Surging bond yields and the sharply rising dollar kept the bears engaged Tuesday in a painful selloff that added to the technical damage of the index charts. The T2122 indicator is in an extreme short-term oversold condition suggesting a relief rally could begin at any time. However, bond yields are still rising this morning with a parade of Fed speakers today, adding to the uncertainty. Investors will look for inspiration in Mortgage, ADP, PMI, Factory Orders, ISM Services, and Petroleum Status figures as well as a handful of notable earnings reports today. Expect the price action to remain challenging as we head toward the Friday, Employment Situation report.
Asian markets were mostly lower overnight as Australia kept interest rates unchanged with China closed for a holiday. European markets are however working to relieve the recent selling pressure with modest gains this morning in a cautious session. U.S. futures recovered from overnight lows pointing to a modestly bullish open ahead of earnings and economic data that could provide fuel to the bulls or bears so plan your risk carefully.
Economic Calendar
Earnings Calendar
Notable reports for Wednesday include ANGO, HELE, RGP, RPM, & TLRY.
News & Technicals’
The U.S. bond yields surged higher on Wednesday, as investors were worried about the possibility of the Fed keeping the interest rates high for a longer period than expected. The Fed’s interest rate policy affects the bond yields, which are the returns that investors get from buying bonds. The higher the interest rates, the lower the bond prices and the higher the bond yields. The Fed has been raising the interest rates since 2015, to control inflation and support economic growth. The Fed’s latest meeting in September signaled that it may raise the interest rates one more time this year and three more times next year. This has caused the bond yields to rise to their highest levels in more than a decade. The 10-year Treasury yield, which is the most widely watched indicator of the bond market, was slightly up at 4.81% on Wednesday. It had reached a high of 4.884% earlier in the day, after crossing the 4.8% mark on Tuesday for the first time since 2007. The 30-year Treasury yield, which is another important indicator of the bond market, was slightly down at 4.934% on Wednesday. It had briefly traded above 5% earlier in the session, also reaching levels last seen in 2007.
The United Nations Conference on Trade and Development (UNCTAD) has released a new forecast for global economic growth in 2024. The forecast predicts that the world economy will grow by 2.5% in 2024, slightly higher than the 2.4% growth in 2023. However, the forecast is based on several assumptions and uncertainties, and UNCTAD warns that the growth outlook is fragile and uneven. UNCTAD is particularly cautious about the U.S. economy, which is expected to slow down from 3.1% in 2023 to 2.1% in 2024, due to the fading effects of the fiscal stimulus and the rising interest rates. A UN director told CNBC that the forecast is “optimistic” given the “pretty weak” state of the global economy. He said that the main risk for global growth is the eurozone, which is on the verge of a recession. The eurozone is expected to grow by only 0.9% in 2024, after a meager 0.7% in 2023. UNCTAD urges the eurozone to adopt more expansionary fiscal and monetary policies and to address the structural problems of its banking sector and its trade surplus.
ntel, the world’s largest chipmaker, announced that it will spin off its Programmable Solutions Group (PSG) as a separate business, with the intention of taking it public in the next two to three years. PSG is the division that makes programmable chips, also known as field-programmable gate arrays (FPGAs), which can be customized for specific applications. Intel acquired PSG in 2015 when it bought Altera for $16.7 billion. Intel said that it will continue to support PSG and will retain a majority stake in the business, but it will give PSG more autonomy and flexibility to pursue its growth strategy. Intel’s stock price rose by 2.3% in after-hours trading following the announcement.
The stock market dropped sharply on Tuesday, as the bond yields and dollar kept rising as investors now seem to be aware that rates will be higher longer as the Fed has been saying. The S&P 500 fell by more than 1% and the Dow lost over 400 points. The sectors that did better were the ones that provided essential goods and services, such as utilities and consumer staples. The sectors that did worse were the ones that depended on innovation and spending, such as technology and consumer discretionary. Today we have ADP, PMI, Factory Orders, ISM Services, Petroleum Status, and a slew of Fed speakers to provide inspiration and volatility in the extreme short-term oversold condition. Although we have a few notable earnings it’s unlikely they will market-moving so instead keep an eye on those bond yields that are continuing to rise this morning. A relief could begin at any time but if bad data continues to pile on be prepared for more selling, whipsaws, and challenging price volatility.
Monday kicked off the fourth quarter with an uncertain mixed start as the so-called magnificent seven tech giants rallied while small caps moved sharply lower. Bond yields were once again higher across the board as the dollar continued to surge higher adding selling pressure to commodities such as gold, silver, and oil. Unfortunately, we have another light day of earnings and economic reports for the bulls or bears to find inspiration likely making for another challenging day of choppy price action and whipsaws. The JOTLS report could be market-moving as the start to a big week of employment figures.
Asian markets traded mixed but mostly lower overnight with Hong Kong leading the way selling off 2.69%. European markets also trade mostly lower this morning as world sentiment continues to decline even as data shows U.K. food prices declined slightly. The U.S. futures fluctuated during the night but currently point to a bearish open ahead of light-day data.
Economic Calendar
Earnings Calendar
Notable reports for Tuesday include CALM & MKC.
News & Technicals’
Satya Nadella, the CEO of Microsoft, testified in the federal antitrust trial against Google in Washington, D.C. He told the court that Google has an unfair advantage in online search, as it controls more than 90% of the market share. He said that this means that publishers and advertisers have to follow Google’s rules and standards, which makes it difficult for other search engines, such as Microsoft’s Bing, to compete and attract users. He also revealed that Microsoft offered to pay billions of dollars to Apple to make Bing the default search engine on its devices, such as iPhones and iPads. However, Apple rejected the offer and chose to stick with Google, which pays Apple an estimated $15 billion a year for the same deal. Nadella argued that Google’s payments to Apple are another way of maintaining its dominance and excluding its rivals.
The Russian ruble has been facing a severe depreciation against the U.S. dollar, as the country’s economy suffers from the impact of Western sanctions, falling oil prices, and the Covid-19 pandemic. The ruble reached its lowest level in more than six years in August when it traded at more than 100 rubles per dollar. The Bank of Russia, the country’s central bank, reacted by raising its key interest rate, which is the rate at which it lends to commercial banks, by 3.5 percentage points to 12% in an emergency meeting. The central bank hoped that this would stabilize the ruble and curb inflation, which is the increase in the prices of goods and services. However, the measure did not have the desired effect, as the ruble continued to weaken and inflation remained high. In September, the central bank increased its key rate again by another percentage point to 13%, citing the persistent inflationary pressure in the economy. The central bank said that it would continue to monitor the situation and take further actions if necessary.
The U.S. stock market has been showing signs of divergence, as the Russell 2000 index, which tracks the performance of small-cap stocks, turned negative for the year on Monday. The index fell by 1.6% on Monday, bringing its year-to-date return to a loss of 0.2%. It is also down by 12.5% from its highest level in the past 52 weeks. This contrasts with the performance of the S&P 500 and the Nasdaq Composite, which track the performance of large-cap stocks, especially in the technology sector. The S&P 500 and the Nasdaq Composite are up by 11% and 26%, respectively, for the year. The gap between the small-cap and large-cap stocks reflects the concerns that the 2023 market rally has been driven by a few big tech companies, such as Apple, Microsoft, and Amazon while ignoring the rest of the market. The Russell 2000 index is often seen as a better indicator of the health of the U.S. economy, as it represents smaller businesses that are more sensitive to economic conditions, such as consumer spending, inflation, and interest rates.
The stock market had a mixed start to the fourth quarter on Monday. The small-cap stocks, lagged, losing almost 2%, and the NASDAQ, gained about 0.7%. The ISM manufacturing report showed that the factory activity was stronger than expected in September while still indicating the sector is in contraction. The construction-spending data came in flat from last month as higher rates restrict home sales. The bond yields rose across the board, with the 10-year Treasury yield ending around 4.7% and the 2-year yield around 5.1%. The rest of this week will be focused on the labor-market reports, which could have a significant impact on monetary policy decisions. We begin with the JOLTS report today with a bit more Fed speak and just a couple of notable earnings for the bulls and bears to try and find inspiration.
Markets opened close to flat Monday (down 0.20% in the SPY, down 0.15% in the DIA, and up 0.04% in the QQQ). At that point, the SPY chopped sideways until 11:30 a.m. while the DIA chopped but slightly to the downside and QQQ chopped slightly to the upside during the same timeframe. Then all three sold off until 12:50 p.m. before closing out the day in a sideways chop channel that lasted until 3 p.m. Finally, all three rallied in the last hour of the day. This action gave us Doji candles in the SPY (white-bodied) and DIA (black-bodied) as well as a Bullish Harami, white-bodied, Spinning Top type candle in the QQQ. This all happened with above-average volume in the DIA, average volume in the SPY, and a bit below-average volume in the QQQ.
