At-Near All-Time Highs, Fed Speakers On Tap

On Friday, markets opened flat.  SPY opened up 0.02%, DIA opened down 0.01%, and QQQ opened up 0.04%.  From that point, the SPY and DIA meandered sideways until about 1:50 p.m.  At that point, both sold off for half an hour before rallying the rest of the day, closing on their highest 5-minute candle of the day. Meanwhile, after the open, QQQ ground sideways until noon.  Then the high-tech index ETF sold off, reaching the lows of the day at 2:25 p.m.  From that point, QQQ also rallied into the close, but from a much lower starting point and not quite reaching the opening level again.  This gave us a white-bodied Hammer Harami in the SPY, a white-bodied Bullish Engulfing candle in the DIA, and a black-bodied long-legged Doji type candle in the QQQ.  This led DIA to close and another all-time high close.  All three major index ETFs also remain well above their T-line (8ema).

On the day, six of the 10 sectors were in the green with Basic Materials (+1.32%) well out front leading the majority of sectors higher.  Meanwhile, the Consumer Defensive (-0.23%) and Healthcare (-0.22%) sectors led the laggards lower. At the same time, SPY gained 0.14%, DIA gained 0.18%, and QQQ lost just 0.05%.  VXX fell 1.30% to close at 11.36 and T2122 dropped but again remains in its overbought territory to close at 84.86.  At the same time, 10-year bond yields rose to 4.42% and Oil (WTI) gained just under one percent to close at $79.97 per barrel.  So, Friday did not see any significant moves but the larger-cap index ETFs (especially the DIA) continued its march North while QQQ did really just pause indecisively.  This all happened on below-average volume across all three major index ETFs.

The major economic news scheduled for Friday was limited to the April US Leading Economic Indicators Index, which fell more than expected at -0.6% (compared to a forecast and March reading of -0.3%).

In Fed news, on Friday, Fed Chair Powell tested positive for COVID-19 Thursday and said he will be working from home and isolating for the next week or so. (He delivered his Sunday Georgetown Law School commencement address via prerecorded video.)

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In stock news, on Friday, MSFT asked hundreds of employees in China (working on both machine learning and cloud computing) to relocate outside China amid increases in China-US trade tensions.  Later, BA delayed the launch of its first-crewed Starliner rocket.  This is the third delay of the launch due to a helium leak and will now take place no sooner than May 25.

In stock legal and governmental news, on Friday, the NLRB announced that the AL plant of MBGAF (Mercedes Benz) voted against unionizing by 56%-44%.  At the same time, C was sued for racial discrimination over its policy of waiving its ATM fees for the customers of minority-owned banks at C ATMs in the state of FL.  (This suit was filed by the same right-wing group which has legally challenged DEI programs at companies across the country.)

Overnight, Asian markets were nearly green across the board.  Only Thailand (-0.29%) was in the red.  Meanwhile, Japan (+0.73%), Malaysia (+0.67%), and South Korea (+0.64%) led the region higher on broad, but modest gains. In Europe, we see a similar picture taking shape at midday with only three of the 15 exchanges in the red.  The CAC (+0.54%), DAX (+0.45%), and FTSE (+0.27%) lead the region higher in early afternoon trade.   In the US, as of 7:30 a.m., Futures are pointing toward a very modest green start to the day.  The DIA implies a +0.07% open, the SPY is implying a +0.17% open, and the QQQ implies a +0.27% open at this hour.  At the same time, 10-year bond yields are down to 4.416% and Oil (WTI) is off a third of a percent to $79.77 per barrel in early trading.

The major economic news scheduled for Monday is limited to a number of fed speakers.  First, Fed Chair Powell speaks Sunday afternoon.  Then Monday, Fed members Bostic (8:45 a.m.), Vice Chair Barr and member Waller (both at 9 a.m.), and Bostic again (7 p.m.) speak.  The major earnings reports scheduled for before the open is limited to QFIN, LI, and RYAAY.  Then, after the close, JHX, KEYS, NDSN, PANW, TCOM, and ZM report.

In economic news later this week, on Tuesday, we get API Weekly Crude Oil Stocks and many Fed speakers (Kroszner, Williams, Bostic, Vice Chair Barr, Bostic, and Mester).  Treasury Sec. Yellen also speaks.  Then Wednesday, April Existing Home Sales, EIA Weekly Crude Oil Inventories, and FOMC Meeting Minutes are reported.  On Thursday, we get Building Permits, Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, S&P Global Mfg. PMI, S&P Global Services PMI, S&P Global Composite PMI, April New Home Sales, Fed Balance Sheet.  Fed member Bostic also speaks again.  Finally, on Friday, April Core Durable Goods, April Durable Goods, Michigan Consumer Sentiment, Michigan Consumer Expectations, Michigan 1-Year Inflation Expectations, Michigan 5-Year Inflation Expectations are reported and Fed member Waller speaks.

