WMT Beats-Raises As Default Fears Ease

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Wednesday was the Bulls’ Day.  The SPY gapped up 0.52% and the DIA gapped up 0.54%.  Then after a modest 30-minute pullback, those bulls started running in a long, steady rally that took us to the highs of the day at about 2 pm.  Meanwhile, the QQQ was more muted, gapping up 0.34% and then recrossing the gap before the Bulls stepped in to drive that same long, steady rally to the highs at 2 pm.  From there, we saw very modest profit-taking and a sideways grind into the close near the highs in the SPY, DIA, and QQQ.  This action gave us large-bodied, white candles with larger lower than upper wicks in all three major indices.  The SPY and DIA both crossed back above their T-line (8ema) and DIA crossed back above its 50sma while QQQ continues its rally and is starting to get a bit extended above its own T-line.

On the day, nine of the 10 sectors were in the green with Financial Services (+2.29%) leading the way higher as Utilities (-0.11%) was the only red sector and lagged the rest.  At the same time, the SPY gained 1.19%, DIA gained 1.30%, and QQQ gained 1.21%.  VXX fell 3.32% to 36.36 and T2122 jumped back up out of the oversold territory to 66.67.  10-year bond yields spiked up to 3.581% while Oil (WTI) jumped up 2.62% to end at $72.72 per barrel.  So, Wednesday saw the three major indices get back “in sync” as the bulls ran and then modest profits were taken to end the day.  While volume was less-than-average, all three indices were closer to average volume than has been the case for several days.    

In economic news, Preliminary April Building Permits came in a bit shy of expectations at 1.416 million (compared to a forecast and prior month reading of 1.437 million).  This was a 1.5% month-on-month decline, which was improved from March’s 3.0% month-on-month decline.  However, at the same time, April Housing Starts were very slightly above expectation at 1.401 million (versus a forecast of 1.400 million and the March value of 1.371 million).  Later in the morning, EIA Weekly Crude Oil Inventories showed a much larger than expected inventory build of +5.040-million-barrels (compared to an expected drawdown of 0.920-million-barrels or the prior week’s 2.951-million-barrel increase in inventories).  With all that said, the main economic news came from the Debt Ceiling front.  Both President Biden and Speaker of the House McCarthy told the press (separate events) that the two sides are making progress and neither thinks the US will default on its debt. 

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In stock news, WAL gave an update on their deposits saying that they continue to rise in May after the March and early April spate of withdrawals. Elsewhere, the CEO of FSR told an automotive conference in Germany that the company is actively pursuing partnerships with rivals PSNY and an EV maker supported by Mercedes.  The partnerships are intended to allow the small EV companies to get to scale and work together to solve supply chain challenges that companies like TSLA can solve on their own.  Later, in other EV news, TM announced they are partnering with SZKMY (Suzuki) and Tokyo-listed Daihatsu on a mini-electric commercial van.  Each partner will release their own branded version of the vehicle later this year.  At the same time, PFE announced it is planning to raise $31 billion through its largest-ever debt offering.  PFE intends to use the proceeds to complete its $43 billion deal to acquire SGEN.  The debt offering is expected to close on May 19.  As the economy weakens, many grocery and household product makers are adding to their low-cost products and smaller-size packages specifically for dollar stores like DLTR and DG.  Among these, according to Reuters, are EPC, KHC, HSY, CAG, PG, and SJM, who all have dedicated dollar-store units or teams.  This falls in line with a Tufts University study that found dollar stores to be the fastest-growing US food and household goods retailers.  Meanwhile, FDX pilots voted overwhelmingly in favor of a strike if needed as the pilots union and company enter the final stages of negotiations.  (However, pilots cannot strike until after given permission by the National Labor Relations Mediation Board and after a cooling-off period if and when an impasse is reached.)  Finally, the Wall Street Journal reported that TPG and Francisco Partners are collaborating on a $5 billion bid to acquire NEWR.

In stock legal and regulatory news, Reuters reports that Qatar’s sovereign wealth fund (the second-largest shareholder of CS prior to its forced sale) is seeking legal help in an attempt to recover the haircut it took when CS was sold to UBS at “a fraction of its value.” At the same time, according to multiple sources, Reuters reported META is set to face an unspecified but claimed to be the largest fine ever levied by the EU.  The fine is a result of META failing to comply with warnings and deadlines from a top EU court and continuing to transfer European user data from EU-based servers to US-based servers.  (The prior record fine levied was $821.2 million levied against AMZN.)  In Congress, a bipartisan group of lawmakers introduced legislation making it illegal for automakers (including GM, F, STLA, TSLA, and VLKAF) from eliminating AM radios from new models of their vehicles.  The bill would direct the NHTSA to mandate that new cars include AM radio at no additional charge.  Elsewhere, AVGO has offered “interoperability remedies” in order to address EU antitrust concerns over its deal to acquire VMW for $61 billion.  The EU Antitrust Agency recently extended the deadline for its final decision to July 17.  Meanwhile, the FAA is forecasting a 4.5% increase in flights over the Memorial Day holiday period, expecting the total to be just shy of the pre-pandemic peak.  (DAL expects a 17% increase in passengers from 2022 while AAL and UAL both expect unspecified increases over last year.)  Then, after the close, WBA reached a $230 million settlement with the city of San Francisco over its role in the city’s opioid epidemic.

In miscellaneous news, on Wednesday, the NY Fed published a report that said the downside risk to the economy “eased a bit so far this year, but remains elevated.” At the same time, a Reuters poll of 116 economists found that 60% believe rates are at the same level they will be at year-end. Interestingly, 26% predict no hike and at least a 25-basis-point rate cut before year-end.  Only 14% are expecting another rate hike by the end of the year.  Meanwhile, the Fedwatch Tool tells us markets (futures) are pricing in a 29% chance of a quarter-point hike in June.  However, those futures also see a 43% chance of a rate cut in September, a 79% probability of a cut in November, and a 95% chance of a rate cut in December. So, somebody is (or somebodies are) wrong. The question is whether it is the market, the majority of economists, the Fed, or some combination of the three.

After the close, CSCO, SNPS, CPRT, STNE, and TTWO all reported beats on both the revenue and earnings lines.  Meanwhile, VSAT and ZTO both missed on revenue while beating on earnings.  It is worth noting that CSCO, SNPS, and STNE all raised their forward guidance.  Meanwhile, TTWO lowered its forward guidance.

Overnight, Asian markets leaned heavily to the green side.  Japan (+1.60%), Taiwan (+1.11%), and Hong Kong (+0.85%) led the region higher while only India (-0.28%) and Shenzhen (-0.12%) showed any red.  Meanwhile, in Europe, the bourses are mixed at midday with the big exchanges rallying.  The DAX (+1.68%), CAC (+0.92%), and FTSE (+0.55%) are leading the region higher in early afternoon trade.  In the US, at 7:30 am, Futures are pointing toward a modestly green start to the day.  The DIA implies a +0.09% open, the SPY is implying a +0.22% open, and the QQQ implies a +0.27% open at this hour.  At the same time, 10-year bond yields are rising again at 3.6% and Oil (WTI) is flat at $72.80/barrel in early trading.  

