Bulls Pushing Around the Globe Today

Monday saw a little divergence in what was a little bit of a Bear trap.  SPY gapped down 0.28%, DIA gapped down 0.15%, and QQQ gapped down 0.65%.  At that point, SPY and QQQ began slow, steady rallies back across the gap until 3 p.m.  From there, SPY and QQQ sold off with SPY ending up at its opening level while QQQ remained in the middle of its morning gap.  While this was happening, DIA sold off slowly all day long, closing very near its lows.  This gave us a white-bodied candle with large upper wick that bounced up off its T-line (8ema) in the QQQ.  At the same time, SPY printed a gap-down, Gravestone Doji.  Meanwhile, the DIA printed a gap-down, black-bodied candle that closed just 24 cents above its T-line.  This happened on less-than-average volume in all three major index ETFs.  (Far below average in the SPY and QQQ.)

On the day, six of the 10 sectors were red as Industrials (-0.53%) out in front leading the market lower.  Meanwhile, Energy (+0.95%) was by far the biggest mover and the sector that held up best.  At the same time, SPY lost 0.28%, DIA lost 0.40%, and QQQ lost 0.36%. VXX fell slightly to close at a still very low 13.08 and T2122 climbed just a bit but remains in its mid-range at 64.94.  10-year bond yields climbed to 4.249% and Oil (WTI) rose 1.55% to close at $81.88 per barrel.  So, Monday saw a gap lower and then divergence with the DIA following through to the downside while SPY rallied and then fell back to the opening level while the QQQ rallied back across the gap before fading back into the middle of its morning gap.

The major economic news scheduled for Monday was limited, but included February Building Permits, which came in above expectations at 1.524 million (compared to a forecast of 1.518 million and much stronger than the previous 1.489 million).  Later, February New Home Sales were lower than anticipate at 662k (versus a forecast of 675k and a January 664k number).

In Fed-speak news, Chicago Fed President Goolsbee said that he expects three rate cuts by the FOMC in 2024.  In an interview with Yahoo finance, Goolsbee said, “So we’re in an uncertain state but it doesn’t feel to me like we’ve changed fundamentally the story that we’re getting (inflation) back to target”…“I was at the median for this one, (meaning he expects three rate cuts in 2024).”  Meanwhile, Fed Governor Cook told a Harvard event, “Although housing-services inflation remains quite high, the current low rate of increase on new rental leases suggests that it will continue to fall.”  She went on to say, “The risks to achieving our employment and inflation goals are moving into better balance.”  “Nonetheless, fully restoring price stability may take a cautious approach to easing monetary policy over time.”

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After the close, BKKT missed on both the revenue and earnings lines.

In stock news, on Monday, the CEO and Chairman, and Head of Commercial Planes Division all announced they are stepping down from BA in the midst of the 737 MAX quality fiasco.  At the same time, IR announced it would buy ILC Dover from New Mountain Capital for $2.33 billion.  (The move will increase IR’s presence in the life sciences market and ILC Dover had $700 million in 2023.  The deal is expected to close in Q2.)  Later, ABBV announced it will buy LABP for $212 million ($20.42/share).  At the same time, the Wall Street Journal reported that TSLA and another unnamed US automaker are in negotiations to license battery technology from China’s CATL.  (CATL already has an existing partnership with F.)  Later, Reuters reported that the workers at VLKAF (Volkswagen) Chattanooga, TN plant will vote on whether to join the UAW on April 17-19.  (UAW told Reuters that more than 70% of plant employees had signed cards requesting the vote.)  At the same time, LCID announced it will receive $1 billion in capital from an affiliate of the Saudi Wealth Fund.  Elsewhere, after the close, DELL announced it will cut an unspecified number of jobs as part of a broader cost reduction initiative.  Also after the close, SON said it will raise prices on all grades of uncoated, recycled paperboard sold in Europe.  (The hike 50-60 Euro per ton hikes are set to take effect on deliveries beginning April 15.)  At the same time, VSTO said it will evaluate a revised acquisition offer from MNC Capital.  The new offer is $37.50 per share came after the original $35/share offer was rejected.  Meanwhile, it is worth noting that RDDT spiked 35% on Monday, closing up 30%.

In stock legal and governmental news, on Monday, TNXP announced it had received FDA “Rare Pediatric Disease” designation and approval for its TNX-2900 drug.  (This is something of an upgrade from the 2022 FDA designation of the drug as an “orphaned drug.”)    At the same time, AAPL was hit with a flurry of Consumer lawsuits accusing the phonemaker of monopolizing its smartphone ecosystem.  (These suits look to piggyback on the DOJ and 16-state antitrust case filed against AAPL last week over the same matters.)  Later, US Energy Sec. Granholm announced $6 billion in US funding to support emission reduction projects.  This included CLF and CENX (each getting $500 million), XOM (getting $332 million), KHC (getting $171 million), OI (getting $125 million), DOW (getting $95 million), among the 33 total projects being supported.  At the same time, AMRX announced it had received FDA approval for its generic ear infection treatment.  Elsewhere, MAXN has filed a patent infringement suit against CSIQ.  Later, the US Dept. of Agriculture announced it has detected avian flu in milk from cattle in KS and TX.  (The USDA, FDA, and CDC are investigating dairy cattle in KS, TX, and NM following symptoms in the cattle.  For now, the USDA said there is no concern about milk safety.)

