The narrative of a Fed pivot kept the bulls inspired Wednesday despite the economic data showing the battle against inflation is not over. Moreover, the decision of OPEC to cut production by two million barrels a day adds pressure to the inflation fight as oil and gas prices surge. With few notable earnings reports, Jobless Claims, and several Fed speakers, we should expect another wild of price volatile as we wait for the Friday Employment Situation numbers.
While we slept, Asian markets traded mixed in reaction to the OPEC decision. European market markets struggle in a choppy morning session turning modestly bearish as the rally momentum fades. As I write this report, U.S. futures have reversed overnight gains suggesting a lower open ahead of earnings and economic reports. With 4th quarter earnings just a week away, uncertainty remains high, so plan for the challenging price action to continue.
Economic Calendar
Earnings Calendar
Just one week before the official kick-off of 4th quarter earnings, we have a few noteworthy stocks on the calendar today. Notable names include ANGO, CAG, STZ, LEVI, & MKC.
News and Techniclals’
Energy analysts believe deep production cuts from OPEC+ could backfire for U.S. ally Saudi Arabia. OPEC and non-OPEC allies, often referred to as OPEC+, agreed on Wednesday to reduce oil production by 2 million barrels per day from November. The move is designed to spur a recovery in oil prices, which had fallen to roughly $80 a barrel from more than $120 three months ago. However, Washington sees OPEC+’s decision as political interference and a “blow” against U.S. President Joe Biden, said Dan Yergin, vice chair of S&P Global. Secondly, it’s seen as somehow political interfering in the U.S. election, although the cut doesn’t go into effect until November,” he said. “There seems to be a mini battle between [Strategic Petroleum Reserve] releases in the White House and what’s going on with OPEC+,” said Bill Perkins, CEO of Skylar Capital Management.
Analysts said Apple’s next iPhone would likely be equipped with USB-C charging rather than its proprietary Lightning system. It comes after lawmakers in the European Parliament approved a law requiring electronics sold in the European Union to be equipped with a USB Type-C charging port by the end of 2024. Indeed, there are rumors that Apple is exploring USB-C for the iPhone 15, which is what the next device could be called if the traditional naming convention continues. Analysts said Apple’s change to USB-C will likely be for the global market, including the U.S., rather than just the EU.
Ford is increasing the entry-level price of its electric F-150 Lightning pickup by $5,000 for the 2023 model year due to rising costs and supply chain issues. As a result, the starting price of the 2023 Lightning Pro model will be $51,974 – up nearly 11% and a 30% increase from the truck’s $39,974 price in May 2021. However, the company said the price increase would not impact current retail order holders and commercial and government customers with scheduled orders. Treasury yields rallied slightly in early Thursday trading as inflation worries and hawkish Fed policies continue.
The wild price action continues as the hope of a Fed pivot inspires buyers to recover the Wednesday morning gap that temporarily produced gains on the day. Unfortunately, bond yields and the dollar’s strength continue to inhibit bullish sentiment. Add in the OPEC decision that’s quickly raising oil and gas prices and fanning the flame of inflation, thickening the dark cloud hanging over the weakening economy. Today we get the latest read on Jobless claims and more Fed speeches for the market to process as we move toward the Friday Employment Situation report. Plan carefully and expect the volatile uncertainties to continue.
Markets gapped significantly lower on Wednesday (1.25% in the SPY, 1.15% in the DIA, and 1.35% in the QQQ) as markets followed Europe in rethinking whether the Fed would actually pivot soon. The bears then proceeded to follow through, taking us to the lows of the day at 10:30 am. However, the bulls stepped in to buy the pullback again, leading a long, steady rally which more than faded the gap and took us to the highs of the day at 3:20 pm. Then there was one more reversal as the bears took back over at 3:20 pm and drove prices back down into the morning gap by the close. This action is giving us gap-down, large white candles with wicks on both ends, that had bounced up off the T-line (8ema).
On the day, 7 of the 10 sectors are in the red with Energy (+1.31%) far out front due to the OPEC+ production cut. On the lagging side, Communications Services (+1.77%) and Utilities (-2.08%) brought up the rear. Meanwhile, SPY lost 0.19%, DIA lost 0.10% and QQQ lost 0.05%. The VXX is up 0.67% to 19.52 and T2122 is a bit higher y at 69.42. The 10-year bond yields are back up to 3.751% and Oil (WTI) is up 1.63% to $87.93/barrel. Basically, it was a schizophrenic day with a strong gap and run one direction that completely reversed to go back in the other direction and then reversed yet again. However, the very short-term bullish trend remains intact.
In economic news, ADP reported September Nonfarm Employment went up more than expected, coming in at +208k jobs (versus +200k forecast and +185k in August). The August Trade Balance also was less slightly negative than expected at -$67.40 billion versus -$67.70 billion forecast and -$70.50 billion in July. In addition, September Services PMI came in better than expected at 49.3 (versus 49.2 forecast and 43.7 in August). The ISM September Non-Mfg. PMI also came in hotter than expected at 56.7 (versus 56.0 forecast and 56.9 in August). Overall, these are all things the Fed will not like to see and will probably want to come in worse to slow inflation. Finally, EIA Weekly Crude Oil Inventories came in with a 1.356 million drawdown (compared to a forecast 2.052-million-barrel build).
In energy news, as mentioned above, OPEC+ decided on and announced a 2 million barrel per day production cut starting in November. This was at the very high end of analyst estimates for the cut, which had ranged between 0.5 million and 2 million. The group’s stated aim is to get oil prices to stabilize in the $100 – $105 / barrel range. Not that it matters much, but most analysts still do not expect the full 2 million barrel cut to be implemented as all OPEC+ countries tend to cheat their quotas at the margins. Elsewhere, the CEO of TTE made an announcement that the French energy giant will continue to ship Russian liquified Natural gas as long as there are no European sanctions on that fuel.
In stock news, TSN announced it is joining other major corporations and moving its corporate headquarters out of Illinois and into Arkansas. This move will impact 1,000 employees. Then, after the close, GM agreed to pay $3.5 million to the DOJ to resolve claims that failed to provide benefits and protections to US service members. This amount only includes $65,000 in penalties and the other $3.435 million will go to the affected US service members. Elsewhere, F announced an 11% price hike on electric F-150 Lightning Pro trucks for the 2023 model year. That brings the base price to $51,974. At the same time, COST announced comparable store sales rose by 8.5% in September. This includes an 11.2% increase in US stores and a much smaller 5.7% increase in Canadian stores. Finally, this morning PTON CEO McCarthy said that his company has 6 months to prove it can survive and that 500 more job cuts are coming soon. PTON was down as much as 8% in premarket trade on this “news” but has recovered to be down only 1.65% at the moment.
