Thursday was a bit of a roller coaster ride with the Bulls getting the best of the deal.  SPY gapped up 0.35%, DIA opened flat at +0.01%, and QQQ gapped up 0.44%.  At that point, all three major index ETFs ran that roller coaster up and then back down, bottoming out at about 11:15 a.m.  (DIA had crossed below the prior close by then, but SPY and QQQ were still in the top part of their opening gap.)  From there, all three began a steady and at times briefly volatile rally the entire rest of the day. SPY and DIA both closed on their highs, while QQQ closed just 31 cents short of its high.  SPY and QQQ joined DIA by crossing back above their T-line (8ema).  This action left all three as large, white-bodied candles.  The DIA printed a Bullish Harami after bouncing up off its T-line. This happened on just less-than-average volume in the three index ETFs.

On the day, all 10 sectors were in the green as Consumer Defensive (+2.05%), Basic Materials (+2.05%) and Utilities (+1.96%) led the way higher.  On the other end of performance, Financial Services (+0.03%) barely participated in the rally.  At the same time, the SPY gained 1.31%, the DIA gained 0.98%, and QQQ gained 1.18%.  VXX lost just 0.79% to close at 15.01 and T2122 climbed into the top half of its mid-range to 68.72.  10-year bond yields dropped again to 3.88% and Oil (WTI) fell 2.45% to close at $73.99 per barrel.  So, mostly good earnings and good economic data led us to a gap higher.  After some volatility, the Bulls stepped in to lead a rally most of the day with traders taking prices out on the highs.

The major economic news released Thursday included Weekly Initial Jobless Claims, which came in higher than expected at 224k (compared to a forecast of 213k and the prior week’s 215k reading).  At the same time, Weekly Continuing Jobless Claims also came in a bit hot at 1,898k (versus the forecast of 1,840k and the previous week’s 1,828k value).  Meanwhile, Q4 Unit Labor Costs grew far less than predicted at +0.5% (compared to a forecast of +1.3% but still higher than Q3’s decline of 1.1%).  This led to a Q4 Nonfarm Productivity gain much higher than anticipated at +3.2% (versus a forecast of +2.4% but again far less than Q3’s +4.9% increase).  Later, the January S&P Global Mfg. PMI was stronger than expected at 50.7 (compared to the 50.3 forecast and the prior month’s downwardly revised 47.9 reading).  Then at 10 a.m., Dec. Construction Spending also came in much stronger than predicted at +0.9% (versus a forecast of +0.5% but in line with November’s +0.9%).  At the same time, ISM reported January Mfg. Employment was slightly above expectations at 47.1 (versus a 47.0 forecast and down from the previous month’s 47.5 reading).  January ISM Mfg. PMI came in well above predictions at 49.1 (compared to the 47.2 forecast and 47.1 prior month).  However, the January ISM Mfg. Price Index came in very hot at 52.9 (versus a 46.0 forecast and a 45.2 prior month index).  Finally, after the close, the Fed Balance Sheet came down significantly to $7.630 trillion versus the prior week’s $7.677 trillion (which was a $47 billion decline).

After the close, AMZN, AAPL, TEAM, CLX, DECK, DXC, EMN, ENSG, HIG, HOLX, HLI, KMPR, LPLA, META, MTX, NOV, OTEX, POST, RGA, and X all reported beat on both the revenue and earnings lines.  Meanwhile, HUBG, MCHP, SKX, and SKYW missed on revenue while beating on earnings.  Unfortunately, COLM and GEN missed on both the top and bottom lines.  It is worth noting that TEAM, CLX, DECK, ENSG, META, and POST all raised their forward guidance. However, COLM, DXC, MCHP, and SKX lowered guidance.

