The wait is almost over and hopefully, the indexes can break the low-volume chop with the release of the CPI inflation report. With the headline number expected to rise with the core number expected to decline how the market reacts is anyone’s guess. We will also get Mortgage application data and what could prove to be a very important Petroleum report as energy prices surge putting additional pressures on an already struggling consumer. Keep in mind Thursday morning is also chalked full of potential market-moving reports so plan your risk carefully.
Overnight Asian markets printed red across the board waiting on the inflation reports pending. European markets also started the day bearish waiting on inflation data as the U.K. posted a 0.5% economic contraction in July. U.S. futures point to a modestly bearish open ahead of earnings and economic reports but expect just about anything by the open with all eyes focused on the CPI and what that might mean for the interest rate path forward.
Economic Calendar
Earnings Calendar
Notable reports for Wednesday include CBRL & REVG.
News & Technicals’
Apple, the world’s most valuable company, has raised the prices of its iPhone models in two of its key markets, China and India, despite keeping them the same in the U.S. The company announced its new iPhone 13 lineup on Tuesday, which features improved cameras, displays, and batteries. However, customers in China and India will have to pay more to get their hands on the latest devices, as Apple has increased the prices by up to 6% and 8%, respectively, compared to the previous generation. The price hikes are likely due to several factors, such as currency fluctuations, higher taxes and tariffs, and supply chain challenges. Apple is also facing fierce competition from local rivals such as Xiaomi, Oppo, and Vivo, which offer cheaper and more diverse smartphones in these markets. The price hikes could hurt Apple’s sales and market share in China and India, which are the world’s largest and second-largest smartphone markets, respectively.
The U.S. mortgage market is experiencing a historic slump as higher interest rates and low housing inventory discourage potential borrowers. According to the Mortgage Bankers Association, the total mortgage application volume fell by 0.8% last week compared to the previous week, reaching the lowest level since 1996. The decline was driven by a 5% drop in refinancing applications, which were 31% lower than the same week a year ago, when interest rates were around 3%. The average contract interest rate for 30-year fixed-rate mortgages rose to 7.27%, more than a full percentage point higher than a year ago. The purchase applications also fell by 1% week to week and were 27% lower than the same week a year ago, as homebuyers faced limited choices and high prices in the housing market. The adjustable-rate mortgage share of activity increased, indicating that some buyers were trying to lower their monthly payments by opting for riskier loans. The mortgage demand slump could have negative implications for the U.S. economy, as it could reduce consumer spending, home construction, and wealth accumulation.
Equities closed mostly lower Tuesday on another low-volume choppy price action day with investors waiting on the CPI inflation report for August. Analysts suggest headline CPI inflation could move higher while also expecting core inflation to decline. That is a tight line to walk and how the market reacts to such data is anyone’s guess so plan for just about anything this morning. Bond yields are rising this morning ahead of the report adding more uncertainty. Other than that we will get the latest read on Mortgage applications and the very important Petroleum numbers as energy prices continue to surge adding pressure to an already struggling consumer.
Tuesday saw us gap down at the open, down 0.34% in the SPY, down 0.23% in the DIA, and down 0.47% in the QQQ. At that point, all three of the major index ETFs ground sideways for about and hour. Then we started some modest wave action, mostly to the side in SPY, a bigger swing to the upside in the DIA, and mostly to the downside in the QQQ all until 1:30 p.m. However, all three then sold off for two hours and then traded sideways in a tight range the last 30 minutes of the day. This action gave us a white-bodied Inverted Hammer in the DIA, a black-bodied Inverted Hammer, and a black-bodied candle with an upper wick in the QQQ. All three retested their T-lines (8ema) during the day with QQQ and SPY failing while SPY held up and closed above. This all happened in well-below-average volume in all three of the major index ETFs (far below in the DIA).
On the day, six of the 10 sectors were in the red with Technology (-1.35%) way out front leading the rest of the market lower while Energy (+1.81%) was way out front holding up better than any other sector. At the same time, the SPY lost 0.56%, DIA lost just 0.05%, and QQQ lost 1.11%. VXX gained slightly to close at 20.93 and T2122 climbed slightly again but remained in the mid-range at 38.02. 10-year bond yields fell a bit to close at 4.272% while Oil (WTI) popped up 1.87% to close at $88.92 per barrel. So, on balance, it was a bearish day. However, it was not very decisive, and overall, it felt like the market is still waiting…maybe on the CPI data.
The major economic news reported Tuesday started with the EIA Short-Term Energy Outlook. That report projects that global oil output will be 101.2 million barrels per day in 2023 and then rise again to 102.9 million barrels per day in 2024. Meanwhile, global oil demand will reach 101.0 million barrels per day in 2023 and rise to 102.3 million barrels per day in 2024. This means EIA projects a 0.2 million barrel per day surplus of oil this year and a 0.6 million barrel per day surplus in 2024. (All of those numbers would be all-time record highs.) Despite the projected surpluses, somehow, EIA projects a decline of global oil inventories of almost half a million barrels per day for the rest of 2023. This led them to predict Brent oil averaging $93/barrel in Q4. The same report said that the US has regained its spot as the world’s largest LNG exporter after the fire-closed Freeport LNG terminal in TX reopened following an eight-month outage. Later, the WASDE Ag Report from the USDA reflected challenging weather conditions (hot and dry in the Midwest) in the last month. The USDA lowered their expected crop yields for both corn and soybeans (down 1.3 bushels per acre to 173.8 in corn and down 0.8 bushels per acre to 50.1 for soybeans). This impact was partially offset by a big jump in the number of acres of corn planted this year. Then after the close, the API Weekly Crude Oil Stocks Report showed an unexpected increase. The report found a build of 1.174 million barrels on the week (compared to a forecast calling for a drawdown of 2 million barrels and the prior week’s 5.521-million-barrel drawdown).
In stock news, TSM announced Tuesday that it will invest $100 million into ARM as part of the latter’s IPO. (TSM is the world’s largest chipmaker and ARM is the major chip design rival to the x86 architecture used by INTC and AMD.) At the same time, the CEO of LAW announced he will step down from both his CEO and Board Member roles. LAW announced an existing board member (Scott Hill) as interim CEO. Later, the CFO of WFC said Tuesday that he expects more layoffs are ahead but gave no timeline for cuts or details on causes. WFC has been cutting for years, having cut more than 40,000 headcount since Q3 of 2020. However, they still had 233,834 employees at the end of June. Elsewhere, BA reported that its deliveries decreased in August as it delivered 35 jets (main competitor EADSY delivered 52 in August). This is well down from BA’s year-to-date average of 43 planes delivered per month. Later the CEO of WMT told a GS Investor Conference that the company was well-positioned and he actually believes prices will fall in 2024 (at least a bit). He went on to say that WMT is concerned about inflation in certain categories but is also already seeing “pockets of disinflation” and given the job market and wage increases the company feels “pretty good about where the consumer is in the US.” In the afternoon, AAPL unveiled their new iPhone 15 line as well as a new Watch. The phones feature brighter screens and an enhanced camera. The phones go on sale September 22. Later, XOS revealed that it has won a contract with the state of CA (and local authorities) to acquire electric step vans and other vehicles for government use in that state. At the end of the day, PFE / BNTX set its list price for the latest COVID-19 shots at $120/dose while MRNA we tits price at $130/dose. On Tuesday evening, the CEO of BP resigned (effective immediately) over charges of failing to disclose past personal relationships with colleagues.
