Markets opened flat on Monday. However, the bears immediately stepped in to drive all three major indices lower for a little over half of an hour. We then saw a 30-minute bullish reversal followed by a second wave lower until 11:45 am. From there, we saw a slower selloff that lasted until we saw some buying at the end of the day. The SPY and QQQ move lower, away from their 50sma and T-line (8ema). Meanwhile, the DIA is retesting its 50sma from above while also moving further away from its T-line. This action is giving us black-bodied candles with lower wicks that can certainly be seen to be forming Bearish Doji Continuation (Sandwich) patterns in the 3 major indices.
On the day, all ten of the sectors are in the red with Technology (-1.74%) leading the way lower while the Consumer Defensive (-0.13%) sector held up best. Meanwhile, the SPY was down 0.85%, the DIA was down 0.47%, and the QQQ was down 1.60%. All three of those indices made these moves on relatively low volume. At the same time, the VXX is down 2.4% to 14.65 and T2122 remains deep in oversold territory at 8.93. 10-year bond yields surged up to 3.594% and Oil (WTI) was up 1.80% to $75.63 per barrel. So, overall, it was a bearish grind of a day, giving us a fourth-straight down day to start the 4.5-day preholiday week.
In stock news, AAPL was fined $1.06 million by a French court Monday for imposing abusive commercial clauses on French App developers by the AAPL app store. In other legal news, the SEC announced that HON will pay $200 million to settle US and Brazilian criminal and civil corruption charges related to bribing Brazilian state-owned energy company. At the same time, MDLZ said Monday that it has agreed to sell its gum business (Trident and Dentyne) to a European gum and confectionary maker. Elsewhere, Reuters reported that BLK plans no major changes to he way the company engages on and votes on environmental and social issues regardless of pushback from Texas GOP and national Republican politicians in general. Meanwhile, seed and pesticide maker CTVA said it will cut a (trivial, 51) jobs next year as its exit from Russia has seen a cut in sunflower seed demand. Finally, after hours, LCID announced it has now completed a $1.5 billion capital raise by issuing stock to Saudi Arabia’s Public Investment Fund.
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In energy news, Reuters reported that Venezuelan-owned Citgo Petroleum is on track to make a record $2.5 billion profit this year. The Houston-based Citgo plans to use the funds to repay debt and invest in the reliability of its operations. (The company posted a $160 million loss in 2021.) In other Reuters news, the agency reports that the US will become a net exporter of oil in 2023. Current government data shows that the US is importing 1.1 million barrels per day (down sharply from 7 million barrels per day just 5 years ago) while at the same time, exporting 3.4 million barrels per day. The US is also the leading LNG exporter in the world. For 2022, the US was a net importer by 0.7%, but US oil production is planned to increase again to another record in 2023. Finally, EU energy ministers agreed to a price cap for natural gas if electric prices exceed $191.11/megawatt-hour for three days).
In miscellaneous news, the Bank of Japan unexpectedly widened (doubled) the range for its rate cap for 10-year Japanese Bonds. (They essentially will let rates vary up to a half of a percent on either side of the 0% target rate, leaving a 1% wide range.) Analysts say that regardless of verbiage, this is a step toward a rate increase early next year which is a change for one of the region’s staunchest “rock bottom rates” central banks. This move also caused the Yen to jump higher. Elsewhere, EPIC games (Fortnite) took a big hit in a settlement with the FTC. Epic will pay a $275 million penalty for violating children’s online privacy rights. It will pay another $245 million in refunds for using deceptive practices (dark patterns) to get children to make accidental in-game purchases in its “free to play” game. Finally, it is worth noting that AMZN has now given back all of its Covid era gains with the stock down 50% on the year.
After the close, HEI reported beats on the revenue and earnings lines. However, SCS missed on revenue while beating on earnings. So far this morning, GIS beat on both the top and bottom lines. Meanwhile, FDS missed on revenue while beating (by 11%) on earnings.
Overnight, Asian markets were red across the board as the Bank of Japan shocked the market with a new yield curve policy Japan (-2.46%), Taiwan (-1.82%), and Shenzhen (-1.58%) led the region lower. Meanwhile, in Europe, there is a lot of red but still three smaller exchanges holding onto green at midday. The FTSE (-0.02%) is flat while the DAX (-0.22%) and CAC (-0.21%) are typical of the modest red action in early afternoon trade. As of 7:30 am, US Futures are pointing toward a mixed, flat start to the day. The DIA implies a +0.18% open, the SPY is implying a +0.03% open, and the QQQ implies a -0.19% open at this hour. 10-year bond yields are surging again to 3.653% and Oil (WTI) is up 1.33% to $76.19/barrel in early trading.
The major economic news events scheduled for Tuesday include November Building Permits and November Housing Starts (both at 8:30 am), and API Weekly Crude Oil Stocks (4:30 pm). The major earnings reports scheduled for before the open include FDS and GIS. Then, after the close, FDX, NKE, and WOR report.
In economic news later this week, on Wednesday, Q3 Current Accounts, Conf. Board Consumer Confidence, Nov. Existing Home Sales, and EIA Weekly Crude Oil Inventories are reported. Thursday, we get Q3 GDP, Q3 GDP Price Index, and Weekly Initial Jobless Claims. Finally, on Friday, Nov. Durable Goods, Nov. PCE Price Index, Nov. Personal Spending, Michigan Consumer Sentiment, and Nov. New Home Sales are reported.
Meanwhile, in earnings later this week, on Wednesday, CCL, RAD, TTC, MU, and MLKN report. On Thursday, we hear from KMX and PAYX. Finally, on Friday, there are no reports scheduled.
One last tidbit of late news. The House passed a $1.7 trillion omnibus budget (lasting through September 2023) as the last piece of business for the year. The bill is expected to pass with bipartisan support in the Senate and be signed before the weekend deadline. The bill did not include either the Democrat’s hoped-for permanent status for expanded child tax credits or the Republican hoped-for tax cuts for businesses. However, on the heals of the committee report on the January 6 insurrection, it did include a tightening of law intended to prevent such events from occurring again.
With that background, it looks like markets want to start the day flat (ahead of housing data) with the exception of the still-bearish tech space. The DIA will be testing its 50sma again and SPY continues to test a support level. However, the QQQ has no such nearby support. Nonetheless, we are extended, both in terms of the T-line (8ema) and the T2122 (4-week new high/low ratio) indicator. So, some relief is in order. Be cautious and aware of the recent volatility (gaps and intraday reversals). Remember, chasing is a bad habit and a good way to walk into a slamming door.
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.
Swing Trade Ideas for your consideration and watchlist: XLF, META, AAPL, BA, GOOG, TSLA, LEN, IAG, and MRNA. 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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