Equity markets ended the day mixed but mostly higher with the DIA finishing lower while SPY and QQQ shook off some early selling to resume the push higher. A strong showing on Netflix after the bell sets the stage for yet another gap to open the scoring tech sector. Today we have Mortgage Apps, PMI, Petroleum, and bond auctions as well as a significant increase in earnings events so expect heightened price volatility as traders react. Also, keep in mind we have the possibility of some big point moves with key economic data coming Thursday and Friday before the bell so carefully plan accordingly.
Overnight Asian markets closed mixed but mostly higher as Hong Kong surged 3.56% and the Shanghai exchange enjoyed a needed relief rally. European markets are decidedly bullish this morning in reaction to PMI data showing an improvement in economic activity. The strong NFLX report after the bell yesterday sets up another gap open as index futures push higher ahead of earnings and economic reports.
Netflix warned its users and investors that it will increase its prices in the future, according to its quarterly investor letter. The company said that it needs to raise its prices to invest more in original and licensed content, as well as to improve its technology and user experience. Netflix also announced that it signed a deal to add 10 years of WWE’s Raw, a popular wrestling show, to its content library. Netflix has not changed the price of its ad tier, which costs $6.99 per month, since it introduced it in 2022. The company reported strong growth in its subscriber base in the fourth quarter of 2023. The company added 13.1 million new subscribers, beating its forecast of 11.5 million. The company now has 260.8 million paid subscribers worldwide, up 18% from a year ago. Netflix also exceeded Wall Street’s revenue estimates, posting $9.9 billion in revenue, up 21% year-on-year. The company attributed its success to its diverse and high-quality content offerings, as well as its global expansion strategy.
Despite surpassing market forecasts on both revenue and profit, ASML, the world’s leading supplier of lithography machines for chipmaking, warned that its sales growth would stall in 2024. The Dutch company, whose products are essential for producing the most advanced semiconductors, has been affected by the escalating tensions between the U.S. and China over technology trade and security. Earlier this month, ASML revealed that the Dutch government had restricted its exports of its latest NXT:2050i and NXT:2100i models to China last year, amid pressure from the U.S. to limit China’s access to cutting-edge chip technology.
The Federal Aviation Administration (FAA) has initiated a probe into Boeing’s aircraft manufacturing practices after a serious incident involving an Alaska Airlines flight. A door panel detached from the plane’s fuselage during the flight, causing a loud bang and a loss of cabin pressure. No one was injured, but the flight had to make an emergency landing. FAA Administrator Mike Whitaker said that the agency had sent several inspectors to Boeing’s factories to conduct a thorough examination of its quality control and safety standards. He said that the FAA was moving away from relying on Boeing’s self-audits and towards a more hands-on approach.
The stock market ended the day mixed but mostly higher, as the tech titans shook off early selling to resume the chase higher. The sectors of consumer goods and telecoms led the gains in the S&P 500, thanks to the impressive quarterly results of P&G and Verizon. The gap between the long-term and short-term Treasury yields widened today, as the 10-year yield climbed to about 4.14% and the 2-year yield dropped to 4.38%. Today the number of earnings ramped up significantly so expect some price volatility as traders react the the substantial amount of data. For the first time this week, we will also have the economic calendar providing some inspiration for the bulls or bears, with Mortgage Apps, PMI Composite, Petroleum Status, Business Uncertainty, and bond auction results. That said keep in mind Thursday morning brings us a slew of market-moving economic reports before the bell so plan your risk accordingly as big point moves are possible.
Wanting to follow through with Friday’s record-breaking surge, Monday began with another substantial gap as the chase higher continues. However, the momentum seemed to fad rather quickly with investors perhaps showing a little caution with key inflation data coming Thursday morning. Today will be all about the earnings results as the number of reports ramps up which will capped by the highly anticipated Netflix report after the bell. Be prepared as price volatility typically picks up during the bulk of earnings and there are some big point moves possible so plan carefully.
While we slept Asian markets reversed early losses to close mostly higher as China mulls a massive stock market rescue package as disinflation and consumer weakness grow. European markets trade flat to slightly bearish this morning resting after recent gains. U.S. markets also suggest a mixed but rather flat open coming off of overnight lows with a busy day of earnings ahead.
China’s economic outlook is bleak, according to Shaun Rein, founder of the China Market Research Group, who has been living in China for 27 years. He told CNBC on Monday that he has never seen such low confidence among consumers and businesses in China. He predicts that China will go through at least another 3-6 months of economic hardship, as it struggles to rebound from the impact of Covid-19. China, the second-largest economy in the world, has failed to meet its growth expectations in 2023, despite lifting pandemic restrictions.
