Even After Failure CS in More Trouble

Markets opened just on the red side of flat (down 0.15% in the SPY, down 0.12% in the DIA, and down 0.18% in the QQQ).  From that point, we saw a divergence in the three major indices as immediately headed South, continuing its fall until 11 am, when it began to grind sideways along the lows until 1:30 pm.  Meanwhile, the SPY meandered sideways from the open until noon, when it began a modest selloff that lasted until 2 pm.  For its part, DIA actually rallied from the open until 10:15 am and then ground sideways (to slightly lower) at noon.  At that point, it too began a modest selloff that lasted until 2 pm.  From 2 pm into the close, all three major indices put in a very steady and modest rally.  This action gave us indecisive candles in all three, with the SPY and DIA printing Doji that held above their T-lines and the QQQ printing a black-bodied Hammer candle that also held its T-line.

On the day, eight of the 10 sectors were in the green with Energy (+1.65%) once again leading the way higher while Technology (-0.58%) again lagged behind other sectors.  At the same time, the SPY lost 0.22%, the DIA lost 0.15%, and QQQ lost 0.53%.  VXX fell almost 3% to 46.64 and T2122 fell back some but remained in the mid-range at 60.24.  10-year bond yields climbed again to 3.571% as money left bonds while Oil (WTI) rose three-quarters of a percent to $73.36 per barrel.  So, Tuesday gave us a mixed morning with the three major indices getting in step during the afternoon to basically go nowhere.  Indecision abounded is about as much as you can say. This all happened on significantly lower-than-average volume.

In economic news, the February Goods Trade Balance came in just slightly worse than expected at -$91.63 billion (compared to a forecast of -$91.00 billion and a January value of -$91.09 billion).  The primary cause for this was a decline in exports as Imports came in increased.  At the same time, February Retail Inventories (ex-Auto) rose 0.4%, which was up from the January increase of +0.1%.  Later in the morning, the Conference Board Consumer Confidence survey found a more optimistic consumer than had been expected.  The reading came in at 104.2, compared to a forecast of 101.0 and a February reading of 103.4.  Later, after the close, the API Weekly Crude Oil Stocks Report showed a much greater than expected drawdown of 6.076 million barrels (versus the forecast of an inventory build of 0.187 million barrels and the prior week’s 3.262-million-barrel build).

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In stock news, AAPL announced its own “buy now, pay later” program imaginatively name “Pay Later.”  The service is enabled through payments made via MA on loans of $50 – $1,000 which are paid in four installments.  The main company in that “buy now, pay later” space (AFRM) fell 8% Tuesday on the news.  Still, AAPL is not the only company reaching into the loan business as PYPL recently did the same thing. AAPL is not even the only retailer to do so as WMT launched the same type of program in December. Meanwhile, the incoming LYFT CEO Risher (who takes over April 17) said Tuesday that the company is not for sale, which runs contrary to Wall Street expectations.  LYFT fell 7.6% on this news.  Elsewhere, AMC shares jumped Tuesday on a report stating that AMZN is considering acquiring the theatre chain.  At the same time, FCNCA shares hit an all-time high Tuesday in follow-through to the Monday acquisition of SIVB assets at a bargain price.   Late in the afternoon, MSFT announced a new cybersecurity product named “Security Co-Pilot” that uses the OpenAI ChatGPT-4 to help identify breaches and potential vulnerabilities by analyzing data.  After the close, LCID said it will lay off 18% of its workforce (about 1,300 employees) to cut costs as part of its restructuring plan. 

In stock legal and regulatory news, the NHTSA opened an investigation into 50,000 TSLA 2022-2023 Model X vehicles after receiving complaints about seat belt failures.  Meanwhile, in Europe, French and German authorities raided the offices of five banks (including HSBC, SCGLY, and BNPQY) over allegations of dividend stripping fraud where the banks and investors quickly trade shares of companies going ex-dividend in order to obscure ownership and allow them to avoid paying taxes on the dividends.  (This was just the kind of headlines the banking sector needed, given the recent industry news.)  Back on this side of the pond, the US EEOC sued WMT Tuesday claiming it had violated the Americans with Disabilities Act when it fired a North Carolina worker.  In Nevada, lawyers for CZR, WYNN, and MGM asked a US judge to dismiss a case that included all the major Las Vegas hotels as well as their software providers and alleged the group was fixing prices on hotel rooms in the city.  In Brazil, META and GOOGL defended (themselves and) a Brazilian law in front of that country’s Supreme Court.  The law in question is very similar to the infamous Section 230 in the US in that it holds that internet platforms are not responsible for the content posted by their users.  After the close, a federal judge ruled in favor of the US Dept. of Justice saying that GOOGL failed to preserve company chat messages related to an antitrust case and that this breach “merits sanctions.”  Finally, CNBC reported that DG is in settlement talks with OSHA after the company was labeled a “severe violator” of workplace safety laws.

