The indexes were once again plagued with uncertainty and chop as we waited for the TSLA report that came in with a 20% decline in revenue and earnings from one year ago despite topping lowered estimates. Today we have Jobless Claims, Philly Fed, and Existing Home Sales along with a busy day of earnings to keep traders guessing and price volatility high while the VIX indicates complacency is on the rise. With tech giant reports and a pending FOMC rate decision around the corner plan for just about anything over the next couple of weeks.
Asian markets closed mixed overnight with modest gains and losses in reaction to earnings results. European markets that tried to shrug off yesterday’s U.K. inflation surprise trade decidedly bearish this morning. U.S. futures also suggest a bearish open but as the earnings and economic data roll out the actual open is anyone’s guess.
Economic Calendar
Earnings Calendar
Notable reports for Thursday include ALK, AN, AXP, BX, BJRI, T, CSX, DHI, FITB, GPC, HTLD, HBAN, KEY, KNX, MMC, NOK, NUE, PM, POOL, PPG, RAD< STX, TSM, TFC, UNP, WSO, & XRX.
News & Technicals’
IBM issued stronger-than-expected first-quarter earnings on Wednesday even as the technology and consulting company reported disappointing revenue. IBM’s revenue increased 0.4% from a year earlier in the quarter, according to a statement. Net income rose 26% to $927 million, or $1.02 a share, for continuing operations. Profit rose faster than revenue as IBM’s total expenses and other income declined 4% to $6.45 billion, with reductions coming in research, development, and engineering.
Twitter CEO Elon Musk threatened Microsoft with a potential lawsuit on Wednesday, claiming the software giant used his company’s data to train its AI. “They trained illegally using Twitter data,” Musk tweeted. “Lawsuit time.” The threat came after Mashable and other publications reported that Microsoft would drop Twitter from its advertising platform.
Tesla’s Q1 2023 revenues and profits were close to expectations according to a survey of analysts from Refinitiv. However, the company’s net income and earnings dropped more than 20% from 2022. Tesla attributed the drop in earnings to “underutilization of new factories” which stressed margins, along with higher raw material, commodity, logistics, and warranty costs, and lower revenue from environmental credits.
Equity markets closed modestly lower on Wednesday as Treasury yields climbed higher on another day highlighted by uncertainty and chop. March CPI inflation rose by 10.1% YoY in the UK, above estimates of 9.8%. The S&P 500 overall is up about 8.0% in 2023, still driven largely by growth sectors like technology and communication services. Treasury yields have moved higher with the 2-year U.S. Treasury yield above its recent lows of 3.76%, up now to 4.25%. The VIX volatility index, continued to drift lower, now down over 12% for April. With a big round of earnings data ahead of today plan for the challenging price action to continue.
On Tuesday, markets gave us a divergent day. The DIA opened flat, sold off until 10:30 am, and then rallied back to flat by 12:20 pm when it then traded sideways in a tight range the rest of the day. Meanwhile, the SPY gapped up 0.40%, sold off until 11:30 am, and rallied back to the prior close level before again trading sideways in a tight range the rest of the day. For its part, the QQQ gapped up 0.65%, sold off hard to more than fill the gap by 10:30 am, and then traded sideways in a tight range along Monday’s close price all the way into a close. This action gave us an indecisive Doji candle that retested the T-line (8ema) in the DIA. Meanwhile, the SPY and QQQ both printed black-body candles with wicks. QQQ tested and bounced up off its T-line while the SPY did not even get down to test its 8ema.
On the day, six of the 10 sectors were modestly in the green with Basic Materials (+0.38%) leading the way higher while Utilities (-0.70%) lagged behind other sectors. At the same time, the SPY gained 0.07%, DIA lost 0.04%, and QQQ gained 0.01%. VXX fell 0.66% to 39.24 and T2122 fell back but remains just inside the overbought territory to 81.82. 10-year bond yields fell a bit to close at 3.576% while Oil (WTI) was flat on the day at $80.85 per barrel. So, Tuesday was a divergent, yet very indecisive day. Despite black-bodied candles, the bullish trend remains with the 3ema > 8ema > 17ema > 50sma > 200sma…and the 3ema, 8ema, and 17ema are all rising across all three major indices. However, this bullish trend continues to be on very low volume (far below average volume in the SPY, DIA, and QQQ).
In economic news, March Building Permits (Prelim.) came in well below expectations at 1.413 million (compared to a forecast of 1.450 million and a February reading of 1.550 million). On a month-on-month basis, this as a -8.8% rate versus an anticipated -6.0% rate forecasted and February’s massive +15.8% rate. Meanwhile, Mach Housing Starts came in slightly above expectation at 1.420 million (versus a forecast of 1.400 million and a February reading of 1.432 million). Then, after the close, the API Weekly Crude Oil Stocks Report showed a very slightly greater than expected drawdown of 2.675- million-barrels (compared to a forecasted drawdown of 2.464-million-barrels and the prior week’s 0.377-million-barrel inventory build).
On the Fed talk front, in an interview Tuesday, St. Louis Fed Pres. Bullard (an extreme Hawk) said Wall Street should not be expecting a recession in the next six months. He said, “The labor market just seems very, very strong…and a strong labor market that feeds into strong consumption…it doesn’t seem like the (right) moment to be predicting that you will have a recession in the second half of 2023.” He also went on to say his St. Louis Fed stress index is at zero, and “If you were really going to get a major financial crisis out of this, that index would spike up to a four or five.” From there, he went on to call for more Fed hikes, including a half percent hike at the early May meeting as well as walking back the idea of a pause in hikes. Shortly after Bullard’s interview, Atlanta Fed President Bostic told CNBC he too foresees the economy avoiding a recession (as his baseline). He said he’s in favor of one final increase and then holding rates at that level for “quite some time.” (Bostic did not comment on the size of the last hike, but in the recent past he said he was leaning toward another quarter percent hike.)
In stock news, Reuters reported Tuesday afternoon that GS is considering the sale of its GSKY fintech unit as it continues to step back from consumer-facing businesses. (GSKY software facilitates consumer home improvement loans.) Elsewhere, RIDE said it has resumed production and deliveries of its electric pickup trucks “at a very low pace.” (This comes after the company stopped production and deliveries in March as part of a voluntary recall due to potential propulsion system problems.) At the same time, BA announced that despite the recently announced problems with supplier SPR (poor quality fuselages) and the stoppage of deliveries of 737 MAX planes, the firm is l comfortable with its buffer inventories and still plans to ramp up production of the jets. (More details will be given during the Q1 earnings call 4/26.) In other air-related news, LUV resumed its service after a software-related outage delayed more than 1800 of its flights on Tuesday. Later in the afternoon, OPEN announced it is cutting roughly 22% (560 jobs) of its workforce, citing a decline in the housing market. After the close, AAPL and GOOGL raised concerns about AMZN’s Kindle app saying that app could contain sexually explicit material accessible to children and threatening the removal of the popular app (from app stores) unless AMZN strengthens its content moderation (i.e. removes adult content).