In miscellaneous news, Bloomberg reported that the entire midday reversal and long rally was likely sparked by a single options trade. They described this trade as a $31 million debit spread on SPX futures, buying 20,000 October $4500 Calls and 14,000 March $4300 Calls while also selling 48,000 January $4500 Calls. Elsewhere, late in the afternoon, GS raised its Q3 GDP estimate to +1.9% (from the previous, and recently revised downward, +0.9%). So, in other words, the economy was stronger in Q3 than GS had expected, even as late as mid-Q3. In Fed speak, Atlanta Fed President Bostic said that the Fed’s fight against inflation is still in early days. Specifically, he said that “despite some glimmers of hope (in recent data), the overarching message I’m drawing (from data) is that we are decidedly in the inflationary woods…not out of them.”
So far this morning, MKC and CAG bother reported beating on the revenue and earnings lines. The STZ report is late for some reason.
Overnight, Asian markets were mixed. Shenzhen (-1.29%), Shanghai (-0.55%), and New Zealand (-0.49%) half of the region lower. Meanwhile, South Korea (+1.02%), Taiwan (+0.66%), and Thailand (+0.56%) led the other half of the region higher. Over in Europe, stocks are mostly in the red at midday. The FTSE (-0.71%), DAX (-0.43%), and CA (-0.42%) lead the majority of exchanges lower. However, there are a handful of smaller exchanges still modestly in the green in early afternoon trading. As of 7:30 am, US Futures are pointing toward another down start to the day. The DIA implies a -0.57% open, the SPY is implying a -0.63% open, and the QQQ implies a -0.57% open at this hour. 10-year bond yields are up a bit to 3.773% and Oil (WTI) is off fractionally to $87.44/barrel in early trading.
The major economic news events scheduled for Thursday is limited to Weekly Initial Jobless Claims (8:30 am). However, we also have two more Fed speakers after the close (Waller at 5 pm and Mester at 6:30 pm). The major earnings reports scheduled for the day is limited to CAG, STZ, and MKC before the open. Then after the close, LEVI reports.
In economic news later this week, on Friday, we get Sept. Avg. Hourly Earnings, Sept. Payrolls, Sept. Participation Rate, and Sept. Unemployment Rate. In earnings reports later this week, on Friday, there are no major earnings reports scheduled.
Overall, the market seems to be caught in the horns of a dilemma. Fed speaker after Fed speaker keeps saying that the fight against inflation is still in the early stages, they may raise rates as high as 4.5% before the end of 2022, and there will be no rate cuts in 2023. However, markets (as gauged by Fed Fund Futures and large-scale equity dip buying) continue to forecast a slowing of easing and a rate cut in 2023. The most recent reasoning being argued is that the Fed needs to slow tightening and then start cutting in order to save other major global economies from collapse. (For example, the UK faces another cliff next week when the BoE stops buying bonds and the new Truss government is still untrusted. Meanwhile, China faces massive government debt, has just reduced its lending to other countries, and has domestic real estate and banking sectors in turmoil.) So, some traders seem to be betting the Fed will let the US live with inflation in favor of stabilizing the global economy.
With this backdrop, the premarket action has been inside of yesterday’s candle in the major indices. This may indicate we are just consolidating and waiting on the September Payrolls data on Friday. Market extension is not a major issue given the implied open. However, the strong bear trend has not been broken and is the main directional indicator we should heed. Continue to expect volatility and watch for the next bearish leg now that we’ve relieved over-extension and had a short relief rally.
Keep in mind that trading is our job. It’s not a hobby. So, treat it that way. Do the work and follow the process. Stick with your trading rules, trade with the trend, and take those profits when you have them. Demonstrate patience and wait for confirmation. Don’t be stubborn. If you have a loss, just admit you were wrong, respect your stop, and take the loss before it grows. When price does move in your direction, always move your stops in your favor (remember the “Legend of the man in the green bathrobe“…it is NOT HOUSE MONEY, it’s all OUR MONEY!). Lastly, remember that you get rich slowly and steadily in Trading…not by striking it rich on one or two trades. So, give up that lottery ticket mentality.
See you in the trading room.
Ed
Swing Trade Ideas for your consideration and watchlist: AMZN, MSFT, SLV, FCX, X, ZS, RIG, FL, ENPH, FDX, PINS, and CORN. You can find Rick’s review of tickers on his YouTube Channel here. Trade your plan, take profits along the way, and smart. Also, remember to check for impending earnings reports. Finally, remember that any tickers we mention and talk about in the trading room are not recommendations to buy or sell.
🎯 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 fast two-day rally revived hope of a market bottom, and it certainly was a welcome change from the selling, but with FOMC unlikely to pivot, was it too much too soon? Currencies continue fluctuating, and the bond yields ticked up early Wednesday, bringing back some uncertainty this morning. If the bottom is indeed in, we need to wait and see proof that the institutions support a higher low and they have the willingness to break the index downtrends. Avoid the fear of missing out on emotional trading and stick to your rules and sound technical analysis principles.
Asian markets closed mostly higher, with Hong Kong surging up 5.90% as the Shanghai index drifted lower by 0.55%. European markets are in pullback mode this morning, seeing red across the board as PMI data points to recession. U.S. futures are also retreating ahead of a busy morning of economic data as the dollar bounces, and bond yields tick up. Plan for another wild day.
Economic Calendar
Earnings Calendar
On the Wednesday earnings calendar, we have six confirmed reports. Notable reports include HELE, LW, and RPM.
News and Technicals’
Elon Musk’s revived $44 billion deal to buy Twitter sparked fresh debate over what the billionaire will do with the service if he eventually owns it. On Tuesday, Musk tweeted that buying Twitter is an “accelerant to creating X, the everything app.” He did not provide further details. However, musk may be hinting toward so-called “super apps,” which are popular in China and other parts of Asia and pioneered by the likes of Chinese technology giant Tencent. Chinese app WeChat, run by Tencent, is the biggest super app in the world. Musk previously called WeChat “great” and said there is an opportunity to create an app like that outside of China.
OPEC+’s plans to cut oil production is a “mistake,” said U.S. Senator Chris Murphy. “I think it is a mistake on their part. And I think it’s time for a wholesale re-evaluation of the U.S. alliance with Saudi Arabia,” Murphy told CNBC. “I think you’ve got to be very careful to do business with the Saudis these days,” he said. Germany’s economy minister has accused the U.S. and other “friendly” gas supplier states of astronomical prices for their gas supplies. He suggested some gas suppliers were profiting from the fallout of the war in Ukraine, which has sent global energy prices soaring.
The substantial two-day rally was just what the market needed to revive traders and investors tired of the consistent selling, but is it too much too soon with FOMC unlikely to pivot? As of now, the index downtrends remain intact, as do the technical and price resistance above. The dollar is bouncing this morning, and the treasury yields ticked up slightly in the early Wednesday trading suggesting the currency fluctuations could continue to raise market uncertainty. Today we will find out if OPEC will cut production levels which could add inflationary pressure as winter approaches. We will also get Mortgage Applications, ADP, Trade numbers, PMI Final, ISM Services, and Petroleum Status reports this morning. Keep in mind the Employment Situation report Friday morning because it’s not uncommon for the price action to become light and choppy ahead of the number.
