Earnings Calls The Tune Today

Tuesday saw a modest (about half of a percent) gap lower in all three major indices.  We then undulated to the side, back and forth in the gap between the prior close and the Tuesday open in all three until 1 pm.  At that point, SPY and QQQ continued their move to the side.  However, the DIA made a little run to the upside before starting to grind sideways again at about 1:55 pm.  From that point forward, all three indices ground sideways for the rest of the day.  This action gave us white-body Spinning Top (indecisive) candles in the SPY and QQQ while the DIA printed a white-bodied candle with just a larger lower wick and smaller upper wick.  DIA climbed back above its 50sma and all three indices remain above their T-line (8ema).

On the day, five of the 10 of the sectors were in the green as Utilities (+0.48%) and Communications Services (+0.46%) led the way higher and Technology (-0.72) lagged the other sectors.  At the same time, the SPY was down 0.11%, the DIA was up 0.28%, and QQQ was down 0.20%.  At the same time, the VXX was down 3.89% to 11.61 and T2122 fell but remains in the overbought territory at 91.86.  10-year bond yields fell to 3.455% and Oil (WTI) was down more than 2% to $80.13 per barrel.  So, on the day we saw indecisive action with a little bit of rotation into the mega-cap DIA names.  However, the main takeaway was they hesitancy within a bullish trend.  Again, this all happened on less-than-average volume.

In economic news, S&P Composite Global PMI improved from December, coming in at 46.6 (compared to the December value of 45.0).  In the US, Manufacturing PMI beat the expectations modestly with a reading of 46.8 (versus a forecast of 46.0 and a Dec. reading of 46.2).  US Services PMI also gave us a beat, coming in at 46.6 (compared to a forecast of 45.0 and a December value of 44.7).  So, overall these show both the US and global economy fairing better than expected but still deteriorating, at least from the reports of Purchasing Managers.  Then, after the close, API reported the Weekly Crude Oil Stocks with a much bigger build than expected once again.  The report showed inventories grew by 3.378 million barrels (versus a forecast build of 1.600-million-barrels by significantly less than the prior week’s 7.615-million-barrel inventory build.  The API report also showed a 0.620-million-barrel build in gasoline stocks and a drawdown of 1.929-million-barrels in distillates (diesel and heating oil).

In miscellaneous news, a technical system glitch at the NYSE (owned by ICE) caused many major tickers to not open for trading at 9:30 am and many others to halt trading.  The system problem impacted 251 tickers, with some of these names opening far above (and/or below) their true market price.  This caused large numbers of preset orders to auto-cancel at the open.  This led the exchange to suggest traders apply for cancellation of trades (Rule 18 Claims) to invalidate trades that were reported at a price well from expected.  Some of the major tickers involved were MMM, XOM, LLY, MO, MCD, VZ, WFC, and WMT.  In addition to the order problems, the glitch caused charting packages to report the wrong candles for all those names throughout the day.  The SEC has opened an investigation into the glitch.

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In stock news, MMM announced 2,500 manufacturing job cuts during its earnings reports.  At the same time, LLY announced an additional $450 million expansion (on top of a previous $1.7 billion expansion) to increase its capacity to make anti-obesity drug Trulicity.  (That drug booked $5.5 billion in sales in the first 3 quarters of 2022.)  HMC announced a reorganization to create an “electrification” division aimed at competing directly with TSLA.  In the early afternoon, WMT announced it will raise average hourly wage of US store workers to $17.50 from $17.00/hour as of the March 2nd paychecks.  (The WMT minimum wage will also rise to $14.00/hour which was a $2.00/hour increase.)  Meanwhile, AMZN deepened its push into the pharmacy space by launching a $5/mo. subscription that would cover unlimited prescriptions to 50 of the most widely used generic drugs, including the shipping, as a benefit to Prime members.  After the close, FOX said that Rupert Murdoch had scrapped plans to recombine FOX with NWSA after other prominent stockholders objected to the idea.  Finally, UBER laid off 3% (150 employees) of their “Uber Freight” staff due to economic uncertainty.

Related to the Russian invasion of Ukraine, the Wall Street Journal reported that the US is poised to send 30 – 50 M1A1 Abrams tanks (made by GD) out of inventory to Ukraine.  Separately, der Spiegel out of Germany reported that their country had decided to supply Ukraine with Leopard-2 tanks, and when combined with other countries Ukraine will get around 100 of them.  Both tanks use 120mm ammunition produced by GD and NOC among others. Separately, reports suggest the US, Netherlands, and Finland have decided they will supply F-16 fighter-bombers (not new, but spare parts supplied by GD, GE, and many others).  The point of this is that GD (and others) may get windfalls from the aid packages supplied by the US and its allies.

