E-mini NASDAQ-100 Index (NQ) Futures Technical Analysis – Strengthens Over 13992.75, Weakens Under 13803.25

September E-mini NASDAQ-100 Index futures are edging higher shortly before the release of a pair of U.S. economic reports and the cash market opening. Prices are consolidating despite a surprise shift to hawkish by the Federal Reserve on Wednesday that triggered a sharp break.

At 11:27 GMT, September E-mini NASDAQ-100 Index futures are trading 13925.25, down 47.50 or -0.34%. This is up from yesterday’s low at 13830.25.

In terms of data due out at 12:30 GMT, the number of weekly jobless claims filed the week ended June 12 is expected to come in at 360K, down from the previously reported 376K. The Philly Fed Manufacturing Index is expected to come in at 30.3, down from last month’s 31.5.

Daily September E-mini NASDAQ-100 Index

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum has been trending lower since Tuesday’s closing price reversal top and yesterday’s subsequent confirmation of the move.

A trade through 14155.25 will negate the closing price reversal top and signal a resumption of the uptrend. The main trend changes to down on a move through 13451.25.

The minor trend is also up. A trade through 13716.25 will change the minor trend to down. This will confirm the shift in momentum.

The minor range is 14155.25 to 13830.25. Its 50% level at 13992.75 is the upside target. Sellers could come in on the first test of this level. Overcoming this level could extend the rally into 14155.25.

The short-term range is 13451.25 to 14155.25. Its 50% level at 13803.25 is potential support.

The main range is 12906.00 to 14155.25. If the minor trend changes to down then look for the selling to possibly extend into its 50% level at 13530.50.

Daily Swing Chart Technical Forecast

The direction of the September E-mini NASDAQ-100 Index on Thursday will be determined by trader reaction to the pivot at 13803.25.

Bullish Scenario

A sustained move over 13803.25 will indicate the presence of buyers. The first upside target is 13992.75. Look for sellers on the first test. Overcoming this level could trigger an acceleration into the main top at 14155.25.

Bearish Scenario

A sustained move under 13803.25 will signal the presence of sellers. The first target is the minor bottom at 13716.25. Taking it out will confirm the shift in momentum and could trigger a further break into the short-term 50% level at 13530.50, followed by the main bottom at 13451.25.

For a look at all of today’s economic events, check out our economic calendar.

Fed Dot Plot Changes. US Equities Lower Post-FOMC Statement

So, we now know that the Fed expects to hike interest rates in 2023.

That could be ok. However, there was some contradictory language yesterday surrounding inflation. Is it transitory in the eyes of the Fed, or is it something more? Yesterday’s press conference seemed to play both sides of this coin, and stocks sold off on the uncertainty.

That’s ok too.

In reality, the selloff wasn’t too bad, with the $SPX losing 0.54%; and the $VIX rising by 6.64% on Wednesday. The benchmark 10-year yield $TNX tacked on 4.67% and finished yesterday’s session at a 1.568% yield. There was a pocket of strength in financial names and a few select market sectors. However, it makes me wonder, will asset managers be taking a different view on equities going forward? 2023 is a long time from now, but the idea of the punch bowl being taken away combined with an uncertain inflationary environment could paint a different picture going forward. We just don’t know yet.

Fortunately, some of the ETFs that we have been following fared well on Wednesday. Strength surfaced in solar and green names, which shows that we are on the right path, as capital had to make its way into something other than cash, financials, and volatility yesterday.

Figure 1 – SPDR S&P 500 ETF February 17, 2021 – June 16, 2021, Daily Source stockcharts.com

So, even though it seemed like the sky was falling if you were watching business news coverage after the Fed statement, it was just a pedestrian down day on decent down volume. For SPY traders that have been waiting for a pullback, there could be an opportunity in the cards soon; if we get some follow-through selling. However, I personally favor the IWM at this time, as discussed thoroughly in the May 27th publication.

Turning bearish of an event like today usually turns out to be the wrong move, in my experience. So what, rates will go up in 2023. They have to go up at some point; there is plenty of warning and plenty of time between now and then. Buying the pullback would still be the prudent move based on probabilities (it is still a bull market).

Speaking of the IWM , it fared better than the SPY in Tuesday’s session, giving up only 0.21%. It could be due to the reconstitution theme that we have been discussing.

Figure 2 – iShares Russell 2000 ETF December 29, 2020 – June 16, 2021, Daily Candles Source stockcharts.com

That is a pretty healthy daily candle for the type of session that the major indices experienced on Wednesday.

So, keeping the above in mind, is it really prudent to suddenly get bearish on the indices based on the Fed guidance towards rate hikes in 2023? Probably not. At least not today, anyway. Bull markets like this don’t just go out with a whimper on most occasions. Let’s see how things transpire across the major indices once the new Fed guidance is digested by market participants.

Now, for more bearish folks, I’d like to turn our attention to the IWM/SPY ratio that we discussed in our May 27th publication surrounding the Russell 2000 reconstitution trade.

Figure 3 – IWM iShares Russell 2000 ETF / SPY S&P 500 ETF Ratio August 27, 2020 – May 26, 2021. Source tradingview.com

While the spread hasn’t moved too much to the upside since May 26th, it has tacked on a penny, moving from 0.53 to 0.54. Percentage-wise, there is nothing wrong with that, and this is a theme that could continue to work through June 28th. This trade is long the IWM and short the SPY .

While it may be too early to tell how the broader markets will react to the Fed’s change in stance, it is also not necessarily a time to make rash decisions. Looking for pullbacks when more emotional traders decide to short the market could be a good idea. For now, we will see how Asia and Europe digest the message of the Fed in the overnight session followed by another US trading session. Time will give us more clues regarding the market’s interpretation of the Fed.

Now, for our premium subscribers, let’s look at what was working, even in yesterday’s down session ( a few of the ETFs we have been analyzing were green on the day ). There are also more buy idea levels that could be triggered soon. Not a Premium subscriber yet? Go Premium and receive my Stock Trading Alerts that include the full analysis and key price levels.

Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter – it’s absolutely free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

Thank you.

For a look at all of today’s economic events, check out our economic calendar.

Rafael Zorabedian
Stock Trading Strategist

Sunshine Profits: Effective Investment through Diligence & Care

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This content is for informational and analytical purposes only. All essays, research, and information found above represent analyses and opinions of Rafael Zorabedian, and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. You should not construe any such information or other material as investment, financial, or other advice. Nothing contained in this article constitutes a recommendation, endorsement to buy or sell any security or futures contract. Any references to any particular securities or futures contracts are for example and informational purposes only. Seek a licensed professional for investment advice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Information is from sources believed to be reliable; but its accuracy, completeness, and interpretation are not guaranteed. Although the information provided above is based on careful research and sources that are believed to be accurate, Rafael Zorabedian, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. Mr. Zorabedian is not a Registered Investment Advisor. By reading Rafael Zorabedian’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Trading, including technical trading, is speculative and high-risk. There is a substantial risk of loss involved in trading, and it is not suitable for everyone. Futures, foreign currency and options trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment when trading futures, foreign currencies, margined securities, shorting securities, and trading options. Risk capital is money that can be lost without jeopardizing one’s financial security or lifestyle. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Rafael Zorabedian, Sunshine Profits’ employees, affiliates, as well as members of their families may have a short or long position in any securities, futures contracts, options or other financial instruments including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice. Past performance is not indicative of future results. There is a risk of loss in trading.

 

E-mini NASDAQ-100 Index (NQ) Futures Technical Analysis – Trend Up, Momentum Down; Straddling 13992.75 Pivot

September E-mini NASDAQ-100 Index futures broke sharply immediately after the Federal Reserve raised its inflation expectations and moved up the time frame on when it will hike interest rates next. Since the initial reaction, the market has clawed back more than half of its intraday losses and is now in a position to turn higher for the session.

At 19:39 GMT, September E-mini NASDAQ-100 Index futures are trading 14024, up 3.00 or +0.02%.

The tech-driven index began its rebound after Chairman Jerome Powell said in a press conference that the so-called dot-plot projections should be taken with a “big grain of salt” and the liftoff is “well into the future.”

Daily September E-mini NASDAQ-100 Index

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, but momentum shifted to the downside when sellers confirmed yesterday’s closing price reversal top.

A trade through 14155.25 will negate the closing price reversal top and signal a resumption of the uptrend. A move through 13451.25 will change the main trend to down.

The minor trend is also up. A trade through 13716.25 will change the minor trend to down. This will confirm the shift in momentum.

The first minor range is 14155.25 to 13830.25. The index is currently straddling its 50% level at 13992.75.

