Markets gapped up again on Wednesday (0.60% in the SPY, 0.42% in the DIA, and 0.83% in the QQQ) and then looked to be following Tuesday’s example as we sold off to reach the lows by 10:15 am. However, then the dip-buyers stepped in to lead a steady rally that lasted until noon. After a 45-minute rest for lunch, the bears stepped in to drive us back near the lows by 2:30 pm, when another rally took over. This action gave us indecisive Doji or Spinning Top-like candles on the day. The large-cap indices managed to climb back just above while the QQQ remains just below its T-line (8ema). The DIA is also continuing to ride along its 50sma.
On the day, all ten of the sectors were in the green with the Consumer Cyclical sector (+3.11%) way out front leading the way higher as the Energy sector (+0.12%) lagged behind. Meanwhile, the SPY was up 0.75%, the DIA was up 0.40%, and the QQQ was up 0.47%. This took place on lower-than-average volume. At the same time, the VXX was down 2.72% to 13.61, and T2122 spiked back up to just outside of the overbought territory at 77.72. 10-year bond yields fell again to 3.679% and Oil (WTI) was down a whopping 4.85% to $73.21 per barrel. So, overall, it was a very indecisive back-and-forth day that remains in the consolidation of the last 2+ weeks.
In economic news, December ISM Mfg. PMI came in slightly below expectations at 48.4 (compared to a forecasted value of 48.5 and below the November value of 49.0). Meanwhile, November JOLTs Job Openings came in higher than expected at 10.458 million (versus the 10.000 million forecast and the October value of 10.512 million). Later, the December FOMC Minutes were released. In the minutes, it was clear that overall the group felt that restrictive policy was still in order until data indicated that inflation was clearly in a “sustained” downward trend toward 2 percent. The minutes also show that no voting members expect rate cuts during 2023. Finally, after the close, the API Weekly Crude Oil Stock Report came out showing a 3.298-million-barrel build (the first increase in three weeks), which was unexpected given the general consensus that the holiday week travel could cause a drawdown.
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In stock news, CRM announced it is cutting 10% of its workforce (which should be roughly 7,900) and reducing office space in cost-cutting measures. CRM had already laid off hundreds of employees in November. Later, GM reclaimed its US sales crown from TM in 2022. GM sold 2.27 million vehicles (up 2.5% over 2021) compared to TM sales of 2.1 million (down 9.6% from 2021). Meanwhile, BLK is delaying redemptions from its UK property funds after a flood of investors have been seeking to exit Britain’s property market. During the afternoon, JEF surged following a Nikkei Asia report that SMFG is in the process of raising its stake in Jeffries. The CEO of SMFG told the outlet that he wants to increase the stake to between 20% and 50% of JEF as soon as discussions with US regulators and JEF management are concluded (SMFG already owns a 5% stake in JEF).
In government action news, CACC was sued by the US Consumer Finance Protection Bureau and the NY State Attorney General for predatory auto lending (misleading its customers and tricking them into taking high-cost loans on used cars). Elsewhere, COIN reached a $100 million settlement (which includes a $50 million penalty) with the NY State Dept. of Financial Services for failure to comply with laws regarding account creation. The FTC disclosed that it had forced OI to drop non-compete requirements that limited where its employees could seek work after leaving OI. (The agreements had covered about 1,700 workers.)
In energy news, Venezuela’s lack of dredging maintenance has caused a problem for CVX as it attempts to load and move four tanker ships. The joint ventures with the Venezuelan government intended to bring heavy crude to the US (Mississippi refineries). The channel to oil terminal in Venezuela is only deep enough to allow tankers to load up to half capacity. Small tankers are being used to shuttle the heavy oil to a ship-to-ship transfer at sea to fill the larger tankers. Elsewhere, as mentioned above, the API Weekly Crude Stock report also showed a 1.2-million-barrel build in gasoline (compared to an expected 486k barrel drawdown). However, there was also a 2.4-million-barrel drawdown in distillate (diesel and heating oil) stocks.
Overnight, Asian markets were mostly green. Shenzhen (+2.13%), Singapore (+1.55%), and Hong Kong (+1.25%) led the region higher while only a couple of exchanges were in the red. In Europe, we see a more mixed picture but still leaning to the upside at midday. The FTSE (+0.46%), DAX (-0.09%), and CAC (+0.05%) lead the region as usual with no clear direction chosen yet in early afternoon trade. As of 7:30 am, US Futures are pointing to a start to the day just on the green side of flat. The DIA implies a +0.05% open, the SPY is implying a +0.15% open, and the QQQ implies a +0.29% open at this hour. At the same time, 10-year bond yields are up a bit to 3.688% and Oil (WTI) is up 2.27% to $74.49/barrel in early trading.
The major economic news events scheduled for Thursday include Dec. ADP Nonfarm Employment Change (8:15 am), Weekly Initial Jobless Claims and Nov. Trade Balance (both at 8:30 am), Dec. Global Composite PMI and Dec. Services PMI (9:45 am), and EIA Weekly Crude Oil Inventories (11 am). The major earnings reports scheduled for the day include STZ, HELE, LW, MSM, RPM, SCHN, and WBA all before the opening bell. There are no major earnings reports scheduled for after the close.
In economic news later in the week, on Friday, we get Dec. Avg. Hourly Earnings, Dec. Nonfarm Payrolls, Dec. Participation Rate, Dec, Unemployment Rate, Nov. Factory Orders, and Dec. ISM Non-Mfg. PMI. And in terms of earnings, on Friday, GBX reports.
So far this morning, WBA, CAG, MSM, and HELE have all reported beats on both the revenue and earnings lines. Meanwhile, RPM missed on revenue while reporting in line on earnings. (STZ, LW, and SCHN report closer to the opening bell.)
In late-breaking news, AMZN has announced it will be laying off more than 18,000 employees. This is a much larger number than the 10,000 layoffs the tech giant had originally planned. We also have three previously unplanned Fed speakers today (Harker at 7:30 am, Bostic at 9:20 am, and Bullard 1:20 pm). And on the Congress front, after six failed votes, the Republicans are no closer to electing a new Speaker of the House as a group of 20 extreme conservatives are revolting in a combination of “give us even more power”, “let any one GOP Congressman call for a new Speaker vote at any time”, and “I’ll never vote for McCarthy” protests. A seventh vote will begin again at noon today. (The good news is that since the GOP has no real agenda, the first real piece of House business does not have to come for weeks, when the Debt Ceiling will need to be increased to avoid the US defaulting on its debt.)
With that background, it looks like all three major indices are trying to start the day slightly green. The SPY and DIA are holding on above their T-line and the QQQ is retesting its own T-line (8ema) from below this morning. The consolidation which has been holding for the last two weeks still seems to have a grip on the market. So, be careful about getting too bullish too soon. This market could still break in either direction. Sitting on your hands remains not the worst idea ever. However, if you trade, continue to either be very nimble or prepared to wait out any short-term pressure your position might face. The volumes are likely to pick up this week but the big money eases back into the market slowly and it hasn’t happened yet. (Remember, the big money does not chase. They buy strictly in a price band and will wait for the price to come back to them.)
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 absolutely 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 money is 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.
Swing Trade Ideas for your consideration and watchlist: EOSE, MASI, CLF, CAT, IAG, BBWI, BIDU, and AUY. 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.
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