Wednesday was the Bear’s Day from the start. SPY gapped down 0.78%, DIA gapped down 0.85%, and QQQ gapped down 0.91%. From there, all three major index ETFs rallied until 10 a.m. For its part, QQQ continued to rally until 10:55 a.m. At that point (10 a.m. in SPY and DIA and 11 a.m. in the QQQ), all three meandered sideways with a modest Bearish trend the remainder of the day. This action gave us a gap-down, white-bodied Doji or Spinning Top type candle with high upper wick in the SPY. DIA printed a gap-down, black-bodied Spinning Top. Finally, the QQQ printed a gap-down, white body Inverted Hammer. Spy gapped down through its T-line (8ema) and failed a retest from below. QQQ held above its T-line and DIA is now very stretched below its own 8ema. Once again, this all happened on well-below-average volume in all three major index ETFs.
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On the day, all 10 sectors were in the red with Basic Materials (-1.68%) and Energy (-1.58%) out in front leading the rest of the market lower. Meanwhile, Communications Services (-0.72%) held up better than the other sectors. At the same time, SPY lost 0.69%, DIA fell 1.00%, and QQQ lost 0.70%. VXX popped another 3.83% to close at a still low 11.93 and T2122 dropped well into its oversold territory to close at 9.97. On the bond front, 10-year bond yields spiked again to 4.614% and Oil (WTI) dropped 1.01% to close at $79.02 per barrel. So, Wednesday was really all about the open as markets gapped down across the board. After that, we saw that modest rebound rally and then the rest of the day was a drift sideways as traders look ahead to the GDP print on Thursday.
The major economic news scheduled for Wednesday was limited to API Weekly Crude Oil Stocks, which showed a much larger drawdown than expected at -6.490 million barrels (compared to a -1.900-million-barrel forecast and the prior week’s 2.480-million-barrel increase).
In Fed news, on Wednesday, the Fed announced that Cleveland Fed President Mester (who steps down on June 30) will be replaced by GS executive Beth Hammack as of August 21. This means the FOMC will be short one voter at the July 30-31 meeting. Hammack, who has served the bulk of her career working for the Fed, is GS’s Co-head of Global Financing. Elsewhere, the Fed Beige Book showed that consumers grew “somewhat more pessimistic.” However, the report said, “National economic activity continued to expand from early April to mid-May,” though overall outlooks “grew somewhat more pessimistic amid reports of rising uncertainty and greater downside risks.” The majority of (Fed) districts noted “better labor availability, though some shortages remained in select industries or areas.” In terms of wages, the report said, “Several (Fed) districts reported that wage growth was at (back down to) pre-pandemic historical averages or was normalizing toward those rates.” The report concluded by saying, “price growth is expected to continue at a modest pace in the near term.”
After the close, HPQ, NTNX, OKTA, and PSTG reported beats on both the revenue and earnings lines. Meanwhile, A, AEO, NOAH, and CRM reported misses on revenue while beating one earnings. On the other side, UHAL beat on revenue while missing on the earnings line. However, CPRI missed on both the top and bottom lines. It is worth noting that NOAH had an absolutely massive miss on revenue. It is also worth noting that A and NTNX lowered their guidance. At the same time, OKTA and CRM raised their forward guidance.
In stock news, on Wednesday, Canadian firm AET.V (Aethon) announced it would buy the upstream assets of TELL for $260 million. Aethon also signed a deal to buy two million tons of LNG per year from TELL. At the same time, Reuters reported that XOM and SHEL are close to an agreement to sell their jointly-owned North Sea natural gas fields to British producer Viaro Energy. (This comes at a time when major competitor CVX is also divesting from North Sea assets.) Later, BITF rejected an acquisition offer of $2.30 per share in cash and stock from RIOT. At the same time, MRK announced it has agreed to buy private biotech EyeBio for $3 billion ($1.3 billion in cash and $1.7 billion in future milestone payments). Later, UNH shares fell 6% after an unnamed executive told an industry conference that they see a “disturbance” coming in its Medicaid business. At the same time, BA announced it had reached a tentative deal with the firefighter’s union. The union is expected to vote Thursday, which may end the company’s lockout of firefighters from its Seattle plant. Later, ARM announced new chips and chip design tools to help smartphones handle AI tasks.
