CPI Data on Tap After Good KO Earnings

On Monday, stocks gapped very modestly higher (up 0.16% in the SPY, up 0.05% in the DIA, and up 0.45% in the QQQ) at the open.  Then a slow, but steady rally took over until 12:45 pm.  From that point, all three major indices ground sideways with the QQQ even having a slightly bearish trend to that grind for the rest of the day.  This action gave us white-bodied candles with small upper wicks.  (QQQ also had a lower wick.)  All three major indices have crossed back above their T-line (8ema) and both large-cap indices are also at least retesting a resistance level.  Meanwhile, the QQQ is retesting the uptrend level it failed last Thursday.  This all happened on a very much lower-than-average volume.

On the day, nine of the 10 sectors were in the green as Consumer Cyclical (+1.51%) led the way higher and Energy (-0.020%) lagged behind the other sectors.  At the same time, the SPY was up 1.18%, the DIA was up 1.12%, and QQQ was up 1.60%.  The VXX lost almost 4% to 11.69 and T2122 rose but remains just outside of the overbought territory at 77.27.  10-year bond yields fell to 3.705% and Oil (WTI) is a half of a percent to $79.25 per barrel.  So, on the day, we saw the bulls in charge all morning and then a dead market most of the afternoon.  This just seems like trader’s waiting on the CPI data Tuesday to give a clue about what the Fed may do in March.

In Fed news, Federal Reserve Governor Bowman spoke Monday.  She said “I expect we’ll continue to increase the federal funds rate because we have to bring inflation back down to our 2% goal…”  Bowman went on to say that a very strong labor market alongside moderating inflation means a “soft landing” remains possible.  In other Fed news, the NY Fed announced that a January survey of consumers shows the biggest monthly drop in “wage growth” (income growth) expectations in 10 years.  The expected wage growth fell 1.3% to +3.3% for the year as of January.

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In stock news, early Monday TWLO announced another round of layoffs, eliminating about 17% of its workforce and closing some offices.  In other layoff news, UPS said Monday that it will join rival FDX is looking to reduce headcount in the areas of the US where demand is down.  This comes ahead of UPS negotiations with the Teamster union (contract expiring July 31).  Meanwhile, Reuters reports that the recent spate of big tech layoffs is a boon for farm equipment makers who are snapping up hundreds of tech workers.  Specifically, the article mentioned DE, CAT, and CNHI as hiring hundreds of engineers each from the pool of former employees from the likes of AMZN, MSFT, and META.  Elsewhere, ALC agreed to pay JNJ $199 million to settle an intellectual property suit related to laser eye-surgery devices.  F announced that they will recognize the UAW at the new $3.5 billion battery plant in Marshall MI (reported here last week).  This means that if a majority of workers at that facility just sign a card supporting a union, then the UAW will represent all workers without the need for formal votes.   Finally, AMZN announced that it has successfully tested its “Zoox” robotaxis using employees as passengers on public roads between two AMZN facilities in Foster City, CA.  The milestone moves the project closer to publicly available self-driving cars as well as competing with GOOGL’s “Waymo” robotaxi project. 

In energy news, after hours Monday, the Biden Administration said that the government is planning to sell another 26 million barrels of oil from the Strategic Reserve.  The White House says they do not want to do so now that oil prices have stabilized.  However, a budget mandate enacted in 2015 (pertaining to the current fiscal year) mandates the sale of 26 million barrels this year.  The Energy Dept. has sought to stop these sales in an effort to begin refilling the reserve.  However, without new Congressional action, the sale is required by law. After this sale, the US reserve would drop to about 345 million barrels.

After the close, CAR, ACGL, IAC, ANET, CDNS, SEDG, and PLTR all reported beats on both the revenue and earnings lines.  Meanwhile, ES, FE, and AMKR beat on revenue while missing on the earnings line.  On the other side, MRC missed on the revenue line while beating on earnings.  Unfortunately, ASTL missed on both the top and bottom lines.  It is worth noting that ANET, CDNS, and SEDG all raised their forward guidance.  However, AMKR, JHX, and PLTR lowered their forward guidance.

Overnight, Asian markets were mixed on mostly modest moves.  Thailand (-0.73%) paced the losses while India (+0.89%), Japan (+0.64%), and South Korea (+0.50%) led the gainers.  Meanwhile, in Europe, the bourses are leaning toward the green side at midday with the notable exception of Russia (-1.27%).  The FTSE (+0.40%), DAX (+0.42%), and CAC (+0.50%) are leading the region higher in early afternoon trade.  AS of 7:30 am, US Futures are pointing to a modest green start to the day (ahead of CPI data). The DIA implies a +0.13% open, the SPY is implying a +0.28% open, and the QQQ implies a +0.43% open at this hour.  At the same time, 10-year bond yields are down to 3.69% and Oil (WTI) is off 1.55% to $78.90/barrel.