The Fed’s Office of Inspector General released a report on Monday that criticized the trading activities of two former regional presidents, Robert Kaplan of Dallas and Eric Rosengren of Boston. The report found that their trades, which involved stocks, bonds, and futures, created conflicts of interest that compromised their independence and integrity as central bank officials. The report also said that their actions violated the Fed’s code of conduct and ethics policies, and undermined the public’s trust in the Fed.
The SEC, the U.S. regulator of the securities markets, revealed that a SIM swap attack was behind the hacking of its official account on X, a social media platform. On Jan. 9, a hacker managed to take over the @SECGov account and posted a false message saying that the SEC had approved the first spot bitcoin ETFs, which are funds that track the price of bitcoin and trade on the spot market. The hacker was able to do this by swapping the SIM card of the phone number linked to the account and resetting the password. The SEC admitted that it did not have two-factor authentication enabled, which would have added an extra layer of security to the account.
The stock market kicked off the week bullish with another substantial gap up but then struggled to continue the upward perhaps acknowledging the uncertainty of the inflation data later this week. Bond yields have also nudged higher suggesting some concern and caution by investors about the pending Thursday data. The Nasdaq has gained about 2.0% since the start of the year, mostly due to the Magnificent 7 stocks (Apple, Microsoft, Google, Amazon, Tesla, NVIDIA, and Meta) which have increased by an average of 3.9%. However, the Russell 2000 small-cap stock index has fallen by over 3.0% this year, even though it had more strength at the end of 2023. With very little to nothing on the economic calendar today investors will be looking to the growing list of earnings reports for inspiration. The Netflix report will be of particular interest after the bell today. Earnings typically mean a ramp up of price volatility so plan your risk accordingly.
All that pushing and shoving by the tech giants finally got the job done as the S&P 500 broke out joining the DIA and QQQ with nothing but blue sky above. Unfortunately, the IWM does not benefit from big tech and continues to lag way behind the other indexes still in a short-term downtrend. That said with a light day on the earnings and economic calendars I would expect the fear of missing out trade to push indexes higher. However, keep in mind that the Thursday GDP and Friday Core PCE nears, bullish momentum could fade into some uncertainty ahead of the data.
Overnight Asian markets traded mixed with Japan hitting 33-year highs as China led the selling down 2.68%. European markets started the week off bullishly mostly green following the Friday surge higher. U.S. futures also point to bullishness wanting to extend the Friday break out with the tech titans leading the way with great anticipation of their pending earnings.
Economic Calendar
Earnings Calendar
Notable reports for Monday include AGYS, AGNC, BRO, IBTX, TFII, UAL, & ZION.
News & Technicals’
Buy now, pay later, a service that allows online shoppers to split their purchases into interest-free installments, boosted online sales to a new high during the holiday season, growing by 14% compared to the previous year. However, many consumers are facing difficulties in paying off their bills, as they are already burdened by record-high credit card debt and rising delinquency rates. The frequency of buy now, pay later defaults is not clear, but the users of the service are more prone to miss payments on other credit products, such as car loans or mortgages.
Moody’s Investors Service has a pessimistic view of the credit quality of APAC countries in 2024, as China’s economic growth decelerates and funding and geopolitical challenges increase. The credit rating agency said that China’s growth slowdown has a large impact on APAC economies, as they are closely linked to China’s role in global trade. It also said that the global liquidity situation, which depends on the Fed’s policy stance, is another factor that affects the credit outlook. The agency expects the Fed to keep its policy tight until the middle of the year, which could limit the availability of funds for APAC countries.
The new year has brought more job losses for many workers, even as the economic indicators show signs of improvement. Inflation has eased, unemployment has fallen, and recession fears have faded, but many big companies are still downsizing their workforce. However, the layoff strategies vary among different companies. Some companies are opting for a one-time, large-scale cut, while others are preferring a gradual, phased-out approach. The reasons for these different methods may depend on the company’s financial situation, industry outlook, and employee morale.
The stock market closed with a huge surge, as the S&P 500 broke out and finally reached a new all-time high joining the DIA and QQQ. However, the IWM continues to lag substantially behind without the benefit of the tech giants. The technology sector was the best performer, with semiconductor stocks boosting the sector after Taiwan Semiconductor Manufacturing Corp. (TSMC), a major chipmaker, posted better-than-expected results, and its shares jumped more than 6%. Today we have a very light economic calendar with a few notable reports but I would expect the fear of missing out on trade to continue this upside breakout at least until we get the next reading on the GDP on Thursday morning. Stay with the trend and enjoy the ride but keep in mind that valuations are very frothy so watch for hints of trouble along the path.
