The large-caps opened slightly higher and the QQQ gapped up three-quarters of a percent on Tuesday. Then after a little morning follow-through, stocks sold off all afternoon. This gave us indecisive black candles (especially in the SPY and the QQQ gap-up Doji). However, the bullish trend remains unbroken. On the day, SPY lost 0.13%, DIA lost 0.37%, and QQQ gained 0.55%. The VXX was flat at 13.16 and T2122 (4-week New High/Low Ratio) pulled back, but remains in the overbought territory at 83.33. 110-year bond yields rose again to 1.623% and Oil (WTI) fell over a percent to $64.68/barrel.
After the close, UBER granted their UK drivers worker status (having lost their legal battle up through the UK Supreme Court claiming they were contractors). This is widely expected to cause follow-on actions throughout Europe and perhaps at some point in the US. In other business news, Mortgage refinance demand fell 39% this week as rates continue to rise. For example, the benchmark 10-year bond yield rose to a 13-month high overnight of 1.65%.
The ongoing FOMC meeting is drawing much more attention than Fed meetings have for quite some time. This is backed up by a BAC survey of investors that found inflation is now the top market fear, replacing the virus for the first time in a year. Nobody is expecting a rate or even much of a statement wording change at this meeting. However, with interest rates rising and massive stimulus just starting to hit the economy, many analysts are saying Chair Powell really has to thread the needle in his afternoon press conference. He has to acknowledge that things look better, but that there really is too much uncertainty to change policy for a long time to come, even as we see a ripping stock market, rising bond rates, and are expecting huge GDP gains in Q1 and Q2.
Related to the virus, US infections are starting to plateau at a level above the fall level after a month and a half of steep and steady decline in new cases. The totals have risen to 30,231,550 confirmed cases and deaths have now passed half a million at 549,367 deaths. The number of new cases fell slightly again to an average of 55,395 new cases per day. Deaths fell slightly also to 1,228 per day. So, we are trending in a good direction overall. On the other hand, 15 states have reported at least a 10% increase in new cases this week versus last week. So, on average we are doing well, but some places are still in danger. Still, DE, OH, and MT all announced they are joining the states expanding vaccinations to everyone over the age of 16…which is also great news.
Globally, the numbers rose to 121,370,336 confirmed cases and the confirmed deaths are now at 2,684,236 deaths. The trends have been good, but we saw a significant uptick today. The world’s average new cases have risen again to 438,942 per day. Mortality, which lags, also rose, now at 8,631 new deaths per day. Following in the path of Germany, France’s PM told press that his country is also experiencing a third wave, mostly of the UK variant. In South American, Brazil reached another new high in daily deaths of 2,841.
Overnight, Asian markets were mixed again, but this time leaned negative. Shenzhen (+1.22%) stood out on the green side while South Korea (-0.64%), Taiwan (-0.60%), and Australia (-0.47%) were more typical. In Europe, stocks have started their day mostly lower. The FTSE (-0.29%), DAX (+0.09%), and CAC (-0.13%) are flat and seem to be trying to buck the trend, but most of the smaller exchanges are further into the red. As of 7:30 am, US futures are mixed but lean to the red. The DIA is implying a flat +0.01% open, the SPY implying a -0.24% open, and the QQQ looking to gap down, implying a -0.74% open at this point.
The major economic news for Wednesday includes Feb. Building Permits and Feb. Housing Starts (both at 8:30 am), Crude Oil Inventories (10:30 am), Fed Interest Rate Projections, Fed Economic Projections, FOMC Statement, and Fed Interest Rate Decision all at 2 pm as well as the Fed Press Conf. at 2:30 pm. Major earnings reports before the open include ARCO, CTAS, LE, and PDD. Then after the close, FIVE, WSM, and ZTO report.
All eyes will be on the Fed this afternoon. While no rate change decision is expected, Fed the interest rate forecast, statement, and especially Chair Powell's press conference need to walk a tight rope for bulls to stay in control. Expect volatility, but also possibly some "wait and see" in front of the 2 pm announcements.
As always, follow the trend, respect support and resistance, and don't chase the moves you missed. Another trade will be along any minute. Also, keep in mind that you are not a fortune-teller. Don't try to predict reversals, just follow the market. Most importantly, keep taking your trade goals (profits) off the table when you can and stick to your discipline. Consistency is the key to long-term trading success.
Swing Trade Ideas for your consideration and watchlist: WFC, BAC, PFE, RIG, AAPL, WRK, MRNA. You can find Rick's review of tickers on his YouTube Channel here. Trade your plan, take profits along the way, and smart. Also, remember to check for impending earnings reports. Finally, remember that any tickers we mention and talk about in the trading room are not recommendations to buy or sell.
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