Mag7 Stocks

Friday closed with the Mag7 stocks working their magic to hold indexes while internally more stocks were declining rather than advancing.  Friday’s big bank reports produced mixed results but they will have another chance today to inspire the bull or bears with reports from the likes of GS and MS before today’s bell.  We will also get figures from Empire State Mfg., have some Fed speak as well as short-term bond auctions to inspire.  The geopolitical tensions in the Red Sea add considerable uncertainty looking forward so plan carefully.

Overnight Asian market closed mostly lower with only the Shanghai exchange eking out a small gain of just 0,27%.  European markets trade lower across the board this morning as they monitor ECB members talking about rate cuts at Davos.  U.S. futures point to a lower open though we have rallied significantly off the overnight lows as earnings results roll in. 

Economic Calendar

Earnings Calendar

Notable reports for Tuesday include CVGW, FULT, GS, HWC, IBKR, MS, PNFP, PNC, & PRGS.

News & Technicals’

Vodafone and Microsoft have announced a 10-year strategic alliance to deliver cutting-edge AI, digital, enterprise, and cloud solutions to millions of customers in Europe and Africa. Vodafone will leverage Microsoft’s Azure OpenAI and Copilot technologies to create customer-centric AI applications and will migrate its data centers to the Azure cloud platform to reduce costs and increase efficiency. Microsoft will also take a stake in Vodafone’s IoT business, which will be spun off as a separate entity by 2024, and will support Vodafone’s expansion of its mobile money service in Africa.

Elon Musk, the CEO of Tesla and SpaceX, wants to increase his voting power over Tesla to 25%. He currently holds about 13% of the electric car maker’s shares. In a post on Monday, Musk said he felt uneasy about Tesla’s future as a leader in AI and robotics without having more say in the company’s decisions. Musk’s move comes after he and Tesla faced a lawsuit from shareholders in Delaware, who claimed that Musk’s 2018 compensation package was too generous and that the board that approved it violated its duty to the company.

The Allianz Risk Barometer, a report that assesses the most pressing risks facing businesses and societies, revealed that political risk reached its highest level in five years in 2023. According to the report, about 100 countries faced a high or extreme likelihood of civil unrest, such as protests, riots, or violence, due to social and economic grievances. The CEO of Allianz, Oliver Bäte, attributed this situation to the growing gap between the political elite and the working class, which he regarded as the biggest threat to social stability.

Chinese Premier Li Qiang urged the world to avoid using tech innovations as tools of geopolitical rivalry and containment. Speaking at the World Economic Forum in Davos, Switzerland, on Tuesday, Li said that the only way to foster healthy competition and unleash the potential of innovation was to enhance cooperation among countries. Li did not single out any country in his speech, but his remarks came amid the ongoing tensions between Beijing and Washington over technology issues. China has repeatedly called on the U.S. to lift its sanctions on Chinese firms that block their access to advanced technology from American suppliers. The U.S. has imposed these measures in the past two years, citing national security concerns and accusing China of using high-end semiconductors for artificial intelligence to boost its military power.

The week ended on a positive note though more stocks were declining than advancing, the effect of the Mag7 stocks. The S&P 500 gained 0.1% and the Dow lost 118 points with UnitedHealth’s leading the selling, as we slide into the uncertainty of a three-day weekend.  In the commodities markets, gold and oil prices increased, as geopolitical tensions escalated and bond yields moved higher. The big bank reports produced mixed results on Friday but with several more coming our way this morning be prepared for just about anything.  We will also have to keep an eye on reports coming out of Daovs as the so-called political elite pontificates the future rest of us, underlings.  Along with earnings we have Empire State numbers, Fed speaks, and bond auctions for the bulls or bears to find inspiration as we begin this holiday-shortened week.

Trade Wisely,

Doug

PNC Crushes, GS Beats, and Empire State Ahead

Friday was another flat and indecisive day in the market.  Spy gapped up 0.32%, DIA opened 0.07% higher, and QQQ gapped up 0.26%.  At that point, DIA diverged from the other two major index ETFs.  DIA sold off the first 90 minutes and then followed the SPY and QQQ, which traded sideways in a tight range.  Both QQQ and SPY spent the day bouncing around in the lower end of the opening gap.  This action gave us black-bodied Spinning Top candles in all three index ETFs with the DIA having the largest body.  DIA retested its T-line (8ema) closing just pennies below it.  This all happened on below-average volume in the QQQ and SPY.  For its part, DIA had just shy of average volume.

