AAPL Working On Licensing GOOGL AI

On Friday, markets jumped lower and then, for the most part, traded sideways the rest of the day.  SPY gapped down 0.92%, DIA gapped down 0.57%, and QQQ gapped down 0.70%.  After that open, all three major index ETFs chopped sideways around the opening level until 11 a.m.  At that point, all three sold off again before chopping sideways the rest of the day.  The main difference is that the SPY chop had a modest bullish trend.  This action gave us gap-down, black-bodied, Spinning Top candles in all three major index ETFs.  All three gapped down through their T-line (8ema) with QQQ and DIA retesting that level only to fail.  This happened on average volume in the DIA, just less-than-average volume in the SPY, and heavy volume in the QQQ on a triple witching Friday.

On the day, six of the 10 sectors were green as Basic Materials (+0.44%) led the gainers.  At the same time, Technology (-1.25%) was far and away the biggest mover and dragged the whole market down.  (Just 8 tech stocks, NVDA, AAPL, MSFT, AMD, TSLA, META, AMZN, and ADBE, six of which were in the red, traded $164 billion in stock alone on the day.)  Meanwhile, SPY lost 0.99%, the DIA lost 0.79%, and the QQQ lost 1.19%. VXX rose 2.01% to close at 14.19 and T2122 climbed back into the dead center of its mid-range at 52.97.  10-year bond yields climbed again to 4.308% and Oil (WTI) fell a third of a percent to close at $81.00 per barrel.  So, triple witching was kicked off by ADBE -13.67% earnings (sales increase) disappointment.  This was followed up by disappointing Empire State Mfg. and Industrial Production numbers. For the most part, that was the story of the day.  After that rough opening and follow-through on Michigan Expectation numbers, the die was cast.

The major economic news on Friday included the February Export Price Index, which came in down but much hotter than expected at +0.8% (compared to a forecast of +0.2% but lower than the January +0.9% reading).  At the same time, February Import Price Index was down briskly, just as expected, at +0.3% (versus a +0.3% forecast and down from January’s +0.8% value).  Meanwhile, the NY Empire State Mfg. Index was far worse than predicted at -20.90 (compared to the -7.00 forecast and the -2.40 Feb. reading).  Later, February Industrial Production increased at +0.1% (compared to the 0.0% flat forecast and the January -0.5% value).  In terms of consumer thoughts, the Michigan Consumer Sentiment was down and a bit lower than anticipated at 76.5 (versus a forecast of 77.1 and even the previous reading of 76.9).  Michigan Consumer Expectations were even lower at 74.6 (compared to the forecast of 75.1 and the 75.2 prior value).  At the same time, Michigan 1-Year Inflation Expectations remains stable at 3.0% (versus a forecast of 3.1% and the prior reading of 3.0%). Finally, Michigan 5-Year Inflation Expectations also remains flat at 2.9% (compared to a forecast and prior reading of 2.9%).

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In stock news, on Friday, Reuters reported that the TSLA Germany workforce will elect a new work council (union leadership) this week.  Later, Reuters also reported the CLF is now considering a much lower bid for X than it had previously made, if the Nippon Steel acquisition of X falls through (is scuttled by the government).  At the same time, AMZN announced it will hold a six-day Spring Sale beginning Wednesday.  This will include, but not be limited to, deals for Prime members only.  Later, INTT announced it is delaying its 2023 annual report due to a need to restate its Q3 financials. Elsewhere, NVDA announced its in-person GPU technology conference (the first in 5 years) will begin Monday.  (The conference will cover AI and GPU, or computer graphics card, technologies.)  At the same time, HTZ announced it had hired Gil West, former COO of DAL as its new CEO.  After the close, X defied political opposition and filed regulatory paperwork saying it expects the $14.9 billion sale to Nippon Steel to close this year.  Later, Reuters reported that TTE will restart its gasoline-producing (238k barrels per day) Port Arthur TX cracker over the weekend.  After the close, in another blow, a BA 737-800 was found to missing an external panel and was forced to return and landed safely in OR Friday.  That flight was operated by UAL.  On Saturday, Reuters reported TSLA will raise the price of its Model Y cars by $1,000 in certain European countries on March 22.  At the same time, Reuters also reported that MCD’s outage on Friday lasted more than 12 hours with some stores, even in the US, unable to accept app orders and even cash as its digital systems were down.

