The bulls remain in control after shaking off the deflationary China worries pushing higher in a below-average volume day. Some uncertainty or hesitation is normal as we wait on the market-moving data coming over the next couple of days. Today the bulls or bears will look for inspiration in CPI data and traders should plan for some morning price volatility that could include some big point moves. After that, markets may go back into a wait-and-see mode with PPI, FOMC, and the Powell press conference. Will he be dovish or hawkish? Stay tuned and we will soon find out.
While we slept Asian markets closed in the green across the board with moderate gains with Shanghai recovering the key psychological level of 3000 by three points. European markets trade mixed in a cautious morning session waiting on the U.S inflation data. However, U.S. futures point to a bullish opening in anticipation of the CPI numbers. Plan carefully as we will soon be thinking about the Wednesday data.
Economic Calendar
Earnings Calendar
Notable reports for Tuesday include JCI.
News & Technicals’
Oracle, the software giant, reported disappointing revenue results for its latest quarter. The company missed analysts’ expectations in three of its operating segments: cloud services and license support, cloud license and on-premise license, and hardware. The company blamed the revenue shortfall on currency headwinds, delayed deals, and competitive pressures. The stock fell sharply in after-hours trading, as investors questioned the company’s growth prospects and strategy. Oracle faces increasing competition from rivals such as Microsoft, Amazon, and Salesforce in the cloud computing market.
Ford Motor, the carmaker, announced that it will slash its production target of its all-electric F-150 Lightning pickup by about 50% next year. This is a big change from its previous plan to boost its plant capacity for the EV in 2023. The company said that the reason for the cutback was the lower-than-expected demand for EVs, as they remain expensive and interest rates are high. However, the company also said that the sales of the F-150 Lightning have been growing steadily this year and that it is confident in the long-term potential of the EV market.
Hasbro, the toy maker, announced that it will lay off 1,100 workers as it faces a decline in toy sales, according to a company memo. The company, which is known for its Transformers and My Little Pony brands, said that the job cuts are part of its restructuring plan to reduce costs and improve efficiency. The company had already eliminated about 800 jobs earlier this year, as it was hit by the pandemic, the supply chain disruptions, and the loss of a major customer, Toys R Us. Hasbro said that it will try to minimize the impact of the layoffs on its employees and customers and that it will focus on its digital and e-commerce strategies to boost its growth.
The bulls remain in control as stocks ended slightly higher on Monday on lower-than-average volume, after shaking off the deflationary data out of China. Markets were mostly in a holding pattern, waiting for the big data points of CPI, PPI, and of course the Fed’s rate decision and press conference. The sectors that performed well were consumer staples, industrials, health care, and financial services, a combination of defensive and cyclical sectors that matched the calm session in the major indexes. Today anything is possible as traders react to the CPI figures, so plan for some volatility in the morning session, and don’t be surprised if choppiness ensues in the afternoon as we wait on the PPI and the FOMC.
Monday saw an open just on the red side of flat with SPY opening down 0.09%, DIA gapping up 0.14%, and QQQ opening down 0.12%. At that point, both large-cap index ETFs meandered sideways until 11 a.m., while QQQ rallied. From there, SPY and QQQ sold off modestly until 11:35 a.m. before starting a rally that lasted until 2:15 p.m. Then they both ground modestly lower and sideways with only the SPY rallying back the last 10 minutes of the day to close very near the high of the day. Meanwhile, DIA ground sideways from 11 a.m. until 12:30 p.m. when it followed the other major index ETFs in rallying the rest of the day, with it too closing near the high of the day. This action gave us, large, white-bodied candles with only the DIA having any real wick (lower). All three also broke out to new highs that had not been seen since January 2022. Obviously, all three remain above their T-lines.
On the day, eight of the 10 sectors were in the green with Technology (+0.74%) out in front leading the way higher while Energy (-0.35%) lagged well behind other sectors. At the same time, the SPY gained 0.39%, DIA gained 0.43%, and QQQ gained 0.85%. The VXX fell another 2.27% to close at 16.37 and T2122 fell but still remains in overbought territory at 87.32. 10-year bond yields climbed a bit to 4.241% and Oil (WTI) rose a quarter of a percent to close at $71.42 per barrel. So, Monday saw the bulls continue their rally but in a modest fashion on a no-news and no-earnings day ahead of the FOMC meeting. So, we go into the CPI reports on a bullish note. This all happened on far less-than-average volume in all three major index ETFs.
The only major economic news reported Monday was the NY Fed 1-Year Consumer Inflation Expectations which came down 0.2% between November and December to 3.40%. This was the lowest reading since April 2021. The report said the 3-year and 5-year inflation expectations remained steady at 3.0% and 2.7% respectively.
As the FOMC begins its meeting today, here are the Fedwatch Fed Fund Forecast probabilities as of Monday evening. For December (Wednesday), 97.1% of Fed Futures bets expect no rate hike while 2.9% expect a hike of a quarter-point. For January (1/31), 97.8% expect rates to be where they are now, 0.2% expect rates to be a quarter percent higher than now, and 2.1% expect a quarter-point rate cut. For March (3/24) the bets start to lean more heavily toward a cut. 56.8% expect rates as they are now, 42.3% expect a quarter-point cut, and 0.9% expect a half-percent rate reduction. By May (5/24) only 25% expect rates as they are now, 50.4% expect rates to be a quarter-point lower, 24% expect them to be a half of a percent lower, and 0.5% expect rates to be three-quarters of a percent lower. So, the market is expecting rate cuts to begin in the first half of 2024. You’ll have to decide whether the Fed will disappoint them (keeping to their “higher for longer” mantra) or not…and either way, how the market will react. However, traditionally, markets start to flag slightly before rate cuts begin.
After the close, CASY and ORCL reported that they missed on revenue while also beating on the earnings line. However, it is worth noting that ORCL did raise its forward guidance.
In stock news, on Monday, TSLA was urged by four Nordic region pension funds to respect collective bargaining for its employees. The public letter the funds sent said TSLA’s behavior was deeply troubling and not only contrary to the region’s labor model but against human rights. Later, GM and EVGO announced the opening of the first 17 sites in its nationwide electric vehicle fast-charging network. Elsewhere, Reuters reported that MSFT had struck a deal with the AFL-CIO union federation where the company agreed to remain neutral in the efforts of unions to encourage its workforce to join a union. The two also agreed to work together in the future related to AI technology and its impact on the workforce. Later, an SEC filing showed that BRKB had cut its holdings of HPQ by more than half. The filing showed Berkshire Hathaway now holds 5.2% of HPQ stock (about 51.5 million shares). The BRKB sales of HPQ took place in November. After the close, HAS announced it is eliminating 900 more jobs (after having announced 1,000 job cuts in January 2023) amid weak toy sales. The cuts are expected to take place sometime “in the next 18-24 months.” Also after the close, F announced it would cut production of F-150 Lightning (electric truck) by 50% in 2024 due to “changing market demand.”