The major economic news events scheduled for Thursday include Philly Fed Mfg. Index and Weekly Initial Jobless Claims (both at 8:30 am), April Existing Home Sales (10 am), Fed Balance Sheet and Bank Balances with the Fed (both at 4:30 pm).  We will also have testimony from Fed Vice Chair (for Bank Supervision) Barr at 9:30 am.  The major earnings reports scheduled for the day include WMS, BABA, BBWI, CSIQ, DOLE, GRAB, BEKE, MSGE, and WMT, before the open.  Then, after the close, AMAT, CVCO, DXC, FTCH, FLO, GLOB, and ROST report. 

In economic news later this week, on Friday, we hear from two Fed speakers (Chair Powell and Williams).  In terms of earnings reports later this week, Friday, we hear from DE and FL.

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So far this morning, WMT, BEKE, CSIQ, WMS, MSGE, and EXP all reported beat to both the revenue and earnings lines.  Meanwhile, BABA, DOLE, and BBWI all missed on revenue while beating on earnings.  It is worth noting that BEKE and WMT have raised forward guidance while WMS lowered its guidance.  It is also worth noting the MSGE has a 132% upside earnings surprise, BEKE posted a 100% upside surprise on earnings, CSIQ posted a 95% upside surprise on earnings, DOLE posted a 79% upside surprise on earnings, and WMS had a 56% upside surprise on earnings.  So, the sandbagging remains strong.

With that background, it looks like all three major indices are running up to test the next potential resistance level in premarket trading. DIA is also retesting its recent downtrend line. However, it is the QQQ (and the handful of massive tech names) that are leading this march higher, until yesterday’s good news gave financials a boost. Over-extension from the T-line is not a problem in general. However, QQQ is getting stretched. Still, the T2122 indicator sits in the mid-range telling us we have at least a little room to move. Be careful of chop and watch for rotation if traders start to think we are overcooked and look to start locking in profits. We still cannot say we have a nicely trending market anywhere except for the QQQ.

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

TC2000 Discount

🎯 Mike Probst: Rick, Got CTL off the scanner today. Already up 30%. Love it.

🎯 Dick Carp: 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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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.

Free YouTube Education  •  Subscription Plans • Private 2-Hour Coaching

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

Retail Sales

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Retail Sales

Tuesday turned out to be a rough day for the DIA, SPY, and IWM after the Home Depot miss and a retail sales report that came in short of expectations.  Of course, the debit ceiling negotiation cloud hanging over the market didn’t help the overall sentiment but now it seems there has been some progress with the President seeming willing to negotiate.  Expect a market reaction if a deal is finally struck.  Target’s earning report seems to have left a mixed reaction as evidence of a slowing economy continues to grow.  Mortgage Apps, Housing, and Petroleum figures are on deck with several earnings reports that could be market-moving. 

Overnight Asian markets traded mixed in reaction to economic data and monitoring debit ceiling negations. However, European markets trade flat to mostly lower this morning with Commerzbank down 6%.  On the other hand, U.S. futures seem to have a very different opinion pushing for a bullish open and working to recover some of yesterday’s losses.

Economic Calendar

Earnings Calendar

Notable reports for Wednesday BOOT, CPRT, CSCO, JACK, STNE, SNPS, TTWO, TGT, TJX, TCOM, WIX, & ZTO.

News & Technicals’

According to reports, there was some progress made in the negations of the debit ceiling between the President and the Speaker of the house.  This continues to weigh on the mind of the market and as information rolls out on this issue expect it to have market ramifications. 

Kraft Heinz is introducing HEINZ REMIX™, a digital sauce dispenser that lets customers create their customized condiments. The dispenser has a touchscreen that offers a choice of four bases and four enhancers, with three intensity levels, resulting in over 200 possible combinations. The company aims to attract consumers who want more variety, spiciness, and sweetness in their sauces and to use the data from the dispenser to inform its future product launches in grocery stores. The innovation is part of Kraft Heinz’s turnaround strategy that focuses on its away-from-home segment.

Target reported better-than-expected earnings for the first quarter of fiscal 2023, despite a slight decline in sales. The retailer earned $1.89 per share, beating the consensus estimate of $1.40 by 35%. However, its revenue fell 0.8% year over year to $25.37 billion, as consumers became more cautious about their spending amid inflation and recession fears. Target’s comparable sales also dipped 0.5% in the quarter. The company said it was focused on investing in its stores, digital capabilities, and merchandise assortment to gain market share and drive long-term growth.

Equities fell on Tuesday after Retail sales missed estimates and Home Depot disappointed on earnings guiding lower for the next quarter. Markets were disappointed by weak consumer-spending data and worried about the debt-ceiling deadline. Small-cap stocks suffered more today, signaling a gloomier economic outlook. This was also reflected in sector performance, with cyclical sectors like energy, real estate, and industrials among the worst performers. Treasury yields edged up slightly on the day with Fed speakers suggesting they will hold the line on rates and still willing to raise them if necessary to achieve their 2% target.  Today markets will have Mortgage Applications, Housing Starts, and Peterleum numbers along with several earnings reports with a retail theme for the day.

Trade Wisely,

Doug

Fed Gives Pause Doubt and TGT Mixed ER

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On Tuesday, markets saw a modest gap lower at the open (down 0.27% in the SPY, down 0.30% in the DIA, and down 0.21% in the QQQ).  However, those three major indices diverged at the point, with the QQQ immediately rallying (recrossing the gap within 5 minutes and continuing higher at 1 pm), the SPY trading sideways along its opening level, and the DIA selling off until 10:15 am and then trading sideways until about 1 pm.  At about 1 pm, all three got back in sync by starting a wavy selloff that lasted into the close.  This action gave us a white-bodied candle with a large upper wick in the QQQ, a black-bodied candle with a significant upper wick in the SPY, and a large-bodied black candle in the DIA.  The SPY fell down through its T-line (8ema) while the DIA failed a retest of its 50sma after holding up above the previous three days.

On the day, all 10 sectors were in the red with Utilities (-2.11) leading the way lower as Technology (-0.25%) held up significantly better than any other sector.  At the same time, the SPY lost 0.67%, DIA lost 1.02%, and QQQ gained 0.11%.  VXX was up more than 3% to 37.61 and T2122 climbed dropped back down into the oversold territory at 14.79.  10-year bond yields spiked up to 3.541% while Oil (WTI) fell 0.76% on the day to end at $70.57 per barrel.  So, Tuesday was a divergent day that saw the mega-cap DIA fall out of its recent range, large-cap SPY stay at the lower end of its recent range, and QQQ stay inside the top of its recent range.  This came on very divergent moves in the QQQ as AMD, AMZN, and GOOGL essentially held up that index on their own.  Once again, this happened on well less-than-average volume across all three of the major indices.    