US stocks followed the rest of the globe, gapping strongly higher at the open (2% in the QQQ, 1.6% in the SPY, and 1.33% in the DIA). The bulls then proceeded to run us up the first 30 minutes, following through strongly on the gap. This leveled off into a sideways grind in a tight range as the bulls caught their breath from 10 am to 12:45 pm. At that point, the bears took us lower for half an hour before the bulls stepped in to slowly rally back close at new highs in the large-cap indices. (The QQQ sold off more heavily and recovered more slowly. So, it did not reach the late morning highs again.) This action is leaving us with gap-up, large white candles (with an upper wick in the QQQ). And, as mentioned in the morning blog, all 3 major indices are now well above their T-lines (8ema).
On the day, all 10 sectors were green with seven of them being up at least 3%. Cons. Defensive (+1.90%) was the laggard and Consumer Cyclical (+4.30%) led the pack higher. The SPY was up 3.05%, the DIA up 2.83%, and the QQQ up 3.14%. VXX was down about 3.77% to 19.39 and T2122 is now well into the overbought territory at 90.08. These moves came on slightly higher than expected volume. Meanwhile, 10-year bond yields have climbed back from early losses but are still down to 3.631% and Oil (WTI) has spiked another 3.12% to $86.24/barrel (as markets seem to anticipate major production cuts by OPEC+ on Wednesday). All-in-all, a very bullish day and perhaps near the end of a relief rally as we now approach the downtrend line.
In economic news, August Factory Orders same in dead flat (0.0%), which was below forecast (+0.2%) but also well above the July reading of -1.0%. However, the most telling number of the day is that August Job Openings (JOLTs) were down a whopping 1.12 million over the July number (10.053 million vs July’s 11.170 million) as well as being far below forecast (10.775 million). Taken together, these economic indicators seem to be telling us the US economy is cooling fast, which potentially could be read by traders as a reason for the Fed to lighten up soon. After the close, API Weekly Crude Oil Stocks reported an unexpected drawdown of 1.770 million barrels (versus a forecast build of 1.966 million barrels and the prior week’s build of 4.150 million barrels).
In Fed news, the FOMC members tried to talk markets out of believing they will pivot soon. NY Fed President Williams reiterated that the Fed’s fight with inflation is not done and it will take some time to decelerate the conditions causing inflation. Meanwhile, new Fed Governor Jefferson also spoke to a conference in Atlanta, saying “Inflation is still the most serious problem facing the Fed and it may take some time to address.” He went on to reiterate that the Fed is resolute on bringing inflation back down to 2%. Finally, San Francisco Fed President Daly said “there’s a lot of room to slow the labor market before we get into severe recessionary conditions.” She added her prediction that unemployment will reach the 4.5% range and not the high levels some project. However, again she reiterated that the Fed needs to do further rate hikes to bring down inflation.
In stock news, during the day, an SEC filing indicated that Elon Musk has abandoned his attempt to back out of buying TWTR and is prepared to proceed under the original terms of the buyout deal. TWTR traded in a 23% range on the day, closing up 22.24%, which is oddly still $2.20/share less than the agreed per share price of the deal. In other stock news, HAS cut its full-year revenue forecast. This falls in line with WMT and TGT having announced plans to drastically reduce inventory (those 2 companies account for one-third of HAS sales). Elsewhere, the New York Times reported that AMZN has sent an internal announcement of a corporate hiring freeze for the rest of the year in its retail/e-tail business (as opposed to cloud IT services). The Wall Street Journal also reported that META is working to reduce its office space by letting some existing leases expire and consolidating multiple buildings into one. This comes as META is hiring fewer employees and adopting a hybrid (office/work-from-home) policy. On the brighter side, F reported strong demand for new vehicles in September although it also reported actual sales for the month were down slightly due to supply shortages.
In miscellaneous news, US Army Corps of Engineers reports that low water levels in the Mississippi River are causing a major shortage of transport in the center of the country. 1,600 barges are waiting for USACE dredging to make the lower Mississippi passable as the river has essentially been closed since last week. The lack of those barges will be a real problem for agriculture, chemical, and other industries. For example, 60% of US grain exports travel that river and exit the country via Gulf ports. This could have a major impact on ADM, CAG, and BG among others. Meanwhile, the EU is set to approve PM purchasing a Swedish competitor of the spinoff MO. Swedish Match is a large player in European cigarette alternatives. Finally, US weekly mortgage demand plummeted last week as the average 30-year fixed-rate mortgage rose to 6.75% (from 6.52%) and hurricane Ian killed demand. The number of applications to refinance loans fell 18% and new home purchase loan applications fell 13% for an overall decline of 14.2%.
So far this morning, AONNY, HELE, and RPM have all reported beats on both the revenue and earnings lines. LW is scheduled to report at 8:30 am.
Overnight, Asian markets were mostly (and in some cases very strongly) green. Hong Kong (+5.90%) was a clear outlier. Meanwhile, India (+2.29%), Australia (+1.74%), and Taiwan (+1.66%) led the gainers. Only the mainland Chinese exchanges, Shenzhen (-1.29%) and Shanghai (-0.55%), were red on the day. In Europe, we see a completely different story, with red across the board at midday. The FTSE (-1.01%), DAX (-0.75%), and CAC (-0.62%) lead the region lower on volume. However, most of the smaller exchanges have made bigger moves in early afternoon trade. This comes as doubt of a central bank pivot sets in among traders. (For what it is worth UK PM Truss also made another blunder in telling her party conference she is undecided whether to raise government benefits to offset inflation. That may be true, but while there are ongoing protests over “cost of living” in the streets, the optics are just abysmal. As of 7:30 am, US Futures are pointing toward a down start to the day. The DIA implies a -0.70% open, the SPY is implying a -0.68% open, and the QQQ implies a -0.65% open at this hour. 10-year bond yields are up again to 3.683% and Oil (WTI) is up another half of a percent to $86.96/barrel in early trading.
The major economic news events scheduled for Wednesday include OPEC+ decision on production cuts (tba), Sept. ADP Nonfarm Employment Change (8:15 am), August Imports/Exports and August Trade Balance (all at 8:30 am), Sept. Services PMI (9:45 am), Sept. ISM Non-Mfg. PMI (10 am), and EIA Weekly Crude Oil Inventories (10:30 am). We also have another Fed speaker (Bostic at 4 pm). The major earnings reports scheduled for the day is limited to HELE, LW, and RPM before the open.
In economic news later this week, on Thursday, the Weekly Initial Jobless Claims are reported. Finally, on Friday, Sept. Avg. Hourly Earnings, Sept. Payrolls, Sept. Participation Rate, and Sept. Unemployment Rate are reported.
In earnings reports later this week, on Thursday, we hear from CAG, STZ, MKC, and LEVI. Finally, on Friday, there are no major earnings reports scheduled.
