Big Earnings Week Starts with BRKB Recap

On Friday, stocks gapped down after disappointing earnings from AMZN and even more scary guidance from INTC, AMZN, and others.  After 30 minutes of finding their footing, the bears took firm control and drove markets on an all-day selloff that closed very near the lows in all 3 major indices.  This left us with big, ugly, black candles in all 3 and took the QQQ to its low of the year with SPY only 0.30% above the February 24 low.  On the day, SPY lost 3.58%, DIS lost 2.73%, and QQQ lost 4.38%.  The VXX gained 6.4% to 27.71 and T2122 dropped deep into the oversold territory at 3.27. 10-year bond yields spiked to 2.926% and Oil (WTI) fell almost 0.9% to $104.45/barrel.

On Saturday, BRKB (Berkshire Hathaway) held its annual meeting.  Among the topics discussed was the fact that BRKB bought back $51 billion worth of stock during Q1.  The company also purchased 14% of OXY ($7 billion) over a 2-week period in March and significantly added to its CVX position during Q1.  They also have bought 9.5% of ATVI (in a simple arbitrage bet for when the MSFT acquisition closes).  Charlie Munger blasted BRKB investor CalPERS for having called for organizational changes including the replacement of Warren Buffett as Chairman.  On other topics, Munger said the stock market is a “mania of speculation” and said that HOOD was “justly unraveling” for disgusting practices.  He also warned people to avoid cryptocurrencies.  For his part, Buffett as usual said he is having a lot of trouble finding anything worth buying and that he’s in a mode of “preparing BRKB for an economic stall” (hence the buying a big stake in non-cyclical oil companies).

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Over the weekend, Bloomberg reported that China’s economy has slowed rapidly as its “Covid Zero” lockdowns are hurting deeply.  The lockdowns have closed factories and other businesses, kept consumers from spending, and closed transportation systems like trucking and ports.  Factory activity fell to the lowest level in 2 years with Mfg. PMI falling to 47.4 for the month.  Meanwhile, Services PMI fell to 41.9 in April (the lowest level since Feb. 2020).  China’s National Bureau of Statistics said that 19 of 21 sectors had seen a contraction over the month.  This in itself tells you how bad it is since China is notorious for painting a rosy picture in official reports.

On the Russian invasion story, US House Speaker Pelosi led a small delegation of US lawmakers to Kyiv on Sunday for talks that included Ukrainian weapons needs.  This comes in front of Congressional wrangling over President Biden’s new $33 billion aid request for Ukraine that was sent to Congress last week.  In Russia, Sunday it was disclosed that $5 million worth of farm equipment (which Russians stole from a Ukrainian DE dealership since the invasion) has been remotely disabled. Dutch Dock Workers also refused to unload a tanker of Russian oil.  More importantly, the German Econ. Minister Baerbock also announced that Germany would be free of dependence on Russian oil by this summer.  That pulls forward the timeline for that independence by at least 3-6 months from previous estimates.  This comes as the Financial Times reports Germany has now called for the EU to add a phased-in ban of Russian oil as part of a new round of sanctions on Moscow.  Bloomberg also reports that Russian state-owned Gazprom reported that its gas exports fell 22% month-on-month in April.  Despite this drop in supply, LNG prices have not spiked due to mild weather and increased supply from other sources, such as the LNG, SHEL, and TOT. Finally, as of Monday, Swedish Foreign Minister Linde said it is now all but certain that Sweden and Finland will both apply for NATO membership after weekend talks.

Bloomberg reported early this morning that Elon Musk sold another $4 Billion of TSLA stock in order to diversify and raise cash for his TWTR bid.  Most of that selling was done on Tuesday, the day TSLA stock fell 12%.  Bloomberg also says his pitch to bankers for funding for the TWTR takeover included job cuts, other cost-cutting, as well as the implementation of new ways to monetize the platform (recoup investment).  However, in a bid to prevent TSLA from sliding further, Musk also added a comment to the SEC filing, saying that he has no more plans to sell TSLA stock.

