Tuesday saw the Bulls go get their new all-time highs and then the Bears fade those gains. SPY gapped up 0.39%, DIA gapped up 0.23%, and QQQ gapped up 0.63%. After that open, all three major index ETFs chopped and then rallied to new highs by mid-morning. Having achieved new all-time highs in SPY and DIA as well as breaking the downtrend line in the QQQ, then the Bears took over to drive the market to lows by early afternoon. From there, all three chopped sideways between their lows and the previous close for the rest of the day. This action gave us black-bodied, indecisive, Spinning Top type candles in all three major index ETFs. The SPY printed a new all-time high and had a gain for the day, but closed slightly below an all-time high close. The DIA did the same, except for closing seven cents below Monday’s close. At the same time, QQQ gapped up and retested its downtrend line reaching back to the all-time high in July. However, it closed back below that line. This happened on less than average volume.
On the day, six of the 10 sectors were in the green again, with Energy (+1.07%) out in front of the others leading the market higher. On the other side, Communications Services (-0.99%) lagged behind the other sectors. Meanwhile, SPY increased 0.04%, DIA lost 0.03%, and QQQ gained 0.05%. VXX gained 2.15% to close at 50.30% and T2122 fell slightly again but remains in the top half of its over-bought range at 92.34. At the same time, 10-Year bond yields gained to close at 3.644% while Oil (WTI) gained 1.75% to close at $71.32 per barrel. So, Tuesday saw the Bulls get their new all-time highs in the large-cap indexes. However, then traders took profits, afraid to hold too much long risk going into tomorrow’s Fed decision, statement, and press conference.
The only major economic news scheduled for Tuesday included the August Month-to-Month Core Retail Sales, which were lower than expected at +0.1% (versus a forecast of +0.2% and the July reading of +0.4%). On the headline number, August Month-to-Month Retail Sales were stronger than expected at +0.1% (compared to a forecast of -0.2% but down a full percent from July’s +1.1%). Later, the August Month-on-Month Industrial Production was much stronger than anticipated at +0.8% (versus a +0.2% forecast and far better than July’s -0.9% value). For the annual number August Year-on-Year Industrial Production was improved at +0.04% versus July’s -0.74% reading. Meanwhile, July Month-on-Month Business Inventories grew by 0.4% (compared to a forecast and June value of +0.3%). On the store front side, July Retail Inventories came in as anticipated at +0.5% (versus the +0.5% forecast and up from June’s +0.3% reading). Then, after the close, Weekly API Crude Oil Stocks showed an inventory build of 1.960 million barrels (compared to a forecasted drawdown of 0.100 million barrels and the prior week’s 2.790-million-barrel drawdown).
In stock news, on Tuesday, BA and union negotiators resume contract talks as the strike against the company continues. (Analysts report the strike is costing BA $100 million per day in lost sales revenue.) At the same time, PM announced it would sell its Vectura Group (asthma inhaler maker) to Molex Asia for $198 million. Later, WMT said it will raise the pay of 100k “Sam’s Club” workers in November. The entry-level pay will go from $15/hr. to $16/hr. (This was part of a labor deal struck three years ago.) At the same time, META announced effective immediately it has rolled out “teen accounts” for its Instagram platform, which automatically puts those under age 18 in an account with extra privacy features and parental controls. Separately, META announced it had banned Russian state media RT for “foreign election interference.” At the same time, the Wall Street Journal reported that JPM is in talks with AAPL about taking over the tech giant’s credit card business from GS.
Elsewhere, Reuters reported that ARKO is planning to sell its convenience store operations (1,500 stores) for around $2 billion. (This is a reversal of company strategy and would leave it with a fuel distribution unit that serves 1,800 independent gas stations and 300 unmanned fueling sites.) Later, Nippon Steel’s CEO (who travelled to Washington to lobby for the deal) told reporters he is now confident the deal to acquire X will be approved “on the merits.” At the same time, MSFT and BLK announced they plan to launch a $100 billion fund to invest in AI infrastructure to build data centers and fund energy projects. Later, after the close, BLNK announced it will lay off 14% of its global workforce (about 100 jobs) by the end of Q1 2025 in a cost-cutting program.
In stock legal and governmental news, on Tuesday, CI-owned Express Scripts sued the FTC, alleging the agency’s recent report stating that prescription middlemen raise the cost of drugs is defamatory. They asked the federal judge to force the rescinding of the report and the recusal of FTC Chair Lina Khan from any decisions involving CI. The FTC said it plans to fight the lawsuit, saying it stands by its report and that three companies (CI, UNH, and CVS) control more than 80% of the pharmacy benefit manager market. At the same time, testimony in the case of the FTC seeking to block KR’s $25 billion acquisition of ACI ended Tuesday. However, a separate trial brought by the WA state Attorney General seeking to block the deal is just in its second day and a second separate trial brought by the Attorney General of CO will begin in Denver on September 30. (The two companies claim to have spent nearly $900 million trying to fight the three cases so far this year.)
