Before the Bell July 27

Tickers discussed: SPY QQQ IWM China Contagion Risk / Strategy Session

Before the Bell  is premarket prep for active traders. The note provides detailed stock market technical analysis focused on the indexes and FAAMGs. Key levels and trading locations are provided, along with trading plans and timely commentary to keep you on the right side of the trade.

Earnings 

Massive week ahead with everything on the line for QQQ and SPY as all of mega-cap Tech reports.  If the earnings reaction is positive, we go higher. If they dump these names we go lower. It’s just math………..the FATMAAN names are 40% of QQQ and 25 % of SPY

Companion Video 

The video is a detailed technical review of the indexes and FATMAAN names. All the key trading levels are identified along with commentary and trade plans for each ticker. Trade ideas are also discussed.  Run the video at 1.25x to reduce run time.

Find the Video  HERE

 

Macro Data Releases Week of July 26

  • Monday – New Home Sales; Dallas FED,  3mo, 6mo and 2yr bond auctions; China / US Trade talks off to a rocky start
  • Tuesday – Durable Goods, Case-Shiller, Consumer Confidence, Richmond Fed, FOMC meeting starts, 5yr auction
  • Wednesday – International Trade Numbers, Retail / Wholesale inventories, Oil inventory; FOMC Announcement 2pm, JPOW presser 2.30pm
  • Thursday – GDP, Jobless Claims, Pending Home sales, EIA NatGas Inventories,   7 yr Bond Auction
  • Friday – Employment Cost Index, Personal Income, FOMC Bullard at 9am, Chicago PMI 9.30am, Consumer Sentiment 10am

Contagion Risk of  China’s Doom Loop

It all started with Jack Ma popping off in Fall 2020 prior to his ANT Financial  IPO.  The CCP had other ideas. They squashed the IPO like a bug and Ma received a FREE extended Vacation at Xi’s Fingernail Factory Spa & Resort where he wasnt seen for 4 months.  The next high profile event was the DIDI IPO where Government officials told DIDI not to list on the NYSE but they did it anyways.  Pissed off beyond belief, the CCP, directed by Xi, set out to teach everyone a lesson. For Profit Education name like TAL, EDU, GOTU woke up the other day to discover they were now non-profits with their stocks going to zero.  The doom loop is widening and worsening to include nation champions like BABA, Tencent, BIDU and dozens of others.

Being long China is now Toxic

In last week’s Weekend Profit Navigator, we discussed the possibility that hedge funds may decide that being long China names to be untenable, indefensible, and unexplainable to clients…..valuations be damned.  We are seeing that outcome unfold as these names are being wholesale liquidated.  Xi could care less about shareholder value and there is a possibility that shareholder value destruction is the point of the exercise.

Contagion Risk

If the 2014-2016 period we used to stay up for the 9.30pm China open to see if it was going to be up 7% or down 7% because there was a linkage to US Markets. That direct correlation has backed off in recent years, but this is the kinda thing that can spread like wildfire as we sit here with record valuations.  We also may find the contagion is POSITIVE  for US stocks as global investors flock to safe capital markets. Regardless we have to be ready either way.  The risk seems like more than than a talking point.

Market Ear China Contagion Graphics

A fantastic summary of the many facets to the story.

 

China’s Margin Debt is Maxed Out

Hello Sir, you don’t know me, but I’m your Margin Clerk.  When do those calls begin? Can you imagine the result?

 

Early Signs of a Regime Shift

Yesterday we saw early signs of a rotational Shift.  $COPPER was up 4% closing on the highs and has been up 10% in 2 sessions. Names like FCX, SCCO, CPER, COPX responded in kind. We also saw Steel make a move ( SLX ) with BHP / RIO / BHP / CLF / X etc make nice moves.  Also, Energy Equities led all sectors.   What we did not see was a move in IWM and we did not get breakouts in the key cyclical ETFS cited below.   Holding fire until Powell clears. 

Rising Rate Environment Areas of Interest.

  • Cyclically focuses ETF’s to watch.:  XLB, XLE, XLF, XLI, KRE, IWM
    • Set alarms on the above EFTs for further confirmation of the move.
    • Traders can then drill down in specific sectors for invididual names if desired
  • Materials.  Commodity and Specialty Chemicals
  • Metals and Mining.  Copper, Aluminum, Steel, XME
  • Industrials. HON / MMM / GE  Infrastructure names
  • JETS / Airlines, Delivery services , marine transport, etc
  • KRE; Regional Banks…………more highly levered to rates than mega banks
  • Travels, Hotels, Cruise Lines re-opening names.

FATMAAN Earnings

July 26: TSLA       July 27: AAPL / GOOGL / MSFT      July 28: FB      July 29 AMZN    All earnings after the bell

INDEX CHARTS

A detailed walk-through of the levels and trading strategy for the indexes is given in the video ( link above) . The static charts are provided for reference. The FATMAAN names are also reviewed in the video along with trade ideas and other charts of interest.

SPY 2 Hour

SPY 30 Min

QQQ 2 hour

QQQ 30 min

IWM 2 hour

IWM 30 min

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