Wednesday saw markets gap higher on stronger than expected GDP only to spend the rest of the day fading that gap.  The SPY gapped up 0.50%, DIA opened 0.26% higher, and QQQ gapped up 0.65%.  However, as mentioned, all three major index ETFs sold the rest of the day with SPY and QQQ recrossing that opening gap at about 3 p.m. and DIA never quite filling the gap.  This action gave us large black-bodied candles with upper wicks that nearly printed Dark Cloud Cover candles in the SPY and QQQ.  At the same time, DIA printed a black-bodied Gravestone Doji-type candle.  All three remain up above their T-line (8ema) with SPY and QQQ having potential support not far below while DIA may have run into resistance above at the highs of the day.  This happened on lower-than-average volume in all three major index ETFs.

On the day, seven of the 10 sectors were in the green again with Financial Services (+0.79%) out front leading the way higher while Consumer Defensive (-0.74%) lagged behind the other sectors.  At the same time, the SPY lost 0.07%, DIA gained 0.15%, and QQQ lost 0.10%.  The VXX climbed 1.44% to close at 17.56 and T2122 climbed back into the lower end of the overbought territory at 86.61.  10-year bond yields fell again to 4.257% and Oil (WTI) popped another 1.68% to close at $77.69 per barrel.  So, Wednesday Started as a gap higher but immediately turned into a “sell the news” day as traders began to worry that the good news was too good.

The major economic news reported Wednesday included Q3 GDP (quarter-on-quarter) which came in even better than expected or previously estimated at +5.2% (compared to a forecast of +4.9% and the Q2 reading of +2.1%).  At the same time, the Q3 GDP Price Index (quarter-on-quarter) was exactly as predicted at +3.5% (versus a forecast of +3.5% and a Q2 value of +1.7%).  Elsewhere, the October Goods Trade Balance came in worse than expected at -$89.84 billion (compared to a forecast of -$86.70 billion and the September reading of -$86.84 billion).  At the same time, October Retail Inventories fell 0.9% (versus a September value of -0.4%).  Later in the morning, EIA Weekly Crude Oil Inventories showed a build of 1.609 million barrels (compared to a forecasted drawdown of 0.933 million barrels but far lower than the previous week’s 8.701-million-barrel build).

In Fed Speak news, Atlanta Fed President Bostic indicated that he expects the US economy to slow its growth as well as see inflation continue to ease.  Bostic said, “The research, data, survey results, and input from business contacts tell me that tighter monetary policy and tighter financial conditions more broadly are biting harder into economic activity … At the same time, I don’t think we’ve seen the full effects of restrictive policy, another reason I think we’ll see further cooling of economic activity and inflation.”  Later, Cleveland Fed President Mester told a conference in Chicago, that inflation is improving and she thinks the Fed is already in a good place on rates.  She said, “While it is still above our 2 percent goal, there has been discernible progress on inflation even while the overall economy has remained relatively strong. … Monetary policy is in a good place for policymakers to assess incoming information on the economy and financial conditions.”

In stock news, Reuters reported Wednesday that WMT has shifted its supply chain to import more from India and less from China.  WMT now sources 25% of its goods from India (compared to just 2% in 2018).  Meanwhile, shipments from China have fallen from 80% to 60% of its total imports over the same period.  Later, JPM CEO Dimon said the bank would exit China if required to do so by the US government (as if, not complying with US government requirements was an option for the bank).  At the same time, UBER struck a deal with London’s black cabs.  The deal will roll out a new service in 2024 where London’s “knowledge-tested” cabbies to sign up with UBER to take pre-booked journeys.  (UBER is taking no commission for the first six months of the deal in an effort to smooth over a decade of friction between the two sides.)  At the same time, mem stock GME had another monster volatility day, opening 15% higher, trading at more than 30% higher one point, and closing up 20.46%.  Elsewhere, in China, NIO announced a partnership with EV-maker Geely to create a battery hot-swapping network across China (as opposed to charging stations).  Later, the Wall Street Journal reported that CI and HUM are in advanced talks on a merger.  (The two had considered merging in 2015, but HUM chose to partner with Aetna at that time.) At the same time, OKTA notified customers that hackers had stolen information including the name and email address of every OKTA customer support user.  Meanwhile, Reuters reported after the close that AVGO is reviewing strategic options for two business units (End-User Computing and Carbon Black) that it had acquired in the purchase of VMW.  Finally, self-proclaimed genius Elon Musk claimed advertisers that pulled their ads from his former Twitter (now X) platform were blackmailing him related to his antisemitic posts.  In a fiery interview Wednesday, the bright bulb told any such advertisers to “Go f*@k yourself” and then asked if that was clear enough (message to the advertisers).  He went on to double down that his post referencing the supposed “great replacement theory” on Nov. 15 did speak the actual truth.  However, he also said it was a very foolish post and was akin to handing his detractors a loaded gun.

