Markets gapped and then ground on Thursday.  SPY gapped 0.64% higher, DIA gapped up 0.41%, and QQQ gapped up 1.11% at the open.  From there, SPY and QQQ sold off until just after 11 a.m., recross the opening gap in SPY and recrossing 85% of its gap by then.  At that point, those two major index ETFs ground sideways inside the gap.  For its part, DIA chopped sideways along its open all day.  This action gave us gap-up, black-bodied candles in all three major index ETFs.  The SPY and QQQ printed large, black, Marubozu candles that ended the day little-changed from Wednesday.  Meanwhile, DIA gave us a gap-up, black-bodied, Doji type candle that also printed a new all-time high and closed at a new all-time high close. This all happened on below-average volume in the SPY and QQQ as well as slightly above-average volume in DIA.

On the day, five of the 10 sectors were in the green and the other half in the red with Utilities (-0.90%) well out in front leading the losers lower.  At the same time, on the other side, Financial Services (+0.40%) led a more tightly-grouped pack of gainers. Meanwhile, SPY gained 0.01%, DIA gained 0.40%, and QQQ gained 0.07%. VXX fell 1.65% to close at 52.45 and T2122 dropped back to just inside the bottom edge of its overbought territory to close at 80.72.  At the same time, 10-Year bond yields spiked again to close at 4.098% while Oil (WTI) gained 0.45% to close at $70.71 per barrel.   So, the Bulls gapped markets higher on strong earnings and raised guidance from the world’s largest chipmaker, TSM (+9.77%), which had countered the previous day’s fear over that crucial sector sewn by ASML (+2.50%).

The major economic news scheduled for Thursday included Weekly Initial Jobless Claims, which were down as expected at 241k (compared to a 241k forecast and the prior week’s 260k number).  In terms of on-going claims, Weekly Continuing Jobless Claims were up, but not as much as feared at 1,867k (versus a 1,870k forecast and the prior week’s 1,858k reading).  At the same time, September Core Retail Sales were much stronger than expected at +0.5% (compared to a +0.1% forecast and August’s +0.2% value).  On the manufacturing front, the Philly Fed Mfg. Index was also much stronger than predicted at 10.3 (versus a 4.2 forecast and well up from September’s 1.7 reading).  This was done with less labor as the Philly Fed Mfg. Employment Index was down to -2.2 (compared to a September value of 10.7).  At the same time, the September Retail Sales (month-on-month) were up to +0.4% (versus the +0.3% forecast and well above August’s +0.1% value). Later, September Industrial Production fell 0.3% (compared to a projected fall of 0.1% and well below August’s 0.3% climb).  Later, August Business Inventories remained steady at 0.3% (versus a forecast and July reading of 0.3%).  However, August Retail Inventories climbed a tick to 0.5% (compared to a forecast and July value of 0.4%).  Later, the Weekly EIA Crude Oil Inventories showed a drawdown of 2.191 million barrels (versus a forecasted inventory build of 1.800 million barrels and the previous week’s 5.810-million-barrel build).  At the close, the TIC Net Long-Term Transactions for August showed a decline to $111.40 billion (compared to the July $137.90 billion value).  Then, after the close, the Fed Balance Sheet showed another reduction for the week at $7.039 trillion (versus last week’s $7.047 trillion).

In other news, on Thursday the Treasury Dept. released data that showed foreign holdings of US Treasury bonds surged to an all-time high in August after four straight months of increases.  The Treasury reported that foreigners owned $8.503 trillion US bonds in August, up 11.5% from one year earlier.  Japan remained the largest foreign holder of bonds at $1.129 trillion while China’s holdings fell to $774.6 billion.

After the close, OZK, CCK, ISRG, and NFLX all reported beats on both the revenue and earnings lines.  Meanwhile, WAL beat on revenue while missing on earnings.  However, WDFC missed on both the top and bottom lines. 

