Markets opened modestly higher Tuesday and then roller-coastered all day. However, a selloff the last 45 minutes of the day left all 3 major indices closing near their lows. All 3 printed big ugly black candles, but the QQQ was the sorts of the lot, printing a Bearish Engulfing candle. On the day, SPY lost 0.78%, DIA lost 0.44%, and QQQ lost 1.60%. The VXX only gained nine-tenths of a percent to 14.97 and T2122 fell all the way back down to 30.00. 10-year bond yields fell significantly to 1.405% and Oil (WTI) lost two-thirds of a percent to $59.35/barrel.
Manufacturing data Monday showed that the US economy is exploding (in a good way) even as the $1.9 trillion relief bill is being debated in the Senate and is expected to pass in the next two weeks. The Atlanta Fed real-time GDP estimates are showing that Q1 may exceed even the most optimistic estimates, now estimating Q1 to see at 10% GDP gain. However, not all sectors are in good shape. Mortgage demand fell again as rates rose again to the highest level since last July. In terms of counter-intuitive thinking, this may be bad for markets as traders fear the Fed will have to go back on its word and take a more hawkish stance by the end of the year.
President Biden invoked the Defense Production Act Tuesday and then negotiated an agreement between JNJ and MRK. As a result, MRK will use two of their manufacturing plants to make the JNJ vaccine and the delivery schedule for JNJ vaccine has been accelerated by two full months. In the early evening, President Biden said this will ensure that the US has enough vaccine to vaccinate every American adult by the end of May (versus the old schedule which would have reached that point by the end of July). Obviously this is great news for the economy and theoretically for businesses as well.
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 29,370,705 confirmed cases and deaths have now passed half a million at 529,214 deaths. As mentioned, the number of new cases fell slightly again to an average of 66,307 new cases per day. Deaths, which have always lagged, also fell slightly to 1,932 per day. TX dropped all mask and building capacity restrictions Tuesday. On the same day OH, MI, and several southern states also partially eased restrictions. Time will tell if going wide open now is another mistake or not.
Globally, the numbers rose to 115,076,964 confirmed cases and the confirmed deaths are now at 2,552,234 deaths. The trends have been good, but we saw a significant uptick today. The world’s average new cases has up-ticked again to 387,769 per day. Mortality also ticked up, now at 9,041 new deaths per day. In the UK, the latest data shows that even a single vaccination of a 2-dose regimen cuts the risk of hospitalization by 80% in people over 80 years old at least after 3-4 weeks of time for the vaccine to work. The study was only of PFE-BTNX and AZN vaccines. People aged 70-80 got only 61% protection from the PFE vaccine and 73% from the AZN. In Asia, China has now said more that 500 million of their population will have been vaccinated by the end of June.
Overnight, Asian markets were green across the board. Shanghai (+1.95%), Hong Kong (+2.70%), and India (+2.19%) paced the gains. In Europe, markets are mixed, but mostly green so far today. There are some major outliers such as Portugal (-1.74%) and Denmark (-1.41%). However, the FTSE (+0.82%), DAX (+0.90%), and CAC (+0.62%) are more typical of the continent so far today. As of 7:30am, US Futures are pointing to a green open. The DIA is implying a +0.65% gap up, the SPY implying a +0.56% gap up, and the QQQ also implying a +0.56% gap open.
The major economic news for Wednesday includes Feb. ADP Nonfarm Employment (8:15 am), Feb Services PMI (9:45 am), Feb. ISM Non-Mfg. PMI (10 am), Crude Oil Inventories (10:30 am), Fed Beige Book (2 pm), and 2 Fed speakers (Bostic at noon and Kaplan at 6:05 pm). Major earnings reports on the day include DLTR, DY, and PDCO before the open. Then after the close, AEO, CNR, MRVL, SPLK, and TCOM report.
It seems inflation fears (or the lack thereof on some days) have been the major market drivers recently. While pre-market futures look good to the bulls, the stories of a potential blowout GDP for the quarter are likely to strike fear in traders watching the Fed. Without a crystal ball, the best we traders can do is to have a plan with protection in place to handle the volatility of the market jerks one way and then the other. All we know for sure is that we are near all-time highs in a manic market. So, preparedness is the key here.
Follow the trend, respect support and resistance, and don’t chase those moves that you miss. Another trade will come along any minute. So, forget about predicting reversals or breakouts. Just book your trade goals when you can and stick with your discipline. Achieve your ambitions in the long-run by taking short-term trade gains off the board consistantly as they are met, over and over again.
Swing Trade Ideas for your consideration and watchlist: SPWR, TER, RAD, ROKU. 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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