Markets traded dead flat on Wednesday until the Fed statements at 2 p.m.  The SPY opened unchanged, DIA gapped down 0.21%, and gapped up 0.30%.  However, from that open we saw very flat trading in all three major index ETFs until 2 p.m. Then, all three spiked for five minutes, chopped sideways for 25 minutes, sold off another five minutes.  At that point Fed Chair Powell began to speak and the Bulls were off to the races the rest of the day.  All three major index ETFs closed very near their highs of the day.  The action gave us large, white-bodied, candles with small lower wicks and almost no upper wick.  SPY and DIA both closed at new all-time high closes after printing new all-time highs.  QQQ closed within 0.40% of its all-time high close.  All three crossed back above their T-line (8ema) during the session.

On the day, all 10 sectors were green as Basic Materials (+1.93%) was out in front leading the market higher and Healthcare (+0.09%) was by far the laggard sector.  At the same time, SPY gained 0.92%, DIA gained 1.05%, and QQQ gained 1.19%. VXX fell another 2.08% to close at 13.19 and T2122 shot up into the top part of overbought territory at 95.36.  10-year bond yields backed off again to 4.277% and Oil (WTI) fell 1.95% to close at $81.84 per barrel.  So, on the March Fed Day, there was nothing like bad news or at least unexpected news.  That was the only excuse the Bulls needed to run hard again…after waiting for the Fed to make sure.  This all happened less than average volume in the SPY and QQQ and slightly above-average volume in the DIA. 

The major economic news scheduled for Wednesday included EIA Weekly Crude Oil Inventories, which came in with a larger drawdown than expected at -1.952 million barrels (compared to a forecast of -0.900 million barrels and a bit more than the prior week’s 1.536-million-barrel drawdown).  Later, the Fed held the Fed Funds Rate at 5.50%.  Meanwhile, the Fed Q1 Current Interest Rate came in at 4.6%, down half of a percent from the 5.4% in December.  At the same time, the Fed Q1 1^st Year Interest Rate Projection was 3.9%, down sharply from December’s 4.6% projection.  Looking out further, the Fed Q1 2^nd Year Interest Rate Projection also fell a half percent to 3.1% from December’s 3.6%.  Finally, Fed Q1 Longer Term Interest Rate Projection rose a tick to 2.6%, up from 2.5% in December.

In Fed news, as expected the FOMC kept its benchmark Fed Funds Rates steady at 5.25% – 5.50% (a 23-year high).  The Fed indicated that, on average, they still expect three rate cuts in 2024.  (The majority of voters favor three.)  This was a relief for the markets that had started to believe the naysayers who had already begun talking of two or even just one cut this year.  Still, the FOMC is more hawkish than in recent statements and the indication is the half of the board members (voters and non-voters) expect less than three cuts. Interestingly, the dot plots (average interest rate forecasts of FOMC members) found current rates significantly lower than they did in December.  They also expect one year and two years out interest rates also to be significantly lower than they had predicted in December.  However, their forecast for long-term interest rates increased by a tenth of a percent.  All-in-all, some analysts, including CNBC’s Steve Leesman seemed to think nothing major had changed, with the exception that the Fed believes the job market is still strong and not as much moderating as the previous statement.  He said there was greater consensus among FOMC members with closer clustering of dot plot inputs.  This could be seen as just a bit more hawkish in the longer-term, but with a dovish mid-term view (removing one rate cut next year while leaving 2024 alone).

During his presser, Fed Chair Powell said, “The economy is strong, inflation has come way down,” … “and that gives us the ability to approach this question carefully and feel more confident that inflation is moving down sustainably at 2% when we take that step to begin dialing back our restrictive policy.”  “(Right now) we believe that our policy rate is likely at its peak for this type of cycle, and that if the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year.”  Also as expected, Powell said “We are prepared to maintain the current target range for the federal funds rate for longer if appropriate.” … “(However) if there were significant weakening in the data, particularly in the labor market, that could also be a reason for us to begin the process of reducing rates.”  While addressing the future, Powell said “My instinct would be that rates will not go back down to the very low levels that prevailed before the onset of the coronavirus pandemic in the spring of 2020.”  (This seemed to indicate that Powell felt rates had been kept too low for too long prior to the pandemic.)  With regard to Fed Balance Sheet reductions (quantitative tightening), the Chair said “It will be appropriate to slow the pace of run-off fairly soon.” 

After the close, CHWY, GES, KBH, LX, and MU all reported beats on both revenue and earnings.  Meanwhile, SCS, and WOR reported misses on revenue while beating on earnings.  However, FIVE missed on both the top and bottom line.  It is worth noting that FIVE lowered its guidance while MU raised its forward guidance.

In stock news, on Wednesday, APA announced it has sold its entire stake of KNTK for $441 million.  Later, Reuters reported that 20,000 LUV flight attendants have reached another tentative deal with the company and the union will vote on the new deal, after rejecting the previous tentative deal.  (The rejected deal offered a 20% raise for 2024 and 3% annual raises after that through 2028.)  At the same time, INTC announced a plant to invest $100 billion in four states between now and 2027 to revitalize US chip manufacturing. Later, Reuters reported APO offered $11 billion for PARA’s Hollywood film studio.  At the same time, SNPS announced it would be seeking a buyer for its Software Integrity business unit.  Later, UNH said it has restored its medical claim processing services (using AMZN cloud services) and will begin working on the month backlog of claims.