In stock government, legal, and regulatory news, on Monday China’s Industrial Ministry announced that over 90% of new electric vehicles will qualify for that country’s tax incentives. Later, a US judge said Monday that he will hear arguments in META’s request to block the FTC from reopening a 2019 consent agreement (including a $5 billion penalty) after the FTC said the company misled parents on how much control they had over children’s messenger accounts among other things. The judge said he will hear arguments in late January. At the same time, in Brazil, the main airline lobbying group IATA urged the state and state-run oil company PBR to slash fuel prices charged to airlines. The statement called current jet fuel prices “excessively high” and “do not reflect the reality of an oil-producing country.” The IATA said high fuel costs are the main challenges facing airlines in Brazil. Later, workers at non-union automakers HMC, HYMTF (Hyundai), and VLKAF (Volkswagen) filed unfair labor practice charges against the companies Monday according to a release by the UAW union. The charges accuse the companies of launching anti-union activities and preventing workers from organizing union campaigns. Late in the day Monday, the US Sec. of Commerce told Reuters that the US was in discussions with NVDA regarding the conditions under which the company can sell AI chips to China. Sec. Raimondo made it clear that NVDA is forbidden from selling its most sophisticated semiconductors to China. After the close, SNY said it terminated an exclusive deal to license a drug from Maze Therapeutics for the treatment of Pompe disease after the FTC objected. The $755 million deal (signed in May) would have granted SNY a US monopoly on treatments for that disease. Finally, late Monday evening a federal jury found that GOOGL Android App Store (Play Store) has been protected by anticompetitive barriers that have damaged smartphone consumers and software developers. The unanimous verdict follows a four-week trial and will impact hundreds of millions of Android phone owners globally, making it a major blow to GOOGL. In fact, this could cost GOOGL billions upon billions of dollars in lost app store fees. (Expect at least months, if not years, of appeals before GOOGL gives up this fight. AAPL largely won a very similar case.)
Overnight, Asian markets were mixed but leaned toward the green side. Hong Kong (+1.07%) was by far the biggest mover and led eight exchanges higher while New Zealand (-0.58%) paced the four losing exchanges. Meanwhile, in Europe, we see a more even split of seven bourses in the red and eight in the green at midday (all on modest moves). The CAC (+0.14%), DAX (-0.16%), and FTSE (+0.52%) lead the region on volume (as always) in early afternoon trade. In the US, as of 7:30 a.m., the Futures are pointing toward a start to the day that is just on the green side of flat. The DIA implies a +0.18% open, the SPY is implying a +0.05% open, and the QQQ implies a +0.12% open at this hour. At the same time, 10-year bond yields have dropped hard to 4.189% overnight and Oil (WTI) is down another half of a percent to $70.94 per barrel in early trading.
The major economic news scheduled for Tuesday includes Nov. CPI and Nov. Core CPI (both at 8:30 a.m.), EIA Short-term Energy Outlook (noon), Nov. Federal Budget Balance (2 p.m.), and API Weekly Crude Oil Stocks (4:30 p.m.). The major earnings report scheduled for before the open is limited to JCI. However, there are no major reports scheduled after the close.
In economic news later this week, on Wednesday, Nov. PPI, Nov. Core PPI, EIA Crude Oil Inventories, Fed Rate Decision, Fed Statement, Current Q4 Interest Rate Projection, Q4 1st Year Projection, Q4 2nd Year Projection, Q4 3rd Year Projection, FOMC Economic Projections, and the Fed Chair Press Conference are reported. On Thursday, we get Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, Nov. Retail Sales, Oct. Business Inventories, Oct. Retail Inventories, and the Fed Balance Sheet. Finally, on Friday, NY Empire State Mfg. Index, Nov. Industrial Production, S&P Global Mfg. PMI, S&P Global Services PMI, and S&P Global Composite PMI are reported.
In terms of earnings reports later this week, on Wednesday, ABM, REVG, ADBE, and NDSN report. On Thursday, we hear from JBL, COST, LEN, and SCHL. Finally, on Friday, DRI reports.
In grain and/or export news, Reuters reported Monday that bulk grain shippers across the US Gulf Coast will be sailing longer routes and paying higher freight costs to avoid the drought-caused record-high transit fees, load-size restrictions, and congestion of the Panama Canal through most of 2024. (Only 18 of the 35 normal transits per day will be allowed as of February and those ships will all be at greatly reduced maximum drafts, meaning much lower load capacities than in the past.) It is hoped that Panama’s wet season (April-May) may begin to refill drought-stricken lakes used to operate the canal locks. However, forecasters have been calling for another year of low rainfalls in the region as climate changes. The immediate impact is that the vast majority of grain ships no longer transit the Panama Canal en route to Asia (the primary US customer). Instead, in October the USDA said 33 of 38 grain ships crossed the Caribbean and Atlantic to transit the Suez Canal (adding 20 days and more than doubling freight costs in a notoriously thin-margin grain trading business). From a stock market point of view, it is hard to predict the ramifications. Input costs for major domestic grain users such as ADM, GM, KHC, etc. may fall as US grain stockpiles rise. It’s also possible that markets will adjust by forcing farmers to produce less grain (or a different mix), which could drive input costs down for other sectors (like livestock feed). Or, Asian customers may simply recognize the changing climate effects and absorb the added costs (more likely the government will recognize the situation and subsidize grain shipping to avoid the loss of exports). In any event, the climate will force changes to the 2024 grain markets, even just through shipping costs.
So far this morning, JCI missed on both the revenue and earnings lines.
With that background, it looks like all three major index ETFs are looking to continue higher (before CPI data) but in a very tepid way. All three major index ETFs opened the premarket slightly higher and are putting in a small, white-body, indecisive (Doji-like) candle so far in the early session. All three remain above their T-line (8ema) this morning. It seems pretty obvious that the market is waiting on CPI but even more likely on the Fed. However, in both cases, the market thinks it knows what the news will be (flat inflation and flat rates). So, while we may well get more “wait and see” for the Fed decision Wednesday, the risk is on the side of a CPI surprise. Overall, the Bulls remain well in control of both the longer-term trend and the short-term trend. In terms of extension, none of the three major index ETFs is extended too far from its T-line (but QQQ is heading in that direction). However, the T2122 indicator remains well into its overbought territory. So, both the Bulls have a little room to run and the Bears have plenty of slack to run…if either of them can find the momentum.
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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The indexes pushed higher shaking off the stronger-than-anticipated jobs data Friday with the hope it will help us dodge a possible 2024 recession and a hawkish Fed continuing its higher-for-longer stance. Although today we have light earnings and economic calendars the CPI, PPI, and Fed’s rate decision on Tuesday and Wednesday add a level of uncertainty for the Monday session. Plan your risk carefully and expect some choppy market conditions as we wait.
