Bulls Hope To Gap Up and End Week Strongly

Markets opened basically flat on Thursday.  SPY opened 0.03% higher, DIA opened down 0.12%, and QQQ opened 0.05% higher.  At that point, all three major index ETFs just bobbed around for 30 minutes, but then all rallied higher for an hour.  From about 11 a.m., all three meandered sideways until 1 p.m.  Then the two large-cap index ETFs began a modest rally that lasted the rest of the day while QQQ continued to meander sideways into the close.  This gave us large, white-bodied candles in the SPY and DIA as well as a white-bodied Spinning Top candle in the QQQ.  All three remained well above their T-lines (8emas).  This all happened on average volume in the DIA and far-less-than-average volume in the SPY and QQQ.

On the day, all 10 sectors were in the green with Basic Materials (+1.47%) led the rest of the groups higher while Technology (+0.01%) was by far the laggard sector.  VXX fell a little again to close at 12.23 and T2122 climbed back up well into its overbought territory to close at 88.98.  At the same time, 10-year bond yields fell to 4.455% and Oil (WTI) gained 0.76% to close at $79.59 per barrel.  Meanwhile, SPY gained 0.58%, DIA gained 0.91%, and QQQ gained 0.22%.  So, Thursday was another bullish day for the market, especially in the DIA and SPY.  (Both of those index ETFs are now within 1.25% of their all-time high, let alone all-time high close.)  However, QQQ continues its 3-day consolidation after Monday’s pop higher.

The major economic news scheduled for Thursday was limited to the Weekly Initial Jobless Claims, which came in significantly higher than expected at 231k (compared to a forecast of 212k and the prior week’s 209k value).  That 231k was the highest level in more than eight months.  At the same time, the Weekly Continuing Jobless Claims slightly lower than predicted at 1,785k (versus the 1,790k forecast but up from the 1,768k previous weekly value).  Then, after the close, the Fed Balance Sheet was down $9 billion versus the prior week at $7.353 trillion (compared to the prior week’s $7.362 trillion).

In Fed speak news, San Francisco Fed President Daly said Thursday that there was “considerable uncertainty” about where inflation will head in the next few months.  (She added that she still believes price pressures will continue to ease.)  Daly said, “What the last three months of data have done is widen the confidence bands back out. (So,) “We’ve had three stubborn months of data, but I still see monetary policy is working.  I do think that we’re seeing, in a really positive way, disinflation.”  Daly did not express when she felt rate cuts might begin or exactly what she would need to see to support them.  Daly said, “I’m in a wait-and-see mode.” However, Daly also noted she is seeing “different signals” coming from various companies that say they are losing their pricing power as consumers become more selective.

After the close, COLD, AMN, DBX, EVH, GEN, G, HRB, MTD, RXT, RBA, and VHI all reported beats on both the revenue and earnings lines.  Meanwhile, AKAM, IAG, PBA, and IOSP missed on revenue while beating on earnings. On the other side, SLF and SSP beat on revenue while missing on earnings.  However, FIHL missed on both the top and bottom lines.

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In stock news, on Thursday, Bloomberg reported that AAPL will power some of its upcoming AI service servers with chips it designed itself.  (The chips will be produced by TSM.)  At the same time, Reuters reported that F is now considering offering gas-powered vehicles (as well as hybrids and electric vehicles) in Europe after 2030.  This is a departure from the company’s 2021-announced plans to sell only electric and hybrid vehicles in Europe beyond 2030.  Later, Bloomberg reported that BP is looking to buy TSLA’s supercharger sites in the US after TSLA killed its supercharger group a few days ago.  No bid was reported, but BP previously said it intended to invest $1 billion in new US locations by 2030.  At the same time, the Wall Street Journal reported that both TMUS and VZ are in talks and close to acquiring parts of USM for more than $2 billion.  Later, BA locked out 130 unionized firefighters from its WA plant campus.  This came after the union representing the firefighters rejected a second contract offer.  (During the lockout, the BA campus fire protection is being covered by mutual aid contracts with civil firefighters from surrounding cities, further away.) 

In stock legal and governmental news, on Thursday, the FAA bowed to industry and political pressure by saying it would delay implementing the recently announced “rest requirement” for air traffic controllers.  (The rule will require controllers to have at least 10 hours between shifts and 12 hours off prior to a midnight shift in the interest of safety.)  The new rules were scheduled to go into effect in mid-July but will not be put off indefinitely while a 3,000-headcount air traffic controller shortage is addressed.  The major airlines welcomed the news, which allows them to fly full schedules.  Meanwhile, CNBC reported that SBGI is looking to sell more than 30% of its broadcast TV stations and has hired MC as the investment banker for the sale.  SBGI received $1.56 billion in average revenue from the stations in question as a group.  Later, the US Supreme Court ruled against WMG by a 6-3 vote in a copyright infringement case brought by a singer.  At the same time, the NRLB issued a complaint Thursday claiming TSLA violated labor laws at its NY assembly plant when it banned personal electronics, records, storing, or sharing content as well as other acts that were part of the company campaign to discourage workers from organizing a union. 

