Fed Speakers As Holiday Sales Are Mulled

Friday was a dead day in markets as the SPY and DIA while QQQ gapped down half of a percent.  From there, the DIA had a half-hour rally before joining the other 2 major indices in grinding sideways in a very tight range into the early close at 1 pm.  This action gave us very low volume candles in all 3 major indices with small Spinning Top type candles in the SPY and QQQ along with a white-bodied candle in the DIA.  The QQQ and SPY were also Doji-Harami (inside day) candles.

On the day, seven of the ten sectors are in the green, with the Utilities sector (+0.70%) and Communications Services sector (+0.68%) leading the way higher while the Tech sector (-0.54%) lagging behind.  At the same time, the SPY lost 0.02%, the DIA gained 0.46%, and the QQQ lost 0.66%.  The VXX gained 0.53% to 15.16 and T2122 stayed in the overbought territory at 89.85.  10-year bond yields have fallen again to 3.691% and Oil (WTI) dropped to $76.28 per barrel.  So, overall, Friday was a nothing burger day after the Technology gap down and 30 minutes of action. 

In economic news, on Friday the National Retail Federation said they expect holiday sales to rise between 6% and 8% in the November-December period.  Obviously, this is a gain, but less than the +13.5% in 2021 and +9.3% in 2020.  Meanwhile, ADBE Analytics reported record online sales ($9.2 billion) on Black Friday, up 2.3% from the same day last year.  This followed a reportedly strong day of online sales on Thursday ($5.29 billion, which was up 2.9% from 2021).  ADBE also reported a 78% increase in “Buy Now, Pay Later” purchases versus the week prior.  Elsewhere, CNBC reported research from ad-tracking company Captify which said that WMT overtook AMZN as the most searched online store on Black Friday.  The research said that TGT and KSS also beat our AMZN, which it said dropped to fourth in terms of online deal searches on that one day.

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In stock news, Reuters reported Friday that AAPL’s biggest supplier (Foxconn) may have to reduce iPhone output by another 30% at its main China factory due to worker unrest.  As of now, Reuters says it will be impossible for Foxconn to resume production at least for another week, even after offering a $1,400 bonus for workers who would return. At the same time, sources reported that it is very possible AMZN will reach a deal with the EU Antitrust investigators by year-end, allowing the company to avoid the threatened fine amounting to 10% of global turnover.  Meanwhile, the FDA declined to approve a lung cancer drug from SPPI and the company announced it will cut 75% of its R&D workforce by year-end.  On Saturday, TROW (a major shareholder of NWSA) said it has strong reservations to Rupert Murdoch’s plan to reunite NWSA and FOX and will likely fight the recombination.

In miscellaneous news, China’s Central Bank announced that in addition to buying bonds, it will offer $162 billion in discounted loans to real estate developers to prop up its struggling real estate sector.  In other China news, there are ongoing mass protests in Shanghai (where the Foxconn AAPL plant is located) where literally thousands of protesters have shut down public transport and caused building and car fires in that major city.  As of Sunday night, police had maintained a heavy presence but had not cracked down as the plan was to let the protest fizzle on its own and then resume public transport gradually on Monday.  Elsewhere, the South Korean government threatened to break up a nationwide strike by truck drivers (who are seeking better pay and conditions).  In the car industry, F recalled 634,000 cars worldwide over cracked fuel injectors.  In other car news, TSLA opened its “Full Self-Driving” beta to anyone in North America, despite the repeated crashes and fatalities of people using that feature.  Finally, on Sunday, China reported that the profits of its Industrial Manufacturers were down 13.4% year-to-date through October (slightly worse than the 13.2% fall through September).

So far this morning, PDD beat (handily) on both lines, including almost double the expected earnings. However, HTHT beat on revenue while missing on earnings. HTHT also lowered its forward guidance.

Overnight, Asian markets were nearly red across the board.  Only India (+0.27%) managed to stay green while Hong Kong (-1.57%), Taiwan (-1.50%), and South Korea (-1.21%) led the region lower.  Meanwhile, in Europe, exchanges are all in the red at midday.  The FTSE (-0.38%) lags, while the DAX (-1.01%) and CAC (-1.04%) are typical of the region in early afternoon trade.  As of 7:30 am, US Futures are pointing toward a gap lower to start the week.  The DIA implies a -0.53% open, the SPY is implying a -0.71% open, and the QQQ implies a -0.66% open at this hour.  10-year bond yields are down to 3.677% and Oil (WTI) is off 3.17% to $73.86/barrel on global demand fears.

The major economic news events scheduled for Monday are limited to two speakers from the Fed (Uber-hawk Bullard and slight-hawk Williams both speak at noon).  On the major earnings reports front, reports scheduled for the day include PDD and HTHT before the open.  Then, after the close, YY reports.

In economic news later this week, on Tuesday we get Conf. Board Consumer Confidence and API Weekly Crude Oil Stocks Report.  Then Wednesday, Nov. ADP Nonfarm Employment Change, Q3 GDP, Q3 GSP Price Index, Oct. Trade Goods Balance, Retail Inventories, Chicago PMI, Oct. JOLTs Job Openings, Oct. Pending Home Sales, EIA Crude Oil Inventories, Fed Beige Book, and Fed Chair Powell speaks.  On Thursday, Weekly Initial Jobless Claims, Oct. PCE Price Index, Oct. Personal Spending, Mfg. PMI, ISM Mfg. PMI, and a Fed speaker (Bowman) report.  Finally, on Friday, we get Avg. Hourly Earnings, Nov. Nonfarm Payrolls, Nov. Unemployment Rate, and Nov. Participation Rate.

In earnings reports later this week, on Tuesday, BNS, BILI, CG, ESLT, SJR, CRWD, HPE, INTU, NTAP, and WDAY report.  Then Wednesday, we hear from DOOO, DCI, HRL, BEKE, WOOF, RY, TITN, XPEV, FIVE, LZB, PSTG, PVH, CRM, SNOW, SPLK, SNPS, and VSCO.  On Thursday, BMO, BIG, CM, DBI, DG, KR, PDCO, TD, MRVL, ULTA, and VEEV report.  Finally, on Friday, we hear from CRBL and GCO.

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As we come back from a long holiday weekend, there is not much cheer in the market. Surprisingly, mass protests in China (some openly calling for President Xi to resign) have not yet been crushed, but that seems to be what analysts and the people there expect. Between that situation, a very minor holiday sales pop in Europe (the UK reported +0.90% in its first measure of holiday sales), and modest sales increases in the US on Black Friday, we are left with a somber mood to start the week. As you can see above, we also have a big data week ahead, led by November Payrolls data on Friday. So, there is a lot of reason for caution by traders at this point. The Dollar is also showing significant weakness again this morning. (News that should help support commodity prices at the margins.) And we also have a couple of hawkish Fed speakers at noon today.

In the short term, markets are just seeing a normal pullback in the uptrend. Only the QQQ appears to even be retesting its T-line (8ema) in the premarket as that index continues to work on a Bullish Pennant pattern. There is no problem with extension, even though the T2122 indicator sits midway into the overbought territory. The risk at this point seems to mainly be news-driven this week. Be careful and don’t be surprised if most of the move comes after Wednesday’s GDP print and Friday morning’s Payrolls data.

As always, be deliberate and disciplined…but don’t be stubborn. Remember it’s 100 times more important to avoid big mistakes than it is to pick big winners. 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.

Ed

Swing Trade Ideas for your consideration and watchlist: STNG, QUOT, ARDX, TXG, EBAY, HUN, APP, PDD, AFRM, and VLDR. 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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