In stock news, BLBD announced a $60 million stock buyback program.  Later, during its conference call, MRK said it is in the market for acquisitions of up to $15 billion to prepare for the revenue decline of its Keytruda (the top-selling prescription drug, with $25 billion in sales in 2023).  Keytruda goes off-patent at the end of the decade and is expected to top out at $30 billion per year by 2026.  At the same time, META announced it will be deploying an in-house designed custom chip in its data centers (to reduce META’s dependence on NVDA chips) to support its push into AI.  For reference, recently CEO Zuckerberg said it will have 350,000 of NVDA’s “H100” GPUs in place by the end of the year.  H100’s sell for $29,000.  Later, BECN announced it had acquired private Roofer’s Supply for an unspecified sum to greatly expand its presence in the Southeast US.  Meanwhile, JPM, BAC, JEF, and DB are in talks to provide $8 billion in financing for DOCU to take itself private through a leveraged buyout.  At the same time, one day after a Delaware judge threw out Elon Musk’s $56 billion pay package, Musk said he would hold a shareholder vote on moving TSLA’s state of incorporation from DE to much more compliant TX. Elsewhere, CSX announced it reached an agreement with four more groups of workers and will extend paid sick leave to employees represented by those unions.  Later, WCN announced they had completed the acquisition of Canadian firm Secure Energy Services for roughly $1.4 billion.  At the same time, INGR announced it had sold its South Korean unit for $294 million.  Later, the Wall Street Journal reported that INTC will delay its $20 billion fab project in OH, citing a slowdown in chip orders.  The OH facilities are now not expected to finish construction until late 2026.

In stock legal, governmental, and regulatory news, the EU said Thursday that it has begun looking into how big tech companies (GOOGL, AMZN, META, BABA, VOD, TSLA, and AAPL) have moved into the financial services sector.  This is a joint look by the EU’s banking, insurance, and securities regulators and is based on concern that big tech will increase instability in those sectors across Europe.  Later, a Federal Appeals Court dismissed an appeal by investors which accused the world’s 10 largest banks (BAC, BCS, BNPQY, C, GS, JPM, MS, NWG, and UBS…CS was also a defendant but was acquired by UBS) of antitrust violations for rigging prices in the US Treasury market.  Later, the White House said it had sent out opening offers in the first-ever price negotiations to the manufacturers of 10 high-cost drugs (including BMY, PFE, JNJ, and MRK).  At the same time, a coalition of labor groups filed a lawsuit seeking to block an MA state ballot initiative saying that ride-share and delivery drivers would be treated as contractors instead of employees in the state.  UBER, LYFT, DASH, and CART all were part of the drive to get the initiative on the ballot, but the suit alleges that the petitions gathered by the industry groups covered several different and vaguely worded proposals (such as limiting a company’s liability for accidents) that were worded to confuse petition signers.  Elsewhere, the FDA granted CABA “orphan drug status” for its investigational therapy for myositis.  This status grants them tax credits waived fees, and 7-years of exclusive marketing rights for the drug.  At the same time, the FDA gave clearance to HOLX for its AI-based cervical cancer screening system.  After the close, a federal appeals court threw out a $366.2 million verdict against FDX for racial bias.  (In an odd ruling, the appeals court said it found sufficient evidence to support the plaintiff’s claims but reduced the pain and suffering award by 75% to 248k and said she was not entitled to any of the $365 million in punitive damages.  In essence, saying FDX was indeed guilty but the company should not be forced to pay for firing an employee that reported racial discrimination.  The basis of the ruling was that the plaintiff had not proven the company did it with malice toward her specifically as opposed to anybody that reports racial discrimination.)

So far this morning, ABBV, BSAC, BMY, BBU, BEP, CBOE, CHD, CI, REGN, and SAIA have all reported beats to both the revenue and earnings lines.  At the same time, AON, CHTR, and LYB beat on revenue while missing on earnings.  On the other side, CVX and XOM missed on revenue while beating on earnings.  There were no reported misses on both the top and bottom lines.  It is worth noting that BMY also raised its forward guidance.

Overnight, Asian markets leaned toward the green side with only the three Chinese exchanges in the red while the other nine were green.  Shenzhen (-2.24%) and Shanghai (-1.46%) were the only significant losers while South Korea (+2.87%) Australia (+1.47%), Thailand (+1.18%), and Singapore (+1.17%) paced the gainers.  In Europe, only Russia (-0.01%) is very marginally red while the other 14 exchanges are well into the green at midday.  The CAC (+0.68%), DAX (+0.85%), and FTSE (+0.50%) lead the region higher in early afternoon trade.  In the US, as of 7:30 a.m., Futures are pointing toward a mixed but green start to the day.  The DIA implies a +0.11% open, the SPY is implying a +0.67% open, and the QQQ implies a +1.13% open at this hour.  At the same time, 10-year bond yields are up very slightly to 3.884% and Oil (WTI) is just on the red side of flat at $73.74 per gallon in early trading.

