Friday was a bullish but mostly sideways day in the market. SPY opened up 0.12%, DIA opened 0.15% higher, and QQQ opened 0.17% lower. At that point, all three major index ETFs rallied all morning, with DIA reaching the high of the day at noon, SPY hitting its high at 1:40 p.m., and QQQ reaching the high of day at 1:55 p.m. From there, all three went on a modest, undulating selloff the rest of the day. This gave us white-body candles with upper wicks. SPY gapped up for its fifth-straight gain on well-below average volume. Meanwhile, DIA gapped up for a third-straight gain and a backing off from the all-time high retest and did this on above-average volume. At the same time, QQQ gapped down, but closed higher for the fifth-consecutive time and closed just down from its downtrend line going back to the all-time high in early July. QQQ did this on below-average volume.
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On the day, all 10 sectors were in the green again, with Basic Materials (+1.63%) and Utilities (+1.61%) well out in front leading the market higher. On the other side, Energy (+0.70%), Communications Services (+0.77%), and Consumer Defensive (+0.78%) were the laggard sectors. Meanwhile, SPY gained 0.52%, DIA gained 0.72%, and QQQ gained 0.45%. VXX fell slightly to close at 48.79% and T2122 jumped higher into the top of its over-bought range at 95.09. At the same time, 10-Year bond yields fell to close at 3.657% while Oil (WTI) gained 0.39% to close at $69.24 per barrel. So, on Friday saw a strong week come to an end on another positive note. For the week, SPY gained 4.01%, QQQ gained 5.94%, and DIA “lagged” while gaining 2.59%. (This was collectively the best week in the market of 2024.)
The major economic news scheduled for Friday included the August Export Price Index, which came in much lower than expected at -0.7% (compared to a -0.1% forecast and July’s +0.5% reading). At the same time, the August Import Price Index was also lower than anticipated at -0.3% (versus a -0.2% forecast and well below the July +0.1% value). Later, Preliminary September Michigan Consumer Sentiment was reported at 69.0 (above the 68.3 forecast and 67.9 August number). At the same time, Preliminary September Michigan Consumer Expectations also came in above the predictions at 73.0 (versus the 71.0 forecast and 72.1 August value). On the future outlook front, Michigan 1-Year Inflation Expectations were reported down at 2.7% (less than the 2.8% forecast and August reading). However, the Michigan 5-Year Inflation Expectations were up to 3.1% (compared to a forecast and August reading of 3.0%).
In stock news, on Friday, UBER announced an expansion of its partnership with GOOGL’s Waymo self-driving taxi unit. The partnership will bring automated ride hailing to Austin TX and Atlanta GA in early 2025. At the same time, Danish DSDVF announced it had agreed to acquire German logistics firm Schenker for $15.85 billion. Later, Bloomberg reported that DBRG is considering the sale of its Southeast Asian unit (EdgePoint Infrastructure) for roughly $4 billion. At the same time, BCSF (Bain Capital) has hired advisers to help in the sale of its British home and car insurer Esure for roughly $1.31 billion). Later, the CFO of BA told reporters the company is eager to return to talks after a strike of 33k workers at its Pacific Northwest plants have shut down production of the company’s best-selling 737 MAX jets. He went on to say the strike now puts delivery targets for 737 MAX planes in jeopardy and will have a financial impact unless settled quickly.
Separately both MCO and Fitch announced they will reduce their credit ratings on BA to “junk status” unless the strike ends quickly. However, no exact definition of “quickly” was provided in either announcement.) On Saturday, DIS and DirecTV announced they had reached a deal that allowed the latter to resume broadcast of ESPN and DIS’s other channels to DirecTV’s 11 million customers after a two-week shutdown. (DirecTV appears to have gotten what they wanted from the negotiation. Specifically, that was the ability to offer DIS channels on an “ala carte” and “skinny package” basis to its customers…as opposed to DIS requiring “all or nothing” offerings of its channels.) At the same time, Reuters reported that T is again in talks with SATS over the merger of their Dish and DirecTV companies. (The initial merger attempt was blocked by the US Justice Dept. in 2002 over anti-trust concerns. However, the entertainment market has obviously changed dramatically since then with streaming and cable market growth.)
In stock legal and governmental news, on Friday, the Washington Post reported that the White House has signaled a delay in making a decision on the Nippon Steel buyout of X. The news comes after Nippon Steel executives flew to Washington to lobby for the deal and the two companies sent a letter to the President urging him to approve the deal or delay the decision until after elections (despite other resistance from both political parties and the Committee on Foreign Investment in the US opposing the deal). Later, Reuters exclusively reported that sources tell it that EU antitrust officials are considering exactly what practices GOOGL will be ordered to end. However, they will not order the breakup of GOOGL (separating ad technology business from the ad sales unit). Meanwhile, a DE judge overruled a Newsmax (planning to IPO in late 2024) motion and ruled the company must face trial for its defamation of Smartmatic (as part of a campaign in support of the disgraced former President’s election lies).