On the day, eight of the 10 sectors were in the green with Energy (+1.09%) out in front leading the way higher on the Yemeni strife.  At the same time, Consumer Cyclical (-0.93%) was by far the biggest loser on the board.  At the same time, the SPY gained 0.07%, DIA lost 0.33%, and QQQ gained 0.05%.  Meanwhile, VXX gained 1.64% to close at 14.84 and T2122 rose but remained firmly in the center of its mid-range at 52.59.  10-year bond yields fell 3.939% and Oil (WTI) gained 1.03% to close at $72.76 per barrel.   

The economic news on Friday, December Core PPI came in dead flat and lower than was expected at 0.0% (compared to a forecast of +0.2% and in line with November’s 0.0% value).  At the same time, December PPI also came in lower than anticipated at -0.1% (versus a forecast of +0.1% and in line with the November -0.1% reading).  

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In stock news, before the open Friday, C announced it was cutting 20k jobs over the next two years as part of its massive restructuring effort.  At the same time, CNC completed the sale of its Circle Health Group to private firm Pure Health.  Later, STLA announced Friday that due to the recent attacks on ships in the Red Sea, the company will temporarily prioritize airfreight to address supply disruptions (at a much higher cost, obviously).  At the same time, DAL announced it is shifting toward EADSY (Airbus) A350-1000 aircraft instead of BA jets (which it has used for decades).  This included the order for 40 of the A350-1000 planes with the first half to be delivered in 2026.  Later, UNP said it expects continued delays in shipments in midwestern states due to heavy snow, severe thunderstorms, and road closures which impact its ability to move crews to trains.  Elsewhere, TSCO and TGT were among the retailers saying Friday that they expect product outages of up to 20 days due to the Red Sea attacks, which are causing ships to be rerouted around the horn of Africa.  At the same time, WFC, C, and JPM all said they expect industry Net Interest Income (spread between borrowing and lending costs) peaked in Q4 2023.  (This is in line with their expectation that rates will fall in 2024.)  Later, SUM finalized its $3.2 billion merger with Argos North America.  Meanwhile, MSFT edged out AAPL as the company with the largest market cap in the world.  (MSFT was at $2.887 trillion as AAPL was “only” $2.875 trillion.)  This is the first time since 2021 that AAPL was not the largest capitalized company in the world.

In stock government, legal, and regulatory news, a bipartisan group of 15 US Senators urged the SEC to closely scrutinize the bid of JBSAY to list on the NYSE.  The group echoed the concerns of British Parliamentarians from earlier in the week.  However, the group’s public letter to the SEC failed to directly call on the SEC to deny the listing, but the letter clearly implied that was their wish.  At the same time, the FDA classified the recall of RMD respiratory masks as extremely serious since the use of those products could lead to major injuries or death.  (It seems the devices cause magnetic interference with other medical devices and implants.)  Later, a US Appeals Court upheld two earlier decisions by a patent tribunal reaffirming the ruling that AAPL stole the intellectual property of MASI related to medial sensor technologies that AAPL then put into their watches.  Elsewhere, the FAA said Friday that the agency is planning to perform “closer monitoring” of BA 737 MAX 9 jets when they do reenter service.  The agency chief told Reuters it was “pretty clear” the mid-air blowout was a manufacturing problem and not a design defect.  As such, BA deserves more scrutiny, including an increase in production line and supplier inspections, which have not been standard in the past.  At the same time, MS agreed to pay $249.5 million to the US Dept. of Justice and SEC to end criminal and civil investigations into the company’s handling of large block trades for its customers.  Later, the US Supreme Court agreed to hear a challenge by SBUX to lower court decisions that required the company to rehire seven employees it was found to have fired due to their support of unionization.  In the afternoon, the FDA announced a major recall by PEP of many Quaker Oats products over the risk of salmonella contamination.  At the same time, WH told Reuters it had received a second request for information from the FTC related to a $7.8 billion hostile takeover bid from CHH.