The second minor range is 13451.25 to 14155.25. Its 50% level at 13803.25 is another potential downside target and support.

The short-term range is 12906.00 to 14155.25. If the minor trend changes to down then look for the selling to extend into its 50% level at 13530.50.

Daily Swing Chart Technical Forecast

The direction of the September E-mini NASDAQ-100 Index into the close is likely to be determined by trader reaction to 13992.75.

Bullish Scenario

A sustained move over 13992.75 will indicate the presence of buyers. If the move creates enough upside momentum then look for the rally to possibly extend into the reversal top at 14155.25. This is a potential trigger point for an acceleration to the upside.

Bearish Scenario

A sustained move under 13992.75 will signal the presence of sellers. If this move generates enough downside momentum then look for the selling to possibly extend into the second pivot at 13803.25. Taking out this level could lead to a test of the minor bottom at 13716.25. This is the last potential support before the 13530.50 short-term 50% level.

For a look at all of today’s economic events, check out our economic calendar.

FOMC Maintains Stimulus, Brings Rate Hike Forecast Forward to 2023

New projections saw a majority of 11 Fed officials pencil in at least two quarter-point interest rate increases for 2023, even as officials in a statement after their two-day policy meeting pledged to keep policy supportive for now to encourage an ongoing jobs recovery.

The Fed also made technical adjustments to prevent its benchmark interest rates from falling too low. It raised the interest rate it pays banks on reserves – the IOER – held at the U.S. central bank by five basis points, and also lifted to 0.05% from zero the rate it pays on overnight reverse repurchase agreements, used to set a floor on short-term interest rates.

In a question and answer period after the statement, Chairman Jerome Powell said the Fed will provide advanced notice before changing asset purchases and that considering tapering of these purchases at coming meetings would be appropriate, if progress allows.

MARKET REACTION

STOCKS: The S&P 500 extended losses to -0.83%%

BONDS: The 10-year U.S. Treasury note yield jumped to 1.5720% and the 2-year yield rose to 0.1991%

FOREX: The dollar index turned higher. It was last up 0.72%

COMMENTS

PETER TUZ, PRESIDENT, CHASE INVESTMENT COUNSEL, CHARLOTTESVILLE, VIRGINIA

“I’m not too surprised by the statement or the reaction. You would have had to have your head pretty buried in the sand not to pick up on inflation rising in many parts of the U.S. economy. So the Fed acknowledged that. The market’s reaction to the Fed acknowledging rising inflation is also not a surprise because now people are wondering if and when are you going to do something.”

STEVEN RICCHIUTO, U.S. CHIEF ECONOMIST, MIZUHO SECURITIES USA LLC, NEW YORK

“The policy statement is verbatim from what we had last time, essentially. And that is going to drive the post-meeting press conference, which is going to drive home the point that this Fed is going to stay the course, which is not what the market wanted. A lot of people wanted the Fed to say something more aggressive and the Fed took the least aggressive tact that they could. That’s the right decision for them to make.

“If the Fed had told you that they’re going to be aggressive and start tapering, yields would have continued to move down. The fact that they’re not doing that means that yields, people were a little bit too aggressive in terms of what was going to happen.

GENNADIY GOLDBERG, INTEREST RATE STRATEGIST, TD SECURITIES, NEW YORK

“The market reacted quite hawkishly and I think that was largely to the 2023 dot actually moving up even more than we had anticipated. We had expected it to move to one hike, it actually moved to two, so certainly a bit more optimism there. The statement was a little bit more upbeat but I would say there weren’t that many changes there that warranted this kind of reaction. So really the crux of the reaction really came down to the dot.”

“On the front-end it does look like the Fed just decided to move preemptively. They effectively raised IOER and RRP and that should help support the money market complex and just prevent any further flirtation with negative rates, at least for now. I think everyone was basically anticipating this hike at some point, the move today was basically done just to be preemptive.”

JASON WARE, CHIEF INVESTMENT OFFICER & CHIEF ECONOMIST, ALBION FINANCIAL GROUP, SALT LAKE CITY

“I think the market is taking it as a bit more hawkish in the initial reaction. In the coming days we will see what investors truly think. The reason traders are a bit skittish is that in some ways the results of the meeting, at least so far in the statement and the pulling forward of the timeline of the first rate hike, just that change is enough to make those that are ultra-short-term-focused re-position. But for longer-term investors, it is still extremely loose financial conditions and ultra-accommodative for equity investors.

“Another element is they increased their headline inflation expectations which demonstrates they are paying attention to the latest CPI reports. They brought that up. That’s a good thing. That helps underscore and solidify the Fed’s credibility.”

“I think there were an increasing number of market participants that expected a more robust conversation about when tapering might begin. Our expectation is we will probably see the stage being set for tapering in August at Jackson Hole.”

STEPHEN MASSOCCA, SENIOR VICE PRESIDENT, WEDBUSH SECURITIES, SAN FRANCISCO

“Basically they are living off this theory that all these inflationary numbers are the result of a disorganized economy exiting Covid and that once the economy reorganizes price pressure will return and inflation will vanish, that is the argument they are making. I actually kind of think it is a good one. Before they react I think waiting for a few months is prudent and I think the market understands that.

“The one guy remaining in power, Powell, knows what he is doing. And if you scream PPI, look at that number, it is just because the economy is so disorganized now coming out of Covid that once it organizes that will be a mirage that goes away. It really does make a lot of sense. If it doesn’t happen that is going to be a real problem for the market. But right now that argument makes sense and everybody is buying it.”

GUY LEBAS, CHIEF FIXED INCOME STRATEGIST, JANNEY MONTGOMERY SCOTT, PHILADELPHIA

“The IOER hike is really about relieving some of the strains in the front-end of the curve related to a tsunami of cash in the financial system. Banks are overreserved, money market funds are finding it hard to get positive yield anywhere and so it addresses some of those problems. But it will also have the effect of pulling yields out the curve a little bit higher, probably out to about three years, because the relative value of a two-year or three year note is in part dependent on what a bank can get in overnight rates, which is now somewhat higher.”

“I don’t think that there’s a ton of information at this stage conveyed in the dots because you’re measuring a median forecast at a time when economic variability is massive.  It’s also a conditional forecast and I think the conditions on which the forecast is based are at best volatile and somewhat unlikely.”

KARL SCHAMOTTA, DIRECTOR OF GLOBAL PRODUCT AND MARKET STRATEGY, CAMBRIDGE GLOBAL PAYMENTS, TORONTO

“We may not be seeing a taper tantrum but we are seeing a hissy fit on currency markets. The interesting thing is that the Fed has gone beyond simply acknowledging that inflation is rising and that the U.S. economy has a lot of momentum, and it has essentially shifted to a much more hawkish stance in this set of projections.”

JACK ABLIN, CHIEF INVESTMENT OFFICER, CRESSET WEALTH ADVISORS

“I think this is pretty close to what the market wanted. The market wanted the Fed to tell investors that there is nothing to see here, keep moving, nothing going on in the economy or inflation, and we’re just going to stay aggressively easy.”

“The Fed is not in complete denial, the way the market would have liked. They do recognize that they will have to respond sometime in the future. But I will call that a tilt – not a change in direction. The Fed is still maintaining its head-in-the-sand policy.”

RYAN DETRICK, SENIOR MARKET STRATEGIST, LPL FINANCIAL, CHARLOTTE, NORTH CAROLINA

“The market’s a little lower but you see that on Fed days.

“There was a big jump in (the Fed’s) inflation expectations, a point above March projections, and with the likelihood of first rate hike now in 2023, there was a knee jerk reaction and the market is trying to digest it.

“But the market was expecting this. The market is having typical Fed day volatility.

“It’s like you get all worked up and excited when the Fed has an announcement and the market sleeps on it overnight and go the other way the very next day.

“They upped the GDP forecast, we’ve got a stronger economy and stronger inflation. Those shouldn’t be surprises to anyone.”

“The action in the bond market is pretty calm. The stock market is having typically volatile Fed day shake-out but the bond market seems to be taking it in stride, and that’s a key takeaway.

“There’s no sign of tapering, but we’ll see with the Q&A.”

FRANCES DONALD, GLOBAL CHIEF ECONOMIST, MANULIFE INVESTMENT MANAGEMENT, TORONTO

“The dot plot is now showing two rate hikes by 2023. That’s enough of a hawkish surprise for the bond market and its getting all of the attention.”

“What’s interesting here is that the Federal Reserve has increased its estimate of when the first rate hikes will come but not materially changed its 2022 and 2023 projections for growth and inflation. What that tells us is that while the outlook hasn’t dramatically changed it seems that the Fed’s confidence in returning to a normal environment has.”