The Bulls were in control from the jump on Friday. SPY gapped up 0.26%, DIA opened 0.28% higher, and QQQ gapped up 0.51%. From that point, all three major index ETFs rallied steadily higher before plateauing in the last 90 minutes of the day, near their highs. This action gave us gap-up, large, white-bodied candles in the SPY, QQQ, and DIA. All three closed at new all-time high closes after printing new all-time highs during the day. SPY and QQQ have almost no wicks while DIA had some wick on both ends. That meant that all three were above their T-lines (8ema). This all happened on slightly above-average volume in DIA and QQQ and slightly below-average volume in the SPY.
On the day, all 10 sectors were in the red with Utilities (-1.36%) out in front leading the way lower. At the same time, Consumer Defensive (-0.40%) and Financial Services (-0.46%) held up better than the other sectors. At the same time, the SPY lost 0.56%, DIA lost 0.25%, and QQQ lost just 0.56%. Meanwhile, VXX gained 3.65% to close at 15.92 and T2122 dropped even further into the oversold territory at 6.25. 10-year bond yields climbed to 4.102% and Oil (WTI) rose 0.60% to close at $72.83 per barrel. So, after a significant gap lower, Mr. Market was indecisive with a very modest bias toward the bullish side. This happened on less-than-average volume in the SPY, and average volume in both the QQQ and DIA.
On the day, nine of the 10 sectors were in the green with Technology (+2.00%) way out in front leading the way higher. At the same time, Consumer Defensive (-0.29%) was by far the worst-performing sector and the only one in the red. Meanwhile, the SPY gained 1.25%, DIA gained 1.01%, and QQQ gained 1.98%. Meanwhile, VXX fell 2.53% to close at 15.00 and T2122 climbed back up into the upper side of its midrange at 69.04. 10-year bond yields spiked to 4.13% and Oil (WTI) fell 0.50% to close at $73.71 per barrel. So, after a significant gap higher at the open, Mr. Market was dead set on achieving that all-time high in the SPY, led by the AI-crazed Tech big dogs (AMD was up 7.11%, NVDA up 4.17%, INTC up 3.03%, GOOGL up 2.02%, META up 1.95%, AAPL up 1.55%, MSFT up 1.22%, and AMZN up 1.20%). Even beleaguered TSLA gained 0.15%.
The major economic news on Friday included December Existing Home Sales, which came in a bit lower than expected at 3.78 million (versus a forecast and November value of 3.82 million). On a month-on-month basis, that was a 1.0% decline compared to a forecasted +0.3% and the prior month’s +0.8%. At the same time, Michigan Consumer Sentiment was stronger than anticipated at 78.8 (versus a 70.0 forecast and December’s 69.7). Meanwhile, Michigan Consumer Expectations also far exceeded the predictions at 75.9 (compared to a 67.0 forecast and a 67.4 December reading). At the same time, the Michigan 1-Year Inflation Expectations were down at 2.9% (versus the forecast and prior value of 3.1%). On a 5-year outlook, the Michigan Consumer Inflation Expectations also came in lower than expected at 2.8% (compared to a 3.0% forecast and the previous reading of 2.9%).
In Fed news, San Francisco Fed President Daly said Friday that she believes FOMC policy “is in a good place” now and that risks have become more balanced. She said, “We have to calibrate very carefully to ensure that we continue to bring inflation down and we ensure that we do it gently, as gently as we possibly can.” Daly went on to say, “The risks to the economy are balanced, and the risks to both sides of our mandate are balanced.” She concluded by saying, “So while I think it’s appropriate for us to look forward and ask when would policy adjustments be necessary so we don’t put a stranglehold on the economy, it’s really premature to think that that’s (speaking of rate cuts) around the corner.”
In stock news, the CEO of STLA told an audience Friday that his company will not sell electric vehicles below cost to boost sales the way TSLA and other competitors do. He said, “I am trying to avoid a race to the bottom.” He went on to imply that TSLA stocks’ slide since last summer was a result of price cuts to maintain sales. At the same time, SCGLY (major French bank Societe Generale) announced it would cut hundreds of jobs in France in order to cut costs. Later, CVX announced it plans to sell its Canadian Duvernay Shale natural gas business between now and 2028. CVX hopes to get between $10 billion and $15 billion for the unit. Elsewhere, F announced it is reducing the production of F-150 Lightning pickups starting April 1. However, at the same time, F said it is adding a third shift of production for Bronco SUVs and Ranger pickups. (This means no job cuts with employees transferred rather than laid off.) After the close, BX announced its acquisition of TCN for $3.5 billion ($11.25 per share).
