Markets opened lower again on Tuesday.  SPY gapped down 0.30%, DIA gapped down 0.22%, and QQQ gapped down 0.50%.  At that point, DIA ground sideways along the opening level.  Meanwhile, the SPY and QQQ also ground sideways but with a bit of a bullish trend. The left the SPY near the top of the gap, DIA at the bottom of its gap, and the QQQ back a bit above its gap at the close.  This action gave us a white-bodied candle with an upper wick, which retested and held the T-line (8ema), DIA printed a Doji (indecisive) Harami candle, and the QQQ printed a large, white-bodied Bullish Engulfing candle that retested and failed its T-line.  This happened on average volume in the DIA and well-below-average volume in the SPY and QQQ.

On the day, nine of the 10 sectors were in the red with Energy (-1.49%) out in front leading the way lower while Technology (+0.04%) held up much better than any of the other sectors. At the same time, the SPY lost 0.02%, DIA lost 0.20%, and QQQ gained 0.25%. The VXX fell 0.69% to close at 17.16 and T2122 fell back out of its overbought territory and back into the mid-range at 62.89.  10-year bond yields dropped sharply to 4.167% and Oil (WTI) dropped 0.32% to close at $72.09 per barrel.  So, Tuesday was another day where the main portion of the move was made at the open.  It felt like a day of rest with traders waiting on more information (waiting on the other shoe to drop) and happy for the consolidation/pullback to continue until it does get dropped. 

The major economic news reported Tuesday, S&P Global Services PMI came in exactly as expected at 50.8 (compared to a forecast of 50.8 and an Oct. reading of 50.6).   At the same time, the S&P Global Composite PMI also came in on target at 50.7 (versus a 50.7 forecast and 50.7 Oct. value).  Later, Nov. ISM Non-Mfg. PMI was reported stronger than predicted at 52.7 (compared to a forecast of 52.0 and an Oct. reading of 51.8).  In addition, Nov. ISM Non-Mfg. Employment came in lower than was anticipated at 50.7 (versus a 51.4 forecast but still up from October’s 50.2).  At the same time, Nov. ISM Non-Mfg. Prices Index was a bit higher than expected at 58.3 (compared to a 58.0 forecast but down from October’s 58.6 value).  Later, after the close, the API Weekly Crude Oil Stock Report showed a modest inventory build of 0.594 million barrels (versus a forecast that called for a 2.267-million-barrel drawdown and a prior week’s reading of -0.817 million barrels.

After the close, TOL reported beats on both the revenue and earnings lines.  At the same time, PLAY missed on revenue while beating on earnings.  It is worth noting that TOL also lowered its forward guidance.

In stock news, F announced a partnership with XEL that will install 30k electric vehicle chargers throughout the US by 2030.  Later, PG unexpectedly announced it would record a $2.5 billion write-down in the value of its Gillette unit. At the same time, GDRX took a hit Tuesday when CVS announced a plan to implement a more transparent model of reimbursement from pharmacy benefit managers like GDRX.  (CVS rose 4% on the announcement while GDRX fell more than 6% on the day.)  Elsewhere, auto industry analysts at MS said Tuesday that TSLA’s market share of the global EV market fell to 13% in October (down sharply from TSLA’s 17% share in September).  At the same time, the CFO of CHTR (speaking at a UBS conference) said he expects a reduction in broadband subscribers in Q4.  (This news hit the stocks of CHTR as well as competitor CMCSA.)  Later, Axios reported that DEO is seeking to sell its portfolio of beer brands (except the flagship Guinness brand) due to concerns over margins.  At the same time, TSLA CEO Musk said Tuesday that “his projections” indicate the newly released Cybertruck will not have a significant impact on TSLA finances until 2025.  In other news, Reuters reported BA delivered 46 narrowbody 737s in November.  That brings the 2023 total to 351 units, leaving BA 25 planes short of the low end of its already reduced target range of 375-400 for the year.  After the close, MA announced it had approved a new $11 billion share buyback program.  The new program takes effect as soon as its current $9 billion buyback program is complete.

In stock government, legal, and regulatory news, a bankruptcy court announced that XPO was the winning bidder and would acquire 28 service centers formerly owned by bankrupt YELL.  XPO will pay $870 million for the 28 centers.  Later, the trial over the US Dept. of Justice seeking to block the JBLU acquisition of SAVE (for $3.8 billion) ended.  The judge suggested he might approve the deal if JBLU agreed to divest more assets, also saying he was “having trouble with the DOJ’s request for a permanent injunction” in a dynamic marketplace.  Elsewhere, an FTC inquiry has delayed the XOM’s planned $60 billion acquisition of PXD.  According to SEC filings, PXD has been asked for additional information for an expanded investigation.  (XOM and PXD remain optimistic the deal will eventually be approved.)  Later, AMZN lent its voice to the calls asking the British antitrust authority to investigate and sanction MSFT for business practices that restrict customers’ ability to choose non-MSFT platforms for cloud computing.  At the same time, a group of Catholic nuns filed suit against SWBI, trying to force the gunmaker to abandon manufacturing and sales of “assault-style” weapons.  After the close, JNJ announced it had settled an unspecified number of additional talc cancer lawsuits.  (JNJ settled with several major law firms with settlements covering all their clients in such suits.)  Also after the close, BAYRY (Bayer) was ordered to pay $3.5 million to a woman by a Philadelphia jury in the latest lawsuit over Roundup weedkiller causing cancer.

In major retraction news, late Tuesday evening, the National Retail Federation retracted previous claims by it and its members that nearly half of all retail losses in 2021 were due to “organized retail crime rings.”   The group admitted that it made and repeated that claim despite data showing this was nowhere near true.  (Clearly, this was another case of lying in politics and attempting to shift blame from its members in the stock market.)

