BP Warns as Premarkets Look Green Tuesday

On Monday, SPY and QQQ essentially ground sideways while DIA did the same in more of a volatile way.  SPY gapped up 0.13%, QQQ opened 0.07% higher, and DIA gapped up 0.20%.  After that open, SPY and QQQ wobbled sideways never venturing more than 0.20% from the gap.  However, DIA rallied almost 0.60% higher after the open before selling off 0.94% by noon and then ground sideways in a very tight range the rest of the day.  This action gave us indecisive candles in all three major index ETFs.  SPY printed a Doji, QQQ printed a white-bodied Spinning Top candle, and DIA gave us a black-bodied Spinning Top candle with the large upper wick. All three remain above their T-line (8ema).  SPY and QQQ gave us well below-average volume while DIA printed just average volume.

On the day, seven of the 10 sectors were in the green again with Technology (+0.41%) leading the way higher. On the other side, Financial Services (-0.14%) was the worst-performing sector, just on the red side of flat.  At the same time, SPY gained 0.12%, DIA lost 0.06%, and QQQ gained 0.24%.  VXX fell 1.82% down to an extremely low 10.27 and T2122 climbed and is now in the center of its mid-range at 47.48.  On the bond front, 10-year bond yields was flat at 4.277% and Oil (WTI) fell 1.11% to close at $82.24 per barrel.  So, Monday was mostly a “much ado about nothing” day where the Bulls took SPY and QQQ to new all-time highs and all-time high close.  Meanwhile, the Bulls tried to move DIA higher but were rejected by the Bears, ending up just on the red side of flat. 

The major economic news scheduled for Monday was limited to the NY Fed 1-Year Consumer Inflation Expectation, which fell strongly to 3.0% from a June reading of 3.2%.  Later, the May Consumer Credit showed significant increase to $11.35 billion (compared to a $10.70 forecast but up sharply from April’s $6.49 billion). 

In stock news, on Monday, Bloomberg reported that MSFT has ordered its Chinese employees to only use iPhones for work as of September.  The internal memo that Bloomberg cited said it was part MSFT’s global security push and a direct result of the GOOGL Play Store not being available in China.  (GOOGL refused to comply with Chinese demands and as a result the Play Store was blocked from the country.  On the other hand, AAPL plays ball with China and has been allowed to operate the AAPL App Store in that country.)  At the same time, PARA and Skydance Media agreed to merge after Skydance acquired 70% of the PARA voting stock when it bought the Redstone family’s National Amusements.  Later, Reuters reported that VSTO rejected the final $3.2 billion buyout offer from MNC Capital for its ammunition manufacturing unit.  However, VSTO did accept an increased bid from a Prague-based Czechoslovak Group for that unit.  At the same time, LLY agreed to buy MORF for $3.2 billion in cash ($57/share).  Meanwhile, GLW raised its Q2 sales forecast and said it expects profits to come in at the top end or exceed the previously announced range.  Later, Reuters reported that US airlines cancelled 1,479 flights and delayed 2,254 more Monday due to Hurricane Beryl.  This included UAL cancelling 405 flights and LUV cancelling 268.  At the same time, WSR Management told shareholders “it is likely there will be a change of control” in the REIT, even though the company had rejected a buyout offer from private MCB Real Estate.  (MCB had offered $14/share, all cash.)  Later, Reuters reported that BCSF is close to reaching a deal to buy ENV, near its current price of $63 per share.

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In stock legal and governmental news, on Monday, the FIM-CISL union warned that STLA vehicle production in Italy could fall by a third if Italian government incentives to buy STLA cars do not work.  (The union said the impact of incentives are not known yet, but output fell 25% in the first half of the year.)  Later, the Dept. of Transportation announced it had screened 3.01 million passengers on Sunday, the most ever in a single day.  Meanwhile, the UK antitrust regulator approved TMO’s $3.1 billion deal to buy OLK.  After the close, the NTSB said it is investigating a UAL flight of a BA 757-200 jet that lost a wheel from its main landing gear after takeoff from Los Angeles.  After the close, the Dept. of Defense said it is in discussions with the Dept. of Justice before determining the impact of BA’s guilty plea on existing government contracts.  In unrelated news, the FAA ordered the inspection of 2,600 BA 737 jets because the planes passenger oxygen masks may fail during an emergency due to retention strap problems.  (The agency had “requested” the inspections on June 17, but is ordering it now due to non-compliance.)

