Fed Talk And Debt Ceiling Meeting Today

Friday saw a very modest gap higher (up 0.24% in the SPY, down 0.03% in the DIA, and up 0.06% in the QQQ).   This led to a sideways grind until 11 am in all three major indices.  However, at that point we saw a sharp selloff across the board for 40 minutes.  From that point, the rest of the day saw an undulating sideways move the entire rest of the day in all three indices.  This action gave us indecisive, black-bodied Spinning Top candles in the QQQ, SPY, and DIA (although the DIA body was admittedly larger than the other two indices).  The DIA also closed just below its T-line (8ema) while the other two major indices remain comfortably above their own.  This all happened on average volume in the DIA and less-than-average volume in the SPY and QQQ.

On the day, seven of the 10 sectors were in the red with Consumer Cyclical (-1.15%) leading the way lower as Healthcare (+0.64%) held up better than the other sectors.  At the same time, the SPY lost 0.15%, DIA lost 0.23%, and QQQ lost 0.56%.  VXX gained 2.5% to 35.77 and T2122 dropped back to the center of the mid-range at 56.95.  10-year bond yields spiked up to 3.682% while Oil (WTI) fell a quarter of a percent to end the day at $71.67 per barrel.  So, Friday saw an intraday whipsaw that really amounted to an indecisive stalemate between the bulls and bears with the Bears having just a bit of the upper hand on the strength of a 40-minute mid-day selloff.  

The only economic news Friday was talking.  On the Fed front, Gov. Bowman again pleaded the case on behalf of banks.  She criticized the Fed for using the collapse of SIVB, SBNY, and FRC as a “pretext” for considering what she termed “radical reform of the bank regulatory framework…as opposed to targeted changes to address identified root causes of banking stress.”  She went on to say the new regulation being considered is simply “incompatible with the fundamental strength of the banking system.”  At the same time, NY Fed President Williams told a conference that he refuses to tie Fed policy to his recently published research that shows major global economies are still fundamentally in a low-interest rate world.  Later, Fed Chair Powell spoke and said that recent banking system troubles (causing tighter credit conditions) mean that “our policy rate may not need to rise as much as it would have otherwise to achieve our goals.”  He went on to give what Bloomberg called a clear signal he is open to pausing interest rate increases next month.  Powell said, “We’ve come a long way in policy tightening and the stance of policy is restrictive and we face uncertainty about the lagged effects of our tightening so far and about the extent of credit tightening from recent banking stresses … Having come this far we can afford to look at the data and the evolving outlook to make careful assessments.” 

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In other talking news Friday, Treasury Sec. Yellen told bank CEOs that more bank mergers may be necessary.  Specifically, she told Reuters “Pressures on U.S. regional bank earnings may lead to more concentration in the sector and regulators will likely be open to such mergers.”  Elsewhere, the proximate cause of the mid-day slump in markets was that GOP negotiators walked out of the Debt Ceiling talks.  However, on Friday evening (once the GOP had made their headlines), they returned to the table and negotiations resumed after a six-hour pause. Progress was reported over the weekend and another meeting between President Biden and Speaker McCarthy is scheduled for today after a call from the President (from Airforce One) to McCarthy which the Speaker called “productive.” At this point, it definitely seems like an agreement is a done deal but the two sides will wrestle for political points until the last minute. So, be prepared for news from the Monday meeting (likely bad news to stoke fear).

In stock news, the Wall Street Journal reported Friday that Samsung (which has a little over 27% of smartphone market share) has decided it will not change its default search engine from GOOGL to the MSFT Bing engine.  The company had been considering a switch for a couple of months.  (GOOGL earns $3 billion per year from its contract with Samsung, in addition to ad revenue.)  Meanwhile, CTLT slashed its forecast and again delayed the release of its quarterly results (the third postponement) after replacing several financial directors and naming a new CFO last month.  At the same time, Reuters reports that META will release a text-based app to compete with Twitter in June.  The news outlet reports META is already testing the service with influencers and content creators.  Elsewhere, the CEO of MS announced he will step down sometime in the next 12 months.  In the auto industry, TSLA began offering more discounts ($1,300 this time) on some Model 3 cars in the US and even heavier discounts in Europe.  Finally, in a funny story, the Wall Street Journal reported Friday that AAPL has issued an internal edict to employees forbidding them from using ChatGPT.  This is interesting because it comes less than a day after AAPL announced they are offering a ChatGPT app for iPhones and less than a week since the company hinted that it is working on its own AI offering (when it touted the fact it has been designing AI chips for years).  So, AI is good as a product to sell…just not good enough a product for “us” to use.

In stock legal and regulatory news, a driver for startup Revel is suing TSLA over a crash at the end of January.  The driver claims his TSLA “suddenly and automatically” took accelerated, forcing the driver to need to crash the vehicle in order to get it to stop.  Elsewhere, EU antitrust regulators questioned MSFT competitors about the type of data their contracts with MSFT require them to turn over.  The watchdog asked if MSFT may have used the required data to go directly to the competitors’ customers. In somewhat related news, the same EU antitrust agency finalized its record fine of META (reported here last week) to be a whopping $1.3 billion for transferring EU customer data from European to US servers. Later, the US FDA approved a KRYS gene therapy used to treat skin disorders.  At the end of the day, the US Forest Service told a federal court it is not sure when it would be able to approve a land swap that would allow RIO and BHP to develop a new copper mine in AZ.  (Native American groups have opposed the swap and mine.)  The Biden Administration (Bureau of Land Mgmt.) on Friday issued a decision supporting a $6.6 billion pipeline proposed by ETRN.  (Earlier last week, Energy Sec. Granholm also had backed the pipeline.)  Meanwhile, a US judge ruled Friday that AAL must end its alliance with JBLU in a victory for the Biden Administration which had claimed their agreement would reduce competition and raise consumer prices.  Finally, the Wall Street Journal reports that the NHTSA is making an official demand and will take legal action against ARCW after the company refused the agency’s request that it recall 67 million airbag inflators after nine of them exploded during deployment, killing two people. While ARCW has been defiant, GM proactively recalled all vehicles with those inflators. However, this recall would cut across F, TM, STLA, VLKAF (Volkswagen), and HYMLF (Hyunda/Kia) and could threaten ARCW solvency.

