Morning Trading Notes Feb 7: Bears regain the upper hand as earnings season continues

February 7, 2018, 7:00 am EST

Yesterday’s rebound for world stock markets is looking like a dead cat bounce with bourses resuming their declines overnight and into this morning. Asia Pacific markets were hit particularly hard last night with the Hang Seng and Nikkei both losing over 2.0%. This morning, indices in Europe like the FTSE, Dax and CAC are down 1-2% but the FTSEMIB and IBEX are up slightly. US index futures are down about 0.5% and so far gains and losses have been contained between Tuesday’s highs and lows.

After a big shock like the one that unfolded over the last three days, it’s not unusual to see markets remain volatile as they try to regain their footing. We could still see some forced selling and weak hands being shaken out of the market, but at the same time the panic lows set earlier in the week appear to be holding.

Commodity markets are mixed this morning with WTI crude oil and copper both losing over 1.0%, but grains are picking up, particularly wheat which has gained over 1.0% and is staging a technical breakout.

Currency markets are also active this morning. The US Dollar continues to carve out a base and turn back upward, weighing on other majors like EUR and GBP. A flight into defensive havens sparked by the market turmoil continues with both gold and JPY climbing again today.   This afternoon the RBNZ is meeting with a decision due at 3:00 pm EST. No change to rates is expected, but the statement could indicate if the central bank is considering a hike this year or if it is still concerned about the value of the Kiwi Dollar. Tonight brings trade data for China which could be positive after the US and Canada both posted bigger than expected trade deficits yesterday.

Disney shares rose in aftermarket trading after the company beat the street on earnings by a wide margin reporting adjusted EPS of $1.89 way above the $1.62 street estimate. Despite big wins at the box office from Thor and Star Wars, revenues came in slightly below expectations at $15.3B. Disney updated its plans to launch a sports streaming service this spring and an entertainment streaming service in early 2019 when it also pulls its content off of Netflix. It did not have a significant update on the Fox purchase as that is in the regulatory approval process. Both Disney and Netflix could be active today on this news. 21st Century Fox may also attract attention around its own earnings report later today.

Earnings season continues today with headliners including Suncor Energy in Canada and Tesla Motors in the US. Earnings for insurers kicks off as well with Manulife and Prudential reporting results.

This article is intended as general market commentary, based on sources considered to be reliable but could contain unintended errors. Commentary, estimates and charts are provided for information, education and entertainment purposes. They are not as and should not be construed in any way as investment advice. The authors assume neither liability nor credit for returns from readers’ trading or investment activity. We do not accept any remuneration from companies mentioned in this report. The authors or related parties may enter or exit short term trading positions in markets mentioned in this report at any time without notice. Some of the charts used in this commentary are based on Forex and Contracts for Difference (CFD) markets; leveraged products which carry a higher degree of risk and may not be suitable for all investors. CFD trading is not available in the United States of America. Copyright 2018 The Fundamental Technician, all rights reserved.


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