On the day, nine of the 10 sectors were in the red. However, Utilities (-4.25%) was a MASSIVE outlier, by 2%. Other than that, Energy (-2.35%) led the rest lower. Only Technology (+0.53%) held onto the green area. At the same time, the SPY lost 0.04%, DIA lost 0.26%, and the tech-heavy QQQ gained 0.83%. VXX gained slightly to close at 23.36 and T2122 dropped deep into the oversold territory at 6.21. 10-year bond yields spiked to 4.683% while Oil (WTI) plummeted 2.34% to end the day at $88.66 per barrel. So, we saw a flat open followed by chop, a selloff, more chop, and finally a rally. That all left us little changed overall with only NVDA, GOOGL, ADBE, META, MSFT, AMZN, PDD, and APPL dragging the QQQ back up above its T-line (8ema) to perform better than the large-cap index ETFs.
The major economic news reported Monday included September Global Mfg. PMI, which came in slightly above expectations at 49.8 (compared to a forecast of 48.9 and a previous reading of 47.9). A few minutes later, September ISM Mfg. Employment was reported above anticipated at 51.2 (versus a forecast of 48.3 and an August value of 48.5). At the same time, September ISM Mfg. PMI also came in above expectation at 49.0 (compared to a forecast of 47.7 and an August reading of 47.6). September ISM Mfg. Price Index came in well below predicted at 43.8 (versus a forecast of 48.6 and an August value of 48.4). So, according to S&P and ISM manufacturing is holding up. At the same time, the manufacturing price drivers (ISM PMI Price factors) are coming down compared to predicted levels.
In Fed speak news, Fed Governor Bowman told a banking conference that she thinks further rate hikes will be needed. She said, “…my own expectation that progress on inflation is likely to be slow given the current level of monetary policy restraint, suggests that further policy tightening will be needed to bring inflation down in a sustainable and timely manner.” Later, Fed Vice Chair for Bank Supervision Barr told a New York economic forecaster conference that he is much less concerned about how much more to raise rates than how long to keep them high. He said, “In my view, the most important question at this point is not whether an additional rate increase is needed this year or not, but rather how long we will need to hold rates at a sufficiently restrictive level to achieve our goals.” Barr went on to say “I expect it will take some time.” Finally, Fed Chair Powell spoke to a business group in PA. He did not address monetary policy, but said the economy was still dealing with the aftermath of the COVID-19 Pandemic. Finally, last night Cleveland Fed President Mester told a group that she still thinks the FOMC may need to raise rates one more time. She added the obvious and often repeated stated Fed position that inflation remains too high and the terminal Fed Funds rate, as well as how long it is held at that level, will depend on how the economy evolves.
In Autoworker contract talks and strike news, GM and F announced they will furlough another 500 workers across four plants because of the impact of the UAW strikes. At the same time, F announced it was laying off 330 workers due to the strike. Meanwhile, the UAW confirmed to Reuters that it had presented a new contract proposal to GM on Monday and also held another round of talks with STLA.
In stock news, TSLA reported disappointing Q3 delivery numbers, saying that it had delivered 435,059 vehicles in Q3 (short of the average analyst estimate of 456,722). At the same time, TSLA manufactured 430,488 cars in Q3 well below the average estimate of 461,992. (It should be noted that this failure brings China’s BYD within 3,456 cars of becoming the world’s largest EV maker.) Shortly after the TSLA report, RIVN reported higher-than-expected Q3 vehicle deliveries of 15,564 (compared to an analyst estimate of 14,470), which was a 23% increase from Q2. At the same time, KKR announced it has sold $560 million worth of industrial real estate (about 5 million square feet) across 50 buildings in Atlanta, Dallas, Chicago, and Central PA. (The buyer was not disclosed.) Elsewhere, the CEO of troubled BA supplier SPR resigned and was immediately replaced on an interim basis by a former BA executive. At the same time, NSC faced its second service outage in the last month (both caused by IT issues). NSC was downgraded by some analysts on this news. Later, MSFT CEO Nadella said Monday that major players were competing to lock up content creators for their data (needed to train AI models). He said the whole atmosphere reminded him of the early days of search engines where the big players started paying tens of billions to lock up publishers with exclusive deals. After the close on Monday, BF.A announced a $400 million share buyback program beginning immediately and lasting until Oct. 1, 2024. Also after the close, a coalition of hedge funds increased its offer for SCU to $13/share (up from $12.76/share). SCU closed at $11.38/share. Meanwhile, WE announced it was delaying a $95 million interest payment. This raised speculation of bankruptcy but was leaked to be a negotiation tactic with creditors and landlords.
In stock government, legal, and regulatory news, CI announced it reached a settlement over the weekend to pay $172 million for overcharging the government for Medicare Advantage claims. (It was actually fraud because false claims were submitted to get tens of millions in unearned money.) Later, MCD and WEN defeated a lawsuit that had alleged the restaurants deceived consumers about the size of their burgers. At the same time, the NHTSA expanded its investigation into F sport utility and trucks over catastrophic engine failures due to faulty valves. The investigation now covers 708k 2021-2022 vehicles. Later, in the early afternoon, the FDIC issued a consent order without fines for DFS, who had been under investigation since an Oct. 2022 audit found incorrect credit card classifications. However, DFS responded quickly and strongly and was rewarded for its treatment by FDIC. Elsewhere, Reuters reported Monday that all 10 of the drugmakers subject to negotiations over Medicare drug pricing signed up for the negotiations with the US HHS Dept. prior to the October 1 deadline. Most of them are suing HHS, wanting to prevent negotiations, but a federal court ruled against a suit on behalf of the 10 from the US Chamber of Commerce on Friday. In the afternoon, AAPL announced it would appeal a Netherlands Consumer and Markets Authority ruling related to App Store policies. At the same time, a US District judge in CA ruled in TSLA’s favor by ruling that TSLA owners must pursue any fraud claims (that the company misled them about Autopilot features) in individual arbitration rather than in courts, throwing out a proposed class-action lawsuit in the process. Meanwhile, the FCC announced the first ever “space debris” fine of just $150k against DISH for waiting until there was not enough fuel left to send an end-of-life satellite into re-entry which would burn up the satellite. After the close, the US Patent Office tribunal rejected a request from VTRS for the agency to review two patents held by NVO related to two weight-loss drugs. VTRS claimed the two patents obviously were based on existing patents for the underlying diabetes drug and should be invalidated.
Overnight, Asian markets leaned heavily to the red side. Hong Kong (-2.69%), Thailand (-1.51%), and Australia (-1.28%) led the region lower. In Europe, we nearly see red across the board at midday. Only the FTSE (+0.19%) remains in the green while the CAC (-0.41%) and DAX (-.51%) lead the region lower in early afternoon trade. In the US, as of 7:30 a.m., Futures are pointing toward a start to the day just on the red side of flat. The DIA implies a -0.07% open, the SPY is implying a -0.09% open, and the QQQ implies a -0.16% open at this time. Meanwhile, 10-year bond yields are spiking again to 4.727% and Oil (WTI) is down another two-thirds of a percent to $88.27 per barrel in early trading.
The major economic news scheduled for Tuesday is limited to JOLTs Job Openings (10 a.m.) and API Weekly Crude Oil Stocks (4:30 p.m.). The major earnings reports scheduled for before the open are limited to MKC. Then after the close, CLM, and NG report.
In economic news later this week, on Wednesday we get Sept. ADP Nonfarm Employment Change, Sept. S&P Global Services PMI, Sept. S&P Global Composite PMI, Aug. Factory Orders, Sept. ISM Non-Mfg. PMI, Sept. ISM Non-Mfg. Price Index, EIA Crude Oil Inventories, and Fed member Bowman speak. On Thursday, we get August Imports, August Exports, Weekly Initial Jobless Claims, the Fed Balance Sheet, and two Fed Speakers (Mester at 9 a.m. and Daly at noon). Finally, Friday, Sept. Avg. Hourly Earnings, Sept. Nonfarm Payrolls, Sept. Private Nonfarm Payrolls, Sept. Participation Rate, Sept. Unemployment Rate, and a Fed speaker (Waller at noon).
In terms of earnings reports later this week, on Wednesday, we hear from AYI, HELE, and RPM. On Thursday, CAG, STZ, LW, and LEVI report. Finally, on Friday, there are no major earnings reports scheduled.