Overnight Asian markets shook off deflationary Chinese data to finish the day mixed but mostly higher. European markets are chopping around the flat line mixed but mostly higher at the time of this report. U.S. markets point to a flat to slightly bearish open working to recover from overnight lows and facing a big week of market-moving economic data. Plan for substantial price volatility as the data rolls out.
Economic Calendar
Earnings Calendar
Notable reports for Monday include CASY, FECL, and ORCL.
News & Technicals’
Macy’s Inc., the iconic department store chain, has received a takeover offer from two hedge funds, Arkhouse Management and Brigade Capital Management. The offer, which was reported by sources close to the deal, values Macy’s at $5.8 billion, or $21 per share. This is a premium of about 23% over the company’s latest closing price of just over $17 per share. Macy’s has been facing a decline in sales over the past year, as the pandemic and the rise of online shopping have hurt its business. The company has been trying to adapt to the changing retail landscape by closing stores, cutting costs, and investing in e-commerce. However, it is unclear whether the offer from Arkhouse and Brigade will be accepted by Macy’s board and shareholders, or whether it will face any regulatory hurdles.
The U.S. economy is facing mixed signals about the possibility of a recession, according to a hedge fund manager. David Neuhauser, the CIO of Livermore Partners, said that “somebody has got it wrong” in interpreting the market indicators. He pointed out that the falling oil prices and rising gold prices suggest that investors are worried about a slowdown in economic growth and inflation. However, he also noted that the 10-year Treasury yields rose on Friday, which implies that investors are optimistic about a soft landing for the economy. He said, “Somebody has it wrong here, is what I’m trying to tell you … It’s hard to describe who has it [wrong] yet.” He added that he is cautious about the outlook for the U.S. economy, given the uncertainty and volatility in the markets.
The Philippines Maritime Task Force denounced the China Coast Guard for “severely damaging” one of its ships and ramming another in the South China Sea on Sunday. The Philippine ships were part of a convoy that was delivering supplies to Second Thomas Shoal, where Filipino troops were stationed on a stranded warship in the submerged reef. The reef is part of the Spratly Islands, which are claimed by both the Philippines and China, among others. The Philippines said that it has the right to access the shoal, based on the 2016 ruling by the Permanent Court of Arbitration that rejected China’s sweeping claims in the South China Sea. China, however, blamed the Philippines for “insisting on rushing into” the disputed waters and violating its sovereignty.
Stocks ended higher on Friday, as markets absorbed a jobs report that was stronger than anticipated a may keep rates higher for longer or hawkish Fed engaged for the time being. Interest rates also ticked higher as a result, with the 10-year Treasury yield climbing back over 4.2% after dropping to 4.1% earlier this week. Despite this, traders choose to concentrate on the hope that strong job data will overcome the weakening consumer dodging recession worries for 2024. Today we have a light day on the earnings and economic calendar as we wait for a CPI report on Tuesday a PPI report and a FOMC decision on Wednesday. That uncertainty could produce low-volume chop as we wait. With the rally now nearly two months straight up it may be wise to raise stops to protect positions should the pending data wate up the bears.
Markets diverged at the open Friday. The SPY gapped down 0.17%, DIA opened dead flat, and gapped down 0.48%. However, the Bulls stepped in immediately for a strong rally until 10:20 a.m. in all three major index ETFs. The next two hours were spent in a volatile bearish move back down to the prior close at 12:20 p.m. The Bulls then stepped in to lead a long, steady rally that lasted until we saw profit-taking that lasted 15 minutes of the day (most heavily in the DIA). This action gave us white-bodied, larger candles in all three major index ETFs. The SPY broke out of its recent range to a new level that has not been seen since March of 2022. QQQ did not break its 11/29 highs but is right at those levels. For its part, DIA printed something that could be seen as a Morning Star if you squint, but remains in its Bull Flag pattern. However, it is worth noting that this again happened on less-than-average volumes in the SPY, DIA, and QQQ.
On the day, seven of the 10 sectors were in the green with Energy (+1.28%) out front leading the way higher while Consumer Defensive (-0.51%) lagged well behind the other sectors. At the same time, the SPY gained 0.43%, DIA gained 0.36%, and QQQ gained 0.45%. The VXX fell 2.90% to close at 16.75 and T2122 spiked back up into its overbought range at 93.95. 10-year bond yields spiked to 4.229% and Oil (WTI) burst up 2.77% to close at $71.26 per barrel. So, Friday saw morning volatility and then a sustained and steady rally that took us to the highs of the day late and was only broken by very late profit-taking. This also capped a sixth-straight week of gains in all three of the major index ETFs.
The major economic news reported Friday included November Nonfarm Payrolls, which came in better than expected at +199k (compared to a +180k forecast and the Oct. reading of +150k). At the same time, November Private Nonfarm Payrolls came in just shy of anticipated at +150k (versus the forecast of +153k and the +85k Oct. value). The Nov. Participation Rate rose slightly to 62.8% (compared to a 62.7% forecast and October value). Altogether, this gave us a significantly lower Nov. Unemployment Rate of 3.7% (versus a 3.9% forecast and 3.9% October reading). At the same time Nov. Avg. Hourly Earnings (month-on-month) rose slightly to +0.4% (compared to a forecast of +0.3% and the Oct. value of +0.2%). However, on a year-on-year basis November Avg. Hourly Earnings remained stable at +4.0% (versus both a forecast and Oct. reading of 4.0%). Later, Michigan Consumer Sentiment was reported far better than had been predicted at 69.4 (compared to a forecast of 62.0 and a November value of 61.3). At the same time, Michigan Consumer Expectations also far exceeded what was anticipated at 66.4 (versus a 57.0 forecast and a 56.8 November value). Meanwhile, the Michigan 1-year Inflation Expectations were DOWN SHARPLY to 3.1% (compared to a forecasted value of 4.3% and the prior reading of 4.5%). Likewise, the Michigan 5-year Inflation Expectations were also sharply lower at 2.8% (versus a forecast of 3.1% and a previous value of 3.2%).
In stock news, on Friday, HON announced it had reached a deal to buy the security unit of CARR for $4.95 billion in cash. Later, the Insurance Institute for Highway Safety expressed concerns over the design of the TSLA Cybertruck. The group said using a thick steel skin and sharp angles on the body to improve the frame rigidness poses a safety hazard during crashes. Later, Reuters reported that SBUX has reached out to unions to mend relations after more than a year of fighting unions and taking action against potentially organizing employees. The letter said SBUX is open to ideas from the union on how bargaining could resume as quickly as possible. Elsewhere, TSLA announced that its Model Y standard range vehicle is now sold out in China for the rest of 2023. Later, LUV flight attendants rejected a tentative agreement between their union and the airline. The deal had called for a 20% immediate raise and then 3% per year over a five-year contract. (AAL and UAL are still in negotiations with their flight attendants and DAL attendants are not unionized. In addition, LUV has not yet reached a deal with its pilots either.) Later, TTM announced it would raise the price of its commercial vehicles by 3% on January 1st. On Sunday, Reuters reported that CI has abandoned its attempt to acquire HUM after the two companies could not agree on a price. Instead of the acquisition, CI plans to announce a $10 billion share buyback plan. At the same time, a group of funds led by Arkhouse Management and Brigade Capital have made a $5.8 billion offer to buy M according to the Wall Street Journal. The offer includes $21/share that they did not own as of December 1st.