In stock government, legal, and regulatory news, a major Chinese bank (ICBC) agreed to pay $32.4 million to the Fed in penalties for unauthorized use and disclosure of confidential supervisory information. At the same time, Reuters reported that the AMZN acquisition of IRBT will be blocked by the EU Antitrust regulator. (IRBT shares plunged nearly 27% on the story.) Later, the EPA sent its proposed standards calling for major reductions in new vehicle emissions to the White House for review. (The auto industry lobbying group called the standards “neither reasonable nor achievable.” Meanwhile, TSLA and environmental groups called on even tougher standards.) At the same time, a class-action shareholder suit was filed against VNET alleging the company provided false and misleading information about financial stability. Later, Reuters reported that the FDA had found new manufacturing and quality control problems at a LLY plant in NJ. (LLY released a statement saying that it has asked the FDA for “added flexibility” to manufacture a migraine medicine at a different production line in light of the findings.) Elsewhere, a federal Court of Appeals upheld a previous ruling in favor of UEIC which prevents ROKU from importing and selling streaming products that were found to violate UEIC’s patents. At the same time, Reuters reported that the European Commission has asked for public comment on AAPL’s offer to settle EU antitrust charges by opening up its “tap and go” payment technology to rivals. (By this, they mean they want competitor comments.) Later, the CDC warned against charcuterie meat being sold at COST and WMT after a multi-state salmonella outbreak. The private brand in question issued a “voluntary recall” after the announcement. At the same time, JBLU and SAVE filed an appeal of a federal judge’s ruling that blocked the tie-up that the Dept. of Justice opposed and the FTC both had previously blocked. Later, a US court approved $20.8 billion in claims made by 17 creditors, including COP, to be paid from proceeds of an auction of Venezuelan-owned Citgo Petroleum. The first bids on the auction of the assets of Citgo are due Monday.
Overnight, Asian markets were evenly split with the exception of Chinese markets which were all three down sharply. (This fall was said to be due to market expectations of a rate cut by the PBOC, which kept rates steady. As a result, China tightened liquidity in the offshore foreign exchange market while selling US Dollars onshore to stabilize the Yuan.) Shenzhen (-3.50%), Shanghai (-2.68%), and Hong Kong (-2.27%) were far and away the biggest losers. Meanwhile, Japan (+1.62%), Taiwan (+0.76%), and Australia (+0.75%) paced the gainers. In Europe, except two small exchanges, we see green across the board at midday. The CAC (+0.42%), DAX (+0.45%), and FTSE (+0.18%) lead the region higher in early afternoon trade. In the US, as of 7:30 a.m., Futures are pointing toward a green start to the day. The DIA lags as it implies a +0.16% open, the SPY is implying a +0.31% open, and the QQQ implies a +0.58% open at this hour. At the same time, 10-year bond yields are down to 4.096% and Oil (WTI) is up 0.42% to $73.72 per barrel in early trading.
The major economic news scheduled for Monday is limited to the December Index of US Leading Economic Indicators (10 a.m.). There are no major earnings reports scheduled for before the open Monday. However, after the close, BRO, LOGI, UAL, and ZION report.
In economic news later this week, on Tuesday we get API Weekly Crude Stocks Report. Then Wednesday, S&P Global Manufacturing PMI, S&P Global Services PMI, S&P Global Composite PMI, and EIA Crude Oil Inventories. On Thursday, Building Permits, Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, Dec. Durable Goods Orders, Q4 GDP, Q4 GDP Price Index, Dec. Goods Trade Balance, Dec. Retail Inventories, Dec. New Home Sales, and Fed Balance Sheet are reported. Finally, on Friday, we get the Dec. Core PCE Price Index, Dec. PCE Price Index, Dec. Personal Spending, and Dec. Pending Home Sales.
In earnings news later this week, on Tuesday we hear from MMM, DHI, ERIC, GE, HAL, IVZ, JNJ, LMT, PCAR, PG, RTX, SYF, VZ, WBS, BKR, CNI, EWBC, ISRG, NFLX, STLD, LRN, and TXN. Then Wednesday, ABT, APH, ASML, T, BOKF, ELV, FCX, GD, KMB, EDU, PGR, SAP, TEL, TDY, TXT, AMP, CACI, COLB, CNXC, CCI, CSX, HXL, IBM, KNX, LRCX, LVS, LVRO, LBRT, PKG, PLXS, RJF, RMD, STX, NOW, TSLA, URI, and WRB report. On Thursday, we hear from ALK, AAL, AIT, BX, BFH, CRS, CMCSA, CFR, DOW, EXP, HUM, HZO, MMC, MKC, MBLY, MUR, NEE, NOK, NOC, ORI, BPOP, SDVKY, SHW, LUV, STM, UNP, VLO, VLY, XEL, XRX, AJG, COF, INTC, KLAC, LHX, LEVI, OLN, TMUS, V, WAL, WDC, AND WY. Finally, on Friday, AXP, ALV, BAH, CL, FCNCA, GNTX, and NSC report.