So far this morning, MKC missed on revenue while reporting in-line on earnings. Even so, this was a 5.6% quarter-on-quarter increase for MKC.
In late-breaking news, late last night Florida Rep. Gaetz followed through on his threats by filing a “motion to vacate the chair” in hopes of removing House Speaker McCarthy. Gaetz has vowed that even if he loses this time, he will refile the motion every time Speaker McCarthy reaches across the aisle to court Democratic votes on any legislation. On that note, it will very likely be Democrats who decide whether McCarthy keeps his post. So, the matter will come down to whether McCarthy and the less-fringe Republicans can reach a compromise (actual governing solution) or whether the parties are too far into the “us good vs. them evil” mindset to govern. Oddly, Gaetz has at least said he backs House Majority Leader (#2 House Republican) as McCarthy’s replacement. The issue is that that person, Steve Scalise, is currently incapacitated while being treated for a rare blood cancer and in the past has been a staunch supporter of McCarthy. The point of the whole story is that Congress now has yet another hurdle to get past before it can accomplish anything. Remember the 15 rounds of votes over a number of days it took the GOP to elect McCarthy? Here’s to hoping that doesn’t become “the good old days of a semi-functional Congress.”
With that background, it looks like the Bears are in control this morning in the premarket. All three major index ETFs are printing black-bodied candles with upper wicks and sitting at their early session lows. The QQQ has (as of now) given up its T-line again and it appears we are headed for a modest gap lower at the open. So, for now, the short-term trend clearly remains headed lower. In terms of extension, none of the three major index ETFs are far below their T-line (8ema) but the T2122 indicator is now well into the lower half of its oversold range. So, over-extension is an open question. This tells us either side has at least some slack if they can find the momentum to run.
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 Indexes whipsawed on Friday began with a bit of bullish hope on the better-than-expected Core PCE reading but that hope quickly faded on a failed vote budget vote in the house. However, with 3 hours to spare Congress passed a 45-day extension kicking the problem down the road to provide the market with more uncertainty during the 4th quarter earnings season. Today we have PMI, ISM, and Construction Spending figures to inspire the bulls and bears. Plan for price action to remain challenging with a big week of job numbers while waiting for the big bank reports to kick off 4th quarter earnings silly season.
Asian markets trade mixed after China reported an improvement in factory activity surging Hong Kong higher by 2.51%. However, eurozone manufacturing continued to decline bringing in modest selling across European indexes to begin the week. With U.S. manufacturing numbers pending U.S. futures work to recover some early loss as they chop around the flatline while relieved over no government shutdown, at least for now.
Economic Calendar
Earnings Calendar
There are no notable earnings reports to begin the first trading day of the 4th quarter.
News & Technicals’
Bill Ackman, the billionaire investor and founder of Pershing Square Capital Management, has expressed his interest in doing a deal with X, the social media platform formerly known as Twitter. Ackman’s new investment vehicle called a SPARC, or special purpose acquisition rights company, received approval from the Securities and Exchange Commission (SEC) on Friday. A SPARC is a type of blank-check company that allows investors to buy shares in a future merger or acquisition deal, without knowing the target company in advance. Ackman told The Wall Street Journal that he would “absolutely” do a deal with X if the opportunity arises. Ackman is an active user of X, where he posts about various topics, such as his support for the presidential candidates Vivek Ramaswamy and Robert Francis Kennedy Jr. Ramaswamy is a former biotech executive and author of the book Woke, Inc., while Kennedy is an environmental lawyer and activist. Ackman said he admires both candidates for their courage and integrity.
China, the world’s largest consumer of many commodities, has been showing a strong appetite for various raw materials, despite the slowdown in its overall economic growth. Goldman Sachs, a global investment bank, said in a recent note that China’s demand for commodities such as iron ore, copper, aluminum, oil, and gas has been growing at “robust rates” in the past few months. The bank attributed this to several factors, such as the recovery of industrial activity, the expansion of infrastructure spending, the resilience of the property sector, and the diversification of energy sources. The bank also said that China’s demand for commodities is likely to remain high in the near term, as the country faces supply constraints and environmental challenges. However, the bank also warned that China’s demand for commodities could moderate in the longer term, as the country shifts to a more consumption-driven and low-carbon economy.
The World Bank, an international financial institution that provides loans and grants to developing countries, has lowered its growth forecast for developing East Asia and the Pacific for this year and the next. The region, which includes countries such as China, Indonesia, Thailand, and Vietnam, is expected to grow by 5% in 2023, down from the previous estimate of 5.1%. The growth projection for 2024 has also been revised down from 4.8% to 4.5%. The World Bank said that the region’s growth prospects are facing several risks, such as the uncertainty of the pandemic, the uneven recovery of global trade and investment, and the rising debt levels of governments, corporations, and households. The World Bank urged the countries in the region to adopt prudent fiscal and monetary policies, strengthen their health systems and social protection, and promote green and inclusive growth.
Equity markets began Friday with a nice gap up reacting to the Core PCE numbers but, after a failed vote to prevent a government shutdown indexs whipsawed finishing the day lower with uncertainty. The S&P 500 lost about 4.8% in September and about 6.4% since its peak on July 31. The Nasdaq suffered more losses, falling by 5.5% in September and by 7.5% since July 31. The bond market was stable on Friday, with the 10-year Treasury yield at 4.58%, close to its highest level in the cycle. The bond yields have risen sharply in September, by nearly 0.5% for the 10-year bond, affecting both stock and bond returns. Today traders have PMI, ISM, and Construction Spending along with some short-term bond auctions to deal with as we kick off the first trading day of the 4th quarter. A relief rally is overdue but expect the price action to remain challenging as we wait for the beginning of the earnings session. Though the government avoided a shutting down we will be dealing with this uncertainty again having kicked the can down the road for 45 days. Price action is likely to remain challenging so pan your risk carefully.
On Friday, markets gapped strongly higher as the Fed’s favorite inflation gauge came in better than expected. The SPY gapped up 0.71%, DIA gapped up 0.65%, and QQQ gapped up 0.98%. However, at that point, the DIA immediately began selling while the SPY traded sideways, and the QQQ continued to rally. This lasted until 10 a.m. when the SPY and QQQ followed the DIA selling off. The selling lasted until all three major index ETFs reached the lows of the day at 2:30 p.m. From that point, the rest of the day saw a sideways grind sideways along the lows with a very, very slight bullish trend. This action gave us black-bodied candles that retested (and failed) their respective T-lines (8ema). In addition, DIA printed a Bearish Engulfing candle, SPY came close to printing a Dark Cloud Cover, and QQQ just printed a large-body, black candle with wicks on both ends. This happened on above-average volume in the DIA and SPY, as well as average volume in the QQQ.
On the day, six of the 10 sectors were in the red led by Energy (-1.51%) way out front leading the other sectors lower. Meanwhile, Consumer Cyclical (+0.42%) holding up better than the other sectors. At the same time, the SPY lost 0.24%, DIA lost 0.50%, and the tech-heavy QQQ gained 0.07%. VXX gained almost 2% to close at 23.32 and T2122 fell but remained just outside the oversold territory at 21.90. 10-year bond yields fell slightly to 4.579% while Oil (WTI) lost just over one percent to end the day at $90.77 per barrel. So, Friday was another whipsaw day that gave us a strong gap-up, which was met by a selloff that ripped the face off of gap chasers. This was not helped when the dysfunctional House GOP failed to pass even their extremist version of a set of appropriations bills, leading to what is likely a government shutdown as of Sunday. The Senate plans to pass a bipartisan funding bill Saturday (after their own GOP troublemaker, Sen. Paul forced the long wait instead of a fast-track Thursday vote after the bill passed 77-19).
The major economic news reported Friday included the August PCE Price Index which came in lower than expected at +0.4% month-on-month (compared to a forecast of +0.5% and a July reading of +0.2%). That amounted to an August PCE Price Index year-on-year of +3.5%, which was in line with the forecast and a tick higher than the July value of +3.4%. The “Core” numbers, which strip out food and energy, on a month-on-month basis were +0.1% (lower than the forecasted and July reading of +0.2%). On a year-on-year basis, the Core number was +3.9% (in line with forecast and down significantly from the +4.3% in July). At the same time, August Personal Spending came in just as predicted at +0.4%, which was down very sharply from the July +0.9% value. Meanwhile, the Preliminary August Trade Goods Balance showed a significantly better than anticipated deficit of -$84.27 billion (compared to a forecast of -$91.20 billion and the prior month’s -$90.92 billion). Preliminary August Retail Inventories came in up 0.6% versus the dead-flat +0.0% in July. Later, September Chicago PMI survey results were a bit below predicted at 66.0 (versus a 66.3 forecast but slightly above the August reading of 65.5).