Overnight, Asian markets leaned heavily to the red side. Hong Kong (-2.16%) was way out in front leading Taiwan (-1.14%), and South Korea (-1.12%) as well as the rest of the region lower.  Only Shenzhen (+0.31%) and Shanghai (+0.27%) were in the green in that region.  In Europe, we see a similar picture taking shape at midday. Only Oslo (+0.22%) is in the green while the CAC (-0.34%), DAX (-0.39%), and FTSE (-0.33%) lead the region lower in early afternoon trade.  In the US, as of 7:30 a.m., Futures are pointing toward a lower open to start the day.  The DIA implies a -0.34% open, the SPY is implying a -0.40% open, and the QQQ implies a -0.46% open at this hour.  At the same time, 10-year bond yields have moved back above four percent to 4.014% and Oil (WTI) is up a half of a percent to $73.08 per barrel in early trading.

The major economic news scheduled for Tuesday is limited to NY Fed Empire State Mfg. Index (8:30 a.m.) and Fed Governor Waller speaks (11 a.m.).  The major earnings reports scheduled for before the open are limited to GS, MS, and PNC.  Then, after the close, IBKR reports.

In economic news later this week, on Wednesday we get Dec. Core Retail Sales, Dec. Retail Sales, Dec Imports, Dec. Exports, Dec. Industrial Production, Nov. Business Inventories, Nov. Retail Inventories, Fed Beige Book, API Weekly Crude Oil Stocks, and Fed member Williams speaks.  Then Thursday, Dec. Building Permits, Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, Dec. Housing Starts, Philly Fed Mfg. Index, EIA Weekly Crude Oil Inventories, and Fed Balance Sheet are reported as well as Fed member Bostic speaks.  Finally, on Friday, we get Dec. Existing Home Sales, Michigan Consumer Sentiment, Michigan Consumer Expectations, Michigan 1-Year Inflation Expectations, and Michigan 5-Year Inflation Expectations as well as Fed member Daly speaking.

In terms of earnings reports later this week, on Wednesday, SCHW, CFG, PLD, USB, AA, DFS, FUL, KMI, SNV, and WTFC reports.  Then Thursday, we hear from FAST, FHN, KEY, MTB, NTRS, TSM, TFC, JBHT, and PPG.  Finally, on Friday, ALLY, CMA, FITB, HBAN, RF, SLB, STT, and TRV report.

In miscellaneous news, on Friday, the Biden Administration put out another bid for 3 million additional barrels of oil to continue refilling the US Strategic Petroleum Reserve.  Elsewhere, if you’ve ever doubted whether the saying “it’s not the news, it’s how the market reacts to the news” than Friday was a day for you.  JPM reported a record $49.6 billion in profit for 2023 on Friday, a 32% increase over 2022.  This caused more than a 2% gap higher and JPM stock was up more than 3.5% in the first five minutes of the day.  This was a bear trap as hard selling started at 9:35 a.m. and lasted all the way into the close.  On the day, JPM sold off more than 4.12% from the high and ended the day down 0.73% compared to Thursday’s close.  For its part, WFC profits rose 9% for Q4, but the market did not like that its costs rose although less than the revenue.  WFC was punished with a 2.38% gap lower and ended the day down 3.34%.  Part of this big bank angst was due to the forecast by big banks that they truly believe rate cuts are real and will start “soon” cutting into their interest income.

In geopolitical weekend news, Taiwan thumbed its nose at Beijing by electing the “status quo” candidate, which was not Xi’s preferred contender because he is not pro-reunification, William Lai.  Almost immediately, President Biden moved to calm the situation by announcing that the US does not support Taiwanese independence and that US policy is still “one China, two systems.” However, the Chinese still did not like the fact that a lesser official, US Sec. of State Blinken, congratulated Lai on his election victory.  Meanwhile, in the Red Sea, Saturday the Houthi rebels fired on a US destroyer with rockets and drones. All drones were shot down and no damage was reported. Then on Sunday, the Pentagon reported two Navy Seals had been lost overboard during a ship boarding operation in rough seas off the coast of Yemen.  (That seems quite odd given the timing and other happenings in that area, but it was the story disseminated.) At the same time, the US led a second wave of air attacks on the Houthi rebels.  In retaliation, on Monday the Houthi hit a US-owned container ship (which was stupid enough to ignore the events in that shipping lane during the last month as well as the US Navy’s explicit warning to all ships to avoid the area for at least three days).  No major damage was reported, but a fire was caused in one hold.

