Great Earnings Galore But Futures Down

Markets gapped higher Thursday on the prior night’s earnings beats from AAPL and FB.  Stocks the proceeded to fade the gap and spent the rest of the day working back toward to gap open.  This left us with Hanging Man candles in all 3 major indices (white body on DIA and the other two black bodies).  However, the SPY was at another all-time high close.  On the day, SPY gained 0.62%, DIA gained 0.66%, and QQQ gained 0.36%.  The VXX was essentially flat at 38.58 and T2122 fell ever so slightly to 91.05.  10-year bond yields rose to 1.636% and Oil (WTI) rose 1.69% to $64.92/barrel.  Copper also reached a 10-year high.

After the close AMZN continued the trend for big tech by smashing expectations with a 44% sales increase for the quarter and earnings that beat estimates by 65% ($15.79 vs $9.54 est. per share).  The online retail giant also said they forecast no fall-off in the pandemic-driven surge in sales.  However, while TWTR did post slight beats on both lines, they rained on the parade somewhat by posting a miss on user numbers and lower than hoped forward guidance as well as not beating as big as the other big tech names.

Early Friday, the executive arm of the EU opened a new antitrust investigation of the AAPL App Store.  This one is based on music platform SPOT complaining about the AAPL license agreements.  The EU announced that “the mandatory use of Apple’s own in-app purchase mechanism for apps distributed through the store likely violates EU antitrust regulations.”  This adds to AAPL’s antitrust problems with Epic Games having filed suit on the same grounds in the US.

Related to the virus, US infections are rising again after plateauing at a level above the fall level.  The totals have risen to 32,983,695 confirmed cases and deaths are now at 588,337.  The number of new cases has ticked lower again and are back down below the peak level from last summer to an average of 55,773 new cases per day. The same is true of deaths, which are trending down again, now at 727 per day.  This has led to the lowest weekly aggregate number of deaths so far this year.  

Globally, the numbers rose to 151,240,576 confirmed cases and the confirmed deaths are now at 3,182,092 deaths.  The trends have reversed and are now trending toward trouble again as we have seen significant upticks recently.  The world’s average new cases continue to rise and is now at the all-time peak and with 829,052 new cases per day.  Mortality, which lags, is also rising sharply again at 13,448 new deaths per day. France announced a 4-step process to end its lockdown with the first step starting on May 19 with a goal of the final lifting happening June 30.  Japan reported its highest number of new cases since January as the country tries to prepare for the delayed Olympic games.  Following in the steps of PFE, MRNA president said patients using their vaccine will also likely need a booster 9-12mo after completing the second dose.  However, in more hopeful news, in India, the first shipments of foreign oxygen-related aid have arrived.

Overnight, Asian markets were red across the board. Hong Kong (-1.97%) and India (-1.77%) paced the losses.  The same story seems to be taking shape in Europe so far today.  Moves are generally modest, with the smallest moves coming from two of the big 3 exchanges with the FTSE (-0.17%) and DAX (+0.04%), which is the only green on the continent.  The CAC (-0.35%) is closer to typical of all the other exchanges.  As of 7:30am, US Futures are also pointing to a gap lower.  The DIA is implying a -0.49% open, the SPY implying a -0.59% open, and the QQQ implying a -0.75% gap-down open.

The major economic news scheduled for Friday includes Mar. PCE Price Index, Q1 Employment Cost Index, and Mar. Personal Spending (all at 8:30 am), Chicago PMI (9:45 am), and Michigan Consumer Sentiment (10 am).  Major earnings reports on the day include ABBV, ALXN, AON, AZN, AVNT, CRI, CHTR, CVX, CLX, CL, XOM, FNMA, GT, HRC, HUN, ITW, IMO, JELD, JCI, LHX, LAZ, LYB, NWL, PSX, PBI, POR, QSR, GWW, and before the open.  Then after the close, WES reports.

Despite continued blowout earnings reports from the massive FAANG names, markets seem poised to follow the rest of the world lower on Friday. Maybe this is related to the month-end or weekend news cycle that both are nearly at hand. Regardless, this just reinforces the bulls have had breaking through the recent highs and running free. Yet, the bears still have no shock or major story to hand their hats on. With blowout earnings and increasing forecasts, future inflation seems to be their storyline...and history shows markets rising in infationary times. So, for now, the bears best case would seem to be for a pullback.

Respect those potential support and resistance levels, but don't just assume they will hold either. Predicting is a sucker's game. So, stick with the trend, but also avoid chasing trades you have missed and be nimble. Lock in your profits when you achieve your trade goals and maintain your discipline by following those trading rules. Don't let your emotions get the better of you. Consistency is the key to long-term trading success.

Ed

Swing Trade Ideas for your consideration and watchlist: PM, XLE, AAPL, JPM, MDLZ, JNPR, AA. 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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🎯 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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