Wednesday was an indecisive day in the market.  Despite a hot PPI, all three major index ETFs opened higher as the SPY gapped up 0.25%, DIA gapped up 0.22%, and QQQ gapped up 0.38%.  From there, all three slowly sold off, recrossing the gap and reaching the lows of the day just before 2 p.m.  However, the Bulls stepped in at that point and led a steeper rally that took the SPY and DIA out very near their highs.  DIA lagged, but still managed to almost close back at its open.  This action gave us white-bodied, Hammer candles in the SPY and QQQ as well as a black-bodied Doji in the DIA.  (DIA is right at its retest of the 200sma from below, QQQ pulled slightly away from its 50sma, and all three sit comfortably above their T-line (8ema).  This happened on less-than-average volume in the SPY and DIA and well-below-average volume in the QQQ.

On the day, seven of the 10 sectors were in the green again with Utilities (+1.33%) way out front again leading the way higher.  Meanwhile, Healthcare (-0.62%) lagged the other sectors.  At the same time, the SPY gained 0.41%, DIA gained 0.17%, and the tech-heavy QQQ gained 0.71%.  VXX fell 1.82% to close at 22.12 and T2122 fell back further into the mid-range at 598.52.  10-year bond yields plummeted again, falling to 4.558% while Oil (WTI) closed down sharply to $83.20 per barrel.  So, if you missed the market Wednesday, you probably thought it was a nothing day.  Those of us who did trade it saw an undulating move that ended with modest gains for the Bulls. Mr. Market may be waiting on CPI or earnings to resume, but clearly, there was no massive fear or greed driving the market.  It was more of a “what else do you have to show me?” kind of day.  

The only economic news reported Wednesday was limited to September PPI, which came in hotter than expected at +0.5% month-on-month (compared to a forecast of +0.3% but still better than August’s +0.7%).  The September Core PPI as also higher than anticipated (but better than the headline number) at +0.3%, versus a forecast and August reading of +0.2%.  Then, after the close, the API Weekly Crude Oil Stocks report showed a MASSIVE inventory build of 12.940 million barrels (versus a forecast that called for a 1.300-million-barrel build and dramatically different than the prior week’s 4.210-million-barrel drawdown.

In Fed Speak news, Fed Governor Waller said higher market rates may help the FOMC slow inflation, letting the central bank “watch and see” (as opposed to hiking rates again).  “The financial markets are tightening up and they are going to do some of the work for us.”  Later, the September FOMC Minutes came out.  Those meeting minutes showed that, at that time, “most” Fed members agreed that one more rate hike would be appropriate at some future meeting while “some” judged that no more hikes would be needed.  However, the thing that everyone seemed to agree on is that rates would need to be kept higher for longer.  Several of the members suggested that the focus of decisions and communications needs to shift away from how high toward how long to hold rates where they are now.  Finally, several participants noted that even after the Fed starts easing again, Quantitative Tightening (reducing the Fed balance sheet) will likely continue for a long time.  Later, Boston Fed President Collins said it is possible the FOMC is not done hiking rates.  “…And while we are likely near, and could be at, the peak for policy rates, further tightening could be warranted depending on incoming information,” she said.  Collins continued, “Patience will give us time to better separate ‘signal’ from ‘noise’ in the data and to balance risks,”.

In Autoworker contract talks and strike news, Reuters reported midday Wednesday that talks between the UAW and the Big 3 have edged closer to a deal.  The report, citing “sources,” noted that there are two main remaining obstacles.  These are first, a union demand to restore defined-benefit retirement plans to pre-2007 levels, which the UAW gave up to save the companies when the industry struggled during the Financial Crisis.  This would force the automakers to take billions of dollars of liabilities onto their books.  Secondly, the UAW wants to include all present and future electric vehicle joint ventures under the union’s contracts.  (Right now, the automakers avoid paying union wages and benefits by organizing those ventures as separate legal entities.)  In a surprise move, union workers began a strike at F’s largest (truck plant in KY) with 8,700 UAW members walking off the job Wednesday evening. This is a sharp increase in pressure since this is F’s most profitable plant (generating $25 billion in annual revenue).

In stock news, speaking of automakers, STLA announced it and its partner Samsung have chosen Kokomo, IN as the site of a second joint-venture EV battery plant.  (This may be a coincidence, but Kokomo is the hometown of UAW President Fain.)  Later, DIS announced it was raising prices at its theme parks by 8.9% on average.  At the same time, AXP announced it is hiking annual fees on a broad range of its cards with the increase going into effect February 28, 2024. In the afternoon, Reuters reported that ERIC has booked a $3 billion impairment charge related to its purchase of Vonage last year.  The company also said, “Core profit fell 39% in Q3.”  (ERIC stock was down more than 3% on the day.)  By mid-afternoon, GS announced it had agreed to sell its Greensky home improvement lender to a consortium of private equity firms.  GS will take a $0.19/share charge in Q3 over the deal.  Elsewhere, the BIRK IPO opened for trade on Wednesday.  Priced at $46/share, the stock opened at $41 and closed down to $40.20 after trading in a $2.50 range.  After the close, VSCO reaffirmed its guidance for the full year 2023.  Also after the close, Australian firm Liontown Resources said it has extended its exclusive due diligence period by a week for its proposed $4.23 billion purchase of ALB.