Overnight, Asian markets leaned toward the green side with only two of region’s 12 exchanges in the red and another (New Zealand) unchanged.  Japan (+2.04%) and Australia (+1.65%) led the region higher on the day.  In Europe, we see a similar picture taking shape with only four of the 15 bourses in the red at midday.  Russia (-1.31%) is by far the biggest loser while the CAC (+0.50%), DAX (+0.30%), and FTSE (+0.49%) lead the rest of the region higher in early afternoon trade.  In the US, as of 7:30 a.m., Futures are pointing toward a start to the day modestly on the green side of flat.  The DIA implies a +0.09% open, the SPY is implying a +0.14% open, and the QQQ implies a +0.16% open at this hour.  At the same time, 10-year bond yields are back up a bit to 4.193% and Oil (WTI) is down another percent to $71.61 per barrel in early trading.

The major economic news scheduled for Wednesday includes Nov. ADP Nonfarm Employment Change (8:15 a.m.), Oct. Exports, Oct. Imports, Oct. Trade Balance, Q3 Nonfarm Productivity, and Q3 Unit Labor Costs (all at 8:30 a.m.), and Weekly EIA Crude Oil Inventories (10:30 a.m.).  The major earnings reports set for before the open are limited to BF.A, CPB, KFY, OLLI, THO, and UNFI.  Then, after the close, CHWY, GME, GEF, and VEEV report.  (We are also supposed to get testimony from all the major bank (JPM, MS, C, GS, and BAC) CEOs. They are expected to testify that banks will be pushed to the brink of failure (and the economy is in big trouble) IF…IF Fed-proposed additional banking oversight and reporting is enacted OR the requirements for capital held in reserve for runs is raised. (JPM CEO Dimon has already said he will testify that higher cash reserve requirements for banks will mean higher interest rates, driving homebuyers out of the market, and hurting low-to-moderate income borrowers.)

In economic news later this week, on Thursday, we get the Weekly Initial Jobless Claims and the Fed Balance Sheet.  Finally, on Friday, we get, Nov. Nonfarm Payrolls, Nov. Private Nonfarm Payrolls, Nov. Participation Rate, Nov. Unemployment Rate, Nov. Avg. Hourly Earnings, Michigan Consumer Sentiment, Michigan Consumer Expectations, Michigan 1-year Inflation Rate, Michigan 5-year Inflation Rate, and WASDE Ag Report.

In terms of earnings reports later this week, on Thursday, we hear from CIEN, DG, GMS, AVGO, COO, DOCU, LULU, and RH.  Finally, on Friday, there are no major earnings reports scheduled.

In economic/banking outlook news, the heads of four major US banks told a GS conference that they are all expecting some version of a soft landing, thanks in large part to a resilient consumer.  GS CEO Soloman said, “People continue to be cautious on the U.S. economy, but I think it’s very, very clear that the U.S. economy has been more resilient than we expected.”  Meanwhile, WFC CEO Scharf remarked, “The consumer is still very, very strong…as we sit here today, our base case is something closer to a soft landing as opposed to something far more serious than that.”  Then BAC CEO Moynihan said, “We’ll be at about $1 billion in fees this quarter,” (which reflects a low single-digit decline that outperforms the average industry expectation).  Finally, SYF CEO Wenzel said delinquencies are not as bad as feared, saying, “As we think about the fourth quarter, delinquency rates will rise, with losses peaking in the first half of the year” (while still being below industry forecasts).

In China news, MCO (Moody’s) downgraded China’s sovereign debt credit rating outlook from stable to negative.  It kept its “A1” rating on Chinese debt, but similarly to the way outlooks were reduced on US debt during various political games in the US, the “outlook” was reduced.  MCO cited property sector pressures and warning signs related to Chinese growth (including a major national pneumonia outbreak).

So far this morning, KFY and OLLI reported beats on both the revenue and earnings lines.  Meanwhile, CPB, THO, and UNFI all missed on revenue while beating on earnings.  (Note that UNFI’s earnings beat was just a significantly lower loss than had been forecasted.)  It is worth noting that OLLI raised its forward guidance.  (BF.A reports closer to the opening bell.)

With that background, it looks like all three major index ETFs are looking to make a modest gap higher this morning. All three major index ETFs opened the premarket higher and are putting in small candles so far in the early session. QQQ opened up above its T-line (8ema) again and has traded back down to retest that level this morning. However, the overall character of the early session suggests nothing has changed yet and more consolidation remains Mr. Market’s plan. On balance, the Bulls are in control of the longer-term trend but the short-term trend is consolidating or sideways. In terms of extension, none of the three major index ETFs is extended too far from its T-line. At the same time, the T2122 indicator is back down in its mid-range. So, both the Bulls and the Bears have plenty of slack to run…if they can find the momentum.

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.

Ed

🎯 Mike Probst: Rick, Got CTL off the scanner today. Already up 30%. Love it.

🎯 Dick Carp: the scanner paid for the year with HES-thank you

🎯 Arnoldo Bolanos: LTA scanner really works $$, thanks Ed.

🎯 Bob S: LTA is incredible…. I use it … would not trade without it

🎯 Malcolm .: Posted in room 2, @Rick… I used the LTA Scanner to go through hundreds of stocks this weekend and picked out three to trade:  PYPL, TGT, and ZS.   Quality patterns and with my trading, up 24%, 7% and 12%…. this program is gold.

🎯 Friday 6/21/19  (10:09 am) Aaron B: Today, my account is at +190% since January. Thanks, RWO HRC Flash Malcolm Thomas Steve Ed Bob S Bob C Mike P and everyone that contributes every day. I love our job.

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