With this backdrop, we see that it appears the Fed members have talked us off the hopium (of a Fed easing) that markets had been smoking. All 3 major indices are above their T-lines, but it looks like we are headed back in that direction for a retest. The strong bear trend remains in place and is the indication we should heed. That line more-or-less coincides with a potential support level from a line across the tops starting on 9/23. Continue to expect volatility and watch for the next bearish leg now that we’ve relieved over-extension.
Keep in mind that trading is our job. It’s not a hobby. So, treat it that way. Do the work and follow the process. Stick with your trading rules, trade with the trend, and take those profits when you have them. Demonstrate patience and wait for confirmation. Don’t be stubborn. If you have a loss, just admit you were wrong, respect your stop, and take the loss before it grows. When price does move in your direction, always move your stops in your favor (remember the “Legend of the man in the green bathrobe“…it is NOT HOUSE MONEY, it’s all OUR MONEY!). Lastly, remember that you get rich slowly and steadily in Trading…not by striking it rich on one or two trades. So, give up that lottery ticket mentality.
See you in the trading room.
Ed
Swing Trade Ideas for your consideration and watchlist: SSYS, BBIG, RIG, TSM, VLO, WMT, COST, PINS, ORCL, XOM, FDX, and MSFT. You can find Rick’s review of tickers on his YouTube Channel here. Trade your plan, take profits along the way, and smart. Also, remember to check for impending earnings reports. Finally, remember that any tickers we mention and talk about in the trading room are not recommendations to buy or sell.
🎯 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
Happy day, the bulls returned to work on Monday, finding inspiration in the pullback of bond yields and the declining dollar. However, it was not all sunshine and roses with the bearish ISM report and the sharply declining construction spending. Though the relief rally was overdue, keep in mind downtrends remain intact, as well as significant overhead resistance, so the feeling the bottom may be in is premature. Stay focused on price, and remember, the bulls still have a lot to prove before we sound the all-clear signal.
Asian market closed mixed after a smaller than expected Australian rate hike, though the Nikkei surged nearly 3%. European markets leap higher this morning as they celebrate the needed selling relief. Ahead of factory orders, the JOLTS report, and a parade of Fed speakers, U.S. futures point to a huge gap up open despite the tremendous economic uncertainties. Watch for the possibility of a pop and drop as we test the downtrend and overhead resistance levels.
Economic Calendar
Earnings Calendar
We have just four confirmed reports on Tuesday. They are AYI, NG, SAR, and SGH.
News & Technicals’
Monetary and fiscal policies in advanced economies — including continued interest rate hikes — could push the world toward a global recession and stagnation, the UN Conference on Trade and Development (UNCTAD) said on Monday. A global slowdown could potentially inflict worse damage than the financial crisis in 2008 and the Covid-19 shock in 2020, warned the UNCTAD in its Trade and Development Report 2022. “We still have time to step back from the edge of recession. Nothing is inevitable. We must change course,” said UNCTAD Secretary-General Rebeca Grynspan. North Korea fired a ballistic missile over Japan for the first time in five years on Tuesday, prompting a warning for residents to take cover and a temporary suspension of train operations in northern Japan. Speaking to reporters shortly afterward, Prime Minister Fumio Kishida called North Korea’s actions “barbaric” and said the government would continue gathering and analyzing information.
Manhattan apartment sales fell 18% in the third quarter, putting the brakes on New York’s real estate comeback. However, the figure last fell in the fourth quarter of 2020 and marks a turnaround for the nation’s largest real estate market. Brokers say the drop marks a return to normalcy after the artificially high sales of 2021. There are growing fears of a housing market crash in the U.K. after a swathe of tax cuts announced by the government sent interest rate expectations soaring, driving up lending rates for homebuyers. As a result, several banks suspended mortgage deals for new customers, and many have now returned to the market with significantly higher rates. Oxford Economics estimates that if interest rates remain at the levels currently being offered, house prices are approximate “30% overvalued based on the affordability of mortgage payments.”
With the U.S. dollar declining and bond yields easing slightly, the bulls finally found the inspiration to rally Monday despite the declining ISM and Construction spending numbers. It’s a welcome relief from the short-term oversold condition of the indexes. However, the indexes remain in downtrends, and we have yet to challenge the significant overhead resistance levels, so be careful in assuming this is an all-clear buy signal. While yesterday’s big point move raises hope of a market bottom, we still have an inflation problem and a Fed showing no signs of pivoting. Today we will get a reading on factory orders and the JOLTS report with another parade of Fed speakers. With the dollar falling, keep a close eye on commodity prices that typically rally during currency weakness which could quickly add pressure to the fight against inflation. With earnings season just nine days away, volatility is likely to remain high, especially if we continue to get downgrades and earnings warnings.
Markets gapped significantly higher on Monday (+1.12 in SPY, +1.20% in the DIA, and +0.75% in the QQQ). Then the bulls took a few minutes to gather themselves before following through in the morning, grinding sideways in the midday, and then strongly rallying from 1 pm to 3 pm. Finally, the three major indices all took profits in the last 30 minutes of the day. This action left us with gap-up, big white candles with significant upper and lower wicks. The large-cap indices also both retested their T-lines (8ema) and the QQQ got close.
On the day, all 10 sectors were well into the green. Consumer Cyclical (+1.66%) and Consumer Defensive (+1.95%) were the lagging sectors. Meanwhile, Energy (+5.50%) and Basic Materials (+4.04%) led the rebound. At the same time, the SPY gained 2.62%, the DIA gained 2.61%, and the QQQ gained 2.35%. The VXX fell 5% to 20.15 and T2122 jumped back up into the mid-range at 52. 10-year bond yields fell to 3.65% and Oil (WTI) spiked 4.69% to 83.22/barrel. So, the strong bearish trend remains in place, but at a minimum, the over-extension was resolved in just one candle.
In economic news, the September Mfg. PMI came in slightly stronger than expected at 52.0 (versus a 51.8 forecast and a 51.5 reading in August). However, the September ISM Mfg. PMI came in below forecast at 50.9 versus a 52.2 expected and a 52.8 number in August. Also, later in the day, NY Fed Pres. Williams said that while there have been a few nascent signs of cooling inflation, the Fed must press forward with its tightening policy to really get inflation under control. He specifically said that some commodity prices are falling, but that is not enough. He went on to say goods demand remains very high and both labor and services demand is still outstripping the available supply. These are all conditions the Fed must force to reverse to get inflation under control in the longer run. Along those lines, Williams said, “I see inflation moving close to our 2% goal in the next few years.” (Meaning this will be a long tightening cycle.)