In stock news, on Thursday SBGSY announced it had acquired controlling interest in private firm Motivair for $850 million. (Motivair makes liquid cooling technologies for data centers.)  At the same time, the Financial Time reported that UBER has explored the idea of making a $20 billion offer to acquire EXPE.  Later, NBRNF was acquired by private firm Bidco for $248.5 million.  At the same time, META announced it partnered with private studio Blumhouse Productions to test its generative AI for video creation. At the same time, AMZN announced it was dipping a toe into the news market for Prime Video as it has hired NBC anchor Brian Williams to lead its coverage of the US election day.  (This is noteworthy because Prime already offers a number of news channels such as CMCSA’s NBC, DIS’s ABC, and CNN.)   Later, Reuters reported that BP is considering selling a minority stake in its offshore wind business. (This is reportedly another move by CEO Auchincloss to reduce the company’s renewables exposure as he was brought in to refocus on fossil fuels.) 

Elsewhere, TSLA tried to rebound from the embarrassment of last week’s Optimus robot prototype show (which was later acknowledged to just be radio-controlled robots).  Thursday, TSLA released a less than 90 second video (with numerous jump cuts) purporting to show an Optimus prototype navigating by itself on a simulated simplistic factory environment. Later, ZUO announced it had agreed to be acquired by the Singapore Wealth Fund and buyout form Silver Lake in a deal valued at $1.7 billion ($10/share).  At the same time, PPG announced it will lay off 1,800 employees across the US and Europe as well as close some plants.  PPG said this was part of reducing structural costs in Europe.  Meanwhile, the Financial Times reported that META has fired around two dozen employees from its Los Angeles office for misusing their company meal allowances for items like laundry detergent and acne treatment pads.

In stock legal and governmental news, on Thursday the Federal Energy Regulatory Commission (FERC) issued an order allowing LNG to move liquified natural gas from its Corpus Christi storage facilities onto tankers. (Having cleared this key hurdle, LNG expects to have the plant producing export gas by year end.)  Later, and somewhat oddly, GM announced it “fully supports” the Mexican government’s plans to strengthen supply chains by bringing production to Mexico rather than importing components.  GM did not comment when asked to comment on speculation about its future plans in Mexico.  At the same time, the FCC proposed a $147k fine for DIS’s ESPN network for violating broadcast rules by broadcasting emergency alert tones during promotional segments in the 2023-2024 NBA basketball season.  Later, two consumer groups and two labor unions urged the FCC to block the acquisition of CTLC by NVO in a $16.5 billion deal.  (The groups claim that deal would threaten competition in the weight loss drugs and cutting-edge gene therapies markets.) 

Elsewhere, the US Dept. of Energy approved a total of nearly $3 billion in conditional loan guarantees for two sustainable aviation fuel projects from CLMT and GEVO.  Later, Reuters reported exclusively that President Biden had directed the Commerce Dept., Dept. of Defense, and State Dept. will ease export restrictions on some satellite and spacecraft-related products to US allies.  This includes technologies made by LMT, LHX, and BA.  At the same time, a suit has been filed against ADM alleging the company failed to maintain and test safety systems on grain equipment for years, resulting in an explosion and the immolation of a worker last year.  Later, the FTC has opened an investigation into DE over the company’s repair policies and restrictions the company puts on hardware and software to prevent customers from repairing their purchased products.  (DE already faces antitrust lawsuits over the same issue in multiple states.)

In miscellaneous news, NOAA released an updated forecast calling for a warmer and drier-than-normal winter in the south and central Great Plains.  This effect of La Nina is expected to worsen the drought across the plains, hitting the US’s top wheat-producing area and impacting wheat yields.  (52% of US wheat-producing areas are currently in a drought condition, compared to 44% just two weeks ago.)  However, a wetter than normal condition is forecast for the Great Lakes and Ohio River Valley regions this winter.  Elsewhere, the CA state Dept. of Food and Ag reported that cattle are dying from bird flu as they are being stressed by heat (at least six days of 95-plus-degree temperatures so far in October).  CA reported that herds are now seeing 15%-20% mortality rates (compared to 2% in other states).

