Analysts Push GS CEO and March Starts

Markets opened basically flat on Tuesday.  The DIA sold off for 5 minutes while the other two major indices stayed held ground during that time.  Then all three of the major indices wandered up and down in a tight range until noon.  From noon until 2 pm, all three made a modest rally and this was matched by a two-hour selloff from 2 pm into the last 5 minutes of the day.  That last 5 minutes saw the strongest selling of the day.  This action gave us Inverted Hamer candles in the SPY and QQQ, with the QQQ failing a retest of its T-line (8ema).  However, DIA gave us a black-bodied, Marubozu (shaved head) candle with no wicks and closing on the lows. The QQQ had average volume, the SPY a little greater than average volume, and the DIA less-than-average volume for the session.

On the day, seven of the 10 sectors were in the red with Utilities (-1.63%) leading the way lower and Basic Materials (+0.55%) holding up better than the other sectors.  At the same time, the SPY was down 0.37%, the DIA was down 0.76%, and QQQ was down 0.13%.  The VXX fell 2.04% to 11.54 and T2122 dropped back down to the edge of the oversold territory to 19.92.  10-year bond yields were flat at 3.924% and Oil (WTI) was up almost 1.5% to $76.81 per barrel.  So, overall, Monday was an indecisive day in the SPY and QQQ with the last leg being a bearish move.  However, the DIA was decisively bearish all day.

In economic news, the January Goods Trade Balance grew as it came in at -$91.50 billion (up from -$89.67 billion in December).  January Retail Inventories also grew, coming in at +0.2% (compared to +0.1% in December).  Later in the morning, the Feb. Chicago PMI came in worse than expected at 43.6 (versus a forecast of 45.0 and the January reading of 44.3).  Shortly thereafter, the Conference Board Consumer Confidence also came in low at 102.9 (compared to a forecast of 108.5 as well as the January value of 106.0).  For those traders reading between the tea leaves, the increase in Retail Inventories, contraction value in the Chicago PMI, and decrease in Consumer Confidence (leading indicator) could be signs of a slowing economy…which a bull could read as an excuse for the Fed to not hike as much in March.  Then, after the close, the API Weekly Crude Oil Stocks were reported much higher than expected yet again at +6.203 million barrels (versus a forecast of +0.440 million barrels but improved over the prior week’s +9.895 million barrels).

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In stock news, AMAT unveiled a new semiconductor chip manufacturing tool Tuesday.  AMAT stock jumped on the news and main competitor ASML gapped lower. During the afternoon, GS told an investor conference that it is considering “strategic alternatives” for its consumer business.  (GS CEO Soloman and President Waldron both signaled the company is backing away from Main Street after the company had previously halted its unsecured lending and folded consumer business units into other divisions.)  Analysts really pressed GS execs hard at the event and the CEO seemed flustered. At the same time (but at a different event), CVX CEO Wirth said we could see consolidation among the 5 huge oil major players (CVX, XOM, BP, SHEL, and TTE).  However, he expects severe antitrust hurdles before it happens.  Meanwhile, the Wall Street Journal reports that APO is in talks to buy ARNC.  Later, Reuters reported that V and MA have both pushed back projects and slammed the breaks on partnerships with crypto firms after the bankruptcies of FTX and BlockFi in 2022. Then, after the close, the US Postal Service announced that it plans to buy 9,250 electric Transit vans from F starting later this year.  Their main competitor, GM, also announced after the close that it will lay off 500 salaried workers. Finally, also after the close, NVAX announced it is slashing spending and raised doubts about the ability of the company to remain solvent.

In stock legal and regulatory news, a US Federal District Judge sentenced GLNCY to pay just over $700 million ($428.5 million fine and $272 million forfeiture) after the company’s guilty plea in a decade-long scheme of bribing foreign officials.  While the fine met the plea agreement the company made with prosecutors, it was 15% below the US sentencing guidelines.  Later, the US Labor Dept. threw out exemptions put in place by the Trump Administration which had allowed Federal Contractors to be exempt from anti-discrimination laws.  Elsewhere, the Biden Administration announced on Tuesday that it will require companies winning funds from the $52 billion CHIPS Act to share “excess profits” in exchange for the tax credits and subsidies.  The Commerce Dept. plans to begin accepting applications for the funds in March and the main beneficiaries are expected to be INTC, AMD, NVDA, TSM, TXN, ADI, SWKS, MCHP, and MU.  Meanwhile, the FDA Advisory Board voted 7-4 to recommend a respiratory virus drug from PFE be authorized for older adults in the US. 