In terms of earnings reports later this week, on Tuesday, we hear from AS, AZO, EXP, LOW, M, OCFT, XPEV, ZIM, MOD, SKY, TOL, URBN, VSAT, and XP.  Then, Wednesday, ADI, DY, GOGL, HOV, WOOF, PDD, TGT, VIPS, WSM, BBAR, SQM, ENS, PLUS, SUPV, NVDA, SNOW, SNPS, TBBB, and VFC report.  On Thursday, we hear from ATAT, BILI, BJ, BEKE, MDT, NTES, PSNY, RL, TD, TITN, CVCO, DECK, INTU, ROST, and WDAY.  Finally, on Friday, BAH reports.

So far this morning, ULS beat on both the revenue and earnings lines.  Meanwhile, RERE beat on revenue while missing on earnings.  On the other side, LI missed on revenue while beating on earnings.  However, QFIN missed on both the top and bottom lines.

In miscellaneous news, the US military pier in Gaza is completed and began operation on Friday.  Humanitarian aid will travel through Cypress, then a mid-Mediterranean trans-shipment point and the smaller ships will deliver to the pier.  The pier will deliver 90 truckloads of aid per day initially with plans to reach a maximum of 150 trucks per day within months.  (At maximum, this would be nearly as much as a open border crossing.)  Meanwhile, AI industry leader OpenAI, eliminated its “AI Safety” (officially called the Superalignment Team) less than a year after creating the team to study and ensure AI risks/threats are controlled.  In addition, OpenAI’s cofounder and chief research scientist, who said “safety culture and processes have taken a backseat to profits” on his way out.  Elsewhere, Bloomberg reported Friday that childcare for two children now exceeds the average rent by 25% IN EVERY STATE.

On Saturday, Bloomberg reported that the US beef cattle supply is at its lowest level since 1961.  The report said Dairy farmers are not just breeding for herd replacement, but are now cross-breeding Dairy cows with beef cattle (artificially).  This allows Dairy farmers to ship calves off to feed-out and slaughter. (A big windfall for an industry that just last summer had to dump milk due to a surplus of supply.) Elsewhere on Saturday, China announced $42 billion to help fix its property crisis.  In addition, it will prop up its Real Estate Sector by relaxing mortgage rules and providing guidance to local and provincial governments to buy up unsold homes to be turned into affordable housing.  In geopolitical news, the US military announced that Yemeni Houthi rebels hit a Greek-owned oil tanker with a missile early Saturday.  (Interestingly, the ship was recently docked in Russia and was headed to China with its cargo.)  The ship lost propulsion and has some flooding, but no casualties were suffered and the ship was later able to get back underway under its own power.  The attack came hours after the Houthi claimed to have shot down a US MQ-9 Reaper drone.  Elsewhere, a helicopter that was carrying the hard-liner Iranian President Raisi as well as Iranian Foreign Minister Amirabdollahain made what was called a “unexpected and hard landing” (crashed) near the mountainous border of Iran, Armenia and Azerbaijan.  Heavy fog and cold slowed the search effort.  However, two people from the helicopter have been in contact with rescuers.  On Monday, Iran announced that both men died in the crash.  This will unsettle oil markets and put many eyes on the Middle East, the succession election in 50 days (a caretaker government is already in place), and the impact on Israeli and Saudi relations.

With that background, it looks as if the Bulls are trying to cautiously edge higher in the premarket. All three major index ETFs opened up slightly and have printed small, white-bodied candles so far in the early session. All three remain at or very near the all-time highs from last week and are obviously well above their T-lines (8emas). So, the short-term trend remains very bullish. Meanwhile, the mid-term is also bullish. And the longer-term market remains very Bullish as all three major index ETFs have returned to “fresh air” with no overhead resistance. In terms of extension, as mentioned, the SPY, DIA, and QQQ are all well above their T-lines and probably need more rest. The T2122 indicator pulled back a bit Friday but still remains in the overbought area. So, again, more pause or pullback are probably needed for a healthy rally if for nothing else. With that said, we have to remember that markets can, and sometimes do, remain overextended longer than we can stay solvent betting on a turn. In short, don’t predict, follow. With regard to those 10 big dog tickers, nine of the 10 are in the green at this point this morning with only APPL (-0.45%) dragging on the QQQ. Meanwhile, the biggest dog of them all, NVDA (+1.41%) is out front pulling the market higher during the early session.

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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