“There has not been a material change of tone. This statement has only a few adjustments.

“The market is reacting to a few strands of information in the dot plot. Now it will be Powell’s time to try to dissuade the market from reading too much into the dot plot.”

TOM MARTIN, SENIOR PORTFOLIO MANAGER, GLOBALT INVESTMENTS, ATLANTA

“The market wants to see the Fed communicate that it’s going to provide the accommodation that the country will need while being on the lookout for inflation, and to me, what you got with this announcement is what the market wanted.

“On average, the market does want the Fed to be measured, which they absolutely were with this release.

“I don’t see that the movements in the S&P and Nasdaq mean much.”

For a look at all of today’s economic events, check out our economic calendar.

(Compiled by the U.S. Finance & Markets Breaking News team)

 

Dow Jones And Transportation Index Breaching Critical Price Support Ahead Of FOMC Meeting

Over the past few weeks, we have watched the markets continue their attempt to melt higher. Recently the Down Jones and the Transportation Index have breached a lower upward sloping support channel that suggests traders are preparing for a surprise Fed statement or a breakdown in the current bullish price trend.  My team and I believe this warning sign may be suggesting the reflation trade is over. Traders believe the US Fed will soon begin to act to contain inflation by raising rates.

As we move closer to the FOMC statements and decisions related to the economy, inflation, and future expectations, the US major indexes usually move into an apprehensive sideways trend.  This happens because US federal reserve decisions can have a very big impact on how consumers and corporations perceive monetary policies and future opportunities.  The US markets will likely react to the US Fed statements this week with increased volatility and trend strength.  If you have not already protected your trades in preparation for the FOMC comments this week, get ready for a potentially wild ride.

FASTEN YOUR SEATBELTS AND MAKE SURE YOU HAVE YOUR “E-TICKETS” READY

The Dow Jones Industrial Weekly chart below shows how price has been moving higher (melting upward) throughout the early part of 2021 and has just recently broken below the YELLOW upward sloping price channel line.  It is our opinion that this move, below a key support level, may be an early indication that traders and the markets expect a policy change from the US Federal Reserve.  Quite possibly, the inflationary aspect of the recovering global economy is sparking greater concern for the US Fed and they may decide to act in steps that will help curb run-away inflation earlier than expected.

We’ll know soon enough as the FOMC statement is due on Wednesday, June 16, 2021.  We are expecting an increase in volatility with the potential of the FOMC comments driving a new upward or downward trend.  If the Fed issues a statement where they are taking no action and don’t believe inflation is a core issue, then the markets will likely continue to move higher.  If the Fed issues a statement that inflation and other concerns are big enough to warrant a surprise rate/policy change, then the markets may react to the downside.

This next Weekly Transportation Index chart highlights a similar type of price pattern.  The Transports have broken below a more recent upward sloping price channel, from the February 2021 lows, and has yet to break below the major upward sloping price channel line, from the COVID-19 lows.  Still, this “rollover” in the Transportation Index suggests traders are changing perspective related to future economic activities 90 to 120+ days into the future.  This sideways rollover suggests traders believe the commodity rally and inflationary pricing pressure will “abate” as we move into the end of 2021.

Logically, we would expect the Transportation Index to continue to move lower if these expectations become rooted in the broad market perspective.  If the Fed takes any action to help curb inflationary expectations, this downward trend in the Transports could move in a much more aggressive manner.

Are the Dow Jones Industrial Average and Transportation Index setups warning that the Fed may be backed into a corner?  Are we starting to see a change in trader/investor sentiment related to the current commodity rally and/or economic activity throughout the rest of 2021?  Only time will tell at this point.

What we do know is that later today, being Wednesday, June 16, 2021, The FOMC decisions and statement will likely set a tone in the markets that will drive increased volatility and trending.  This could prompt some very big trends in major market sectors such as precious metals, oil, and others.  Now is the time to get ready for some bigger trends that will likely last throughout the rest of 2021 and into 2022.

Want to know how our BAN strategy is identifying and ranking various sectors and ETFs for the best possible opportunities for future profits? Please take a minute to learn about my BAN Trader Pro newsletter service and how it can help you identify and trade better sector setups.  My team and I have built this strategy to help us identify the strongest and best trade setups in any market sector.  Every day, we deliver these setups to our subscribers along with the BAN Trader Pro system trades.  You owe it to yourself to see how simple it is to trade 30% to 40% of the time to generate incredible results.

For a look at all of today’s economic events, check out our economic calendar.

Have a great day!

Chris Vermeulen
Chief Market Strategist
www.TheTechnicalTraders.com

Oracle Cloud Initiative Could End Uptrend

Oracle Corp. (ORCL) is trading lower by more than 5% in Wednesday’s pre-market after beating fiscal Q4 2021 estimates and lowering Q1 2022 profit guidance. The software giant earned a respectable $1.54 per-share during the quarter, beating estimates by $0.21, while revenue rose 7.5% year-over-year to $11.23 billion, nearly $200 million higher than consensus. Shareholders hit the exits after the company warned it would “roughly double its Cloud CapEx spending in fiscal year 2022 to nearly $4 billion”.

Investing Revenue in Cloud Growth

Cloud computing is more profitable than overall business operations and Oracle is trying to increase market share and improve margins going forward. As a result, it’s “confident that the increased return in the Cloud business more than justifies this increased investment and margins will expand over time”.  However, disappointed investors held a less bullish view, voting with their feet to exit positions.

Success in the new investment is no sure thing because Oracle’s transition into cloud computing has been slower than its rivals, who have already built large and diverse customer bases.. As a result, it will be hard to take market share from Amazon.Com Inc.’s (AMZN) AWS or Microsoft Corp’s (MSFT) Azure in coming quarters, raising doubts about the initiative. In addition, while this high tech venue is growing at a rapid rate, so is competition, with many operations throwing their hats into the ring.

Wall Street and Technical Outlook

Wall Street consensus is skeptical as well, with a ‘Hold’ rating based upon 5 ‘Buy’, 1 ‘Overweight’, and 18 ‘Hold’ recommendations. In addition, three analysts recommend that shareholders close positions and move to the sidelines. Price targets currently range from a low of $60 to a Street-high $115 while the stock is set to open Wednesday’s session about $2 above the median $75 target. This mid-range placement suggests that Oracle is now fully-valued.

Oracle failed a 2019 breakout over the 2017 high at 53.14 during 2020’s pandemic decline and turned higher, breaking out in the fourth quarter. The uptick added more than 40% into early June’s all-time high at 85.03, ahead of a pullback that’s now accelerating to the downside. The decline has settled on the 50-day moving average in the pre-market, generating the first test since February, It’s likely to hold for now but the stock may be headed into months of sideways action.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

What’s Your Trade Ahead of the Fed? Wooden Opportunity?

Major US equity indices traded lower ahead of the Fed meeting, and the debate over growth versus value stocks continues. Is there any magic language or policy stance that can come out of today’s Fed meeting to provide clarity in this market?

PPI data came out stronger than expected yesterday. This data adds more fuel to the inflationary theme, while Retail Sales were weak. The markets should have been lower from this data, and they were, albeit slightly.

As the anticipation builds to today’s FOMC statement at 2:00 PM ET today and the subsequent press conference at 2:30 PM ET, it seems like a good time to revisit a market that we are following – lumber .

If you have been following along and read the June 9th publication , you know that we are eyeballing the lumber markets for an ETF trade possibility. While the lumber market has been just insane to the upside in 2021, it has recently pulled back substantially. The question remains: are these higher lumber prices sustainable? If so, is there a way to participate via an ETF?

While this may seem like an obscure sector or at least an underappreciated one, let’s take a look at the front-month lumber futures to get caught up on the most recent price action.

Figure 1 – Random Length Lumber Futures Continuous Contract February 21, 2020 – June 15, 2021 Daily Source stooq.com

Front-month lumber futures made a pandemic low of 251.50 on April 1, 2020. Its recent and all-time high is 1733.30, which was put in on May 10, 2021. Taking a 50% retracement of this move, we have a value of 992.40. Yesterday’s low in front-month lumber futures was 943.70 and a close of 1009.90. Yesterday’s trading was also on higher than average volume. It is important to note that it traded below the psychologically important level of 1000, through the 50% Fibonacci retracement, and then reversed intraday and closed higher. This kind of price action really gets me going.

