AMZN Joining Dow and NVDA Reports AMC

The Bears were in control in the SPY and especially QQQ on Tuesday while the DIA was undecided.  SPY gapped down 0.36%, DIA opened 0.15% lower, and QQQ gapped down 0.49%. After the open, DIA wandered sideways, crossing and recrossing the opening gap until 12:40 p.m.  Meanwhile, SPY and QQQ followed through to the downside for an hour, bounced to retrace half of the follow-through, and then sold off again until about 12:40 p.m.  At that point, all three major index ETFs put in a very slow and modest rally that took us into the close.  This action gave us gap-down, indecisive candles in all three.  The SPY and QQQ printed black-bodied Spinning Top candles at the same time DIA printed a white-bodied Doji. All three crossed back down below their respective T-lines (8ema).  This happened on average volume in the QQQ and below-average volume in the large-cap index ETFs.

On the day, seven of the 10 sectors were in the red again as Technology (-1.21%) was out in front leading the way lower Consumer Defensive (+0.83%) held up better than the other sectors.  Meanwhile, the SPY lost 0.55%, the DIA lost 0.12%, and the tech-heavy QQQ dropped 0.75%.  VXX rose 3.12% to close at 14.85 and T2122 dropped back down into the middle of the mid-range at 46.30.  10-year bond yields fell back just a bit to 4.275% and Oil (WTI) fell 1.16% to close at $78.27 per barrel.  So, Tuesday gave us a gap lower and then indecision across the market.  With that said, we must note that we do have a downtrend in progress in the QQQ (a lower high and a lower low).  Meanwhile, SPY and DIA are not far behind having given use a lower high…but both may also have found a potential support level.

The major economic news released Tuesday was limited to the January US Leading Economic Indicators Index, which came in lower than expected at -0.4% (compared to a forecast of -0.3% and the December reading of -0.2%). 

After the close, CHK, CSGP, CWK, FANG, FLS, GMED, KEYS, MTDR, MATX, PANW, PSA, QUAD, RNG, SPNT, SUI, VIV, TX, and TOL all reported beats on both the revenue and earnings lines.  Meanwhile, ANDE, CVI, ESI, ENLC, GPK, JBT, and TDOC missed on revenue while beating on earnings.  On the other side, BCC, BKD, CYH, GFL, IFF, and O beat on revenue while missing on earnings.  Unfortunately, CZR, CE, LZB, and WSC missed on both the top and bottom lines.  It is worth noting that CE, CSGP, IFF, KEYS, LZB, and QUAD all lowered forward guidance.  However, JBT raised guidance.

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In stock news, on Tuesday, F announced it had cut the prices of its Mustang Mach-E electric SUV by up to $8,100 after sales fell sharply in January.  (This brings the MSRP down below $40k on the base model and down to $52,395 on the high-end model.)  At the same time, TFC agreed to sell its remaining stake in an $15.5 billion insurance brokerage business to private investors.  TFC said that move is part of its move to focus on its core banking business.  At the same time, AAL announced it is raising its bag fee to $40 for a first checked bag and $45 for the second effective immediately. Later, Reuters reported that UAL said the airline is switching to relying on BA 737 MAX 9 and EASDY (Airbus) A321 aircraft after BA production problems have raised doubts about the FAA certification schedule of 737 MAX 10 jets.  (UAL has not yet canceled its order for 277 of the MAX 10 jets, with an option to buy 200 more.)  Elsewhere, GM announced that it has temporarily paused the production of Chevrolet Colorado and GMC Canyon mid-sized trucks while it works to solve intermittent software quality issues.  At the same time, CAG announced it will begin selling frozen meals designed for people taking the most recent wave of weight loss drugs.  Later, FANG announced a series of major C-suite leadership reshuffles.  After the close, it was announced that AMZN would replace WBA in the Dow Jones Industrial Average before the open on Monday, February 26.  Also after the close, Reuters reported exclusively that OXY is exploring the sale of its WES natural gas pipeline unit.  Meanwhile, CNP announced it will sell natural gas assets in LA and MS for $1.2 billion to a private investor group.

In stock legal, governmental, and regulatory news, on Tuesday the FDA granted “Breakthrough status” to a liver condition therapy from BTTX.  At the same time, the FDA granted “Fast Track” status to an anemia treatment from IRON.  The FDA gave the same status to a myotonic dystrophy drug from PEPG.  Later, the US Dept. of Commerce announced a $1.5 billion direct funding grant to GFS (NY state also is giving GFS $600 million in funding) for the tripling of the production capacity of its NY chip plant.  Elsewhere, Reuters reported that local Germans voted against approving TSLA’s plans to expand its German plant.  TSLA has plans to clear a forest to build warehousing and expand train station capacity.  However, citizens voted against the move in a non-binding (but certainly noticed by politicians) vote.  At the same time, Bloomberg reported that the FTC will file suit to block the KR $24.6 billion acquisition of ACI.  The report is expected to be filed next week.  Later, the US Supreme Court declined to hear an AAPL appeal of a 2020 $502.8 million jury verdict over patent infringement.  At the same time, the full appeals court of the heavily conservative 5th circuit agreed to reconsider a ruling by a three-judge panel (of their members) that was in favor of NDAQ.  The earlier ruling allowed the NDAQ rule (requiring Nasdaq-listed companies to disclose their board diversity), which had also been approved by the SEC, to stand ruling against a conservative lawsuit seeking to end the disclosure requirement. Later, FUBO filed suit against DIS, FOX, WBD, and their affiliates alleging anti-trust behaviors.  At the same time, JNJ announced it had received FDA approval for a new biweekly dosing of its TECVAYLI drug.  Later, a US appeals court threw out a $1 billion jury verdict that had been in favor of SONY, UMG, and WMG.  The ruling said the award was not appropriate and a new trial should be held to determine the actual, lower amount of damages.

