The market was flat on Monday. Both the SPY and DIA opened flat. Meanwhile, QQQ gapped down 0.34% at the open. From there all three did a very modest morning rally and an equally modest afternoon selloff. This action gave us indecisive candles across all three major index ETFs. The SPY printed a white-bodied Spinning Top with a larger upper wick than the lower, the DIA printed a black-body Doji, and QQQ printed what might be seen as a white-bodied, Inverted Hammer. All three closed little changed and stayed below their T-line (8ema) and 50sma. All three also held onto the support level that they were sitting on at the close of Friday. This all happened on far-below-average volume in all three major index ETFs.
On the day, five of the 10 sectors were in the green (and red) with Energy (+0.41%) out in front leading half of the market higher, while Consumer Cyclical (-0.75%) led half lower than other sectors. At the same time, the SPY gained 0.06%, DIA was dead flat +0.00%, and QQQ lost 0.04%. VXX fell 0.82% lower to close at 20.51 and T2122 fell back but remained in the mid-range at 32.69. 10-year bond yields fell again to close at 4.307% while Oil (WTI) rose another 1.82% to end the day at $92.40 per barrel. So, in a sense, it was a typical pre-Fed Monday where everyone was just waiting on the Fed decision. This time around, the entire market thinks (well 99.0% according to the Fed Futures) they already know the Fed decision. So, if we are waiting on the Fed, it would be waiting to see the verbiage and tone of Fed Chair Powell’s statement.
The only major economic news reported Monday was July TIC (Treasury International Capital) Net Long-Term Transactions. This measures the difference between long-term foreign securities purchased by US citizens and the US long-term securities bought by foreign investors. “Long-Term” is a bit of a misnomer here in as much as TIC includes all stocks, bonds, derivatives, options, swaps, currency, and even bank transactions. It also does not measure the length of hold or even the intended length of the hold. So, TIC is really just a measure of the flow of money into and out of the US. In other words, it is measuring how the world (including the US) views the US as an investment relative to the entire rest of the world. For July, TIC came in at its lowest level since December of 2021 but was still positive at +$8.8 billion (compared to a forecast of +$116.5 billion and a June reading of +$186.0 billion). Therefore, in July, the world continued to view the US as the best place to invest money.
In stock news, on Monday AAPL announced that it has received a promising number of pre-orders for its iPhone 15 (10%-12% stronger than the iPhone 14). That’s both good and bad. It shows demand but has also forced AAPL to push back the first deliveries into November to avoid seeming to trickle out the phones. At the same time, GEHC has received a $44 million grant from the Gates Foundation to develop AI-assisted ultrasound technology. Later, CLX reported it has been fighting with operational issues caused by a mid-August cyberattack. The company said the attack caused significant damage to its IT infrastructure and forced the company’s automated order processing system offline. The company warned investors to expect a substantial impact on quarterly results. Elsewhere, the Wall Street Journal reported that TSLA and Saudi Arabia are in the early stages of talks over the opening of a TSLA plant in the Kingdom. (CEO Elon Musk then denied the report.) Later, C announced they are getting into blockchain by launching “Citi Token Services” to offer digital asset solutions to institutional customers. At the same time, M announced it will be hiring 38,000 full and part-time workers for the holiday season. (This is down from the 41,000 M hired in the 2022 holiday season and far below the 76,000 in 2021.) After the close, NSC launched a program to compensate homeowners in East Palestine OH who sell their houses and experience a reduction in value after the Feb. 3 train derailment and chemical spill. Also after the close, SAN announced it would merge divisions and make a significant leadership reorganization, including the reduction of management layers and job cuts. Monday evening, a regulatory filing showed that the CEO of SQ was stepping down from her post on Oct. 2 and Chairman Jack Dorsey will take over at least temporarily. Finally, CART priced its IPO at $30 (top of the estimated range) and will begin trading today.
In stock government, legal, and regulatory news, NVO shares dropped Monday after a MarketWire report claiming the company failed an FDA inspection of its NC plant, with quality control lapses cited in the report. Later, LYFT agreed to pay a $10 million fine as part of a settlement with the SEC. The case involved the undisclosed pre-IPO sale of $424 million in shares. Elsewhere, the FDA approved a GSK treatment for adults with myelofibrosis and anemia. (GSK acquired the treatment by buying SRRA for $1.9 billion in 2022.) This will make GSK an immediate competitor in one $2.4 billion market as well as treating two other diseases (markets). At the same time, the Brazilian telephone regulator approved VIV’s capital reduction plan (which now needs the approval of shareholders). Near the close, it was reported that Taiwan had approved TSMs’ $4.5 billion investment (working capital) into its AZ chip fab. However, Investing.com reported that TSM is having trouble finding skilled chip plant workers for its new AZ plant. As a result, TSM is shifting focus toward a $8.6 fab plant it is building in Japan. Meanwhile, a federal judge ruled SBUX must face a lawsuit claiming the coffee chain’s “fruit beverages” actually do not contain fruit. After the close, MS was sued for $750 million by private equity lenders that claimed MS defrauded them in an investment in a high-speed rail company.
