BA In Trouble Again and Big Bitcoin Week

The markets opened around the flat line on Friday. SPY opened up 0.05%, DIA started down 0.08%, and QQQ opened up 0.03%.  At that point, all three major index ETFs began a rally that lasted until 10:15 a.m. in the DIA, until 11 a.m. in the SPY and until 11:20 a.m. in the QQQ.  From there, all three sold off until 1:20 p.m.   Then we saw a new wave up for about an hour followed by down wave down wave that lasted another hour and finally a 30 minute up wave to end the day.  This action gave us White-bodied Spinning Top candles in all three major index ETFs.  The DIA again retested its T-line (8ema) but failed to close above it.  This happened on above-average volume in the DIA, less-than-average volume in the SPY, and average volume in the QQQ.

On the day, nine of the 10 sectors were in the green with Communications Services (+0.76%) out front leading the way higher while Consumer Defensive was the lone laggard in the red. At the same time, the SPY gained 0.14%, DIA gained 0.03%, and QQQ gained 0.12%.  The VXX fell 3.30% to close at 15.55 and T2122 rose but still remained in its midrange at 45.71.  10-year bond yields rose back above four percent to 4.05% and Oil (WTI) spiked 2.4% to close at $73.92 per barrel.  On the day, we saw a volatile seesaw action that really ended up not far from where Thursday had closed.

This ended a string of nine up weeks in a row in the SPY, DIA, and QQQ.  On the week, SPY lost 1.55% (on average volume) and DIA lost 0.59% (on above-average volume).  However, QQQ lost 3.12% (on less-than-average volume) in what seems to have been at least a short-term rotation out of the big dog tech names that have pulled markets higher for more than a year.  TSLA fell 4.42%, AAPL dropped 5.90%, MSFT fell 2.20%, AMZN dropped 4.41%, AMD plummeted 5.99%, GOOGL fell 2.83%, and INTC plummeted 6.69% on the week.  However, of these, only AAPL recorded even average volume for the week.

The economic news on Friday included Dec. Avg. Hourly Earnings (year-on-year) which came in higher than expected at +4.1% (compared to a forecast of +3.9% and the Nov. reading of +4.0%).  On a month-on-month basis this was +0.4% (versus a forecast of +0.3% but in line with November’s +0.4% value).  At the same time, Dec. Nonfarm Payrolls were much stronger than expected at +216k (compared to a forecast of +170k and the Nov. reading of +173k).  On the private side, Dec. Private Nonfarm Payrolls were also much stronger than predicted at +164k (versus a forecast of +130k and the Nov. value of +136k).  These resulted in a Dec. Unemployment Rate that was lower than anticipated at 3.7% (compared to a forecast of 3.8% but in line with the November reading of 3.7%).  The Dec. Participation Rate was lower than predicted at 62.5% (versus a forecast and November reading of 62.8%).  So, the jobs market remains strong and workers saw real wage growth (compared to inflation) again last month.  Later, Nov. Factory Orders were also much stronger than expected at +2.6% (versus a +2.1% forecast and far better than the November 3.4% decline).  At the same time, Dec. ISM Non-Mfg. Employment was far below predicted at 43.3 (compared to a forecast of 51.0 and the November value of 50.7).  Meanwhile, Dec. ISM Non-Mfg. PMI was also below expectations at 50.6 (versus the forecast of 52.6 and November’s 52.7 reading). Finally, Dec. ISM Non-Mfg. Prices were slightly above anticipated at 57.4 (compared to a forecast of 57.3 but down from November’s 58.3 value).

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In stock news, STLA announced it would not advertise during next month’s Super Bowl, citing a challenging US auto market.  (GM made the same announcement in November.)  STLA has often been a significant advertiser at the event.  At the same time, the Wall Street Journal reported that SNPS is in advanced discussions to buy ANSS for around $35 billion in cash and stock.  Later, a large US medical study was reported in the peer-reviewed journal Nature Friday, which found NVO’s hit weight-loss drugs are not linked to an increase in suicidal thoughts.  Elsewhere, Reuters reported that CHK and SWN are very close to a $17 billion merger agreement.  After hours, Reuters reported that the UAW has reached a tentative deal with ALSN.  Meanwhile, LLY announced a new website offering telehealth prescriptions and direct-to-home delivery of drugs on Friday.  This move alone may not dramatically impact the pharmacy industry but other drugmakers are expected to follow suit, which could put pressure on grocery and pharmacy chains currently filling prescriptions.  At the same time, the Insurance Journal reported Friday that AUR (driverless trucking technology) along with two other competing private firms intend to drop their human copilots from their semi-truck shipments, starting in Texas.  (AUR carries freight for WMT, KR, FDX, TSN, and other major shippers.)  On Saturday, ALK grounded its entire fleet of 65 BA 737 MAX 9 planes after a midnight flight Friday had an entire section of the fuselage blown out, causing explosive decompression of the cabin at 16,000 feet during a flight. 