In stock legal and governmental news, on Friday, RBGLY (Reckitt Benckiser) said it would appeal the $60 million jury verdict (announced Thursday) against its Mead Johnson subsidiary.  (The jury found the company negligent for not disclosing risks on its baby formula labelling.)  At the same time, AAPL agreed to pay $490 million to settle a class-action lawsuit from shareholders who alleged CEO Cook defrauded investors by concealing falling iPhone demand in China.  Later, ALTM announced that its operations won’t be affected by an Argentine court ruling halting new environmental permits for mining operations.  At the same time, TSLA settled a racial discrimination lawsuit by a former employee.  (The terms were not disclosed, but both sides dropped their appeals and the original jury award was $137 million.)  Later, an FDA advisory board voted 11-0 to recommend the approval of LEGN’s CARVYKTI multiple myeloma treatment.  (The FDA approval vote is scheduled for April 5.)  At the same time, the FDA approved XHANCE nasal spray from OPTN.  (The same treatment under other names has been available for years.)  Later, a IN jury found TSLA 70% liable for an employee car crash involving a company truck.  The jury awarded the injured motorist $42 million of the $191 million the plaintiff had been seeking.  Elsewhere, RDDT received a letter from the FTC saying that the agency is conducting a non-public inquiry into the company.  (The inquiry is rumored to be in reference to selling user data to AI companies.)  Later, the finance unit of VLKAF (Volkswagen) agreed to pay $48.75 million to settle an SEC lawsuit accusing the company and its former CEO of defrauding investors in a bond offering.  After the close, META won a Brazilian court order overturning a previous ruling that barred the company from using that name in Brazil. Also after the close, the NHTSB said it has begun an investigation into a fatal crash between a F Mach-E electric Mustang (using partial automation or driver assistance) and a HMC CR-V.  On Saturday, the Wall Street Journal reported that the state of VA are investigating META with a grand jury hearing testimony in relation to how the FaceBook platform facilitated and profited from illegal sale of drugs.  (META commented that they cooperate with law enforcement authorities.)

Overnight, Asian markets were mostly green with only three of 12 exchanges in the red.  Japan (+2.67%) Shenzhen (+1.46%), Taiwan (+1.00%), and Shenzhen (0.99%) led the strong rally on better-than-expected Chinese retail and industrial data.  In Europe, the picture is more mixed at midday with six of 15 exchanges in the red.  The CAC (+0.15%), DAX (+0.27%), and FTSE (+0.20%) lead the region higher in early afternoon trade.  In the US, as of 7:30 a.m., Futures are pointing toward a gap higher with divergence.  The DIA is the laggard, implying a +0.06% open, the SPY implies a +0.61% open, and the QQQ implies a +1.05% open a this hour.  At the same time, 10-year bond yields are flat at 4.304% and Oil (WTI) is up 0.35% to $81.32 per barrel in early trading.

There is no major economic news scheduled for Monday.  The major earnings reports scheduled for before the open are limited to ERJ and SAIC.  Then, after the close, YY and STNE report.    

In economic news later this week, on Tuesday we get Feb. Building Permits, Feb. Housing Starts, and API Weekly Crude Oil Stocks.  Then Wednesday, EIA Weekly Crude Oil Inventories, Fed Rate Decision, Fed Statement, Fed Chair Press Conf., Q1 Current Interest Rate Projection, Q1 1st Year Interest Rate Projection, Q1 2nd Year Interest Rate Projection, and Q1 Longer Term Interest Rate Projection are reported.  On Thursday, we get Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, Philly Fed Mfg. Index, Philly Fed. Mfg. Employment, S&P Global Mfg. PMI, S&P Global Services PMI, S&P Global Composite PMI, Feb. Existing Home Sales, and Fed Balance Sheet.  Finally, on Friday the only scheduled news is Fed member Bostic speaking.

In terms of earnings reports later this week, on Tuesday, we hear from CAL, CNM, TME, and XPEV.  Then Wednesday, BNTX, GIS, HTHT, JKS, OLLI, PDD, SIG, CHWY, FIVE, GES, KBH, MU, SCS, and WOR report.  On Thursday, we hear from ASO, ACN, BZUN, CMC, DRI, DBI, FDS, LU, TITN, WGO, AIR, FDX, LULU, NKE, and WS.  There are no major earnings reports scheduled for Friday.

In miscellaneous news, on Friday, the National Assn. of Realtors agreed to settle antitrust litigation accusing brokerages of inflating sales commissions.  NAR agreed to pay a $418 million settlement as well as eliminate decades long rules that required a 6% sales commission.  This is likely to reduce home prices and allows buyers and sellers to negotiate commissions with their agents.  (The settlement still must be approved by a judge.)  Elsewhere, Japanese media Nikkei reported that the Bank of Japan is set to end negative rates this week.

In late-breaking news, Bloomberg reported that AAPL is in active negotiations to license GOOGL’s Gemini AI tools for use in future iPhones.  GOOGL shares were up 5.14% on the news

So far this morning, ERJ reported beats on bot h the revenue and earnings lines. At the same time, SAIC beat on revenue while missing on earnings.

With that background, it looks like the Bulls are trying to run this morning on the strong economic data out of China and more fuel for the AI fire. All three of the major index ETFs are up, with QQQ leading the way on a strong gap higher in the premarket. The QQQ and SPY are also printing large white-body Marubozu candles in the early session. However, while the SPY has crossed back above its T-line (8ema) in the premarket, the other two remains below that level based off the damage done the last two days of last week. It is worth noting that the QQQ T-line is flat while the SPY T-line is turning up and the QQQ 8ema is flat this morning. So, the short-term trends remain mixed. Meanwhile, the longer-term trend remains bullish in the SPY while the DIA chops sideways and the QQQ has just rolled over bearish. In terms of extension, none of the three major index ETFs is too far from its T-line and the T2122 indicator is back in the center of its mid-range. This means both sides still have plenty of room to run if they can gather the momentum. Looking at those 10 Big Dog tech names, nine of the 10 are green this morning with only MSFT (the one left out of the AI news this morning) modestly in the red. This tends to point toward a green market, 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.


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🎯 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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