Bulls Try to Regain Feet on Good Earnings

Markets gave us a Bull trap Monday as SPY gapped up 0.82%, DIA gapped up 0.91%, and QQQ gapped up 0.86%.  However, that was the last of the joy for the Bulls as we then started an all-day, wavy sell off in all three major index ETFs that recrossed the gap and continued strongly South.  All three then flattened out the last 40 minutes of the day.  The action gave up large, gap-up, outside day, black candles with tiny wicks on the bottom of the body.  SPY and QQQ retested and failed their T-lines (8emas).  This all happened on above-average volume in all three major index ETFs.

On the day, all 10 sectors were in the red with Technology (-2.01%) way out in front leading the market lower.  Meanwhile, it was Communications Services (-0.15%) that held up far better than any other sector.  At the same time, SPY lost 1.23%, DIA lost 0.66%, and QQQ lost 1.65%.  VXX spiked another 5.54% higher to close at a still very historically low 15.61 and T2122 dropped even further into the low end of its oversold territory at 1.73.  10-year bond yields spiked again to 4.612% and Oil (WTI) was flat at $85.65 per barrel. So, Monday was the Bear’s Day again. The three major index charts all look clearly bearish now.  However, it is worth remembering that the worst of the  index ETFs (DIA) is still less that 5.75% from its all-time high (not below the high close, close, but down from the actual all-time high).  So, we aren’t truly in a Bear market and not even in a correction at this point…at least yet.

The major economic news scheduled for Monday included March Core Retail Sales, which came in extremely hot at +1.1% (compared to a +0.5% forecast and February’s +0.6% reading).  Meanwhile, March Retail Sales was not as hot as the “core” at +0.7% (versus a +0.4% forecast but down from February’s +0.9%).  At the same time, the NY Empire State Mfg. Index was weaker than predicted at -14.30 (compared to a -5.20 forecast but better than February’s -20.90).  Later, February Business Inventories rose more than anticipated at +0.4% (versus a +0.3% forecast and a +0.0% January value).  At the same time, February Retail Inventories also were +0.4% (compared to a +0.4% forecast and up a tick from January’s +0.3%). 

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In stock news, on Monday, BP announced it had cut over 10% of its electric vehicle charging business unit workforce (still only 100 jobs) as well as pulling out of several markets.  BP said its bet on rapid growth in commercial EV fleets just didn’t pay off.  (BP will continue its operations in the US, Britain, Germany, and China markets while pulling out of eight other countries.)  At the same time, Clearlake Capital announced it had indeed offered to acquire BLKB for $80 per share.  (This was a premium over Friday’s $76.72 close and well above Clearlake’s original $71/share offer.)  Later, BNPQY (BNP Paribas) agreed to buy a 9% stake in Belgian Insurer Ageas for $780 million.  This makes the French bank the largest shareholder in Ageas.  At the same time, Reuters reported that EQT will sell some of its PA state Natural Gas assets to EQNR in exchange for $500 million and some of EQNR’s “Appalachian Basin” assets.

Elsewhere, ADBE announced it is in the early stages of letting OpenAI and other AI tools into its widely-used video editing software.  The company would allow those tools in via an app, which could then be monetized.  At the same time, TSLA confirmed it will lay off 10% of its global workforce (about 14,000 jobs) as electric vehicle sales fall.  Later, GM announced it will move its headquarters to new skyscraper offices further into downtown Detroit after 20 years in its riverfront campus.

In stock legal and governmental news, on Monday, META announced it will temporarily suspend Threads (its Twitter knock off) in Turkey on April 29 to comply with provisional orders from the Turkish competition authority. (META also said it will appeal the order.) Later, COIN asked two courts for permission to appeal part of its lawsuit against the SEC.  At the same time, TPR received both EU and Japanese approval for its $8.5 billion deal to buy CPRI, (US approval from the FTC is still pending.)  Later, MGM sued the FTC in hope of blocking an FTC probe into the casino’s 2023 hack that hobbled it last year.  The MGM suit claims the FTC has no jurisdiction because the company feels it is not subject to consumer financial data rules since it is not an interstate bank.  At the same time, the NHTSA said it has opened an investigation into 2023 GM Cadillac Lyric cars over the loss of brake assist during operation.  At the same time, PLL announced it had received NC state approval for its lithium “mining” operations and can begin the required construction. 

Elsewhere, the US State Dept. approved the sale of “aircraft support” for training and support aircraft to Iraq.  This will result in a $140 million contract for NOC. At the same time, AVGO was questioned by EU antitrust regulators over change (massive price increases, as much as 20x in cases) in its pricing after its acquisition of VMW.  (In many cases AVGO changed VMW to a subscription-only model, simply telling customers who had bought lifetime licenses they now will pay annually or lose access to what they bought.)  Later, LMT was awarded a $17 billion contract to develop the next generation of interceptors for use against incoming intercontinental ballistic missiles.  At the same time, the Wall Street Journal reported the US Dept. of Justice is preparing an antitrust lawsuit against LYV.