In stock news, CS was the news of the day trading wildly. It was down 11% in the premarket, opened down just 1%, and then sold off 6% before reversing and raying 9%. It closed the day up 2.3%. Elsewhere, AAPL lost its second bid to challenge patents held by QCOM after the Supreme Court declined to hear an AAPL appeal. This leaves AAPL on the hook for violation of 3 QCOM smartphone patents as had been ruled by lower courts in 2017-2019. A multi-billion-dollar settlement had already been reached, between the companies, but now that AAPL’s appeal has failed, it will need to renew licenses for those patents from QCOM as soon as 2025. Meanwhile, RIVN announced it had produced 7,363 vehicles in Q3 (a 67% increase from Q2) and reiterated it still expects to make 25,000 for the full year. However, not all RIVN news was good after a County judge in Georgia blocked proposed state and county incentives for RIVN to build a $5 billion manufacturing plant in that area. The ruling found the plan did not appear feasible and it failed to promote the public welfare of local communities.
In other overnight AAPL news, the EU has passed regulations that will force AAPL to violate its longstanding policy of not conforming to industry standards. The new law would force all mobile devices (phones, tablets, and cameras) to use standard charging ports meaning they can all use the same chargers. In other AAPL news, Foxconn (the main iPhone manufacturer) said that they are “cautiously optimistic” about Q4 sales and production. This flies in contrast to last week’s announcement that AAPL had scrapped plans to increase production of iPhone 14s.
Also overnight, the Reserve Bank of Australia has sparked global speculation that central banks are about to pivot away from tightening by easing their rate hikes. The bank raised its rates by only a quarter of a percent (versus the widely expected half of a percent hike). It seems global traders are adding this to NY Fed President Williams Monday statement that tighter monetary policy has BEGUN to cool demand and reduce inflationary pressures…and lurched to the conclusion a pivot is near at hand. This could be a leading factor in the global rally we are seeing today. (Be extremely careful buying into a market reversal on such thin logic.)
Overnight, Asian markets were mixed but mostly green. Australia (+3.75%), Japan (+2.96%), and South Korea (+2.50%) led the gainers. Meanwhile, Shenzhen (-1.29%), Hong Kong (-0.83%), and Shanghai (-0.55%) were the only red in the region. At the same time, in Europe, we see green across the board at midday. The FTSE (+1.86%), DAX (+2.95%), and CAC (+3.28%) are leading a charge higher in early afternoon trading. Even Russia (+0.01%) has managed green so far today. As of 7:30 am, US Futures are pointing toward a strong gap higher to start the day. The DIA implies a +1.31% open, the SPY is implying a +1.61% open, and the QQQ implies a +2.04% open at this hour. 10-year bond yields are falling again to 3.589% and Oil (WTI) is up another half of a percent to $84.06/barrel.
The major economic news events scheduled for Tuesday, include August Factory Orders, August JOLTs, and API Weekly Crude Oil Stocks. However, again we have three Fed speakers (Williams at 9 am, Mester at 9:15 am, and Daly at 1 pm). The major earnings reports scheduled for the day is limited to AYI before the open.
In economic news later this week, on Wednesday, we get the Sept. ADP Nonfarm Employment Change, August Imports/Exports, August Trade Balance, Sept. Services PMI, Sept. ISM Non-Mfg. PMI, and EIA Weekly Crude Oil Inventories as well as an OPEC+ decision on production cuts. Then Thursday, the Weekly Initial Jobless Claims are reported. Finally, on Friday, Sept. Avg. Hourly Earnings, Sept. Payrolls, Sept. Participation Rate, and Sept. Unemployment Rate are reported.
In earnings reports later this week, on Then on Wednesday, HELE, LW, RPM report. Thursday, we hear from CAG, STZ, MKC, and LEVI. Finally, on Friday, there are no major earnings reports scheduled.
With this backdrop, we see all 3 major indices looking to gap up above their T-lines. However, the strong bear trend remains in place and has not yet been challenged. It is important to note that we appear to be opening back in the September 23 gap, but there is still a lot of resistance above to work through. Expect more volatility and even though everything looks bearish early, do not forget that we still need over-extension relief.
Keep in mind that trading is our job. It’s not a hobby. So, treat it that way. Do the work and follow the process. Stick with your trading rules, trade with the trend, and take those profits when you have them. Demonstrate patience and wait for confirmation. Don’t be stubborn. If you have a loss, just admit you were wrong, respect your stop, and take the loss before it grows. When price does move in your direction, always move your stops in your favor (remember the “Legend of the man in the green bathrobe“…it is NOT HOUSE MONEY, it’s all OUR MONEY!). Lastly, remember that you get rich slowly and steadily in Trading…not by striking it rich on one or two trades. So, give up that lottery ticket mentality.
See you in the trading room.
Ed
Swing Trade Ideas for your consideration and watchlist: AMZN, HD, META, LVS, NEM, GIS, MPC, and VLO. You can find Rick’s review of tickers on his YouTube Channel here. Trade your plan, take profits along the way, and smart. Also, remember to check for impending earnings reports. Finally, remember that any tickers we mention and talk about in the trading room are not recommendations to buy or sell.
🎯 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
As we begin a new quarter, inflation remains unacceptably high, and everyone wonders what will break first. The economy or the FOMC’s hawkish stance? Today the FOMC has called an emergency meeting. One has to wonder if we are again on the brink of a banking or liquidity crisis. Stay alert for price gyrations as news comes out. The official kick-off of 4th quarter earnings is only 10-days away, so keep an eye out for possible downgrades and warnings with the consumer-facing some difficult decisions as prices continue to rise. The overnight reversal and intraday whipsaws will likely continue, so plan your risk carefully.
Asian markets closed mostly lower, with oil rising and the Hang Seng falling to its lowest level in 11 years. European markets trade primarily lower this morning as Credit Suisse declines sharply. However, as I write this report, the U.S. futures have recovered from overnight lows, pointing to another gap as another premarket pump hopes to inspire the bulls. Watch for the possible pop and drop with so much price resistance above despite the short-term oversold condition.
Economic Calendar
Earnings Calendar
There are no confirmed earnings reports for today.
News & Technicals’
Shares of Credit Suisse plunged nearly 10% in Europe’s morning session after the Financial Times reported that the Swiss bank’s executives are talking with its major investors to reassure them amid rising concerns over the Swiss lender’s financial health. Spreads of the bank’s credit default swaps (CDS), which provide investors with protection against financial risks such as default, rose sharply Friday. They followed reports the Swiss lender is looking to raise capital, citing a memo from its Chief Executive Ulrich Koerner. The U.K government reverses planned tax cuts due to currency fluctuations. It represents a major and humiliating U-turn for new Prime Minister Liz Truss, who was insisting that she was “absolutely committed” to the cut as recently as Sunday. She also revealed the decision was taken by Kwarteng and had not been announced to her whole cabinet.
Markets entered a dangerous new phase in the past week, in which statistically unusual moves across asset classes are commonplace. According to Mark Connors, former Credit Suisse global head of risk advisory, surging volatility in what are supposed to be among the world’s safest fixed income instruments could disrupt the financial system’s plumbing. He said that could force the Fed to prop up the Treasury market. Doing so will likely force the Fed to halt its quantitative tightening program ahead of schedule. The other worry is that the whipsawing markets will expose the weak hands of asset managers, hedge funds, and other players who may have been overleveraged or taken on unwise risks. As a result, margin calls and forced liquidations could further roil markets.
