Big Banks Beat to Start Off Friday Right

Again, on Thursday, markets gapped higher after PPI came in lower than expected.  The SPY gapped up 0.27%, DIA gapped up 0.13%, and QQQ gapped up 0.63%.  We then saw 30 minutes of figuring out the direction in all three major indices.  This led to a long, slow, steady rally that ran all day in the large-cap indices as well as a sharper 20-minute rally before the long, slow steady follow-through rally in the QQQ. These rallies lasted until 3 pm when a sideways grind in a very tight range took hold in all three major indices.  This action gave us large-bodied, white candles in the SPY, DIA, and QQQ.  The two large-cap indices broke out of their recent pullback while the QQQ broke above its consolidation range dating back to 4/5 but did not break out of the pullback that began at the start of the month.

On the day, all 10 sectors were in the green with Healthcare (+1.75%) leading the way higher while Utilities (+0.20%) lagged behind the others.  At the same time, the SPY gained 1.33%, DIA gained 1.12%, and QQQ gained 1.96%.  VXX fell 3.64% to 41.34 and T2122 climbed back well into the overbought territory at 93.45.  10-year bond yields rose to close at 3.449% while Oil (WTI) was down 1.02% to $82.39 per barrel.  So, markets liked the PPI data falling more than expected and didn’t give the bears an inch all day long Thursday.  It was a risk-on day with the tech big dogs (AMZN, NFLX, AAPL, TSLA, and META) taking markets higher.  This happened on just less-than-average volume in SPY and QQQ with the mega-cap DIA trading a bit less than the other two indices (relative to average).    

In economic news, the March Producer Price Index surprisingly came in well below expectations at -0.5% month-on-month (compared to a forecast of +0.1% and also well below the Feb. reading of +0.0%).  More importantly, the March year-on-year PPI value came in at 2.7%, below the forecast of +3.0% and far below the February value of 4.9%.  At the same time, Weekly Initial Jobless Claims were above the anticipated at 239k (versus a forecast of 232k and well above the prior week’s reading of 228k).  Later in the day, Fed data was released showing that of the week ending April 12, bank borrowing from the Fed Discount window fell again to $67.6 billion/day (average) from $69.7 billion/day the prior week.  At the same time, the total banks borrowed from the new Fed Bank Term Funding Program also fell to $71.8 billion (total for the week) from $79.02 billion in the prior week.  This data points to the liquidity problems and turmoil in the banking sector easing, albeit in a modest way. 

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In stock news, AMZN joined the AI race on Thursday, announcing its Cloud Computing division has released a suite of tools aimed at helping other companies develop their own chatbots and image-generation services powered by artificial intelligence.  These services will be powered by AMZN chips as well as AI chips from NVDA.  Midday, it was reported by Reuters that XOM raised its CEO pay by 52% in 2022.  This came as the pay (median) for XOM workers actually fell by 9%.  For reference, the pay of competitors, such as the CEO of CVX rose 4%, the pay of OXY’s CEO rose 35%, and the CEO of COP saw his pay fall 16% (all versus the prior year).  Meanwhile, LCID announced the start of a nationwide tour aiming to allow consumers in 40 US cities to get a chance to experience and drive the company’s Air luxury electric vehicle at “pop-up studio locations” in the cities.  Separately, LCID announced they produced 2,314 and delivered 1,406 vehicles in Q1 (ending March 31).  Elsewhere, S&P reported after the close that hedge funds thought the recent “banking crisis” was a buying opportunity.  The report said hedge funds increased their regional bank stock exposure by 5.5%.  As an example, Citadel (one of the most profitable hedge funds) bought a 5.3% stake in WAL while it was being battered.  After the close, Reuters reported that BBVA, BAC, and SAN will jointly fund a $6 billion deal allowing Mexico to purchase power plants from IBDRY.  Finally, BA announced after the close that it has stopped deliveries of 737 MAX planes as new quality problems (possibly stretching back to 2019) were identified with parts from their supplier SPR.