In terms of earnings, on Thursday, we hear from VLVLY, ALK, AAL, AIT, ADM, ATLKY, BX, BFH, BFH, CRS, CNX, CMCSA, CFR, DOW, EXP, EWBC, FCNCA, JBLU, HZO, MMC, MA, MKC, MBLY, MUR, NOK, NOC, NUE, ORI, ROK, SAP, SHW, LUV, STM, TROW, TSCO, VLO, VLY, WBS, XEL, XRX, AJG, EMN, INTC, KLAC, KNX, LHX, OLN, RMD, RHI, V, WRB, and WY.  Finally, on Friday, AXP, ALV, BAH, CHTR, CVX, CL, GNTX, HCA, and ROP report.

So far this morning, ABT, GD, USB, ASML, NEE, KMB, ADP, TEL, GPI, TXT, HES, RES, and ELV all reported beats on both the revenue and earnings lines.  Meanwhile, T and TDY missed on revenue while beating on earnings.  On the other side, NDAQ beat on revenue while missing on earnings.  However, BA and SF both missed on the top and bottom lines.  It is worth noting that T, KMB, and TEL lowered their forward guidance while TXT and ASML both raised forward guidance.

Overnight, Asian markets were mixed as Singapore (+1.79%) led the way higher and India (-1.25%) led the way lower.  (Chinese and Korean markets remain closed.)  In Europe, we are seeing red across the board at midday, with the sole exception of Greece (+0.12%).  The FTSE (-0.19%), DAX (-0.44%), and CAC (-0.39%) lead the region lower in early afternoon trade.  As of 7:30 am, US Futures are pointing toward a gap lower at the open.  The DIA implies a -0.58% open, the SPY is implying a -0.74% open, and the QQQ implies a -1.18% open at this hour.  At the same time, 10-year bond yields are down to 3.427% and Oil (WTI) is flat at $80.16/barrel in early trade.

The major economic news events scheduled for Wednesday are limited to EIA Crude Oil Inventories (10:30 am).  The major earnings reports scheduled for the day include ABT, APH, ASML, T, ADP, BA, BOKF, ELV, FCX, GD, GPI, HES, KMB, NDAQ, NEE, NSC, BPOP, PGR, TTM, TEL, TDY, TXT, and USB before the opening bell.  Then, after the close, AMP, AXTA, AXS, BOOT, CACI, CLS, CCI, CSX, FLEX, IBM, LRCX, LVS, LEVI, LBRT, PKG, PLXS, RJF, STX, NOW, STLD, TER, TSLA, and URI report.

In economic news later in the week, on Thursday, we get Dec. Durable Goods Orders, Q4 GDP, Dec. Goods Trade Balance, Weekly Initial Jobless Claims, Dec. Retail Inventories, and Dec. New Home Sales.  Finally, on Friday, Dec. PCE Price Index, Dec. Personal Spending, Michigan Consumer Sentiment, and Dec. Pending Home Sales are reported.

In terms of earnings, on Thursday, we hear from VLVLY, ALK, AAL, AIT, ADM, ATLKY, BX, BFH, BFH, CRS, CNX, CMCSA, CFR, DOW, EXP, EWBC, FCNCA, JBLU, HZO, MMC, MA, MKC, MBLY, MUR, NOK, NOC, NUE, ORI, ROK, SAP, SHW, LUV, STM, TROW, TSCO, VLO, VLY, WBS, XEL, XRX, AJG, EMN, INTC, KLAC, KNX, LHX, OLN, RMD, RHI, V, WRB, and WY.  Finally, on Friday, AXP, ALV, BAH, CHTR, CVX, CL, GNTX, HCA, and ROP report.

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With that background, it looks like market is going to gap lower at the open. This will put DIA in a retest of its T-line and 50sma. SPY will be near a T-line retest and at one of its 200sma. QQQ is in the best shape, but not too far away from a retest of its T-line as support either. So, this looks like a decision day for markets as bulls fight to hold support levels and bears push for further downside. With very limited economic data, expect earnings and gloom over the economy to dominate the discussion. Continue to be very careful of earnings dates. However, with all that said, he trend is still bullish, especially in the SPY and QQQ.

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: No Trade Ideas today. 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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