In Autoworker contract talks and strike news, in a hopeful sign, the UAW dropped its unfair labor practices charges against GM and SLTA on Friday. (The union had filed charges with the NLRB on Aug. 31.) Then in late morning, the UAW expanded the strike, this time hitting a GM plant and an F plant. The added facilities bring 6,900 new workers to the strike, which has now increased to cover 17% of the workers whose contracts are under negotiation (18,300 total out of 146,000). Later, the F CEO Farley said the UAW was “holding a deal hostage” over EV battery plants. UAW President Fain fired back that Farley was “lying about the state of the negotiations,” going on to say the CEO “hasn’t been at the bargaining table this week or for most of the last 10 weeks. If he were there, he’d know we gave Ford a new comprehensive proposal Monday and still haven’t heard back.” (For what it is worth, the CEO of F has previously said he expects massive workforce reductions once the transition to EVs is complete. Perhaps as much as 40% workforce reduction.) Following those lines of contention, GM CEO Barra said she felt “It’s clear that there is no real intent to get an agreement (on the union’s part).”
In government shutdown news, having broken their word from June, the House GOP failed to approve even their own extreme government funding bill Friday. (It would have caused 30% budget reductions in most departments of the government.) However, 21 GOP members voted against the bill, either because it was not extreme enough for them or because they were more interested in political theatre than the situation. One of the most extreme right-wing members (Gaetz) even approached Democrats, trying to strike a deal that would allow him to replace the Speaker with a Freedom Caucus member. Then Saturday, with only 9 hours left (and perhaps in response to Gaetz’s move), Speaker McCarthy reversed course by reaching across the aisle to pass a 45-day CR with Democratic help. The bill passed 335-91, with 126 GOP votes (58%) and 209 (all but 1) of the Democratic votes. The CR removed additional support for Ukraine but, oddly, doubled US disaster relief again. (President Biden asked for $4 billion, the Senate made it $8 billion additional, and the House doubled it again to $16 billion.) The removal of Ukraine aid led to the lone Democratic thumbs down in the House and caused Dem. Senator Bennet to hold up a fast-track vote in the Senate. However, with three hours to spare the Senate approved the House CR bill 88-9 as-is (meaning no reconciliation and re-votes in both houses were needed). Then the President signed the bill shortly before the deadline. Dow futures jumped more than 100 points on the news that the shutdown was averted. The bottom line is that a shutdown was avoided by kicking the can 45 days down the road…and we can now look forward to more drama a week or so before Thanksgiving. In the meantime, Gaetz said he will move to remove McCarthy as Speaker this week for the high crime of reaching across the aisle to Democrats to keep the government open.
In stock news, Reuters reported exclusively Friday that CG is in talks to acquire two units from MDT for more than $7 billion. Sources tell them an agreement could be reached within a few weeks. Elsewhere, the Teamsters Union picketed two AMZN distribution facilities in CA on Friday. At the same time, TSLA announced that one of its semi-trucks traveled over 1,000 miles in a single day. (There was no word about any load. So, it must be assumed it was just the truck with no trailer. For reference, a semi with a load will typically travel 650 miles in an 11-hour shift, which would be about 1,300 in a driver-team day.) Later, Reuters reported that APO is among two finalist investors to acquire bankrupt SAS airline. Monday marks the separation of K from its snack business which will trade under KLG. Industry analyst IQV reported that 1.8 million people got COVID-19 vaccine shots last week, with 1 million getting the PFE shot and 800k getting the MRNA vaccine. RYAAY announced it is reducing its Winter flight schedule, citing BA not delivering promised jets on time. (RYAAY said it now expects to get 14 at most of the 27 aircraft scheduled for delivery in Q4 from BA.) After the close, WFC announced it had sold $2 billion of its private equity investments to a group or private equity firms including CG. Then on Saturday, AAPL announced it will be issuing a software update to address a problem on its newly released iPhone 15, which has caused the phones to overheat. AAPL said the phones are “running hot” due to bugs in iOS 17, a temporary set-up period of the phone, and bugs in apps. On Sunday, AMZN took an image hit as many customers reported receiving email confirmations of gift card purchases, that they never bought. This led the customers to fear account hacking or much more ominously that AMZN may have been hacked. As of Sunday evening, AMZN is still investigating.
In stock government, legal, and regulatory news, the SEC announced Friday that eight more broker-dealers have settled over employees discussing business using off-books messaging channels. IBKR, FITB, PWP, and Nuveen paid a total of $91 million combined. IBKR also paid $20 million to the CFTC over similar charges. At the same time, a federal judge in OH declined to block the Biden Administration from negotiating the price of drugs for the Medicare plan. Elsewhere, MS, BCLYF, and DRW Securities won a dismissal of a private suit alleging the institutions manipulated SPX options linked to the VIX in 2018. The SEC fined D.E. Shaw $10 million for violating whistleblower protection rules. Later, the SEC reported that 10 firms were charged a cumulative $79 million for recordkeeping violations. At the same time, NLRB accused AMZN of violating the terms of a 2021 agreement that required the company to allow workers to unionize if they choose. After the close, HOOD said it expects to see charges of $100 million in Q3 related to regulatory and legal issues. Finally, the US Dept. of Energy is in the final stages of talks to lend $1 billion to LAC to allow the company to build out the largest lithium deposit in the US. The loan is said to provide more than half the funding for the operation.
Overnight, Asian markets were evenly split in number but leaned bullish on the strength of the move. Hong Kong (+2.51%) and Taiwan (+1.24%) were by far the biggest movers and led the region higher as New Zealand (-0.47%) was the biggest loser on the day. In Europe, the bourses are leaning to the res side at midday with only four bourses in the green. The CAC (-0.18%), DAX (-02.7%), and FTSE (-0.26%) lead the region lower with Russia (+0.92%) an outlier to the upside in early afternoon trade. In the US, as of 7:30 a.m., Futures are pointing toward a mixed, flat start to the day. The DIA implies a -0.02% open, the SPY is implying a +0.02% open, and the QQQ implies a +0.17% open at this hour. At the same time, 10-year bond yields are moving higher again to 4.631% and Oil (WTI) is up just under another percent to $91.66 per barrel in early trading.
The major economic news scheduled for Monday includes September S&P US Mfg. PMI (9:45 a.m.), September ISM Mfg. PMI and September ISM Mfg. Prices (both at 10 a.m.) We also have three Fed speakers (Chair Powell at 11 a.m., Harker at 11 a.m., and Williams at 1:30 p.m.). There are no major earnings reports scheduled for Monday.
In economic news later this week, on Tuesday we get JOLTs Job Openings and API Weekly Crude Oil Stocks. Then Wednesday we get Sept. ADP Nonfarm Employment Change, Sept. S&P Global Services PMI, Sept. S&P Global Composite PMI, Aug. Factory Orders, Sept. ISM Non-Mfg. PMI, Sept. ISM Non-Mfg. Price Index, EIA Crude Oil Inventories, and Fed member Bowman speak. On Thursday, we get August Imports, August Exports, Weekly Initial Jobless Claims, the Fed Balance Sheet, and two Fed Speakers (Mester at 9 a.m. and Daly at noon). Finally, Friday, Sept. Avg. Hourly Earnings, Sept. Nonfarm Payrolls, Sept. Private Nonfarm Payrolls, Sept. Participation Rate, Sept. Unemployment Rate, and a Fed speaker (Waller at noon).
In terms of earnings reports later this week, on Tuesday MKC, CLM, and NG report. Then Wednesday, we hear from AYI, HELE, and RPM. On Thursday, CAG, STZ, LW, and LEVI report. Finally, on Friday, there are no major earnings reports scheduled.
In miscellaneous news, US crop exports are at risk again as water levels in the Mississippi River have fallen below safe barge traffic levels again. Just like the Panama Canal, barge operators are being forced to carry smaller, lighter loads per barge to avoid grounding. In a related story, the low freshwater level of the river has allowed saltwater to creep up the river from the Gulf of Mexico, endangering or ruining drinking water supplies. The US Army Corps of Engineers has been working on an underwater dam to slow the creep since July and will begin barge delivery of 36 million gallons of fresh water per day to the lower Mississippi area starting this month.