In stock legal and regulatory news, on Tuesday, GOOGL convinced a US Court of Appeals to overturn a Texas jury verdict of $20 million (plus ongoing royalties) for having infringed on three anti-malware patents. The ruling invalidated the plaintiffs’ patents. Elsewhere, the US Supreme Court heard a case involving a US Postal worker and appears to be leaning toward making it harder for companies to not accommodate employees’ religious practices (such as not working on their Sabbath day). This would overturn the precedent in place since 1977, which said companies can avoid accommodating employees if the requests caused more than a minimal inconvenience to the company. Meanwhile, GM reached a settlement with the US Dept. of Justice related to the company’s discrimination against non-citizens. The agreed fine was just $365,000. At the same time, a US Senate Committee released a report claiming CS has hampered a multi-year investigation into Nazi clients and Nazi-linked accounts. The report said, CS simply halted its internal review and fired the ombudsman overseeing the investigation of accounts that may contain assets of Holocaust victims. Over at the Ninth Circuit Court of Appeals, judges ruled in favor of UL related to a long-running false advertising claim. The ruling said that “I Can’t Believe It’s Not Butter” spray and similar products should be allowed to use artificially low serving sizes (less than one spray) related to calories and other nutritional facts on their advertising and labeling. Finally, FOX was able to limit the damage of the Dominion case by admitting it lied about Dominion facilitating any fraud and the media company got off relatively cheaply (given their obvious guilt) by agreeing to pay $787.5 million in damages. At least one other defamation case is still pending against FOX and several groups (January 6th defendants as well as the Officers who were on the other side) are considering filing liability cases based on the now proven and admitted lies and misrepresentations of facts by the supposed news outlet. So, a hurdle was cleared, but FOX may not be out of the woods yet.
In banking news, Reuters reported that despite BAC, JPM, WFC, and C all beating their analyst estimates this quarter, including windfalls from increasing rates, industry leaders are lowering future expectations. (Combined, the four banks wrote off $3.4 billion in bad consumer loans in Q1, a 73% increase from Q1 2022.) Unnamed industry executives are warning profits will tail off as a recession looms and customer defaults climb. Industry analysts that Reuters quoted said “normal” card loan delinquencies run 3%-3.5%. However, they now expect branded card delinquencies may reach 5%-5.5% by early 2024. At the same time, the same article cited an AXP filing on Tuesday which said February card loan write-offs grew slightly from 1.4% to only 1.7%. The filling also said AXP “past due loan” volumes remained stable between February and March. In related news, WAL reported a beat (see above) and said that its deposits had stabilized after being the focus of a potential second leg of the “regional banking crisis.” WAL deposits fell 11.3% in Q1, but have grown more than $2 billion between March 31 and April 14. The bank also reaffirmed its full-year deposit growth forecast of +13% to +17%.
After the close, OMC, ISRG, FHN, and WAL all reported beats to both the revenue and earning lines. Meanwhile, NFLX and UAL both missed on revenue while beating on earnings. On the other side, IBKR beat (by a significant margin) on revenue while missing on earnings. It is also worth noting that NFLX lowered its forward guidance.
Overnight, Asian markets were again mixed but leaned toward the red side. Singapore (+0.44%) led the four exchanges that managed to stay green. Meanwhile, Hong Kong (-1.37%), Shenzhen (-0.84%), and Thailand (-0.82%) paced the losses among the eight exchanges that were in the red. In Europe, we see a similar picture taking shape as of midday with only three bourses clinging to green while 12 show red. However, it is worth noting that these are mostly on modest moves as the CAC (-0.03%), DAX (-0.20%), and FTSE (-0.25%) lead the region lower in early afternoon trade. In the US, as of 7:30 am, Futures are pointing to a down start to the day. The DIA implies a -0.28% open, the SPY is implying a -0.45% open, and the QQQ implies a -0.69% open at this hour. At the same time, 10-year bond yields are spiking, now up to 3.621% and Oil (WTI) is down nearly 2% to $79.26/barrel in early trading.
The major economic news events scheduled for Wednesday are limited to EIA Crude Oil Inventories (10:30 am) and Fed Beige Book (2 pm). We also get another Fed speaker, Williams at 7 pm. The major earnings reports scheduled for the day include ABT, ALLY, ASML, BKR, CFG, ELV, LAD, MS, NDAQ, EDU, SYF, TRV, and USB before the open. Then, after the close, AA, CCI, FDS, EFX, FFIV, IBM, KMI, LRCX, LVS, LBRT, STLD, TSLA, WTFC, and ZION report.
In economic news later this week, on Thursday, Weekly Initial Jobless Claims, Philly Fed Mfg. Index, and March Existing Home Sales are reported and we get two Fed speakers (Waller and Bowman). Finally, on Friday, Mfg. PMI, S&P Global PMI, and Services PMI are reported.
In terms of earnings reports later this week, on Thursday, ALK, T, AN, BX, CMA, DHI, EWBC, FITB, GPC, HRI, HBAN, KEY, MAN, MMC, NOK, NUE, PM, POOL, RAD, SNA, SNV, TSM, TFC, UNP, WSO, and WBS report. Finally, on Friday, ALV, FCX, HCA, PG, RF, SDVKY, SAP, and SLB report.
So far this morning, MS, ABT, TRV, USB, ASML, BKR, NDAQ, EDU, and ELV all reported beats on both the revenue and earnings lines. Meanwhile, SYF, ALLY, and CFG all beat on the revenue line while missing on earnings. Unfortunately, LAD missed on both the top and bottom lines. It is worth noting that ASML and EDU both raised forward guidance. However, CFG lowered its guidance. It is also worth noting that some of the revenue beats included large upside surprises, especially among the financial names. MS surprised on revenue by 60%, CFG by 34%, USB by 32%, NDAQ by 69%, and SYF by 19%.
In miscellaneous last-minute news, TSLA cut prices yet again overnight. This time on Model 3 and Model Y vehicles. Elsewhere, the rate for a 30-year fixed-rate conforming loan increased sharply last week from 6.30% to 6.43%. The origination points charged also increased from 0.55 to 0.63. This caused a 10% fall in new home purchase loan applications and a 6% decrease in mortgage refinancing applications.
With that background, it looks like the bears are taking all three major indices back down to retest their T-lines (8ema) as support this morning. However, the bullish trend remains in place with the moving averages stacked. Over-extension is obviously not a problem in terms of the T-line for any of the major indices. Meanwhile, the T2122 indicator is just barely in the overbought area as well. We should also realize we are either sitting on or are near above potential support in the SPY, DIA, and QQQ. So, it looks like it could be a bearish start to a day in a bullish trend. Once again, if we can put aside fear and prediction, the chart tells us to maintain a long bias on a swing trading horizon while keeping a sharp eye out for trend breaks. So, be careful and go with the flow.
