  With little market-moving data from earnings, U.S. futures indicate a flat to slightly bullish open filled with Fed speak and the Beige Book later this afternoon.  So, fasten your seatbelts tightly and stay focused because anything is possible.

Economic Calendar

Earnings Calendar

On the midweek earnings calendar, we have about 30 companies listed with less than 20 verified reports.  Notable reports include ASO, AVAV, AEO, CASY, PLAY, GIII, GME, KFY, NIO, REVG, & VRNT.

News & Technicals’

Russian President Vladimir Putin slammed the West again on Wednesday, saying sanctions imposed on Russia for its invasion of Ukraine are a “danger” to the world.  Putin said the current global geopolitical crisis had been precipitated by the U.S.’s “slipping dominance” in global politics and economics.  He said the West had been reluctant to recognize “irreversible tectonic shifts” in international relations, particularly a pivot east.  U.S. President Joe Biden has called Putin a “war criminal.”  Google and Alphabet CEO Sundar Pichai gave more details about how he is thinking of making Google run “on fewer resources” as it faces a slew of challenges to its businesses.  Pichai said he hopes to improve efficiency by 20%.  He gave past examples of cutting down a team and merging two products into one.  Bitcoin traded below $19,000 on Wednesday, hitting its lowest level since June following a global drop in stock markets and the U.S. dollar’s continued strength.  The value of the entire cryptocurrency market also fell below $1 trillion as digital coins across the board saw a sell-off.  Policy tightening by the Fed has strengthened the U.S. dollar, which has weighed on risk assets.  Bitcoin has traded in correlation to stocks, so if equities fall, in general, so does cryptocurrency.

A recession is inevitable, says the CEO of Deutsche Bank, and Germany must cut its reliance on China.  Sewing said Russia’s invasion of Ukraine had shone a spotlight on the dangers of becoming too dependent on individual countries and regions.  “When it comes to dependencies, we also have to face the awkward question of how to deal with China,” he said.  European economies are facing an energy crisis and soaring prices over the coming months.  There have been concerns in some quarters that the increasing cost of charging an EV will disincentivize uptake among consumers.  “The cost advantage for electric vehicles versus a gasoline car is fast diminishing here in Europe, and I’m wondering to what degree that will begin to impact EV sales,” Saxo Bank’s Peter Garnry tells CNBC.  Treasury yields pull back slightly in early Wednesday trading, with the 12-month at 3.57%, the 2-year at 3.47%, the 5-year at 3.42%, the 10-year at 3.32%, and 30-year at 3.48%.

The bulls tested the waters for a relief rally only to run into the shrinking global PMI report and quickly lost the edge to the bears.  Unfortunately, the price action and technical damage continue to grow as supports give way to additional selling as the short-term oversold condition extends.  Perhaps traders extending their holiday played a part, but the slowing global economy and fears of rate increases have taken a toll on sentiment.  Today we will get a reading on International Trade followed by a wave of Fed speakers.  Keep in mind the ECB is expected to raise rates by 75 basis points tomorrow, and then we will hear from Jerome Powell.  Plan your risk carefully!

Trade Wisely,

Doug