The major economic news scheduled for Friday include Jan. Avg. Hourly Earnings, Jan. Nonfarm Payrolls, Jan. Private Nonfarm Payrolls, Jan. Participation Rate, and Jan. Unemployment Rate (all at 8:30 a.m.), Dec. Factory Orders, Michigan Consumer Sentiment, Michigan Consumer Expectations, Michigan 1-year Inflation Expectations, and Michigan 5-year Inflation Expectations (all at 10 a.m.).  The major earnings reports scheduled for before the open are include ABBV, AON, BSAC, BMY, BBU, BEPC, BEP, CBOE, CHTR, CVX, CHD, CI, XOM, IMO, LYB, REGN, SAIA, and GWW.  There are no earnings scheduled for after the close.

It is worth noting that the huge beats by AMZN and META are leading to the global rally we are seeing this morning. Despite the company’s job cuts in 2023, the company delivered better-than-expected profits, its first-ever quarterly dividend, and it announced a $50 billion stock buyback program. However, this is tempered somewhat by AAPL, which beat but is worrying markets because it reported slowing iPhone sales in China (which represents 20% of company sales). There is also renewed angst over regional banks after NYCB was down another 11% Thursday on top of Wednesday’s record 38% plunge.

In miscellaneous news, JPM said Thursday that January saw a record for the US issuance of institutional leveraged loans.  This happened as falling borrowing costs enticed many companies to borrow.  $140.1 billion net was borrowed for the month, including $51.4 billion in refinancing with the rest made up of new debt.  Elsewhere, IBKR reported an increase in trading activity in January, up 11% from 2023 and up 12% from December.  Margin loan balances also increased 12% over January 2023 to $44.3 billion.  Meanwhile, the US House of Representatives has scheduled a vote on a bill aimed at overturning the Biden Administration pause in LNG project approvals until a climate impact study is completed. However, this is a political stunt by the GOP since the bill stands virtually no chance of approval in the Senate.

In geopolitical news, the EU agreed on a deal to provide Ukraine with $54 billion in financial aid after Hungarian Putin-puppet Orban finally agreed.  In the announcement, the EU shamed the US saying they hope their example encourages the US to do its fair share of supporting democracy by backing Ukraine.

With that background, it looks like we are headed to a strong start to the day (ahead of January Jobs data). Both SPY and DIA gapped up in the premarket and are at new all-time highs. putting in white body candles after the start of the early session. QQQ made the biggest premarket gap up but has not reached its all-time high yet (although it is not far away) and it has put in an indecisive Doji candle since then in the early session. All three major index ETFs are above their T-line (8ema). So, the Bulls remain in control of the trend in the longer term and short-term. In terms of extension, none of the three is too far stretched from the 8ema. T2122 is also still in its mid-range. This means the market has room to run in either direction if the Bulls or Bear can gain enough momentum to do it. Also, continue to keep an eye on those Tech Big Dogs. If those 7-10 stocks lead in one direction, it’s nearly impossible for the rest of the market to do anything but follow given their trading volumes. Finally, remember that its Friday. So, pay yourself and prepare your account for the weekend.

As always, be deliberate and disciplined…but don’t be stubborn. If you have a loss, admit you were wrong and take that loss before it gets out of hand. And when the price does move in your direction, always move your stops in your favor and take a little profit off the table. You have to keep the “Legend of the Man in the Green Bathrobe” in mind. In a winning situation, it is NOT HOUSE MONEY you’re betting, it’s YOUR MONEY! There is no reason to keep raising your bet (risk) size just because you’ve had a win. Finally, remember that trading is not a hobby, it’s a job. The gains are real and so is the risk. So, treat it that way. Do the work and follow the process. Stick to your trading rules, trade with the trend, and take those profits when you have them. Do the work!

See you in the trading room.

Ed

🎯 Mike Probst: Rick, Got CTL off the scanner today. Already up 30%. Love it.

🎯 Dick Carp: the scanner paid for the year with HES-thank you

🎯 Arnoldo Bolanos: LTA scanner really works $$, thanks Ed.

🎯 Bob S: LTA is incredible…. I use it … would not trade without it

🎯 Malcolm .: Posted in room 2, @Rick… I used the LTA Scanner to go through hundreds of stocks this weekend and picked out three to trade:  PYPL, TGT, and ZS.   Quality patterns and with my trading, up 24%, 7% and 12%…. this program is gold.

🎯 Friday 6/21/19  (10:09 am) Aaron B: Today, my account is at +190% since January. Thanks, RWO HRC Flash Malcolm Thomas Steve Ed Bob S Bob C Mike P and everyone that contributes every day. I love our job.

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