After the close, ROST, A, URBN, FRG, FSLR, GO, BGS, ICFI, IHRT, MASI, VZIO and VRSK all reported beats to both the revenue and earnings lines.  Meanwhile, HPQ, AMC, RKT, JXN, EXPI, RIVN, and CPNG missed on revenue while beating on the earnings line.  On the other side, SWX beat on revenue while missing on the earnings line.  Unfortunately, MNST, COMP, and EDR missed on both the top and bottom lines.  It’s worth noting that EDR raised its forward guidance while IHRT and GO both lowered their forward guidance.

Overnight, Asian markets were mixed but leaned heavily to the green side on very uneven moves.  Hong Kong (+4.21%), Shenzhen (+1.11%), and Shanghai (+1.00%) led the gainers.  Hong Kong’s jump came after a bunch of economic data indicated that China was reopening much faster than expected.  For example, the official PMI hit the highest level since 2012.  Meanwhile, in Europe, we see green across the board at midday with the sole exception of Portugal (-0.58%).  The FTSE (+0.88%), DAX (+0.58%), and CAC (+0.69%) are leading the region higher in early afternoon trade.  As of 7:30 am, US Futures are pointing to a modestly green start to the day.  The DIA implies a +0.16% open, the SPY is implying a +0.21% open, and the QQQ implies a +0.36% open at this hour.  At the same time, 10-year bond yields are up to 3.94% and Oil (WTI) is down 0.70% to $76.53/barrel in early trade.  (That’s odd that oil did not get the memo indicating China demand is roaring back.) 

The major economic news events scheduled for Wednesday, include Mfg. PMI (9:45 am), ISM Mfg. PMI (10 am), and EIA Crude Oil Inventory (10:30 am).  Major earnings reports scheduled for the day include ANF, BHG, CLVT, CLH, DLTR, DCI, DY, FWONK, HGV, HZNP, JACK, KSS, LSXMA, LOW, EYE, NIO, ODP, PBR, QRTEA, RY, SGRY, VST, WB, and WEN before the opening bell.  Then after the close, AAN, ADV, AGL, AEO, CANO, SQM, CODI, ERIE, GEF, JAZZ, LNW, OKTA, PFG, CRM, SNOW, SPLK, and VEEV report. 

In economic news later this week, on Thursday, we get Q4 Nonfarm Productivity, Q4 Unit Labor Cost, and Weekly Initial Jobless Claims.  Finally, on Friday, Services PMI, S&P Global Composite PMI, and ISM Non-Mfg. PMI are reported.

In terms of earnings later in the week, on Thursday, we hear from AER, AMRX, BUD, BBY, BIG, BILI, BURL, CPG, GMS, HRL, KR, M, PDCO, SFM, STGW, TD, AVGO, COO, COST, DELL, HPE, MRVL, JWN, VVX, and VSCO.  Finally, on Friday, HIBB reports.

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So far this morning, RY, DY, CLVT, WEN, ACIW, HZNP, and GOLF have all reported beats to both the revenue and earnings lines.  Meanwhile, LOW, ODP, NIO, BHG, DCI, WB, and EYE have all missed on the revenue line while beating on earnings.  On the other side, KSS, QRTEA, ANF, HGV, and QRTEB beat on revenue while missing on the earnings line.  (There were no misses on both lines reported so far today.) It is worth noting that KSS, NIO, and EYE lowered their forward guidance.  However, ODP raised its forward guidance.

In mortgage news, interest rates increased for the third straight week.  As a result, mortgage demand also dropped for the third straight week after spiking earlier this year as rates had dropped.  Last week saw the slowest mortgage demand in 28 years.  The national average rate for a 30-year, fixed-rate, conforming loan hit 6.71% with an increase in points to 0.77 (up from 0.75).  This caused refinance applications to fall 6% and new home purchase applications to also fall the same 6% on the week.

With that background, it looks like the bulls want to make another modest move back up toward the T-line (8ema) in all three major indices again this morning. However, over-extension is not a problem in terms of the T-line and the T2122 indicator is just at the edge of oversold territory. So this is not the result of being stretched to the downside. Regardless, all three major indices remain in a downtrend. In addition, all three indices have minor potential support below as well as resistance above. Respect the trend (the trend is the trend until it ends) and be aware of the potential support and resistance.

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 absolutely 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 money is 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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