In stock legal and regulatory news, across the pond, the Swiss parliament rejected the Swiss government’s $121 In stock legal and regulatory news, mid-afternoon Thursday, GOOGL’s attorneys were grilled by a US District Court judge as the company sought to get a US Dept. of Justice antitrust case thrown out.  The suit alleges that GOOGL illegally paid billions of dollars each year to AAPL, MSI, VZ, LG, Samsung and others to keep Google as the default search engine on their phones.  Interestingly, the main alleged victim in the lawsuit is MSFT, who the Dept. of Justice successfully sued for antitrust violations in 1998.  At the same time, STLA told Bloomberg it is leaning toward expanding production of a Peugeot electric vehicle in Spain. This has caused France to directly pressure the CEO of STLA and Slovakia (where the vehicle is now produced) is formulating a strategy to keep or add jobs. Meanwhile, KR asked a US federal judge to dismiss an antitrust case that had been filed by consumers, in hopes of blocking the acquisition of ACI.  Across the pond, the EU said that Ireland has one month to create an order blocking META from doing transatlantic data flows.  This would be the finalization of a ban on META from sharing and using European user data.  Elsewhere, the US Dept. of Justice said ADBE has agreed to pay $3 million to settle allegations the company paid kickbacks to companies that convinced the federal agencies to buy ADBE software.

In miscellaneous news, the downward spiral of Natural Gas prices continued as the front-month Natty contract closed at $1.997/mmBtu on Thursday.  This was the lowest close since June 2020 (amidst national lockdowns).  Prior to that, this low level had not been seen since January 2016.  Thursday’s move came as the EIA announced its natural gas storage data for the week.  This week saw the first inventory build of the year for Nat Gas, but it was a smaller increase than expected at +25bcf (compared to a forecast of +28bcf). In other news, the Supreme Court has decided not to halt a legal settlement that erases $6 billion in debt that was owed by former students of (mainly for-profit) colleges who had been misled about school academics and job prospects.  Meanwhile, a group representing Southern CA seaports (the Pacific Maritime Assn.) claimed Thursday that the largest union of longshoremen on the West Coast is disrupting the busiest seaport in the US for the second week in a row.  This slowdown comes as negotiations over a new contract covering 22,000 West Coast dockworkers near the one-year milestone (with no major progress apparent).  Major shippers like WMT and HD have been diverting cargo ships to ports on the Gulf of Mexico and East Coast to avoid potential work stoppages.

Overnight, Asian markets leaned heavily to the green side. Only New Zealand (-0.42%) and Thailand (-0.28%) were in the red.  Meanwhile, Japan (+1.20%), Taiwan (+0.79%), and Shanghai (+0.60%) led the region higher.  In Europe, we see a similar picture taking shape at midday.  The CAC (+0.43%), DAX (+0.39%), and FTSE (+0.59%) are leading that region higher in early afternoon trade.  In the US, as of 7:30 am, Futures are pointing toward a mixed open ahead of news.  The DIA implies a +0.07% open, the SPY is implying a -0.06% open, and the QQQ implies a -0.44% open at this hour.  At the same time, 10-year bond yields are rising to 3.467% and Oil (WTI) is up half of a percent to $82.57/barrel in early trading.

The major economic news events scheduled for Friday include March Retail Sales and March Import/Export Price Indexes (both at 8:30 am), March Industrial Production (9:15 am), Feb. Business Inventories, Michigan Consumer Sentiment, and Feb. Retail Inventories (all at 10 am).  We also have a Fed Speaker (Waller at 8:45 am).  The major earnings reports scheduled for the day include BLK, C, JPM, PNC, UNH, and WFC before the open.  There are no major earnings reports scheduled for after the close.

So far this morning, UNH, JPM, WFC, PNC, and BLK all reported beats to both the revenue and earnings lines.  (It is worth noting that on the revenue line, JPM surprised by 52% while PNC surprised by 37%, and WFC surprised by 33%.)  C reports at 8 am.  So far, only PNC has changed forward guidance, lowering its outlook.

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With that background, at least at this point, it looks like the market’s “wait and see” stance remains intact. The QQQ is making the biggest premarket move…and it is only showing an inside candle move that has yet to go back down to retest the T-line (8ema). I suppose traders could be hanging tight until they see Retail Inventories or even Industrial Production. Still, that seems less important than the big banks starting us off with good reports this morning with record revenues, big deposit increases, and the benefit of higher rates (rate margins) as a tailwind. With that said, all three major indices remain in their bullish trends. The 3ema is still above the 8ema, which is above a rising 17ema, which is above the 50sma and that is above the 200sma for all of them. Over-extension does not appear to be a problem either in terms of the T-line but the T2122 indicator is back in the overbought area. This is what the chart tells us now. So, again, putting aside fear and prediction, the chart is telling us to maintain a long bias on a swing trading horizon while keeping a sharp eye out for trend breaks. However, also remember that it’s Friday. So, don’t forget to pay yourself and prepare for the weekend news cycle when you cannot react to changes until Monday.

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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🎯 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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