In miscellaneous news, on Friday, Axios reported the results of an Axios – Harris poll of 2,120 US adults conducted in mid-to-late December. According to the poll, 63% of Americans rate their own current financial situation as “good” or “very good.” At the same time, 66% expect 2024 to be better than 2023 economically and a whopping 85% feel their personal financial situation will be better at the end of the year than at the end of 2023. Part of the reason for that is that 63% of respondents feel their job security is “a sure thing.” I guess the moral of the story is that things may not be as bad as some report. Elsewhere, on Friday, the bipartisan tax cut deal (restoring research and development deductions for business and child tax credits for families) passed out of the Ways and Means Committee by a vote of 40-3. Perhaps due to the GOP House majority, the tax cuts lean heavily in favor of businesses with child tax credits growing at $100 per year to just $2,000 in 2025. (For reference, those deductions were $3,600 per child in 2021.) Interestingly, Congress reports that only $399 million of the $77.5 in reduced revenue will add to the federal deficit. This is because their estimates assume $77.1 billion in savings will be obtained from previous fraudulent COVID-relief claims. (Although, I have no idea what this has to do with the tax cuts and I won’t hold my breath that they actually recover that much.)
In other news, MSFT reported that Russian state-sponsored hackers had broken into company systems to spy on top company executives. The breach resulted in some lost emails and documents from senior staff. Elsewhere, the Biden Administration issued another purchase of 3.2 million barrels of oil to refill the US Strategic Petroleum Reserve. (Delivery is in April for this batch.) At the same time, in what may become a much wider trend, 26 states (led by deep red TX) asked a US Appeals Court to delay deciding whether or not to block a US Dept. of Labor rule until after the US Supreme Court decided whether (and, if so, how) to black the executive branch from issuing rules (and interpreting the law) to achieve laws. SCOTUS is expected to announce its decision on the matter in June. (The lawsuit in question seeks to block retirement plans from being allowed to consider ESG factors in any way when choosing where to invest retirement funds and the suit was brought by Republicans because the Dept. of Labor does not explicitly forbid retirement funds from considering those factors.)
With that background, all three major index ETFs gapped higher to start the premarket session. However, all three are also printing small, white-bodied candles so far in the early session indicating some indecision early. The SPY, DIA, and QQQ remain above their T-line (8ema) and sitting at all-time highs, obviously the Bulls are in control of the trend in the short-term. In the longer term, we are also clearly bullish in all three. In terms of extension, the QQQ is getting a little stretched above its T-line, while the other major index ETFs are still well inside the normal range. The T2122 indicator is also sitting in its midrange. So, both sides have room to run if they can gather the momentum to do it. As I’ve been saying for some time, keep watching those 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 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
🎯 Mike Probst: Rick, Got CTL off the scanner today. Already up 30%. Love it.
🎯 DickCarp: 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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Markets followed Asia and Europe down by gapping lower at the open again. The SPY opened 0.65% lower, DIA gapped down 0.49%, and QQQ opened 0.80% lower. At that point, SPY meandered sideways following the opening level the entire day. Meanwhile, DIA roamed back and forth across its gap the entire day. For its part, QQQ sold off after the open but from 10 a.m. until the close it traded in a bullish trend the rest of the day, closing very near the high of the day and inside its morning gap. This action gave us white-bodied candles in all three major index ETFs. The SPY printed a gap-down Spinning Top with most of its wick below the body. DIA printed a larger, white-bodied Spinning Top with most of its wick above the body. QQQ split the difference, printing a larger white-bodied Spinning Top with most of its wick below the body and retested its T-line (8ema) from below after the gap down. It did close just above that T-line.
On the day, all 10 sectors were in the red with Utilities (-1.36%) out in front leading the way lower. At the same time, Consumer Defensive (-0.40%) and Financial Services (-0.46%) held up better than the other sectors. At the same time, the SPY lost 0.56%, DIA lost 0.25%, and QQQ lost just 0.56%. Meanwhile, VXX gained 3.65% to close at 15.92 and T2122 dropped even further into the oversold territory at 6.25. 10-year bond yields climbed to 4.102% and Oil (WTI) rose 0.60% to close at $72.83 per barrel. So, after a significant gap lower, Mr. Market was indecisive with a very modest bias toward the bullish side. This happened on less-than-average volume in the SPY, and average volume in both the QQQ and DIA.