In stock government, legal, and regulatory news, on Friday the FTC requested more information about the CVX acquisition of HES. (This comes after 23 Democratic Senators had requested the agency look into the deal’s antitrust ramifications in November.) At the same time, Bloomberg reported that the FTC is also examining MSFT’s investment into ChatGPT, again in terms of whether it might violate antitrust laws. (Later, the UK announced it is also studying the MSFT-OpenAI collaboration.) Later, FDX was sued by a company formerly contracted by FDX to deliver packages in CA and OR. The suit alleges that FDX has engaged in systematic and illegal business practices that amount to racketeering. Elsewhere, GOOGL criticized a potential order from EU antitrust regulators that may require it to sell its profitable adtech business (the platform through which ads are sold). GOOGL claimed that such a divestment was not proportional to the circumstances and is not right for GOOGL’s advertising partners. (Essentially, claiming that they should be allowed to control the ad sales platform and that nobody else could run it as well as GOOGL.) Later, the FDA made a major announcement, approving two gene-editing treatments for sickle cell disease. The therapies were produced by VRTX and BLUE using the CRISPR gene editing technology. At the same time, AMZN asked a federal court to dismiss an FTC lawsuit, claiming that no consumer harm had been proven in the FTC’s allegations of antitrust violations by AMZN using algorithms to push up prices and feature the highest margins. AMZN claimed these are all common retail practices. Later, TSLA defended its “Autopilot” self-driving feature in court Friday, claiming that the state of CA implicitly approved its feature and branding when it had not taken action against the company in previous investigations. (This was part of the CA Dept. of Motor Vehicles lawsuit seeking to suspend TSLA’s license to sell vehicles with that feature in the state and requiring the company to make restitution to consumers who had bought TLSA cars believing they could safely drive autonomously.)
In dividend and buyback news last week, MA hiked its dividend by 15.8% (to $0.66 per share) and approved a new $11 share buyback program. Later, XOM said it would raise the pace of its buybacks following the announcement of its purchase of PXD. The increased buyback program will not be $20 billion (up from $17.5 billion) through 2025. At the same time, AVGO hiked its quarterly dividend by 14.1% to $5.25/share. Meanwhile, MBI announced a special $8.00/share dividend for owners of record 12/18 with an ex-div date of 12/26/23. (That was 108% of the stock price at the time it was announced.) Later, DE announced an 8.9% dividend increase to $1.47/share. At the same time, OC raised its dividend by 15.4% to $0.60/share.
Overnight, Asian markets were mostly green. Japan (+1.50%), Shenzhen (+0.82%), and Shanghai (+0.74%) led the region higher with only two exchanges in the red. In Europe, things are much more bearish at midday with only seven of the 15 exchanges in the green. The CAC (+0.27%), DAX (+0.04%), and FTSE (-0.51%) lead the region on volume and Russia (-0.96%) is the biggest mover in early afternoon trade. In the US, as of 7:30 a.m., Futures are pointing toward a flat start to the morning. The DIA implies an unchanged open, the SPY implies a -0.03% open, and the QQQ implies a -0.08% open at this hour. At the same time, 10-year bond yields are up again to 4.272% and Oil (WTI) is off by two-thirds of a percent to $70.76/barrel in early trading.
There is no major economic news scheduled for Monday. There are no major earnings reports scheduled for before the open. However, after the close, CASY, and ORCL report.
In economic news later this week, on Tuesday we get November CPI, Nov. Core CPI, EIA Short-term Energy Outlook, Nov. Federal Budget Balance, and API Weekly Crude Oil Stocks. Then Wednesday, Nov. PPI, No.v Core PPI, EIA Crude Oil Inventories, Fed Rate Decision, Fed Statement, Current Q4 Interest Rate Projection, Q4 1st Year Projection, Q4 2nd Year Projection, Q4 3rd Year Projection, FOMC Economic Projections, and the Fed Chair Press Conference are reported. On Thursday, we get Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, Nov. Retail Sales, Oct. Business Inventories, Oct. Retail Inventories, and the Fed Balance Sheet. Finally, on Friday, NY Empire State Mfg. Index, Nov. Industrial Production, S&P Global Mfg. PMI, S&P Global Services PMI, and S&P Global Composite PMI are reported.
In terms of earnings reports later this week, on Tuesday, we hear from JCI. Then Wednesday, ABM, REVG, ADBE, and NDSN report. On Thursday, we hear from JBL, COST, LEN, and SCHL. Finally, on Friday, DRI reports.
In miscellaneous news, the SEC announced it will vote next Wednesday (and is now widely-expected to approve) a major rule change that would force more Treasuries trading to go through clearing houses. The clearing houses act as counter-parties to every trade in the event either the buyer or seller defaults, which ensures every trade is made. The rule is expected to reduce volatility in the $25 trillion US bond market. It will also have the effect of reducing hedge funds leveraged debt bets. Elsewhere, Freddie Mac reported Thursday that the average US 30-year fixed loan rate dropped to 7.03% this week. This was the lowest rate since early August. Meanwhile, one of the world’s largest coffee brokers, Mercon Coffee Group, filed for bankruptcy in the US. The company said its major lenders chose to not extend credit agreements, leaving the company with very tight working capital conditions. Finally, we have some economic news out of China. Chinese exports in November rose 0.5% from the same month in 2022. However, Chinese imports in November shrank 0.6% compared to the same month in 2022.
In Oil news, on Friday the US Dept. of Energy asked for bids to sell it 3 million barrels of crude oil (for delivery in March 2024) to refill the US Strategic Petroleum Reverse. Elsewhere, after announcements from XOM and CVX last week, the EIA said it is now clear that US oil production will reach new record amounts again in 2024. This comes after a recent all-time high of 13.2 million barrels per day was averaged for September. Meanwhile, early on Monday OXY agreed to buy CrownRock (a major private Permian Basin oil producer which produces roughly 140k barrels per day with 100k new acres under development) for $12 billion.
With that background, it looks like all three major index ETFs are again looking to give us indecisive inside-day candles in the premarket again. All three major index ETFs opened the premarket slightly lower and are putting in small and mostly indecisive (Doji-like) candles so far in the early session. All three remain above their T-line (8ema) this morning. The overall character of the early session suggests that either Traders are waiting for the Fed decision on Wednesday (which 98.4% believe will be no hike) or that it’s just early on a Monday. Overall, the Bulls are in control of both the longer-term trend and the short-term trend. However, the short-term trend is much more consolidating than a strong bullish trend in the large-cap indices with the QQQ trying to resume the rally. In terms of extension, none of the three major index ETFs is extended too far from its T-line. However, the T2122 indicator is again well into its overbought territory. So, both the Bulls have a little room to run and the Bears have plenty of slack to run…if either of them can find the momentum.