In economic news, April Retail Sales came in much lower than was expected at +0.4% (compared to a forecast of +0.8% but also far better than the March reading of -0.7%).  Later, April Industrial Production month-on-month came in much better than expected at +0.5% (versus a forecast of -0.1% and the March reading of +/- 0.0%). On an annual basis, Industrial Production was up 0.24% (and last year had been up 0.07% versus the 2021 reading). March Business Inventories were a bit lower than expected at -0.1% (compared to the forecast of +0.1% and the February value of +0.2%).  In addition, March Retail Inventories also grew less than expected at +0.3% (versus the forecast and February reading which were both +0.4%).  Finally, after the close, the API Weekly Crude Oil Stocks report showed a 3.690-million-barrel inventory build (compared to an expected drawdown of 1.300-million-barrels but in line with the prior week’s value of a 3.618-million-barrel inventory build).

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In Fed talk, Cleveland Fed President Mester said Tuesday that she does not think the FOMC is at a point where it can hold rates steady for a period of time.  Specifically, she said, “Have we gotten to that rate yet? At this point, given the data we’ve gotten so far, I would say no.”  Later Richmond Fed President Barkin told Bloomberg “I do want to learn more about what’s happening with all these lagged effects.  But I also want to reduce inflation…and if more increases are what’s necessary…I’m comfortable doing that.”  However, NY Fed President Williams told a university audience he was more comfortable with a “pause and see” approach, telling them “We know it takes a while for our decisions to fully affect the economy” … “We’ve got to make our decisions and then watch what happens, get that feedback, see how the economy’s behaving.”  Then Dallas Fed President Logan told a Fed conference “(Changing rates in) smaller, less frequent steps can make it less likely that FOMC monetary policy causes US financial instability.”

In stock news, CNBC (citing sources) reported that CMCSA is likely to sell its 33% stake in the Hulu streaming platform to DIS between now and early next year.  Later, an investing consortium including BX and TRI released a term sheet stating that it is going to sell $3 billion worth of stock in the London Stock Exchange, which would be approximately 5.5% of the exchanges voting shares.  Mid-day, the CEO of OpenAI (creator of ChatGPT) and IBM both told US Senators that artificial intelligence needs to be heavily regulated…but also that we shouldn’t stifle innovation or the great benefits AI could offer.  Testimony from the two raised fears of AI spreading misinformation, influencing elections, infringing copyrights, and upending the economy by replacing swaths of jobs.  (Needless to say, MSFT, GOOGL, and many others companies that have gone “full speed ahead” on AI were likely not pleased by the news.)  Also in the afternoon, a German Automobile Club study found that TSLA Model 3 vehicles dominated its internal combustion engine competitors in terms of reliability for cars older than three years finding that just 1.1 out of every 1,000 2020 TSLA Model 3 broke down annually.  (6.9 breakdowns per 1,000 was the average for gas vehicles and 4.9/1000 was the EV average.)  Elsewhere, after the close, NYCB announced that the FDIC is selling shares of the bank that were acquired during the seizure of SBNY in what amounts to a secondary share offering.  Meanwhile, NOW announced its first-ever stock buyback program of up to $1.5 billion.  Finally, it was announced that the new entity created by the combination of WWE and EDR will trade under the ticker TKO (TKO Group).

In stock legal and regulatory news, the FTC said Tuesday that it will sue to prevent the proposed AMGN $27.8 billion purchase of HZNP which would give AMGN monopoly positions in the treatments in certain diseases.  Meanwhile, the NHTSA announced that STLA is recalling 219,000 2014-2016 Jeep Cherokee SUVs over fire risks due to electrical shorts in the power liftgate.  Later in the day, Reuters reported that WFC has agreed to pay $1 billion to settle a lawsuit that accused the company of defrauding shareholders by misinforming them about its progress in recovering from a series of scandals.”  A US District judge has granted preliminary approval to an all-cash settlement of the suit, but the deal will not be final until a hearing in early September.  Elsewhere, Reuters reports that JNJ has set aside $400 million in a separate fund to resolve State AGs claims that it violated state unfair business practices and consumer protection laws as part of its second attempt to settle 38,000 lawsuits over talc product liability.  (JNJ’s second bankruptcy plea offered $8.9 billion to settle the 38,000 cases.)  At the same time, a US Appeals Court has ruled in favor of GE, HD, and Ikea and against the University of CA, which had sought to ban the import of light bulbs that infringe on the university’s patents. (Lawsuits against AMZN, WMT, and TGT had also  been paused waiting on the outcome of this ruling.)   After the close, MAR settled with the state of TX and agreed to “prominently display all resort fees” to increase price transparency.  This comes a day after the TX State AG filed suit against H for misleading consumers with marketing and hidden fees. 

Overnight, Asian markets were mixed but leaned toward the red side.  Hong Kong (-2.09%) and Thailand (-1.25%) were by far the biggest losers while Taiwan (+1.60%), Japan (+0.84%), and South Korea (+0.58%) were the only appreciable gainers on the day.  Meanwhile, in Europe, the bourses lean heavily to the red side at midday.  The DAX (+0.43%) is an outlier while the CAC (-0.01%) and FTSE (-0.07%) are typical of the small losses being registered across most of the region 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 +0.41% open, the SPY is implying a +0.37% open, and the QQQ implies a +0.23% open at this hour.  At the same time, 10-year bond yields are back down to 3.519% and Oil (WTI) is up a half of a percent to $71.23/barrel in early trading.

The major economic news events scheduled for Wednesday are limited to April Building Permits and April Housing Starts (both at 8:30 am), and EIA Crude Oil Inventories (10:30 am).  The major earnings reports scheduled for the day include ARCO, TGT, and TJX before the open.  Then, after the close, SQM, CSCO, STNE, SNPS, TTWO, VSAT, and ZTO report.   

In economic news later this week, on Thursday we get Weekly Initial Jobless Claims, Philly Fed Mfg. Index, April Existing Home Sales, Fed Balance Sheet, and Bank Balances with the Fed.  Finally, on Friday, we hear from two Fed speakers (Chair Powell and Williams).

In terms of earnings reports later this week, Thursday, WMS, BABA, BBWI, CSIQ, DOLE, GRAB, BEKE, MSGE, WMT, AMAT, CVCO, DXC, FTCH, FLO, GLOB, and ROST report.  Finally, on Friday, we hear from DE and FL.