Monthly consumer prices grew by 3.08% and annually by 83.45%. The domestic producer price index was up 4.78% from the previous month and a whopping 151.5% year on year. Inflation for the country of 84 million people has soared in the last two years, particularly as Turkish President Recep Tayyip Erdogan insists on continuing to cut interest rates rather than raise them — deviating from the conventional way of controlling inflation. “My biggest battle is against interest. My biggest enemy is interest. We lowered the interest rate to 12%. Is that enough? It is not enough. This needs to come down further,” Erdogan said during an event in late September.
As we begin a new quarter, indexes remain in a short-term oversold condition, and as of the Friday close, the bears left all but IWM at fresh 2022 lows. Moreover, with the official start of the 4th quarter earnings 10-days away and the mid-term election only 35 days, there is a lot of uncertainty about what comes next. Adding to the concern, the FOMC has called an emergency meeting for today. Could we be on the brink of another banking or liquidity crisis? China is also making concerning moves that may soon trigger a selloff in the dollar to stabilize the Yuan. With so much uncertainty, traders must be ready for just about anything. As a result, overnight reversals and news-inspired intraday reversals are likely to continue. Watch for reports of earnings downgrades and warnings from companies of potential top or bottom line misses as consumers face some complex decisions heading into the winter. September was challenging, but we have not seen full-on panic, so perhaps October will bring us some selling relief.
Stocks gapped down very modestly (0.25% – 0.35%) Friday and followed through for 5 minutes. However, then volatility stepped in to rally us to the highs of the day by 11:15 am. At that point, the market reversed again as the bears led a selloff the rest of the day. This took us to a series of new lows at about 2:30 pm and took us out on the lows. This action has left us with black-bodied, indecisive, inverted hammer-type candles in all 3 major indices. It is also worth noting that all 3 indices are again getting extended from their T-lines.
On the day, 9 of 10 sectors are in the green with Basic Materials (+0.15%) as the only sector able to hold onto a gain and Consumer Cyclical (-1.63%) leading the charge lower. At the same time, SPY was down 1.55%, DIA was down 1.70%, and QQQ was down 1.70%. The VXX gained almost 3% to 21.21 and T2122 has actually risen to 5.06 (which is still deep in the oversold territory). 10-year bond yields are down, but way up off the early morning lows to 3.821%, and Oil (WTI) is down almost 2% to $79.61/barrel. Overall, it was a very volatile and bearish day.
So, with inflation high and the Fed on a super-sized hike cycle (while saying they are not going to let up until inflation is clearly headed to 2%), Mr. Market is not a happy camper. That brought us to the end of a rough week, a brutal month, and a tough quarter. On the week, SPY lost 2.93%, DIA lost 2.89%, and QQQ lost 2.99%. For the month, SPY lost 9.62%, DIA lost 8.98%, and QQQ lost 10.70%. For the quarter, SPY lost 5.32%, DIA lost 6.67%, and QQQ lost 4.65%.
In economic news, the August Month-on-Month PCE Price Index came in at +4.9%, which was above the +4.7% forecast (and the previous reading of 4.7%). In addition, the August Mon-on-Month Personal Spending was up +0.4% (compared to a +0.2% forecast and previous reading of -0.2%). (It is worth noting that core PCE is the Fed’s favorite gauge of inflation and what its 2% target is set against.) Meanwhile, August Year-on-Year PCE Price Index came in a +6.2%, which was better than the previous reading of +6.4%. Then the Chicago PMI came in at 45.7 (versus a 51.8 forecast) and Michigan Consumer Sentiment came in at 58.6 (versus a 59.5 forecast and a previous reading of 59.5). So, that information tells us inflation is up, business is contracting, and the general public is pessimistic.
Speaking of the Fed, Vice Chair Brainard added her full endorsement of the current “higher rates for longer” approach the Fed is undertaking. She went on to say “Monetary policy will need to be restrictive for some time to have confidence that inflation is moving back toward the target.” Earlier, Richmond Fed President Barkin had said there were some promising signs of inflation progress. However, he said that “festering inflation” remains a bigger threat to the economy than us (the Fed) over-correcting.” Earlier, Fed Governor Bowman (a Republican) suggested averaging bank stress tests to determine bank capital requirements (as opposed to setting them every time they are tested). Her generally suggested approach was toward lighter regulation of banks. This stands in stark contrast to Fed Bank Supervisor Barr (Democrat), who has called for more scrutiny of bank risk-taking given the history of financial crises that banks have led the economy into in the past.
In stock news, on Friday, UAL announced it will cancel service from JFK airport as of October because the FAA will not give them additional flights out of that airport. (UAL had only resumed service from JFK in 2021.) Meanwhile, EU regulators announced they would publish a decision on whether to allow (or what mandated stipulations must be met to allow) the MSFT acquisition of ATVI by November 8. Elsewhere, after hours, SWK announced it is cutting 1,000 finance jobs. (It makes you wonder either who will do the books…or why they had so many since they only have 71,000 total employees.) On Sunday, TSLA reported that it delivered 343k new vehicles in Q3 which was about 20k fewer vehicles than analysts had been expecting. However, it was also a 35% increase over Q3 2021. TSLA blamed employee turnover in management positions (after Musk’s “work at least 40 hours per week in the office” decree) and logistics snarls for the shortfall.
After the close, NKE reported beating on both the revenue and earnings lines. However, MU missed on revenue while beating on earnings. MU also lowered its forward guidance. It is also worth noting that despite beating on both lines, NKE reported that they have way too much inventory (44% globally and 65% too much in North America) across multiple seasons of apparel) due to severe supply chain problems. The company said it will be forced to aggressively discount in order to liquidate the excess inventory. Later this morning, CCL reports (9:15 am).
Overnight, Asian markets were mostly in the red. Japan (+1.07%) was a clear outlier to the upside with only one other exchange managing any green. However, Thailand (-1.98%), Shenzhen (-1.29%), and India (-1.21%) led the region lower. Meanwhile, in Europe, we see a similar story taking shape at midday. Russia (+3.43%), Norway (+1.34%), and Portugal (+0.96%) are the only green to be found on the continent. At the same time, the FTSE (-0.56%), DAX (-0.59%), and CAC (-0.88%) are leading the region lower in early afternoon trade. As of 7:15 am, US Futures are pointing toward a mixed start to the day. The DIA implies a +0.57% open, the SPY is implying a +0.42% open, and the QQQ implies a +0.04% open at this hour. At the same time, 10-year bond yields are down to 3.75% and Oil (WTI) is up 4.26% to $82.88/barrel in early trading.
The major economic news events scheduled for Monday is limited to September Mfg. PMI (9:45 am) and Sept. ISM Mfg. PMI (10 am). There are no major earnings reports scheduled for the day.