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.
Hit and Run Candlesticks / Road To Wealth Youtube videos
Disclosure: We do not act on all trades we mention, and not all mentions acted on the day of the mention. All trades we mention are for your consideration only.
DISCLAIMER: Investing / Trading involves significant financial risk and is not suitable for everyone. No communication from Hit and Run Candlesticks Inc, its affiliates or representatives is not financial or trading advice. All information provided by Hit and Run Candlesticks Inc, its affiliates and representatives are intended for educational purposes only. You are advised to test any new trading approach before implementing it. Past performance does not guarantee future results. Terms of Service
Thursday gave us a gap-up start to the day again. The SPY opened 0.45% higher, DIA gapped up 0.21%, and QQQ opened 0.78% higher. From there the SPY and QQQ gave us a gradual wavy rally that took us to the highs of the day at about 2:25 p.m. At the same time, DIA spent the morning chopping sideways inside of its morning gap, before rallying to its highs of the day at about 1:45 p.m. At that point, DIA started a slow and gradual selloff the rest of the day, closing very near the open level. SPY and QQQ followed suit after 2:20 p.m. but both stayed well above their opening level. This action gave us a white-body candle with a wick on both ends that closed above the high of Wednesday’s dark cloud cover candle. So, it looks like QQQ has decided to push toward resuming its uptrend. Meanwhile, SPY gave us a white-bodied Bullish Harami candle that crossed back up above the T-line (8ema) and near the top of Wednesday’s bearish engulfing candle. At the same time, DIA gave us a Doji Inside Day candle as it continued its Bull Flag above its T-line.
On the day, eight of the 10 sectors were in the green with Industrials (+1.83%) and Technology (+1.34%) out in front leading the way higher while Energy (-0.25%) lagged well behind the other sectors. At the same time, the SPY gained 0.74%, DIA gained lost 0.17%, and QQQ gained 1.40%. The VXX was flat at 17.25 and T2122 remains in its mid-range at 71.08. 10-year bond yields rose a bit to 4.144% and Oil (WTI) gained 0.40% to close at $69.66 per barrel. So, Thursday saw a gap higher, followed by a bull run in the SPY and especially QQQ. However, the DIA remained indecisive and all three major index ETFs showed some profit-taking at the end of the day (ahead of the November Payrolls data tomorrow). With that all said, AI ruled the day, as AMD soared 9.84% on the day after announcing its new AI chip Wednesday. Meanwhile, GOOGL shot up 5.31% after it announced a new AI model (Gemini) Wednesday. This happened on low volume across all three major index ETFs.
The major economic news reported Thursday included Weekly Initial Jobless Claims which came in just shy of expectations at 220k (compared to a forecast of 222k and just above the prior week’s 219k reading). At the same time, Weekly Continuing Jobless Claims fell to 1,861k (versus a forecast of 1,910k and the prior week’s 1,925k value). Later October Consumer Credit was reported as FAR lower than anticipated at $5.13 billion (compared to a forecast of $9.00 billion and dramatically below the Sept. reading which was revised upward sharply to $12.22 billion). Finally, after the close, the Fed Balance Sheet continued to show a reduction, coming in at $7.737 trillion (versus the prior week’s $7.796 trillion). So, that was a fairly steep $59 billion of bonds offloaded by the Fed last week.
After the close, AVGO, COO, DOCU, and LULU all reported beats on both the revenue and earning lines. Unfortunately, RH missed on both the top and bottom lines. It is worth noting that DOCU raised its forward guidance.
In stock news, fresh off its new deals with the Big 3 Automakers, the UAW announced that more than 1,000 VLKAF (Volkswagen) workers at its Chattanooga TN plant signed union authorization cards this week. This came even though VLKAF increased worker pay by 11% in November following the UAW deals. (In 2019, the same plant rejected the union by a vote of 833 against to 776 for the union.) Later, GM announced that it has partnered with Autocar Industries to create hydrogen-fueled heavy vehicles using GM’s hydrogen fuel cells. Elsewhere, BA informed its suppliers Thursday that there will be a two-month delay in its 737 narrow-body jet production plan. The new schedule calls for 42 jets per month produced beginning in February 2024. It also pushes back the ramp up to 47 per month from June to August and the 52.5 jets per month level pushed from December 2024 to February 2025. Later, MCD announced it would launch ten “CosMc’s” restaurants in 2024, focused on a limited menu and cold beverages. This is not much of an announcement just one day after MCD said they’ll open 10,000 new full-line stores by 2027 (which is the most aggressive growth MCD has ever had.) After the close, STLA said it would temporarily cut SUV production in Detroit, citing CA emissions regulations as the reason. (The idea is they will produce fewer SUVs and more of its lower-emission vehicles so the company average meets CA standards.) Also after the close, MBI announced a special dividend of $8.00/share for shareholders of record on December 18 to be paid Dec. 22. (This is noteworthy since MBI closed at $7.38 on Thursday. So, the dividend yield will be 108%…for the quarter.) Meanwhile, the Teamster union said that UPS has fired 35 newly organized workers. The union said if the company does not “get its act together” they will face a strike of their 340k Teamster employees.
In stock government, legal, and regulatory news, AUB agreed to pay a $6.2 million settlement ($1.2 million in fines and $5 million in customer compensation) with the CFPB. Later, a Swedish court ruled against TSLA in its legal battle with Sweden’s postal service (where the postal union has refused to deliver license plates to TSLA in sympathy with the IF Metall union which TSLA flatly refuses to negotiate with). The ruling said that postal union workers do not need to deliver TSLA license plates. At the same time, the Bank of England and the UK’s Financial Conduct Authority have proposed draft rules that place new regulations on “critical third parties” such as AMZN and MSFT. The proposed rules would require those critical third parties to evaluate and mitigate operational risks that might impact their customers in the financial sector. Later, AAL asked a US Appeals Court to reverse a lower court decision that sided with the US Dept. of Justice’s position that the now-scrapped JBLU and AAL partnership in the Northeast was anticompetitive. At the same time, the FCC said it had approved the merger between DISH and SATS.
In major retraction news, late Tuesday evening, the National Retail Federation retracted previous claims by it and its members that nearly half of all retail losses in 2021 were due to “organized retail crime rings.” The group admitted that it made and repeated that claim despite data showing this was nowhere near true. (Clearly, this was another case of lying in politics and attempting to shift blame from its members in the stock market.)