In Autoworker contract talks and strike news, F is set for more bad news on the labor front. The company’s 5,600 Canadian union workers contract expired Monday night at midnight. Unifor (Canadian version of UAW) said they will remain at the table, but the likelihood of a strike increases each hour. In other tangentially related news, 44k union workers for Hyundai (HYMTF) in South Korea have approved a new contract (by a vote of 58.8% for and 41.1% against). The contract provides those workers a one-time bonus, a 12% per year pay increase, and new performance-based bonuses. Back in the US, GM told 2,000 non-striking workers in KS the company expects to lay them off later this week due to a lack of parts. In MI, a parts supplier to the Big 3, told state officials it expects to close 4 plants for a month, laying off 300 workers. At the same time, X shut down one of its plants (Granite City) due to the lack of demand from the automakers, laying off 1,000 workers. Meanwhile, STLA negotiators told the press that Monday’s talks were “constructive.” Then, early today, Unifor said it has received a substantial offer from F and is extending the strike deadline by 24 hours to give time for more talks. In the US, the UWA said it will definitely strike additional plants if “serious progress” is not made by Friday. On the company side, STLA said it could close 18 US facilities (10 Mopar distribution centers among them) under the new contract (although none has been agreed yet). However, STLA said it could also bring in new investments and repurpose the Illinois plant (closed in February) into a mega-hug for Mopar distribution.
So far this morning, AZO beat on both the revenue and earnings lines. This included quarter-on-quarter growth of 6.4%.
Overnight, Asian markets were decidedly in the red on modest moves. Only Hong Kong (+0.37%) was able to stay in the green. Meanwhile, Japan (-0.87%), Shenzhen (-0.73%), and Singapore (-0.69%) paced the losses. In Europe, we see a much more mixed picture at midday. Russia (-1.34%) and Greece (-1.13%) are the only movers of more than one percent while nine of the 15 bourses are in the green. The CAC (+0.30%), DAX (-0.06%), and FTSE (+0.15%) lead the region on volume. In the US, as of 7:30 a.m., Futures are pointing toward a start just on the green side of flat. The DIA implies a +0.07% open, the SPY is implying a +0.09% open, and the QQQ implies a +0.08% open at this hour. At the same time, 10-year bond yields are back up to 4.319% and Oil (WTI) is up yet another 1.03% to $92.42 per barrel in early trading.
The major economic news scheduled for Tuesday includes Preliminary August Building Permits and August Housing Starts (both at 8:30 a.m.), and API Weekly Crude Oil Stocks (4:30 p.m.). The major earnings reports scheduled for Tuesday are limited to AZO before the open. Then, after the close SCS reports.
In economic news later this week, on Wednesday, we get EIA Weekly Crude Oil Inventories, FOMC Rate Decision, FOMC Statement, FOMC Q3 Interest Rate Projection, Q3 1st Year Interest Rate Projection, Q3 2nd Year Interest Rate Projection, Q3 3rd Year Interest Rate Projection, Q3 Long-Term Interest Rate Projection, and the Fed Chair Press Conference. On Thursday, Q2 Current Account, Weekly Jobless Claims, Philly Fed Mfg. Index, Philly Fed Mfg. Employment, August Existing Home Sales, and Fed Balance Sheet. Finally, on Friday, S&P US Mfg. PMI, S&P U Services PMI, and S&P Global Composite PMI are reported.
In terms of earnings reports later this week, on Wednesday, GIS, FDX, and KBH report. On Thursday, we hear from DRI and FDS. Finally, on Friday, there are no major earnings reports scheduled.
In miscellaneous news, the GOP proposal for a continuing resolution that includes an 8% cut in domestic program budgets lasted all of about 18 hours. On Monday, 10 far-right MAGA Congressmen that Speaker McCarthy needs to pass such a resolution announced they oppose the idea altogether. McCarthy can only afford to lose 8 votes unless he can get Democratic support. Elsewhere, the US military is asking for the help of the public to locate a F-35 fighter that crashed in SC after the pilot ejected. (Am I the only one worried that the DoD can’t find it on its own…or they didn’t think to stick an AAPL airtag in the thing while operating in the US?) Overnight, the debris field was found about two hours Northeast of the Charleston Joint-Service Base.
With that background, markets are little moved again and trading indecisively this morning. All three major index ETFs gapped up to start the early session, but have traded in a very tight range when they traded at all in the premarket. All three remain below their T-line (8ema) but DIA is getting close to a retest from below. So, for now, the trend of the last two weeks continues to be choppy. If you are looking at a very short timeframe, the momentum has switched from bearish to bullish and back several times during that period. In the mid-term the trend is bearish. A longer outlook shows a bullish long-term trend. The premarket session is just up off the obvious potential support levels that were just below the SPY, QQQ, and DIA on the close Friday. In terms of extension, none of the major index ETFs are far from their T-line and the T2122 indicator is now in the lower side of its mid-range. So, there is plenty of slack for either the Bulls or the Bears to make a move.
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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