The major economic news on Wednesday included December Core Retail Sales, which came in much stronger than expected at +0.4% (compared to a forecast and Nov. readings of +0.2%). For the broader, Dec. Retail Sales things also came in above what was anticipated at +0.6% (versus a forecast of +0.4% and the Nov. value of +0.3%). At the same time, the December Import Price Index was flat at 0.0% (versus a forecast and November of -0.5%). In addition, the Dec. Export Price Index fell more than predicted at -0.9% (compared to a -0.6% forecast but in line with November’s -0.9% reading). Later, Dec. Industrial Production (year-on-year) increased at +0.98% (versus a 2023 reading of -0.62%). On a month-on-month basis, the Dec. Industrial Production grew more than expected at +0.1% (compared to a 0.0% forecast down also down from November’s +0.2%). After that, Nov. Business Inventories came in as predicted at -0.1% (versus the -0.1% forecast and October reading). At the same time, Nov. Retail Inventories were down more than anticipated at -0.9% (compared to a -0.8% forecast but in line with the October -0.9% value). Then, after the close, the API Weekly Crude Oil Stocks report showed a modest inventory build of 0.483 million barrels (versus a forecast calling for a 2.400-million-barrel drawdown and the prior week’s 5.215-million-barrel drawdown.
In Fed news, the Fed Beige Book showed steady to slightly improved economic activity and employment levels. This included stable or declining input costs, more than half of the Fed districts having steady employment levels, and retailers adjusting profit margins in response to the changing costs. Earlier, Fed Governor Bowman said the proposed plan to increase bank capital requirements has some shortcomings. Still, she was optimistic policymakers and the banking industry advocates could compromise. (It is worth noting that Bowman had voted against the rules which passed anyway back in July.)
After the close, AA and FUL missed on revenue while beating on earnings. (It is worth noting that AA’s beat was just less of a loss than expected.) At the same time, DFS, SNV, and WTFC all beat on revenue while missing on earnings. However, KMI missed on both the top and bottom lines.
In stock news, after settling the lawsuit related to how majority owner BRKB was doing valuation accounting, BRKB bought out the remaining 20% of the Pilot Truck Stop business from the Haslam family. (Terms were not disclosed.) At the same time, DOOR announced it had ended its bid to acquire PGTI. Later, ALSN employees voted to ratify the previously tentative contract the UAW had negotiated with the company. (82% voted in favor of the deal, which offers a $20/hour starting wage and a 6%-8% increase in company contributions to 401k accounts.) At the same time, AMD said it has cut the price of its Radeon RX 7900 XT graphics card by $40 (originally $809, then $749 and now sold at $709) to better compete with NVDA products. Elsewhere, ALB (the world’s largest lithium producer) announced Wednesday that it will cut jobs, and push off one new project as part of cost-cutting it said was driven by falling lithium prices. At the same time, VZ announced that it will take a $5.8 billion write-down of its wire-based unit amidst increased competition from wireless services. Later, TSLA slashed the price of its Model Y cars in Europe (between 8% and 9%). At the same time, Reuters reported that AAPL topped Korea’s Samsung as the top seller of smartphones. AAPL had a 20.0% market share in 2023 compared to Samsung’s 19.4%. (Interestingly, QCOM and Samsung jointly announced a new S24 line of phones that include a QCOM chip and will come with GOOGL generative AI built-in.)
In stock government, legal, and regulatory news, the FAA announced Wednesday that it had completed inspection of the first 40 (of 171 total) BA 737 MAX 9 jets. (This was just data collection. The data from the inspection still needs to be reviewed.) In the UK, British antitrust regulators won a court appeal over data requests to BMWYY (BMW motors) and VLKAF (Volkswagen), which the companies had sought to block. At the same time, GOOGL announced it will tweak search results in Europe to comply with EU rules to treat rival services and products the same as its own listings. Later, the NTSB announced that if a partial government shutdown takes effect on Friday, it will be forced to suspend the probe into the ALK airline BA 737 MAX 9 jet losing a portion of its fuselage in flight. Elsewhere, the US Court of Appeals rejected AAPL’s appeal and ordered the ban on importation of AAPL watches effective at 5 p.m. ET on Thursday. (Lower courts found that AAPL violated the patent rights of MASI by putting MASI-designed oxygen sensors in their watches without paying MASI.) Later, a unit of SBGI signed a deal with creditors to emerge from bankruptcy by getting funding from AMZN as part of a streaming sports content deal. The deal must still be approved by the bankruptcy court, but this is expected since creditors are now on board. After the close, ARAV announced it will delist from the NASDAQ and dissolve the company by selling company assets to satisfy creditors.