Overnight, Asian markets were mostly green. Singapore (+1.19%), South Korea (+1.03%), and Taiwan (+0.61%) led the region higher. Meanwhile, in Europe, 12 of the 15 bourses are also in the green at midday. The CAC (+0.71%), DAX (+0.16%), and FTSE (+0.19%) lead the region higher on volume in early afternoon trade. In the US, as of 7:30 a.m., Futures are pointing toward a modestly red start to the day (ahead of data). The DIA implies a -0.11% open, the SPY is implying a -0.12% open, and the QQQ implies a -0.26% open at this hour. At the same time, 10-year bond yields are back up to 4.182% and Oil (WTI) is popping up 1.83% to $70.60 in early trading.
The major economic news scheduled for Friday include Nov. Nonfarm Payrolls, Nov. Private Nonfarm Payrolls, Nov. Participation Rate, Nov. Unemployment Rate, and Nov. Avg. Hourly Earnings (all at 8:30 a.m.), Michigan Consumer Sentiment, Michigan Consumer Expectations, Michigan 1-year Inflation Rate Expectations, and Michigan 5-year Inflation Rate Expectations (all at 10 a.m.), and the WASDE Ag Report (noon). There are no major earnings reports scheduled for either before the open or after the close.
In miscellaneous news, the SEC announced it will vote next Wednesday (and is now widely-expected to approve) a major rule change that would force more Treasuries trading to go through clearing houses. The clearing houses act as counter-parties to every trade in the event either the buyer or seller defaults, which ensures every trade is made. The rule is expected to reduce volatility in the $25 trillion US bond market. It will also have the effect of reducing hedge funds leveraged debt bets. Elsewhere, Freddie Mac reported Thursday that the average US 30-year fixed loan rate dropped to 7.03% this week. This was the lowest rate since early August. Meanwhile, one of the world’s largest coffee brokers, Mercon Coffee Group, filed for bankruptcy in the US. The company said its major lenders chose to not extend credit agreements, leaving the company with very tight working capital conditions. Finally, we have some economic news out of China. Chinese exports in November rose 0.5% from the same month in 2022. However, Chinese imports in November shrank 0.6% compared to the same month in 2022.
In inflation analysis news, a study released Thursday by the British Think Tank Institute for Public Policy Research and Common Wealth found that contrary to corporate and political right-wing claims, it was “excessive profits” (especially in the energy and food sectors) were the major contributing factors that led to the high post-pandemic inflation. The study, based on an analysis of 1,350 listed-company financial reports found that the spike in inflation was not driven by wage inflation or too many government handouts. Instead, the primary issue was corporate greed, in the form of 30% higher profits when comparing 2019 to 2022, that drove inflation (at least in the US, UK, Germany, Brazil, and South Africa which the study covered).
With that background, it looks like all three major index ETFs are again looking to give us indecisive inside-day candles in the premarket. All three major index ETFs opened the premarket lower and are putting in small and mostly indecisive (Doji-like) candles so far in the early session. All three remain above their T-line (8ema) this morning. The overall character of the early session suggests that either nothing has changed yet (and more consolidation remains Mr. Market’s plan) or Traders are waiting on a big push one way or the other from the Nov. Payrolls reports. On balance, the Bulls are in control of both the longer-term trend and the short-term trend. However, the short-term trend is much more consolidating than a strong bullish trend. In terms of extension, none of the three major index ETFs is extended too far from its T-line. At the same time, the T2122 indicator remains in its mid-range. So, both the Bulls and the Bears have plenty of slack to run…if they can find the momentum.
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.
Hit and Run Candlesticks / Road To Wealth Youtube videos
Disclosure: We do not act on all trades we mention, and not all mentions acted on the day of the mention. All trades we mention are for your consideration only.
DISCLAIMER: Investing / Trading involves significant financial risk and is not suitable for everyone. No communication from Hit and Run Candlesticks Inc, its affiliates or representatives is not financial or trading advice. All information provided by Hit and Run Candlesticks Inc, its affiliates and representatives are intended for educational purposes only. You are advised to test any new trading approach before implementing it. Past performance does not guarantee future results. Terms of Service
Stocks rested though the bears briefly made an appearance after the China credit downgrade but we quickly shook off the mounting debits as traders bought the dip in the tech giant’s. The labor market data in the JOLTS report pointed to a slowing economy but encouraged the bulls as bond yields fell that additional rate hikes are unlikely. Today we have more labor data pending in the ADP along with Mortgage, Trade, Productivity, and Petroleum data along with a handful of notable reports to inspire traders. Corporate buybacks will begin winding down as their blackout period begins next week so plan your risk accordingly.
Overnight Asian markets shook off the China downgrade with the Nikkei leading the buying up 2.04% with only the Shanghai seeing modest selling. European markets trade green across the board this morning with the DAX extending its record high. U.S. futures also point to a resurgence of buyers after a brief two-day rest ahead of earnings and economic data.
The world is facing a major change in 2024, according to the Danish investment bank. The bank said that the past decade’s trends are coming to an end, and that the future will be shaped by some unexpected events that could have a huge impact on the financial markets. These events are unlikely but possible, and the bank warned that investors should be prepared for them. Some of the events that the bank predicted are: a global cyberattack, a new pandemic, a war between China and Taiwan, a collapse of the European Union, and a massive solar storm. These events could disrupt the global economy, politics, and society, and create new opportunities and challenges for the financial sector.
Generative artificial intelligence, which can create realistic texts, images, and sounds, is attracting a lot of attention and investment from Big Tech companies. However, these models also consume a lot of water, which raises environmental concerns. A study by Shaolei Ren, a researcher at the University of California, Riverside, revealed that ChatGPT, a popular chatbot developed by OpenAI, uses 500 milliliters of water for every 10 to 50 prompts, depending on the location and time of its deployment. The water is needed to cool down the servers that run the model, which requires a lot of computing power. The study suggests that generative AI models should be designed and deployed more efficiently, and that their water footprint should be taken into account when evaluating their social and economic impacts.
The U.S. consumer spending, which has been the main driver of the economic growth, is facing a challenge from the high interest rates on credit cards, according to some economists. Carl Weinberg, an economist at High Frequency Economics, told CNBC that consumer spending is being financed by credit cards, where interest is “over the top, out of control, off the hook right now”. He predicted that consumers will cut back on their spending in the new year, as their debt burdens increase. However, he did not expect this to push the U.S. economy into a recession. Monica Defend, the head of the Amundi Investment Institute, had a more pessimistic view. She said that she sees a coming pullback in consumer spending as sufficient to trigger a recession in the first half. She cited the weak consumer confidence, the rising inflation, and the uncertainty over the fiscal and monetary policies as the main factors behind her forecast.
Stocks rested a second day largely shaking of the credit downgrade of China as the tech giant’s found their footing as buyer bought the dip. The JOLTS report showed signs of slowing economy, weakening bond yields as odds of additional rate hikes shrink. However, some doubts emerged about whether markets are too optimistic about rate cuts with the higher for longer theme gaining some attention. Today traders will look for inspiration in a handful of notable earnings as well as Mortgage Apps, ADP, International Trade, Productivity and Petroleum data on the economic calendar. Corporate buybacks continue but keep in mind their blackout period is quickly approaching so a last ditch effort may well surge the market higher the rest to of the week.