In stock government, legal, and regulatory news, EU antitrust regulators asked MSFT competitors and customers for comments on the impacts they may experience if the MSFT-proposed remedies (to gain approval for the ATVI acquisition) are approved. No formal EU investigation of the remedies has been launched. So, this may just be a precaution or it could signal the EU is waiting for the UK Competition Authority’s final decision before taking another step itself. Elsewhere, the US Dept. of Defense signed a $21 million deal with a subsidiary of TLOFF (Canadian metal miner) to increase US nickel production by exploring the possibility of a mine in MN. At the same time, US House Republicans held a hearing of their Chinese Communist Party Committee, hearing from several witnesses. Interestingly, the party of “less regulation” supported the call from former Trump SEC Chair Clayton’s call for all companies over $50 billion (or with China-based revenue over $10 billion) to report on the company’s exposure to China. (I suppose they believe they can spin it that this is good additional reporting while also opposing climate risk reporting as too onerous but that logic illudes me.) At mid-afternoon, the FDA ruled that the active ingredient in many over-the-counter cold and allergy medicines is not effective. New research found the active ingredient gave no better results than placebo. (The next step is for the FDA to decide whether the medicines based on this ingredient need to be removed from sale.) Later, HYMTF (Hyundai) and Kia asked a US judge to reject lawsuits filed by 17 cities for a failure to install anti-theft technologies in millions of their vehicles. (A TikTok-inspired crime has led to millions of HYMTF and Kia vehicle thefts burdening police and leading to dozens of crashes and 10 deaths, as of February.) The automakers responded that the real cause was lax policing by the cities rather than easy-to-steal cars. (96% of all new vehicles sold since 2015 have had immobilizers, which would stop/limit this type of theft. However, only 26% of HYMTF and Kia cars contain those devices.) Meanwhile, a federal “Interagency Working Group on Mining Laws” issued a 168-page report that among other things called on Congress to introduce royalties on US hard rock mining and graduating (increasing over time) mining fees to encourage more and faster development of US mines for materials like lithium, cobalt, and nickel. After the close, the CDC Advisory Panel voted 13-1 in favor of widespread use of the new COVID-19 vaccines for anyone 6 months of age and older. In the evening, the SEC filed suit against VIRT (broker) for misleading investors/traders into believing it properly safeguarded confidential information when in reality anyone working for the company in 2018-2019 could access all information with just common usernames and generic passwords shared amongst the broker’s offices. This allowed their proprietary traders to access holdings, prices, and volumes to aid in their own trading. Finally, the FDA warned CVS and WBA against manufacturing and selling unapproved eye products (some of which were being illegally marketed for treating medical conditions like cataracts, glaucoma, and conjunctivitis).
In Autoworker contract talks or strike news, auto industry and stock analysts’ notes are coming hot and heavy as the current contract end nears. BCS said their sources tell them the talks are proceeding very slowly and there is now a high likelihood of a strike. At the same time, Third Bridge says their analysis finds F the most vulnerable to a strike of the Big 3. (They say this is based on F’s reliance on just a few high-value models to make their numbers…including the F-series pickups.)
Overnight, Asian markets were mixed but leaned bearish. Shenzhen (-1.14%) was by far the biggest loser followed by Australia (-0.74%), and Thailand (-0.66%). On the plus side, New Zealand (+0.52%) and India (+0.38%) were the leading gainers. In Europe, things are much more on the red side at midday. There are only two very modestly green bourses while the CAC (-0.90%), DAX (-0.91%), and FTSE (-0.47%) lead the region lower in early afternoon trade. In the US, as of 7:30 a.m., Futures are pointing toward a modestly lower open. The DIA implies a -0.14% open, the SPY is implying a -0.11% open, and the QQQ implies a -0.11% open at this hour. At the same time, 10-year bond yields are up a bit to 4.30% and Oil (WTI) is up another two-thirds of a percent to $89.40 per barrel in early trading.
The major economic news scheduled for Wednesday includes August Year-on-Year CPI and August Month-on-Month CPI (at 8:30 a.m.), EIA Weekly Crude Oil Inventories (10:30 a.m.), and Federal Budget Balance (2 p.m.). The major earnings reports for the day include CBRL and REVG before the open. There are no major reports scheduled for after the close.
In economic news later this week, on Thursday, we get August Month-on-Month PPI, Weekly Initial Jobless Claims, August Retail Sales, July Business Inventories, July Retail Inventories, and the Fed Balance Sheet. Then Friday, August Export Price Index, August Import Price Index, NY Empire State Mfg. Index, August Year-on-Year Industrial Production, August Month-on-Month Industrial Production, Michigan Consumer Sentiment, Michigan Consumer Expectations, Michigan Consumer 12-month Inflation Expectation, and Michigan Consumer 5-Year Inflation Expectations are reported.
In terms of earnings reports later this week, on Thursday, we hear from ADBE, CPRT, and LEN. Finally, on Friday, there are no major earnings reports scheduled again.
In miscellaneous news, Reuters reports that unless the current regional drought ends, the Panama Canal will further reduce the maximum number of daily vessel transits. Many ships already need to reduce loads (containers or bulk) for the transit and then wait to reload on the other side. (Currently 32 ships per day can transit, down from 36, and the maximum draft has been reduced from 50 feet to 44 feet.) The canal uses 50 million gallons of fresh water for every ship it transits and the lakes feeding the canal system are drying up due to prolonged drought. Elsewhere, just ahead of its auction, Citgo (Venezuela-owned and US seized oil refiner) was valued at between $32 and $40 billion. (The refiner was seized to satisfy $23 billion in claims against Venezuela.) Citgo is the seventh-largest US oil refiner. Finally, the US Census Bureau reported that average US individual income fell for the third straight year to a median $74,580. Similar declines have historically led to recessions. However, those recessions have usually come at the beginning of the declines, not after the third year. At the same time, the agency reported that the number of Americans living in non-metro areas outgrew urban populations for the first time in three decades in 2021.
In late-breaking mortgage news, the Mortgage Brokers Association released their weekly data. This week the national average 30-year, fixed-rate, conforming loan rate increased to 7.27% (up from 7.21%). As a result, overall demand for mortgages dropped 0.8% from the previous week (and was 31% lower than the same week in 2022). This included a 5% week-over-week drop in refinance loan applications and a 1% increase in applications for new home purchase loans.
With that background, it looks like markets are waiting on the CPI data today. All three of the major index ETFs are giving us very small premarket candles so far. The DIA is still slightly above its 8ema while the SPY remains slightly below its own T-line. QQQ is the furthest below its T-line but that is not far and it is giving us the best-looking candle this morning. QQQ is also retesting its 50sma, sitting right on that level at the moment. We are likely to see a reaction to CPI (either bullish or bearish). So, expect volatility as we get closer to the open and shortly after the opening bell. The very short-term and mid-term trends remain bullish, but only just so in the short-term. (The previous short-term downtrend has been broken, but we have not yet proven we can hold above that line. So, it is really just a presumed resumption of the mid-term uptrend as of now.) In terms of extension, none of the major index ETFs are very far from their T-line and the T2122 indicator is still sitting in the lower end of its mid-range. So, there is plenty of slack for either the Bulls or the Bears to make a move. Again, it’s a matter of finding the buyers or sellers to get the move started and the CPI data may help with that…one way or the other.
