With last week’s bullish run, the SP-500 P-E ratio hit 37.5 as earnings top analysts lowered expectations by as much as 22%.  Coca-Cola reported this morning topping analysts’ targets as the futures try to rise off of overnight lows.  Keep in mind if the bears were to find inspiration, the price support levels in the SPY and QQQ are painfully lower due to their extended condition.  Plan your risk carefully and avoid complacency remembering anything is possible as 2^nd quarter earnings ramp up over the next couple of weeks. Significant morning gaps are possible.

Asian markets mostly rallied through the India markets plunged as pandemic infection rates continue to surge to severe levels.   European markets trade mixed around the flatline as they monitor earnings and global sentiment.  As the premarket earnings roll out, the U.S. futures rise off overnight lows but still point to a modestly lower open.  Prepare for price volatility to remain challenging in this elevated market condition.

Economic Calendar

Earnings Calendar

We will have a busy week on the earnings calendar as the 2^nd quarter earnings season ramps up.  Notable reports include ACC, KO, HXL, Ibm, MTB, PLC, STLD, UAL, & ZION.

News and Technicals’

After another very bullish week in trading, the SP-500 P-E ratio hit 37.5, 89% above the historical 10-year average.  However, there seems to very little concern about inflation, with the 10-year Treasury yields start the week modestly lower.  Trip.com surged more than 4% from their issue price in its Hong Kong debut.  According to reports, we reached a pandemic milestone with half of U.S. adults vaccinated with at least one shot.  It occurred just one day after the U.S. reported the Covid death toll topping 3 million Americans.  China’s CanSino Bilogicis will start clinical trials for a Covid vaccine administered through inhalation though the efficiency rates of China vaccines have much lower effective rates. 

The DIA, SPY, and QQQ charts appear highly extended on the technical front, and though the futures indicate a lower open, they are well off of overnight lows as earings roll out.  Logically one would expect a significant pullback to begin, but with the lowered analyst expectations, companies thus far have been able to top these targets by nearly 22%.  Though many companies are not earning more than they were one year ago, the low expectations and the frenzy of buying something no matter the price could easily continue.  However, should the market find a reason to stumble, the pullback could be very painful, so at the risk of sounding like a broken record, avoid overtrading but stay with the bullish trends as long as this party continues to rage. 

Trade Wisely,

Doug