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
Tuesday proved to be a day of frustrating low-volume chop as the market waited for NFLX earnings after GS dampened early bullishness missing expectations. Bond yields rose yesterday and look to extend higher this morning with the U.K. reporting a 10.1% inflation rate above estimates. Today we have a light day on the economic calendar but we ramp up the earnings data with MS this morning and TSLA this afternoon we should expect another day of challenging price action.
Asian markets finished the day mixed but mainly lower worried about rate hikes and possible recession. The surprise U.K. inflation rate and uncertainty of the Fed’s next rate decision have European markets seeing red across all indexes this morning. As investors digest earnings miss from GS and NFLX, the U.S. point to bearish open as we ramp up the number of reports with confidence in the results slightly fading. Be watchful for big-point intraday whipsaw or full-on reversals as traders react to the data.
According to the Office for National Statistics, the consumer price index rose by an annual 10.1% in March 2023 in the UK. This is above a consensus projection of 9.8% in a Reuters poll of economists. The inflation rate remained in double digits as households continued to grapple with soaring food and energy bills. This is a slight dip from the unexpected jump to 10.4% in February, which broke three consecutive months of declines since October’s 41-year high of 11.1%.
Netflix released its first-quarter 2023 financial results on April 18th, 2023. The company outperformed expectations for the first quarter financial results, delivering a 16% positive surprise in earnings per share ($0.94 vs. $0.80 anticipated) and a 5% positive surprise in revenues ($26.39 billion vs. $25.19 billion). Netflix said it was pushing back the broad rollout of its password-sharing crackdown. Originally, Netflix wanted the rollout to take place late in the first quarter, but on Tuesday it said it would do it in the second quarter. The company said it saw its subscriber growth impacted in the international markets where it has already rolled out such initiatives.
On Wednesday, U.S. Treasury yields climbed after another sticky inflation report in the U.K. raised concerns global central banks would need to stay the course with their tightening campaigns. The yield on the 10-year Treasury was up by over 6 basis points to .63%. The yield on the 2-year Treasury was last trading at 4.28% after rising by 8 basis points.
Equity markets were mixed on Tuesday, as the S&P 500 closed higher after a frustrating day of low-volume chop. Forecasts still call for -6.5% earnings growth year-over-year in the first quarter. The S&P 500 overall is up about 8.0% in 2023, still driven largely by growth sectors like technology and communication services. More recently, we have seen better performance from defensive sectors, like consumer staples and health care, and cyclical sectors, including energy and materials. This comes as Treasury yields have moved higher, with the 2-year U.S. Treasury yield up by nearly 0.46% since its recent lows to 4.22% 1. The VIX volatility index has also moved lower, down about 9% in April thus far. Index technicals remain bullish but once again over-extended according to the T2122 indicator.
Markets opened flat and ground sideways for the first hour in all three major indices. The bears then stepped in to drive a modest selloff that lasted until 12:30 pm. At that point, again all three major indices ground sideways along the lows. However, at about 2 pm, markets began a rally (slightly stronger than the morning selloff) which continued all the way into the close. This action gave us white-bodied candles with lower wicks and also inside day candles. You might even say the QQQ printed a Hammer that also retested its T-line. So, all three major indices remain in a bullish average stack (3ema > 8ema > 17ema > 50sma > 200sma).
On the day, nine of the 10 sectors were in the green with Financial Services (+0.77%) leading the way higher while Energy (-0.83%) lagged behind the other sectors. At the same time, the SPY gained 0.36%, DIA gained 0.32%, and QQQ gained 0.08%. VXX fell 2.73% to 39.50 and T2122 climbed back into the overbought territory to 90.22. 10-year bond yields continued to shoot higher to close at 3.602% while Oil (WTI) lost 1.85% to $80.99 per barrel. So, Monday was sort of a meandering day that saw price drift lower in the morning and higher in the afternoon but all within a fairly tight range (inside Friday’s candles in all three major indices).
In economic news, on Monday NY Fed’s Empire State Manufacturing Index came in far above expectation at 10.80. This is compared to a forecast of -18.00 and the March reading of -24.60. The 10.80 was the strongest reading since July of 2022. Meanwhile, in political news, US House Speaker McCarthy traveled to Wall Street Monday to pitch the same idea that he has proposed for months. Namely, the GOP will pass a one-year debt ceiling increase (paying debts already incurred, money already spent), in exchange for Democrats and the President agreeing to cut spending back to 2022 levels, reversing some of President Biden’s policies, and then only increasing spending a maximum of 1% per year going forward. The proposal continues to be a non-starter for Democrats and would also require significant cuts to everything else in the budget unless McCarthy’s fellow Republican, Senate Minority Leader McConnell, gives up his (and others) proposed Defense spending increases (which added $118 billion to President Biden’s last Defense budget request of $740 billion). So, the US default versus Debt Ceiling increase (and whatever else rides along with that passage) debate is not likely to get serious until May when pressure builds. This will give financial news more fodder to discuss the implications of a US default on its debt.
In stock news, LLY announced it will invest $1.6 billion in two Indiana manufacturing plants in order to support the production of its recently approved cancer drug Jaypirca. At the same time, TSLA got bad public relations buzz after the company cut the bonuses of 20,000 employees at its Shanghai factory over the weekend. As a result, employees took to social media to ask the Chinese people to rally behind them and to ask TSLA CEO Elon Musk to override the decision. (These are the same workers he praised in tweets last year for “burning the 3 am oil” to keep operations running during the city’s COVID-19 lockdown.) In other auto-industry news, RNLSY (Renault) announced it is reviewing prices worldwide for its electric vehicles after the latest round of price cuts by TSLA. Elsewhere, PCRFY (Panasonic), which supplies batteries to TSLA, said Sunday that it is considering building a battery plant in Oklahoma after the state passed laws to allow the Governor to offer the company more incentives to do so. Meanwhile, MRK announced a deal to acquire RXDX for $200/share. After the close, it was reported Samsung (SSNLF) is considering replacing GOOGL’s Google with MSFT’s Bing as the default search engine for its phones and tablets. This would be a significant hit to GOOGL’s search ad business.