After the close, LULU, JEF, CALM, and PLAY all reported beats on both the revenue and earnings lines.  Meanwhile, MU missed on both the top and bottom lines.  It is worth noting that MU lowered its forward guidance after a massive downside earnings surprise (-$2.03/share versus -0.80/share expected).  However, LULU raised its own forward guidance.

Overnight, Asian markets were mostly green.  Only New Zealand (-0.29%) and Shanghai (-0.16%) were in the red. Meanwhile, Hong Kong (+2.06%), Japan (+1.33%), and Malaysia (+0.80%) led the rest of the region higher.  In Europe, we see green across the board at midday.  The CAC (+1.24%), DAX (+0.91%), and FTSE (+0.82%) are leading the region higher in early afternoon trade.  In the US, as of 7:30 am, the Futures are pointing toward a bullish start to the day.  The DIA implies a +0.73% open, the SPY is implying a +0.85% open, and the QQQ implies a +0.84% open at this hour.  At the same time, 10-year bond yields are down a bit to 3.558% and Oil (WTI) is up 1.04% to $73.96/barrel in early trading.

The major economic news events scheduled for Wednesday are limited to February Pending Home Sales (10 am) and EIA Weekly Crude Oil Inventories (10:30 am).  Fed Vice Chair for Bank Supervision Barr also testifies again at 10 am.  The major earnings reports scheduled for the day are limited to CTAS, PAYX, and UNF before the opening bell.  Then after the close, CNXC, FUL, and RH report.

In economic news later this week, on Thursday, we get Q4 GDP, Q4 GDP Price Index, Weekly Initial Jobless Claims, and Treasury Sec. Yellen speaks.  Finally, on Friday, Feb. PCE Price Index, Feb. Personal Spending, Chicago PMI, and Michigan Consumer Sentiment are reported as well as Fed Member Williams speaking.

In economic news later this week, on Wednesday, Feb. Pending Home Sales and EIA Weekly Crude Oil Inventories are reported.  Thursday, we get Q4 GDP, Q4 GDP Price Index, Weekly Initial Jobless Claims, and Treasury Sec. Yellen speaks.  Finally, on Friday, Feb. PCE Price Index, Feb. Personal Spending, Chicago PMI, and Michigan Consumer Sentiment are reported as well as Fed Member Williams speaking.

In earnings later this week, on Thursday and Friday, there are no major earnings reports scheduled.

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So far this morning, there have been no major reports.  UNF is scheduled to report at 8:10 am.  Then, CTAS and PAYX are scheduled to report at 8:30 am.

In late-breaking news, the CEO of M, who has been leading the company’s turnaround effort, announced he will retire early next year.  Elsewhere, whistleblowers from failed CS reported that prior to its failure, the bank was once again helping rich Americans dodge taxes.  (In 2014, CS pleaded guilty to criminal charges for “knowingly and willfully” helping wealthy US clients hide assets offshore to avoid taxes.)  The report, released by the US Senate, said the investigation took place over two years and that the illegal activity was still ongoing.  CNBC reports that it is unclear at this point how much liability UBS will face for its newly acquired CS having violated its 2014 plea deal or current ongoing efforts to defraud the US government by hiding taxable assets for US clients.

With that background, it looks like the bulls will be gapping markets higher at the open. The SPY is starting to get closer to its 50sma from below and may move for a retest if there is some follow-through to the opening gap. DIA is also retesting the downtrend line stretching back to mid-February in premarket trading. All three of the major indices are above their T-line (8ema). However, overextension is not an issue in any of the big indices, nor does the T2122 indicator look stretched. Again, the economic news scheduled for today is not likely to be market-moving today. With that said, it is possible some news about the banking sector with another day of grilling for regulators (this time from the House) and the story on CS helping Americans cheat on taxes in the headlines this morning. Either way, the market remains very choppy with a bullish lean (over the last couple of weeks but certainly not a longer timeframe) in all three major indices (especially the 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.


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🎯 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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