The major economic news events scheduled for Tuesday include January CPI (8:30 am) and the API Weekly Crude Oil Stock Report (4:30 pm).  We also get a couple of Fed speakers (Harker at 11:30 am and Williams at 2:05 pm).  Major earnings reports scheduled for the day include CAE, CLF, KO, ECL, ENTG, EXC, FELE, GTX, GEO, GFS, HRI, HWM, LCII, LDOS, MAR, BTU, PKI, QSR, TRU, WCC, and ZTS before the opening bell.  Then after the close, ABNB, AKAM, ANDE, CLW, CRK, CNDT, DVN, WIRE, ENLC, GDDY, GXO, HLF, MCY, NU, SCI, SU, TX, and WFG report. 

In economic news later this week, on Wednesday, NY Fed Empire State Mfg. Index, January Retail Sales, January Industrial Production, December Business Inventories, December Retail Inventories, and EIA Weekly Crude Oil Inventories are reported.  On Thursday, we get January Building Permits, January PPI, January Housing Starts, Weekly Initial Jobless Claims, Philly Fed Mfg. Index, and a couple of Fed speakers (Mester, Bullard, and Mester).  Finally, on Friday, January Import Price Index and January Export Price Index are reported.

In terms of earnings later in the week, on Wednesday, ADI, AVNT, GOLD, BIIB, CHEF, FIS, GNRC, ICL, KHC, LAD, MLM, OC, PSN, RPRX, RBLX, R, SABR, SITE, SAH, SUN, TMHC, TTD, WAB, WAT, ALB, ALSN, AMED, AEE, AIG, AWK, AR, CF, CSCO, SYH, CPA, ET, EQT, EQIX, HST, INVH, KGC, MRO, NEX, NUS, NTR, QDEL, RSG, REZI, RNG, ROKU, ROL, RGLD, RUSHA, SGEN, SHOP, SUM, SPWR, SNPS, TNET, TROX, TWLO, WCN, WELL, and Z report.  On Thursday, we hear from ARCH, BLMN, CVE, CEG, CROX, CNB, ETR, EPAM, FOCS, GGR, GVA, HAS, HSIC, H KBR, KELYA, LH, NSRGY, NGD, NMRK, DNOW, NRG, OGN, PARA, PBF, POOL, POR, RCM, RS, STNG, SO, SCL, SYNH, TOST, USFD, VC, VNT, VMC, WSO, WST, WE, ZBRA, AEM, AL, AEL, COLD, AMN, AMAT, ATR, BIO, BFAM, ED, CLR, DASH, DKNG, DBX, FBIN, GLOB, IAG, TDS, TXRH, USM, and VALE.  Finally, on Friday, ASIX, AMCX, AXL, AN, CNP, CRBG, DE, MD, and PPL report.

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So far this morning, EXC, KO, WCC, MAR, LDOS, ZTS, QSR, HWM, GFS, HE, ENTG, and GEO all reported beats to both the revenue and earnings lines.  Meanwhile, CLF, TRP, LCII, and HRI all beat on revenue while missing on earnings.  On the other side, PKI missed on revenue while beating on earnings.  Unfortunately, GTX and TRU both missed on both the top and bottom lines.  It is worth noting that ZTS and GFS raised forward guidance.  However, PKI, HWM, GTX, and ENTG all lowered their own forward guidance.

With that background, it looks like the bulls are looking to a positive open at this point. However, that is sure to change to either a nasty gap down or to a bigger gap up once the CPI numbers are out. Regardless of how that turns out, be careful wading into the volatility at the open. There is likely to be jerks in both directions before the bell stops ringing. However, the trend remains bullish, at this point, in all three major indices. SPY and DIA are still not quite broken free of their resistance test (they are passing so far) and QQQ is back up against the uptrend line dating back to the first of the year.

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.

Ed

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🎯 Mike Probst: Rick, Got CTL off the scanner today. Already up 30%. Love it.

🎯 Dick Carp: the scanner paid for the year with HES-thank you

🎯 Arnoldo Bolanos: LTA scanner really works $$, thanks Ed.

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🎯 Malcolm .: Posted in room 2, @Rick… I used the LTA Scanner to go through hundreds of stocks this weekend and picked out three to trade:  PYPL, TGT, and ZS.   Quality patterns and with my trading, up 24%, 7% and 12%…. this program is gold.

🎯 Friday 6/21/19  (10:09 am) Aaron B: Today, my account is at +190% since January. Thanks, RWO HRC Flash Malcolm Thomas Steve Ed Bob S Bob C Mike P and everyone that contributes every day. I love our job.

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