Be Wary Of a Bull Trap, PPI up Next

Wednesday gave us a sideways move within a range.  SPY opened 0.06% higher, DIA gapped up 0.24%, and QQQ gapped down 0.24%. At that point, SPY sold off modestly for 30 minutes before trading sideways in a tight range until 3:30 p.m.   Meanwhile, DIA rallied modestly for an hour before trading sideways in a very tight range until 1:30 p.m.  From 1:30 p.m. until 3:30 p.m. DIA sold off modestly.  As for QQQ, it sold off briskly the first 30 minutes before grinding sideways in a modest range until 3:30 p.m.  However, at 3:30 p.m. all three major index ETFs sold off sharply (biggest 5-minute candle of the day) and then modestly rebounded the last 25 minutes of the day.  This action gave us a gap-up black-body Doji-type candle in the DIA, a gap-up black-bodied Hanging Man-type candle in the SPY, and a gap-down Bearish Harami in the QQQ.  The two large-caps remain above their T-line (8ema) and the QQQ closed the day right at its own.  All three major index ETFs did this on less-than-average volume.

On the day, eight of the 10 sectors were green as Energy (+1.32%) was out in front leading markets higher.  At the same time, Technology (-0.63%) lagged behind the other sectors and was the only sector much in the red on the day.  Meanwhile, SPY lost 0.16%, the DIA gained 0.11%, and the QQQ lost 0.77%. VXX fell 0.51% to close at 13.56 and T2122 climbed but remained just outside of overbought territory to 79.92.  10-year bond yields spiked again to 4.188% and Oil (WTI) popped 2.63% to close at $79.72 per barrel.  So, for the most part, it was a sideways drift day in the markets.  The was a small amount of movement early, but the bulk of the trading was done in a range-bound area, not far from the prior close.

The only major economic news on Wednesday was EIA Weekly Crude Oil Inventories, which surprised (after API numbers Tuesday evening) with a 1.536-million-barrel drawdown (compared to a forecasted 0.900-million-barrel inventory build and much lower than the prior week’s 1.367-million-barrel build).

After the close, LEN missed on revenue while beating on earnings.  LEN also lowered its forward guidance.

Click for video

In stock news, on Wednesday, BKSY announced it has been awarded a $24 million contract to supply AI services by the US Air Force.  At the same time, Swedish EV maker PSNY announced it is cutting the base price of its Polestar 3 model by more than 12% (down to $73,400).  The company also launched new model variants.  Later, LFWD announced a 1-for-7 reserve split effective at the market open on Friday, March 15.  The move is aimed at maintaining the stock price requirement for NASDAQ listing.  At the same time, MSFT announced it will widen the availability of its AI-powered cyber-security tool on April 1.  Later, VLKAF (Volkswagen) announced it expects only a 3% increase in car sales this year, which is down sharply from 2023’s 12% increase.  At the same time, GEHC announced an increase in the size of its secondary offering from 13 million to 14 million shares a day after announcing the secondary listing.  Later, the GOOGL subsidiary Waymo announced Wednesday that it begin offering free driverless robotaxi services in Los Angeles to select people starting Thursday.  GOOGL said the service will cover 63 square miles ranging from Santa Monica to downtown LA. 

At the same time, X stock fell sharply after the Financial Times reported that President Biden intends to voice concerns about the Nippon Steel acquisition of X.  In unrelated Japanese news, the Japanese media reported the NSANY (Nissan) board of directors is now seeking a partnership with HMC on electric vehicles.  Elsewhere, WS announced it has signed a licensing agreement with MT and will begin using MT’s patented technology to ablate hot-formed blanks, entering a new segment.  After hours, FSR stock crashed 35% when the Wall Street Journal reported the company’s advisors were preparing for a potential bankruptcy.  Also after the close, MO announced it would sell part (35 million shares of its 197 million shares) of its stake in BUD.  This will be accomplished via a secondary offering of BUD.  In addition, BUD has agreed to buy $200 million of its stock back directly from MO.  Meanwhile, UA announced its founder Plank will return as the CEO as of April 1.  At the same time, KNTK announced an 11.4 million share secondary offering.  DLTR announced it plans to close 1,000 stores in the coming years (schedule not specified) after significant setbacks during Q4.

In stock legal, governmental, and regulatory news, on Wednesday the FDA announced it has granted “orphan drug” designation to PRTC’s LYT-200 therapy. (The designation offers tax and other benefits.)  Later, Epic Games asked a US federal judge to hold AAPL in contempt for allegedly violating an injunction governing its App Store.  Epic asked the judge to “end AAPL’s sham compliance” with the court order.  At the same time, the NTSB said Wednesday that BA still refuses to disclose the names of those employees who worked on the 737 MAX 9 door plug or production line.  BA also overwrote video footage of the production.  BA’s CEO’s response was the ridiculous “I’m unable to provide that information…Boeing has no records of the work being performed.”  Later, the FDA also granted PSTX orphaned drug status for its multiple myeloma treatment.  At the same time, PI and NXPI announced they had reached a comprehensive settlement and cross-patent licensing agreement, ending the litigation between the companies.  (NXPI will make a one-time $45 million payment to PI immediately and $15 million per year increasing afterward.)  Elsewhere, Reuters reported the UNH has already been hit with six class action lawsuits of alleged failures related to the loss of personal data.  (It is also expecting suits over financial losses related to its failures to process claims and make payments.)  Separately, the US Dept. of Health announced it has opened an investigation into UNH’s Feb. 21 cyberattack over a breach of protected consumer health (HIPAA) data.  After the close, the FDA approved LIVMARLI (a treatment for a rare liver disease) from MIRM.