So far this morning, GS and PNC reported beats on both the revenue and earnings lines.  (PNC destroyed market expectations by reporting $3.16/share in earnings against the consensus forecast of $2.14/share on only modestly higher than expected revenue.)  At the same time, MS beat on revenue while missing on earnings.  GS cited better-than-expected “asset management profits” during its report.

With that background, markets look to be recovering a bit from a gap lower to start the premarket. All three major index ETFs are showing significant white-bodied candles at this point in the early session. SPY and QQQ both crossed back above their T-line (8ema) and DIA is close to retesting the level that all three gapped below early this morning. So, the Bulls remain in control of the short-term trend in at least the QQQ and SPY (market leaders) although the news out of Yemen had traders very nervous at the beginning of the premarket. In the longer term, we are near all-time highs (potential resistance) in the SPY, QQQ, and DIA. In terms of extension, none of the three major index ETFs are far from their T-line (8ema). At the same time, the T2122 indicator is now sitting in the middle of its mid-range. So, both the Bulls and Bears do have room to run if they can gather the momentum to do it. Continue to keep an eye on the Tech Big Dogs. If they make a move as a group, it is almost impossible for the rest of the market to do anything but follow given their trading volumes.

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

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Market Waited

Market Waited

As expected the price action reflected uncertainty as the market waited for the release of the CPI inflation data coming out before today.  With the market uber-confident, the Fed will begin cutting rates early this year expect substantial price volatility as traders react.  There is a lot of blue sky above if the number is bullish but should it prove not to be so bullish be prepared because big point-down moves are also possible.  Remember as soon as we are past the morning reaction the market will quickly shift its gaze toward Friday and the big bank report along with a reading on the PPI with a 3-day weekend just beyond.  Plan carefully!

Overnight Asian markets closed mostly higher with Japan continuing to surge closing above 35K.  European market trade this morning with cautions bullishness waiting on the U.S. data. Futures in the U.S. also suggest a cautiousness pointing to a flat open but that will quickly change after the data is revealed. Anything is possible so be prepared at the market reacts.

Economic Calendar

Earnings Calendar

Notable reports for Thursday are only INFY.

News & Technicals’

The consumer price index (CPI), a measure of inflation, is expected to have increased by 0.2% in December 2023, bringing the annual inflation rate to 3.2%. This is higher than the Fed’s target of 2% but lower than the peak of 4.5% in June 2023. The Fed has signaled that it will cut interest rates twice in 2024, but the market is pricing in four rate cuts, reflecting a more pessimistic outlook for the economy. The Fed faces a delicate balance between easing too much and risking higher inflation, or easing too little and triggering a recession that many economists have been warning about.

Citigroup’s fourth-quarter earnings will be hit by two major factors: the plummeting value of the Argentine peso and the cost of streamlining its operations. The bank revealed on Wednesday that it suffered $880 million in losses from converting its assets in Argentina to U.S. dollars, as the peso fell by more than 40% in 2023. It also incurred $780 million in expenses related to CEO Jane Fraser’s plan to simplify the bank’s structure and reduce its global footprint. These charges are much higher than the $400 million that CFO Mark Mason had estimated at a Goldman Sachs conference in December. Citigroup will report its fourth-quarter results on Friday morning.

The U.S. Securities and Exchange Commission (SEC) has given the green light to the first bitcoin exchange-traded fund (ETF) in the country. This is a historic moment for the cryptocurrency industry, as it signals the growing acceptance and legitimacy of Bitcoin as an asset class. The approval will pave the way for the Grayscale Bitcoin Trust, the largest holder of Bitcoin with $29 billion in assets, to convert into an ETF and offer investors lower fees and greater liquidity. Other major financial institutions, such as BlackRock and Fidelity, are also expected to launch their own Bitcoin funds in the near future.

