Thursday saw a significant gap lower in all three major index ETFs, perhaps mostly on warnings from META and MSFT that spiraling AI costs may impact earnings. SPY gapped down 0.74%, DIA gapped down 0.63%, and QQQ gapped down 0.84%.  From there, SPY and QQQ immediately began following-through with a selloff, finding some support shortly after 11 a.m. and then meandering sideways until the end of the day. For its part, after the open, DIA chopped sideways along the open until 10:25 a.m. before beginning to selloff sharply until the low of the day at 11 a.m.  At that point, DIA rallied back to its open by 1:30 p.m. and then meandered sideways until the end of the day. All three major index ETFs sold off sharply the last 10 minutes with SPY and QQQ going out very near the low of the day. 

This action gave us gap-down, black-bodied candles in all three.  SPY was a black Marubozu (shaved head) candle that gapped below its T-line (8ema) and closed right on its 50sma.  DIA printed a gap-down, black-body Spinning Top candle that gapped down through its 50sma, retested from below and failed that test.  Finally, QQQ gave us a black Marubozu (shaved head) candle that gapped below its T-line, printed a big black candle, but has not reached its 50sma yet.  This happened on above-average volume in all three of the major index ETFs.

On the day, eight of the 10 sectors were in the red with Technology (-2.71%) way, way out in front (by 1.2%) leading the way lower.  On the other side, Utilities (+0.64%) held up far better than most of the market. Meanwhile, SPY lost 1.98%, DIA lost 0.96%, and QQQ lost 2.52%.  VXX spiked 7.65% higher to close at 57.87 (the highest it has been since early August) and T2122 fell just inside of the oversold territory at 17.55.  At the same time, 10-Year bond yields climbed back up to close at 4.286% while Oil (WTI) jumped 2.92% to close at $70.61 per barrel. So, Thursday was a rough, rough day for the Bulls as Bears gapped us lower and then followed-through in the morning.  We saw a midday sideways chop as the Bulls tried to find their footing.  However, the dark pool came in to close out the day on a whoosh lower. The big losers on the day were the Tech giants, with MSFT (-6.03%), NVDA (-4.81%), and META (-4.09%) leading the parade lower.  Of the 10 “Big Dogs,” only NFLX (+0.30%) was in the green.

The major economic news scheduled for Thursday included Weekly Initial Jobless Claims, which came in lower than expected at 216k (compared to a forecast of 229k and the prior week’s reading of 228k).  In terms of ongoing claims, Weekly Continuing Jobless Claims were also well down to 1,862k (versus the 1,890k forecast and prior week’s 1,888k).  At the same time, the September Core PCE Price Index came in as anticipated at a flat 2.7% (Year-on-Year), compared to the 2.6% forecast and August value of 2.7%).  On the monthly side, the September Core PCE Price Index was as predicted at 0.3% (versus the 0.3% forecast but up a tick from August’s 0.2% value).  For the headline numbers, the September PCE Price Index was down as predicted to 2.1% (compared to a 2.1% forecast and the August 2.3% reading). This made it the lowest PCE number since 2021.  For the monthly value, the September PCE Price Index was 0.2% (versus a 0.2% forecast but up a tick from August’s 0.1% Month-on-Month value).  At the same time, the Q3 Employment Cost Index was lower than expected at 0.8% (compared to a forecast and Q2 reading of 0.9%).  Meanwhile, September Personal Spending, Month-on-Month, was up more than anticipated at +0.5% (versus a +0.4% forecast and August’s +0.3% number). Then, after the close, the Fed Balance Sheet showed a $16 billion decline to $7.013 trillion (from $7.029 trillion).

After the close, AMZN, AAPL, TEAM, CVCO, CNO, CPS, EMN, ERIE, JNPR, MERC, RGA, SEM, SKYW, X, and VICI all reported beats on both the revenue and earnings lines.  Meanwhile, AES, AMCR, CON, DORM, ICFI, IR, MTZ, SM, and SON missed on revenue while beating on earnings. On the other side, INTC beat on revenue while missing on earnings.  However, CAR and CTRA missed on both the top and bottom lines.