Let’s also illustrate this price action described above via weekly candlesticks:

Figure 2 – LBS1! Random Length Lumber Futures Continuous Contract September 2019 – June 2021 Weekly Candles Source tradingview.com

Isn’t that something? I wanted to illustrate this via the weekly candlesticks to add a little more clarity. The weekly candlestick that is being formed this week could be a sign of things to come. Now before we go any further:

I strongly suggest against trading in Lumber Futures. They can be illiquid, and experience many limit up and limit down days. You could be stuck in a losing position and not be able to get out. The only traders in Lumber futures should be hedgers that are in the wood business or deep pocket institutional traders that have real money to burn. Futures trading entails unlimited risk. I am sure that many fortunes have been made, and many more have been lost during this insane lumber market. Being on the wrong side of a futures market like Lumber can be brutal.

Lumber is a very thin contract and may only trade a few hundred contracts per day. But with such intriguing technicals, I want to circle back to an ETF that we covered in the June 9th publication : WOOD iShares Global Timber & Forestry ETF.

Figure 3 – iShares Global Timber & Forestry ETF (WOOD) Daily Candles November 10, 2020 – June 15, 2021. Source stockcharts.com

So, we see some interesting potential weekly candlestick formation in the Lumber futures and an interesting daily candle in WOOD. While the 2 instruments do not trade a perfect or near-perfect correlation, a correlation exists.

I like the idea of getting long the WOOD ETF based on the action in the Lumber futures markets.

While trying to catch a falling knife can be a precarious proposition, I view this as buying a pullback in a bull market. While we discussed certain levels in the June 9th publication , I would like to explore some different levels and a potential scaling/tranche entry strategy today.

And, while the price of gold certainly hasn’t caught an inflation bid (at least not yet), this could be a wooden opportunity. Maybe a wooden opportunity is the new golden opportunity.

Now, for our premium subscribers, let’s look to pinpoint potential entry levels in WOOD , and recap the eight other markets that we are covering. Not a Premium subscriber yet? Go Premium and receive my Stock Trading Alerts that include the full analysis and key price levels.

Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter – it’s absolutely free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

Thank you.

Rafael Zorabedian
Stock Trading Strategist

Sunshine Profits: Effective Investment through Diligence & Care

* * * * *

This content is for informational and analytical purposes only. All essays, research, and information found above represent analyses and opinions of Rafael Zorabedian, and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. You should not construe any such information or other material as investment, financial, or other advice. Nothing contained in this article constitutes a recommendation, endorsement to buy or sell any security or futures contract. Any references to any particular securities or futures contracts are for example and informational purposes only. Seek a licensed professional for investment advice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Information is from sources believed to be reliable; but its accuracy, completeness, and interpretation are not guaranteed. Although the information provided above is based on careful research and sources that are believed to be accurate, Rafael Zorabedian, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. Mr. Zorabedian is not a Registered Investment Advisor. By reading Rafael Zorabedian’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Trading, including technical trading, is speculative and high-risk. There is a substantial risk of loss involved in trading, and it is not suitable for everyone. Futures, foreign currency and options trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment when trading futures, foreign currencies, margined securities, shorting securities, and trading options. Risk capital is money that can be lost without jeopardizing one’s financial security or lifestyle. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Rafael Zorabedian, Sunshine Profits’ employees, affiliates, as well as members of their families may have a short or long position in any securities, futures contracts, options or other financial instruments including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice. Past performance is not indicative of future results. There is a risk of loss in trading.

 

Oracle Shares Slump As Earnings Guidance Misses Estimates

Oracle Corporation shares slumped about 5% in extended trading on Tuesday after the world’s largest database management company called for a lower earnings outlook for the fiscal first quarter than equity analysts had previously expected.

The Austin, Texas-based computer technology corporation reported earnings per share of $1.54 per share, beating analysts’ expectations of $1.31 per share. The company’s revenue came in at $11.23 billion, topping the Wall Street consensus estimates of $11.04 billion.

According to CNBC, Oracle CEO Safra Catz called for $0.94 to $0.98 in adjusted earnings per share and 3% to 5% revenue growth in the fiscal first quarter, lower than the market expectations of $1.03 per share.

Oracle Corporation shares slumped about 5% to $77.75 in extended trading on Tuesday. The stock rose over 26% so far this year.

Analyst Comments

“Strong momentum in back-office apps and a pick-up in bookings growth gives management confidence to increase investment ahead of a potential acceleration in revenue growth. However, investors likely need more evidence in the numbers before pushing multiples higher, leaving share range-bound,” noted Keith Weiss, equity analyst at Morgan Stanley.

Oracle Stock Price Forecast

Ten analysts who offered stock ratings for Oracle in the last three months forecast the average price in 12 months of $76.10 with a high forecast of $93.00 and a low forecast of $54.00.

The average price target represents a -6.79% from the last price of $81.64. Of those 10 analysts, two rated “Buy”, eight rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley raised the stock price forecast to $77 from $73 with a high of $90 under a bull scenario and $58 under the worst-case scenario. The firm gave an “Equal-weight” rating on the database management company’s stock.

Oracle’s current low valuation at ~16.7x CY22e EPS reflects its slower growth rate compared to peers. Despite potential opportunities within existing database customers and cloud-based ERP applications, offsets from waning businesses mean 2021 likely lacks the catalysts for the positive inflection in revenue growth investors would need to see to drive multiples higher,” Morgan Stanley’s Weiss added.

“With management guiding to mid-single-digit CC revenue growth in a software sector filled with strong secular growth stories, and operating margins declining in FY22 due to heightened investment in Cloud, we remain Equal-weight while our price target moves up to $77.”

Several other analysts have also updated their stock outlook. Jefferies assumed coverage with hold rating and raised the target price to $80 from $75. JP Morgan lifted the target price to $77 from $73. Barclays increased the target price to $83 from $80. Piper Sandler increased the target price to $80 from $57.

Check out FX Empire’s earnings calendar

U.S. IPOs Hit Annual Record in Less Than Six Months

With more than six months until the year ends, U.S. initial public offerings have already totaled $171 billion, eclipsing the 2020 record of $168 billion, according to data from Dealogic.

Driving the IPO rush are sky-high corporate valuations in the stock market, inflated by the Federal Reserve’s low-interest rates and monetary stimulus in the wake of the COVID-19 pandemic. This has fueled a wave of speculative frenzy that benefit not just traditional companies going public, but also special purpose acquisition companies (SPACs) formed strictly to raise money through IPOs.

The IPO gold rush is set to reach new heights in the second half of 2021, as a number of high-profile startups such as China’s largest ride-sharing company Didi Chuxing Technology Co Ltd, online brokerage Robinhood Markets Inc and electric-vehicle maker Rivian Automative LLC prepare to launch multi-billion dollar share sales.

“If the markets hang in anywhere near where they are right now, we are going to be incredibly busy this summer, and into the fall with IPOs,” said Eddie Molloy, co-head of equity capital markets for the Americas at Morgan Stanley.

“Trees don’t grow to the sky forever, so you’re not going to have a record volumes every year. But assuming stability, we’d also expect a busy 2022.”

Excluding proceeds from SPAC IPOs, traditional listings of big names, including South Korean e-commerce giant Coupang Inc, have raked in $67 billion this year, keeping 2021 on track to be the biggest year for such IPOs.

The average one-day gain for U.S. IPOs so far this year is 40.5%, compared with 28.2% during the same period in 2020 and 21.7% in 2019, according to Dealogic. The average one-week return for 2021 is 35.7%, higher than 32.2% in 2020 and 25.5% in 2019.

Capital markets bankers and lawyers estimate that companies could end up raising close to $50 billion through traditional IPOs, excluding SPACs, before the end of the September quarter. IPO proceeds have touched $24.1 billion in the second quarter through June 15, according to Dealogic.

Didi’s offering alone could raise close to $10 billion, sources have previously told Reuters.

By the end of the year, U.S. IPOs could raise $250 billion to $300 billion or more – a staggering sum once considered unthinkable, according to investment bankers.

“Five-hundred million used to be a pretty big IPO. Nowadays everything seems to be in the billions or three-quarters of a billion-plus. So there’s really been an explosion in the size of transactions as well,” said Jeff Bunzel, global co-head of equity capital markets at Deutsche Bank.

“And there seems to be adequate amount of capital out there to help support that level of activity.”

SPACS FUEL BOOM

The record numbers have been fueled largely by the boom in listings of special purpose acquisition companies.

SPACs, or blank check companies, are listed shell companies that raise cash with the sole purpose of merging with a private company within two years of the listing. The process takes the private company public.

During the first quarter alone, SPAC listings raised close to $100 billion, well above the $83 billion for all of 2020, according to data from SPAC Research.