In stock legal and regulatory news, ILMN settled a patent infringement suit (related to genetic testing patents) brought against it by Ravgen Inc. The settlement details were not disclosed. Elsewhere, the $1.6 billion defamation lawsuit brought against FOX for allegedly defaming Dominion Voting Systems was delayed one day. It is widely believed this delay was to allow FOX to seek settlement terms from Dominion (which has already been granted summary judgment on the facts that FOX knowingly and purposefully published lies about Dominion and that those lies caused Dominion harm). In related news, Reuters reported after the close that a group of FOX investors has now demanded company files and part of the Dominion case discovery as they consider filing suit against FOX directors and executives for the damage they have suffered as a result of the company’s false narrative and fraudulent reporting (and presumably any settlement or judgments) have or will have on their stock value. Meanwhile, the US Treasury Department announced Monday that VLKAF (Volkswagen), BMWYY (BMW), NSANY (Nissan), RIVN, HYMTF (Hyundai) and VLVLY (Volvo) electric vehicles would lose access to a $7.500 tax credit. TSLA Model 3 vehicles will see their eligibility cut to $3,750 while other TSLA models retain the full $7.500 credit. Most F and STLA electric vehicles will also see their tax credit cut to $3,750. GM Bolt, Bolt EUV, Cadillac Lyriq, Chevy Equinox EV and Blazer EV will all still qualify for the $7.500 tax credit. Over at the US Supreme Court, justices declined to hear a GM appeal seeking to revive a racketeering lawsuit against STLA (or more precisely its Fiat division). In other Supreme Court news, the justices did hear an appeal by WORK (owned by CRM now) seeking to have a shareholder lawsuit dismissed. The case accuses WORK of misleading statements prior to the “self-listing” when WORK was offered. At the same time, the SEC filed charges against another cryptocurrency exchange (Bittrex) for operating an unregistered securities exchange. After hours, nine more US states joined the US Dept. of Justice lawsuit against GOOGL that alleges the company broke antitrust law with its digital advertising business (by abusing its dominance).
In banking news, Bloomberg reported that WFC execs are privately concerned that efforts to unionize its bank employees will soon result in union victories. However, the executives say they have plans to spend millions of dollars to address employee “pain points” and defeat organizing efforts. Elsewhere, a report showed that the average regional bank has reported only a 3% reduction in deposits since before the “banking crisis” began. However, there are exceptions, such as SCHW which saw an 11% reduction in deposits. Meanwhile, AAPL has announced a high-yield 4.15% savings account (via partner GS) for users of its Apple Card as it seeks to draw users away from traditional banks.
Overnight, Asian markets leaned heavily to the red side. Only Japan (+0.51%), Shanghai (+0.23%), and Shenzhen (+0.04%) managed any green. Meanwhile, Hong Kong (-0.63%), Taiwan (-0.59%), and New Zealand (-0.44%) led the rest of the region lower. In Europe, the mirror image of Asia is taking shape at midday. Only Russia (-0.21%) and Spain (-0.24%) are in the red. Meanwhile, the CAC (+0.67%), DAX (+0.64%), and FTSE (+0.21%) lead the rest of the region 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 +0.39% open, the SPY is implying a +0.41% open, and the QQQ implies a +0.63% open at this hour. At the same time, 10-year bond yields are back down to 3.577% and Oil (WTI) is off 0.20% to $80.69/barrel.
The major economic news events scheduled for Tuesday are limited to March Building Permits and March Housing Starts (both at 8:30 am) and API Weekly Crude Oil Stock Report (4:30 pm) and Fed member Bowman speaks at 1 pm. The major earnings reports scheduled for the day include BAC, BK, ERIC, GS, JNJ, LMT, and PLD before the open. Then, after the close, FHN, IBKR, ISRG, NFLX, OMC, UAL, and WAL report.
In economic news later this week, on Wednesday, EIA Crude Oil Inventories and Fed Beige Books are reported and Fed member Williams speaks. On Thursday, Weekly Initial Jobless Claims, Philly Fed Mfg. Index, and March Existing Home Sales are reported and we get two Fed speakers (Waller and Bowman). Finally, on Friday, Mfg. PMI, S&P Global PMI, and Services PMI are reported.
In terms of earnings reports later this week, on Wednesday we hear from ABT, ALLY, ASML, BKR, CFG, ELV, LAD, MS, NDAQ, EDU, SYF, TRV, USB, AA, CCI, FDS, EFX, FFIV, IBM, KMI, LRCX, LVS, LBRT, STLD, TSLA, WTFC, and ZION. On Thursday, ALK, T, AN, BX, CMA, DHI, EWBC, FITB, GPC, HRI, HBAN, KEY, MAN, MMC, NOK, NUE, PM, POOL, RAD, SNA, SNV, TSM, TFC, UNP, WSO, and WBS report. Finally, on Friday, ALV, FCX, HCA, PG, RF, SDVKY, SAP, and SLB report.
After the close, JBHT reported misses on both the revenue and earnings lines. So far this morning, BAC, JNJ, LMT, ERIC, BK, and CBSH all beat on both the revenue and earnings lines. Meanwhile, GS missed on revenue while beating on earnings. A couple of notes of interest, BAC’s revenue was a 58% larger beat than analysts expected and BK’s revenue was also a 63% upside surprise. At the same time, ERIC’s earnings beat was double the analyst-expected number. It is also worth noting that JNJ has raised its forward guidance.
One last miscellaneous story of note. Bloomberg reports this morning that investors are the most underweight stocks (versus bonds) that they have been since early 2009. This may mean nothing significant for short-term traders. However, for longer-term traders and investors, it means there is a ton of money sitting on the sideline earning almost nothing. That flood of cash back into the market as FOMO kicked in is what led to the massive rally that began in 2009 and continued essentially unbroken until the pandemic in 2020 (or if we throw out that one-off event until the top in 2022). It is just something to keep in mind moving forward.
With that background, it looks like the bulls are trying to break out of the recent range (going back to the start of the month in the case of QQQ) this morning. The bullish trend continues with the moving averages stacked. Over-extension does not appear to be a problem in terms of the T-line (8ema) for any of the major indices. Yet a case can be made that we are getting extended to the upside according to the T2122 indicator. We should also realize we are up against a potential resistance line in the SPY and not too far below on in the DIA. QQQ might be called at “resistance” but it is definitely a weaker or less obvious level. Once again, if we can put aside fear and prediction, the chart is telling us to maintain a long bias on a swing trading horizon while keeping a sharp eye out for trend breaks. So, be careful and go with the flow.
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
Despite the last-minute surge the SP-500 finished the day little changed in an overall choppy low-volume session as we waited on the market-moving reports from BAC and GS Tuesday morning with NFLX coming after the bell. We will also get a reading on the health of the housing sector with a starts and permits report before the opening of trading. Bond prices continue to be problematic but interestingly the market seems happy to ignore it as the VIX continues to fall and the T2122 indicator presses back into the overbought region. The morning session could be wild so watch for some big gaps and possible big point whipsaws as the investors react.
Overnight Asian markets closed mixed even as China beat first-quarter GDP expectations. However, European markets see nothing but green with earnings data on the horizon and the ECB signaling a possible 50 basis point rate increase. As we wait on big bank reports the U.S. futures push for a gap up open that could move dramatically as results come into the light.
