On Tuesday, the bears went to work with the uncertainty of inflation and rate increases, producing an ugly pop and drop that ultimately tested 2022 market lows.  However, this morning’s futures suggest an overnight reversal and relief rally ahead of more uncertain earnings and economic data.  Traders should keep a close eye on overhead resistance levels as we rally the possibility of entrenched bears willing to hold the downtrend with the FOMC rate decision coming soon.   Expect another day of very challenging price action that could include more pops and drops, intraday whipsaws as well as continued overnight reversals.

During the night, Asian markets traded mixed, with Shanghai surging upward while worries of a collapsing Japan sent the Nikkei lower.  This morning, European markets are in rally mode despite Russia shutting off gas supplies to Poland and Bulgaria.  With a big day of earning and economic data ahead, U.S. futures point to a substantial gap up open.  So, buckle up for another wild day of price action!

Economic Calendar

Earnings Calendar

With nearly 200 companies listed on the earnings calendar, plan for another hectic price action day.  Notable reports include FB, AFL, ALGN, AMT, AWK, AMGN, NLY, ADP, AVB, AVNT, BMRN, BA, BSX, BG, CHRW, CP, CHKP, CAKE, CME, CLB, COUR, CS, DFS, EHC, EQT, EQIX, FISV, GRMN, GD, GSK, HOG, HTZ, HES, HESM, HOLX, HUM, IQV, KHC, LC, MHO, MAT, MTH, MOH, NSC, ORLY, ODFL, OSK, OC, PYPL, PPC, PINS, QCOM, RJF, R, STX, NOW, SPOT, STM, TMUS, TEL, TECK, TDOC, URI, UPWK, VALE, & AUY.

News & Technicals’

Alphabet reports a weak earnings quarter and revenue mix due to a sharp decline in YouTube.  As a result, GOOGL missed on the top and bottom lines for the first quarter.  On the other hand, other Bets, which includes self-driving car unit Waymo, nearly doubled its revenue compared to the year prior.  Microsoft beat expectations on the top and bottom lines.  In addition, fourth-quarter revenue guidance for each of the company’s three business segments surpassed analysts’ expectations surveyed by StreetAccount.  The company announced plans to buy Activision Blizzard for almost $69 billion in the quarter.  On Wednesday, Russia’s gas supplies to Eastern Europe are looking highly uncertain after Poland and Bulgaria were told their supplies would stop.  The move comes after both countries refused Moscow’s recent demand to pay for gas supplies in rubles.  It also coincides with a sharp rise in tensions between Western allies and Russia as the war in Ukraine continues into the third month.  Cheaper gas is one of Walmart’s perks to get customers to sign up for Walmart+.  The membership program already included a gas discount, but Walmart has doubled the savings per gallon and expanded the number of gas stations to more than 14,000.  The big-box retailer is flexing its low prices as a competitive advantage, with inflation driving up the price of food and fuel.  Robinhood announced laying off 9% of full-time employees in a blog post made by CEO Vlad Tenev Tuesday afternoon.  Robinhood reported 3,800 full-time employees as of Dec. 31.  Amid rising costs and supply chain instability, General Motors reaffirmed its earnings expectations for 2022 despite reporting a lower net profit and margin than a year ago.  GM reaffirmed its pretax adjusted earnings forecast of between $13 billion and $15 billion for the year while raising its net income expectations to $9.6 billion and $11.2 billion.  GM also reaffirmed plans to produce 25% to 30% more vehicles than last year.  Treasury yield traded nearly flat early Wednesday morning, with the 5-year at 2.80%, the 10-year trading at 2.77%, and the 30-year ticking higher to 2.86%.

Tuesday produced an ugly pop and drop as worries over rate changes and earnings disappointments inspired the bears.  The DIA and SPY held the 2022 market lows, but unfortunately, the QQQ and IWM created new lows for the year.  After the bell, mixed results in earnings added to the uncertainty, but this morning futures look ready to begin a relief rally.  The T2122 indicator supports a relief rally showing a substantial short-term oversold condition.  That said, we have a long way to go before the index charts can develop bullish patterns.  Remember, we have significant overhead resistance and downtrends that can harbor entrenched bears ready to attack, so plan your risk carefully.  Expect price volatility to remain challenging with another big day of earnings and economic data. 

Trade Wisley,

Doug