Germany is facing a severe transport crisis as train drivers stage a three-day strike over pay and working conditions. The strike, which began on Wednesday and will last until Friday evening, has paralyzed rail services across the country, affecting millions of commuters, travelers, and businesses. The strike comes amid ongoing protests by farmers who are unhappy with the government’s agricultural policies and environmental regulations. Some analysts have compared the situation to a general strike, the likes of which Germany has not seen since 1906. The economy minister, Peter Altmaier, was confronted by angry demonstrators last weekend and had to be escorted by security guards. The social unrest reflects the growing dissatisfaction and frustration among various sectors of German society.

As the market waited for the CPI data, U.S. stocks edged up, except for small-caps which fell slightly in a choppy session. Back in the U.S., the Magnificent 7 (Apple, Amazon, Alphabet, Meta, Microsoft, NVIDIA, and Tesla) continue doing the majority of the work with NVIDIA leading the pack. The efforts of the tech giants may finally achieve an all-time high breakout in the SPY as long as the pending inflation data corporates.  Before the bell watch for some price volatility with the release of the CPI report and Jobless Claims. The potential for big point moves is high and watch for whipsaws after the first knee-jerk reaction to the data.  Past that we have some bond auctions and more Fed speak to be aware of in the afternoon.  Keep in mind the market thinking will quickly shift to the Friday PPI report and kick off to the earnings session with several big bank reports before sliding into a 3-day weekend.

Trade Wisely,

Doug

Uncertainty

Uncertainty

Markets finished mostly lower in a choppy Tuesday session as CPI uncertainty ruled the day.  The QQQ outshined the rest with the tech giants providing the majority of the bullish effort.  Optimism grew among businesses yet remains below the 50-year average of 98.8 continuing to indicate small business uncertainty.  Today investors will look for inspiration in Mortgage Apps, Inventories, Petroleum Status, and Fed speak as we hurry up and wait on Thursday’s CPI report.  A lot is riding on this inflation report with so much bullish sentiment so plan carefully as big point moves are possible before the market opens tomorrow.

While we slept the Nikkei broke the 34,000 level for the time since 1990 while at the same time, the Chinese CSI 300 declined to near 5-lows as Asian markets closed the day mostly lower.  European markets trade mostly lower this morning with modest gains and losses in a caution session waiting on inflation data. However, U.S. futures are mixed this morning the Nasdaq leading the way higher as the tech giants dominate buying interest. 

Economic Calendar

Earnings Calendar

Notable reports for Wednesday include only, KBH.

News & Technicals’

X, a social media platform, said on Tuesday that it has finished a preliminary investigation into the hacked account of the U.S. Securities and Exchange Commission (SEC) that showed a fake post. The post claimed that the SEC was investigating a major company for fraud. X said that the hack was not caused by any flaw in X’s systems, but by an unknown person who gained access to a phone number linked to the @SECGov account through another service. X said it has taken steps to secure the account and prevent further incidents.

A major attack by Iranian-backed Houthi rebels on commercial ships in the Red Sea has triggered a response from the U.S. Navy, which has deployed four warships from Operation Prosperity Guardian to the area. The operation is a maritime security mission that aims to protect the vital waterway from Houthi threats. According to CNBC, about 50 merchant vessels are in the vicinity of the attack, which is the largest of its kind by the Houthi militants. The attack poses a serious risk to global trade and stability in the region.

HPE, a technology company that provides hardware, software, and services, announced on Tuesday that it will buy Juniper Networks, a network equipment maker, for $14 billion in cash. The deal will expand HPE’s portfolio of networking products and solutions, and strengthen its position in the cloud and edge computing markets. Juniper’s stock soared on Tuesday after the Wall Street Journal reported on Monday night that the deal was imminent. HPE is paying $40 per share for Juniper, which is 32% higher than Juniper’s closing price on Monday before the news broke.