Economic Calendar
Earnings Calendar
Earnings begin to pick up today through Thursday then get really busy next week. BAC, BK, ERIC, FHN, FULT, GS, IBKR, ISRG, JNJ, LMT, NFLX, OMC, PLD, UAL, & WAL.
News & Technicals’
Apple opened its first store in India, called Apple BKC, in Mumbai. The company is also opening another store in Delhi. Apple CEO Tim Cook has long held a bullish view on India and now the company is ramping up sales and manufacturing of its flagship iPhone in the country. This highlights the importance of the Indian market to Apple’s future.
House Speaker Kevin McCarthy spoke at the New York Stock Exchange. He opened a new phase in the debt ceiling fight by saying House Republicans would pass their stand-alone debt ceiling hike with spending cuts and stricter work requirements. However, such a bill would be dead on arrival in the Democratic-controlled Senate and in Democratic President Joe Biden’s White House.
The S&P 500 was little changed after an up week that pushed it near the year’s highs. Small-caps outperformed. Earnings remain the area of focus, with 60 S&P 500 companies scheduled to report this week, including Charles Schwab and State Street today. Bank of America, Goldman Sachs, Netflix, and Tesla are due to deliver results later this week. House Speaker McCarthy is expected to outline Republican demands for spending cuts and other concessions regarding the debt ceiling. Treasury yields were higher as investors are starting to rethink the likelihood of the Fed cutting rates later this year.
Bank stocks led the gains on Friday while overall the indexes struggled as rising bond yields and worries about tightening credit weighed on investors’ minds. Today we will hear from Schwab which has been challenged by substantial capital outflows in the recent banking scare. The results could be market-moving with the warnings from Jamie Dimon and Warren Buffet of more bank failures to come. Also ahead will be the Empire State MFG and Housing Market Index reports which have shown a weakness in the sectors.
Asian market closed Monday trading with modest gains despite the surge in Hong Kong up 1.68%. European markets also trade with modest gains hoping to shake off recession worries as earnings ramp up. As I write this report U.S. futures point to modest gains as bond yields rise ahead of earnings and economic reports that could bring more bullish inspiration or embolden the bears. Plan for just about anything as the market reacts.
Economic Calendar
Earnings Calendar
Notable reports for Monday include SCHW, ELS, JBHT, MTB, PNFP, & STT.
News & Technicals’
Google CEO Sundar Pichai has warned that society is not prepared for the rapid advancement of AI. In an interview with CBS’ “60 Minutes” that aired Sunday, he said that laws that guardrail AI advancements are “not for a company to decide” alone. He also warned of consequences, saying that AI will impact “every product of every company.”
U.S. Treasury Secretary Janet Yellen has said that banks are likely to become more cautious and may tighten lending further in the wake of recent bank failures. This could negate the need for further Federal Reserve interest rate hikes. “Banks are likely to become somewhat more cautious in this environment,” Yellen said in the interview, which is scheduled to air on Sunday. “We already saw some tightening of lending standards in the banking system prior to that episode, and there may be some more to come.” She said that would lead to a restriction in credit in the economy that “could be a substitute for further interest rate hikes that the Fed needs to make.”
Indexes struggled to finished slightly lower Friday after Thursday’s sharp rally that helped push global indexes to their highest close in 10 weeks while rising bond yields and tightening credit worried investors. Bank stocks led the gains, with shares of JPMorgan jumping after the company reported strong earnings results. Government bonds yields rose after the Fed’s Waller urged more monetary-policy tightening to reduce still high inflation, pressuring some of the rate-sensitive sectors. Elsewhere, oil prices rose after the International Energy Agency (IEA) said it expected global demand to rise this year on the back of a recovery in Chinese consumption and warned that output cuts announced by OPEC+ producers could exacerbate an oil-supply deficit. As earnings ramp up plan for price volatility to remain challenging in the days and weeks ahead.
Again, on Thursday, markets gapped higher after PPI came in lower than expected. The SPY gapped up 0.27%, DIA gapped up 0.13%, and QQQ gapped up 0.63%. We then saw 30 minutes of figuring out the direction in all three major indices. This led to a long, slow, steady rally that ran all day in the large-cap indices as well as a sharper 20-minute rally before the long, slow steady follow-through rally in the QQQ. These rallies lasted until 3 pm when a sideways grind in a very tight range took hold in all three major indices. This action gave us large-bodied, white candles in the SPY, DIA, and QQQ. The two large-cap indices broke out of their recent pullback while the QQQ broke above its consolidation range dating back to 4/5 but did not break out of the pullback that began at the start of the month.
On the day, all 10 sectors were in the green with Healthcare (+1.75%) leading the way higher while Utilities (+0.20%) lagged behind the others. At the same time, the SPY gained 1.33%, DIA gained 1.12%, and QQQ gained 1.96%. VXX fell 3.64% to 41.34 and T2122 climbed back well into the overbought territory at 93.45. 10-year bond yields rose to close at 3.449% while Oil (WTI) was down 1.02% to $82.39 per barrel. So, markets liked the PPI data falling more than expected and didn’t give the bears an inch all day long Thursday. It was a risk-on day with the tech big dogs (AMZN, NFLX, AAPL, TSLA, and META) taking markets higher. This happened on just less-than-average volume in SPY and QQQ with the mega-cap DIA trading a bit less than the other two indices (relative to average).
In economic news, the March Producer Price Index surprisingly came in well below expectations at -0.5% month-on-month (compared to a forecast of +0.1% and also well below the Feb. reading of +0.0%). More importantly, the March year-on-year PPI value came in at 2.7%, below the forecast of +3.0% and far below the February value of 4.9%. At the same time, Weekly Initial Jobless Claims were above the anticipated at 239k (versus a forecast of 232k and well above the prior week’s reading of 228k). Later in the day, Fed data was released showing that of the week ending April 12, bank borrowing from the Fed Discount window fell again to $67.6 billion/day (average) from $69.7 billion/day the prior week. At the same time, the total banks borrowed from the new Fed Bank Term Funding Program also fell to $71.8 billion (total for the week) from $79.02 billion in the prior week. This data points to the liquidity problems and turmoil in the banking sector easing, albeit in a modest way.