Meanwhile, the CFPB published legal guidance intended to stop banks from charging overdraft fees when consumers had not genuinely consented to the practice. (This is often done via “phantom opt-in” agreements buried in fintech (i.e. websites and ATMs). Later, T agreed to pay $13 million to resolve investigations into the data breach of the cloud vendor in January 2023. (The breach exposed the information of 8.9 million T customers.) At the same time, the US Dept. of Justice said it would allow the ALK $1.9 billion acquisition of HA after the airlines agreed to maintain Hawaiian routes, protect frequent flyer rewards, etc. Later, the Dept. of Energy announced it is accepting bids for 6 million barrels of oil for refilling the Strategic Petroleum Reserve amidst low oil prices. After the close, LUNR announced it had been awarded a $4.82 billion contract by NASA for navigation and communications services in the “near space” region.
In other news, the Insurance Institute for Highway Safety announced the results of a month-long study of TSLA’s Autopilot and VLVLY (Volvo) Pilot Assist partial driving automation systems. The study found that drivers were more likely to be distracted when using these driver assistance systems. In fact, it found they were distracted 30% of the time because the driver had been trained that they could focus attention on other matters and only need to nudge the wheel every three seconds to avoid escalation. (It is worth noting that the studied only covered 43 drivers. So, automakers might argue that the sample size is too small. However, 30% is a huge number and this may well end up meaning additional costs added to carmakers in the form of tools that guard against driver abuse of “assistance.”)
In look-ahead news, the Fedwatch tool has shown a growing number of traders are betting on a half percent rate cut today. One months ago, only 25% or interest rate futures bets were for a 50 basis-point cut. One week ago, that had risen to 34%. On Monday that had risen to 62%. Finally, Tuesday night the implied probabilities from interest rate futures trades showed a 63% chance of a half percent cut versus 37% for a quarter percent cut. (There is absolutely no trades expecting a rate hike, no cut, or a bigger than half percent reduction.)
Overnight, Asian markets were evenly split with six exchanges in the green and six in the red. Hong Kong (+1.37%) was by far the biggest winner while Taiwan (-0.78%) and New Zealand (-0.67%) paced the losses. However, in Europe, we see red across the board at midday. The CAC (-0.45%), DAX (-0.11%), and FTSE (-0.66%) lead the region lower in early afternoon trade. Meanwhile, in the US, as of 7:30 a.m., Futures are pointing toward a modestly green start to the morning. The DIA implies a +0.12% open, the SPY is implying a +0.14% open, and the QQQ implies a +0.22% open at this hour. At the same time, 10-Year bond yields are up to 3.668% and Oil (WTI) is down 1.32% to $70.25 per barrel in early trading.
The major economic news scheduled for Wednesday include August Building Permits and August Housing Starts (both at 8:30 a.m.), Weekly EIA Crude Oil Inventories (10:30 a.m.), Fed Rate Decision, FOMC Statement, Current Q3 Interest Rate Projection, 1st-Year Q3 Interest Rate Projection, 2nd-Year Q3 Interest Rate Projection, 3rd-Year Q3 Interest Rate Projection, Longer-Term Q3 Interest Rate Projection, and FOMC Economic Growth Projections (all at 2 p.m.), Fed Chair Press Conference (2:30 p.m.), and TIC Net Long-Term Transactions (4 p.m.) The only major earnings reports scheduled for before the open is GIS. Then, after the close is SCS reports.
In economic news later this week, on Thursday, we get Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, Q2 Current Account, Philly Fed Mfg. Index, Philly Fed Mfg. Employment, August Existing Home Sales, August US Leading Economic Index, and Fed Balance Sheet. Finally, on Friday, there is no major news, but Fed member Harker speaks.
In terms of earnings reports later this week, on Thursday, we hear from CBRL, DRI, FDS, FDX, LEN, and MLKN. Finally, on Friday there are no earnings reports of note.
So far this morning, GIS reported beats on both the revenue and earnings lines.
With that background, it looks as if markets are slightly bullish in the premarket. The three major index ETFs opened modestly higher and are giving us small, white-bodied candles inside Tuesday’s black Spinning Top. QQQ looks like it wants to retest that downtrend line going back to the all-time high in mid-July. At the same time, SPY and DIA are close enough to make another run at their all-time highs again. All three remain above their T-line (8ema). So, the short-term trend is bullish. The mid-term trend remains mixed (barely) with the QQQ bearish and just below its downtrend line while the others chase clean air at their highs. In the longer-term we still have a strong Bull trend all three major index ETFs. In terms of extension, none of the three major index ETFs are extended above their T-lines yet. However, at the same time, the T2122 indicator remains in the middle of its overbought range. So, markets have room to run either direction (if one side or the other can find momentum), but the Bears have a little more slack to work with today. With regard to those 10 big dog tickers, seven of the 10 are in the green so far this morning. GOOGL (+0.89%) leads the gains. Meanwhile, NVDA (+0.17%) and TSLA (+0.30%) lead, as usual, in the dollar-volume traded.
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 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 gains are 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.
Ed
🎯 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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