In Middle East news, on Thursday, Israeli attacks in Gaza and Lebanon continued. The Israeli government also confirmed that it had, in fact, killed the Hamas military leader Yahya Sinwar on Wednesday.  (An IDF unit was operating in Gaza when it stumbled into a 3-man Hamas ground unit. In the firefight that resulted, Israel killed the other two Hamas militants and seeing the severely injured Sinwar was still alive, fired another tank shell, which killed him. After the attack, they recognized Sinwar and collected his body for identification.  He was identified by dental records, which Israel had because he had previously spent 23 years in Israeli prison before being released in a prisoner exchange in 2011.) Sinwar had been the subject or a ton of intelligence work and targeted attacks for over a year and had always been thought to be in tunnels hiding with hostages.  However, it turns out he had actually been fighting as a regular Hamas fighter all along.  While many hope this offers an opportunity to end the Israeli bombing and invasion of Gaza, Israeli PM Netanyahu said the fighting will continue. In addition, Hamas has already named a replacement for Sinwar. Elsewhere, the US confirmed B2 bombing of five weapon storage targets in areas controlled by Houthi rebels in Yemen.

Overnight, Asian markets were mostly green with just three of 12 exchanges below break-even.  Shenzhen (+4.71%), Hong Kong (+3.61%), Shanghai (+2.91%), and Taiwan (+1.88%) paced the gains.  Australian (-0.87%) and South Korea (-0.59%) led the losses.  In Europe, we see a more mixed picture with five of 14 bourses in the red at midday.  The CAC (+0.58%), DAX (+0.29%), and FTSE (-0.27%) lead the region and are typical of the early afternoon trade.  In the US, as of 7:30 a.m., Futures are pointing toward a mixed but generally green start to the day.  The DIA implies a -0.05% open, the SPY is implying a +0.21% open, and the QQQ implies a +0.49% open at this hour.  At the same time, 10-Year bond yields are up to 4.108% and Oil (WTI) is down four-tenths of a percent to $70.40 per barrel in early trading.

The major economic news scheduled for Friday is limited to Preliminary September Building Permits and Preliminary September Housing Starts (both at 8:30 a.m.).  We also hear from Fed member Bostic (9:30 a.m.), Fed member Kashkari (10 a.m.), Fed Governor Waller (12:10 p.m.), and Fed member Bostic again (12:30 p.m.).  The major earnings reports scheduled for before the open include ALLY, AXP, ALV, CMA, FITB, PG, RF, and SLB.  Then, after the close, there are not reports scheduled.

So far this morning, VLVLY (Volvo), ALLY, CMA, FITB, and RF all reported beats on both the revenue and earnings lines.  Meanwhile, AXP, PG, and SLB missed on revenue while beating on earnings. However, ALV missed on both the top and bottom lines.

In late-breaking news, GOOGL announced they had replaced the head of their search and ads unit leader (Raghaven) with longtime Google employee Nick Fox.  GOOGL’s statement said that Raghaven will move to the role of Chief Technologist.  (It was unclear if this was a new position or if he was replacing someone else.)  Elsewhere, CVS replaced their CEO Lynch with longtime executive David Joyner, effective immediately.  Meanwhile, the Chinese rally may be explained by its release of “better-than-expected” GDP growth of 4.6% year-on-year for Q3, where the consensus analyst estimate had been 4.5%. (Still, this was still the slowest growth in six quarters.) The tell may be that Beijing almost immediately announced new stimulus that propped up the Chinese markets.

With that background, it looks like the Bulls are in charge again in the SPY and QQQ as they both gapped higher to start the premarket and have followed-through with white-body candles. For its part, DIA is down a bit after opening the early session higher and then trading indecisively but lower. All three remain above their T-line (8ema). So, the short-term trend remains bullish. The mid-term and longer-term trends are also strongly Bullish in all three. With regard to extension, none of the major index ETFs are too far extended from its T-line (8ema). However, the T2122 indicator is still at the lower edge of its overbought territory. So, markets have room to run either direction, but the Bears have more slack to work with again today. With regard to those 10 big dog tickers, nine of the 10 are in the green this morning. NFLX (+6.74%) leads on price move after blow-out earnings last night. The biggest dog, NVDA (+0.93%) has traded a bit more than twice the next closest ticker in terms of dollar-volume traded. Finally, remember its Friday and options expiration Friday at that. So prepare your account for the day and 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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