Elsewhere, Bloomberg reported that the EU is planning a final vote on raising tariffs on Chinese EVs on September 25. Later, the State Dept. approved the sale of $7.2 billion of LMT F-35 fighter jets to Romania. Later, the US EPA said it has found that ADM violated federal safe drinking water laws as well as the company’s underground injection permit with leaks at its carbon sequestration facility in IL. At the same time, IEP won the dismissal of a lawsuit alleging the company artificially inflated its share price by issuing “unsustainably high dividends.” Later, after the close, the Dept. of Justice announced WBA had agreed to pay $106.8 million to settle charges it fraudulently billed the US government (Medicare / Medicaid) for prescriptions it never filled. Alsos after the close, Bloomberg reported that INTC has officially qualified for as much as $3.5 billion in federal grants to make chips for the Dept. of Defense. Saturday, HD agreed to pay $1.98 million to CA for over-charging CA consumers via “checkout scanner violations” where checkout scanners charged higher prices than were listed on the item or shelf.
In miscellaneous news, on Friday, China announced it will raise its retirement age for the first time since 1978. The Chinese male retirement age will go from 60 to 63 while women’s retirement will be pushed from 50 to 55. For women in management jobs the increase goes from 58 instead of 55. However, the Chinese government will implement these changes slowly to avoid public unrest. (This seems to be the country’s first real public acknowledgement, without saying it out loud, of the country’s demographic crisis.) Elsewhere, on Saturday, China’s Commerce Minister announced that foreign direct investment in China, covering January through August, had fallen 31.5% year-on-year.
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Overnight, Asian markets were mixed but leaned toward the green with just four of the 12 exchanges in the red. Malaysia (+0.84%) and Thailand (+0.78%) led the gainers while New Zealand (-1.00%) and Shenzhen (-0.88%) paced the losses. In Europe, we see a similar picture taking shape with six of the 15 bourses under water at midday. The CAC (+0.02%), DAX (-0.26%), and FTSE (-0.04%) in early afternoon trade. In the US, as of 7 a.m., Futures are pointing toward a mixed start to the day. DIA implies a +0.21% open, the SPY is implying a flat +0.03% open, and QQQ implies a -0.19% open at this hour. At the same time, 10-Year bond yields are down to 3.646% and Oil (WTI) is up almost half a percent to $68.98 per barrel in early trading.
The major economic news scheduled for Monday is limited to the NY Fed Empire State Mfg. Index (8:30 a.m.). here are no major earnings reports scheduled for either before the open or after the close.
In economic news later this week, on Tuesday, we get August Core Retail Sales, August Retail Sales, August Industrial Production, July Business Inventories, July Retail Inventories, and Weekly API Crude Oil Stocks. Then Wednesday, August Building Permits, August Housing Starts, Weekly EIA Crude Oil Inventories, Fed Rate Decision, FOMC Statement, Current Q3 Interest Rate Projection, 1st-Year Q3 Interest Rate Projection, 2nd-Year Q3 Interest Rate Projection, 3rd-Year Q3 Interest Rate Projection, Longer-Term Q3 Interest Rate Projection, FOMC Economic Growth Projections, Fed Chair Press Conference, and TIC Net Long-Term Transactions are reported. On Thursday, we get Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, Q2 Current Account, Philly Fed Mfg. Index, Philly Fed Mfg. Employment, August Existing Home Sales, August US Leading Economic Index, and Fed Balance Sheet. Finally, on Friday, there is no major news, but Fed member Harker speaks.
In terms of earnings reports later this week, on Tuesday we hear from FERG. Then Wednesday, GIS and SCS report. On Thursday, we hear from CBRL, DRI, FDS, FDX, LEN, and MLKN. Finally, on Friday there are no earnings reports of note.
In overnight news, according to Bloomberg the Dollar fell to its lowest level in nine months, with the move driven by a strong Yen, which reached a 14-month high. Most of these machinations come from speculation on not only the Fed but other central bank rate decisions due this week. Speaking of anticipated central bank decisions, the Fedwatch tool tells us the futures trader positions indicate a 59% probability of a half percent Fed rate cut Wednesday while a quarter-point cut has a 41% chance. This is a 30% shift toward half point in the last week. However, those probabilities are volatile, with 15%-20% moves in a day recently. Finally, PFE published mid-stage trial results in the New England Journal of Medicine which say its experimental cancer treatment ponsegromab has shown positive results treating the weight loss (loss of appetite) that is caused by the cancer. (That condition, cachexia, impacts 9 million people worldwide and results in 80% of them dying within one year due to the inability to withstand the actual cancer treatments.)
With that background, it looks as if markets are undecided early in the premarket. DIA opened slightly higher and has put in a white-body candle with almost no wick as it moves to retest its all-time high in the early session. However, SPY opened down modestly and has printed an indecisive Doji candle in the Premarket. At the same time, QQQ opened flat but has printed a black-body candle with little wick as it is working on a Bear Harami candle at this point. All three remain above their T-line (8ema). So, the short-term trend is bullish. The mid-term trend remains mixed with the QQQ bearish and just below its downtrend line. In the longer-term we still have a Bull trend all three major index ETFs. In terms of extension, none of the three major index ETFs are extended above their T-lines. However, at the same time, the T2122 indicator is back in the top end of its overbought range. So, markets have room to run either direction (if one side or the other can find momentum), but the Bears has a little more slack to work with today. With regard to those 10 big dog tickers, they are split evenly between gainers and losers early, but the dollar-volume trading leaders are in the red, led by NVDA (-1.60%), AAPL (-2.34%), and TSLA (-0.03%).
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
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