On Friday, the bears showed up with lots of reinforcements, and the carnage created significant technical damage to all four index charts.  Asia and Europe have joined the selling as economies slow amid the punishing inflation and the soon to be aggressive FOMC rate increases.  As the indexes test the low’s 2022, we have a big week of earnings and economic data that could save or sink the market into a complete bear condition.  With so much at stake, expect very challenging price action in the days ahead that could easily cause substantial point whipsaws and overnight market reversals. 

As we slept, Asian markets suffered significant selling, with Shanghai falling 5.13% as pandemic impacts extended.  European markets trade decidedly bearish this morning as global sentiment declines.  With U.S. futures suggesting a gap down open to test the market lows of 2022, there is a palpable uncertainty as we face a substantial week of earnings and economic data. 

Economic Calendar

Earnings Calendar

We have a hectic week of earnings ahead, with more than 100 companies listed on the Monday calendar.  Notable reports include ATVI, ARE, AXTA, BOH, CDNS, KO, CR, LII, OI, OTIS, PKG, PHC, SBAC, WRB, WHR, & ZION.

News & Technicals’

Twitter’s board met Sunday to discuss Elon Musk’s takeover bid after the billionaire disclosed he had secured $46.5 billion in the financing, a source close to the situation told CNBC.  The person said the board is looking for other offers, and the company could provide an update by the time it reports its latest financial results Thursday, if not before.  Centrist Macron obtained 58.54% of the votes on Sunday, whereas his nationalist and far-right rival Le Pen got 41.46%.  Back in 2017, when the two politicians also disputed the second round of the French presidential vote, Macron won with 66.1% of the support, versus Le Pen’s 33.9%.  Addressing her supporters in Paris Sunday night, Le Pen conceded defeat but said: “We have nevertheless been victorious.”  China’s capital city of Beijing reported a spike in Covid cases over the weekend and warned more would be found since the virus had spread undetected in the city for a week.  The city’s business district of Chaoyang began three days of mass testing on Monday for anyone living or working in the region.  The increase in cases in Beijing comes as mainland China faces its worst Covid outbreak since early 2020, and most of Shanghai, China’s largest city, remains under prolonged lockdown.  European stocks opened sharply lower on Monday as investors digested the projected result of the French presidential election and monitored the latest developments in Ukraine.  France’s Emmanuel Macron has comfortably beaten his rival Marine Le Pen in Sunday’s election, securing a second term as president on his pro-business and pro-EU agenda.  Treasury yields pulled back in early Monday trading, with the 5-year declining to 2.85%, the 10-year slipping to 2.82%, and the 30-year falling to 2.88%.

Friday’s selling created significant technical damage, with all four indexes closing below their 50-day averages.  With the Asian and European markets joining in on the selling, U.S. markets look to open lower to begin a hectic week of earnings.  With rising inflation and an aggressive Fed, will earnings be able to hold us at 2022 market lows, or will the results push into a complete bear market condition?  On the hopeful side, the T2122 indicator suggests a short-term oversold condition that could bring about a relief rally anytime.  However, if this week’s earnings disappoint, the path ahead might be filled with hungry bears.  If that’s not enough drama, we have a big week of market-moving economic data to keep us guessing.  Expect a challenging week of wild price action that could easily include huge point whipsaws and overnight market reversals as the drama unfolds. 

Trade Wisely,

Doug