In stock news, AMZN joined the AI race on Thursday, announcing its Cloud Computing division has released a suite of tools aimed at helping other companies develop their own chatbots and image-generation services powered by artificial intelligence. These services will be powered by AMZN chips as well as AI chips from NVDA. Midday, it was reported by Reuters that XOM raised its CEO pay by 52% in 2022. This came as the pay (median) for XOM workers actually fell by 9%. For reference, the pay of competitors, such as the CEO of CVX rose 4%, the pay of OXY’s CEO rose 35%, and the CEO of COP saw his pay fall 16% (all versus the prior year). Meanwhile, LCID announced the start of a nationwide tour aiming to allow consumers in 40 US cities to get a chance to experience and drive the company’s Air luxury electric vehicle at “pop-up studio locations” in the cities. Separately, LCID announced they produced 2,314 and delivered 1,406 vehicles in Q1 (ending March 31). Elsewhere, S&P reported after the close that hedge funds thought the recent “banking crisis” was a buying opportunity. The report said hedge funds increased their regional bank stock exposure by 5.5%. As an example, Citadel (one of the most profitable hedge funds) bought a 5.3% stake in WAL while it was being battered. After the close, Reuters reported that BBVA, BAC, and SAN will jointly fund a $6 billion deal allowing Mexico to purchase power plants from IBDRY. Finally, BA announced after the close that it has stopped deliveries of 737 MAX planes as new quality problems (possibly stretching back to 2019) were identified with parts from their supplier SPR.
In stock legal and regulatory news, across the pond, the Swiss parliament rejected the Swiss government’s $121 In stock legal and regulatory news, mid-afternoon Thursday, GOOGL’s attorneys were grilled by a US District Court judge as the company sought to get a US Dept. of Justice antitrust case thrown out. The suit alleges that GOOGL illegally paid billions of dollars each year to AAPL, MSI, VZ, LG, Samsung and others to keep Google as the default search engine on their phones. Interestingly, the main alleged victim in the lawsuit is MSFT, who the Dept. of Justice successfully sued for antitrust violations in 1998. At the same time, STLA told Bloomberg it is leaning toward expanding production of a Peugeot electric vehicle in Spain. This has caused France to directly pressure the CEO of STLA and Slovakia (where the vehicle is now produced) is formulating a strategy to keep or add jobs. Meanwhile, KR asked a US federal judge to dismiss an antitrust case that had been filed by consumers, in hopes of blocking the acquisition of ACI. Across the pond, the EU said that Ireland has one month to create an order blocking META from doing transatlantic data flows. This would be the finalization of a ban on META from sharing and using European user data. Elsewhere, the US Dept. of Justice said ADBE has agreed to pay $3 million to settle allegations the company paid kickbacks to companies that convinced the federal agencies to buy ADBE software.
In miscellaneous news, the downward spiral of Natural Gas prices continued as the front-month Natty contract closed at $1.997/mmBtu on Thursday. This was the lowest close since June 2020 (amidst national lockdowns). Prior to that, this low level had not been seen since January 2016. Thursday’s move came as the EIA announced its natural gas storage data for the week. This week saw the first inventory build of the year for Nat Gas, but it was a smaller increase than expected at +25bcf (compared to a forecast of +28bcf). In other news, the Supreme Court has decided not to halt a legal settlement that erases $6 billion in debt that was owed by former students of (mainly for-profit) colleges who had been misled about school academics and job prospects. Meanwhile, a group representing Southern CA seaports (the Pacific Maritime Assn.) claimed Thursday that the largest union of longshoremen on the West Coast is disrupting the busiest seaport in the US for the second week in a row. This slowdown comes as negotiations over a new contract covering 22,000 West Coast dockworkers near the one-year milestone (with no major progress apparent). Major shippers like WMT and HD have been diverting cargo ships to ports on the Gulf of Mexico and East Coast to avoid potential work stoppages.
Overnight, Asian markets leaned heavily to the green side. Only New Zealand (-0.42%) and Thailand (-0.28%) were in the red. Meanwhile, Japan (+1.20%), Taiwan (+0.79%), and Shanghai (+0.60%) led the region higher. In Europe, we see a similar picture taking shape at midday. The CAC (+0.43%), DAX (+0.39%), and FTSE (+0.59%) are leading that region higher in early afternoon trade. In the US, as of 7:30 am, Futures are pointing toward a mixed open ahead of news. The DIA implies a +0.07% open, the SPY is implying a -0.06% open, and the QQQ implies a -0.44% open at this hour. At the same time, 10-year bond yields are rising to 3.467% and Oil (WTI) is up half of a percent to $82.57/barrel in early trading.
The major economic news events scheduled for Friday include March Retail Sales and March Import/Export Price Indexes (both at 8:30 am), March Industrial Production (9:15 am), Feb. Business Inventories, Michigan Consumer Sentiment, and Feb. Retail Inventories (all at 10 am). We also have a Fed Speaker (Waller at 8:45 am). The major earnings reports scheduled for the day include BLK, C, JPM, PNC, UNH, and WFC before the open. There are no major earnings reports scheduled for after the close.
So far this morning, UNH, JPM, WFC, PNC, and BLK all reported beats to both the revenue and earnings lines. (It is worth noting that on the revenue line, JPM surprised by 52% while PNC surprised by 37%, and WFC surprised by 33%.) C reports at 8 am. So far, only PNC has changed forward guidance, lowering its outlook.
With that background, at least at this point, it looks like the market’s “wait and see” stance remains intact. The QQQ is making the biggest premarket move…and it is only showing an inside candle move that has yet to go back down to retest the T-line (8ema). I suppose traders could be hanging tight until they see Retail Inventories or even Industrial Production. Still, that seems less important than the big banks starting us off with good reports this morning with record revenues, big deposit increases, and the benefit of higher rates (rate margins) as a tailwind. With that said, all three major indices remain in their bullish trends. The 3ema is still above the 8ema, which is above a rising 17ema, which is above the 50sma and that is above the 200sma for all of them. Over-extension does not appear to be a problem either in terms of the T-line but the T2122 indicator is back in the overbought area. This is what the chart tells us now. So, again, putting aside fear and prediction, the chart is telling us to maintain a long bias on a swing trading horizon while keeping a sharp eye out for trend breaks. However, also remember that it’s Friday. So, don’t forget to pay yourself and prepare for the weekend news cycle when you cannot react to changes until Monday.
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
The bull ran hard Thursday on better-than-expected economic data surging through resistance with no regard to the uncertainty that lies before the market today. It would seem that the market has full confidence that the big banks will report strong enough to support current prices and that the pending economic data will also be rosy. If they are correct look for more upside but watch for possible whipsaws from this short-term extended condition. However, if the data disappoints be prepared for a substantial bear attack that could quickly change market sentiment. Anything is possible so plan carefully.
Asian markets closed green across the board overnight responding to the bullish U.S. prices surge on better-than-expected inflation data. European markets trade with modest gains this morning as they wait and hope for bullish bank reports to support current market pricing. However, after yesterday’s buying spree the U.S. futures point to a slightly bearish open but that could all change as investors react to all the market-moving data ahead.
Economic Calendar
Earnings Calendar
The day the market has been waiting for is here, the kick-off of 2nd quarter earnings begins today. Notable reports for Friday include JPM, BLK, C, PNC, WFC, & UNH.