Overnight, Asian markets were red across the board.  Taiwan (-2.68%), Shenzhen (-2.29%), and South Korea (-2.28%) led the region lower on broad-based and large losses.  Meanwhile, in Europe, we see a similar picture taking shape at midday with only one of 15 bourses in the green (barely).  The CAC (-1.23%), DAX (-1.31%), and FTSE (-1.40%) lead the region lower in early afternoon trade.  In the US, as of 7:30 a.m., Futures are pointing toward a mixed bounce after Monday’s downdraft.  The DIA implies a +0.50% open, the SPY is implying a +0.10% open, and the QQQ implies a +0.01% open at this hour.  At the same time, 10-year bond yields are popping again to 4.651% and Oil (WTI) is off 0.28% to $85.17 per barrel in early trading.

The major economic news scheduled for Tuesday includes March Building Permits and March Housing Starts (both at 8:30 a.m.), March Industrial Production (9:15 a.m.), and API Weekly Crude Oil stocks (4:30 p.m.).  We also hear from Fed member Williams (12:30 p.m.) and Fed Chair Powell (1:15 p.m.). The major earnings reports scheduled for before the open include BAC, BK, ERIC, JNJ, MS, NTRS, PNC, and UNH.  Then, after the close, AMX, IBKR, JBHT, OMC, and UAL report.

In economic news later this week, on Wednesday, EIA Weekly Crude Oil Inventories and the Fed Beige Book are reported.  We also hear from Fed Members Mester and Bowman.  On Thursday, we get Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, Philly Fed Mfg. Index, Philly Fed Mfg. Employment, March Existing Home Sales, US Leading Economic Indicator Index, Fed Balance Sheet, and three Fed speakers (Bowman, Williams, and Bostic twice).  Finally, there are no major economic news scheduled for Friday.

In terms of earnings reports later this week, on Wednesday, ABT, ASML, CFG, FHN, PLD, TRV, USB, AA, CCI, CSX, DFS, EFX, KMI, LVS, LBRT, SNV, and WTFC report.  On Thursday, we hear from ALK, AALY, BX, CMA, DHI, ELV, GPC, INFY, KEY, MAN, MMC, NOK, SNA, TSM, ISRG, NFLX, PPG, and WAL.  Lastly, on Friday AXP, FITB, HBAN, PG, RF, SLB, and WIT report.

So far this morning, BAC, BK, CBSH, JNJ, MS, PNC, and UNH all reported beats on both the revenue and earnings lines.  Meanwhile, ERIC missed on revenue while beating on earnings.  On the other side, NTRS crushed on revenue (doubling expectations) but also missed significantly on earnings.  The only guidance out so far is from PNC, which lowered its forward guidance.

In miscellaneous news, several Israelis, including PM Netanyahu and the spokesman for Israeli Defense Forces said they will retaliate against Iran for the weekend’s large, telegraphed, and ineffective retaliatory strike on their country.  Israel said it would choose the time and place, but diplomacy is holding so far with hope that Israel will just strike Iranian proxies which participated, such as Hezbollah in Lebanon, Houthis in Yemen, and various Iran-backed militias in Syria and Iraq.  Elsewhere, Chinese GDP was above pace in Q1 at +5.3%.  However, most of that growth came in January and February as the country’s economy slumping in March.  Both Chinese Retail Sales and Industrial Output fell well short of estimates in March in addition to a decline in home sales.  For his part, Chinese President Xi made statements pushing back on US and EU pressure to refocus the Chinese economy away from industrial growth and toward stimulating consumer spending.

With that background, it looks as if the Bulls are trying to rebound from Monday’s drubbing but are not having a ton of success yet. All three major index ETFs opened the premarket flat, traded lower, and have pushed back higher to form white-body candles that are in the green compared to Monday’s huge black candle. (DIA has done by far the best job of this push-back.) However, only a small fraction of Monday’s losses have been recovered so far in the early session. The SPY, DIA, and QQQ remain well below their T-line. So the short-term trend is bearish. Meanwhile, the mid-term has also turned bearish and the longer-term market remains Bullish but trend is broken and is clearly under pressure. In terms of extension, all three of the major index ETFs now a fair distance below their T-line and the T2122 indicator is deeply in its oversold range. So, at the very least, the Bears are in need of some rest. (Just remember markets can remain oversold a lot longer than we can stay solvent predicting a reversal.) In terms of those 10 big dog tickers, seven of the 10 are in the green early with only TSLA (-2.40%) truly pushing to the downside (more than 2.1% worst off than the other nine big dogs so far 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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