Uncertainty ruled the day on Tuesday as stocks ended mostly lower, as investors look ahead to the December CPI inflation data and the Friday kick-off of earnings season. The Nasdaq did better than both the S&P 500 and Dow Jones with the tech giants doing most of the lifting. The NFIB Small Business Optimism survey rose a bit for December to 91.9, but was still lower than its 50-year average of 98.0, showing that small business confidence is low. Meanwhile, WTI crude oil recovered, rising over 1.5% to around $72, after falling over 4% on Monday, as oil markets faced more geopolitical and supply challenges. Today it’s likely more of the same hurry-up and wait choppy price action with a chance Mortgage Apps, Inventories, Petroleum Status, and more Fed pontification could provide some bullish or bearish inspiration.  With so much bullish sentiment a lot is riding on tomorrow’s CPI number so plan your risk carefully as big price moves are possible before the bell.

Trade Wisely,

Doug

Waiting On CPI and Earnings

Markets gapped lower Tuesday as the Bears tried hard to deny the Bulls any follow-through on the Monday candles.  SPY opened 0.56 lower, DIA opened 0.54% lower, and QQQ opened down 0.74%. However, the Bulls stepped in right at the open to lead a rally (at least in the QQQ and SPY) that lasted until shortly after 1 p.m.  QQQ had recrossed the opening gap by 11:55 a.m. and continued higher while SPY recrossed its by 1 p.m. After that, both traded sideways with a slight bearish trend. Meanwhile, DIA just treaded sideways after the open, with a very slight bullish trend.  The action gave us white-bodied candles in the QQQ and SPY (both retesting and staying above their T-line) as well as a white-bodied Spinning Top in the DIA (which gapped below and did not cross back above its T-line). 

On the day, eight of the 10 sectors were in the red again with Energy (-1.31%) out in front leading the way lower while Consumer Defensive was dead flat and Technology (+0.09%) was the lone green spot on the board.  At the same time, the SPY lost 0.17%, DIA lost 0.44%, and QQQ gained 0.20%.  Meanwhile, VXX fell 2.30% to close at 14.84 and T2122 dropped back into the center of its mid-range at 45.00.  10-year bond yields were basically flat at 4.021% and Oil (WTI) climbed 2.05% to close at $72.22 per barrel.  On the day, we saw the significant gap lower but from that point forward the Bulls were in control all day.  This all happened on below-average volume in the SPY, DIA, and QQQ.

The economic news on Tuesday included November Imports were down, at $316.90 billion (compared to the October value of $323.10 billion, meaning there was a $6.20 billion reduction).  At the same time, the Nov. Exports were down a bit less at $253.70 billion (versus the October $258.60 billion, a $4.90 billion reduction).  This resulted in a Nov. Trade Balance that was a bit better than anticipated at $63.20 billion (compared to a forecast $65.00 billion deficit and an October deficit of $64.50 billion).  Then, after the close, API Weekly Crude Oil Stocks showed a much larger drawdown than was expected at -5.215 million barrels (versus a forecasted 1.200-million-barrel draw but not as much as the prior week’s 7.418-million-barrel drawdown).   

In Fed news, Vice-Chair Barr announced the end of the bank’s Term Funding Program (emergency loans initiated during the regional bank crisis).  Barr said financial stress s has been successfully eased and there is no immediate crisis in the banks sector.  He acknowledged concerns about banks coming to rely on the program as rates are cut later this year.  The program ends on March 11, a year after it was launched.  In a related story, GS analysts said Tuesday that they expect major bank profits to decrease 10% for Q4 when they begin reporting Friday.  GS attributed the decline in the forecast to a 15% fall in trading profits, higher payouts to depositors, and an unspecified increase in reserves for loan defaults.

After the close, PSMT beat on both the revenue and earnings lines.   At the same time, WDFC reported a massive miss on revenue and, at the same time, a huge beat on earnings ($140 million revenue versus $576 million forecast and $1.28/share earnings versus $1.00/share consensus forecast).