Overnight, Asian markets leaned heavily toward the green side, with only three of the region’s exchanges in the red.  New Zealand (-0.88%) saw the worst of the losses as Hong Kong (+1.17%), Thailand (+0.95%), and Japan (+0.90%) led the region higher.  Meanwhile, in Europe, the bourses are leaning the opposite direction at midday.  The CAC (-0.35%), DAX (-0.33%), and FTSE (flat) lead the region lower with two notable exceptions (Greece +7.06% and Denmark +1.23%) in early afternoon trade.  (Greece skyrocketed as its ruling conservative party won the most seats in the Greek election and will now enter talks with other smaller parties about forming a government.)  In the US, as of 7:30 am, Futures are pointing to a start just on the red side of flat.  The DIA implies a -0.07% open, the SPY is implying a -0.10% open, and the QQQ implies a -0.15% open at this hour.  At the same time, 10-year bond yields are down 3.663% and Oil (WTI) is just on the green side of flat at $71.58/barrel.

The major economic news events scheduled for Monday are limited to just three Fed speakers (Bullard at 8:30 am, Barking at 10:50 am, and Bostic at 10:50 am). The major earnings reports scheduled for the day are limited to RYAAY and ZIM before the open.  Then, after the close, HEI, NDSN, and ZM report  

In economic news later this week, on Tuesday we get Building Permits, Preliminary May Mfg. PMI, Preliminary May S&P Global Composite PMI, Preliminary May Services PMI, April New Home Sales, and API Weekly Crude Stocks Report.  Then Wednesday, EIA Weekly Crude Oil Inventories, FOMC May Minutes, and Treasury Sec. Yellen speaking are on tap.  On Thursday, we get Preliminary Q1 GDP, Preliminary Q1 GDP Price Index, Weekly Initial Jobless Claims, April Pending Home Sales, the Fed Balance Sheet, and Bank Reserve Balances with the Fed.  Finally, on Friday, April Durable Goods Orders, April Goods Trade Balance, Aprile PCE Price Index, April Personal Spending, April Retail Inventories, and Michigan Consumer Sentiment are reported. 

In terms of earnings reports later this week, on Tuesday, we hear from AZO, BJ, DKS, HIS, LOW, VIPS, WSM, A, INTU, PANW, TOL, URBN, and VFC.  Then Wednesday, ANF, ADI, BMO, BNS, DY, KSS, WOOF, XPEV, UHAL, AEO, ENS, PLUS, GES, MOD, NVDA, SNOW, and SPLK report.  On Thursday, we hear from AMWD, BBY, BURL, CM, DLTR, GCO, HEPS, MDT, NTES, RL, RY, TD, TITN, ADSK, COST, DECK, GPS, MRVL, RH, ULTA, and WDAY.  Finally, on Friday, BIG, BAH, and HIBB report.

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So far this morning, RYAAY beat on both the revenue and earnings line.  Meanwhile, ZIM missed on both the top and bottom lines.

In miscellaneous news, after the close Friday, the Fed reported that deposits at US banks edged lower on the week ending May 10, falling to $17.10 trillion (from $17.16 trillion the week prior).  At the same time, the Fed reported that bank-provided credit fell from $17.37 trillion to $17.32 trillion.  Meanwhile, at the G-7 Summit, President Biden changed course and approved the transfer of F-16 fighter-bomber jets (from US allies, not the US directly) to Ukraine.  The US will provide Ukrainian pilot training on the jets after having already trained two for the purposes of determining what topics would need to be covered and to what extent.  LMT and GD make the F-16 and it is now being speculated that orders will be placed to replace the jets given to Ukraine by US allies.  (The most recent sale of F16s averaged a price of $350 million per jet after add-ons, accessories, and spare parts were figured in…$4.21 billion for 12 jets in 2022.)  The number of jets to be provided is unknown, however, military analysts say 50 or more may be the fleet size required for combat effectiveness across all of Ukraine.  So, there is a strong potential for large orders of spare parts and maintenance supplies at the very least…and the possibility of large orders for F16 or F35 planes to replace the jets going to Ukraine.

With that background, it looks like traders are still undecided early on Monday. DIA seems to be retesting its T-line while the other two major indices are just sitting inside Friday’s candle just below their closes. SPY may be getting some support from the 2/2 and 5/1 highs level. Meanwhile, QQQ still has to deal with its next resistance level it failed Friday (which has caused multiple reversals back into early 2021. Over-extension from the T-line is not a problem although QQQ remains a bit stretched. The T2122 indicator also sits in its mid-range (telling us we have at least a little room left to run). With this all said, it does not pay to fight the tape and the trend remains bullish at the moment in the SPY and especially QQQ. DIA, on the other hand, is a choppy, slightly bearish mess.

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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🎯 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.

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🎯 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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