Overnight, Asian markets were nearly green across the board.  Only Thailand (-0.20%) was lower as Japan (+1.96%), Shenzhen (+1.68%), and Shanghai (+1.26%) led a broad rally in the region.  In Europe, markets are mixed at midday with six exchanges in the green while eight are down and one (Greece) is unchanged.  The CAC (-0.87%), DAX (-0.44%), and FTSE (-0.13%) lead the region on volume as always.  In the US, as of 7:30 a.m., Futures are pointing toward a modest green start to the day.  The DIA implies a +0.08% open, the SPY is implying a +0.22% open, and the QQQ implies a +0.37% open at this hour.  At the same time, 10-Year bond yields are up to 4.299% and Oil (WTI) is down half of a percent to $81.94 per barrel in early trading.

The major economic news scheduled for Tuesday are limited to EAI Short-Term Energy Outlook (noon) and API Weekly Crude Oil Stocks (4:30 p.m.).  We also hear from Fed Vice Chair Barr (9:15 a.m.), Fed Chair Powell Testifies before Congress (10 a.m.), Treasury Sec. Yellen (10 a.m.), and Fed Governor Bowman (1:30 p.m.).  The major earnings reports set for before the open are limited to HELE.  After the close,  there are no reports of note scheduled.

In economic news later this week, on Wednesday, EIA Weekly Crude Oil Inventories are reported.  Fed Chair Powell also continues his testimony and Fed Governor Bowman speaks again.  On Thursday, we get June Core CPI, June CPI, Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, and June Federal Budget Balance.  Fed member Bostic also speaks.  Finally, on Friday, June Core PPI, June PPI, Michigan Consumer Sentiment, Michigan Consumer Expectations, Michigan 1-Year Inflation Expectations, Michigan 5-Year Inflation Expectations, and the WASDE Ag report are delivered.

In terms of earnings reports later this week, Wednesday, PSMT and WDFC report. On Thursday, earnings start again as we hear from CAG, DAL, and PEP.  Finally, on Friday, BK, C, ERIC, FAST, JPM, and WFC report.

So far this morning, HELE missed on both the top and bottom lines.

In miscellaneous news, early Tuesday BP warned of a $2 billion impairment related to a German refinery.  It also cited weak refining margins and poor oil trading execution as reasons for concern.  Elsewhere, CNBC reports that the office space vacancy rate in San Francisco proper has hit a record 34.5% in Q2.  (San Fran has historically been some of the most expensive real estate in the country.)  The report said that to adjust for that the “asking price” for office space has fallen back to 2015 levels.  Meanwhile, the Sun Valley “Summer Camp for Billionaires” kicks off today with the CEOs of AAPL, AMZN, DIS, META, NFLX, PARA, WBD, and Bill Gates as well as Jeff Bezos meet with the CEO of OpenAI in the exclusive Idaho gathering.

With that background, it looks as if markets are set to open higher, but not in a decisive way. All three major index ETFs gapped up modestly to start the premarket. However, they have printed small, indecisive candles with the leader (QQQ) even giving us a black-body so far in the early session. Remember that all three are either at new all-time highs or not far away in the case of DIA. All three remain above their T-line (8ema). So, regardless of your timeframe, the market trend (short-term, mid-term, or longer-term) remains very bullish. In terms of extension, QQQ is stretched above its T-line. However, the T2122 indicator is in the center of its mid-range. Therefore, the market has room to run in either direction, but the Bears have more slack to work with today. With regard to those 10 big dog tickers, eight of them are in the green early this morning. For the second straight day it is INTC (+2.35%) leading that way joined by the biggest dog, NVDA (+1.52%). However, note that the two laggards are led by the second-biggest dog, TSLA (-1.04%) in the premarket.

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 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 gains are 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.


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