Last week, bulls created significant improvement in the indexes as they found reason to rally with falling mortgage applications, rising producer prices, declining retail sales, and more hawkish fed willing to sacrifice growth to fight the out-of-control inflation.  As a result, downtrends breached, but now comes the tricky part, can the bulls hold a higher low to confirm an uptrend?  With commodities rising again, the uncertainty is likely to keep price action volatile and challenging.  So, focus on price action, watching for head-fakes, whipsaws, and reversals.

Overnight Asian markets traded mixed as oil once again surges higher.  European markets trade mixed and muted as the fighting in Ukraine intensifies.  U.S. futures are well off the overnight highs as surging commodity prices dampen bullish sentiment and again raise the ugly head of economic uncertainty.   With oil up more than 4.50% this morning, prepare for another wild price action day.

Earnings Calendar

Economic Calendar

On the Monday earnings calendar, we have about 72 companies listed, but many of them are unconfirmed.  Notable reports include KERN, HRT, JAGGF, MRNS, NKE, PDD, & TME. 

News & Technicals’

Berkshire Hathaway said Monday morning it agreed to buy insurance company Alleghany for $11.6 billion, or $848.02 per share, in cash.  The conglomerate said the deal “represents a multiple of 1.26 times Alleghany’s book value at December 31, 2021,” as well as a 16% premium to Alleghany’s average stock price in the past 30 days.  A Boeing 737 has crashed in China with 132 people on board.  The authority said that contact was lost with the flight over Wuzhou in the Guangxi region.  It was scheduled to fly from Kunming to Guangzhou in the country’s southeast.  The number of casualties is currently unknown.  China’s Civil Aviation Administration said it had “activated the emergency mechanism and dispatched a working group to the scene,” according to a translation.  Crude futures were up more than 3% on Monday morning during Asia trading — international benchmark Brent crude was at  $111.46, and U.S. futures at $108.25.  Oil prices have been volatile in recent weeks – soaring to record highs in March before tumbling more than 20% last week to touch below $100.  They jumped again in the latter half of last week.  Ukrainian and Russian officials have met intermittently for peace talks, which have failed to progress to key concessions.  Tight supply continued to worry markets, sparking the International Energy Agency (IEA) call on Friday for “emergency measures” to reduce oil usage.   The price hit $31,380 a metric ton of nickel as it opened for trade on the London Metal Exchange, according to Refinitiv data.  The 145-year-old exchange, which still has some open outcry trading, has had a wild couple of weeks of nickel trading, with price surges, technical glitches, and trading suspensions.  Treasury yields rose in early Monday trading, with the 10-year trading at 2.888% and the 30-year moving up slightly to 2.4429%.

Last week, there was a significant improvement in the indexes as the bulls used the falling mortgage applications, rising producer prices, declining retail sales, and a hawlkish Fed as a reason to rally.  Although the bulls breached the downtrends, now comes the most critical test, can they hold a higher low?  With commodities again surging higher as the fighting intensifies in Ukraine, nothing has changed regarding the economic uncertainty on consumers.  The rally pushed the T2122 indicator into a short-term overbought condition, so traders should watch closely for the potential of a pullback that could begin at any time.  That said, it’s nice to see the substantial relaxation in the VIX, but keep in mind that emotions are high, and consumer sentiment remains very low.  Not exactly an ideal situation as we wind down the first quarter of the year wondering how the consumer impacts will play out in the second-quarter earnings.  It would not be surprising to see some end-of-quarter window dressing, but we should continue to expect significant price volatility.  So watch carefully for head-fakes, whipsaws, and overnight reversals in the days and weeks ahead.

Trade Wisely,

Doug