In late-breaking news, CA Governor Newsome appointed Laphonsa Butler to the open interim position to replace Senator Feinstein who died last Thursday. Her seat will be up for election again in November 2024. Elsewhere, in good labor news, the UAW and VOLAF (Volvo, Mack trucks) reached a new labor deal just before midnight last night to avoid a strike. The tentative deal must still be ratified by UAW members. In less good labor news, union healthcare workers of Kaiser Permanente (private) told CNBC is it not likely that the 310,000 workers will reach a deal with management of the healthcare giant. This makes a strike, which has already been authorized by the workers, likely across CA, OR, WA, VA, and Washington DC as soon as Wednesday.
With that background, it looks like the pop from Saturday night’s government shutdown avoidance did not last long. All three major index ETFs opened the premarket with a strong gap higher but have sold steadily since, giving us gap-up large black candles in all three so far in the early session. All three remain below their T-line (8ema) and 50sma. (However, QQQ did gap above before selling back below its T-line this morning.) So, for now, the short-term trend clearly remains headed lower. In terms of extension, none of the three major index ETFs are far below their T-line (8ema) and the T2122 indicator is still just outside of its oversold range. This tells us either side has room to run if they can find the momentum to do so.
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
After a very volatile day of price action, indexes closed little change after the Senate passed a temporary spending bill to keep the government open but that is likely dead on arrival in the House wanting to curb the deficit spending. With the worries of a shutdown weighing on investors’ minds, they will have to deal with a GDP, Jobless Claims, a flurry of Fed Speakers that include Jerome Powell as well as a handful of notable earnings reports. The focus will then quickly turn to the Friday Core PCE inflation numbers. Though a relief rally could begin at any time it may prove to be anemic in light of the government shutdown worries. Expect the challenging price action to continue.
Overnight Asian markets closed mixed but mostly lower as rising oil and bond yields and more real estate woes plagued China. European markets have recovered slightly from early lows training around the flatline as leisure stocks suffer from consumer weakness. Ahead of market-moving economic reports, U.S. Futures are trying to put on a positive face despite all the uncertainties ahead. Buckle up it is likely to be another volatile day.
Economic Calendar
Earnings Calendar
Notable reports for Thursday include CAN, BB, KMX, JBL, NKE, and MTN.
News & Technicals’
Oil prices reached their highest level in more than a year, as the supply of crude oil in a major storage hub decreased to its lowest level since last summer. The U.S. West Texas Intermediate (WTI) futures, which are the benchmark for U.S. oil prices, rose to $95.03 per barrel during the Asian trading hours, the highest since August 2020. This was driven by the decline in crude oil inventories at Cushing, Oklahoma, which is the delivery point for WTI futures and the largest storage hub in the U.S. According to the latest data from the Energy Information Administration (EIA), the crude oil stocks at Cushing fell by 3.6 million barrels to 34.8 million barrels in the week ending September 17, the lowest since July 2020. The drop in Cushing stocks reflects the strong demand for crude oil in the U.S., as well as the impact of Hurricane Ida, which disrupted the production and transportation of oil in the Gulf of Mexico. The surge in oil prices also reflects the global recovery in oil demand, as well as the ongoing supply constraints from OPEC+ and other producers.
The labor dispute between the United Auto Workers (UAW) union and the three major U.S. automakers, General Motors, Ford Motor, and Stellantis, is escalating as the union threatens to expand its strikes if the negotiations do not make significant progress by Friday morning. The UAW, which represents about 146,000 workers at the three companies, has been on strike since Sept. 15, after the expiration of their labor contracts on Sept. 14. The strikes currently affect about 18,300 workers, or 12.5% of the UAW members, at several plants across the country. The main issues in the negotiations are wages, health care, job security, and electric vehicle production. The UAW announced last week that it would increase its strikes to more plants if the talks did not advance by Sept. 22. However, as of Tuesday, no breakthroughs have been reported, and the union has set a new deadline of 10 a.m. ET on Sept. 24. If the deadline is not met, the UAW said it will announce more strikes at more plants, potentially disrupting the production and sales of the automakers.
Evergrande, the Chinese property giant that is facing a debt crisis, has suspended its shares from trading on the Hong Kong stock exchange since Sept. 16. This is not the first time that the company has halted its shares from trading. In March 2020, Evergrande also suspended its shares, citing a major restructuring plan. The shares did not resume trading until Aug. 28, 2021, after a 17-month hiatus. However, the company’s troubles did not end there. Earlier this month, Evergrande postponed a meeting with its creditors, where it was supposed to discuss a debt restructuring plan. The company has about $300 billion of debt and has been struggling to pay its suppliers, contractors and investors. The situation has sparked fears of a possible default and contagion in the Chinese and global markets.
The stock market ended a very volatile day with little change, waiting on market-moving economic data and the worries of a government shutdown. The Senate approved a temporary funding bill to prevent a government shutdown, but it looks like it will be dead on arrival at the House of Representatives, which is attempting to curtail the massive deficit spending. Yields also rose, with the 2-year Treasury yield reaching over 5.1% and the 10-year yield closing around 4.6% as the dollar continued to surge higher with the oil sector. Today the bulls and bears will look for inspiration in the GDP, Jobless Claims, and a handful of notable consumer-based earnings. We will also have a flurry of Fed members speaking including Jerome Powell as we wait on Friday’s Core PCE inflation figures. We are overdue for a relief rally but keep in mind if it should begin it could be muted by government shutdown worries.
On Wednesday, markets gapped modestly higher at the open (up 0.26% in the SPY, up 0.23% in the DIA, and up 0.33% in the QQQ). However, then the Bears took over and slowly sold off in a wavy move that eventually took us to the lows of the day at 2:15 p.m. Then the Bulls stepped in to drive an hour-long rally that took the SPY and QQQ to the highs of the day (and the DIA back into the morning gap at 3:15 p.m.). At that point, we saw a modest selloff in the last 45 minutes of the day in all three major index ETFs. This action gave indecisive candles in all three. The SPY printed a black body Doji or small-body Spinning Top candle. The QQQ gave us a long-legged, black-bodied Doji. Finally, the DIA printed a black-body Hammer-type candle. This happened on above-average volume in the DIA and SPY, as well as slightly less-than-average volume in the QQQ.
On the day, the market was split with five of the sectors in the green and 5 in the red as Utilities (-1.83%) way out front leading the other sectors lower. Meanwhile, Energy (+2.26%) way, way out in front (by 1.5%) leading the rest higher. At the same time, the SPY gained 0.04%, DIA lost 0.18%, and the tech-heavy QQQ gained 0.23%. VXX fell hard to close at 23.97 and T2122 jumped back up but remained in the oversold territory at 12.24. 10-year bond yields spiked again to 4.607% while Oil (WTI) also spiked up to end the day at $93.68 per barrel. So, Wednesday was another whipsaw day that seems to have been largely influenced by the impending government shutdown (and its effect on markets). We saw a modest gap up, a long and slow selloff, a sharp rebound, and then one last modest leg down. After all of that, markets ended the day not very far from their Tuesday close.
The major economic news reported Wednesday was limited to August Durable Goods Orders which came in better than expected at +0.2% (compared to a forecast of -0.5% and far better than the July reading of -5.6%). At the same time, August Core Durable Goods Orders came in even better at +0.4% (versus a forecast and July reading of +0.1%). Later the EIA Weekly Crude Oil Inventory Report showed a greater-than-expected drawdown of stocks at -2.170-million-barrels (compared to a forecasted -1.320-million-barrels and the prior week’s -2.135-million-barrels).
In Autoworker contract talks and strike news, the UAW threatened to expand its strike against the Big 3 Automakers on Friday, if significant progress is not made in the meantime. The UAW President will announce the next steps in a streamed videocast at 10 a.m. Eastern Friday. (So far, only about 12% of UAW members have gone on strike.) Later, on Wednesday night, the ex-President talked at UAW members (not to them) when he counter-programmed the GOP Presidential debate by speaking at a non-union auto parts supplier in Detroit. The UAW was not involved in his visit and he was not scheduled to speak to UAW leaders.
