Earnings GDP and Durable Goods On Tap

Markets gapped lower at the open on Wednesday (down 1.06% in the SPY, down 0.86% in the DIA, and down a whopping 1.71% in the QQQ).  All three major indices then drifted lower during the first hour.  However, at that point, the bulls stepped in to lead a slow, steady rally the entire rest of the day, closing near the highs.  This allowed all three indices to retest their T-line and close back above.  The DIA also retested and closed above its 50sma while the SPY retested and closed above its 200sma.  This action gave us gap-down, white candles with lower wicks.

On the day, seven of the 10 sectors were in the green as Comm. Services (+1.07%) was way out front leading the way higher and Utilities (-0.54) lagged the other sectors.  At the same time, the SPY was up 0.04%, the DIA was up 0.07%, and QQQ was down 0.22%.  At the same time, the VXX was flat at 11.63 and T2122 fell again but remains in the overbought territory at 91.03.  10-year bond yields fell slightly to 3.451% and Oil (WTI) was up slightly to $80.41 per barrel.  So, on the day, we saw an indecisive action after a strong gap down.  However, the bullish trend remains intact on average volume.

In stock news, ROG is on the cusp of gaining final approval to buy SJR after court defeats have caused the Canadian Competition Bureau to drop plans to kill the deal.  Only approval from the Canadian Finance Minister remains as a hurdle.  Meanwhile, the Wall Street Journal reports that the US Dept. of Justice is investigating GT or more specifically the way GT handled a tire recall that resulted in a number of deaths.  Near the close, the CDC reported that the most recent vaccines from PFE and MRNA have been proven to help prevent symptomatic infections of the most recent covid-19 variants.  Elsewhere, FCX warned that it is struggling to find US workers, and this shortage is limiting the amount of copper it can produce.  At the same time, IBM announced it will cut 3,900 jobs (1.5% of its global workforce).  After the close, Reuters reported that e-cigarette maker Juul is in talks with PM, NO, and Japanese Tobacco (JAPAF).  The talks range from a buyout to licensing and distribution deals as Juul explores its strategic options.  Finally, again, after-hours, CVX announced a massive $75 billion buyback plan (three times its prior $25 billion plan) starting April 1, 2023.  The move exceeded even XOM’s $50 billion buyback plan.

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In energy news, the EIA reported that US Crude Oil Inventories are the highest since June of 2021 after another build last week. However, this was a much smaller increase in stocks than was anticipated based on the API report Tuesday night.  US oil refining margins were also reported to be at a three-month high.  On the Natural Gas front, despite forecasts of colder temperatures, front-month Natural Gas futures dropped into the $2 range before fighting to close right at the all-important $3 support level.  (Actual close was $3.003/mmBtu, which was a 20-month low.)

After the close, FLEX, STLD, LRCX, AMP, STX, RJF, LEVI, CCI, NOW, AXS, AXTA, TER, PLXS, and BOOT all reported beats on both the revenue and earnings lines.  At the same time, IBM, URI, and CACI beat on revenue while missing on earnings.  On the other side, TSLA, CSX, and PKG all missed on revenue while beating on earnings.  Unfortunately, LVS missed on both the top and bottom lines.  It is worth noting that even though TSLA missed on revenue, it did report record Q4 revenue of $24.32 billion.  Also note that LRCX, STX, PKG, TER, and PLXS all lowered forward guidance while URI raised its forward guidance.

So far this morning, CMCSA, ADM, AAL, NOC, NOK, STM, XEL, ATLKY, TSCO, ORI, ROK, JBLU, XRX, CNX, AIT, BFH, and MBLY all reported beats on both the revenue and earnings lines.  Meanwhile, VLO, VLVLY, MMC, SHW, and ALK reported misses on revenue while beating on earnings.  On the other side, SAP, MUR, VIRT, FCNCA, and VLY all reported beats on revenue while missing on earnings.  Unfortunately, DOW, LUV, MKC, and HZO all missed on both the top and bottom lines.  It is worth noticing that AAL, NOC, NOK, STM, ROK, JBLU, and AIT all raised their forward guidance.  However, DOW, LUV, SHW, MKC, and HZO all lowered their own forward guidance.

Overnight, Asian markets were mixed with Hong Kong (+2.37%) leading to the upside while India (-1.27%) leading to the downside.  In Europe, the bourses lean to the green at midday.  The FTSE (+0.11%), DAX (-0.02%), and CAC (+0.67%) are typical and lead the region higher in early afternoon trade.  As of 7:30 am, US Futures are pointing toward a mixed start to the day.  The DIA implies -0.02%, the SPY is implying +0.24%, and the QQQ implies +0.67% at this hour.  Meanwhile, 10-year bond yields are up to 3.495% and Oil (WTI) is up 1.17% to $81.08/barrel in early trading.

The major economic news events scheduled for Dec. Durable Goods Orders, Q4 GDP, Dec. Goods Trade Balance, Weekly Initial Jobless Claims, and Dec. Retail Inventories (all at 8:30 am), and Dec. New Home Sales (10 am). Major earnings reports scheduled for the day include 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, and XRX before the opening bell.  Then, after the close AJG, EMN, INTC, KLAC, KNX, LHX, OLN, RMD, RHI, V, WRB, and WY report.

In economic news later in the week, on Friday, Dec. PCE Price Index, Dec. Personal Spending, Michigan Consumer Sentiment, and Dec. Pending Home Sales are reported.  In terms of earnings, on Friday, AXP, ALV, BAH, CHTR, CVX, CL, GNTX, HCA, and ROP report.

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With that background, it looks (ahead of a lot of data) like the market is going to gap higher at the open. This will put all three major indices in a retest of recent highs. So far, it seems generally good earnings are giving the bulls energy this morning. However, GDP and Durable Goods Orders could change that tune in either direction. The trend remains bullish in the SPY and QQQ. Meanwhile, the DIA continues to grind sideways in its wedge (since mid-December).

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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