Elsewhere, BHP announced it had ended its efforts to acquire AAUKF and walking away from its $49 billion offer for the London-based rival. At the same time, Reuters reported that NABL is exploring a sale after attracting acquisition interest. Later, MCD President (Erlinger) denounced viral reports of “runaway Big Mac prices.” Erlinger said that such reports frustrate him and are vastly distorted, saying the average menu item had risen only 40% since 2019. (The viral report had complained of an $18 Big Mac and 100% increases since 2021.) At the same time, META announced it had identified networks that are pushing deceptive AI-generated content (such as praising Israeli actions in Gaza) onto social media feeds including those of US lawmakers. These bad actors include Israeli-based political marketing firm STOIC. Later, GD announced it is opening a new plant in Mesquite, TX to produce 100k 155mm artillery shells per month. (The US Army will actually own the plant equipment and lease it to GD.) After the close, WMT announced a technical issue in mid-March had caused self-checkout kiosks to overcharge customers at 1,600 of its 5,000 stores.
In stock legal and governmental news, on Wednesday, the NHTSA told owners of 84,000 older NSANY (Nissan) vehicles to stop driving them due to unrepaired Takata air bags. At the same time, AAL was sued for racial discrimination for temporarily removing three black men from a January Phoenix to NYC flight. The suit alleges that the plaintiffs and five other black men were removed from the flight when a white flight attendant complained about offensive body odor. Later, the EU announced it will hold a closed-door meeting with car battery makers (including BANR) where the companies will defend themselves against charges of operating as a cartel to fix battery prices. At the same time, the NHTSA said it’s seeking TSLA records as part of the investigation into 334k 2023 Model 3 and Model Y vehicles losing power steering while in motion. (There have been 2,388 complaints on this issue as of February.) Later, Reuters reported that FDA sources tell it that the agency has determined that nicotine and nicotine-like chemicals in vape products may be more potent (and addictive) than those in tobacco products. This puts MO and BTI in the investigative crosshairs.
Elsewhere, a US district judge in Seattle rejected an AMZN motion to dismiss an FTC lawsuit that alleges the company enrolled consumers into Amazon Prime without the consumer’s consent. (The trial remains scheduled to start in October 2026.) Later, the FAA announced that the agency chief (FAA Administrator Whitaker) is scheduled to meet with the BA CEO and other company executives to be presented the company’s quality improvement plans, which was demanded 90 days ago after the most recent spate of BA quality issues. After the close, a settlement was announced in a class action case against V and MA. The two companies will pay a $197 million settlement to end the case of millions of consumers alleging they colluded to keep cash access fees artificially high. (V will pay $104.6 million and MA will pay $92.8 million.) Later, the conservative activist group known for filing DEI lawsuits sent open letters to TSN and the US Dept. of Justice alleging the company is illegally hiring immigrants and children rather than adult US citizens.
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Overnight, Asian markets were mostly red with only two of 12 exchanges able to hold onto green territory. Meanwhile, South Korea (-1.56%), Taiwan (-1.38%), Hong Kong (-1.34%), and Japan (-1.30%) led the region South. In Europe, we see a much brighter picture taking shape at midday with 10 of 15 bourses in the green, albeit on modest moves. The CAC (+0.17%), DAX (-0.01%), and FTSE (+0.21%) lead the region higher in early afternoon trade. In the US, as of 7 a.m., Futures are pointing toward mixed but bearish follow-through to yesterday’s selling. The DIA implies a -0.83% open, the SPY is implying a -0.38% open, and the QQQ implies a -0.28% open at this hour. At the same time, 10-year bond yields are back down a bit to 4.594% and Oil (WTI) is off a half of a percent to $78.85 per barrel in early trading.