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In stock news, SSREY (Swiss Re, a major insurer of insurers) announced Tuesday that US insurers accounted for the bulk of 2023’s $95 billion in insured losses.  (The 30-year average of insured losses is $57 billion while the 10-year average is up to $90 billion due to climate change impacts).  At the same time, GE announced they have signed a record-setting deal to supply 674 large wind turbines to Canadian wind project developer Pattern Energy.  (Financial details of the “record-setting” deal were not disclosed.)  Later, Reuters reported that HPE is near to a $13 billion deal to buy JNPR with the deal to be announced as early as the next few days.  (JNPR ended the day 21.81% higher.)  At the same time, amidst all its problems related to the 737 MAX 9, BA announced its 2023 deliveries reached 528 aircraft, the most since 2018 (before its 737-MAX debacle of multiple crashes).  Elsewhere, UNP said Tuesday it is expecting a 24–48-hour delay in shipments as blizzards in the Midwest impact railroad operations.  In a related story, TSN announced it had closed meat processing plants in KS due to the storm.  Later, STLA, BB, and AMZN unveiled a collaboration product that allows “infotainment” to be streamed to vehicles 100 times faster than current methods.  At the same time, BLK announced the cut of roughly 600 jobs (3% of its workforce) but said the company expects a higher headcount by the end of 2024.  After the close, BA CEO Calhoun acknowledged the company’s “mistake” when speaking about the explosive decompression of an ALK flight on Sunday and subsequent loose bolts found on multiple airlines’ 737 MAX 9 jets.

In stock government, legal, and regulatory news, Reuters reported Tuesday that TSLA has lowered its guidance range, citing new tighter US vehicle-testing regulations.  As a result, TSLA cut the range estimates on all of its models.  (In the past, TSLA rigged the in-car algorithm to misreport miles left on a battery charge to assume absolute optimal conditions.  This stood in stark contrast to the stricter mileage standards traditional internal combustion vehicles have to follow.  In addition, in 2023 it was discovered that TSLA had created an internal team to suppress thousands and thousands of customer driving-range complaints.)  At the same time, 12 members of the UK parliament sent a public letter to the Chairman of the SEC, arguing that the US market regulator should block to listing of JBSAY (now pink sheet) on the NYSE.  Their reason is that the company is allegedly slowing efforts to curb global warming via deforestation.  Later, GOOGL presented its case in a Boston federal court to argue against computer scientists’ claims that the company should be forced to pay $1.67 billion for infringing patents related to the processors GOOGL uses to power AI applications.  At the same time, META announced it will hide more content from teens as regulators in the EU and US have pressed the company to protect children from harmful content.  (META says teens will, now, by default be placed under the most restrictive of their content-control settings.)  Elsewhere, Reuters reported that EU antitrust regulators are examining MSFT’s investment into OpenAI related to the EU merger rules.  (Interested parties have until March 11 to provide input and feedback related to the matter and its impact on competition before the investigation starts in earnest.)   Interestingly, China announced late Tuesday that one of its state-backed institutions has devised a way to identify users who send messages via AAPL’s AirDrop Bluetooth feature.  (It was not known what benefits China would get by announcing this crack, but the release could hurt AAPL since this feature is used globally by protesters, activists, and general iPhone users.)

Overnight, Asian markets were mostly red with only two of 12 exchanges in the green.  However, by far the biggest mover in the region was Japan (+2.01%).  Malaysia (-0.80%), South Korea (-0.75%), and Australia (-0.69%) paced the losses in the region.  Meanwhile, in Europe, a similar picture is taking shape at midday with only two of 15 bourses in the green.  However, again, by far the biggest mover is Portugal (+1.80%).  The CAC (-0.15%), DAX (-0.09%), and FTSE (-0.31%) lead the region lower in early afternoon trade.  In the US, as of 7:30 a.m., Futures are pointing toward a mixed, flat start to the day.  The DIA implies a -0.13% open, the SPY is implying a -0.04% open, and the QQQ implies a +0.07% open at this hour.  At the same time, 10-year bond yields are back down a bit to 3.998% and Oil (WTI) is up one-third of a percent to $72.45 per barrel in early trading.

The major economic news scheduled for Wednesday is limited to EIA Weekly Crude Oil Inventories (10:30 a.m.) and Fed member Williams speaks at 3:15 p.m.  There are no major earnings reports scheduled for before the open.  However, after the close, KBH reports.