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After the close, KEYS and KD both reported beats to both the revenue and earnings lines.  It is worth noting that KEYS raised its forward guidance while KD lowered it own guidance.  So far this morning, TCEHY and ARCO have reported beats to both the revenue and earnings lines.  Meanwhile, TGT and TJX both missed on revenue while beating on earnings.  (This includes a 50% upside earnings surprise from ARCO and an 18% upside earnings surprise by TGT.)

With that background, it looks like the SPY is retesting its T-line and the QQQ continues its march higher, at least as of the premarket. Even DIA is trying to climb back above its 50sma (and back into the recent trading range). Over-extension is not a problem yet in terms of distance from the T-lines. However, the T2122 indicator is back in the oversold region. Be careful of the chop and watch for rotation given the divergence of short-term attitudes of the SPY, DIA, and QQQ. We still do not have a nicely trending market anywhere except the QQQ.

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

TC2000 Discount

🎯 Mike Probst: Rick, Got CTL off the scanner today. Already up 30%. Love it.

🎯 Dick Carp: 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.

Free YouTube Education  •  Subscription Plans • Private 2-Hour Coaching

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

Another Day of Chop

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Another Day of Chop

The indexes finished the day about where they began the day with modest gains in another day of chop despite a truly awful Empire State MFG report showing a massive decline in the sector.  The capacity for the market to continue to ignore these data points is remarkable and makes one wonder if its actual market strength or complacency. With an earnings miss from HD this morning we have Retail Sales, Industrial Production, Inventories, the Housing Index, and several Fed speaker to keep traders on edge.  Plan for yet another day of uncertainty while hoping something happens to end the range-bound chop.

As we slept Asian market traded mixed with modest gains and losses after China reported better-than-expected retail sales activity. European markets trade with modest gains this morning as they monitor the U.S. debt ceiling negotiation progress and economic data.  Ahead of a big morning of earnings and economic reports along with Fed speakers while wrangling over the debt ceiling continues, futures suggest a bearish open.

Economic Calendar

Earnings Calendar

Notable reports for Tuesday include AGYS, BIDU, HUYA, KEYS, KD, HD, SE, SSYS, TME, & TUP.

News & Technicals’

The debt limit crisis is looming over Washington as President Joe Biden and House Speaker Kevin McCarthy are set to meet again on Tuesday with other top lawmakers. The meeting comes after a week of daily negotiations between staff from both parties, but with no clear sign of a breakthrough. The federal government could face a default on its obligations as soon as early June if Congress does not raise the debt ceiling, which limits how much the government can borrow to pay its bills. Biden and McCarthy have been at odds over how to address the issue, with Biden calling for a bipartisan solution and McCarthy insisting that Democrats act alone.

Home Depot, the largest home improvement retailer in the U.S., reported disappointing results for the fiscal first quarter of 2023. The company missed analysts’ estimates for revenue and lowered its outlook for the full year, citing weaker demand for big-ticket items and smaller home improvement projects. Home Depot’s Chief Financial Officer Richard McPhail said that customers are spending less on items such as patio sets and grills, which typically drive sales in the spring season. He also attributed the lower revenue to colder weather and falling lumber prices, which reduced the average ticket size.

China’s crackdown on due diligence consultancies, such as Capvision, has raised concerns among foreign investors about the country’s openness and transparency. Capvision is the latest firm to be accused of violating national security laws by providing sensitive information to overseas clients. This follows the recent restrictions on foreign access to China’s data and information platforms, which have hampered the ability of investors to conduct research and analysis. Some experts argue that China’s enforcement of its anti-espionage law is arbitrary and vague, as the term “national security” is not clearly defined or delimited.

Despite a terrible Empire State Mfg. number the indexes experienced another day of chop ending the day slightly positive about exactly where they began the day.  Retail giants, HD, Target, and Walmart prepare to report their earnings and lawmakers will meet this afternoon hoping to reach a deal on the debt limit. The Nasdaq led the gains among the major indexes, while the S&P 500 Index and Dow Jones also advanced. Treasury yields edged up, with the 2-year Treasury yield approaching 4.0% again. However, yields are still well below their early March peaks. The market expects the Fed to lower rates by September but that thought process does not seem to be shared by the voting members of the Fed.  We shall see!  Oil prices also rose slightly, with WTI crude oil recovering above $71, but still down by about 11% this year. Today before the bell we have the market moving Retail Sales figures followed by Industrial production, Inventories, Housing Market along with several Fed speakers. 

Trade Wisely,

Doug

HD, Debt Ceiling Meeting and Fed Speakers

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Markets opened very modestly higher Monday (up 0.14% in the SPY, up 0.09% in the DIA, and up 0.15% in the QQQ).  However, after that open the Bears stepped in to recross the gap and reach the lows of the day at about 10:15 am. From there, the Bulls took the three major indices on a slow, wavy rally that reached the highs of the day at about 1:15 pm.  At that point, we took some profits and then ground sideways in a tight range not too far off the highs.  This action gave us indecisive candles in the SPY, DIA, and QQQ.  The DIA printed a Doji Bullish Harami, the SPY printed a white-bodied Spinning Top Bullish Harami, and the QQQ gave us more of a larger white-bodied Hammer-type candle.  The SPY and QQQ remain above their T-line (8ema) while the DIA remains below its own T-line but also remained above its 50sma.

On the day, nine of the 10 sectors were in the green as Technology (+1.30%) led the way higher while Utilities (-0.79%) lagged behind the other sectors.  At the same time, the SPY gained 0.33%, DIA gained 0.17%, and QQQ gained 0.54%.  VXX was down 2.69% at 36.50 and T2122 climbed back up while remaining in the mid-range at 61.70.  10-year bond yields climbed back to end up to 3.496% while Oil (WTI) gained 1.48% on the day to end at $71.12 per barrel.  So, Monday was an indecisive yet overall bull market that nudged a bit higher.  This came despite very disappointing economic news prior to the open.  And, once again, this happened on well less-than-average volume across all three major indices.    

In economic news, the New York Fed Empire State Manufacturing Index came in far below expectations at -31.80 (compared to a forecast of -3.70 and the April value of +10.80). In Fed speak, Chicago Fed President Goolsbee said Monday that his decision to support a quarter-point hike at two weeks ago was a “close call.”  He went on to say that the thing which gave him pause on a last hike was the potential impact of a hike on credit conditions.  Elsewhere, Atlanta Fed President Bostic told CNBC that if there was a vote Monday, he would vote to hold rates flat.  He went on to say “The appropriate policy is really just to wait and see how much the economy slows from the policy actions that we’ve (already) had.”  However, at the other end of the spectrum was Minneapolis Fed President Kashkari, who told a conference the Fed probably has “more work to do on our end, to try to bring inflation back down.”  He is joined on that side by Richmond Fed President Barkin who told Reuters “You could tell yourself a story where inflation comes down relatively quickly … with only a modest economic slowdown (but) I’m not yet convinced … I do wonder whether we’re not going to need more impact on demand to bring inflation down to where we need to go.”