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
Markets gapped up on Monday (up 0.59% in the SPY, up 0.49% in the DIA, and up 0.86% in the QQQ). After that we had a sag in all three major index ETFs that lasted until 11 a.m. At that point, the SPY and QQQ had only retraced about half of their morning gap before beginning a long, slow rally that lasted the rest of the day. On the other hand, DIA continued to sell until almost noon, at which point it had recrossed the morning gap up. Then DIA followed the other two majors with a very modest afternoon rally getting back up into the middle of the gap. This action gave us a white-bodied Hammer that bounced up off the T-line (8ema) in the SPY and QQQ, as well as a black-bodied Spinning Top that bounced up off the T-line in the DIA. Both the SPY and QQQ crossed back above their 50sma. This all happened on well-below-average volume (far-below in the DIA) in the major index ETFs.
On the day, nine of the 10 sectors were in the green with Consumer Cyclical (+1.04%) and Communication Services (+0.96%) leading a broad rally while Energy (-0.82%) was the only laggard in the red. At the same time, the SPY gained 0.66%, DIA gained 0.25%, and QQQ gained 1.18%. VXX fell another 2.35% to close at 20.78 and T2122 climbed again but remained in the mid-range at 37.21. 10-year bond yields climbed up to close at 4.294% while Oil (WTI) fell just a couple of pennies from Friday’s close to close at $87.31 per barrel. So, on balance, the bulls won the day again and the breadth has improved in the last few days. (For example, 302 of the S&P500 were in the green Monday.) However, the breadth is starting from a very low level and, as an example, only 158 of the S&P500 were up more than the SPY itself. (TSLA did a lot of lifting in both the SPY and QQQ on its +10.09% day.) DIA remains the weak link and laggard.
There was no major economic news reported Monday. However, the NY Fed released the results of its August Consumer Sentiment survey. The bank said that respondents now see slightly higher inflation a year from now compared to the July survey. August showed 3.6% is expected in a year while 3.5% was expected a year out in July. When looking out three years, the average expectation fell slightly from 2.9% in July to 2.8% in August. For the five-year horizon, consumers expect 3.0%, which is up slightly from the 2.9% 5-year-out expectation in July. Elsewhere, a Commissioner for the CFTC proposed the creation of a national database (hard to believe one does not yet exist) where investors and law enforcement can research past fraud convictions and civil fines from agencies for financial misconduct.
In stock news, early Monday QCOM announced it will continue supplying AAPL with 5G chips for its phones and tablets until at least 2026. Previously, the deal was set to end at the end of 2023 and AAPL purchased the INTC modem business in 2019 with the expectation they could replace QCOM with internally-made modems. Later, STLA announced that is has teamed up with an investment firm to begin the third phase of its share buybacks (which is part of the $1.5 billion buyback program announced back in February). This round of buybacks will be comprised of roughly $537 million. At about the same time, BA announced that Vietnam Airlines committed to order 50 of the company’s 737-8 jets for $7.8 billion during President Biden’s post-G20 Summit visit to their country. At the same time, back in the US, SJM announced an agreement to acquire TWNK for $5.6 billion ($4.6 billion plus $1 billion in assumed debt). Elsewhere, DIS and CHTR (second-largest cable operator) reached a deal midday, ending the service disruption that was impacting CHTR customers. (Despite media predictions of this contract dispute potentially changing the industry, it looks as if that was much more hype than reality.) In the mid-afternoon, EVGO announced it had received the first batch of 350kw fast chargers from DLTEF. After the close, analysts say that TSLA’s huge 10% gain was fueled almost completely by industry reports that TSLA’s new “Dojo” supercomputer could add $600 billion in market value by helping speed up the move into robotaxis and software services. In response, stock analysts from JPM, MS, and others raised their TSLA target prices and the stock exploded higher. After the close, GE announced it would sell its 32.4 million share stake in AER via an underwritten public offering. (The deal is worth $2 billion at AER’s closing price.) GE had previously sold 18 million shares of AER in March. Also after the close, UPS said it expects its new contract with the Teamsters to increase its wage and benefit costs by 3.3% annually over the life of the contract, which expires July 31, 2028.
In stock government, legal, and regulatory news, a US federal judge ruled against the motion by META, ruling that the company must face a lawsuit claiming they have violated the medical privacy of patients. At least 664 Hospitals and clinics had let META collect Pixel tracking data, which was then sold to advertisers by META like all other tracking data. In a follow-up to an earlier report, RTX took a $3 billion charge and told airline customers that an average of 350 of EADSY (Airbus) jets will need to be grounded each year (with a maximum of 650 at one time in 2024). This is needed in order to remove the Pratt & Whitney (owned by RTX) engines to check for a metal flaw in internal engine parts. RTX estimates 700 engines will need to be removed from jets to undergo a lengthy quality inspection and that process will last through 2026. (A microscopic impurity was inadvertently introduced into the metal powder used to make internal parts of the engines, potentially causing engine failures when in operation.) In COVID news, the FDA authorized COVID-19 vaccines from BFE/BNTX and MRNA. (A third vaccine from NVAX is still under review.) The approval paves the way for the release of the two vaccines later this week.
After the close, CASY and ORCL both missed on revenue while beating on earnings. Neither company changed forward guidance, although the ORCL quarterly guidance did disappoint by not raising after weaker than was expected cloud revenue for the quarter being reported.
In Autoworker contract talks or strike news, STLA said they plan to make a new offer to the UAW after the union made its own counteroffer on Sunday. The UAW responded by saying they are ready to negotiate 24×7 until things get hammered out and that some progress has been made, but there is a long way to go. For its part, STLA sent an email to employees saying the negotiations are on a good path and that many of the negotiating subcommittees had reached a tentative deal over things like health and safety concerns. Elsewhere, industry analyst J.D. Power said they estimate that the production cuts from a strike against all three major automakers could raise new car prices by 1% each week the strike lasts. They also say TM, HMC, and VLKAF (Volkswagen) could be winners from a domestic-maker strike. However, JDP believes they would run out of inventory quickly as well amidst any significant-length strike. (The current contract ends at midnight on Thursday night and the union has already voted to authorize a strike.)
Overnight, Asian markets were mostly in the red but the biggest movers were on the green side. Japan (+0.95%) and Taiwan (+0.85%) were by far the largest gainers. At the same time, South Korea (-0.79%) and Hong Kong (-0.39%) were the leaders of the more numerous down exchanges. In Europe, the bourses are more evenly split at midday, with six of the 15 exchanges in the green, led by Russia (+1.03%) while eight of the bourses are in the red, led by Finland (-1.11%). The CAC (-0.06%), DAX (-0.32%), and FTSE (+0.52%) are typical of the spread and lead the region on volume as usual. In the US, as of 7:30 a.m., Futures are pointing toward a down start to the day. The DIA implies a -0.18% open, the SPY is implying a -0.26% open, and the QQQ implies a -0.28% open at this hour. Meanwhile, 10-year bond yields are flat at 4.29% and Oil (WTI) is up a little more than two-thirds of a percent to $87.90 per barrel in early trading.
The major economic news scheduled for Tuesday includes the EIA Short-Term Energy Outlook and WASDE Ag Report (both at noon), August Federal Budget Balance (2 p.m.), and API Weekly Crude Oil Stock Report (4:30 p.m.). In addition, SEC Chairman Gensler is scheduled to testify before the Senate Banking Committee at 10 a.m. There are no major earnings reports scheduled for Tuesday, either before the bell or after the close.