Drilling down, AMZN shares soared after-hours on huge beats with ad revenue up 19% year-on-year and cloud services posting the biggest profit in a decade.  At the same time, INTC spiked 7% on an earnings miss that was less than feared and upbeat guidance. Not to be outdone, AAPL beat and announced that it is seeing early demand for the iPhone 16 (where AAPL is counting on AI revenue to generate future growth). So, despite the very down day for big tech, after-hours a sigh of relief seemed to be released by markets on the three big reports.

In stock news, on Thursday, SIEGY (Siemens) announced it had agreed to buy ALTR for $10.6 billion, strengthening its position in the industrial software market. This will raise SIEGY to number 2 (from number 4) in that market, behind just ANSS.  At the same time, Korean Samsun Electronics announced it had made progress on new “high-bandwidth memory” products, which it said are advancing through qualification tests. (As a result, direct competitor MU, which has recently said it is still in “early days” on its own HBM products, stock fell 4.5%.) Later, GOOGL announced a set of AI features for map applications (such as Google Maps).  At the same time, CMCSA said it is considering the spinoff of its cable TV networks, such as CNBC and MSNBC (but not including NBC or the Peacock streaming network).  Later, PTON announced it has hired former AAPL exec Peter Stern as its new CEO effective January 1. Stern will be tasked with guiding a turnaround for PTON. At the same time, Reuters reported that sources indicate the F has told employees that the company will cut management bonuses by 65% if the company does not speed up the implementation of cost-cutting and quality improvement programs. 

Later, OpenAI announced the release of ChatGPT search capability. The previously-announced tool increases competition for GOOGL’s primary search business.  At the same time, COP raised its annual output forecast, citing improvements in operational efficiency. (COP output has increased 6% year-on-year to 1.92 million barrels per day. It now forecasts 1.94-1.95 million barrels per day for the 2024 average.)  Later, F announced it will halt production of its F-150 Lightning from November 18 until January 6, 2025.  (This includes previously-planned holiday plant shutdown weeks.) Although sales of the vehicle are up 86% year-on-year, they have not grown as much as the company anticipated. After the close, CNBC reported that BA and the Machinist Union reached a sweetened tentative agreement.  (The new dela would provide a 38% pay increase, versus the previous 35% offer that was rejected, over four years. With compounding, it would be a 44% increase by the end of the agreement. It also offers a $12k ratification bonus…or employees could choose a $7k bonus with a $5k contribution to their 401k.  However, the agreement does not include the return of a pension plan that was widely cited as the main reason for the two earlier rejections.  The union urged member to accept the offer and the vote will be Monday.)

In stock legal and governmental news, on Thursday, the European Commission told NVDA that the company needs the approval of the EU Antitrust Regulator before it can close the $700 million purchase of Run:ai.  The public statement said, “The transaction threatens to significantly affect competition in the markets where NVIDIA and Run:ai are active, which are likely to be at least European Economic Area-wide and therefore include the referring country Italy.”  Later, the US 6^th Circuit Court of Appeals heard arguments in a suit brought against the FCC.  In the hearing, brought by the Telecom industry, the court questioned FCC authority to reinstate “Net Neutrality” rules. (This is pretty novel position, considering that the FCC was the agency that did away with the rules in the first place back in 2017.) The current situation allows US telecom providers to charge different rates and set different speeds for internet traffic from AMZN, MSFT, AAPL, GOOGL, and META (among others)…basically as a way to get the tech giants to pay more.  There was no timeline provided for a ruling in the case.

Elsewhere, Russia fined GOOGL $20 decillion ($2 followed by 36 zeroes) which is 20 billion, trillion, trillion dollars.  The fine was for not paying earlier fines for blocking pro-Russian propaganda channels on YouTube.  After the close, a jury in a MO state court found that ABT and RBGLY (Reckitt Benckiser) were not responsible for debilitating intestinal disease for failing to warn the parents of the premature baby formula risks. (This is one of roughly 1,000 similar lawsuits in process in the US.)  At the same time, the SEC announced that JPM has agreed to pay $100 million to settle charges the bank misled customers who invested in “conduit” products. (This includes a $10 million fine and $90 million to be distributed to conduit product customers. It also included a censure, but no admission of liability.)  Meanwhile, a TX jury ordered TXT to pay $16 million to private CA company Rogerson Aircraft for giving the latter’s proprietary information to a rival parts supplier.