Elsewhere, 27 Republican Attorney’s General filed suit against the EPA, hoping to block landmark carbon emission reduction rules for coal-fired power plants and new natural gas plants. (The rule requires power plants to reduce carbon emissions by 90% by the end of 2032, which those states say this is setting up coal-fired plants to fail and would threaten both the national electric grid and coal industry.)  Meanwhile, the Consumer Financial Protection Bureau and Dept. of Transportation held a joint hearing, investigating claims of “bait and switch” schemes (on fees and points) by airline-affiliated credit cards.  No specific bank or airline was identified at Thursday’s hearing, but an ongoing investigation was announced.  At the same time, the SEC began an investigation into BA for statements the company made about its safety practices and risks after the January ALK loss of a 737 MAX 9 door plug mid-flight. (Inquiries found numerous and wide-spread safety problems and resulting business impacts at BA since that event.) 

Overnight, Asian markets leaned heavily to the green side.  Only Shenzhen (-0.58%) was appreciably in the red while Hong Kong (+2.30%) was by far the biggest mover and led 10 of the region’s 12 exchanges higher.  In Europe, we see green across the board at midday.  The CAC (+0.67%), DAX (+0.51%), and FTSE (+0.71%) lead the 15 bourses in the region higher on volume in early afternoon trade.  In the US, as of 7:30 a.m., Futures are pointing toward a green start to the day.  The DIA implies a +0.24% open, the SPY is implying a +0.31% open, and the QQQ implies a +0.38% open at this hour.  At the same time, 10-year bond yields are at 4.463% and Oil (WTI) is up 0.72% to $79.83 per barrel in early trading.

The major economic news scheduled for Friday includes Michigan Consumer Sentiment, Michigan Consumer Expectations, Michigan 1-Year Inflation Expectations, and Michigan 5-Year Inflation Expectations (all at 10 a.m.), the WASDE report (noon), and April Federal Budget Balance (2 p.m.).  In addition, Fed members Bowman (9 a.m.) and Vice Chair Barr (1:30 p.m.) speak.  The major earnings reports scheduled for before the open include AQN, AMCX, CLMT, CPG, CRH, ENB, HMC, and DNOW.  There are no reports scheduled for after the close. 

So far this morning, CMRE, ENB, HMC, and SLVM have reported beats on both the revenue and earnings lines.  Meanwhile, CPG and CRH missed on the revenue line while beating on earnings.  However, AQN, AMCX, and DNOW missed on both the top and bottom lines.

In miscellaneous news, the President-elect of Panama vowed to “fix” the Panama Canal water shortage, by building large water reservoirs.  (This which would help the situation now where ship capacities and number of ships have been greatly reduced because of a lack of water for the locks.  The lack of water has been caused by years of drought in the region depleting the lakes used for lock water now.)  Elsewhere, ADBE Analytics reported that US online retail spending was up 7% during January through April, versus the same period in 2023.  In oil news, China’s access to Niger oil was blocked Thursday due to a border dispute.  (Niger is a landlocked nation.)  China had built a 1,200-mile pipeline to move 90,000 barrels per day of Niger oil to a port in Benin for shipping to China.  However, a dispute between Niger and Benin caused the latter to block oil flow across their land before it even began.  Lastly, real estate data firm ATTOM reported that one in 38 homes in the US are “seriously underwater.”  (They define that as a home having a loan balance at least 25% more than the property value.)  ATTOM reports this is more prevalent in the Southern US than in the other areas, but is clearly a national issue.

In property rights news that could impact companies, on Thursday, the US Supreme Court (by its Conservative super-majority) ruled 6-3 that police agencies do not have to provide timely hearings on property they seize.  This is true regardless of whether any crime is actually charged related to the property or to the legal owners, or to the possessors of the property at time of seizure. The underlying case involved cars seized by AL police where a drug crime was said to be suspected but no charges were ever filed.  The cars had not been returned or even a disposition hearing held related to the cars for more than a year.  In two of the cases, the owners of the cars were not involved in potential cases at all, were not present at time of seizure, and the suspected criminals (who were never charged anyway) were other people. Yet, the Supreme Court has ruled the agencies have the right to seize the property and there is no property right to a timely hearing to get property back.

With that background, it looks as if the Bulls are pushing to close out the week strong. All three major index ETFs gapped up to start the premarket with QQQ giving the most follow-through after that start. The two large-cap ETFs are more indecisive (although white-bodied) after the gap to start the early session. All three major index ETFs remain above their T-line (8ema). So, the short-term trend remains bullish. Meanwhile, the mid-term remains sideways but is leaning toward the bullish again now. The longer-term market remains Bullish as all three major index ETFs have returned within a couple percent of all-time highs. Overall, the character of the market is bullish but gappy. In terms of extension, the SPY, DIA, and QQQ are all getting a bit stretched above their T-lines. The T2122 indicator is also back well into its overbought area. So, we should expect a pause or pullback soon, to relieve overextension if nothing else. (Just remember the market can remain extended longer than we can remain solvent predicting a turn that hasn’t come yet.) In terms of those 10 big dog tickers, nine of the 10 are in the green this morning with only GOOGL dragging behind (perhaps on the reports of employee unrest related to blow-out quarters, job cuts, and moving jobs overseas to reduce payroll). Finally, remember that it’s Friday, Pay Day, and time to prepare your account for the weekend news cycle.

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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