In stock government, legal, and regulatory news, the NYSE began a delisting process for SSU on Wednesday morning.  Later, the FDA announced it would review MRK’s immunotherapy drug Keytruda on October 16.  This comes after the drugmaker said the drug met both of its primary goals in its recent study.  (The review is over expanded use of the drug which already earned MRK $12.06 billion in the first half of 2023.)  The biggest news in this area came at the close Wednesday when the IRS claimed its audit found that MSFT owes $28.9 billion in back taxes (plus interest and penalties) related to tax periods from 2004 to 2013. (MSFT restructured and changed practices related to profit allocation across regions in 2013.)  MSFT immediately disputed the claim and said it plans to appeal through the IRS system.  After the close, GOOGL, AMZN, and NET jointly reported the largest-ever denial of service (DoS) attack. The attack began in late August using a new technique and was three times larger than any DoS attack seen in the past.

Overnight, Asian markets were mostly green with only three of the 12 exchanges in the region showing even modest red.  Hong Kong (+1.93%), Japan (+1.75%), and South Korea (+1.21%) led the region higher.  In Europe, with the lone exception of Russia (-1.07%) we see green across the board at midday.  The CAC (+0.47%), DAX (+0.57%), and FTSE (+0.77%) are leading the region upward in early afternoon trade.  In the US, as of 7:30 a.m., Futures are pointing toward another green start to the day. The DIA implies a +0.34% open, the SPY is implying a +0.36% open, and the QQQ implies a +0.24% open at this hour.  At the same time, 10-year bond yields are up slightly to 4.571% and Oil (WTI) is up more than 1% to $84.37 per barrel in early trading.

The major economic news scheduled for Thursday include September CPI and Weekly Initial Jobless Claims (both at 8:30 a.m.), EIA Crude Oil Inventories (11 a.m.), WASDE Ag Report (noon), Federal Budget Balance (2 p.m.), and the Fed’s Balance Sheet (4:30 p.m.).  We also get a Fed speaker (Bostic at 1 p.m.).  The major earnings reports scheduled for Thursday include CMC, DAL, DPZ, FAST, INFY, SVNDY, and WBA all before the open.  There are no major reports scheduled for after the close.

In economic news later this week, on Friday, we get the September Export Price Index, Sept. Import Price Index, Michigan Consumer Sentiment, Michigan Consumer Expectations, Michigan 1-year Inflation Expectations, and Michigan 5-year Inflation Expectations.  Fed member Harker also speaks at 9 a.m.

In terms of earnings reports later this week, on Friday, we hear from BLK, C, JPM, PNC, PGR, UNH, and WFC all report as earnings season kicks off again.

In US Congressional news, Rep. Scalise won a GOP caucus nod and was nominated to be House Speaker. This came on a 113 to 99 vote between Scalise and Rep. Jordan.  It is worth noting that three of Scalise’s 113 votes came from GOP delegates who have no vote where it really counts, in the House.  (An interesting side note is that multiple GOP sources indicated the first ballot actually had ex-Speaker McCarthy leading with 60 votes, Jordan with 47, and Scalise with 31 plus a ton of abstentions.  However, when McCarthy said “no way” all of his support, and more, shifted to Scalise.)  The problem for the GOP is that they need 217 votes to elect a speaker and somewhere between five and 20 the 221 GOP members have said publicly that they won’t vote for Scalise.   So, we may see another fiasco like the record 15 rounds of votes needed to select a crippled-from-the-start McCarthy. As a reminder, beyond the GOP caucus, there are 38 calendar days left until the existing CR ends (Nov. 17 is the last day) and a government shutdown.  There are some, both in government and outside analysts, who say even beyond Americans who would be hurt by a shutdown, Ukraine and Israel may also need House action (money appropriations) even before Nov. 17.

So far this morning, DAL, FRCOY, and INFY reported beats on both the revenue and earnings lines.  Meanwhile, CMC and WBA beat on the revenue line while missing on earnings.  On the other side, DPZ, FAST, and SVNDY all missed on revenue while beating on earnings.  It is worth noting that WBA lowered its forward guidance.

With that background, and ahead of data, the Bulls seem to be making another move this morning. The three major index ETFs all gapped up to start the premarket and have moved slightly higher, printing white-bodied candles in the early session. During this premarket, the DIA is testing its 200sma from below again and SPY is just under a retest of its 50sma. However, remember the news at 8:30 a.m. may cause volatility and that may carry through at the actual open. Also, remember it is possible we start seeing voting for the latest Speaker of the House today. That could either be non-news or a cause for volatility, depending on how the drama plays out. In terms of extension, none of the three major index ETFs are too far above their T-line (8ema) yet, but QQQ is starting to get just a bit stretched. The T2122 indicator is now back in the center of its mid-range. So, again we have room to run in either direction. However, this latest Bull run is starting to get just a little long in the tooth and in need of a rest.

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

🎯 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.

🎯 Bob S: LTA is incredible…. I use it … would not trade without it

🎯 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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