In stock news, Reuters reported that the META executive leading the company’s AI Chip program is leaving the company at the end of the month. In related news, META unveiled a new AI assistant to help Facebook users create images, etc. At the same time, LCID opened its new plant in Saudi Arabia on Wednesday. (The Saudi government committed to buy 100,000 vehicles from LCID over the next decade.) The facility will serve the whole Middle East producing 155,000 cars per year. Later, in a twist, cryptocurrency exchange Kraken announced it is planning to offer trading of US-listed stocks and ETFs. Kraken has filed for FINRA licensing as a broker-dealer and is now targeting a launch date in 2024. At midday, VLKAF (Volkswagen) took a major hit with an IT outage in Germany that shut down production of cars across the whole group of brands including Porsche and Audi. Elsewhere, in one of the largest real estate deals so far this year, WFC announced it is investing $550 million in retail real estate in New York City’s 20 Hudson Yards building. (Half a billion doesn’t go as far as it used to as the investment only gets WFC the 5th-7th floors of the building.) At the same time, NYC shares surged in volatile trading after a tender offer from Bellevue Capital Partners. (NYC stock closed up 28.62% after trading in a 44% range on the day.) Later, NEE stock took an 8.23% loss on the day (massive for a utility) after the CEO attributed poor recent company performance to higher interest rates. PTON jumped 30% higher in after-hours trading following the company announcement that it had signed a 5-year partnership with LULU. (The companies agreed to become the exclusive partner of the other, with LULU being the exclusive apparel provider to PTON and PTON being the exclusive digital fitness content provider to LULU.)
In stock government, legal, and regulatory news, controversial hedge fund Citadel has decided to fight the SEC, refusing to turn over employee “off books” private messages in apps like WhatsApp and Signal. The fund (known as the biggest buyer of order flow from brokers) is threatening to sue the SEC to avoid disclosing the (probably damning) information. CG, APO, KKR, BX, and others were served notice to turn over employee “off books” communications at the same time. Several large banks paid significant fines for such collusion. Elsewhere, WASH agreed to pay a civil penalty of $9 million to the Dept. of Justice to settle charges of discriminatory lending. At the same time, the Dept. of Justice sued EBAY, claiming the company was violating the Clean Air Act by selling harmful products, including devices to defeat vehicle emissions controls. (The case could theoretically lead to billions in fines with a penalty of nearly $6,000 for each of 343,000 such devices the government claims were sold through EBAY.) Later, the US Senate advanced a bill aimed at allowing banks to finance legal marijuana ventures. The bill now moves to the Senate floor for debate. In auto news, HYMTF (Hyundai) and Kia are recalling 3.37 million vehicles over the risk of engine fires according to the NHTSA. Later, a CA federal court ruled in favor of QCOM dismissing a consumer suit alleging the chipmaker’s exclusive contracts with phone makers artificially inflate phone prices. By midday, Epic Games appealed to the US Supreme Court to review its AAPL antitrust case, in hopes of overturning lower-court rulings. In other AAPL news, after the close, AAPL was ordered to face a private antitrust lawsuit brought by payment card issuers accusing the company of stifling competition for its Apple Pay Mobile Wallet, enforcing a monopoly in the US over the iPad, iPhone, and Apple Watch tap-to-pay market. (The suit alleges that unlike the GOOGL Android platform, which lets users choose between the GOOGL Wallet, Samsung Wallet, and others, AAPL forces its users to use the AAPL wallet.) Also after the close, a CA federal judge refused to overrule the Santa Barbara County Supervisors who had denied XOM the permits needed to replace a pipeline that has been ruptured since 2015 with a fleet of 25,000 tanker trucks (which would have allowed XOM to reopen its closed offshore platform). Finally, the judge randomly assigned to hear the FTC antitrust case against AMZN has recused himself without citing a reason. The case was reassigned, based on rotation, to a judge nominated by President Biden. However, the FTC has asked the case to be assigned to yet another judge who is already hearing smaller private antitrust cases against AMZN.
After the close, MU reported beats on both the revenue and earnings lines. Meanwhile, WOR missed on revenue while beating on earnings. However, CNXC, FUL, and JEF all missed on both the top and bottom lines. It is worth noting that FUL also lowered its forward guidance.
Overnight, Asian markets were mixed but leaned toward the red side. Taiwan (+0.27%) was the biggest mover among the five green exchanges while Japan (-1.54%), Hong Kong (-1.36%), and New Zealand (-1.23%) were by far the biggest losers among the seven exchanges in the red. In Europe, we see a similar story taking shape at midday with just five of 15 bourses in the green (led by Russia +1.16%). The CAC (+0.24%), DAX (+0.01%), and FTSE (-0.39%) lead the region on volume in early afternoon trade. Meanwhile, in the US, Futures are pointing to a mixed and mostly flat start to the day as of 7:30 a.m. The DIA implies a +0.08% open, the SPY is implying a +0.01% open, and the QQQ implies a -0.16% open at this hour. At the same time, 10-year bond yields have spiked again to 4.641% and Oil (WTI) is off a quarter of a percent to $93.45 per barrel in early trading.
The major economic news scheduled for Thursday includes Q2 GDP, Q2 GDP Price Index, and Weekly Initial Jobless Claims (all at 8:30 a.m.), August Pending Home Sales (10 a.m.), and Fed Balance Sheet (4:30 p.m.). Fed Chair Powell speaks at 4 p.m. The major earnings reports scheduled before the opening bell is limited to ACN, KMX, and JBL. Then after the close, NKE reports.
In economic news later this week, on Friday, August PCE Price Index, August Goods Trade Balance, August Personal Spending, August Retail Inventories, Chicago PMI, Michigan Consumer Sentiment, Michigan Consumer Expectations, Michigan 1-year Inflations Expectations, Michigan 5-year Inflation Expectations are reported and Fed member Williams speaks.
In terms of earnings reports later this week, on Friday, CCL reports.
In miscellaneous news, an interesting event took place in China on Wednesday. Regional lender Shengjing Bank agreed to sell $24 billion worth of assets (including mostly non-performing loans and corporate bonds) to a government entity. Given the state of China’s real estate market, the move raised eyebrows. Elsewhere, a US Senate staffer leaked to Reuters that the MSFT email server security flaw (made public in July) allowed Chinese hackers to steal 60,000 emails from the State Department. Meanwhile, data shows us that US oil prices continue to rise in large part due to oil producers continuing to ship more oil abroad and draw down US stocks despite lower US demand. (It is more profitable to ship and sell oil abroad than it is to sell in the US.) In spite of that dynamic, US gasoline inventories rose over a million barrels last week, as refineries have plenty of oil supply. This took place in the face of what was expected to be a gasoline drawdown of half a million barrels, based on falling retail sales. So, we have plenty of oil and gasoline. It is just cheaper to ship the oil abroad and the market allows the industry to keep raising fuel prices (consumers reduce the demand but only do so slowly). In other words, prices are stickier than demand. Finally, the House GOP remains at square one, working through 700 proposed amendments and four ridiculous partial funding bills that are dead on arrival anyway. This is due to Speaker McCarthy remaining subservient to a radical minority of his party refusing to do anything bipartisan. McCarthy and his handful of MAGA Congressmen have told sources that they think a shutdown will gain them more concessions. He has even decided to change the subject, talking about non-issues by saying he wants to “sit down with the President to secure the border.” In the meantime, both sides of the aisle acted as grownups in the Senate and have advanced a compromise 45-day CR to fund the government.
With that background, it looks like traders are undecided but leaning bearish in the premarket. All three major index ETFs are printing small, indecisive, but definitely black-bodied candles in the early session. Perhaps we are waiting on the GDP or Jobless Claims for a clue. All three remain well below their T-line (8ema) and 50sma. So, for now, the short-term trend clearly remains headed lower with retests of the August and June lows either accomplished or being the apparent next target for the Bears. In terms of extension, as I said, all three major index ETFs are far below their T-line (8ema), with QQQ obviously stretched furthest, and the T2122 indicator is still in its oversold range. This tells us we are in need of a bounce or at least a pause to relieve the pressure. However, we must remember the market can remain oversold (or overbought) longer than we can stay solvent while betting against it.
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
Equity markets dropped sharply on Tuesday with investors worried about higher rates with data indicating the consumer is wreaking adding to the bearish sentiment. The Costco report after the bell would seem to support the notion of a struggling consumer despite their top line beat of estimates. Today investors will have to deal Mortgage Apps, Durable Goods, and Petroleum numbers as well as a handful of notable reports to find directional inspiration. We are overdue for a relief rally but keep in mind if it does begin it could rather be muted with a possible government shutdown possible at midnight Friday. Expect the challenging price action to continue if the possibility persists.
Overnight Asian markets reversed early bearishness finding some relief in some industrial data and Australian inflation modest improvement to close mostly higher overnight. However, European markets remain muted and mostly lower this morning as consumer data cause continued sentiment concerns. U.S futures on the other hand are trying to put on a brave face an inspire a bit of a relief rally ahead of potential market-moving earning and economic reports with a looming government shutdown weighing on investor’s minds.
Economic Calendar
Earnings Calendar
Notable reports for Wednesday include CNXC, FUL, JEF, MU, PAYX, & WOR.