In economic news later this week, on Wednesday, August Year-on-Year CPI, August Month-on-Month CPI, and EIA Weekly Crude Oil Inventories are reported. On Thursday, we get August Month-on-Month PPI, Weekly Initial Jobless Claims, August Retail Sales, July Business Inventories, July Retail Inventories, and the Fed Balance Sheet. Then Friday, August Export Price Index, August Import Price Index, NY Empire State Mfg. Index, August Year-on-Year Industrial Production, August Month-on-Month Industrial Production, Michigan Consumer Sentiment, Michigan Consumer Expectations, Michigan Consumer 12-month Inflation Expectation, and Michigan Consumer 5-Year Inflation Expectations are reported.
In terms of earnings reports later this week, on Wednesday, CBRL reports. On Thursday, we hear from ADBE, CPRT, and LEN. Finally, on Friday, there are no major earnings reports scheduled again.
In miscellaneous news, AAPL is expected to introduce another new iPhone (v15) today. At the same time, the US vs. GOOG antitrust case gets underway. This case accuses GOOG of using exclusive (or effectively exclusive) business contracts to stop competitive search engines from gaining or even maintaining any market share. GOOG is expected to counter by claiming the definition of search is too narrow and if you include searches on AMZN, the AAPL store, SPOT, DASH, and many others then it is possible to say GOOG does not have a search monopoly.
In last-minute stories, Bloomberg reports that Mexico has overtaken China to become the US’s largest supplier of goods (origination point of US imports). Interestingly, Mexico’s currency is the strongest-performing one in the world so far this year, which is saying something given the strength of the Dollar. The Mexican stock market is also one of the best-performing. Elsewhere in the world, Russia’s Putin traveled across his country to meet North Korea’s Kim Jung Un. Putin is desperate for more weapons for his so-far-failed invasion of Ukraine and North Korea has always been and probably will always be in desperate need of economic assistance.
With that background, it looks like the Bears want to test the Bulls resolve after a positive Monday. The SPY and DIA are both retesting their T-line (8ema) from above and the SPY is retesting its 50sma from above in this morning’s premarket action. All three major index ETFs are showing very small candles at this time. So, it may be a wait-and-see market or it could be that there is indecision early this morning. Either way, we are not seeing major volatility or move so far before the opening bell. The very short-term and mid-term trends remain bullish, but only just so in the short-term. (The previous short-term downtrend has been broken, but we have not yet proven we can hold above it. So, it is really a presumed resumption of the mid-term uptrend.) As far as extension goes, none of the major index ETFs are very far from their T-line and the T2122 indicator is still sitting in the lower end of its mid-range. So, there is plenty of slack for either the Bulls or the Bears to make a move. Again, it’s a matter of finding the buyers or sellers to get the move started.
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 an early session pop the market spent the rest of the waiting mired in low-volume chop as investors exercised caution ahead of pending inflation data. Expect more of the same hurry-up-and-wait price action today with very little on the earnings and economic calendars to inspire the bulls or bears. Plan for all the chop to change quickly depending on the reaction to the before-the-bell release of the CPI. We can not rule out a substantial gap up or down in reaction to the data so plan your risk carefully today.
While we slept Asian markets closed mixed with the NIKKEI leading the buying up .95% with Hong Kong and Shanghai selling off modestly. European markets trade mostly lower with modest losses this morning as they wait on inflation data. U.S. futures suggest a modestly lower open this morning facing another light day of data to inspire with the CPI report pending Wednesday morning.
Economic Calendar
Earnings Calendar
We have no notable earnings reports for this Tuesday. Those that are reporting are very small cap and low volume names.
News & Technicals’
JPMorgan Chase CEO Jamie Dimon warned on Monday that the U.S. economy, which is currently doing well, could face significant challenges in the future. He said that it would be a “huge mistake” to assume that the current consumer strength would translate into a booming environment for years. He cited several factors that could derail the economic recovery, such as the central banks tightening their monetary policies, the escalating war in Ukraine, and the excessive spending by governments around the world. He said that these factors could create uncertainty, volatility, and inflation, which could hurt the business and consumer confidence. He urged the policymakers to act responsibly and prudently to avoid a potential crisis. “To say the consumer is strong today, meaning you are going to have a booming environment for years, is a huge mistake,” Dimon said.
Oracle, the software giant, reported disappointing results for the fiscal first quarter, missing analysts’ expectations on license and hardware revenue. The company’s total revenue rose by 4% year-over-year to $9.73 billion, but fell short of the consensus estimate of $9.77 billion. The license revenue, which reflects the sales of new software products, declined by 8% to $813 million, while the hardware revenue, which includes the sales of servers and storage devices, dropped by 6% to $763 million. The company also issued weaker-than-expected guidance for the second quarter, projecting a revenue growth of 3% to 5%, below the analysts’ forecast of 5.3%. The company’s shares fell by more than 2% in after-hours trading following the earnings release.
Despite the disappointing results, Oracle highlighted its achievements and innovations in the quarter, such as launching new database hardware and artificial intelligence software features. The company unveiled the Oracle Database 23c, which it claimed to be the world’s first database with built-in machine-learning capabilities. The company also introduced the Oracle Exadata X9M, a new generation of database hardware that delivers up to 25 times faster performance than previous versions. The company said that these products would help it compete with rivals such as Amazon Web Services and Microsoft Azure in the cloud computing market. “We are confident that our cloud strategy and strong product portfolio will continue to drive our growth and profitability in the future,” said Safra Catz, Oracle’s CEO.
We kicked off a new week of trading with an early session surge that quickly faded with the remainder of the day mired in a low volume as traders ponder the pending CPI number out Wednesday morning. TSLA was a bright shiny spot in the tech sector surging 10% after receiving an upgrade. Unfortunately, we have another day to wait with little to nothing on earnings and the economic calendar to inspire. One distraction could be the AAPL product release show that can at times provide some bullish or bearish action in tech gient. Plan your risk carefully today because the release of the CPI number before the bell tomorrow could create a big market gap up or down depending on investor reaction.
We closed Friday with the indexes near the flatline with investors in a wait-and-see mode with pending inflation data coming Wednesday this week. Adding to the uncertainty the slowing Chinese and European economies as well as the rising U.S. bond yields and energy price impacts on an already stressed consumer. We begin the week with a light day of earnings and economic reports as we ponder what comes next with the pending CPI and PPI reports. Expect choppy price conditions as we hurry up and wait.
Overnight Asian markets began the week by closing mixed as they wait on key data later this week from Chain and India. However, European markets see modest bullishness across the board as they work to relive some of last week’s selling. U.S. futures also point to a modestly bullish open hoping to keep the relief rally alive with the inflation data uncertainty just around the corner.
Economic Calendar
Earnings Calendar
Notable reports for Monday include ORCL, CASY, and FCEL.
News & Technicals’
Europe’s largest economy, Germany, is facing a bleak outlook for 2023 as the COVID-19 pandemic continues to weigh on its recovery. According to the European Commission, Germany is expected to shrink by 0.4% this year, a downward revision of 0.6 percentage points from its previous forecast in May. This would make Germany the only major European economy to contract this year, as its peers are projected to grow by an average of 4.7%. The main reasons for Germany’s poor performance are the prolonged lockdowns, the slow vaccination rollout, and the supply chain disruptions that have affected its export-oriented manufacturing sector. The Commission also warned that Germany faces significant downside risks from the spread of new variants, the uncertainty over fiscal policy, and the potential spillovers from other countries.