Markets opened lower again on Tuesday. SPY gapped down 0.30%, DIA gapped down 0.22%, and QQQ gapped down 0.50%. At that point, DIA ground sideways along the opening level. Meanwhile, the SPY and QQQ also ground sideways but with a bit of a bullish trend. The left the SPY near the top of the gap, DIA at the bottom of its gap, and the QQQ back a bit above its gap at the close. This action gave us a white-bodied candle with an upper wick, which retested and held the T-line (8ema), DIA printed a Doji (indecisive) Harami candle, and the QQQ printed a large, white-bodied Bullish Engulfing candle that retested and failed its T-line. This happened on average volume in the DIA and well-below-average volume in the SPY and QQQ.
On the day, nine of the 10 sectors were in the red with Energy (-1.49%) out in front leading the way lower while Technology (+0.04%) held up much better than any of the other sectors. At the same time, the SPY lost 0.02%, DIA lost 0.20%, and QQQ gained 0.25%. The VXX fell 0.69% to close at 17.16 and T2122 fell back out of its overbought territory and back into the mid-range at 62.89. 10-year bond yields dropped sharply to 4.167% and Oil (WTI) dropped 0.32% to close at $72.09 per barrel. So, Tuesday was another day where the main portion of the move was made at the open. It felt like a day of rest with traders waiting on more information (waiting on the other shoe to drop) and happy for the consolidation/pullback to continue until it does get dropped.
The major economic news reported Tuesday, S&P Global Services PMI came in exactly as expected at 50.8 (compared to a forecast of 50.8 and an Oct. reading of 50.6). At the same time, the S&P Global Composite PMI also came in on target at 50.7 (versus a 50.7 forecast and 50.7 Oct. value). Later, Nov. ISM Non-Mfg. PMI was reported stronger than predicted at 52.7 (compared to a forecast of 52.0 and an Oct. reading of 51.8). In addition, Nov. ISM Non-Mfg. Employment came in lower than was anticipated at 50.7 (versus a 51.4 forecast but still up from October’s 50.2). At the same time, Nov. ISM Non-Mfg. Prices Index was a bit higher than expected at 58.3 (compared to a 58.0 forecast but down from October’s 58.6 value). Later, after the close, the API Weekly Crude Oil Stock Report showed a modest inventory build of 0.594 million barrels (versus a forecast that called for a 2.267-million-barrel drawdown and a prior week’s reading of -0.817 million barrels.
After the close, TOL reported beats on both the revenue and earnings lines. At the same time, PLAY missed on revenue while beating on earnings. It is worth noting that TOL also lowered its forward guidance.
In stock news, F announced a partnership with XEL that will install 30k electric vehicle chargers throughout the US by 2030. Later, PG unexpectedly announced it would record a $2.5 billion write-down in the value of its Gillette unit. At the same time, GDRX took a hit Tuesday when CVS announced a plan to implement a more transparent model of reimbursement from pharmacy benefit managers like GDRX. (CVS rose 4% on the announcement while GDRX fell more than 6% on the day.) Elsewhere, auto industry analysts at MS said Tuesday that TSLA’s market share of the global EV market fell to 13% in October (down sharply from TSLA’s 17% share in September). At the same time, the CFO of CHTR (speaking at a UBS conference) said he expects a reduction in broadband subscribers in Q4. (This news hit the stocks of CHTR as well as competitor CMCSA.) Later, Axios reported that DEO is seeking to sell its portfolio of beer brands (except the flagship Guinness brand) due to concerns over margins. At the same time, TSLA CEO Musk said Tuesday that “his projections” indicate the newly released Cybertruck will not have a significant impact on TSLA finances until 2025. In other news, Reuters reported BA delivered 46 narrowbody 737s in November. That brings the 2023 total to 351 units, leaving BA 25 planes short of the low end of its already reduced target range of 375-400 for the year. After the close, MA announced it had approved a new $11 billion share buyback program. The new program takes effect as soon as its current $9 billion buyback program is complete.
In stock government, legal, and regulatory news, a bankruptcy court announced that XPO was the winning bidder and would acquire 28 service centers formerly owned by bankrupt YELL. XPO will pay $870 million for the 28 centers. Later, the trial over the US Dept. of Justice seeking to block the JBLU acquisition of SAVE (for $3.8 billion) ended. The judge suggested he might approve the deal if JBLU agreed to divest more assets, also saying he was “having trouble with the DOJ’s request for a permanent injunction” in a dynamic marketplace. Elsewhere, an FTC inquiry has delayed the XOM’s planned $60 billion acquisition of PXD. According to SEC filings, PXD has been asked for additional information for an expanded investigation. (XOM and PXD remain optimistic the deal will eventually be approved.) Later, AMZN lent its voice to the calls asking the British antitrust authority to investigate and sanction MSFT for business practices that restrict customers’ ability to choose non-MSFT platforms for cloud computing. At the same time, a group of Catholic nuns filed suit against SWBI, trying to force the gunmaker to abandon manufacturing and sales of “assault-style” weapons. After the close, JNJ announced it had settled an unspecified number of additional talc cancer lawsuits. (JNJ settled with several major law firms with settlements covering all their clients in such suits.) Also after the close, BAYRY (Bayer) was ordered to pay $3.5 million to a woman by a Philadelphia jury in the latest lawsuit over Roundup weedkiller causing cancer.
In major retraction news, late Tuesday evening, the National Retail Federation retracted previous claims by it and its members that nearly half of all retail losses in 2021 were due to “organized retail crime rings.” The group admitted that it made and repeated that claim despite data showing this was nowhere near true. (Clearly, this was another case of lying in politics and attempting to shift blame from its members in the stock market.)
Overnight, Asian markets leaned toward the green side with only two of region’s 12 exchanges in the red and another (New Zealand) unchanged. Japan (+2.04%) and Australia (+1.65%) led the region higher on the day. In Europe, we see a similar picture taking shape with only four of the 15 bourses in the red at midday. Russia (-1.31%) is by far the biggest loser while the CAC (+0.50%), DAX (+0.30%), and FTSE (+0.49%) lead the rest of the region higher in early afternoon trade. In the US, as of 7:30 a.m., Futures are pointing toward a start to the day modestly on the green side of flat. The DIA implies a +0.09% open, the SPY is implying a +0.14% open, and the QQQ implies a +0.16% open at this hour. At the same time, 10-year bond yields are back up a bit to 4.193% and Oil (WTI) is down another percent to $71.61 per barrel in early trading.