News & Technicals’
The U.S. is facing a potential government shutdown if Congress fails to pass a spending bill by Oct. 1, the start of the new fiscal year. This would mean that many federal agencies and programs would have to stop or reduce their operations, affecting millions of Americans and the economy. This is not the first time that the U.S. has faced such a situation, as political disagreements over the budget and the debt ceiling have often led to impasses in the past. In fact, in 2011, after a prolonged standoff over raising the debt limit, S&P downgraded the U.S. long-term credit rating from AAA, the highest possible rating, to AA+, indicating a slightly higher risk of default. The downgrade was a historic and unprecedented move that reflected the growing political polarization in Washington.
Costco, the wholesale retailer, reported its quarterly earnings on Tuesday, beating the analysts’ expectations. The company earned $1.25 per share, higher than the estimated $1.17 per share. The revenue was $44.77 billion, also higher than the expected $43.99 billion. However, the company’s comparable sales, which measure the sales growth at stores open for at least a year, were not very impressive. The comparable sales increased by 1.1% globally, but only by 0.2% in the U.S., which is Costco’s largest market. The company attributed this to the strong performance of its grocery business, which offset the weaker demand for discretionary items, such as clothing, jewelry, and furniture. Costco also faced higher costs due to the pandemic, such as wages, sanitation, and e-commerce investments.
Indonesia, the largest e-commerce market in Southeast Asia, is planning to tighten its regulations on online shopping, especially on social media platforms. The country’s Ministry of Trade said on Tuesday that it is working on a new rule that would ban transactions on social media, such as Facebook, Instagram and TikTok. The ministry said that social media platforms are not registered as e-commerce businesses and do not comply with the existing laws and standards. The move is aimed at protecting local consumers and sellers, especially the micro, small, and medium-scale enterprises (MSMEs), which have been affected by the influx of foreign goods sold through social media. President Joko Widodo said that the MSMEs have seen their sales start to decline due to the unfair competition from foreign products. The new regulation is expected to benefit the traditional e-commerce players in Indonesia, such as Sea Ltd., which operates Shopee, one of the leading online shopping platforms in the region. Citi, a global bank, said that the regulation would reduce the competitive pressure from TikTok, which has been expanding its e-commerce presence in Indonesia.
The stock market dropped sharply on Tuesday, reversing the gains from Monday, as investors were worried about the Fed’s plan to keep interest rates high for a longer period. The Fed’s decision was based on its assessment of the inflation and labor market conditions. The sectors that suffer the most today are the ones that depend on consumer spending and innovation, such as consumer discretionary and technology. The only sectors that performed better were the ones that provided essential goods and services, such as health care and consumer staples. The energy sector also benefited from the rising oil prices. The global markets also followed a downward trend. Today we have a few notable earnings reports as well as Mortgage Apps, Durable Goods, and Petroleum numbers for the bulls or bears to find inspiration. The indexes remain in an extreme short-term oversold condition so be prepared for a relief rally to begin at any time assuming the data does not pile on to the bearishness. Also, keep in mind any relief rally could be muted due to the uncertainty of a possible government shutdown on Oct. 1st.
Markets gapped down on Tuesday (down 0.73% in the SPY, down 0.63% in the DIA, and down 0.73% in the QQQ). All three major index ETFs followed through the first hour before then trading sideways in a tight range until 1:15 p.m. At that point, all three took another leg lower for 30 minutes before trading sideways along the lows for the last 2.25 hours of the day. This action gave us gap-down, black-bodied candles with small wicks on both ends across the SPY, DIA, and QQQ. All three remain stretched below their T-line (8ema) and 50sma, with the DIA falling down through its 200sma on the day. This happened on a bit below-average volume in the QQQ, right at average volume in the SPY, and a bit above-average volume in the DIA.
On the day, all 10 sectors were in the red with Utilities (-2.65%) way out front leading the other sectors lower. Meanwhile, Healthcare (-0.45%) held up much better than the other sectors. At the same time, the SPY lost 1.47%, DIA lost 1.16%, and the tech-heavy QQQ lost 1.50%. VXX spiked to close at 25.04 and T2122 cropped back to the low end of the oversold territory at 3.47. 10-year bond yields spiked above four-and-a-half percent to 4.55% while Oil (WTI) also gained almost one percent to end the day at $90.54 per barrel. So, the day started off bearish and step-by-step continued that way for the rest of the day. This took us back to a state of being over-extended to the downside.
The major economic news reported Tuesday included Building Permits, which were up but still a touch below expectations at 1.541 million (compared to a forecast of 1.543 million and the prior reading of 1.443 million). That amounted to a 6.8% increase while the forecast called for a 6.9% increase. Later, the September Conf. Board Consumer Confidence came in a touch low at 103.0 (versus a forecast of 105.5 and well down from the prior value of 108.7). At the same time, August New Home Sales also came in light at 675k (compared to the forecast of 700k and well down from the July 739k number). That was a decline of 8.7% month-on-month versus the July number which was a 8.0% increase over June. Then, after the close, the API Weekly Crude Oil Stock report showed a 1.586-million-barrel build (compared to a forecasted drawdown of 1.650 million barrels and much increased from the previous week’s 5.250-million-barrel drawdown.
In Autoworker contract talks and strike news, President Biden joined the UAW picket line on Tuesday. During remarks over a bullhorn, he was asked whether autoworkers deserved a 40% raise. He answered “Yes.” On the same trip, Biden met with auto suppliers impacted by the strike where MEMA (auto supplier trade group) asked him to provide federal assistance to ensure the viability of the idled parts suppliers.
In stock news, QCOM announced Tuesday that it has entered into a multi-year partnership with Japanese IT company NTT to develop a 5G ecosystem that promotes the adoption of 5G and “AI over 5G” in Japan. At the same time, the CEO of FWONA (which owns 83% of SIRI) proposed that the radio unit of FWONA be spun off and then merged with SIRI. Later, FSR closed up 9.60% (after trading in a volatile 20% range) after reaffirming its plan to increase vehicle deliveries to 300 per day later this year (and saying it had already produced 5,000 of its SUVs). Elsewhere, LILM announced it has begun assembly of its jet-powered electric VTOL jet. This comes just two months after successful tests of a full-scale prototype in Germany. At the same time, MMM agreed to pay $10 million for violating sanction restrictions on sales to Iran. Later, ICPT received an unsolicited $19/share cash bid from Alfasigma. This was an 82% premium on the price at the time but ICPT closed up more than 79% on the news. At the same time, TGT reported that it would close nine stores across four states on Oct. 21, citing organized retail theft rings that were threatening employees, customers, and inventory shrinkage.
In stock government, legal, and regulatory news, the Financial Times reported that TSLA (along with several European carmakers) is the subject of an EU probe into whether its cars (built in China) are receiving unfair subsidies. Later, JPM paid $75 million to the US Virgin Islands to settle a lawsuit over the bank’s ties to Jeffrey Epstein. Elsewhere, the FTC and 17 states filed suit against AMZN over alleged antitrust violations that allowed the giant to dominate large segments of online retail. The case was assigned to Reagan-appointed judge Coughenour. Later the Canadian government announced it will review the proposed merger between BG and Viterra (a company backed by GLCNF). That merger would create another grain giant, close to the scale of competitors ADM and Cargill. However, it would make a 3-way grain triopoly. After the close, a federal judge in AM has overturned a jury verdict of $176.5 million against LLY in favor of TEVA over infringement on three patents. Meanwhile, a federal district judge in Atlanta ruled in favor of a venture capital fund (backed by JPM, BAC, etc.) and against the conservative anti-diversity plaintiff that had charged the fund was acting illegally because it considered the racial identity of award recipients. (This will be appealed as it was brought by the same group that was behind the anti-affirmative action decision by the Supreme Court earlier this year.) Also after the close, the SEC announced that HYZN has agreed to pay $25 million to settle charges of fraud (without admitting guilt, naturally). Finally, after the close, the FCC announced it would reintroduce “net neutrality” regulations to prohibit T, VZ, CMCSA, and others from blocking websites, slowing internet speeds, or charging higher prices for access to different websites. This is a huge deal and has been fought tooth and nail by the big telecom and cable companies while it will be cheered by AMZN, NFLX, and other major content platforms. The FCC will vote Oct. 19 on whether to solicit public comment (which is when the opponent media blitz will begin).
After the close, AIR, COST, and MLKN all reported beats on both the revenue and earnings lines. The AIR and COST numbers were quarter-on-quarter increases, but despite its own “beats” the MLKN numbers were actually down almost 15% quarter-on-quarter. Nonetheless, MLKN also raised its forward guidance.