News & Technicals’
The health of Europe’s commercial real estate market is causing concerns among investors. Some are questioning whether it could be the next sector to blow. Following March’s banking crises, fears have arisen of a so-called “doom loop,” in which a potential bank run could trigger a property sector downturn. According to Morningstar Direct data, European funds invested directly in real estate recorded outflows of £172 million ($215.4 million) in February. Some analysts now see real estate stocks falling by 20%-40% by next year. However, it’s important to note that the situation is not the same across all countries in Europe. Some countries are doing better than others. For example, according to a report by Savills, the UK commercial property market is expected to grow by 3% in 2023. It’s also worth noting that the real estate market is cyclical and downturns are not uncommon. However, these downturns are usually followed by periods of growth.
Chinese President Xi Jinping’s signature foreign policy idea, the Belt and Road Project, was announced in 2013. The ambitious plan aimed to build infrastructure trade links across Eurasia and beyond. However, observers say that a decade after the project’s rollout, it is losing steam. Xi reportedly invited President Vladimir Putin to travel to China for the third Belt and Road Forum this year in an attempt to inject new momentum into the massive endeavor.
The bull ran hard on Thursday as producer price index (PPI) inflation data surprised to the downside. The PPI came in at 2.7% YoY for March, well below last month’s 4.9% reading. This comes after headline U.S. consumer price index (CPI) inflation in March also moved lower for the ninth consecutive month. In addition, jobless claims inched higher this week, up to 239,000, another sign that the labor market may be starting to soften. Markets are still pricing in about a 70% probability of a 0.25% Fed rate hike at its May meeting, although they expect a pivot to rate cuts by the second half of the year*. In our view, the Fed likely has one additional rate hike ahead of it, followed potentially by a longer pause in its rate-hiking cycle. However, today is a big day of data that could keep the bullish party going or dramatically shift sentiment. Prepare for a wild morning of price gyrations and watch out for big point whipsaws from these short-term overbought conditions.
The better-than-expected CPI brought out the bulls with a big gap up open but investors exhaled closing the indexes lower as rising bond yields raised recession concerns. Adding to the uncertainty looking forward both Jerome Powell and Warren Buffett warned that more banking troubles are likely on the horizon. Expect some price volatility this morning as investors react to the PPI and Jobless Claims figures but don’t be too surprised if low-volume chop rules the rest of the day as we wait for the huge day of market-moving data Friday morning.
Asian markets traded mixed overnight reacting to the Fed’s warning of recession as a result of the banking crisis. European markets also trade mixed this morning as recession uncertainty weighs on investors’ minds. At the time of writing this report U.S. Futures trade near the flatline ahead of jobless numbers and producer inflation data after the Fed signaled a recession on the horizon.
Economic Calendar
Earnings Calendar
Just one more day to wait until we begin 2nd quarter’s earnings with several big banks ramping up the volatility. Notable reports for Thursday include DAL, FAST, FRC, & PGR.
News & Technicals’
SoftBank sold $7.2 billion worth of shares in Alibaba via prepaid forward contracts. Three years ago, SoftBank maintained a nearly 25% stake in Alibaba worth over $100 billion. SoftBank and its Vision Fund have been posting huge quarterly losses amid a slowdown in the tech sector that has hammered valuations.
According to a survey by the International Association of Credit Portfolio Managers, 81% of fund managers see defaults picking up in the next 12 months, compared with 80% in the survey last December. For North American corporates, 86% of respondents see defaults rising, while 91% see defaults rising in Europe.
Oil traded near a five-month high as falling US inventories and surging Chinese imports added to signs of a tightening global market. West Texas Intermediate futures held above $83 a barrel after gaining 4.4% over the past two days.
According to Federal Reserve documents released Wednesday, the fallout from the U.S. banking crisis is likely to tilt the economy into recession later this year. Though Vice Chair for Supervision Michael Barr said the banking sector “is sound and resilient,” staff economists said the economy will take a hit.
Stocks opened higher on Wednesday, as investors exhaled after the latest read on inflation failed to produce any worrisome surprises. That enthusiasm faded somewhat as the trading day went on, with the S&P 500 closing 0.4% lower while the Dow shed 38 points. Interest rates responded by moving lower, with the 10-year Treasury yield falling back near 3.4%, while shorter-term rates fell more amid some relief on the Fed rate-hike outlook. Today traders will get more inflation data from the PPI report and the data on the jobs front with the jobless claims. Shortly after attention will turn to the big bank earnings Retail Sales and Industrial Production figures out Friday morning.
Markets gapped higher on Wednesday after good CPI data. SPY gapped up 0.52%, the DIA gapped up 0.50%, and the QQQ gapped up 0.64%. However, again we saw divergence at that point with the large-cap indices meandering sideways for an hour before selling off for 45 minutes, recrossing the gap in the process. Meanwhile, QQQ had faded the gap-up within 20 minutes of the open and then kept heading lower until 11:15 am. At that point, all three major indices put in a long, slow rally that lasted until just after 2 pm. Then, the selloff was on with the bears driving prices lower the rest of the day. This action gave us large-body, black candles in all three major indices. This included an Evening Star signal in the SPY, a Dark Cloud Cover in the DIA, and a big, black, outside day candle in the QQQ. QQQ also crossed back below its T-line while the other two major indices held above their own 8ema.
On the day, seven of the 10 sectors were in the red with Consumer Cyclical (-1.77%) leading the way lower while Industrials (+0.32%) held up best. At the same time, the SPY lost 0.39%, DIA lost 0.09%, and QQQ lost 0.88%. VXX gained 0.61% to 42.90 and T2122 fell back out of the overbought territory to 72.44. 10-year bond yields fell to close at 3.402% while Oil (WTI) was up 2.11% to $83.24 per barrel. So, markets liked the CPI data falling more than expected, following the Fed’s preferred path. However, as soon we got the three-week-old Fed takes from the day following the SBNY bank, the bears roared as (at that time) Fed members said they expected the banking crisis to push the economy into recession sometime this year. This happened on less-than-average volume in the large-cap indices and slightly above-average volume in QQQ.
In economic news, the March Consumer Price Index came in below expectations at 5.0% year-on-year (versus a forecast of 5.2% and the February reading of 6.0%). This was the ninth consecutive monthly decline. Later in the morning, the EIA Crude Oil Inventories came in above expectation with a build of 0.597-million-barrels (compared to a forecasted drawdown of 0.583-million-barrels and far higher than the prior week’s 3.739-million-barrel drawdown). Then at 2 pm, the March Federal Budget Balance was larger than anticipated at -$378.0 billion (versus a forecast of -$302.0 billion and significantly worse than the February reading of -$262.0 billion). At the same time, the FOMC Minutes basically followed Fed Chair Powell’s remarks from the March 22 press conference. There was a broad consensus to raise rates by a quarter percent at that point. However, the terminal level of the Fed Funds Rate was also tamped down by the banking crisis going on then. Four of the regional Fed Presidents did not want any hike. The other big news was that Fed Staff (not the voters) put forth that their base case was then expecting a “mild recession later this year” given their assessment of the impact of the banking turmoil on available credit. Elsewhere, San Fran Fed President Daly told an audience Wednesday that more rate hikes may not be needed to tame inflation, saying “there are good reasons to think that policy may have to tighten more to bring inflation down.”