Some people who take drugs for diabetes and weight loss have reported an unexpected side effect: they have less desire for addictive substances and behaviors. These drugs, known as GLP-1s, include Ozempic and Wegovy, which have been shown to help people lose weight by suppressing appetite and increasing metabolism. However, some patients also claim that these drugs have reduced their cravings for alcohol, nicotine, opioids, and some compulsive behaviors, such as online shopping and gambling. These anecdotal reports suggest that GLP-1s may have a role in treating addiction, a chronic brain disorder that affects millions of people worldwide. Several studies in animals support this idea, showing that GLP-1s can modulate the reward system in the brain and decrease the reinforcing effects of drugs. However, more research is needed to confirm these findings in humans and to understand the mechanisms and optimal doses of GLP-1s for addiction treatment.
The 10-year U.S. Treasury yield, which reflects the market’s expectations for future interest rates, rose on Monday as investors awaited key economic data due this week. The yield climbed to 1.62%, up from 1.57% on Friday, as bond prices fell. Investors are looking for clues about the strength of the U.S. recovery and the inflation outlook, which could influence the Federal Reserve’s monetary policy decisions. Some of the data releases that could move the market this week are the consumer price index (CPI) on Tuesday, the producer price index (PPI) on Wednesday, and the retail sales and consumer sentiment on Friday. Higher-than-expected inflation or growth figures could fuel expectations that the Fed will taper its bond-buying program or raise interest rates sooner than anticipated, which could put upward pressure on yields. Conversely, lower-than-expected data could ease those expectations and lower yields.
Equity markets closed near the flatline on Friday lacking momentum as pending inflation left investors in a wait-and-see mode. Chain’s ban on iPhone use for government employees weighed heavily on the tech sector which struggled for direction throughout the week. The slowing economic numbers out of China and Europe added to the uncertainty while rising bond yields and energy prices piled on keeping traders cautious heading into the weekend. Monday begins with a very light day of earnings and economic reports likely to keep price action choppy and volume low, as wait on the Wednesday CPI data. The big question is, will it inspire the bulls or will it bring out the bears? Only time will tell so get ready for a choppy couple of days as we hurry up and wait.
Friday was a “much ado about nothing” day in the market. All three major index ETFs opened flat. Then they rallied to the highs of the day by mid-morning and slowly sold off, reaching the lows of the day at about 3:30 p.m. Finally, the SPY, DIA, and QQQ all rallied modestly in the last 30 minutes. This action gave us white-bodied, indecisive candles in all three major index ETFs. The SPY and QQQ printed high-wick, Inverted Hammer type candles while the DIA printed more of a white-bodied Spinning Top candle. All three retested their T-lines from below…and failed that test, with DIA closing right at its T-line (8ema) while the other two closed below theirs. The SPY and QQQ also retested their 50smas from below, with QQQ managing to close about a dime above its 50sma while the SPY filed its test.
On the day, five of the 10 sectors were in the green with Energy (+0.91%) out in front leading the way higher and Industrials (-0.45%) by far the biggest loser among the sectors. At the same time, the SPY gained 0.15%, DIA gained 0.24%, and QQQ gained 0.14%. VXX fell a bit over two percent to close at 21.27 and T2122 climbed up out of the oversold territory to the lower end of the mid-range at 29.33. 10-year bond yields were up slightly to close at 4.258% while Oil (WTI) gained another half of a percent to close at $87.33 per barrel. This all happened on far-below-average volume in all three of the major index ETFs. So, on balance, the bulls won the day. However, there was not a lot to feel good about for the Bulls with those upper wicks and failures to clearly break through moving averages.
For the week, all three major index ETFs printed black, Bearish Harami candles. The DIA also fell through its weekly T-line (8ema). However, both the SPY and QQQ retested their own weekly T-lines and passed that test, remaining above. All three major index ETFs remain well above their weekly 50sma, with the SPY and QQQ far above. Those latter two remain in a weekly PBO (potential J-hook in formation) pattern of a strong bullish uptrend. DIA is in the same weekly pattern, but is in a much weaker (and possibly breaking or being challenged uptrend…depending on how you draw it).
There was no major economic news reported Friday. However, to summarize Fed speakers during the week, we repeatedly heard something like there is no hurry to move and it may well be worth not hiking in September…but we are not declaring victory over inflation and it is very possible we may need to hike or otherwise tighten later. This included Dallas Fed President Logan (normally more hawkish) saying late Thursday “Another skip could be appropriate … this month but my base case, though, is that there is work left to do.” Another usually hawkish member, Fed Governor Waller came right out and said it earlier, “We can just sit (to see if inflation keeps trending in a downward direction).” Meanwhile, other Fed speakers tended to tow the “let’s wait to see what more data says” line in their comments during the week. For example, NY Fed President Williams said “It’s still an open question as we go forward. Have we got sufficiently restrictive to achieve that (a 2% Fed inflation goal)?” While this went on, as of the Friday close, Fed futures indicated that the market has priced in a 93% chance of no rate hike at the September FOMC meeting. (That probability is up 7% from one month prior.)
The US dollar completed an eight-straight week of gains against its peers on Friday. Elsewhere, a Fed report Friday showed that US household wealth jumped to a record in Q2, increasing 3.7% to $154.3 trillion. This included a $2.6 trillion increase in US household equity holdings, while the value of their real estate rose just $2.5 billion in the quarter. Of course, the wealth gap continues to widen with most of than wealth concentrated in the top 10 percent of American households. (Which, in part, helps explain the “woe is us” reports of credit card debt climbing and people living paycheck-to-paycheck at the same time wealth is at record levels.)
In stock news, late Thursday night, an independent research group announced they had found a security flaw in AAPL iPhones that had allowed Israeli firm NSO to plant spyware on iPhones. Then on Friday, ABG said it was buying private firm Jim Koons Automotive for $1.2 billion in order to expand its presence in the Mid-Atlantic region. Later, Bloomberg reported that BABA has decided to temporarily shelve its plans to IPO its Freshippo grocery chain due to poor performance in the consumer stock sector recently. (BABA was hoping for a $6 billion – $10 billion valuation, but investment houses were advising roughly $4 billion would be achieved now.) At the same time, Chinese auto market analyst CPCA announced that TSLA had more than doubled its Chinese market share in August thanks to significant discounts and tax breaks. This allowed TSLA to return to unit sales growth for the month. Later, Reuters reported plastics and chemical maker COVTY has entered into discussions with suitor Abu Dhabi National Oil Company. (In August, ADNOC had offered $12.4 billion for COVTY.) Elsewhere, the Financial Times reported that the ARM IPO is already oversubscribed by five times (Reuters reported the number was more than six times oversubscribed) in the widely-watched tech IPO. Later, SLTA announced it is expanding its battery production capacity by 60% globally. No specific timetable was provided, but the company already has six battery plants under construction around the world and said there are more to come. At the same time, GNL shareholders approved a planned merger with RTL in an all-stock deal. After the close, NKLA announced that one of its electric semi-trucks caught fire near company headquarters and that this was the second such incident in the last week. Also after the close, GT announced they would cut 1,200 jobs in Europe, Africa, and the Middle East.