Overnight, Asian markets were mixed but leaned toward the green side with only four of 12 exchanges in the red. Hong Kong (+0.83%) was by far the biggest mover as the other moves in either direction were for less than half of a percent. In Europe, we see a similar mixed picture taking shape at midday. Greece (-1.52%) is the largest loser and Russia (+0.66%) is the biggest gainer. However, as usual, the CAC +0.05%), DAX (-0.12%), and FTSE (-0.21%) lead the region on volume 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 implies a +0.27% open, the SPY is implying a +0.36% open, and the QQQ implies a +0.35% open at this hour. At the same time, 10-year bond yields have backed up a bit again to 4.505% and Oil (WTI) is up another 1.42% to $91.69 per barrel.
The major economic news scheduled for Wednesday is limited to the August Durable Goods Order (8:30 a.m.) and EIA Weekly Crude Oil Inventories (10:30 a.m.). The major earnings reports scheduled before the opening bell are limited to PAYX. Then after the close, CNXC, FUL, JEF, MU, and WOR report.
In economic news later this week, on Thursday, we get Q2 GDP, Q2 GDP Price Index, Weekly Initial Jobless Claims, August Pending Home Sales, Fed Balance Sheet, and Fed Chair Powell speaks. Finally, on Friday, the August PCE Price Index, August Goods Trade Balance, August Personal Spending, August Retail Inventories, Chicago PMI, Michigan Consumer Sentiment, Michigan Consumer Expectations, Michigan 1-year inflation expectations, Michigan 5-year Inflation Expectations are reported and Fed member Williams speaks.
In terms of earnings reports later this week, on Thursday, CAN, KMX, JBL, and NKE report. Finally, on Friday, CCL reports.
In miscellaneous news, the Wall Street Journal reported that the tentative deal struck between Writers and Hollywood studios will allow the studios to train AI models on the work of the writers, although the writers would be compensated for the work trained upon. (This may well leave writers vulnerable to replacement. Studios have done similar things with actors, recording a day or two of lower-tier actors from many angles at scale rate and then using CGI trained on those recordings to produce realistic “cast of thousands” effects in many future movies.) In related news, the Writers Guild union called for their strike to end today with a member vote on the tentative deal still pending. Elsewhere, Reuters reported that OpenAI is in talks with institutional investors about selling existing shares at a price that values the company between $80 and $90 billion. (For reference, earlier this year, OpenAI got an investment that valued the company at $30 billion.) If completed, this would make OpenAI one of the most valuable private companies. Finally, House Speaker McCarthy and his MAGA-placating approach have continued to make little (no) progress toward avoiding a government shutdown. Luckily, on the other side of the building, the Senate is working in a bipartisan fashion (led by both Majority Leader Schumer and Minority Leader McConnell) to move forward a short-term continuing resolution to fund the government through Nov. 17. A procedural vote on this passed 77-19 and this CR also includes $6 billion for disaster relief and $6 billion in additional support for Ukraine. Late Tuesday, moderate GOP members of the House said they are now willing to invoke a seldom-used “discharge vote” procedure to force a House vote on a CR negotiated between the moderate GOP members and Democrats. Having the GOP Governance Caucus (Anti-burn it all down MAGA group) do the work of governing allows McCarthy to continue kowtowing to 20 extreme-right members while actually keeping the government operating. However, it’s unsure what that discharge vote might mean for McCarthy’s Speakership.
In late-breaking mortgage news, in China, police have placed the founder of the troubled China Evergrande Group in “police control.” This is the latest indicator that a liquidation of the company may be in the cards and comes a day after creditors gave the company until October 30 to submit a debt restructuring deal to avoid their moving for that liquidation. Back in the US, the Mortgage Brokers Assn. reports that the average rate for a conforming, 30-year, fixed-rate loan rose to 7.41% this week (up from 7.31% the week before). As a result, new home loan applications fell 2% week-on-week (and were down 27% versus the same week last year). At the same time, applications for loan refinancing fell 1% week-on-week (down 21% over the same week in 2022).
With that background, it looks like the Bulls are gapped us up in the premarket. However, so far in the early session, we are seeing black-bodied, “inside day” candles in all three major index ETFs. (This means that the premarket open was the early session high so far.) All three remain well below their T-line (8ema) and 50sma. The morning gap also did not give the DIA enough energy to retest its 200sma so far this morning. So, for now, the short-term trend is clearly remains headed lower with retests of the August and June lows as the apparent next target for the Bears (except in the SPY where those two targets have already been achieved). In terms of extension, as I said, all three major index ETFs are far below their T-line (8ema) and the T2122 indicator is also in the low end of its oversold range. This tells us we remain stretched and are in need of a bounce or at least a pause to relieve the pressure. However, we must remember the market can remain oversold (or overbought) longer than we can stay solvent betting against it.
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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After a bearish start to the day, the bulls worked to begin a relief rally that lacked momentum as investors moved cautiously in this final trading week of September. The rising bond yields contributed to the uncertainty with the 10-year bonds topping a sixteen-year high. Today we face more possible market-morning economic reports and a few more notable earnings to inspire the bulls or bears. Expect the challenging price action to continue and watch and be prepared for some big point whips or reversals and pent-up waiting for an opportunity.
Asian markets closed their Tuesday session red across the board as real estate woes continue with inflation data on the horizon. European markets also trade cautiously bearish this morning with German manufacturing continuing to decline under the economic pressures. U.S. futures point to a bearish open ahead of earnings and economic data possibly reversing yesterday’s tepid bullishness.
Economic Calendar
Earnings Calendar
Notable reports for Tuesday include AIR, CTAS, COST, FERG, MLKN, SNX, PRGS, & UNFI.
News & Technicals’
The global economy is facing a serious threat from the escalating tensions in Eastern Europe. The war in Ukraine, which started in 2014, has not only caused human suffering and political instability but also strained the relationships between the economic superpowers, such as the US, China, Russia, and the EU. The conflict has also increased the risk of sanctions, trade wars, cyberattacks, and military confrontations. Jamie Dimon, the CEO of JPMorgan Chase, suggested that Eastern Europe was the epicenter of risk, and compared the situation to the aftermath of World War II. He said that the world had not faced such a complex and uncertain scenario before, and warned that it could trigger inflation, deficits, and recessions
Ukraine is facing a challenging situation as it tries to maintain its international support in its conflict with Russia. The war, which has been going on since 2014, has caused thousands of deaths, millions of displacements, and widespread damage. Ukraine relies on its allies, especially the US and the EU, for political, economic, and military assistance. However, some recent diplomatic gaffes, such as the leaked phone call between President Zelensky and President Biden, have raised doubts about the strength of their partnership. Moreover, public opinion in both Europe and the US has shown a decline in support for Ukraine’s cause, especially when it comes to providing more funding and weapons. Some analysts fear that Russia could take advantage of this situation and try to undermine Ukraine’s alliances and increase its aggression.
The artificial intelligence (AI) chip market is heating up as more startups compete with established players like Nvidia and Arm. One of them is Kneron, a U.S.-based semiconductor company that specializes in edge AI solutions. Edge AI refers to the processing of AI tasks on devices such as smartphones, cameras, and robots, rather than on cloud servers. Kneron announced on Tuesday that it raised an additional $49 million in its funding round, bringing its total funding to over $100 million. The round was led by Taiwanese giant Foxconn, the world’s largest electronics contract manufacturer and a key supplier of Apple’s iPhones. Other investors included Alltek, a communications tech company, and several venture capital firms. Kneron said it will use the funds to accelerate the commercialization of its AI chips, which are designed to enable low-power and high-performance edge AI applications across various industries.
After the DIA tested and held its 200-day moving average the bulls worked to provide a little relief rally on Monday but lacked momentum with inflation data looming later this week. The ongoing increase in U.S. Treasury yields, which have reached their highest level for the year, surpassing 4.5% for the 10-year bond added to Monday’s uncertainty. The U.S. dollar, which tends to appreciate when investors seek safety, has also risen sharply. The DXY dollar index is above 105, its highest level for the year, creating some headwinds for global companies and markets. Today we have a few more notable earnings reports that could provide some inspiration for the bulls or bears and may also give us a glimpse into the 4th quarter as well as hints to the strength of the consumer. Investors will have to also deal with Case Shiller, FHFA House Prices, Consumer Confidence, New Home Sales, a 2-year bond auction as well as more Fed member pontifications. Plan carefully as Asian and European bearishness tries to reverse yesterday’s relief all at once at the open.