Despite the recent slowdown in SPAC dealmaking, 339 SPACs have been formed this year, raising roughly $105 billion or nearly two-thirds of the total IPO volume. In 2020, SPAC volumes accounted for less than half of the total IPO proceeds.

“Valuations are strong, fund flows are strong, and all the ingredients that you need to have an active and successful IPO market remain intact right now,” said Bunzel.

Investment bankers and lawyers also pointed out that the capital markets boom is attracting more companies that would have otherwise stayed private for longer, making the IPO pipeline even more robust for the foreseeable future.

“Because of the surge in SPAC transactions, a lot of companies are thinking this is an opportune time to hit the market and achieve attractive valuations. I think it’s led to private companies being more receptive and interested in pursuing a public option,” said Paul Tropp, who co-heads the capital markets group at Ropes & Gray.

(Reporting by Anirban Sen in Bengaluru and Krystal Hu in New York; Editing by Richard Chang)

 

Wall Street Slips as Fed Mulls Policy, Economic Data Disappoints

With the Fed kicking off a two-day policy meeting today, investors are balancing the central bank’s insistence inflation will be transitory with fresh data showing prices growing faster than expected.

In separate reports, U.S. economic data showed an acceleration in producer prices in May as supply chains try to keep up with surging demand with the pandemic easing, while retail sales dropped more than expected as consumers turned their attention back to service industries.

The readings have investors wondering if the Fed may come out of its meeting Wednesday with any indication it is tweaking its go-slow approach.

“Rising prices are expected to subside as the supply side of the economy recovers to meet demand and inventories are restocked, but accomplishing that will not be as easy as flipping a switch,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors. “It will take some time for that gap to be filled. In the meantime, upward pressure on prices are likely to continue.”

The central bank is not expected to announce any plans to ease back on its bond purchases until August, but investors are looking for any indication the Fed has begun discussing such an exit. Nearly 60% of economists in a Reuters poll expect a taper announcement will come in the next quarter, despite a patchy recovery in the job market.

“To a large extent, high US inflation has to do with the massive US fiscal stimulus. Inflation has been increasing in most of G10, but the US clearly stands out,” wrote Bank of America Securities analysts in a note. “Assuming that some of the recent increase in inflation is indeed sustained, we would argue that the Fed will react to it, supporting the USD later this year.”

After markets reached new highs in Europe, U.S. markets eased following the economic reports. U.S. Treasury yields also dipped, while the dollar ticked up.

The MSCI world equity index, which tracks shares in 45 nations, fell 0.86 points or 0.12%.

The Dow Jones Industrial Average was down 114.95 points, or 0.33% in afternoon trading, while the S&P 500 lost 9 points, or 0.21%, and the Nasdaq Composite dropped 89.10 points, or 0.63%.

OIL GAINS

Oil prices hit their highest levels since 2019 during trading Tuesday on an expected demand surge that should accompany increased travel as pandemic restrictions ease.

Brent crude was last up $1.09, or up 1.5%, at $73.95 a barrel. U.S. crude was last up $1.16, or 1.64%, at $72.04 per barrel. It previously hit a session high of $72.16 a barrel, the highest level seen since October 2018.

In currency markets, the dollar hit a one-month high against a basket of currencies Tuesday on the back of the fresh economic data. The dollar index, which measures the greenback against a basket of six currencies, was 0.06% higher at 90.544, after rising as high as 90.677, its highest since May 14.

Spot gold prices fell $9.585 or 0.51%, to $1,856.41 an ounce, while U.S. gold futures were down 0.4% at $1,857.60.

Benchmark 10-year yields were 1.4939%, slightly lower than Monday, when they rebounded from Friday’s three-month low.

(Reporting Pete Schroeder in Washington; Editing by Kim Coghill, Alex Richardson, Barbara Lewis and Peter Graff)

 

Kroger Earnings to Fall About 20% in Q1; Target Price $35

Kroger, one of the world’s largest food retailers, is expected to report its fiscal first-quarter earnings of $0.98 per share, which represents a year-over-year decline of about 20% from $1.22 per share seen in the same period a year ago.

The retailer, which operates over 2,500 supermarkets in the U.S., would post a revenue decline of 5.6% year-on-year to $39,222 million. However, it is worth noting that in the last four quarters, on average, the company has beaten earnings estimates about 19%.

Kroger is likely to have faced tough year-over-year comparisons in sales, as COVID-19 benefits are lapped. Industry experts believe that lower at-home consumption activities and a drop in pantry-loading trends might have hurt the company’s first-quarter top-line performance,” noted analysts at ZACKS Research.

Kroger shares rose over 20% so far this year. The stock ended 0.8% lower at $38.4 on Monday.

Analyst Comments

“The company has been making every effort to strengthen position not only with respect to products but also in terms of the way consumers prefer shopping. The company’s “Restock Kroger” program involving investments in omni-channel platform, identifying margin-rich alternative profit streams, merchandise optimization, and lowering of expenses has been gaining traction,” noted analysts at ZACKS Research.

“These aided the company to post decent fourth-quarter fiscal 2020 results, wherein both the top and the bottom lines grew year-over-year. However, Kroger expects tough year-over-year comparison in fiscal 2021, and signaled a decline in identical sales, without fuel. Pandemic-induced demand is likely to moderate, as vaccination drive gather space and consumers return to the old normal.”

Kroger Stock Price Forecast

Eight analysts who offered stock ratings for Kroger in the last three months forecast the average price in 12 months of $35.00 with a high forecast of $38.00 and a low forecast of $31.00.

The average price target represents a -8.85% from the last price of $38.40. Of those 8 analysts, none rated “Buy”, five rated “Hold” and three rated “Sell”, according to Tipranks.

Morgan Stanley gave the stock price forecast of $29 with a high of $45 under a bull scenario and $16 under the worst-case scenario. The firm gave an “Underweight” rating on the software company’s stock.

Kroger (KR) is one of the largest conventional food retailers, with competitive advantages including leading scale, an advanced customer data science platform, and ramping digital capabilities. 2020 was a historically strong year for KR driven by COVID-19 uplifts, but KR’s share gains are already normalizing we anticipate an industry sales slowdown in 2021-2022 that is underappreciated in Street estimates,” noted Simeon Gutman, equity analyst at Morgan Stanley.

“Meanwhile we model EBIT margins to return to pre-COVID-19 levels by 2022 as normalizing promotional activity and e-comm pull-forward pressure margins. Longer-term we continue to struggle to model a path to sustainable EBIT growth and margin stabilization.”

Several other analysts have also updated their stock outlook. Oppenheimer raised the price target to $38 from $34. BMO lifted the price target to $36 from $34. Jefferies increased the price target to $37 from $33. UBS raised the target price to $35 from $33. Deutsche Bank lifted the target price to $36 from $35.

Check out FX Empire’s earnings calendar

The ETF You Want for Sunny and (Potentially) Cloudy Days

If you like to buy on pullbacks in bull markets (like me), you may have trouble swallowing some of the price levels and medium-term overbought technicals on many instruments right now.

Digging deeper into the trenches, some areas have had meaningful pullbacks, and we are going to get into one ETF right now that is currently trading at/near key technical levels.

Figure 1 – Invesco Solar ETF (TAN) August 21, 2020 – June 14, 2021, Daily Candles Source stockcharts.com

I like to find bullish short to medium-term technicals, and the Invesco Solar ETF (TAN) just closed over its 50-day moving average yesterday. This technical action comes after a period of retracement and consolidation that dates back to the beginning of 2021. Its 52-week high close is $121.94, put in back on February 9, 2021.

So, while everyone is still talking about inflation and the upcoming Fed decision, we can focus our attention on an ETF that has pulled back nicely over a four + month time period and is exhibiting some signs of bullish technical strength. Also, take note of the RSI above 50 (57) and the MACD poised to cross the zero line.

We can see that June 14th’s candle was a gap higher and a close above the 50-day moving average. More clarity can be obtained by viewing an intraday 15-minute chart:

Figure 2 – Invesco Solar ETF (TAN) June 10, 2021 – June 14, 2021, 15 Minute Candles Source stooq.com

The gap-up volume and TAN ’s ability to stay above and close above its 50-day moving average could be a bullish signal.

US Administration and Solar Outlook

Just like some of the other markets that I am currently following, TAN seems to make sense given the current US administration and democratic congressional majority. In fact, just as I am writing this, Reuters published an article about first-quarter US solar installations soaring . I do wish that this article would come out later instead, but it is out now.