Overnight, Asian markets were mixed. Shenzhen (+1.00%), Hong Kong (+0.75%), Shanghai (+0.43%), and Taiwan (+0.38%) led the rebound from a tough Wednesday while Malaysia (-0.81%) and Australia (-0.63%) dragged on the rally. In Europe, with the sole exception of Russia (-0.01%) we see green across the board at midday. The CAC (+0.94%), DAX (+0.73%), and FTSE (+0.23%) led a broad-based rally in early afternoon trade. In the US, as of 7:30 a.m., Futures are pointing toward a much better start than earlier in the week. The DIA implies a flat open at -0.01%, the SPY is implying a +0.42% open, and the QQQ implies a +0.76% open at this hour. At the same time, 10-year bond yields are down to 4.088% and Oil (WTI) is flat at $72.50 per barrel in early trading.
The major economic news scheduled for Thursday includes Dec. Building Permits, Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, Dec. Housing Starts, and Philly Fed Mfg. Index (all at 8:30 a.m.), EIA Weekly Crude Oil Inventories (11 a.m.), and the Fed Balance Sheet (4:30 p.m.). We also hear from Fed member Bostic (7:30 a.m. and 11:30 a.m.). The major earnings reports scheduled for before the open include FAST, FHN, KEY, MTB, NTRS, TSM, and TFC. Then, after the close, JBHT, and PPG report.
In economic news later this week, 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 a Fed member Daly speaking.
In terms of earnings reports later this week, on Friday, ALLY, CMA, FITB, HBAN, RF, SLB, STT, and TRV report.
In miscellaneous news, the National Assoc. of Builders reported Wednesday that the confidence of Builders jumped 7 points this month to 44 on its index as optimism flowed from falling mortgage rates and signs of an improving economy. However, 31% of the surveyed group still reported cutting prices to boost sales. (That is down from 36% who were cutting price in both December and November.) Meanwhile, China reported that its population fell in 2023, making it the second consecutive population decline. The Chinese population now stands at 1.4 billion after a spike to 11.1 million deaths following the lifting of COVID restrictions in that country. Meanwhile, Chinese births fell 5.6% to 9 million. (2023 was China’s seventh-straight year of decline in births.) This leads to concerns over the potential growth of the world’s second-largest economy as faltering demographics point to higher costs for retirement benefits and increasing competition for a shrinking labor pool could also mean higher labor costs.
In Government-related news, on Wednesday, President Biden hosted a negotiation session over the $110 billion package that will include aid to Ukraine, and Israel, as well as funds for the US border. It was a large meeting with the leadership of both parties in both houses of Congress as well as all the key committee leaders in attendance. After the meeting, attendees were upbeat and hoped for an agreement soon. However, House Speaker Johnson made a point of saying there will be no compromise on immigration. Elsewhere, the Consumer Financial Protection Bureau proposed cutting credit card overdraft fees to a maximum of $3.00. This is much lower than the current average of $26.00. Banks immediately responded that they have already cut other fees and there is no reason to cut overdraft fees. (The bankers did not mention the potential impact on bank profits.) Meanwhile, the US Supreme Court heard arguments Wednesday on what is called the “Chevron deference.” This is a long-standing (since 1984) position of the courts that when there is a dispute over the interpretation of a regulation, the deference goes to the regulators (executive agencies) that wrote those regulations. The case at hand challenges the executive branch’s ability to regulate fishing. (Specifically, whether fishermen must pay for tracking devices that make sure they were not fishing in protected areas that had been set as off limits to protect fish populations.) The plaintiff seeks to overturn the “Chevron deference” to make it such that only laws and rules explicitly passed by Congress could be enforced by the executive branch. This would have massive implications, overturning a huge part of government regulation and forcing Congress to visit every single issue and interpretation of every law. Even with that said, the questioning by justices led many observers to feel that the court is split with many of the conservative-packed court members strongly in favor of stripping all federal agencies of the power to regulate anything not explicitly laid out by Congress. While it is possible to argue the issue on both sides, the idea of Congress getting into every detail would likely lead to a practical problem of nothing being regulated for a long time. (Think environment, labor, health, education, energy policy, etc.) After all, it’s been years since Congress could pass even broad department-level budgets, let alone dictating every rule and regulation as well as how each will be interpreted. That would leave litigation and federal courts to decide on the interpretation of every rule and regulation. In other words, who should write and interpret federal regulation details? Congress? The Courts? Or the Agencies that are experts in and are charged with carrying out those regulations? This could be a massive societal change.