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In stock news, Reuters reported Monday that WDC and Kioxia (formerly Toshiba’s Memory Business Unit) are speeding up their merger talks in a very tough business environment for computer memory makers.  If agreed, the deal would likely face tough antitrust challenges since the two are the #2 and #4 flash memory makers in the world.  WDC closed up 11.26% on the story Monday. Elsewhere, STLA has stopped the work on construction of a $3.74 billion battery plant in Windsor CA over a disagreement on subsidies. (STLA is now demanding that the CA government give it the same subsidies and grant very recently offered to VWAGY (Volkswagen) in order to get them to commit to building a battery plant in Canada.  STLA made their location decision in 2022 and had already begun plant construction prior to the VWAGY deal.)  In other EV news, FSR announced Monday that it is accelerating production of its Ocean SUV, raising its output goal to between 1,400 and 1,700 by the end of June.  Meanwhile, HEI announced it has reached a deal to buy Wencor (private) for just over $2 billion in order to fill out its portfolio of generic aerospace parts.  In that space, late in the day, Bloomberg reported that DAL is in talks with EADSY (Airbus) for a large wide-body jet order.   At the same time, Reuters reported that CEO Elon Musk has told TSLA management that there can be no hires (including contractors) unless he personally approves the hiring request.  For reference, TSLA has 128k employees at the moment.  Finally, after the close Monday, BRKB said it has begun investing in COF and that it no longer has a position in BK.  This was a somewhat odd information release since regulatory filings back on March 31 had shown this to be the case.

In stock legal and regulatory news, in an interesting twist to a saga that was thought to be dead, the EU gave antitrust approval to the MSFT $69 billion purchase of ATVI.  However, MSFT still faces an uphill battle in overturning the British veto of this acquisition.  MSFT has until May 24 to appeal the denial from the British Competition and Marketed Authority.  In other European legal news, a French prosecutor in Paris has opened a judicial inquiry into “planned obsolescence” and “deceptive marketing” of AAPL products stemming from a December 2022 complaint.  Elsewhere, GS was fined $7.3 million by the ECB for underreporting the risk associated with some corporate loans between 2019 and 2021.  Meanwhile, ABT was sued Monday in a proposed class action suit claiming the company advertising misled consumers into believing its PediaSure product would increase the height of children.  On the docket for Tuesday will be AI regulation as the CEO of OpenAI will appear before a US Senate panel that is considering several different approaches to AI regulation.  MSFT and GOOGL will be the most obviously impacted companies from such regulation.  However, IBM, BABA, BIDU, AMZN, CRM, NVDA, TMPS, TSLA, and dozens of other companies offer or use AI already and could be impacted. Finally, Elon Musk lost his appeal to the US Second Circuit Court of Appeals.  Musk’s appeal was an attempt to overturn his settlement with the SEC which requires the advance review of any tweets Musk puts out containing information about TSLA after Musk’s tweets misled investors in 2018.  (Musk also paid a $20 million fine and was forced to temporarily step down as CEO of TSLA.)

In miscellaneous news, the US Dept. of Energy said after the close that it will purchase 3 million barrels of crude oil to begin filling the Strategic Petroleum Reserve with offers to be submitted by May 31 for delivery in August. Elsewhere, the NY Fed released data showing that the demand for new mortgages had slowed substantially in Q1.  The Fed said this demand fell to the lowest Q1 level since 2014, even after overall mortgage debt rose $121 billion from Q4 to $12.04 trillion.  This came as overall household debt levels rose 0.9% to $17.05 trillion. 

Overnight, Asian markets were mixed.  Taiwan (+1.28%) and Japan (+0.73%) led the gains while Shenzhen (-0.71%), India (-0.61%), and Shanghai (-0.60%) paced the losses.  In Europe, we see a similar picture taking shape at midday.  Belgium (-1.11%) is by far the biggest mover.  However, the CAC (+0.07%), DAX (+0.12%), and FTSE (+0.13%) lead the more plentiful green bourses in early afternoon trade.  In the US, as of 7:30 am, Futures are pointing to a mixed start to the day.  The DIA implies a -0.23% open, the SPY is implying a -0.07% open, and the QQQ implies a +0.03% open at this hour.  At the same time, 10-year bond yields are down a bit to 3.478% and Oil (WTI) is off a quarter of a point to $70.95/barrel in early trading.

The major economic news events scheduled for Tuesday include April Retail Sales (8:30 am), April Industrial Production (9:15 am), March Business Inventories and the March Retail Inventories (both at 10 am), and the API Weekly Crude Oil Stocks report (4:30 pm).  We also have Fed speakers (Mester at 8:15 am, Bostic at 8:55 am, Barr testifies at 10 am, Williams at 12:15 pm, and Bostic again at 7 pm).  There will also be another meeting between President Biden and the leaders of both parties from Congress over the debt ceiling (and budget deficit).  The major earnings reports scheduled for the day include BIDU, HD, IQ, SE, and TME before the open.  Then, after the close, CPRT, KEYS, KD, and PTC report.  

In economic news later this week, on Wednesday, April Building Permits, April Housing Starts, and EIA Crude Oil Inventories are reported.  On Thursday we get Weekly Initial Jobless Claims, Philly Fed Mfg. Index, April Existing Home Sales, Fed Balance Sheet, and Bank Balances with the Fed.  Finally, on Friday, we hear from two Fed speakers (Chair Powell and Williams).

In terms of earnings reports later this week, Wednesday, we hear from ARCO, TGT, TJX, SQM, CSCO, STNE, SNPS, TTWO, VSAT, and ZTO.  On Thursday, WMS, BABA, BBWI, CSIQ, DOLE, GRAB, BEKE, MSGE, WMT, AMAT, CVCO, DXC, FTCH, FLO, GLOB, and ROST report.  Finally, on Friday, we hear from DE and FL.

LTA Scanning Software

After the close, NU and XP both reported beats on the revenue and earnings lines.  So far this morning, BIDU, TME, and ONON have reported beats on both the revenue and earnings lines. Meanwhile, HD missed on the top line while beating on earnings.  At the same time, SE and IQ have missed on both the top and bottom lines.  It’s worth noting that ONON has raised guidance while HD lowered its forward guidance.

With that background, it looks like the premarkets are pulling back from earlier highs. However, all three major indices still are hanging inside their recent tight chopping range. The SPY and QQQ remain above their T-lines and the DIA remains below its own 8ema. Only the QQQ has been clearly trending bullishly of late with the SPY grinding sideways and the DIA leaning to the bearish side of trend. With that said, DIA is sitting on a potential support level and the SPY has one just below. All three major indices have a little room above before hitting the next potential resistance level. Over-extension is not a problem yet, either in terms of distance from the T-lines or in terms of the T2122 indicator. So, be careful given the chop and divergence of short-term attitudes of the SPY, DIA, and QQQ.