In stock government, legal, and regulatory news, in China, the State Administration for Market Regulation said Friday that TSLA would be recalling and fixing all 1.62 million vehicles (all sold in the country) equipped with the full self-driving feature.  (This is for the same reason as the US recall of all TSLA vehicles sold in the US in December.)  Later, MSFT and OpenAI were hit with a new lawsuit in federal court in NY Friday.  The suit alleges the companies misused the works of nonfiction authors to train their AI models.  At the same time, Reuters reported that India’s Antitrust Regulator launched an investigation into UPS, FDX, and Germany’s DHL for alleged collusion on discounts and tariffs.  Elsewhere, the FDA approved a new topical gel treatment for the highly contagious skin disease molluscum contagiosum produced by LGND.  (The disease impacts 6 million Americans per year with up to 73% of patients not receiving treatment.)  During the afternoon, the New York Times reported that the US Dept. of Justice is preparing an antitrust lawsuit against AAPL.  (The suit purportedly attacks the way AAPL watches only work with iPhones as well as exclusivity restrictions for the iMessage app as well as distribution of iPhone apps.)   At the same time, the NASDAQ announced it will delist LMDX on January 9th.  Later, two groups representing the auto dealers filed a lawsuit challenging the FTC consumer protection regulations finalized in December which ban “bait and switch” advertising tactics and prohibit dealerships from charging add-on costs without prior customer approval.  (The groups are supported by GM, TM, VLKAF, and other automakers.)  On Saturday, following the ALK incident with a BA 737 MAX 9 jet (see above), the FAA grounded some of the same model jets nationwide and ordered the immediate inspection of all BA 737 MAX 9 jets.  (There are 215 in service worldwide and the FAA order impacts 171 of them.)

Overnight, Asian markets were mixed.  Hong Kong (-1.88%), Shenzhen (-1.85%), and Shanghai (-1.42%) paced the losses while Malaysia (+0.54%), Taiwan (+0.31%), and Japan (+0.27%) led the gainers.  In Europe, we see a similar picture taking shape at midday with only five of the 15 bourses in the green.  The CAC (-0.02%), DAX (+0.15%), and FTSE (-0.25%) are typical of the region.  Athens (+1.27%) and Portugal (-1.13%) are the outliers in early afternoon trade.  In the US, as of 7:30 a.m., Futures are pointing toward a mixed open with the Dow was an outlier.  The DIA implies a -0.42% open, the SPY is implying a -0.05% open, and the QQQ implies a +0.07% open at this hour.  At the same time, 10-year bond yields are back up to 4.061% and Oil (WTI) is down by 2.82% to $71.75 per barrel in early trading.

The major economic news scheduled for Monday is limited to the NY Fed 1-year Consumer Inflation Expectations (11 a.m.) and November Consumer Credit (3 p.m.). The major earnings reports scheduled for the day are limited to CMC and HELE before the open.  Then, after the close, JEF reports. 

In economic news later this week, on Tuesday we get Nov. Imports, Nov. Exports, Nov. Trade Balance, EIA Short-Term Energy Outlook, and API Weekly Crude Oil Stocks.  On Wednesday, EIA Weekly Crude Oil Inventories are reported and Fed member Williams speaks.  Then Thursday, we get Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, Dec. Core CPI, Dec. CPI, Dec. Federal Budget Balance, and the Fed’s Balance Sheet.  On Friday, Dec. Core PPI, Dec. PPI, and the WASDE Ag report are delivered. 

In terms of earnings reports, the main thrust does not start again until the end of the week. In the meantime, on Tuesday, AYI, ACI, MSM, SNX, PSMT, and WDFC report.  Then Wednesday, we hear from KBH.  On Thursday, INFY reports.  Finally, on Friday, we hear from BAC, BK, BLK, C, DAL, JPM, UNH, WFC, and WIT.

In miscellaneous news, the NY Fed reported Friday that global supply chain issues eased in December.  The report said the Fed’s proprietary supply chain pressure index came in a -0.15 for December, down from a November reading of +0.13.  (The gauge peeked at +4.33 in December 2021.)  Elsewhere, several major investment firms including BLK and FNF updated their filings Friday and hope that their Bitcoin spot price ETFs will be approved this week.  This comes after the SEC asked the fund managers to submit written requests to accelerate approval.

In government funding news, the first of two cliffs (partial shutdowns) is scheduled for January 19.  On Sunday afternoon, Congressional leaders (Senate Majority Leader Schumer and House Speaker Johnson) announced a $1.59 trillion agreement on the top-line spending number. The only details agreed are that this will be divided between $886 billion for Defense and $704 billion in non-defense spending.  The deal does give a few more concessions to the MAGA types, allowing the GOP to renege on the June 2023 agreement. However, it doesn’t give specifics for any of the 12 appropriations bills and it is still unclear whether Speaker Johnson even has the power to get this agreement passed in his own House with the GOP majority now down to two votes (there is no tie-breaker in the House and so a tie vote fails).

So far this morning, CMC reported beats on both the revenue and earnings lines.  At the same time, HELE beat on revenue while missing on earnings.

With that background, it looks like Mr. Market is indecisive so far this morning. The DIA opened the premarket with a gap lower and this has put in a small black-bodied candle that is about half wick. The other two major index ETFs are also giving no clear direction with the QQQ gapping down, but putting in the strongest whit-body of the two candles while SPY prints a true Doji type inside of Friday’s candle so far in the early session. So, the Bears remain in control of the short-term trend and the longer-term bullish daily trend lines remain broken. However, no new lower-high has presented itself in any of the three major index ETFs. (We are technically not yet in a downtrend.) In terms of extension, the two large-cap index ETFs are not far from their T-line (8ema), but the QQQ is getting a bit stretched below its T-line. At the same time, the T2122 indicator remains in its mid-range. So, both the Bulls and Bears do have room to run if they can gather the momentum to do it. Continue to keep an eye on the Tech Big Dogs. If we are seeing a rotation out of those names (which have dragged markets along for a year or more), it will be hard for markets to do anything except retreat.

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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