So far this morning, FAST, FHN, KEY, NTRS, and TSM all reported beats on both the revenue and earnings lines. (Some of the banks, in particular, had big beats on revenue, such as NTRS beating revenue by 51% and FHN beating that line by 23%.) At the same time, MTB, TBCI, and TFC all beat on revenue while missing on earnings.
With that background, all three major index ETFs gapped lower to start the premarket session. SPY gapped down through its T-line, but QQQ again is holding on to that level after an early test. Both SPY and QQQ are giving us white-bodied candles in the early session while DIA is indecisive after the gap down. So, the short-term trend is being challenged and is indeterminate except for DIA which has turned down in the short-term. (If you take a broader look at DIA, it has just chopped sideways for a month.) However, the Bulls remain slightly in control of the short-term trend in at least the QQQ and SPY (market leaders). 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). However, the T2122 indicator is now sitting well inside of its oversold range. So, both sides have room to run if they can gather the momentum to do it. However, the Bulls have more slack to work with. As I’ve been saying, keep watching those 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
🎯 Mike Probst: Rick, Got CTL off the scanner today. Already up 30%. Love it.
🎯 DickCarp: 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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The bears were a bit more active on Wednesday as rate uncertainty grew with hotter-than-expected retail numbers and Fed speeches continuing to suggest higher for longer than the market has anticipated. However, the SPY and QQQ left behind some hopeful candle patterns that a relief rally may be close at hand as long as earnings and economic data cooperate. Investors will look for inspiration in the housing, jobless, manufacturing, oil and gas reports along with more Fed speeches and earnings. Big point swings remain possible so plan your risk carefully.
While we slept Asian market ended mixed but mostly higher as Hong Kong relieved some of yesterday’s sharp selloff while China continued to linger near five-year lows. European markets are also taking a break from the recent selling showing green across the board this morning. U.S. futures suggest a substantial gap in the Nasdaq though the Dow and SP-500 trade flat ahead of earnings and economic data.
Economic Calendar
Earnings Calendar
Notable reports for Thursday include OZK, FNB, FAST, FHN, HOMB, JBHT, KEY, MTB, NTRS, PPG, TCBI, & WNS.
News & Technicals’
Google’s CEO Sundar Pichai announced in a memo to employees on Wednesday that the company will reduce its workforce this year. Pichai said that the company has big plans in fields such as artificial intelligence and that it needs to invest more in these areas. He also said that to make room for this investment, the company has to make difficult decisions and cut some jobs. He did not specify how many jobs will be affected or which divisions will be impacted.
Apple has decided to scrap the blood oxygen feature from its newest Apple Watches, the company announced on Wednesday. The feature, which measures the oxygen level in the blood, was challenged by Masimo, a medical device maker, who claimed that Apple infringed on its patents. Apple said that by removing the feature, it will be able to keep importing the devices to the U.S. while the legal dispute is ongoing. The revised versions of the Apple Watch Series 9 and Ultra 2, which were launched in September, will be available for purchase on Thursday.
TSMC, the world’s largest contract chipmaker, saw its revenue and net income decline in the fourth quarter of 2023, compared to the same period a year ago. The company reported revenue of NT$625.53 billion, down 1.5% year-on-year, and net income of NT$238.71 billion, down 19.3% year-on-year. The company attributed the lower results to the global chip shortage, which affected its production and delivery. TSMC’s main customers include Apple and Nvidia, who rely on TSMC to make the most advanced processors for their products, such as the iPhones.
Rate uncertainty inspired the bears to be a bit more active as the markets ended the day in the red on Wednesday, extending Tuesday’s losses, but leaving behind some hope clues that a relief rally is possible soon. Investors seem to be adopting a more cautious stance on 2024 rate cuts and the geopolitical tensions that continue to grow. Rates rose on the day, following Fed Governor Waller’s speech which seemed to counter the market’s anticipation of imminent rate cuts. The 10-year yield has risen to 4.1% after beginning the year below 4%. Across the globe, stocks fell after data revealed weak growth in China and higher inflation in the U.K., while oil prices edged up and gold fell on the day. Today investors will look for inspiration in Housing Starts and Permits, Jobless Claims, Philly Fed Mfg., Natural Gas, and Petrolem figures. We also have several notable earnings and more Fed member speeches to keep traders guessing.