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

TC2000 Discount

🎯 Mike Probst: Rick, Got CTL off the scanner today. Already up 30%. Love it.

🎯 Dick Carp: 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.

Free YouTube Education  •  Subscription Plans • Private 2-Hour Coaching

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

Battled for Dominance

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Battled for Dominance

The bulls and bears battled for dominance last week with the QQQ trend remaining bullish while the other indexes continue to chop in the same price range they have been stuck in for weeks.  Unfortunately, regional banking outflows continued last week which is a troubling problem as the economy continues to slow.  Today we have to deal with Empire Stae MFG numbers, several fed speakers, and a declining number of earnings reports to find inspiration for movement.

While we slept Asian markets mostly rallied with Hong Kong leading the way up 1.79%.  European markets also trade with modest gains across the board this morning as they monitor Turkish election results.  U.S. futures recover from overnight losses to suggest a bullish open despite the uncertainties in the regional banking sector. Watch for a possible morning whipsaw with substantial resistance levels above for the DIA, SPY, and IWM.

Economic Calendar

Earnings Calendar

We have a retail theme on the earnings calendar this week.  Notable reports for Monday include CTLT, RIDE, TSEM, & NVTS.

News & Technicals’

Vice Media, a digital media company that produces news, culture, and entertainment content, has filed for bankruptcy protection and agreed to sell most of its assets to a group of lenders led by Fortress Investment, Soros Fund Management, and Monroe Capital. The deal, which values Vice at $225 million, will allow the company to shed some of its debt and restructure its business amid declining revenues and audience. 

The pandemic has led to a surge in the average age of cars and trucks on U.S. roads, reaching 12.5 years in 2023, according to S&P Global Mobility. This is the largest annual increase since the financial crisis of 2008-2009 when people delayed buying new vehicles due to economic uncertainty. The aging of the vehicle fleet benefits aftermarket parts retailers such as AutoZone, O’Reilly Automotive, and Advance Auto Parts, who can expect more demand for their products and services. The number of vehicles in operation in the U.S. also rose slightly to 284 million in 2023, from 283 million in 2022.

Some crypto companies are threatening to leave the U.S. if the SEC does not ease its regulatory pressure on the industry. They are trying to use their influence and leverage to persuade the SEC to adopt a more favorable approach to crypto innovation and adoption. However, it is unclear if they will follow through on their threats, as the U.S. is a major market for crypto, with more than 50 million Americans owning some form of digital currency.

Markets were lower on Friday as the bulls and bears battled for dominance amid regional bank worries. The outperformance this week comes from the communication services and consumer discretionary sectors, while areas like energy, materials, and financials all underperformed. Treasury yields remain well below the fed funds rate, with the 2-year Treasury now just under 4.0%. This comes as markets continue to price in Fed rate cuts by the September FOMC meeting. Meanwhile, the number of earnings decline provided less inspiration though there is a retail theme this week.  Furthermore, traders will have decisions to make based on Empire State MFG. numbers with several fed speakers yacking it up throughout the day.

Trade Wisely,

Doug

Bulls Pushing in Premarket to Start Week

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On Friday, markets opened very modestly higher (up 0.29% in the SPY, up 0.35% in the DIA, and up 0.17% in the QQQ).  However, then the Bears took over for most of the day as all three major indices sold off slowly and reached the lows of the day at about 2:30 pm.  At that point, the Bulls stepped in to lead a steady rally up off the lows for the last 90 minutes of the day.  This action gave us black-bodied, Hammer-like candles in the SPY, DIA, and QQQ.  With that said, the QQQ bounced up off its T-line (8ema) while printing a Bearish Engulfing signal (that engulfed a white Spinning Top) on what was the largest-bodied Hammer of the three.  At the same time, the SPY retested and managed to hold its T-line.  Meanwhile, the DIA lagged and did not manage to even retest its T-line during the day.

On the day, six of the 10 sectors were in the green (although only two of them were more than just marginally green).  Utilities (+0.59%) and Energy (+0.46%) led the way higher while Consumer Cyclical (-0.77%) lagged behind the other sectors.  At the same time, the SPY lost 0.13%, DIA lost 0.04%, and QQQ lost 0.36%.  VXX was flat at 37.51 and T2122 fell but remains in the mid-range at 27.46.  10-year bond yields spent the day climbing back to end up just positive at 3.453% while Oil (WTI)fell 1.20% on the day to end at $70.09 per barrel.  So, Friday consisted of 5 hours of slow, steady, bearish action followed by 90 minutes of bullish relief.  This all happened on well less-than-average volume across all three major indices.    

In economic news, April Export Price Index came in just as anticipated at +0.2% (right on the forecast but well above the March value of -0.6%).  However, the April Import Price Index came in above expectation at +0.4% (compared to a forecast of +0.3% and also far above the March reading of -0.8%).  Later, Michigan Consumer Sentiment was reported well below expectation at 57.7 (versus a forecast of 63.0 and the April reading of 63.5).  Elsewhere, Fed uber-hawk Bullard told a Hoover Institution conference that “Monetary policy is now at the low end of what is arguably sufficiently restrictive given current macroeconomic conditions.” He went on to say “the prospects for continued disinflation are good but not guaranteed.”  Finally, President Biden nominated sitting Fed Board member Philip Jefferson to become Fed Vice Chair and current World Bank representative from the US Adriana Kugler to take Jefferson’s seat on the Fed if, in fact, Jefferson is confirmed by the Senate.

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In stock news, on Friday, Twitter announced that Elon Musk will be stepping down as CEO in six weeks, to be replaced by a former NBC (owned by CMCSA) Advertising Executive, while Musk remains as Chairman and “Chief Technology Officer.”  This move is aimed at easing the fears of advertisers who have taken away business and expressed serious concerns since Musk took over the company.  In other big tech news, NFLX told the Wall Street Journal on Friday that it’s planning to reduce spending by $300 million in 2023.  However, the company also said it won’t implement a hiring freeze or additional layoffs.  In the afternoon, TSLA announced it had received an endorsement for its “Full Self Driving” program in China by the Shanghai Municipal Commission.  Elsewhere in electric auto news, FSR announced that it is postponing the release of its “Pear” model until 2025.  Meanwhile, solar stocks soared Friday after new guidance from the Treasury Dept. clarified the clean energy tax incentives that are available to customers installing solar panels.  This included FSLR (+26.48%), ARRY (+16.00%), and ENPH (+4.20%) among others.   After the close, the CEO of PFE told Reuters that negotiating with Medicare over drug prices is like “negotiating with a gun to your head.”  While he said he was unaware of plans Friday, he told the outlet that he expects drug companies to sue in order to block the requirement that drug companies must negotiate the prices they charge.  (This might just be relying on a conservative court system and Supreme Court to lean in favor of business since drug companies already negotiate prices with insurance plans as well as other countries.)