In economic news later this week, on Thursday, we get Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, Dec. Core CPI, Dec. CPI, Dec. Federal Budget Balance, and the Fed’s Balance Sheet.  On Friday, Dec. Core PPI, Dec. PPI, and the WASDE Ag report are delivered.

In terms of earnings reports, the main thrust does not start again until the end of the week.  On Thursday, INFY reports.  Finally, on Friday, we hear from BAC, BK, BLK, C, DAL, JPM, UNH, WFC, and WIT.

In miscellaneous news, on Tuesday the CME announced it is rolling out new longer-horizon e-mini futures for both the S&P-500 and Nasdaq-100.  The new products will begin trading on January 29 and are intended to allow traders to trade around longer-term economic cycles.  They will feature quarter-end and year-end expirations.  Elsewhere, Moody’s reported that US office space vacancies rose to a record level in Q4 as 25 million square feet of new space came online, more people continue to work from home since the pandemic, and companies downsize operations to reduce costs.  The survey found that 19.6% of office space was empty in Q4.  (The prior record was 19.3% set twice in the past.)  Meanwhile, the SEC confirmed that its official X (formerly Twitter) account had been “compromised” (not due to a hack of X systems) and then a bogus tweet announcing the approval of Bitcoin ETFs had been sent.  While the real approval is widely expected sometime this week, the news caused a brief spike and the rebuttal caused a brief plunge in Bitcoin prices.  (The SEC specifically saying it was not due to a hack, tends to imply that this was just an early release of news that will come very soon.) Finally, in societal news, the UK publication The Guardian reported that newly released data shows that US police agencies killed a record 1,232 people in 2023.  (It is worth noting the statistics have only been gathered since 2013.)  Oddly, the increase in police violence comes even as US violent crime and especially murder rates declined a whopping 13% in 2023.  The increase in police killings was driven by disproportionate increases in rural geographic areas.

In government shutdown news, Republican Senators told reporters Tuesday that a “short-term continuing resolution” will be needed to avoid a government shutdown on January 19.  Senator Thune had told reporters that a CR through sometime in March would be needed for negotiators to finish and the Senate to act on the results.  House Speaker Johnson said he (and his House GOP caucus) would have a hard time swallowing that.  However, later, Senate Majority Leader McConnell told reporters “It was obvious.”  He went on to say, “The simplest things take a week in the Senate. So, I think the House doesn’t understand how long it takes to get something through the Senate.”  McConnell continued, “We’re going to have to pass a CR,” McConnell said. “We need to prevent a government shutdown.” 

In mortgage news, loan demand spiked 10% last week as rates for 30-year, fixed-rate, conforming loans (20% down) dropped from 6.81% to 6.76%.  (Closing points remained unchanged at 0.61%.)  Applications for new home purchase loans rose 6% but were still 16% lower than a year prior. At the same time, applications for refinance loans jumped 19% from the prior week and were 30% higher than a year prior. 

With that background, it looks like markets are indecisive this morning with all three major index ETFs printing candles in the premarket that are mostly wick. With that said, the QQQ did gap a bit higher and the body of those indecisive candles are white. DIA is also retestings its T-line (8ema) from below in the early session. So, the Bulls still have control of the short-term trend (again, mostly on the back of Monday’s strong white candles). However, it is not a done deal with the move not decidedly bullish yet. The longer-term bullish daily trend lines remain broken but there is no Bearish trend established yet. So, technically we are not yet in a downtrend. In terms of extension, none of the three major index ETFs are far from their T-line (8ema). At the same time, the T2122 indicator is now sitting in the middle of its mid-range. So, both the Bulls and Bears do have room to run if they can gather the momentum to do it. Continue to keep an eye on the Tech Big Dogs. After a week of seeming rotation out of those names, we saw money flood back into them Monday as a slew of new product announcements came out of the CES trade show in Las Vegas. For that matter, watch CES as Tuesday saw a slew of non-Big Dog product announcements such as a new EV line of cars from HMC. Either way those seven Big Dog to ten stocks decided to go, it will be hard for the market to do anything but follow.

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

LTA Scanning Software
TC2000 Discount

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🎯 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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