The major economic news scheduled for Wednesday includes Nov. ADP Nonfarm Employment Change (8:15 a.m.), Oct. Exports, Oct. Imports, Oct. Trade Balance, Q3 Nonfarm Productivity, and Q3 Unit Labor Costs (all at 8:30 a.m.), and Weekly EIA Crude Oil Inventories (10:30 a.m.). The major earnings reports set for before the open are limited to BF.A, CPB, KFY, OLLI, THO, and UNFI. Then, after the close, CHWY, GME, GEF, and VEEV report. (We are also supposed to get testimony from all the major bank (JPM, MS, C, GS, and BAC) CEOs. They are expected to testify that banks will be pushed to the brink of failure (and the economy is in big trouble) IF…IF Fed-proposed additional banking oversight and reporting is enacted OR the requirements for capital held in reserve for runs is raised. (JPM CEO Dimon has already said he will testify that higher cash reserve requirements for banks will mean higher interest rates, driving homebuyers out of the market, and hurting low-to-moderate income borrowers.)
In economic news later this week, on Thursday, we get the Weekly Initial Jobless Claims and the Fed Balance Sheet. Finally, on Friday, we get, Nov. Nonfarm Payrolls, Nov. Private Nonfarm Payrolls, Nov. Participation Rate, Nov. Unemployment Rate, Nov. Avg. Hourly Earnings, Michigan Consumer Sentiment, Michigan Consumer Expectations, Michigan 1-year Inflation Rate, Michigan 5-year Inflation Rate, and WASDE Ag Report.
In terms of earnings reports later this week, on Thursday, we hear from CIEN, DG, GMS, AVGO, COO, DOCU, LULU, and RH. Finally, on Friday, there are no major earnings reports scheduled.
In economic/banking outlook news, the heads of four major US banks told a GS conference that they are all expecting some version of a soft landing, thanks in large part to a resilient consumer. GS CEO Soloman said, “People continue to be cautious on the U.S. economy, but I think it’s very, very clear that the U.S. economy has been more resilient than we expected.” Meanwhile, WFC CEO Scharf remarked, “The consumer is still very, very strong…as we sit here today, our base case is something closer to a soft landing as opposed to something far more serious than that.” Then BAC CEO Moynihan said, “We’ll be at about $1 billion in fees this quarter,” (which reflects a low single-digit decline that outperforms the average industry expectation). Finally, SYF CEO Wenzel said delinquencies are not as bad as feared, saying, “As we think about the fourth quarter, delinquency rates will rise, with losses peaking in the first half of the year” (while still being below industry forecasts).
In China news, MCO (Moody’s) downgraded China’s sovereign debt credit rating outlook from stable to negative. It kept its “A1” rating on Chinese debt, but similarly to the way outlooks were reduced on US debt during various political games in the US, the “outlook” was reduced. MCO cited property sector pressures and warning signs related to Chinese growth (including a major national pneumonia outbreak).
So far this morning, KFY and OLLI reported beats on both the revenue and earnings lines. Meanwhile, CPB, THO, and UNFI all missed on revenue while beating on earnings. (Note that UNFI’s earnings beat was just a significantly lower loss than had been forecasted.) It is worth noting that OLLI raised its forward guidance. (BF.A reports closer to the opening bell.)
With that background, it looks like all three major index ETFs are looking to make a modest gap higher this morning. All three major index ETFs opened the premarket higher and are putting in small candles so far in the early session. QQQ opened up above its T-line (8ema) again and has traded back down to retest that level this morning. However, the overall character of the early session suggests nothing has changed yet and more consolidation remains Mr. Market’s plan. On balance, the Bulls are in control of the longer-term trend but the short-term trend is consolidating or sideways. In terms of extension, none of the three major index ETFs is extended too far from its T-line. At the same time, the T2122 indicator is back down in its mid-range. So, both the Bulls and the Bears have plenty of slack to run…if they can find the momentum.
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.
Hit and Run Candlesticks / Road To Wealth Youtube videos
Disclosure: We do not act on all trades we mention, and not all mentions acted on the day of the mention. All trades we mention are for your consideration only.
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The urgency of corporate buybacks as we near the beginning of the blackout period was not quite enough to recover the early selling with only the IWM managing to close the day in the green. The rest of this week’s jobs data will be the center of attention as we head toward the market-moving Employment Situation report Friday morning. Today we will begin with the JOLTS report and a handful of notable earnings to provide bullish or bearish inspiration. However, Moody’s credit downgrade highlighting the weakening economic conditions in China could start the day with some bearish activity so plan your risk carefully.
Overnight Asian markets have had a rough session selling off across the board after a credit downgrade adding the economic concerns in China. However, European markets trade with modest gains and losses as Ericsson surges while Nokia plunges. Ahead of earnings and economic reports U.S. Futures point to bearish open.
Moody’s, a global credit rating agency, has lowered its outlook on China’s government credit ratings from stable to negative, citing concerns over the country’s fiscal, economic, and institutional strength. Moody’s said that China’s government may have to provide more support and bailouts for local governments and state-owned enterprises that are facing financial difficulties, which could weaken China’s fiscal position and increase its debt burden. Moody’s also said that China’s economic growth may slow down further due to structural challenges and external pressures and that China’s institutional capacity may not be able to cope with the rising complexity and risks of its economy. Moody’s maintained China’s long-term rating on its sovereign bonds at “A1”, which is the fifth-highest level in its scale, but warned that it could downgrade it in the future if China’s fiscal, economic, and institutional situation deteriorates.
Some experts believe that the Fed is lagging behind the market expectations and needs to cut interest rates sooner rather than later. Paul Gambles, managing partner at MBMG Group, said that the Fed is behind the curve and that traders are anticipating a 25-basis-point cut as early as March 2024. David Roche, a veteran investor and president of Independent Strategy, said that he is “almost certain that the Fed is done raising rates” and that inflation will not go back to 2% anymore. These views suggest that the Fed may have to adjust its policy stance and communication in response to the changing economic and financial conditions.
Banque Pictet, a major Swiss bank that provides private banking services, has admitted that it helped U.S. taxpayers and others evade taxes by hiding over $5.6 billion from the IRS. The bank has reached an agreement with the U.S. prosecutors to pay about $122.9 million in restitution and penalties and to cooperate with the ongoing investigation. In exchange, the Justice Department will defer the prosecution of the bank for three years and then drop a criminal charge of conspiracy to defraud the IRS, if the bank complies with the terms of the deal. The bank is one of the several Swiss banks that have been accused of facilitating tax evasion by U.S. clients, and the latest to settle with the U.S. authorities.
The S&P 500 ended its five-week winning streak on Monday, with most of the indexes closing lower despite the energy of the corporate buybacks. The best-performing sector was real estate, while sectors that rely on growth, such as information technology and communication services, lagged. Small-cap stocks gained nearly 1% today adding to their more than 3% increase last week. Today’s market movement may reflect some profit-taking in areas like large-cap technology that have driven the market higher in the recent rally. The bulls and bears will look for inspiration in several reports on the labor market, starting with the JOLTS report today. There will also be a dozen or so notable earnings reports that have the potential to inspire price action. The Moody’s credit downgrade of China could make the bears a bit more aggressive so it may be wise to take some profits or raise stoploss orders to protect your capital.