Overnight, the Asian markets were lower on mostly modest moves as all the Chinese exchanges closed for a Labor Day holiday.  Australia (-1.18%), New Zealand (-0.84%), and South Korea (-0.28%) paced the region Monday.  In Europe, stocks are nearly red across the board at mid-day, with the sole exception of London.  The FTSE (+0.47%), DAX (-0.60%), and CAC (-1.43%) are typical and lead the region as Europe digests bad Chinese data and the proposition of Energy sector sanctions on Russia.  As of 7:30 am, US Futures are pointing toward a modestly green start to the day.  The DIA implies a +0.40% open, the SPY is implying a +0.36% open, and the QQQ implies a +0.49% open at this hour.  10-year bond yields are down slightly from Friday to 2.912% and Oil (WTI) is off almost 3% to $101.64/barrel in early trading.

The major economic news scheduled for release on Monday is limited to Apr. Mfg. PMI (9:45 am), Apr. ISM Mfg. PMI (10 am).  Major earnings reports scheduled for the day include AMG, ARLP, BRKB, CAN, EDP, FMX, GPN, GPRE, ITRI, JELD, MCO, ON, SAIA, TKR, and WEC before the open.  Then after the close, ARGO, ANET, CAR, BGCP, BXP, CBT, CC, CLX, CNO, CTRA, CVI, DVN, FANG, EXPE, FN, FLS, FMC, KMPR, KMT, LEG, LOGI, MGM, MOS, NTR, NXPI, OGS, SANM, SEDG, RIG, TA, WMB, and WWD report.

So far this morning, BRKB (Saturday), EPD, WEC, GPN, TKR, SXC, and PK have all reported beats on both revenue and earnings.  Meanwhile, AMG missed on revenue while beating on earnings.  On the other side, CAN, and MCO have reported beating the estimates on revenue but missed on the bottom line.  Finally, JELD and ARLP reported misses on both lines.

Economics news coming later this week includes Mar. Factory Orders and Mar. JOLTs Job Openings on Tuesday.  Then on Wednesday, we see ADP Apr. Nonfarm Payrolls, Imports/Exports, Mar. Trade Balance, Apr. Service PMI, Apr. ISM Non-Mfg. PMI, Crude Oil Inventories, FOMC Statement, FOMC Rate Decision, FOMC Press Conference.  On Thursday, we get Weekly Initial Jobless Claims, Q1 Nonfarm Productivity, and Q1 Labor Costs.  Finally, on Friday we see Apr. Avg. Hourly Earnings, Apr. Nonfarm Payrolls, Apr. Participation Rate, and Apr. Unemployment Rate.

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This week we will see almost 1,500 earnings reports.  The major reports coming later in the week include AMD, AIG, DD, EL, FIS, HLT, ITW, KKR, MPC, PFE, PRU, PSA, SPGI, SBUX, and TRI on Tuesday.  Then Wednesday we get BKNG, CTSH, CTVA, CVS, EMR, FTNT, IDXX, JCI, MAR, MET, MRNA, PXD, O, REGN, and UBER.  On Thursday, we see APD, APO, BDX, COP, D, EOG, ILMN, ICE, MCK, MNST, MSI, PH, RSG, SRE, SQ, VRTX, WELL, and ZTS.  Finally, on Friday we get CI.

So, another heavy week of earnings has kicked off. This morning those earnings are leaning green but are more mixed than earlier reports this quarter. As has been the case recently, it is the forward guidance that most traders are waiting to hear since the bad Q1 GDP Print last week has everyone fearing recession. With that said, remember that the trend is still very clearly bearish, but that we have seen choppy moves (white candles, intraday reversals, and plenty of wicks in the bearish trend). Caution is still the smart play. Don’t get caught chasing a gap only to be caught in a whipsaw you are not prepared to weather.

Remember that the first rule of making big money in the market is to not lose big money in the market. Staying hedged, nimble, and measured are good things…not bad. So, don’t be stubborn, and protect yourself from yourself. Nobody is right all the time. If you’re wrong, just admit it and take your loss. Just focus on your process and enjoy yourself. Stick with your trading rules and manage the things that you can control while trying not to worry about the things you have no control over at all. Trade with the trend, don’t chase, keep consistently taking profits when you have them, and move your stops in your favor.

Ed

Swing Trade Ideas for your consideration and watchlist: HSY, UNG, MO, SQQQ, MMM, BAC, KO, LLY, KBH, GM, MSFT, AAPL, HD, BTU, SLB, HAL, AA, TSLA. You can find Rick’s review of tickers on his YouTube Channel here. Trade your plan, take profits along the way, and smart. Also, remember to check for impending earnings reports. Finally, remember that any tickers we mention and talk about in the trading room are not recommendations to buy or sell.

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

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

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🎯 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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