European Covid Fear vs Strong Earnings

Markets gapped up a bit on Thursday and then put in a choppy day.  A mid-afternoon rally took s to the highs, but we backed off the last few minutes.  It is worth noting that the DIA diverged from SPY and QQQ as CSCO and KD (formerly IBM) had outsized moves to the downside.  This action gave us a black hammer candle in the DIA, a strong white candle with a lower wick in the QQQ (also closing at a new all-time high close), and a white hammer-type candle in the SPY (also closing at a new all-time high close).  On the day, SPY gained 0.34%, QQQ gained 1.03%, and DIA lost 0.13%.  The VXX gained almost a percent to 20.71 and T2122 fell to 26.09.  10-year bond yields fell just slightly to 1.584% and Oil (WTI) rose slightly to $78.67/barrel.

After the close ROST continued the strong retail earnings and WDAY and INTU kept the trend going as all 3 posted beats on both the revenue and earnings lines.  However, AMAT missed on both lines, which was an interesting result in the red-hot semiconductor business. This morning FL beat on both lines but said it expects supply chain issues to impact Q4 and is suffering in premarket as a result.

Despite the strong earnings in retail, rationalization continues.  CVS, which had a blowout quarter announced Thursday that it will be closing 900 of its 10,000 US stores as it shifts to slightly more of an online-focused business model.  M also blew away estimates for the quarter.  However, they too said they will close 10 stores in January and are still considering the timing of the closure of 60 more stores (which were part of the previously announced 125 store closures planned by 2023).  Again, M said they are focusing on a stronger “digital presence.”  

TC2000 Discount

In government news, the House is scheduled to vote on the President’s Social Spending (and budget) bill today.  Republican wrangling to slow the vote appears to not have worked.  However, even if passed, the bill would then go to the Senate, which does not plan to even start considering the bill until after the Thanksgiving break.  Another potential shoe to fall is the nomination of the next Fed Chair.  President Biden has said it will be announced as soon as today, but in the next few days at least.  While the renomination of Chair Powell continues to be the betting favorite, a second possibility is Fed Governor Lael Brainard.  CNBC analysts predict markets would move quickly (in a bullish way) if Brainard were nominated because she is a noted dove (and thus likely to be slower on the tapering and slower to raise rates).

Overnight, Asian markets were mixed again with a wide spread of results.  Indonesia (+1.26%), Shenzhen (+1.19%), and Shanghai (+1.13%) paced the gainers, but the green was widespread among the major exchanges in the region.  Meanwhile, Hong Kong (-1.07%) was the biggest loser by a third of a percent due to follow-through after BABA’s terrible report on Thursday.  In Europe, markets are red almost across the board as a resurgence of Covid-19 has forced more mitigation measures, including lockdowns for the unvaccinated in Germany and a full lockdown in neighboring Austria.  Even after the ECB’s President Lagarde said that any rate hike in 2022 is not in the cards, did not help.  The FTSE (-0.60%), DAX (-0.18%), and CAC (-0.73%) are typical of the continent, with only two minor and barely green exchanges at mid-day.  As of 7:30 am, US Futures are pointing toward a mixed open.  The DIA is implying a -0.58% open, the SPY implies a -0.26% open, and the QQQ implies a +0.36% open at this hour.

The major economic news scheduled for release Friday is limited to Oct. Building Permits (8:30 am) and a couple of Fed speakers (Waller at 10:45 am and Clarida at 12:15 pm).  However, remember that this is options expiration Friday.  So, be wary of volatility and pinning, especially in the afternoon. Major earnings reports scheduled for the day are limited to FL before the open.  There are no earnings reports scheduled for after the close.

LTA Scanning Software

The bullish trend continues, especially in the QQQ and to a lesser extent SPY, both of which sit at all-time highs. However, there is a notable divergence by the mega-cap DIA (which to be fair is only 1.5% from its own all-time high). In particular, CVX is pulling the DIA down hard in premarkets as Oil (WTI) is continuing its very recent cliff-fall (down another 3.5% in early trading).

Remember that it's Friday and next week is a short week for the market. So, watch your current positions before looking to add any new trades. Consider how you want to enter the weekend news cycle (and potential low-volume week ahead) and if there is any profit-taking or hedging to get done. 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. Trade carefully and continue to think twice before holding through earnings...especially without a hedge.

Ed

Swing Trade Ideas for your consideration and watchlist: PLUG, VXX, NOK, FCEL, MSFT, AAPL, CVS. 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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