In miscellaneous news, on Thursday, oil spiked higher on an Axios report that Israeli intelligence had told it Iran is preparing to attack Israel from inside Iraqi territory.  In other oil news, the US Energy Information Administration reported that US production rose 1.5% to hit another record high in August of 13.4 million barrels per day.  (That topped the previous record of 13.31 million barrels per day in December 2023.)  At the same time, US natural gas production slowed 0.6% to 115.9 billion cubic feet in August.

In Middle East news, on Thursday, multiple outlets reported the Israeli military leaders say the IDF have achieved all of its objectives in both Gaza and Lebanon.  However, the reports also indicate that PM Netanyahu is unlikely to agree to end the campaigns and certainly not before the US election.  Instead, on Thursday, Netanyahu again said the fighting will continue until “absolute victory” and announced that Israel’s “supreme objective” is stopping Iran from getting nuclear weapons.  For its part, Hamas rejected the Egyptian-proposed 2-day ceasefire in exchange for an unspecified number of Israeli hostages.  In northern Israel, seven people (four of which were foreign workers) were killed by a “direct hit.” It was not definitive, but assumed, this resulted from a Hezbollah rocket either direct or after interception.  In Lebanon, Israeli strikes in the North and East of the country (near Baalbek) killed 45.

Overnight, Asian markets were mostly red with just three of the 12 exchanges above break-even.  Japan (-2.63%) was by far the biggest loser, while Hong Kong (+0.93%) led the gainers.  However, in Europe, we see green across the board at midday with all 14 bourses strongly green.  The CAC (+0.71%), DAX (+0.60%), and FTSE (+0.78%) lead the region higher in early afternoon trade.  In the US, as of 7:40 a.m., Futures are pointing toward a modest higher open.  The DIA implies a +0.40% open, the SPY is implying a +0.40% open, and the QQQ implies a +0.47% open at this hour.  At the same time, 10-Year bond yields are up to 4.295% and Oil (WTI) is up 1.89% to $70.57 per barrel in early trading.

The major economic news scheduled for Friday includes October Average Hourly Earnings, October Nonfarm Payrolls, October Private Nonfarm Payrolls, October Participation Rate, and October Unemployment Rate (all at 8:30 a.m.), October S&P Global Mfg. PMI (9:45 a.m.), September Construction Spending, October ISM Mfg. Employment, October ISM Mfg. PMI, October ISM Mfg. Employment, October ISM Mfg. Prices (all at 10 a.m.).  The major earnings reports scheduled for before the open include AMR, ARCB, ARES, BTSG, CAH, CBOE, GTLS, CHTR, CVX, CHD, D, ENB, XOM, IMO, LYB, MGA, NVT, MD, PPL, SPG, TROW, TXNM, USM, WAT, and W.  There are no earnings scheduled for after the close.

So far this morning, ACDVF, ARES, CAH, CBOE, CHTR, CHD, ENB, NMR, MD, SCGLY, TXNM, and WAT all reported beats on both the revenue and earnings lines. Meanwhile, CVX, D, XOM, NVT, PPL, TROW, and W missed on revenue while beating on earnings. On the other side, AMR, BTSG, and LYB beat on revenue while missing on earnings.  However, ARCB, GTLS, and MGA missed on both the top and bottom lines.

With that background, it looks like the market is modestly bullish early this morning. All three major index ETFs have gapped higher and are printing white-body, inside candles against Thursday’s big black candles. All of them are mostly body at this point. So, indecision is not an issue at least yet (ahead of data). With all three below their T-line after the rough session Thursday, the short-term trend is now bearish. However, the mid-term and longer-term trends are obviously still strongly Bullish in all three, as they still sit not far from all-time highs. With regard to extension, none of the major index ETFs are too far extended from its T-line (8ema), but QQQ is pushing that limit. In addition, the T2122 indicator is now just inside the oversold area. So, markets do have room to run either direction if traders can find momentum, but the Bulls have more slack to work with today. With regard to those 10 big dog tickers, eight of the 10 are in the green again this morning. As mentioned, AMZN (+7.26%) and INTC (+5.34%) lead the gains in premarket with AAPL (-1.73%) the laggard. AMZN has traded enough stock to even be leading in dollar-volume sold, although normal leader NVDA is close behind it. Once again, overall the premarket volume is light today. Don’t forget it’s Friday, so pay yourself and prepare for the weekend news cycle.

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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