Earnings, PCE Index, Personal Spending

Stocks gapped higher (up 0.67% in the SPY, up 0.31% in the DIA, and up 1.23% in the QQQ) on Thursday.  However, all three major indices almost immediately moved to fill the gap, with the SPY and DIA having retraced the gap entirely and the QQQ fading its gap by three-fourths by 11 am. Then it was the bulls’ turn to step in with a more modest rally that took all three indices back up to the opening level by 1:40 pm.  At that point, the large-cap indices bobbed along their opening level while the QQQ kept slowly moving higher for another hour before starting its sideways move.  Finally, another modest rally began again at 3 pm and ran into the close.  This action gave us a gap-up, Hanging Man candles in all three major indices.

On the day, nine of the 10 sectors are in the green as Energy (+1.86%) lead the way higher and Consumer Defensive (-0.32) lagged the other sectors.  At the same time, the SPY was up 1.09%, the DIA was up 0.59%, and QQQ was up 1.95%.  Meanwhile, the VXX was down 1.55% to 11.45 and T2122 rose again and remains deep in the overbought territory at 96.98.  10-year bond yields were up to 3.506% and Oil (WTI) was up 1.19% to $81.10 per barrel.  So, on the day, we saw a gap-up day that was indecisive with a bullish lean most of the day.  The DIA stayed above its 50sma and QQQ is testing its 200sma from below. All of this happened on lower-than-average volumes.

In economic news, December Durable Good Orders came in much better than was expected at +5.6% (compared to a forecast of +2.5% and the November value of -1.7%).  At the same time, Q4 GDP came in better than expected at +2.9% (versus the forecast of +2.6%, but worse than the Q3 GDP of +3.2%).  The Q4 GDP Price Index was higher than expected at +3.5% (compared to the forecast of +3.3% but better than the Q3 value of +4.4%).  So, again GDP did not grow as fast as inflation in Q4. In other data, December Goods Trade Balance came in worse than expected at -$90.27 billion (versus the November reading of -$82.93 billion).  Elsewhere, Weekly Initial Jobless Claims were better than expected at 186k (versus a forecast of 205k and last week’s value of 192k).  Then Dec. Retail Inventories grew 0.3% (compared to the Nov. value of -0.4%).  Finally, Dec. New Home Sales grew much more than expected at +2.3% (versus a forecast of -4.7% and a Nov. reading of +0.7%).

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In stock news, on Thursday, Reuters reported that Panama denied QMCO permission to expand its copper mining operations in that country.  Elsewhere, TM surprised the markets with a leadership shakeup when the grandson of Toyota’s founder will step down as CEO on April 1 to be replaced by someone outside of the Toyoda family.  Elsewhere, a Delaware court ruled that shareholders can sue a former MCD executive for damages caused by his allegedly allowing a culture of sexual harassment to flourish.  In a follow-up to the ChatGPT story, BZFD announced that they will use that AI tool to enhance their content.  A separate story by the Wall Street Journal says that BZFD will be paid millions by META to bring content to their platforms.  In other news, BBBY received a notice of default and repayment acceleration from JPM according to regulatory filings.  BBBY said it does not have the money to pay and is considering skipping debt payments on Feb. 1 according to Reuters.  After the close, HAS announced it will cut 1,000 jobs (15% of its workforce) and expects Q4 revenue to be down 17% from the previous year.  The Canadian Privacy Regulator has found HD’s Canadian unit to have shared customer online sales receipts and personal data with META up through October 2022.  Finally, BA plead not guilty to fraud conspiracy charges stemming from the 737 MAX design flaws that caused two plane crashes in 2018 and 2019.

In energy news, natural gas failed to hold the pivotal $3 support level and closed at $2.908/mmBTU Thursday.  However, the price had to rally hard to close at even that level after plunging to $2.688 (lowest since April 2021) early in the day.  Meanwhile, Oil (WTI) rallied all day on upbeat US economic data and news of more supply limitations due to unplanned refinery maintenance shutdowns.  The other news in the oil space was the reaction to the massive CVX buyback plan (as reported here yesterday) of $75 billion, plus an increase of 6.3% on the company dividend.  President Biden attacked the plan as “an odd way for CVX to show what it had recently been claiming to him and Congress…that it was working hard to increase oil production.”

After the close, V, LHX, WRB, KLAC, AJG, and RMD all reported beats on both the revenue and earnings lines.  Meanwhile, SHECY, OLN, WY, and RHI all missed on revenue while beating on earnings.  On the other side, PACW and SSB beat on revenue while missing on earnings.  However, INTC, EMN, and KNX missed on both the top and bottom lines.  It is worth noting that INTC lowered its forward guidance while EMN raised its forward guidance (despite its misses).

Overnight, Asian markets leaned heavily to the green side.  India (-1.61%) was the outlier to the downside.  Meanwhile, Shanghai (+0.76%), South Korea (+0.62%), Shenzhen (+0.54%), and a handful of others were up more than half of a percent in that region.  In Europe, the bourses are moderately higher with only a few minor spots of red on the board at midday.  The FTSE (+0.13%), DAX (+0.16%), and CAC  (+0.01%) are leading the region modestly higher in early afternoon trade.  As of 7:30 am, US Futures are pointing toward a diverging and modestly down start to the day.  The DIA implies a +0.06% open, the SPY is implying a -0.17% open, and the QQQ implies a -0.35% open at this hour.   At the same time, 10-year bond yields are up strongly to 3.557% and Oil (WTI) is up another 1.5% to $82.28/barrel in early trading.

The major economic news events scheduled for Friday include Dec. PCE Price Index, Dec. Personal Spending, Michigan Consumer Sentiment, and Dec. Pending Home Sales are reported.  Major earnings reports scheduled for the day include AXP, ALV, BAH, CHTR, CVX, CL, GNTX, HCA, and ROP before the opening bell.  There are no major reports scheduled for after the close on Friday. 

So far this morning, CL, FANUY, and BAH have reported beats on both the revenue and earnings lines.  At the same time, CVX beat on revenue while missing on earnings (which is extremely odd for a company that just announced a record-breaking buyback plan and a significant increase in dividends).  On the other side, ALV missed on revenue while beating on earnings.  However, AXP, CHTR, and HCA all reported messes on both the top and bottom lines.  It is worth noting that despite its miss, AXP raised its forward guidance.

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In late-breaking news, INTC’s report was terrible Thursday evening.  AMD is taking market share, INTC’s last two lines of chips were extremely power-hungry and in a down computer sales environment their sales forecast missed analyst expectations by billions of dollars.  CEO Gelsinger is doing the rounds today touting a multi-year turnaround plan.  Meanwhile, Japan and the Netherlands are poised to join President Biden’s alliance aimed at limiting Chinese access to any advanced semiconductor-making equipment.  The deal should be announced later today according to Bloomberg. 

With that background, it looks (ahead of some economic data) like the market is going to open in a diverging, yet flattish way this morning. The SPY and QQQ will start with inside day candles while the DIA tepidly reaches toward new recent highs. The trend remains bullish in the SPY and QQQ. Meanwhile, the DIA continues to grind sideways in its wedge (since mid-December). Remember that it is Friday and we have a Fed meeting next week. So, some profit-taking and a “wait and see” market attitude is to be expected. Get yourself positioned for this period by taking profits, hedging, reducing position sizes, etc.

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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🎯 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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Disclosure: We do not act on all trades we mention, and not all mentions acted on the day of the mention. All trades we mention are for your consideration only.

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