Overnight, Asian markets were mixed but leaned toward the green side.  Singapore (+1.10%), Hong Kong (+0.88%), and South Korea (+0.71%) led the region higher.  Meanwhile, India (-0.42%) was the biggest loser on the day.  In Europe, a similar but greener picture is taking shape at midday.  11 of the 15 bourses are in the green with the CAC (+0.20%), DAX (+0.63%), and FTSE (+0.02%) leading the region higher in early afternoon trade.  In the US, as of 7:30 a.m., Futures are pointing toward markets following the rest of the globe higher.  The DIA implies a +0.21%open, the SPY is implying a +0.37% open, and the QQQ implies a +0.50% open at this hour.  A the same time, 10-year bond yields are down slightly to 4.241% and Oil (WTI) is up another third of a percent to $82.21 per barrel in early trading.

The major economic news scheduled for Tuesday includes February Core Durable Goods Orders and February Durable Goods Orders (8:30 a.m.), Conference Board Consumer Confidence (9 a.m.), and API Weekly Crude Oil Stocks (4:30 p.m.).  The major earnings reports scheduled for before the open include ESLT, MKC, and SNX.  Then, after the close, CNXC, GME, and NOAH report.

In economic news later this week, on Wednesday, EIA Crude Oil Inventories are reported and Fed member Waller speaks.  On Thursday, we get Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, Q4 GDP, Q4 GDP Price Index, Chicago PMI, Michigan Consumer Sentiment, Michigan Consumer Expectations, Michigan 1-Year Inflation Expectations, Michigan 5-Year Inflation Expectations, Feb. Pending Home Sales, and the Fed Balance Sheet.  Finally, on Friday, despite being a market holiday, Feb. Core PCE Price Index, Feb. PCE Price Index, Feb. Personal Spending, Feb. Goods Trade Balance, Feb. Retail Inventories are reported and Fed Chair Powell speaks.

In terms of earnings reports later this week, on Wednesday, CCL, CTAS, LE, PAYX, UNF, FUL, JEF, MLKN, and RH report.  On Thursday, we hear from AZUL, DOOO, MSM, and WBA.  Finally, on Friday, there are no major earnings reports scheduled since it is a market holiday.

In miscellaneous news, Reuters reported Monday that legal issues are hindering the development of US lithium.  A 1972 federal law gives authority over water extraction (brine pumped into drilled holes, pumped back out, and lithium is extracted from the water) to the federal government. However, states (in particular seven GOP-run states) are passing their own regulations, attempting to override federal control or at least have their own rules.  In most cases, these rules have not been written yet at the state levels.  Since the federal government can’t stop states from passing their own laws and regulations, things are at a standstill.  CVX, XOM, TTI, ALB, and others have lithium projects on hold not wanting to get into operations that are very likely to end in litigation over the activity.

In commodity news, Russia limited its crude exports, presumably at least partially as a result of recent successful Ukrainian attacks on the Russian oil infrastructure.  The promise of an Israeli cease fire also took a hit after the UN Security Council demanded one and Israel (who had demanded that the US veto the measure) wrongly lied about the US and played the victim, accused the US of turning their back on Israel and not caring about Israeli blood.  The net result being that oil shipments through the Red sea and Suez Canal are not on the table for the foreseeable future. Combined, the factors support higher oil prices.  Meanwhile, Cocoa prices hit an all-time high after bean blight and climate-caused hotter and dryer conditions in the Ivory Coast (the world’s largest cocoa producer) have driven prices up 39% year-to-date.

With that background, it looks like the Bulls are trying to bounce back and are in control this morning. All three major index ETFs opened higher and have printed white-body candles since that point. All three remain above their T-line (8ema) and all three T-lines are rising. However, DIA is by far the weakest of these moves and remains near its T-line. So, the short-term trend is still bullish, but is under a little pressure at least in the DIA. Meanwhile, the longer-term trend in the three major index ETFs remain bullish. In terms of extension, none of the SPY, DIA, or QQQ are extended above their T-line and the T2122 indicator is back in its mid-range. So, both sides still have room to run if they can gather the momentum. Looking at those 10 Big Dog tech names, all 10 are in the green during the premarket. The market dollar-volume leaders TSLA, AMD, and NVDA are leading that group higher this morning. This should help the Bulls across the market at least early.

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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