In stock legal and regulatory news, EU antitrust regulators postponed the deadline for their decision on the AVGO proposed $61 billion acquisition of VMW until June 26.  At the same time, HSBC agreed to pay $75 million to settle CFTC (US Commodity and Futures Trading Commission) charges of manipulative and deceptive trading as well as record-keeping failures by the firm.  Meanwhile, China announced their equivalent of a recall, saying TSLA had agreed to fix the software on 1.1 million Model S, Model X, and Model 3 TSLA vehicles (nearly every car the company has ever sold in China).  This is intended to fix a brake failure issue and will be done via over-the-air software updates starting May 29.  (The US NHTSA said it is aware of the problem and is still gathering information related to TSLA vehicles in the US.)  Elsewhere, the business lobby Chamber of Commerce has sued the SEC in an effort to get a new rule forcing corporations to disclose more information about their share buyback programs.  Later, GOOGL agreed to pay the state of TX $8 million to settle claims of deceptive advertising related to the Pixel 4 smartphone.  Toward the end of the day, TSLA Model S and Model X owners sued TSLA over software updates that decreased driving range or caused battery failures in their cars.  The case claims TSLA violated both state and federal laws and has been proposed as a class action suit.  In other auto news, after the close Friday, the NHTSA announced that GM is recalling 1 million SUVs in the US due to the possibility of the airbag inflator exploding during deployment.  This includes the 2014-2017 model years of many different GM brands.  This was part of 67 million airbag inflators that were made by Delphi (which is now owned by ALV) that the company is refusing to recall

In miscellaneous news, the Fed reported Friday that the amount of money parked in money-market funds rose to an all-time high for the second straight week.  Despite this, the Fed also reported that US bank deposits rose in early May, ticking up from the lowest level in two years while bank lending did not change appreciably and remains at that low level.  Elsewhere, in potentially ominous news for the tech industry, China’s largest smartphone manufacturer (Oppo) announced that it is closing its chip design business unit as the global smartphone market continues to decline.  Finally, the Wall Street Journal reported Saturday that AMZN has “optimized” its delivery network.  The redesign results in products having 12% fewer touchpoints prior to being delivered.  At the same time, AMZN is offering US customers $10 to pick up a purchase rather than have it delivered to a home address. 

Overnight, Asian markets leaned to the green side.  Hong Kong (+1.75%), Shenzhen (+1.57%), and Shanghai (+1.17%) led the region higher while Thailand (-1.28%) was the main loser.  In Europe, the bourses are green across the board at midday.  The CAC (+0.48%), DAX (+0.25%), and FTSE (+0.47%) lead the region with Russia (+1.54%) oddly being the largest gainer in mid-afternoon trade.  In the US, as of 7:30 am, Futures are pointing toward a modest gap higher to start the day.  The DIA implies a +0.36% open, the SPY is implying a +0.36% open, and the QQQ implies a +0.26% open at this hour.  At the same time, 10-year bond yields are up to 3.487% and Oil (WTI) is up 0.57% to $70.44/barrel in early trading.

The major economic news events scheduled for Monday is limited to NY Empire State Mfg. Index (8:30 am) and a Fed speaker (Kashkari at 9:15 am).  The major earnings reports scheduled for the day include CTLT, AZUL, CGAU, and GOGL before the open.  Then, after the close, JHX, NU, and XP report. 

In economic news later this week, on Tuesday, we get April Retail Sales, April Industrial Production, March Business Inventories, March Retail Inventories, API Weekly Crude Oil Stocks report and a Fed speaker (Williams).  Then Wednesday, April Building Permits, April Housing Starts, and EIA Crude Oil Inventories are reported.  On Thursday we get Weekly Initial Jobless Claims, Philly Fed Mfg. Index, April Existing Home Sales, Fed Balance Sheet, and Bank Balances with the Fed.  Finally, on Friday, we hear from two Fed speakers (Chair Powell and Williams).

In terms of earnings reports later this week, on Tuesday, BIDU, HD, IQ, SE, TME, CPRT, KEYS, KD, and PTC report.  Then Wednesday, we hear from ARCO, TGT, TJX, SQM, CSCO, STNE, SNPS, TTWO, VSAT, and ZTO.  On Thursday, WMS, BABA, BBWI, CSIQ, DOLE, GRAB, BEKE, MSGE, WMT, AMAT, CVCO, DXC, FTCH, FLO, GLOB, and ROST report.  Finally, on Friday, we hear from DE and FL.

LTA Scanning Software

So far this morning, TIO reported beats on both the top and bottom lines.  (Including a surprise 121% revenue beat.)  Meanwhile, TGP beat on revenue (a 117% surprise) while missing on the earnings line.

With that background, it looks like the bulls are looking to make a modest push to start the week. The DIA is poised to retest its T-line from below, while the SPY and QQQ seem to be making modest gains further above their own 8emas. With that said, both of the large-cap indices remain inside their recent sideways chop range of the last week and a half with only the QQQ trending (higher) over that period. None of the major indices are fighting a resistance level right this moment, but all of them have a resistance level not too far above. Over-extension is not a problem yet, either in terms of distance from the T-lines or in terms of the T2122 indicator.

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

TC2000 Discount

🎯 Mike Probst: Rick, Got CTL off the scanner today. Already up 30%. Love it.

🎯 Dick Carp: 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.

Free YouTube Education  •  Subscription Plans • Private 2-Hour Coaching

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

Commercial Real Estate Defaults (CRE)

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The Hidden Danger That Could Derail the Stock Market Recovery

Commercial Real Estate Defaults (CRE)

Commercial real estate (CRE) is a $20 trillion industry that plays a vital role in the US economy. It provides space for businesses to operate, jobs for millions of workers, and income for investors and lenders. However, the industry is facing a wave of defaults that could have serious repercussions for the stock market and the broader economy.

A default occurs when a borrower fails to repay a loan or meet other contractual obligations. In CRE, defaults are usually triggered by a decline in property income, a drop in property value, or a rise in borrowing costs. Any of these factors can make it difficult for property owners to service their debt or refinance their loans when they mature.

Why

Why

The Covid-19 pandemic has exacerbated these risks for many CRE sectors, especially office and retail. The shift to remote work and online shopping has reduced the demand for physical space, leading to lower occupancy rates and rents. According to Green Street, office and retail property values have fallen by 25% since last year, while hotel values have plunged by 40%.

Meanwhile, the Federal Reserve’s efforts to fight inflation by raising interest rates have also hurt the credit-dependent industry. Higher interest rates increase the cost of borrowing and refinancing, as well as reduce the attractiveness of CRE as an investment relative to other assets. According to Morgan Stanley, about $1.5 trillion of CRE debt is set to mature over the next two years, posing a significant refinancing challenge for many borrowers.

