DIS Surprise Starts Slow Holiday Week

Markets diverged at the open again Friday as the SPY gapped up 0.87%, DIA gapped up 0.37%, and QQQ gapped up 1.10% to start the day. However, at that point, all 3 got back in-step and sold off the first 40 minutes with all 3 having recrossed their gaps by 10:10 am.  Then 3 major indices diverged again with QQQ continuing its selloff, DIA going sideways back and forth inside its morning gap in waves, and the SPY bouncing along on both sides of the Thursday close. This lasted until 3:30 pm, when a broad-based rally took all 3 indices back up a bit.  All this action is giving us black-bodied candles that retested and held the T-line in all 3 major indices.  The DIA was more of an indecisive Doji candle while the SPY was more of a Black Hammer, and the QQQ was just a black candle with a large lower wick.

On the day, seven of the ten sectors are in the green, with Utilities sector (+2.00%) leading the winners by a large margin while the Energy Sector (-0.67%) fared worst.  Meanwhile, the SPY gained 0.45%, the DIA gained +0.38%, and the QQQ was dead flat at day end.  The VXX fell 1.03% to 16.41 and T2122 climbed back into the low end of the overbought territory at 85.71.  10-year bond yields have climbed back up to 3.824% and Oil (WTI) plunged another 1.90% to $80.09 per barrel.  So, overall Friday was a gap-up day where that turned indecisive as the bulls could not follow through and the bears were able to fade the gap, but ultimately could not drive prices lower as the late-day rally turned markets modestly green.

In stock news, CVNA announced Friday they are cutting another 1,500 jobs (another 8% of the workforce) after cutting 2,500 earlier in the fall.  In other Auto industry news, EVGO announced a deal to become the preferred EV charging partner of Subaru with buyers of some of Subaru’s EV offerings receiving a $400 credit to use EVGO fast charging stations nationwide in the US.  Elsewhere, HON agreed to pay $1.3 billion to end asbestos-related lawsuit claims against a former business unit.  On Saturday, TSLA recalled 321,000 cars over rear light problems.  Finally, in a shocker, the CEO of DIS (Chapek) was ousted Sunday night and replaced with former DIS CEO, Bob Iger. Iger returns to the job after a 3-year hiatus.

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In miscellaneous news, the CFTC reports the that US Dollar is in a “net short” position for the first time since July 2021.  Former Theranos CEO Elizabeth Holmes was sentenced to 11 years in prison Friday after the close for her defrauding of investors.  In economic news from Friday, the October Existing Home Sales came in a bit higher than expected at 4.43 million (compared to the forecasted value of 4.38 million, but worse than the September value of 4.71 million).  In China-related news, the bull’s hopes that China was pivoting from its “Zero Covid” policy evaporated over the weekend as the city was rumored to be a test case for loosening instead closed schools, locked down universities and ordered its residents to stay at home for 5 days. So, no loosening yet.

In Ecological news, the COP27 conference reached a deal to pay the poor countries for all the environmental damage caused by climate change due to the industrialized nations’ emissions.  However, no more progress was made on getting the industrialized nations (especially the US and China) to actually meet their previously agreed commitments to reduce emissions.

So far this morning, J and SJM both beat on the revenue and earnings lines. 

Overnight, Asian markets leaned heavily to the downside, but on mostly modest moves.  Hong Kong (-1.87%) was by far the biggest loser while South Korea (-1.02%), and India (-0.88%) rounded out the biggest red numbers.  On the upside, only Japan (+0.16%), and Thailand (+0.09%) managed to stay green on the day.  Meanwhile, in Europe, we see a similar picture taking shape at midday.  The FTSE (-0.05%), DAX (-0.67%), and CAC (-0.20%) are typical of the region in early afternoon trade, with only 2 small exchanges managing to stay modestly green so far.  As of 7:30 am, US Futures are pointing toward a red start to the day.  The DIA implies a -0.25% open, the SPY is implying a -0.57% open, and the QQQ implies a -0.82% open at this hour.  At the same time, 10-year bond yields are up to 3.831% and Oil (WTI) is off eight-tenths of a percent to $79.40/barrel in early trading.

There are no major economic news events scheduled for Monday. The major earnings reports scheduled for the day are FUTU, SJM, J, and NIU before the open.  Then, after the close, A, CENTA, CENT, DELL, MMS, SNEX, URBN, ZM, and ZTO report.

As you would expect on a holiday week, this week will be light on economic news.  On Tuesday we get the API Weekly Oil Stock report as well as 3 Fed speakers (Mester, George, and Bullard).  Then Wednesday, October Building Permits, October Durable Goods, Weekly Initial Jobless Claims, Mfg. PMI, Services PMI, Michigan Consumer Sentiment, October New Home Sales, EIA Weekly Crude Oil Inventories, and FOMC Meeting Minutes are reported.  Thursday and Friday have no economic news due to the holiday.

In earnings reports later this week, on Tuesday, we hear from ANF, AEO, AMWD, ADI, BIDU, BBY, BURL, CAL, CSIQ, CHS, DKS, DLTR, DY, IQ, MDT, VIPS, WMG, ADSK, GES, HPQ, and JWN.  Then on Wednesday, DE and LU report.  There are no reports on Thursday or Friday due to the holiday.

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The shortened holiday week is shaping up to be light on news and lighter on earnings than in recent weeks. Still, we will get some more retail and miscellaneous earnings reports (mostly Tuesday). In the short term, the trend remains bullish and over-extension has been addressed with last week’s pullback and hold to the T-line and support. With this background, what we know for sure is that the probabilities in the near term lie in the Bull’s favor. However, continue to be cautious about chasing. Finally, expect the volume to lighten up as we get closer to the holiday (and we can expect Friday’s half-day to be a dead market).

As always, be deliberate and disciplined…but don’t be stubborn. Remember it’s 100 times more important to avoid big mistakes than it is to pick big winners. 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: GRWG, DDD, AAPL, NKE, FSM, TSLA, NOK 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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