In stock legal and governmental news, on Wednesday, VZ announced it will begin complying with a 2022 FCC mandate that requires broadband providers to display a comparison label (similar to food nutrition labels).  VZ is the first company to comply with smaller internet providers having until October to comply.  At the same time, the NHTSA announced that MBGAF (Mercedes Benz) will recall 116k vehicles related to an unsecured 48v cable.  Later, the FDA approved a Phase II clinical trial for PBYI’s breast cancer treatment.  At the same time, the French competition authority hit GOOGL with a $272 million fine for breaches of intellectual property rules related to its dealings with media publishers (stealing content to feed AI).  Later, INTC signed an agreement with the Biden Administration to receive $8.5 billion in grants and up to $11 billion in loans for building plants in AZ, OH, OR, and NM.  Elsewhere, in the EU, META, MSFT, MTCH, and Elon Musk’s X filed amicus briefs supporting Epic Games and claiming that AAPL had failed to honor a court-ordered injunction governing payments from its app store.  Later, the FCC announced it is investigating AMZN for selling illegal electronic products, such as Wifi, GPS, and security camera jammers.  After the close, Bloomberg reported that the Dept. of Justice would sue AAPL for antitrust violations by blocking competitors from accessing hardware and software features on its iPhone.

Overnight, Asian markets leaned heavily to the green side.  South Korea (+2.41%), Japan (+2.03%), and Hong Kong (+1.93%) led the way for the 10 gaining exchanges with only Shenzhen (-0.36%) and Shanghai (-0.08%) in the red.  In Europe, the same picture is taking shape at midday.  Only two of 15 exchanges are showing red as the CAC (-0.20%), DAX (+0.38%), and FTSE (+1.02%) lead the region higher on volume in early afternoon trade.  In the US, as of 7:30 a.m., Futures are pointing toward a gap higher.  The DIA implies a +0.22% open, the SPY is implying a +0.36% open, and the QQQ implies a +0.81% open at this hour.  At the same time, 10-year bond yields are down sharply to 4.233% and Oil (WTI) is off half of a percent to $80.84 per barrel in early trading.

The major economic news scheduled for Thursday include Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, Philly Fed Mfg. Index, and Philly Fed. Mfg. Employment (all at 8:30 a.m.), S&P Global Mfg. PMI, S&P Global Services PMI, S&P Global Composite PMI (all at 9:45 a.m.), Feb. Existing Home Sales (10 a.m.), and Fed Balance Sheet (4:30 p.m.).  The major earnings reports scheduled for before the open are limited to ASO, ACN, BZUN, CMC, DRI, DBI, FDS, LU, TITN, and WGO.  Then, after the close, AIR, FDX, LULU, NKE, and WS report.

In economic news later this week, on Friday the only scheduled news is Fed member Bostic speaking.

In terms of earnings reports later this week, there are no major earnings reports scheduled for Friday.

In government shutdown news, on Wednesday, the House missed its deadline to get out the written language of the six spending bills.  (Reporters were told the bills will be between 1000 to 2000 pages.)  House Republicans have a rule requiring that they are given three full days to read the text prior to a vote on any bill.  This would mean the House could not vote until at least Saturday night (if the written version got out last night) or violate that rule.  House Speaker Johnson told Reporters Wednesday that he hopes to wave that rule because he wants to give allowances for the fact many of the Representatives (of both parties) will be travelling and gone for the weekend.  Some GOP critics (MAGA) called for a shutdown to avoid breaking the GOP rule.  Of course, none of that even considers the time needed in the more procedure-laden Senate.  (The Senate Majority Leader cannot just call a vote as the Speaker can do in the House.)  The short version of this story is that unless another continuing resolution is passed, we are extremely likely to see a partial government shutdown starting one minute after midnight Saturday morning.  For what it is worth, the six spending bills give a budget increase to defense while holding other areas at the 2023 budget level, giving us a $1.66 trillion.

In miscellaneous news, the EPA released revised average production emissions rules for automakers.  The new rules do not take effect until 2027 and are greatly softened from the earlier version of the rules after heavy pressure from TM, GM, F, STLA, etc.  Reportedly, the argument that swayed the softening of restrictions was that hybrid vehicles (internal combustion plus battery-operated) actually cause less long-term CO2 despite higher emissions, because they have smaller batteries and their manufacture causes a smaller carbon footprint than full-electric vehicles after electricity and battery production are considered.  Still, the new rule has the strongest restrictions to date when and if they come into effect.

With that background, it looks like the Bulls are pushing again this morning. All three major index ETFs gapped higher to start the premarket. However, they are putting in small, black-bodied candles so far in the early session with morning news yet to come. All three are above their T-line (8ema) and all three T-lines are rising. So, the short-term trend is now clearly bullish. Meanwhile, the longer-term trend in the three major index ETFs have all recovered and are bullish again. In terms of extension, we are starting to seem a little stretched above the T-line, especially in the QQQ and the T2122 indicator is now in the upper part of its overbought territory. So, we should expect rest (consolidation) or pullback soon but that does not mean today necessarily. This means both sides still have room to run if they can gather the momentum, but the bears have more slack to work with now. Looking at those 10 Big Dog tech names, nine of the 10 are in the green during the premarket with only AAPL and its regulatory issues lagging. (Again, it is the AI names of NVDA, AMD, and INTC leading the way.) This tends to point toward another green day, since it is hard to fight the sheer dollar flows from those 10 tickers.

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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