Overnight, Asian markets were mixed as South Korea (+0.94%), Singapore (+0.81%), and Thailand (+0.75%) led the seven gainers.  Hong Kong (-0.71%) and Shenzhen (-0.52%) paced the losing 5 exchanges.  In Europe, the bourses lean heavily toward the green at midday.  The CAC (+0.99%), DAX (+0.42%), and FTSE (unchanged) lead the region higher in early afternoon trade.  In the US, as of 7:30 a.m., Futures are pointing toward a gap higher to start the day.  DIA implies a +0.38% open, SPY is implying a +0.34% open, and QQQ implies a +0.42% open at this hour.  Meanwhile, 10-year bond yields are up to 4.194% and Oil (WTI) is up 0.73% to $80.31 per barrel in early trading.

The major economic news scheduled for Thursday includes Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, Feb. Core PPI, Feb. PPI, and Feb. Retail Sales (all at 8:30 a.m.), Jan. Business Inventories and Jan. Retail Inventories (both at 10 a.m.), and the Fed’s Balance Sheet (4:30 p.m.).  The major earnings reports scheduled for before the open are limited to AVAH, CSIQ, DKS, DG, GIII, and BEKE.  Then, after the close, AGCO, ADBE, ALTG, TLNE, and ULTA report.    

In economic news later this week, on Friday, Feb. Export Price Index, Feb. Import Price Index, NY Empire State Mfg. Index, Feb. Industrial Production, Michigan Consumer Sentiment, Michigan Consumer Expectations, Michigan 1-Year Inflation Expectation, and Michigan 5-Year Inflation Expectation are reported.

In terms of earnings reports later this week, on Friday, we hear from ERJ and JBL.

So far this morning, AVAH, CSIQ, DKS, DG, and BEKE all reported beats on both the revenue and earnings lines.  Meanwhile, GIII missed on revenue while beating on earnings.  It is worth noting that GIII also lowered its forward guidance.

In miscellaneous news, on Wednesday, for the second day in a row, Ukrainian drones struck Russian oil refineries.  This attack caused a fire at Rosneft’s largest oil refinery.  (Tuesday’s attacks significantly damaged Lukoil’s largest refinery.) Elsewhere, Reuters reported that global corporate dividends topped $1.66 trillion in 2023 with banks accounting for more than half of the growth.  Meanwhile, the US CFPB alleged that banking and business groups such as the US Chamber of Commerce have been “judge shopping” in the filing of lawsuits challenging credit fee regulations.  Later Wednesday evening Reuters reported that the probe into Monday mid-air dive by a LTMAY airline BA 787 plane is now centered on the pilot seat coming loose from the cabin floor.  Yet another problem for the troubled aircraft maker.  In Europe, the ECB announced a new framework for how it will implement monetary policy.  The interesting change is that the new framework gives banks much more say in how big their cash reserves on hand need to be. 

In late-breaking news, the International Energy Agency said overnight that it projects oil markets will face a supply deficit throughout 2024.  This comes after OPEC+ agreed to extend their 2+ million barrel per day production restrictions as a means of propping up crude prices.  In addition, in the last week, the three largest Russian oil refineries have been attacked by Ukraine in retaliation for the invasion of their country and Russia’s deliberate targeting of energy and economic infrastructure.  The amount of damage done and the schedule of repairs remain unknown.  However, this is expected to have at least some impact on the net oil and distillates availability globally.

With that background, it looks like the Bulls will start the day by leading a positive move. All three major index ETFs opened the premarket by gapping a bit higher and have printed tiny, but white-body candles since that start. All three remain above their T-line (8ema) and all three of those averages are rising. So, the short-term trends are now bullish in all three while the strong bullish longer-term trend is back in play in SPY (and to a lesser extent QQQ) but remains under significant pressure in the DIA. In terms of extension, none of the three major index ETFs is too far from its T-line, but the T2122 indicator is back just outside the edge of overbought territory. This means both sides still have room to run if they can gather the momentum. However, the Bears have more slack. Looking at those 10 Big Dog tech names, seven are in the green this morning. However, it is worth noting that the leader of the AI pack, NVDA, is down more than 1.5% in the early session and TSLA is down 1.4%. As the two most heavily traded stocks in the market (by far) they carry a bigger stick to the market fight. So, be careful. With those two strongly in the red, it will be much harder for Bulls to have traction. It is possible the gap up is just a Bull trap today.

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.


LTA Scanning Software
TC2000 Discount

🎯 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.

Hit and Run Candlesticks / Road To Wealth Youtube videos

Disclosure: We do not act on all trades we mention, and not all mentions acted on the day of the mention. All trades we mention are for your consideration only.

Free YouTube Education  •  Subscription PlansPrivate 2-Hour Coaching

DISCLAIMER: Investing / Trading involves significant financial risk and is not suitable for everyone. No communication from Hit and Run Candlesticks Inc, its affiliates or representatives is not financial or trading advice. All information provided by Hit and Run Candlesticks Inc, its affiliates and representatives are intended for educational purposes only. You are advised to test any new trading approach before implementing it.  Past performance does not guarantee future results.  Terms of Service

Comments are closed.