CPI Number and Jobless Claims on Tap

Markets opened flat on Tuesday but sold off hard the first half-hour of the day.  From that point, stocks traded sideways in a pretty tight range the rest of the day but did close up off the lows.  This left us with black candles in all 3 major indices and broke a long string of consecutively higher closes in the large caps.  However, all 3 indices remained in their uptrends and above the 8ema (T-line).  On the day, SPY lost 0.32%, DIA lost 0.29%, and QQQ lost 0.69%.  The VXX rose to 21.21 and T2122 fell to just outside of the overbought territory at 78.79.  10-year bond yields fell to 1.441% and Oil (WTI) rose almost 3% to $84.40/barrel.

Before the open Tuesday, wholesale prices were announced.  They came in up 0.6% for the month and up 8.6% year-on-year (the highest pace in 11 years).  As such, markets sold off early on Tuesday. The PPI was seen as a potential read-through to the more widely watched CPI number coming today.  The consensus expectation for the CPI number is 0.6% for the month and 4.3% year-on-year. However, those seem a lot less likely given the 8.6% wholesale-level increase.

During the day, the big business news was the GE announcement that they will break their company.  The 3 new companies will focus on aviation, healthcare, and energy.  This will be done by spinning off the health care unit by mid-2023 and then spinning off the energy unit by early 2024.  GE stock closed up 2.65% after a very volatile (more than 5% range) on the day.  While activist investors had been calling for such a move for a long time and many thought that was the reason Larry Culp (GE’s first “outsider” CEO) was brought in, the timing surprised the market.

TC2000 Discount

In miscellaneous news, RIVN is set to launch its IPO this morning.  The company priced its shares above the underwriter-valued range (initially $60, then $73) at $78 per share.  Mortgage rates have also dived in the last week, moving from 3.24% to 3.16% on average nationally for a 30-year fixed, conforming loan.  As a result, refinance loan demand was up 7% and new home purchase loan application were up 3% for the week.  Finally, GOOG lost another appeal of the $2.8 billion fine the EU imposed in 2017 for antitrust law breaches.  The company can drag it out the requirement to pay even further with one last appeal to the EU’s highest court and this is exactly what GOOG is expected to do.

Overnight, Asian markets were mostly in the red.  Hong Kong (+0.74%), Indonesia (+0.20%), and Taiwan (+0.10%) were the only exceptions.  However, South Korea (-1.09%), Japan (-0.61%), and Shanghai (-0.41%) paced the losses in the rest of the region.  In Europe, markets are mixed, but mostly red at mid-day.  The FTSE (+0.44%), DAX (-0.12%), and CAC (-0.37%) are typical of the region, with the lone outlier of Denmark (-1.54%).  As of 7:30 am, US Futures are pointing to a down open.  The DIA is implying a -0.16% open, the SPY implies a -0.25% open, and the QQQ is implying a -0.47% open ahead of the news.  10-year bond yields are up to 1.474% and Oil (WTI) is down nine-tenths of a percent in early trading.

The major economic news scheduled for release on Wednesday is limited to Oct. CPI and Weekly Initial Jobless Claims (both at 8:30 am), Crude Oil Inventories (10:30 am), and Oct. Federal Budget Balance (2 pm).  (The Jobless Claims come a day early this week due to the Veterans Day government holiday on Thursday.)  Major earnings reports scheduled for the day include ADNT, AER, ARCO, ARKO, GIB, DFH, ENR, KELYA, EYE, PFGC, RPRX, WEN, and WWW before the open.  Then after the close, APP, ATO, BZH, COMP, ENS, ULCC, KGC, OPAD, OPEN, SPTN, and DIS report.

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Inflation is in focus this morning, along with jobless claims. However, after the win streak on the Jobless Claims front the last 6 weeks, few are expecting a jump in claims today. However, the CPI data is expected to come in much hotter than the 4.3% rate consensus forecast. The reaction to this number is likely to call the tune and drive markets at least the first part of the day.

The trend remains bullish, but the last couple of candles have given the bulls come relief from extension. Yes, they were black candles, but this was a good thing for bulls because that over-extension was preventing some new buying. With that said, consolidations and pullbacks can last a lot longer than you expect. So, just as with long-term trend reversals, don't get caught trying to predict short-term reversals either. The trend is our friend.

Focus on your trade rules and on managing the things you can control. That should include consistently taking profits when you have them and moving your stops in your favor. Watch your current positions before looking to add any new trades. Trade carefully and think twice about holding through earnings.

Ed

Swing Trade Ideas for your consideration and watchlist: HL, CGC, CLX, NEM, TLRY, KR, KRE. 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.

🎯 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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