In stock government, legal, and regulatory news, KR announced it will sell 400 stores to private firm C&S Wholesale Grocers for $1.9 billion in an effort to gain approval for its $25 billion acquisition of ACI. Elsewhere, in Congress, the House announced it will be holding more AI hearings this week including testimony from the President of MSFT and the Chief Scientist of NVDA. On the Senate side, on Tuesday they will also hold an AI hearing. Separately, on Wednesday, Senate Majority Leader Schumer is hosting a forum (non-hearing) intended to allow Senators and Congressmen to become more informed on AI matters. These will consist of various industry presentations and Q&A sessions including one by META CEO Zuckerberg and TSLA CEO Musk. At the same time, an FTC Administrative Judge ruled against INTU on Friday. The ruling found that INTU engaged in deceptive advertising and deceived at least 4.4 million customers with ads claiming they were offering “free” tax products and services. The ruling issued a “cease and desist” order, but no financial penalty. Later KR announced they had agreed to a $1.4 billion settlement (paid over 11 years) to resolve thousands (most) of outstanding lawsuits by US states and local governments over opioid distribution. This included $1.2 billion going to states, $177 million in attorney fees, and $36 million to Native American tribes. In the afternoon, a US federal judge ruled META must face a lawsuit claiming it violated the medical privacy of patients who used medical facility websites that included a META Pixel tracking tool. The judge ruled against META’s motions to dismiss the case. In the afternoon, the FDIC released a report saying the agency should have been more aggressive in its policing of the risk management of FRCB prior to its failure in May. (It said it was unclear if this could have saved the bank given the speed at which depositors pulled their money out of the bank. However, it should have done more and sooner.) After the close, the NHTSA cited inadequate inspections as the cause of a UAL 2021 jet engine failure. Soon after the failure, the FAA ordered immediate inspections of all BA jets with RTX-made Pratt & Whitney 4000 engines.
In Autoworker contract talks or strike news, on Friday, STLA offered the UAW a 14.5% wage increase over four years. This is far short of the UAW’s desired 46% increase and a reduction to a 32-hour work week. Previously, GM offered a 10% immediate raise, followed by two other 3% increases over the four years. The week before, F had offered 9% increase over four years along with a 6% lump-sum one-time payment. The UAW contract with all of the “Big 3” automakers ends Thursday night at midnight.
Overnight, Asian markets were mixed but leaned toward the green side. Shenzhen (+0.98%), India (+0.89%), and Shanghai (+0.84%) paced the gains. Meanwhile, Taiwan (-0.86%), Hong Kong (-0.58%), and Japan (-0.43%) paced the 5 (or 12) down exchanges. However, in Europe, we see nearly green across the board at midday. Only Russia (-0.82%) is in the red while the CAC (+0.42%), DAX (+0.34%), and FTSE (+0.06%) lead the 15 green exchanges higher in early afternoon trade. In the US, as of 7:30 am, Futures are pointing toward a green start to the day. The DIA implies a +0.19% open, the SPY is implying a +0.41% open, and the QQQ implies a +0.61% open at this hour. At the same time, 10-year bond yields are up a bit to 4.294% and Oil (WTI) is off by three-quarters of a percent to $86.89 per barrel in early trading.
There is no major economic news scheduled for Monday. There are also no major earnings reports scheduled for before the opening bell. However, after the close, CASY and ORCL report.
In economic news later this week, on Tuesday we get the EIA Short-Term Energy Outlook, WASDE Ag Report, August Federal Budget Balance, and API Weekly Crude Oil Stock report. Then Wednesday, August Year-on-Year CPI, August Month-on-Month CPI, and EIA Weekly Crude Oil Inventories are reported. On Thursday, we get August Month-on-Month PPI, Weekly Initial Jobless Claims, August Retail Sales, July Business Inventories, July Retail Inventories, and the Fed Balance Sheet. Then Friday, August Export Price Index, August Import Price Index, NY Empire State Mfg. Index, August Year-on-Year Industrial Production, August Month-on-Month Industrial Production, Michigan Consumer Sentiment, Michigan Consumer Expectations, Michigan Consumer 12-month Inflation Expectation, and Michigan Consumer 5-Year Inflation Expectations are reported.
In terms of earnings reports later this week, on Tuesday there are no major reported scheduled. Then Wednesday, CBRL reports. On Thursday, we hear from ADBE, CPRT, and LEN. Finally, on Friday, there are no major earnings reports scheduled again.
In miscellaneous news, on Friday, the SEC approved a NASDAQ request to allow a new AI-driven order type. The new M-ELO order type would use AI to speed up the matching of orders at the midpoint of the bid-ask spread. The new order type, first proposed in 2018, would allow investors to trade with 10-millisecond waiting periods. (This means these orders would fill about 20% faster, greatly reduce non-fills, and reduce required holding times by more than 11%.) It was not mentioned, but this certainly seems aimed at high-frequency traders and the benefit of brokers. Elsewhere, the state of AK filed suit against the US Dept. of Agriculture, seeking to block the decision announced Wednesday that President Biden was reversing a Trump-era ruling allowing large swaths (9.37 million acres) of the Tongass National Forest to be opened for logging, mining, and oil exploration and production. Biden’s order canceled dozens of oil and gas leases issued in the last days of the Trump administration. Finally, on Sunday, the now-former CEO of BABA resigned. (It was not long ago that he was “relieved” of CEO and Chairman duties to focus on the new BABA Cloud business.) The unexpected move riles BABA shares in China.
In late-breaking geopolitical news, over the weekend, President Biden and Indian PM Modi announced a new international transportation network project meant to rival China’s “Belt and Road” initiative at the G20 Summit. The idea is to invest in infrastructure connecting Asia, the Middle East, and Europe. Not only will US-based multinationals benefit, but it will make the US and India an alternative funding source (competitor) to help limit the increase in Chinese influence in the world (achieved through financing and then takeover). In a separate initiative, on Sunday it was announced the Biden Administration and Saudi Arabia have jointly entered into talks with multiple African nations to secure ownership of various mining operations (mostly rare earth mines). Under the joint deals being offered, the Saudis would buy the mines and the US would be guaranteed the right to buy percentages of those mine’s production. (Implied, but unstated, is that US force would be there to ensure the security of the mines should anything of an Islamic or Wagnerian nature threaten them.) Finally, there was a major 6.8 earthquake in Morocco Friday. (This was made “more major” because the region was not built or prepared for such a disaster.) So far, 2,400 are known dead and 300k are homeless.
With that background, it looks like the Bulls are trying to make another move this morning. All three major index ETFs are back above their T-line (8ema) in the early session. The SPY and QQQ are also back above their 50sma. However, with its black premarket candle, the DIA has, so far, failed a retest of its 50sma. This leaves the SPY, QQQ, and DIA all on the green side of flat at least at this point. The very short-term and mid-term trends are now bullish, but only just so in the short-term. (The previous short-term downtrend has been broken, but we have not yet proven we can hold. So, it is really a presumed resumption of the mid-term uptrend.) As far as extension goes, none of the major index ETFs are far from their T-line and the T2122 indicator is sitting in the lower-end of its mid-range. So, there is plenty of slack for either the bulls or the bears to make a move…again, if they can find the buyers or sellers.
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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Thursday gave us another schizophrenic day with a gap in one direction and the market then trading in the opposite direction all day. In this case, we gapped down 1.21% in the QQQ, 0.69% in the SPY, down just 0.11% in the DIA. All three major index ETFs then traded sideways for an hour. However, at that point, the Bulls stepped in to drive a slow, modest rally that lasted the entire rest of the day. The SPY and QQQ climbed back up into the opening gap while DIA crossed its much smaller gap to close a little to the positive side. This gave us white-bodied candles in all three index ETFs that could all be seen as larger-bodied Spinning top-type candles in the SPY, QQQ, and DIA. QQQ ended the day testing its 50sma from below and DIA was just below its T-line (8ema) at the high of the day.