In economic news later this week, on Tuesday, we get August Factory Orders, August JOLTs, and API Weekly Crude Oil Stocks. Then Wednesday, the Sept. ADP Nonfarm Employment Change, August Imports/Exports, August Trade Balance, Sept. Services PMI, Sept. ISM Non-Mfg. PMI, and EIA Weekly Crude Oil Inventories are reported. Thursday, we get the Weekly Initial Jobless Claims. Finally, on Friday, Sept. Avg. Hourly Earnings, Sept. Payrolls, Sept. Participation Rate, and Sept. Unemployment Rate are reported.
In earnings reports later this week, on Tuesday we hear from AYI. Then on Wednesday, HELE, LW, and RPM report. Thursday, we hear from CAG, STZ, MKC, and LEVI. Finally, on Friday, there are no major earnings reports scheduled.
In late-breaking news from across the pond, the new government of UK PM Truss has scrapped its radical shift to large-scale tax cuts for top-end tax rates and “trickle down” economics. It seems the new PM (who even on Sunday had said she was absolutely committed to her plan) was told to drop it or get out by her fellow Torry party ministers amidst a public backlash, cost of living protests, and market rejection of the plan. The British pound briefly jumped on that news. Elsewhere, Reuters reports that CS is in bad financial health and is seeking to raise capital saw the stock drop 10% at one point during the premarket. Finally, Oil (WTI and Brent) is challenging its downtrend with a major gap this morning. This seems to be driven by rumors coming out of OPEC+ that point to the group announcing major production cuts at their Wednesday meeting.
With this backdrop, and as we start the fourth quarter, markets seem headed toward an inside candle at the open in the large-cap indices and a slight continuation of the down move in the tech-heavy QQQ. Once again, this is not showing a major change in sentiment. The trend remains strongly bearish across the market, but last week’s volatile chop may be continuing. Expect more volatility and even though everything looks bearish early, do not forget that we still need over-extension relief.
Keep in mind that trading is our job. It’s not a hobby. So, treat it that way. Do the work and follow the process. Stick with your trading rules, trade with the trend, and take those profits when you have them. Demonstrate patience and wait for confirmation. Don’t be stubborn. If you have a loss, just admit you were wrong, respect your stop, and take the loss before it grows. When price does move in your direction, always move your stops in your favor (remember the “Legend of the man in the green bathrobe“…it is NOT HOUSE MONEY, it’s all OUR MONEY!). Lastly, remember that you get rich slowly and steadily in Trading…not by striking it rich on one or two trades. So, give up that lottery ticket mentality.
See you in the trading room.
Ed
Swing Trade Ideas for your consideration and watchlist: OXY, VLO, MPC, META, NFLX, BE, EGO, JBHT, TWTR. You can find Rick’s review of tickers on his YouTube Channel here. Trade your plan, take profits along the way, and smart. Also, remember to check for impending earnings reports. Finally, remember that any tickers we mention and talk about in the trading room are not recommendations to buy or sell.
🎯 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
A negative GDP, hotter than expected jobs market, layoff reports, company downgrades, and currency fluctuations are just some of the issues creating the wide-ranging chop in the indexes. This morning we wait for the FOMC favored inflation report, the Core PCE, after learning the Eurozone hit a new 10% inflation record. Though we are oversold in the short-term and should watch for a possible relief rally, the uncertainty of the path forward will make it difficult for the bulls to find much inspiration and gives the bears very little reason to back off. Expect the challenging price action to continue in the days ahead with the 4th quarter earnings season rapidly approaching.
Asian markets closed mostly lower while we slept, reacting to the SP-500 new year low. However, with European inflation soaring to 10% and the BOE back on the QE train, the eurozone market see modest gains across the board. U.S. futures also point to a bullish open as we wait for the Personal Income and Outlays report. Plan for price volatility and watch out for those big point intraday whipsaws in this wide-ranging chop zone.
Economic Calendar
Earnings Calendar
W have a very light day on the Friday earnings calendar with only one CCL with any noteworthiness.
News & Technicals’
Eurozone inflation spikes to a record 10%, adding pressure on the ECB to act. Moreover, the reading showed price increases broadening out from volatile food and energy prices into nearly all segments of the 19-member bloc’s economy. Energy prices rose 40.8% year-on-year, up from 38.6% in August, followed by food, alcohol, and tobacco at 11.8%, up from 10.6% last month. In addition, federal student loan borrowers whose loans are not held by the U.S. Department of Education will no longer be able to consolidate for forgiveness as of Thursday. Nike’s first fiscal quarter revenue was up 4% to $12.69 billion, beating estimates. However, Nike’s net income was down 22% to $1.5 billion. The sneaker giant said inventory on its balance sheet was up 44% to $9.7 billion, driven by ongoing supply chain issues.
British Prime Minister Liz Truss and Finance Minister Kwasi Kwarteng met the U.K.’s independent monetary watchdog for talks on Friday. The talks followed a turbulent week for the U.K. economy, including a slump in the pound and gilt yields soaring. The Senate voted 72 to 25 to pass a funding bill to avert a federal shutdown and fund government operations through mid-December. The bill now goes to the House, where it’s expected to pass later this week. It includes an additional $12 billion in aid for Ukraine, $1 billion in heating and utility assistance, and emergency aid for natural disasters.
A negative GDP reading and hotter-than-expected jobless claims quickly reversed the Wednesday rally as the wide-ranging chop filled with uncertainty plagues the indexes. While the FOMC works to reduce inflation, Congress continues to burrow and spend like drunken sailors. This morning Europe reported a new record high of 10% inflation as we wait here in the U.S. for the FOMC favorite indicator, the Core PCE numbers, before the bell. The downgrade of APPL put a lot of pressure on Nasdaq, and I suspect we will see more companies downgrades as we head for the 4th quarter earnings season. Though we remain oversold in the short-term, suggesting a relief rally is due to the pressure in bond yield, and currency fluctuations will likely keep volatility challenging in the days and weeks to come.
Markets gapped lower at the open Thursday (0.65% in the DIA, 1% in the SPY, and 1.25% in the QQQ). All 3 major indices made a strong follow-through move for the first hour. Then we saw a sideways meander until Noon. However, the Bears stepped back in at that point to continue the wavy, gradual ride lower until 2:30 pm when the bulls tried to form a bottom. From there we saw a sideways grind that bobbed along in a channel for the last hour before slightly breaking back out to the upside. This action has given us gap-down, black candles (with a large lower wick).
On the day, Utilities (-3.71%) and Consumer Cyclical (-3.37%) led the charge lower. (Utilities is a very odd leader to the downside as one would think that sector would be a destination for a flight to safety.) Meanwhile, Energy (-0.59%) was the laggard in the decline. The SPY has lost 2.08%, DIA lost 1.52% and QQQ lost 2.81%. The VXX was up almost 3% to 20.62 and T2122 is again deeply oversold at 3.22. 10-year bond yields are back down to 3.778% and Oil (WTI) is down three-quarters of a percent to $81.55/barrel. Overall, just a bearish day in a choppy week all in the middle of a strong bearish trend.