Although there are some supply chain concerns in solar right now (think commodities), there ought to be many initiatives and subsidies put forth by the Biden administration in the coming years. Regardless of your personal opinion on solar vs. fossil fuels, the idea is to try to profit from economic conditions. TAN could be a great addition to holdings to get exposure from a sector that has already experienced a meaningful pullback; brought on partially by the buy the rumor, sell the fact type of trading action that we saw in TAN from November 2020 (US presidential election) and January 2021 (inauguration).

Based on the technicals that we have covered above and the pullback/consolidation that we have seen in the medium-term in TAN , this seems like a potentially solid entry point area.

For additional details on the US Solar Market, the SEIA (Solar Energy Industries Association) just released their Q2 2021 report.  It contains numerous datasets, charts, and other data, including projected residential and commercial installation projections.

Figure 3 – Invesco Solar ETF (TAN) April 14, 2008 – June 14, 2021, Weekly Candles Source stockcharts.com

Let’s also take note that TAN has traded at these levels before. It traded north of $220 back in the Summer of 2008. Hint, hint: there was $4 per gallon retail gasoline in the US at that time. I think it is wise to know the long-term trading history of instruments that are covered.

What could TAN do if additional solar subsidies are issued by the Biden administration and residential + commercial installations increase? Time will tell.

Now, for our premium subscribers, let’s look to pinpoint potential entry levels in TAN , and recap the eight other markets that we are covering. Not a Premium subscriber yet? Go Premium and receive my Stock Trading Alerts that include the full analysis and key price levels.

Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter – it’s absolutely free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

Thank you.

For a look at all of today’s economic events, check out our economic calendar.

Rafael Zorabedian
Stock Trading Strategist

Sunshine Profits: Effective Investment through Diligence & Care

* * * * *

This content is for informational and analytical purposes only. All essays, research, and information found above represent analyses and opinions of Rafael Zorabedian, and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. You should not construe any such information or other material as investment, financial, or other advice. Nothing contained in this article constitutes a recommendation, endorsement to buy or sell any security or futures contract. Any references to any particular securities or futures contracts are for example and informational purposes only. Seek a licensed professional for investment advice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Information is from sources believed to be reliable; but its accuracy, completeness, and interpretation are not guaranteed. Although the information provided above is based on careful research and sources that are believed to be accurate, Rafael Zorabedian, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. Mr. Zorabedian is not a Registered Investment Advisor. By reading Rafael Zorabedian’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Trading, including technical trading, is speculative and high-risk. There is a substantial risk of loss involved in trading, and it is not suitable for everyone. Futures, foreign currency and options trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment when trading futures, foreign currencies, margined securities, shorting securities, and trading options. Risk capital is money that can be lost without jeopardizing one’s financial security or lifestyle. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Rafael Zorabedian, Sunshine Profits’ employees, affiliates, as well as members of their families may have a short or long position in any securities, futures contracts, options or other financial instruments including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice. Past performance is not indicative of future results. There is a risk of loss in trading.

 

E-mini NASDAQ-100 Index (NQ) Futures Technical Analysis – Trader Reaction to 14117.25 Sets the Tone

September E-mini NASDAQ-100 Index futures are trading higher during the pre-market session on Tuesday after rising for the sixth time in the past seven sessions on Monday. The index was supported by gains in shares of Tesla Inc, Apple Inc and Amazon.com Inc.

At 03:40 GMT, September E-mini NASDAQ-100 Index futures are at 14137.50, up 20.25 or +0.14%.

High-growth tech-related stocks, which were at the heart of a sell-off driven by fears of rising rates, have regained their footing this month at the expense of economy-linked industrials, financials and materials stocks.

Investors are seeking new cues from the Federal Reserve this week on its inflation outlook, after recent data indicated the U.S. economy is regaining momentum but not overheating. This has eased investor worries about inflation, helping to boost demand for high growth technology stocks.

Daily September E-mini NASDAQ-100 Index

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The uptrend was reaffirmed earlier in the session when buyers took out Monday’s high. A trade through 13451.25 will change the main trend to down.

The minor trend is also up. A move through 13716.25 will change the minor trend to down. This will also shift momentum to the downside.

The first minor range is 13716.25 to 14155.25. Its 50% level at 13935.75 is potential support. This level will move up as the index moves higher.

The second minor range is 13451.25 to 14155.25. Its 50% level at 13803.25 is another potential support level.

The short-term range is 12906.00 to 14155.25. A third potential downside target is its 50% level at 13530.50.

Daily Swing Chart Technical Forecast

The direction of the September E-mini NASDAQ-100 Index on Tuesday is likely to be determined by trader reaction to 14117.25.

Bullish Scenario

A sustained move over 14117.25 will indicate the presence of buyers. Taking out the intraday high at 14155.25 will indicate the buying is getting stronger. This could trigger an acceleration to the upside if the buying volume is strong enough.

Bearish Scenario

A sustained move under 14117.25 will signal the presence of sellers. If this move creates enough downside momentum then look for the selling to possibly extend into the first pivot at 13935.75. Since the main trend is up, buyers could show up on the first test of this level.

If 13935.75 fails as support then look for the selling to possibly extend into the next pivot at 13803.25.

For a look at all of today’s economic events, check out our economic calendar.

S&P 500 and Dow Slip as Upcoming Fed Meeting Looms

The technology-heavy Nasdaq rose for the sixth time in the past seven sessions, lifted by gains in shares of Tesla Inc, Apple Inc and Amazon.com Inc.

Investors are seeking new cues from the central bank this week on its inflation outlook, after recent data indicated the U.S. economy is regaining momentum but not overheating. This has eased investor worries about inflation.

While the Fed has reassured that any spike in inflation would be transitory, policymakers could begin discussing the tapering of bond buying at the Tuesday-Wednesday meeting. Most analysts, however, do not expect a decision before the central bank’s annual Jackson Hole, Wyoming, conference in August.

Any shift in the Fed’s dovish rhetoric could upend equity markets. The S&P benchmark has climbed 13% this year, while the Dow and the Nasdaq have risen 12% and 9.6%, respectively.

“As we get closer to the end of the summer, they (the Fed) are going to want to start talking about taper and telegraphing when they’re going to raise rates and that’s where we do have a potential for a misstep,” said Max Gokhman, head of asset allocation at Pacific Life Fund Advisors in Newport Beach, California.

High-growth tech-related stocks, which were at the heart of a sell-off driven by fears of rising rates, have regained their footing this month at the expense of economy-linked industrials, financials and materials stocks.

Materials and financials were the biggest drags on the S&P 500 on Monday, while technology and consumer discretionary were the only sectors in positive territory.

By 2:00PM ET, the Dow Jones Industrial Average fell 256.18 points, or 0.74%, to 34,223.42, the S&P 500 lost 10.99 points, or 0.26%, to 4,236.45 and the Nasdaq Composite added 64.61 points, or 0.46%, to 14,134.03.

Having traded up earlier in the day as crude prices hit their highest levels in more than two years, the energy index slipped 1%. [O/R]

Lordstown Motors Corp tumbled 16.6% after it said Chief Executive Steve Burns and Chief Financial Officer Julio Rodriguez have resigned, days after the electric-truck maker warned that it may not have enough cash to stay in business over the next year.

Tesla gained 1.8% as CEO Elon Musk tweeted that the electric car maker may resume bitcoin transactions. Bitcoin vaulted back above $40,000 on Musk’s comments.

The S&P 500 posted 29 new 52-week highs and 2 new lows; the Nasdaq Composite recorded 120 new highs and 20 new lows.

(Reporting by Medha Singh and Devik Jain in Bengaluru and David French in New York; Editing by Maju Samuel and Dan Grebler)

 

Stocks Waver as Investors Eye the Fed

The Dow Jones Industrial Average fell 248.82 points, or 0.72%, in midday trading. The S&P 500 lost 11.83 points, or 0.28%, while the Nasdaq Composite added 53.24 points, or 0.38%.

Yields on benchmark 10-year U.S. Treasuries rose slightly to 1.495%, after falling to a three-month low of 1.43% on Friday, a dip experts pegged to positioning and a watchful eye on the global pandemic.

“While it’s not entirely intuitive to us, we understand the move to be a combination of positioning, peak liquidity and renewed concerns about COVID as the U.K. pushes back its latest steps toward re-opening,” said Stephanie Roth, senior markets economist at JPMorgan Private Bank. “We are not surprised to see choppy markets ahead of Wednesday’s FOMC. Investors are wondering… whether the Fed will hint at tapering.”

That sentiment weighed on gold prices as well, as the precious metal slipped as much as 1.7%. Spot gold prices were down 0.66% by 1:26 p.m. EDT (1726 GMT) to $1,864.19 an ounce. U.S. gold futures dropped 0.7% to $1,865.10.