In stock government, legal, and regulatory news, the USDA has extended its trial program to allow US pork processing plants to operate at higher speeds (while still collecting data on the impact of the speed increase on workers, safety, and quality).  This is a big win for TSN, JBSAY, WHGRF, BRFS, and HRL.  Later, Reuters reported that EU antitrust lawyers initially opposed sending a charging sheet to AMZN related to its acquisition if IRBT.  (This indicates there are some in the EU antitrust group who do not oppose the deal and some feel this gives hope for eventual deal approval.)  Later, a lawsuit was filed against CSX claiming that a Thanksgiving-eve train derailment that spilled molten sulfur in Eastern KY was caused by company negligence, recklessness, and failure to follow federal train regulations.  Elsewhere, the US Supreme Court gave hints that its right-wing super majority is leaning toward limiting the SEC’s power to enforce securities laws.  (The case stems from a fund manager being found guilty of securities fraud and the SEC fining and barring him from the industry.)  Later, VZ agreed to pay $23.5 million to resolve an FCC investigation into its TracFone subsidiary violating government program rules (collecting millions of dollars in undeserved emergency broadband benefit funds).  After the close, DD, CTVA, and CC agreed to pay the state of OH $110 million to resolve claims related to the release of toxic PFAS “forever chemicals.”

After the close, FIVE, LZB, NTNX, SNOW, and SNPS all reported beats on both the revenue and earnings lines.  Meanwhile, NOAH, PSTG, PVH, and CRM all missed on revenue while beating on earnings.  Unfortunately, VSCO missed on both the top and bottom lines.

Overnight, Asian markets were largely in the green.  Australia (+0.74%), South Korea (+0.61%), and Japan (+0.50%) led a broad rally with only three exchanges in the red across the region.  Meanwhile, in Europe, we see a similar picture taking shape at midday.  Only Russia (-0.23%) and Belgium (-0.16%) are in the red, while the CAC (+0.48%), DAX (+0.41%), and FTSE (+0.62%) lead the rest of the region higher in early afternoon trade.  In the US, as of 7:30 a.m., Futures are pointing toward another green start to the day (before data).  The DIA implies a +0.50% open, the SPY implies a +0.24% open, and the QQQ implies a +0.28% open at this hour.  At the same time, 10-year bond yields are up slightly to 4.301% and Oil (WTI) is up two-thirds of a percent to $78.40 per barrel in early trading.

The major economic news scheduled for Thursday includes Oct. Core PCE Price Index, Oct. PCE Price Index, Weekly Initial Jobless Claims, and Oct. Personal Spending (all at 8:30 a.m.), Nov. Chicago PMI (9:45 a.m.), Oct. Pending Home Sales (10 a.m.), and Fed Balance Sheet (4:30 p.m.).  We also hear from Fed member Williams (9:05 a.m.). The major earnings reports set for before the open include ASO, BIG, DOOO, CM, CBRL, EXPR, KR, RY, TD, and TITN. Then, after the close, AMWD, DELL, MRVL, and ULTA report. 

In economic news later this week, on Friday, we get Nov. S&P Global Mfg. PMI, Nov. ISM Mfg. Employment, Nov. ISM Mfg. PMI, and Nov. ISM Mfg. Price Index.  We also hear from Fed Chair Powell at 11 a.m.

In terms of earnings reports later this week, on Friday, GCO and BMO report.

In miscellaneous news, GOOGL’s DeepMind supercomputer has used AI to predict the chemical structures and properties of two million new (unknown) materials.  This includes 400,000 that could be produced in a lab now.  This research offers incredible potential for more efficient batteries, computers, solar panels, etc.  Elsewhere, in geopolitical news, Bloomberg reported Wednesday night that Saudi Arabia is dangling the prospect of economic investments as an enticement to its arch-rival Iran.  The one condition is that it works against the escalation of the Israel-Hamas War.  The Saudis have proposed that Iran restrain its allies in Lebanon, Gaza, and Syria in exchange for serious financial investment and relief for Iran’s sanctions-hobbled economy.  The report suggested that this overture stemmed from a low-key US approach to stabilize the Middle East after the Oct. 7 Hamas attacks and the resulting Israeli reprisal offensive.  In other geopolitical news, Chinese President Xi surprised the world Wednesday when he installed his trusted loyalist Li Qiang as leader of the Central Financial Committee.  This comes after Li became the first Chinese Premier to represent China at the G20 in September.  (This was a major change to Xi’s approach of eliminating opposition and taking all key jobs for himself for more than a decade. It has some analysts watching Li as a potential future successor to Xi.)

In late-breaking news out of Europe, Eurozone inflation came in far below expectation at +2.4% in November (compared to a +2.9% in October and a consensus forecast from analysts that was +2.7%).  Core inflation also fell to +3.6% from the prior month’s +4.2%.  While ECB officials say it’s too early to claim victory, there is no doubt that prices are on the right path after peaking at +10.6% in October 2022.

So far this morning, CM and RY have reported beats on both the revenue and earnings lines.  Meanwhile, BIG and DOOO missed on revenue while beating on earnings.  On the other side, TD beat on revenue while missing on earnings.  Unfortunately, EXPR and TITN reported missed on both the top and bottom lines.  (ASO, CBRL, and KR do not report until 8 a.m.) 

With that background, it looks like the Bulls may be ready to attempt another leg-up in their November rally. All three major index ETFs opened the premarket session with a gap up and have printed white body candles, indicating follow-through on that very early jump. (These sentences were repeated from yesterday on purpose.) All three remain above their T-line (8ema) and 50smas. So, the Bulls are definitely still in control of both the shorter and the longer-term trends. In terms of extension, the major index ETFs all relieved the stretch above their T-lines (8emas) which they had been feeling last week. At the same time, the T2122 indicator has now climbed back up inside its overbought territory but is not pegged to the very top. So, the Bulls do have some slack to work with if they are intent on continuing the really. Of course, the Bears have tons of room to run if they could mount a charge. I suspect PCE data and reaction will call the tune for most of the day.

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.

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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