In economic news, the Q2 GDP (2nd revision) came in exactly as expected at -0.6% (compared to Q1 -1.6%). However, the Q2 Price index was revised up to 9.1% (higher than the 8.9% expected this revision) and the 8.3% in Q1. The Weekly Initial Jobless Claims also came in better than expected at 193k (versus 215k forecast and 209k last week). This all means the economy continues to be stronger than expected and inflation remains undaunted by the Fed’s 3 “super-sized” rate hikes this year.
Speaking of the Fed, in Fed news, St. Louis Fed President Bullard said Thursday that the Us is mostly insulated from the turmoil in UK stock and currency markets. The mixed signals the BoE and UK government are sending are essentially a UK problem that will only effect US markets on the edges according to Bullard. Meanwhile, Cleveland Fed President Mester reiterated that “at some point” the Fed will start to consider (economy) growth prospects against inflation. However, she said this will not be until inflation is clearly heading back down toward 2%. Then at the end of the day, Sand Francisco Fed President Daly said the Fed does not need to trigger a recession in order to take the heat out of high inflation. She went on to say that slowing down growth was the right path, but that inducing a deep recession was not necessary.
In stock news, after the close META announced it has paused hiring and warned that it will be restructuring in the face of an uncertain economic outlook. It was also reported that BCS was fined $361 million by the SEC over internal control failures related to the unregistered sale of a massive and unprecedented quantity of securities. Elsewhere, the FTC sued two top pesticide makers for price-fixing through distributors to keep the prices farmers pay artificially high for generic pesticides, herbicides, and fungicides. Privately-owned Syngenta was one and CVTA was the other and the FTC estimates the collusion cost farmers 20% more for the company’s generic products every year. Reuters reports that a senior supply chain exec at AAPL is leaving the company after making an inappropriate remark about fondling women in a TikTik video. Meanwhile, the FCC has asked for more information regarding the sale of TGNA (TV station operator) to hedge fund Standard General (which already owns a number of TV stations). Finally, AMZN (and 5 large book publishers) won a dismissal of two antitrust lawsuits that had accused them of price-fixing on books and e-books.
In energy news, OPEC+ have begun discussions ahead of their production level announcement at the Oct. 5 meeting. Reuters reports that some members question the logic of doing a major production cut (as posed by some) to maintain high oil prices when Russia continues to sell oil at near full capacity (at discounted prices) to major importers China, India, and Turkey. Elsewhere, the 10% of US oil production that was shut down due to Hurricane Ian is expected to reopen in the next day or so after the storm missed the critical energy facilities in the Gulf and in Florida. Meanwhile, in Florida itself, one in four gas stations are out of fuel Thursday afternoon. However, the KMI pipeline and CVX fuel terminal are expected to resume operation Friday. And nearly 200 fuel tanker trucks are already on the road heading toward Southern Florida where the shortages are worse.
After the close, NKE reported beating on both the revenue and earnings lines. However, MU missed on revenue while beating on earnings. MU also lowered its forward guidance. It is also worth noting that despite beating on both lines, NKE reported that they have way too much inventory (44% globally and 65% too much in North America) across multiple seasons of apparel) due to severe supply chain problems. The company said it will be forced to aggressively discount in order to liquidate the excess inventory. Later this morning, CCL reports (9:15 am).
Overnight, Asian markets were mostly in the red. Japan (-1.83%), Shenzhen (-1.29%), and Australia (-1.23%) led the way lower. Meanwhile, India (+1.64%), Singapore (+0.49%), and Hong Kong (+0.33%) were in the green. In Europe, with the exception of Russia (-1.41%), we see green across the board at mid-day. The FTSE (+0.27%), DAX (+0.14%), and CAC (+0.68%) are leading the region higher with Norway (+2.10%) being an outlier to the upside in early afternoon trade. As of 7:30 am, US Futures are pointing toward a modestly green start to the day. The DIA implies a +0.24% open, the SPY is implying a +0.36% open, and the QQQ implies a +0.27% open at this hour. At the same time, 10-year bond yields are back down to 3.698% and Oil (WTI) is up a third of a percent to $81.42/barrel in early trading.
The major economic news events scheduled for Friday include August PCE Price Index and August Personal Spending (both at 8:30 am), Chicago PMI (9:45 am), Michigan Consumer Sentiment (10 am), and several Fed Speakers (Mester at 9 am, Williams at 9 am, Bowman at 11 am, and Williams at 4:15 pm). The major earnings reports scheduled for the day are limited to CCL before the open. There are no earnings scheduled for after the close.
In late-breaking news from across the pond, the British pound has managed to hold onto the gains it made after BoE intervention (3 days ago, buying long-dated bonds and stopping the reduction of its balance sheet). This comes amid wide speculation that the new government will be forced to back down from its radical shift to large-scale tax cuts and “trickle down” economics. This came as a report showed that Eurozone inflation has hit a record 10% (well above the 9.7% projections and 9.1% reading in August). If there is any good news in the report, it is that “core inflation” rose only 4.8% with energy (+40.8%) and “Food Alcohol, and Tobacco” up 11.8% doing most of the lifting. (The good news idea being that eventually, energy prices will come under control as replacement sources for Russian oil and gas begin to materialize in the next couple of months.)
With this backdrop, and as the Quarter comes to a close, it again looks like we will see a modest gap higher, inside of Thursday’s candle to start the day. So, this is not showing a major change in sentiment. It just looks like more chop in this week’s consolidation (albeit more volatile consolidation yesterday). The strong bear trend remains in place in all 3 major indices. Expect more volatility and even though everything looks bearish early, do not forget that we still need over-extension relief. Also, do not be surprised if we see some window dressing at the end of Q3 as funds get their portfolios in shape for their Q4 marketing campaigns. Finally, keep in mind that it’s Friday (and that Russia will announce it has annexed parts of Ukraine today). So, prepare your account for the weekend news cycle, which will include the second landfall of Ian.
Keep in mind that trading is our job. It’s not a hobby. So, treat it that way. Do the work and follow the process. Stick with your trading rules, trade with the trend, and take those profits when you have them. Demonstrate patience and wait for confirmation. Don’t be stubborn. If you have a loss, just admit you were wrong, respect your stop, and take the loss before it grows. When price does move in your direction, always move your stops in your favor (remember the “Legend of the man in the green bathrobe“…it is NOT HOUSE MONEY, it’s all OUR MONEY!). Lastly, remember that you get rich slowly and steadily in Trading…not by striking it rich on one or two trades. So, give up that lottery ticket mentality.
See you in the trading room.
Ed
Swing Trade Ideas for your consideration and watchlist: No Trade Ideas today. You can find Rick’s review of tickers on his YouTube Channel here. Trade your plan, take profits along the way, and smart. Also, remember to check for impending earnings reports. Finally, remember that any tickers we mention and talk about in the trading room are not recommendations to buy or sell.
🎯 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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Disclosure: We do not act on all trades we mention, and not all mentions acted on the day of the mention. All trades we mention are for your consideration only.
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