The recent uptick in inflation data heightens the stakes for the Fed’s upcoming policy-setting meeting, which will be followed by a news conference by Chairman Jerome Powell. Analysts said the central bank will have to tread a fine line, laying out its strategy for exiting an unprecedented era of pandemic-spurred accommodation without spooking investors.

“The Fed’s messaging this year will be critical; the Fed needs to convey its intention to wind down ultra-accommodative policy, but at the same time convey that it has no intention of abruptly tightening policy, a fine line that could easily be miscommunicated,” wealth management firm Glenmede cautioned in a client note.

The prospect of a return to economic normalcy put gas into oil prices, which hit their highest levels in more than two years. Brent rose 34 cents to $73.03 a barrel by 12:56 p.m. EDT (1656 GMT). Earlier in the session, it reached $73.64 a barrel, its highest since April 2019, boosted by the economic recovery and anticipated demand growth as vaccination campaigns accelerate.

U.S. West Texas Intermediate rose 27 cents to $71.18 a barrel. It hit a session high of $71.78 a barrel, its highest since October 2018. [O/R]

BITCOIN BUMP

In currencies, the U.S. dollar dipped slightly on Monday after logging its largest weekly change in over a month.

The dollar index, which tracks the greenback versus a basket of six currencies, fell 0.058 point or 0.06%.

The yen stood little changed at 109.92 yen, while the British pound changed hands at $1.4108, near the lower end of its trading range over the past month.

Bitcoin has bounced back somewhat after Tesla Inc CEO Elon Musk tweeted that the electric carmaker could reopen the door to bitcoin transactions in the future. It was last bought at $40,140.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting Pete Schroeder in Washington. Editing by Jacqueline Wong, Alexander Smith, Chizu Nomiyama and Dan Grebler)

How HIGH Can It Fly? Tilray And Cannabis ETF (MJ) Prepare To Rally 25% More To The Upside

Over the past few weeks, a unique opportunity continues to unfold in the Cannabis & Marijuana sector.  I highlighted this near the end of May 2021 with a research article showing how a multiple upside price wave setup may start to unfold after a recent momentum base/bottom setup across various cannabis/marijuana sector symbols.  The confluence of price patterns across a number of cannabis sector stocks suggests a bigger price trend may be about to setup.  My team and I believe this new momentum base/bottom may prompt a strong upside price trend throughout the end of 2021 and may prompt a continuation of this trend into 2022.

Today, I am revisiting these same charts/symbols to see how far things have progresses since our May 31, 2021 research post.  Let’s get started with the charts.

MJ Still Setup For A +14% Rally To Levels Near $24.50 (Or Higher)

This Weekly MJ chart shows the deep momentum base/bottom near $19.90 with moderate upside support above $20 to $21. Using a Fibonacci 100% Measured Move technique, we can identify upside targets near $22.40 and $24.50. Over the past two weeks, MJ actually reached the $22.40 target with recent highs.  Yet, price closed the week lower, near $21.59.

I am also seeing strong trading volume as this new upside price trend extends higher.  This increased volume is a good indication that the upside price trend is starting to build momentum as traders accumulate shares in anticipation of the bullish price rally phase.

My team and I still believe the upside potential in the Cannabis/Marijuana sector is relatively strong.  We believe the recent momentum base that setup across numerous Cannabis sector stocks is presenting a very clear  opportunity for traders to position trades for the pending multi-wave upside price trends.  After the first Fibonacci 100% Measured Move targets are reached, a brief pause in price should be expected, then another upside price trend should prompt an even higher price advance.  This next move will likely conform for the current rally attempt as another Fibonacci 100% Measured Move to the upside.

Tilray Inching Higher – Still Showing A Potential For A +35% Advance

Very similar to the MJ Weekly chart setup, this Weekly TLRY chart shows a fantastic momentum advance after a moderate price pullback from recent highs.  Although recent highs have touched our first Fibonacci target level, near $21.67, there is still ample opportunity for a move to the second target level near $26.70.

We are seeing strong accumulation in the recent trading volume indicated by the series of GREEN candles – suggesting the upside price trend is starting to build real momentum.  We believe the next move higher will target the $23 to $24 level – which will prompt a close above the first target level and setup TLRY on a stronger advance towards the second target level.

From the current price close, the second target level, near $26.70, represents a solid +35% opportunity for traders to profit from this initial wave higher.

GRYN Makes A Big Move – Still Showing Opportunities For Another +22% Advance

In our first research article about this unique setup in the Cannabis/Marijuana sector, we includes GRYN as a potential candidate for an explosive upside trend.  GRYN is not one of the most heavily traded symbols in this sector, yet we feel it is uniquely positioned because it has US FDA approval for its Hemp-based CBD growing and extraction processes.  This US FDA approval means GRYN can produce and sell into almost any medical, consumer, beverage, consumable or other industry as an FDA Approved supplier.

Recently, we saw a big upside in GRYN, rallying over 32% since we first published our May 31 research article.  The next move higher should target levels above $2.21 and setup a new range for the next Fibonacci 100% Measured Move higher.  If GRYN rallies to a high near $2.50 in this current trend, then the next Measured Move upside targets will be $2.79 to $3.45 if the $1.65 to $1.70 price level holds as support.  These approximate (estimated) upside targets represent another +60% to +98% rally phase for GRYN.

Overall, we believe the Cannabis/Marijuana/Alternative Medicine sector has moved away from the downside price trend that has dominated this sector over the past 2 to 3+ years.  Now, after the Reddit group targeted this sector late in 2020, we are seeing renewed focus by traders into this sector.  Once the momentum moves past moderate accumulation and into breakout trending, we may see another big explosive upside trend in a number of Cannabis sector stocks.

The one thing that could deflate this trend is if we start to see a broad US/Global market price correction. If something like a moderate 11% (or greater) US/Global market downtrend sets up, then we will likely see these Cannabis/Marijuana sector stocks attempt to move lower as well – attempting to reset/retest the recent momentum base levels.  This would present a very interesting opportunity for traders to get into positions as these base levels setup and as the accumulation starts to build again.

Want to know how our BAN strategy is ranking the Cannabis/Marijuana sector (and other sectors) for trading opportunities to identify the best opportunities for future profits? Please take a minute to learn about my BAN Trader Pro newsletter service and how it can help you identify and trade better sector setups.  My team and I have built this strategy to help us identify the strongest and best trade setups in any market sector.  Every day, we deliver these setups to our subscribers along with the BAN Trader Pro system trades.  You owe it to yourself to see how simple it is to trade 30% to 40% of the time to generate incredible results.

Have a great Monday!

For a look at all of today’s economic events, check out our economic calendar.

Chris Vermeulen
Chief Market Strategist
www.TheTechnicalTraders.com

 

Sink or Swim Time for Tesla

Tesla Inc. (TSLA) has underperformed badly in the first half of 2021, posting a 12% year-to-date decline. Of course, that’s no big deal after 2020’s historic 839% return but don’t tell that to shareholders who took exposure in December or the first quarter of this year. Those folks, in particular, should pay attention to the ticker tape in coming weeks because the stock has entered a critical phase that could dictate performance into 2022.

Bearish Descending Triangle

The stakes are high because the current pattern is carving a bearish descending triangle that favors a breakdown and decline into November 2020’s unfilled gap between 412 and 433. However, that prediction will come off the table if the rally that started in May can mount tough resistance centered at the 650 level. Fortunately for bulls, accumulation has remained strong since the stock topped out in January, giving them a good shot at blasting through that barrier.

CEO Elon Musk’s erratic comments about Bitcoin and other cryptocurrencies aren’t helping the stock’s performance because many institutions have taken positions in the last year and are looking for conservative accounting that just isn’t possible, given high volatility in digital assets. In addition, the company is now a SP-500 component that’s been public for more than a decade, forcing them to compete for capital with other blue chips, rather than at-home speculators.

Wall Street and Technical Outlook

Wall Street consensus is mixed after last year’s outsized share gains, with a ‘Hold’ rating based upon 15 ‘Buy’, 1 ‘Overweight’, 11 ‘Hold’, and 3 ‘Underweight’ recommendations. More importantly, 6 of 36 analysts covering Tesla recommend that shareholders close positions and move to the sidelines. Price targets currently range from a low of $67 to a Street-high $1,471 while the stock is set to open Monday’s session more than $100 below the median $725 target.

