The bulls maintained the strong rally yesterday and plan to continue this morning with another big gap open.  Be careful chasing this morning gap because we will have gone from oversold to overbought in two trading days!  With overhead resistance and downtrend still in play, today’s gap sets up the possibility of a pop a and drop.  I plan to take advantage of the move by taking profits rather than getting caught up in a fear of missing out buying spree.  Gaps are gifts; take the gift and bank it!

Asian markets surged overnight as the world shook off concerns of China’s variant economic impacts and money easing plans.  European markets are also decidedly bullish this morning as pandemic fears fade.  The U.S. futures point to a considerable upside gap to challenge overhead resistance levels ahead of earnings, trade, and productivity data. However, price volatility remains high, so plan your ricks carefully as Russian and Chinese aggression accelerates.

Economic Calendar

Earnings Calendar

On the Tuesday earnings calendar, we have 28 companies listed with several unconfirmed.  Notable reports include TOL, AVAV, AZO, CASY, CONN, DBI, PLAY, & SFIX.

News & Technicals’

Intel plans to IPO its self-driving unit in the U.S. by mid-2022.  It acquired Mobileye, an Israeli autonomous driving firm, for $15.3 billion in 2017. As a result, Intel’s share price has fallen from $68 in April to less than $50 in December.  Founded in Jerusalem in 1999, Mobileye is one of Israel’s biggest success stories in tech.  Evergrande plans to forge ahead into a restructuring that would include all of its offshore public bonds and private debt, according to analysts.  The troubled real estate developer, snowed under by $300 billion of liabilities, also said Tuesday that it’s setting up a risk management committee, which will play a role in mitigating and eliminating future risks for the firm.  Analysts say that sentiment has also been buoyed by China’s move towards an emphasis on easing.   President Joe Biden is expected to give Russian President Vladimir Putin a stark warning against attacking Ukraine during Tuesday’s video call.  Experts say time is running out for the U.S. to prevent further hostilities between the neighbors.  The call is expected to take place around 3 p.m. London time.  There are widespread concerns about Russian military troop movements on the border with Ukraine and increasingly aggressive rhetoric towards Kiev from Moscow.  Toyota will build a new $1.29 billion battery plant for electrified vehicles in North Carolina, and the company announced Monday afternoon.  The automaker expects the facility to produce enough lithium-ion batteries for 200,000 vehicles when production begins in 2025.  Treasury Yields rose in early Tuesday trading, with the 10-year edging higher to 1.444% and the 30-year climbing to 1.7784%. 

Yesterday’s strong rally improved technicals, and the futures market suggests another big gap this morning as the recovery continues.  However, I would be a little cautious rushing into this morning’s pop until we see some follow-through buying after the open.  My concern is that we may have moved too far too fast, setting up a possible pop and drop.  Don’t get me wrong, having picked up SPY calls yesterday morning, I love the big gap and will take advantage of it to take profits at the open. However, going from oversold to overbought in just two trading days, with overhead resistance and downtrends still in play, is a good enough reason for caution in my book.  Toss in Russian and Chinese aggression escalating, and I will consider this gap a gift!

Trade Wisely,

Doug