On the day, eight of the 10 sectors were in the red with only Utilities (+0.93%) by far the strongest while Technology (-1.13%) and Basic Materials (-0.97%) led the way lower. At the same time, the SPY lost 0.31%, DIA gained 0.20%, and QQQ lost 0.72%. VXX was essentially flat at 21.71 and T2122 climbed but remained inside of the edge of oversold territory at 17.25. 10-year bond yields fell to close at 4.254% while Oil (WTI) dropped 0.81% to close at $86.83 per barrel. (That was Oil’s first drop in 10 days.) This all happened on lower-than-average volume in all three of the major index ETFs. So, the Bears had control at the open, but once they got their footing, the bulls were in charge of a tepid rally the rest of the way.
The major economic news reported Thursday included Weekly Initial Jobless Claims which came in well below expectations at 216k (compared to a forecast of 234k and the prior week’s 229k). At the same time, Q2 Nonfarm Quarter-on-Quarter Productivity came in at +3.5% (a bit below the +3.7% forecast but far better than the Q1 -2.1%). In addition, Q2 Quarter-on-Quarter Unit Labor Costs rose 2.2% (far outstripping the +1.6% forecast but also dramatically lower than the Q1 +4.2%). Later, the EIA Weekly Crude Oil Inventories followed Wednesday evening’s API data by showing a much larger-than-expected drawdown of 6.307 million barrels (versus a forecast calling for a 2.064-million-barrel draw but still far lower than the prior week’s 10.584-million-barrel drawdown). Finally, after the close, the Fed reported that they reduced their Balance Sheet by another $20 billion from $8.121 trillion to $8.101 trillion.
In Fed and regulator news, on Thursday, the FDIC reported that US bank profits and deposits were broadly steady in Q2. This suggested that the turmoil in the sector in Q1 had passed. The report said industry profits in Q2 fell 11.3% year-on-year from 2022 to $70.8 billion. (If the SIVB and SBNY failures were stripped out of the report, the rest of the sector increased profits by 5.7% in Q2 versus 2022.) However, deposits declined for the fifth quarter in a row, down 0.5% quarter-on-quarter. Elsewhere, the Senate confirmed the last open Fed Governor seat, approving Adriana Kugler (who is a labor market expert). Later, NY Fed President Williams told Bloomberg “We’ve got policy in a good place, but we’re going to need to continue to be data dependent.” He went on to say that it was an “open question” whether monetary policy is restrictive enough to bring the economy back into the proper balance of inflation and full employment. After the close, Dallas Fed President Logan said that while it could be appropriate to skip an interest rate hike in September, more policy tightening may be needed before we reach the 2% goal. She said, “Another skip could be appropriate when we meet later this month, … but skipping does not imply stopping.”
In stock news, on Tuesday, SUM announced they have agreed to buy Columbian cement producer Cemento Argos for $3.2 billion in cash and stock. (That deal would make SUM the largest cement maker in the US.) Elsewhere, NWSA said it’s engaged in various negotiations with artificial intelligence companies over the use of content produced by AI. At the same time, MGA (electric vehicle components maker) told an investors conference that it expects to roughly double its sales this year and double again by 2025. Later, the CEO of CHTR said it was urgent to resolve its contract dispute with DIS. (DIS has blocked CHTR customers from accessing DIS content, including ESPN during the highest-rated football season and CHTR is hemorrhaging subscribers as a result.) In cost-cutting news, WMT announced changes to its entry-level store compensation plans to make cashiers, stockers, self-checkout helpers, department associates, and personal shoppers all receive the same hourly wage. The move was meant to take advantage of a slowing job market (which I must have missed happening). WMT did not specify the amount it expects the move to save. Meanwhile, the CFO of BA said the company still expects to hit its annual 737 deliveries goal, despite a new production problem that has slowed deliveries of its bestselling 737 MAX. However, he also said BA will be on the low end of its 400-450 jet target. In other BA news, SPR told an investor conference Thursday that it has asked BA to absorb more of the financial pain caused by inflation and parts shortages. The CEO told the conference that their contracts with BA are “not sustainable.” (BA did not reply to Reuters requests for comment.) At the same time, the CFO of RIVN told a GS conference that the company expects a significant decrease in the cost of battery materials during 2024, and will even see some of those effects in Q4 of 2023.
In stock government, legal, and regulatory news, AAPL suffered a second-straight terrible day after China banned the use of iPhones by government officials. (This move by China is widely seen as both a signal to AAPL, which has recently been moving operations out of China and into places like India, and to the US government that it could ban iPhones altogether if trade wars continue.) a three-judge federal appeals court panel revived a lawsuit against GM from a black safety supervisor. The suit accused GM of racism and sexism that created a hostile work environment over complaints of workers displaying nooses and Confederate flags as well as using racial and sexist slurs toward herself and other black employees for a prolonged period without company sanctions. At the same time, MSFT announced it would pay the legal damages that its customers might suffer if they are sued for copyright infringement for using the output of MSFT AI products. The potentially legally risky plan could also be a marketing boon for its co-pilot assistant products. At nearly the same time, MSFT also announced that it suspects Chinese-controlled social media accounts are already using AI to influence voters as the US prepares to enter the heart of the 2024 election cycle. MSFT said they have made the US Dept. of Justice aware of its research findings. (Screenshots of META’s Facebook and X, formerly Twitter were provided.) After the close, Reuters reported that ZM has been in talks with the US FTC and EU, UK, and German competition regulators, outlining anti-competitive behavior by MSFT related to chat and video apps and bundling with MSFT’s dominant Office suite.
In Autoworker contract talks or strike news, GM offered a 10% immediate wage hike and two additional 3% increases over four years. The offer also included a $5,500 ratification bonus (immediate) as well as $5,000 in potential bonuses over the life of the contract. The UAW President quickly called it “an insulting proposal that doesn’t come close to an equitable agreement.” He continued by implying the threat of a strike as of midnight on September 14. Elsewhere, the UAW said it plans to deliver a counter-proposal to STLA Friday. Meanwhile, F is taking a different tact, by giving 8,000 UAW hourly workers a $4.33/hour ($9,000/year) raise effective immediately (a week ahead of the expiration of the current contract and before a new contract has been agreed. For what it is worth, analysts say a strike against STLA is the most likely thing to happen with a strike against GM and F held as negotiating escalation tools by the UAW.
Overnight, Asian markets were nearly red across the board on a modest move day. Only India (+0.47%) was in the green, while Japan (-1.16%), New Zealand (-0.72%), and Singapore (-0.58%) led the region lower. In Europe, we see a similar picture taking shape at midday. Three of the 15 bourses are in the green. However, the CAC (-0.09%), DAX (-0.41%), and FTSE (-0.09%) lead the way lower in early afternoon trade. In the US, as of 7:30 a.m., Futures are pointing toward a modestly red start to the day. The DIA implies a -0.19% open, the SPY is implying a -0.22% open, and the QQQ implies a -0.30% open at this hour. At the same time, 10-year bond yields are flat at 4.254% and Oil (WTI) is up two-thirds of a percent to $87.48 per barrel in early trading.
There is no major economic news scheduled for Friday. The only major earnings report on the day is KR before the opening bell. There are no reports scheduled for after the close.