In stock news, a day prior to competitor DAL’s earnings report, AAL announced it is forecasting profits below market expectations. AAL specifically cited high labor and fuel costs. In other transport news, GOOGL got some bad press when some of their Waymo self-driving vehicles pulled over due to heavy fog in San Francisco Tuesday night, causing traffic problems during rush hour. Meanwhile, WBD announced it is combining HBO Max and Discovery+ content to create a new streaming service called “Max” as the company attempts to compete with DIS, NFLX, AMZN, and PARA. At the same time, the world’s largest luxury brand (LVMH, not US-listed) reported a 17% rise in sales in Q1 and specifically notes a strong rebound in the Chinese market. In the electric market, an industry insider reported Wednesday that TSLA is about to launch a third generation of its home battery pack, named Powerwall 3. (No pricing or specs were yet available since the equipment has not yet been approved for connection to the electric grid.) Elsewhere, EMR agreed to buy NATI for $8.2 billion ($60/share). Elsewhere, the Teamsters union told UPS it won’t begin national contract negotiations as (previously scheduled to start next week) until after regional supplemental contracts are completed. 30 supplemental contracts remain unsettled and the national contract expires July 31.
In stock legal and regulatory news, across the pond, the Swiss parliament rejected the Swiss government’s $121 billion aid package that had been part of UBS’s buyout of failing CS. (That government commitment cannot be overturned, but the vote signals that the large house of parliament is not happy with the deal.) Meanwhile, the US Dept. of Labor (in cooperation with other federal agencies) sent a letter to meat companies TSN, JBSAY, and 16 other meat companies Wednesday, ordering those companies to inspect their supply chains in order to root out illegal child labor. The letter said the Dept. of Agriculture is exploring enforcement mechanisms and will take action in the near future. At the same time, US Senator Wyden called for an investigation by Congress and the Administration following a Reuters report that Russia is using facial recognition technology based on chips from NVDA and/or INTC to identify and detain political dissenters. Russian customer records showed that NVDA products continued to arrive in Russia at least through Oct. 31, 2022. (NVDA responded by saying that if it finds a customer who violated US Export Laws, it will cease doing business with that customer.) Elsewhere, a Del. Superior Court Judge imposed sanctions on FOX for withholding evidence in the $1.6 billion defamation case brought against it by Dominion Voting Systems. No fine dollar amount was mentioned, but the cost of added legal work by Dominion following newly the disclosed information will be borne by FOX. In banking news, head of the National Economic Council (and former Fed Vice-chair) Brainard told reporters Wednesday the banking crisis now has eased in terms of deposit outflows. However, she also called for stronger stress testing (liquidity) requirements that include regional banks. Finally, CO became the first state to pass “right to repair” legislation for farmers on Wednesday. The bill will force farm machinery makers like DE and CNHI to provide manuals, diagnostic equipment, and parts to farmers who want to repair (or have local mechanics repair) their farm machinery. Other states are now expected to follow suit and similar legislation may impact other consumer electronics (like phones, tablets, Mac computers, etc.).
In miscellaneous news, Wednesday evening, CNBC reported that a Univ. of Florida finance professor (Lopez-Lira) told them that he used Chat-GPT to predict the next day’s market directions (based on analyzing all news headlines). Reportedly, the results were “much better than random chance.” The professor’s paper has not yet been peer-reviewed. However, Lopez-Lira said his research suggests AI could be trained to predict stock movements. (For what it is worth, this research was done using the older ChatGPT 3.5 model. The professor found less than a 1% chance the model could have achieved the results it attained by mere chance.) Elsewhere, Bloomberg announced overnight that it will integrate a “ChatGPT-style” AI into its Bloomberg Trading Terminal. No timeline was mentioned.
Overnight, Asian markets were mixed in very uneven trading. Shenzhen (-1.21%) and Taiwan (-0.80%) were by far the largest losers. Meanwhile, South Korea (+0.43%) was the biggest gainer. Still, the green exchanges outnumbered the red exchanges in the region. Over in Europe, we see a similarly mixed picture taking shape, but most of the bourses lean toward the green side at midday. The CAC (+0.93%), DAX (-0.08%), and FTSE (+0.01%) lead on volume as usual in early afternoon trading. In the US, as of 7 am, Futures are pointing toward a flat to green start to the morning (ahead of PPI data). The DIA implies a +0.01% open, the SPY is implying a +0.10% open, and the QQQ implies a +0.24% open at this hour. At the same time, 10-year bond yields are back up to 3.424% and Oil (WTI) is down half a percent to $82.86/barrel.
The major economic news events scheduled for Thursday are limited to March PPI and Weekly Initial Jobless Claims (both at 8:30 am). The major earnings reports scheduled for Thursday include DAL, FAST, INFY, and PGR before the open. There are no major earnings reports scheduled for after the close.
In economic news later this week, on Friday, March Retail Sales, March Import/Export Price Indexes, March Industrial Production, Feb. Business Inventories, Michigan Consumer Sentiment, and Feb. Retail Inventories are reported.
In terms of earnings reports later this week, on Friday, BLK, C, JPM, PNC, UNH, and WFC report.
So far this morning, FAST beat on both the revenue and earnings lines. Meanwhile, DAL beat on revenue while missing on earnings. Unfortunately, INFY missed on both the top and bottom lines. (PGR is scheduled to report at 8:15 am.)
With that background, at least before the PPI data release, traders seem to be continuing their “wait and see” stance. All three major indices are starting to form tiny Bull Harami-type inside candles, staying within the recent consolidation range. Little has changed in the large-cap indices. The 3ema is still above the 8ema, which is above a rising 17ema, which is above the 50sma and that is above the 200sma. The QQQ has nearly the same bullish moving average stack. However, the QQQ 3ema has fallen below the T-line, perhaps giving an indication that the bullish trend has cracks. We also have to recognize that all three major indices are sitting on a potential support level. Over-extension does not appear to be a problem either in terms of the T-line or T2122 indicator. So, the consolidation continues, but the bullish trend has not yet broken. New data or news could change that picture in a heartbeat. However, this is what the chart tells us now. So, again, putting aside fear and prediction, the chart is telling us to maintain a long bias on a swing trading horizon while keeping a sharp eye out for trend breaks.
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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