The major economic news scheduled for Thursday includes Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, April Goods Trade Balance, April Retail Inventories, Preliminary Q1 GDP, Preliminary Q1 GDP Price Index, and Preliminary Q1 PCE Prices (all at 8:30 a.m.), April Pending Home Sales, (10 a.m.), EIA Crude Oil Inventories (11 a.m.), and Fed Balance Sheet (4:30 p.m.). We also hear from Fed member Williams (12:05 p.m.). The major earnings reports scheduled for before the open are limited to BBY, BIRK, BURL, CAL, CM, CBRL, DG, FL, HRL, KSS, RY, and SPTN. Then, after the close, COO, COST, DELL, GPS, GES, MRVL, NTAP, JWN, ULTA, VEEV, and ZS report.
In economic news later this week, on Friday, we get April Core PCE Price Index, April PCE Price Index, April Personal Spending, and May Chicago PMI. We also head from Fed member Bostic.
In terms of earnings reports later this week, on DOOO reports.
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So far this morning, BIRK, BURL, BWLP, CM, DG, and RY all reported beats on both the revenue and earnings lines. Meanwhile, BBY, CAL, FL, HRL, and SPTN all missed on revenue while beating on earnings. (FL had a huge +83.3% earnings beat.) However, unfortunately, KSS missed on both the top and bottom line. It is worth noting that only KSS changed guidance, lowering its outlook.
In miscellaneous news, the White House said Wednesday that it is taking measures to support new US nuclear power plants. This is part of the administration push for more carbon-free electricity to battel climate change. (Nuclear plants account for 19% of US electric production currently.) Elsewhere, the new T+1 trade settlement process went mostly smoothly in its first day. Major clearing houses report that 92.76% of Tuesday’s trades were settled, which was up from Friday’s 89.59%. (However, it is worth noting that both Friday and Tuesday were low-volume trading days in the market. So, the new process has not been “stress tested” quite yet.) Meanwhile, a federal judge in TX transferred a suit brought against the CFPB by the US Chamber of Commerce (who had shopped for a conservative court) to Washington. This is a major win for the CFPB and loss for banks and the Chamber of Commerce. (This came after the 5th Circuit Appeals Court had prevented the original transfer. So, the judge had to reconsider and document the reasons for the transfer again.) Finally, in interesting geopolitical news, BABA stopped all deliveries to customers in Russia and will no longer do transactions in Russian Rubles. BABA said it will return funds already received from customers located in that region for unfilled orders. (This seems to indicate the company, if not China itself, are seeking to avoid US or Western sanctions.)
In late-breaking news, activist investor Nelson Peltz announced Wednesday evening that he had sold his enter 30 million share holdings of DIS (at $120/share) after losing his proxy war with DIS CEO Iger. (DIS now trades at $100/share.) Then this morning, AMZN announced that it has added a GRUB subscription ($120/year value) to its Amazon Prime membership ($139/year) service. Also this morning, FL posted better than expected results as its CEO said he said average selling prices increased in Q1 and he still sees consumers willing to pay full price.
With that background, it looks as if markets continue their bearish mood this morning in the premarket. (The DIA in particular fell out of bed again.) However, so far, all three major index ETFs are printing small, indecisive candles after the gap lower to start the early session. (SPY and QQQ are printing white body candles with QQQ retesting its T-line from below in Premarket. DIA is printing a small black-body candle.) Bear in mind that we get a second pass at GDP data later in the premarket and then PCE inflation data on Friday morning. With that said, the bears are in control of all three major index ETFs in the short-term. At the same time, the mid-term remains bullish and the longer-term market remains very Bullish in trend. In terms of extension, DIA is now extremely stretched to the downside below its T-line (8ema). The other two major index ETFs are not over extended from their T-lines. The T2122 indicator is back in the oversold range. So, the bottom line is that the market, especially the DIA names, is now in need of at least a rest or pull up to relieve pressure. With regard to those 10 big dog tickers, they are evenly split this morning with the five green names led by AMD (+0.82%) and the five red names led by MSFT (-0.84%).
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.
Ed
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