After the close, DOCU and RH reported beats on both the revenue and earnings lines. It is worth noting that DOCU raised its forward guidance. This morning, KR was supposed to report at 7:15 a.m. However, for some reason, they are delayed and have not posted results yet as of 7:45 a.m. (Late, KR reported a miss on revenue and a beat on earnings. It has not posted any change to guidance yet.)
In miscellaneous news, traffic on the ChatGPT website fell for the third month in a row. Since they are widely accepted as the leader in the AI space, this begs the question as to whether “AI mania” is subsiding or if this is just the result of numerous competitors diluting the ChatGPT market leadership. Elsewhere, the Financial Times reports that GS will begin following the “Jack Welch at GE” plan, meaning they now have plans to fire 1%-5% of the GS workforce annually, based on performance evaluations. This “culling of the deadwood” would lead to 450 to 2,500 firings (and presumably replacement hires) each year. Meanwhile, CNBC did an analysis of just how much impact “shrinkage and theft” are really impacting retailer profits. (The topic has been a major talking point among right-wing media and has even been cited as an excuse by some retailers to explain poor results.) CNBC analyzed seven big retailers (TGT, M, DKS, LOW, FL, ULTA, DLTR, TJX, and WMT) balance sheets. Contrary to the general narrative of the right, they found that inventory losses were only a small fraction of the retailer’s sales and “pale in comparison to other factors squeezing margins.” (Those factors include “excessive” discounting and promotions.) In fact, CNBC found that shrink is in line with the industry-standard losses over the last decade (1% – 1.5% of sales). This suggests that despite individual well-publicized cases that are aided by ever-present video, “organized theft rings” and “people just feeling entitled to take ransack or take what they want” is not really more of a problem than it was a decade or two ago. It just seems that way because companies are looking for excuses and one side of the political aisle wants to push the narrative that things are terrible. (To be fair, this is certainly not exclusively a tactic of the right. It has been said that there are only two themes to politics. “Things have gone to hell, throw the bum out” and “You’ve never had it this good, give me another term.”) The point is, that theft was mostly just a convenient excuse, taking advantage of one part of society that wanted to push a certain narrative, being used by companies to justify poor performance.
In geopolitical news, Bloomberg reports that India is currently studying its potential responses to a Chinese invasion of Taiwan. The report says this comes after the US made discreet inquiries about how India might contribute in the event of war, which would result when the US steps in to defend Taiwan. While this made news and is being reported as a “new study commissioned by India’s top military commander,” I have serious doubts whether that is entirely true. Frankly, both Indian and the US military and political leadership would need to be completely incompetent if such a scenario had not been extensively studied and various responses discussed, over and over again. The topic is probably revisited at least annually in each country. In fact, I would bet that the subject has been discussed between the militaries and between the political leaders of the two countries repeatedly over many years. (At least ever since India started to think of itself as an emerging power in Asia.) So, I suspect this is just a story leak meant to make news and apply a bit of pressure on China as the G-20 meeting gets going. Still, it made Bloomberg’s top headlines.
With that background, it looks like the Bulls tried to make a move in the premarket, but have sold off since that point. All three major index ETFs started the early session at or very near their T-line (8ema), but have since sold down to create black-bodied premarket candles. (QQQ has also done the same with its 50sma this morning.) This leaves the SPY, QQQ, and DIA just on the red side of flat as we get nearer to the open. The short and mid-term trends remain bearish with the long-term trend remaining bullish across all three major index ETFs. As far as extension goes, none of the major index ETFs are far from their T-line and the T2122 indicator is sitting just inside the top edge of the oversold territory. So, both sides have room to run, if they can gain the momentum to do so. Finally, don’t forget it’s Friday. Pay yourself and prepare your account for the weekend news cycle. Hedge, lighten up, or get some insurance (options) to mitigate risk as you see appropriate.
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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Indexes closed with losses on a light day of data here in the U.S., while Asian and European economic news started the day off with a little bearish sentiment. The pressure continued to grow as oil rose to a 10-month high adding worries to its potential inflation impact and helping bond yields to surge higher on the day. To find inspiration today we have Mortgage, Trade, PMI, ISM, Beige Book, Fed speak, and just a few notable earnings events for the bulls and bears to wrangle over. Plan for price action to remain challenging as the bulls look for anything to resume the relief rally and the bears look for some inspiration to resume selling.
While we slept Asian markets traded mixed even as Country Garden made payments allowing China real estate stocks to surge. However, European markets trade bearishly across the board as surging energy prices add additional challenges to an already struggling economy. U.S. futures also suggest a modestly bearish open ahead of earnings and economic data worried about the inflationary and economic impacts of rising energy prices.
Economic Calendar
Earnings Calendar
Notable reports for Wednesday include AEO, AI, CNM, GME, PLAB, PLAY, SPWH, PATH, & VRNT.
News & Technicals’
The European Commission, the executive branch of the European Union, has announced that it has identified six tech giants as “gatekeepers” under its new Digital Markets Act (DMA) — a landmark law that aims to curb the power of the dominant digital platforms. The six gatekeepers are Alphabet, Amazon, Apple, ByteDance, Meta, and Microsoft. These are large digital companies that provide core platform services, such as online search engines, app stores, social networks, and messaging services. The DMA imposes a set of obligations and prohibitions on these gatekeepers to prevent them from abusing their market position and harming competition and consumers. The DMA is one of the first regulatory tools to comprehensively regulate the gatekeeper power of the largest digital companies. The DMA complements but does not change EU competition rules, which continue to apply fully. The European Commission is the sole enforcer of the DMA and will monitor the compliance of the gatekeepers with the law.
The U.S. government is facing the risk of a shutdown at the end of September unless Congress passes a spending bill to fund its operations. The White House and the leaders of both chambers of Congress have agreed to support a stopgap measure, also known as a continuing resolution, that would keep the government running until December 3. However, the stopgap measure still needs to be approved by both the House and the Senate, which could face some challenges from lawmakers who oppose certain provisions or demand additional funding for their priorities. A government shutdown would have negative consequences for the economy, public services, and federal employees. The last government shutdown occurred in 2018-2019 and lasted for 35 days, the longest in U.S. history.
Country Garden, a Chinese property developer, has seen its shares rise after it narrowly avoided defaulting on its bond payments. The company reportedly paid $22.5 million in bond coupon payments on Tuesday, just hours before a 30-day grace period expired. The bond payments were originally due in August, but Country Garden had requested an extension due to liquidity problems. The company has been facing financial difficulties amid the tightening regulations and slowing demand in China’s real estate sector. The successful payment of the bond coupons has eased some of the market concerns and boosted the confidence of the investors. Country Garden’s shares rose by 4.6% on Wednesday, outperforming the broader market.
Tuesday, the stock market closed with losses, while the bond market and the dollar gained. There was no major news that moved the market, but some weak economic data from abroad caught some attention. The services sector in China grew slower than expected in August, showing that the stimulus measures have not boosted consumption yet. Similarly, the final numbers for the services sector in the eurozone were lower than the initial estimates, indicating some slowdown in growth. The energy sector was the best performer today, as oil prices rose after Saudi Arabia announced that it would keep its voluntary production cuts until the end of the year. Oil prices reached a ten-month high of $87 per barrel. Today investors will have Mortgage Applications, International Trade, PMI, ISM, Beige Book, and some Fed speak along with a handful of notable earnings to find bullish or bearish inspiration.