Tesla mounted the February 2020 high at 193.80 in June, entering a multiwave uptrend that topped out above 900 in January 2021. The stock then sold off to the 200-day moving average at 558.79, marking the first leg in a descending triangle that will post a second lower high if the current uptick reverses at or below 650. A test at the trading floor in the mid-500s could easily fail if that happens, yielding a breakdown that potentially sheds an additional 125 to 150 points.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Best Stocks For July 2021

Here’s how I found the top stocks to own in July of 2021. I went to MAPsginals.com and I found all the Top 20 stocks since 2012. I then just sorted for the most frequently occurring stocks in descending order. This is what I found:

Source: MAPsignals.com

Outlier stocks are the ones that account for a lion’s share of the gains of the stock market. One thing they have in common is the same ones keep showing up over and over. These were the top 5.

To show why they are great quality stocks, I wanted some quick metrics. I looked up the following key fundamentals I look for:

  • 1 Year Sales Growth
  • 3 Year Sales Growth
  • 1 Year Earnings Growth
  • 3 Year Earnings Growth
  • Profit Margin
  • Debt/Equity

The best quality stocks being bought by big money is what I look for and these fit the bill. Look at these stunning fundamentals:

Source: FactSet

The real test is if Big Money is buying the stocks. By finding the ones most frequently on the Top 20 report, we get a quick filter for the best of the best. In order to even get on one instance of a MAP Top 20 report, the stock needs to have superior fundamentals and get some Big Money Buy Signals. The Top 20 stocks are the best 20 out of over 6,000 every week. So imagine what it means to be on a report 70 or 80 times!

Here’s what it looks like… below we are the instances when each stock saw Big Money buying and made our rare Top 20 report. The key to finding outlier stocks is the repeating Buy signals.

Up first is Facebook, Inc (FB):

Source: MAPsignals, end of day data sourced from Tiingo.com

Now, Align Technology, Inc. (ALGN):

Source: MAPsignals, end of day data sourced from Tiingo.com

And Fortinet, Inc. (FTNT):

Source: MAPsignals, end of day data sourced from Tiingo.com

Number 4 is Adobe Systems Inc. (ADBE):

Source: MAPsignals, end of day data sourced from Tiingo.com

Finally, NVIDIA Corp. (NVDA):

Source: MAPsignals, end of day data sourced from Tiingo.com

So there you have it: a power packed list of the best stocks for July 2021. I’d like to say this is a quick and dirty way to find the best stocks out there, but there’s nothing dirty about it. MAPsignals uses quantitative analysis of mounds of daily stock data. Thirty years of it says two clear things:

  1. Outliers keep appearing time and time again.
  2. When they do, those are the best in show.

When Big Money is buying the best quality stocks, we should always pay attention. But when they do it year after year, it’s a message we don’t want to miss.

The Bottom Line

FB, ALGN, FTNT, ADBE, & NVDA represent the best stocks for July 2021. Based on strong fundamentals and Big Money buy signals year after year, these are worth further investigation.

To learn more about MAPsignals’ Big Money process please visit: www.mapsignals.com

Disclosure: the author holds no positions in FB, ALGN, ADBE, FTNT, & NVDA at the time of publication.

Investment Research Disclaimer

https://mapsignals.com/contact/

For a look at all of today’s economic events, check out our economic calendar.

Adobe Could Hit New All-Time High on Strong Q2 Earnings; Target Price $567

The U.S. multinational computer software company Adobe is expected to report its fiscal second-quarter earnings of $2.81 per share, which represents year-over-year growth of about 15% from $2.45 per share seen in the same period a year ago.

The San Jose, California-based software company would post year-over-year revenue growth of over 19% to $3.73 billion. In the last four consecutive quarters, on average, the company has delivered an earnings surprise of over 7%.

Adobe’s better-than-expected results, which will be announced on June 17, would help the stock hit new all-time highs. Adobe shares rose over 8% so far this year. The stock ended 1.07% higher at $541.26 on Friday.

Analyst Comments

“Upside to Digital Media net new ARR, positive checks in Digital Experience, and conservative operating margin forecasts for 2Q make us buyers into the print. Multiple rev growth engines and durable 20%+ EPS growth frames an attractive risk/reward for this solid secular growth franchise,” noted Keith Weiss, equity analyst at Morgan Stanley.

Adobe has leading market share in some of the most dynamic secular growth areas in software: creative design, dynamic media, and marketing automation. As such, we see the longer-term growth story for ADBE as better than most. With a large recurring rev base and operating margin improvements expected (as margin pressure from recent acquisitions comes to an end), we expect 20%+ EBIT CAGR from FY20-FY22 and believe this durable growth is not fully reflected in shares. Our $575 PT is based on 41x CY22e EPS of $13.96, which implies ~2.3x PEG on 16% EPS CAGR from FY20-FY22e.”

Adobe Stock Price Forecast

Twenty analysts who offered stock ratings for Adobe in the last three months forecast the average price in 12 months of $567.78 with a high forecast of $650.00 and a low forecast of $520.00.

The average price target represents 4.90% from the last price of $541.26. Of those 20 analysts, 17 rated “Buy”, three rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the stock price forecast of $575 with a high of $698 under a bull scenario and $438 under the worst-case scenario. The firm gave an “Overweight” rating on the software company’s stock.

Several other analysts have also updated their stock outlook. Wolfe Research set an “outperform” rating and a $650.00 target price for the company. The Goldman Sachs Group reiterated a “neutral” rating and issued a $523.00 price target.

Bank of America reiterated a “buy” rating and issued a $570.00 price target on shares. Credit Suisse issued an “outperform” rating and a $575.00 price target for the company. Jefferies raised the target price to $630 from $560.

ADBE +8% YTD trails SP50 13% and peer INTU 24%, despite strong fundamentals (FY21 JEFe rev +20% with OM +150bp to 44%). Our expert calls have been very positive, especially for DX,” noted Brent Thill, equity analyst at Jefferies.

“These point to a decent size FQ2 beat (JEFe 2%+), though stock may need more to overcome headwinds affecting growth & software sectors and CFO transition uncertainty. Improving momentum into 2H could help turn around cautious sentiment. ADBE remains a top 4 large-cap software pick.”

Check out FX Empire’s earnings calendar

US Stock Futures Higher as Benchmark S&P 500 Index Presses Record High

The major U.S. stock indexes opened steady during the pre-market session on Sunday as investors continued to digest last week’s U.S. consumer inflation data and its potential impact on Wednesday’s Federal Reserve monetary policy decision.

At 22:20 GMT, September E-mini S&P 500 Index futures are trading 4241.25, up 4.75 or +0.11%. September E-mini Dow Jones Industrial Average futures are at 34384, up 27 or +0.08% and September E-mini NASDAQ-100 Index futures are trading 14010.25, up 24.50 or 0.18%.

Last Week’s Recap

In the cash market, U.S. stocks ended last week with a record closing high for the S&P 500 and the beginning of a rotation back into growth names.

Last week, the 30-stock Dow Jones Industrial Average fell 0.8%, but the S&P 500 rose 0.4%, for its third straight positive week. The NASDAQ Composite was the outperformer with a gain of nearly 1.9%, posting its fourth winning week in a row as the tech trade came back into favor.

Sectors and Stocks on the Move

Among the 11 major sectors in the S&P 500, rebounding financial stocks and tech led the gainers, while healthcare suffered the biggest percentage drop. The interest-sensitive financial sector was pressured most of the week as benchmark U.S. Treasury yields posted their biggest weekly drop in nearly a year

Meanwhile, the Food and Drug Administration is facing mounting criticism over its “accelerated approval” of Biogen Inc’s Alzheimer’s drug Aduhelm without strong evidence of its ability to combat the disease. Biogen shares ended down 4.4%, while the broader healthcare sector shed 0.7%.

Much of the trading volume last week was attributable to the ongoing social media-driven “meme stock” phenomenon, in which retail investors swarm around heavily shorted stocks. AMC Entertainment, Clover Health Investments, GameStop and more experienced volatile trading as the group continued to get attention from the social media investors on Reddit. AMC Entertainment outperformed the group, gaining 15.4%.

Federal Reserve to Dictate Early Direction of Stocks

The Fed’s two-day policy meeting will likely dominate investor behavior this week. Although the central bank is not expected to take any action, its forecasts for interest rates, inflation and the economy could move the markets.

Fed Chairman Jerome Powell speaks to the press after the central bank issues its statement at 18:00 GMT on Wednesday. He is expected to affirm the Fed’s commitment to easy policy. However, concerns over inflation and how the Fed could react is likely to influence market direction, especially after a hotter-than-expected consumer inflation reading for May was reported last Thursday, CNBC reported.

For a look at all of today’s economic events, check out our economic calendar.