So far this morning, ALIT, ADI, EXC, GRMN, GIL, PHIN, and UIS all reported beats to both the revenue and earnings lines.  Meanwhile, BLCO, CLH, DINO, NI, OGE, TNL, and VRT missed on revenue while beating on earnings.  On the other side, CSTM, VRSK, and WWW beat on revenue while missing on earnings.  Unfortunately, AVA and HSBC missed on both the top and bottom lines.  It is worth noting that ADI and PRG lowered forward guidance.  However, BLCO raised its guidance.

Overnight, Asian markets were mostly (and modestly) in the red with just four of the 12 exchanges in the green.  However, those four were the biggest movers in the region.  Hong Kong (+1.57%), Shanghai (+0.97%), and Thailand (+0.91%) led the gains while Singapore (-0.83%), Australia (-0.66%), and India (-0.64%) paced the more numerous losers.  In Europe, we also see a mixed picture taking shape with six of the 15 bourses in the green at midday.  The CAC (+0.22%), DAX (+0.46%), and FTSE (-0.84%) lead the region on volume as Russia (-1.82%) is the biggest mover in early afternoon trade.  In the US, as of 7:30 a.m., Futures point toward another down start to the day.  The DIA implies a -0.18% open, the SPY is implying a -0.26% open, and the QQQ implies a -0.57% open at this hour.  At the same time, 10-year bond yields are down to 4.264% and Oil (WTI) is off a third of a percent to $76.81 per barrel in early trading.

The major economic news scheduled for Wednesday, we get the FOMC Meeting Minutes (2 p.m.) and the API Weekly Crude Oil Stocks report (4:30 p.m.).  We also hear from Fed members Bostic (8 a.m.) and Bowman (1 p.m.).  The major earnings reports scheduled for before the open include ALIT, ADI, AVA, BLCO, CLH, CSTM, EXC, GRMN, GIL, DINO, HSBC, NI, OGE, PRG, TNL, UIS, UTHR, VRSK, VRT, and WWW.  Then, after the close, AGI, ANSS, APA, AGR, BTG, BALY, CWH, CENX, CAKE, CHRD, CHDN, ETSY, EXAS, FG, FNF, HST, HUN, ICLR, JACK, JXN, KALU, MRO, VAC, MOS, NEXA, NDSN, NTR, NVDA, OGS, OUT, PAAS, RRC, RIVN, RYI, SM, SU, RUN, SNPS, TS, TCOM, TBI, VMI, and WES report.  

In economic news later this week, on Thursday, Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, S&P Global Mfg. PMI, S&P Global Services PMI, S&P Global Composite PMI, January Existing Home Sales, EIA Weekly Crude Oil Inventories, and Fed Balance Sheet are reported, and Fed member Waller speaks.  Finally, on Friday there is no major economic news scheduled.


In miscellaneous news, the Greek-flagged ship that was attacked by missile over the weekend (and its crew abandoned ship) reached its destination, Aden Yemen, on Tuesday.  The attack appears to be a mistaken missile attack by the Houthis.  At the same time, Reuters reports that the White House will approve a request by Midwest governors to allow year-round sales of E15 gasoline.  However, the start date of the measure will be in April, 2025.  (E15 sales in summer had been restricted over smog concerns.)  Elsewhere, the Biden Administration announced it will forgive another $1.2 billion in student debt covering more than 150,000 student loan holders.  Finally, mortgage demand dropped sharply last week.  Applications for refinancing fell 11% (week-on-week) and new home purchase loan applications fell 10% on the week as 30-year, fixed-rate, mortgages shot higher from 6.87% to 7.06%.

In economic prediction news, Reuters reported Tuesday afternoon that US interest rate swap options (which are used to hedge interest rate risk) pricing are now skewed in favor of interest rate cuts.  In other words, the interest rate swap options markets are showing increased demand for options that pay off if US interest rates fall (i.e. the Fed cuts rates).  It seems markets are now betting on a hard landing in the short term, which to a trader of such options is in the three-month range.  This falls in line with the timing Fed speakers have been saying and Fed Fund Futures show…just for different reasons.  (The Fed is saying that is when inflation will have proven to be on a trajectory toward 2%.)  For what its worth, Fed Fund Futures now are projecting a 76.6% probability of a first cut in June with a 92.1% chance of a cut by July.  (May rate cut probabilities have fallen to 33%.)

In cyber-crime news, one of the largest hacker groups of all time (Russian-based Lockbit, which specialized in ransomware attacks like the one that shut down Las Vegas a while back) was more or less shut down Tuesday.  The FBI, the UK National Crime Agency, and authorities from 11 different countries seized 11,000 web domains the group used to deploy its malware.  (This was the group responsible for attacking the US arm of the Industrial & Commercial Bank of China, causing a $26 billion disruption to the US Treasury market late last year.)

With that background, it appears the Bears are holding on to their control as all three major index ETFs are looking to gap lower although they are all printing indecisive candles in the premarket after the gap. All three are below their T-lines in the premarket. So, the short-term trend is bearish while the longer-term steep bullish trend has been violated or is being tested now. The QQQ has even confirmed a downtrend with a lower-high and lower-low in place. In terms of extension, none of the three major index ETFs is too far from its T-line and the T2122 indicator sits at the top of its mid-range. So, either side has room to run if they can gather the energy to do so. Continue to watch those 10 Big Dog tech names. As mentioned above, they represent a huge portion of the market and if they move together in one direction, it’s hard for indexes to go the other way. Right now, eight of the 10 are bearish. Also don’t forget NVDA reports tonight and it just passed TSLA to become the most traded stock on Wall Street. (Meaning NVDA swings a big stick in this market.)

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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