Possible Impacts

The impact of CRE defaults could spill over to the stock market in several ways. First, defaults could erode the earnings and capital of banks and other lenders that hold CRE loans on their balance sheets. According to Goldman Sachs, about 80% of all bank loans for commercial properties come from regional banks, which are more exposed and vulnerable to liquidity shocks.

Fire Sale

Second, defaults could trigger fire sales of distressed properties, putting further downward pressure on property values and impairing the collateral of other loans. This could create a negative feedback loop that amplifies losses and contagion across the financial system.

Third, defaults could undermine the confidence and sentiment of investors and consumers, leading to a pullback in spending and investment. This could weigh on the growth and profitability of various sectors that depend on CRE activity, such as construction, hospitality, retail, and business services.

Conclusion

In short, CRE defaults could pose a significant threat to the stability and performance of the stock market and the economy. While the Fed and other regulators have taken steps to monitor and mitigate these risks, such as providing relief measures and conducting stress tests, the situation remains uncertain and volatile. Investors should be prepared for more turbulence ahead.

Doug

Finished Mixed

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After learning that April inflation was 4.9% down one-tenth of one percent the indexes finished mixed in a choppy whipsawing session.  Bonds yields slightly pulled back even as the regional banking sector experienced some renewed selling pressure and debit ceiling rhetoric swirled keeping investors on edge.  Today it’s all about the Jobless claim numbers and the April PPI with the number of earnings events starting to decline.  Although with select tech giant’s names rising the QQQ continued its bullish trend as the DIA, SPY, and IWM remained rangebound where they have traded for more than a month. 

Asian markets finished the day mixed but mostly lower with modest gains and losses.  European markets show modest gains this morning with the BOE raising rates by 25 basis points.  Ahead of market-moving economic data U.S. futures suggest a flat open however that is likely to quickly change as the data is reviled.  Plan for another challenging day of price action.

Economic Calendar

Earnings Calendar

Notable reports for Thursday include AQN, CRSP, CYBR, DDS, ENTG, FVRR, HIMX, JD, DNUT, MLCO, NWSA, NIO, PKI, TPR, USFD, UTZ, & YETI.

News & Technicals’

According to Jeffrey Kleintop, chief global investment strategist at Charles Schwab, the labor market may experience a reversal later in 2023, similar to how supply chain shortages turned into gluts of goods and materials in mid-2022.  However, some analysts argue that monetary policy may take longer to influence the labor market, especially in the services sector, where labor demand is high and labor supply is constrained by factors such as pandemic-related disruptions, demographic changes, and skill mismatches. Moreover, a contraction in labor supply may reduce labor productivity and variety, which could put upward pressure on wage growth and inflation. Therefore, meaningful policy action to grow the size and productivity of the labor force is needed to address the underlying causes of inflation and ensure a balanced and sustainable economic recovery.

The media and entertainment industry is facing a dilemma as it tries to balance raising prices and cutting costs amid a slowdown in subscriber growth and a shift in consumer preferences. Disney, for example, lost 4 million Disney+ subscribers in the quarter, most of which came from India. To find a new growth narrative, the industry may need to look at gaming, which is on track to be the primary source of entertainment across the world. Gaming not only reaches three billion people on the planet and drives multi-billion-dollar revenue streams, but also creates a sense of community and social interaction among its users. Gaming also offers opportunities for innovation and diversification, such as cloud gaming, virtual reality, augmented reality, and interactive storytelling. Therefore, media and entertainment companies may need to develop strong visions that span video, social media, and gaming sectors to create a richer and more engaging ecosystem for consumers.

On Wednesday, the indexes finished mixed with regional bank and debit ceiling issues worrying investors. This happened as April’s U.S. inflation rate was 4.9% higher than a year ago, a bit lower than the expected 5.0%, but still much higher than the Fed’s goal of 2.0%. Unfortunately, the DIA, SPY, and IWM remain stuck in the same wide trading range they have been stuck in for more than a month.  However, the QQQ managed a marginal break of overhead resistance with the tech giants doing all of the work. With the number of earnings events declining for 2nd quarter earnings the focus this morning will be the Jobless Claims and the April PPI report with a little fed speak tossed in for good measure.  Plan for the challenging price action to continue!

Trade Wisely,

Doug

Pending CPI Data

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Pending CPI Data

Indexes churned in a frustrating flat trading rage on Tuesday with the pending CPI report center stage.  However, the debt ceiling negotiations and the regional banking stress added to the uncertainty.  I would not rule out the possibility of a big point move in the indexes before the market open either up or down reacting to the inflation data.  That said, anything is possible with additional volatility created by another big day of earnings data. 

Asian market traded lower overnight with an eye on the pending inflation data. European markets are also red this morning waiting in a light volume session ready to react to the pending U.S. report.  Ahead of the April consumer price index report U.S. futures trade marginally lower as banking and debit ceiling stresses continue in the background.

Economic Calendar

Earnings Calendar

Notable reports for Wednesday include ALRM, AAP, BYND, BILI, CAKE, COHR, CRSR, CR, DIS, EBIX, FLEX, GDRX, GRPN, HL, JAZZ, LI, MFC, NYT, NTNX, NTR, OSUR, PAAS, PFGC, REYN, RBA, HOOD, RBLX, SONO, TEVA, TTD, COOK, TUP, U, VVV, VERX, WEN, WWW.

News & Technicals’

Despite the pandemic’s impact on travel, Airbnb achieved its first profitable quarter in Q1 2021, earning $117 million in net income. This was a significant improvement from the net loss of $19 million it posted in Q1 2020. The company also grew its revenue by 5% year-over-year to $1.82 billion, surpassing the expectations of analysts. The revenue growth was fueled by higher demand and prices in North America. However, the company warned that its second-quarter performance might be weaker than expected due to the uncertainty around travel restrictions and the high demand it faced last year.

A White House meeting on Tuesday failed to break the deadlock over the debt ceiling, as President Joe Biden and House Speaker Kevin McCarthy stuck to their opposing positions on how to raise the nation’s borrowing limit before it runs out on June 1st. The meeting, which also included other congressional leaders, did not result in any new progress or agreement on the issue. President Biden called on Congress to pass a clean debt limit increase without any strings attached, while House Speaker McCarthy demanded spending cuts as a condition for any votes to support more borrowing.

Another day of sideways chop as investors monitored banking turmoil, and debit ceiling wrangling while pensive about the pending CPI data.  Opinion Survey released yesterday indicated that banks continued to tighten lending standards, but the tightening was not as severe as feared given the recent stress in the banking sector. Nevertheless, with banks less willing to lend and demand for loans weakening, economic growth and inflation will likely slow further in the quarters ahead. We will also get Mortgage data, Petroleum numbers along with another big day of earnings reports to keep traders guessing and price action challenging.

Trade Wisely,

Doug