Jobless Claims on Tap as Bulls Try a Push

Markets diverged at the open Wednesday as SPY started down 0.18%, QQQ gapped down 0.48%, and DIA opened dead flat.  SPY and QQQ immediately recrossed the gap and then traded sideways from 10:30 a.m. to 2:45 p.m.  At that point, the two market- leading index ETFs sold back down and recrossed the gap before rallying the last 30 minutes of the day.  Meanwhile, DIA traded higher until 10 a.m., traded sideways until 2 p.m., sold off until 3:20 p.m., and rallied modestly the last 40 minutes.  This action gave us white-body candles with upper wicks in the SYP and QQQ.  Both retested their T-line (8ema) but closed back below.  However, the DIA gave us a black body Doji candle that never quite retested its own T-line.  This happened on average volume in the DIA and below-average volume in the SPY and QQQ.

On the day, eight of the 10 sectors were green as Basic Materials (+1.14%) was out in front leading the market higher.  Meanwhile, far and away the strongest (and only green sector).  Meanwhile, Consumer Defensive (-0.96%) was by far the weakest sector. At the same time, SPY gained 0.12%, DIA lost 0.08%, and QQQ gained 0.22%.  VXX lost 0.52% to close at a still low 13.38 and T2122 climbed but remains in its mid-range at 73.76.  10-year bond yields fell slightly to 4.351% and Oil (WTI) rose another 0.59% to $85.65 per barrel.  So, Wednesday was mostly a bullish, but indecisive day that did not change anything overall in the market.

The major economic news scheduled for Wednesday included March ADP Nonfarm Employment Change which came in quite strong at 184k (compared to a forecast of 148k and a February reading of 155k).  Later, March S&P Global Services PMI was exactly as predicted at 51.7 (versus the 51.7 forecast but down from February’s 52.3).  At the same time, March S&P Global Composite PMI was a tick low at 52.1 (compared to a 52.2 forecast but down from February’s 52.5 value).  Later, March ISM Non-Mfg. Employment was down at 48.5 (versus the 49.0 forecast but up from the February 48.0 reading).  At the same time, March ISM Non-Mfg. PMI was lower than predicted at 51.4 (compared to a 52.8 forecast and the previous value of 52.6).  March ISM Non-Mfg. Price Index showed prices lower at 53.4 (versus a forecast of 58.4 and a Feb. reading of 58.6).  Later, EIA Weekly Crude Oil Inventories showed a bigger inventory build than anticipated +3.210 million barrels (compared to a predicted drawdown of 0.300 million barrels and even slightly larger than the previous week’s +3.165 million barrels).

In Fed speak news, Atlanta Fed President Bostic came out with a hawkish outlook that expects one rate cut in 2024, not coming until Q4.  Bostic said, “We’ve seen inflation kind of become much more bumpy,” … “If the economy evolves as I expect and that’s going to be seeing continued robustness in GDP and employment, and a slow decline in inflation over the course of the year, I think it will be appropriate for us to start moving down at the end of this year, the fourth quarter.”  Later, Fed Chair Powell said, “If the economy evolves broadly as we expect, most FOMC participants see it as likely to be appropriate to begin lowering the policy rate at some point this year.”  Powell said  that recent data had not materially changed the Fed’s outlook, which continues “to be one of solid growth, a strong but rebalancing labor market, and inflation moving down toward 2 percent on a sometimes bumpy path.”  Still, Powell also said that cuts would not start until “we have greater confidence that inflation is moving sustainably down toward 2 percent.”  Later, Fed Governor Kluger said “I expect the disinflationary trend to continue.” (Saying that would pave the way for rate cuts over the course of the year.)  She continued, “If disinflation and labor market conditions proceed as I am currently expecting, then some lowering of the policy rate this year would be appropriate.”

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After the close, LEVI reported beats on both the revenue and earnings lines.  However, BB reported a massive miss on revenue while beating on earnings.  It is worth noting that LEVI raised forward guidance.

In stock news, on Wednesday, Bloomberg reported SPOT will increase prices for the second time in a year.  (The report indicated prices will increase $1 – $2 per month by the end of April.)  In addition, SPOT will offer a new pricing tier on $11/month which will include only music and podcasts (but not audiobooks).  At the same time, Taiwan was hit with the largest earthquake since 1999.   This caused TSM (the world’s largest chip maker) to temporarily close some its plants.  Hours later workers returned to the plants to begin inspections prior to restart of those cleanroom tight fab. TSM management said this could cause a “short-term hiccup” to electronics manufacturers.  Later, F reported a 6.8% rise in US Q1 auto sales.  At the same time, AMZN announced it will cut several hundred “sales, marketing, and tech” jobs in its cloud computing unit.  (The timing is a bit suspect since AMZN announced it will be investing an additional $10 billion per year for each of the next 15 years…$150 billion overall…to expand its cloud computing unit.)  That business unit has 60,000 employees, putting the “few hundred” into perspective.  Later, Reuters reported that EADSY (Airbus) delivered 142 planes in Q1, up 12% from Q1 2023.  Still, this was six planes shy of company goals for Q1.  (EADSY refused comment on the report.)  At the same time, 5,000 pilots at JBLU began negotiations with the company for a new labor contract.  Later, the CEO of ULTA warned that Q1 demand was lackluster for his company and across the industry.   (ULTA fell 15.34% on the comments while peers COTY was down 6.28% and EL fell 4.12%.)  At the same time, HXSCL (SK Hynix), the second largest computer memory chip maker and a major supplier to NVDA, announced it will invest $3.87 billion to build a plant in the state of IN.  This plant would begin full production in H2 2028. 

Elsewhere, DIS management won its battle with shareholders choosing CEO Iger’s slate over the slate proposed by activist Iger opponent Nelson Peltz.  Later, COST announced it will offer members access to weight-loss programs, including access to the hit prescription drugs Ozempic and Wegovy.  At the same time, Bloomberg reported that AAPL is now exploring a move into personal robotics as its “next big thing.”  Later, Reuters reported that sources tell it that BA plane deliveries fell sharply in recent weeks as the FAA has increased quality audits.  After the close, MSFT announced that it (in partnership with Quantinuum) had achieved a breakthrough in quantum computers, making them much more reliable.  (Quantum computes basic unit is a “qubit” which are notoriously error prone.  MSFT said their partnership has developed an error correction algorithm that allow quantum computers to have 800 times fewer errors than any other quantum effort.)  Also after the close, the Financial Times reported that GOOGL is planning to charge for its “AI-powered search engine.”  Meanwhile, XOM made a filing saying that it expects Q1 results to be weaker based on lower oil and gas prices.  At the same time, Reuters reported AAPL has had 6,400 app store users reported outages in addition to service losses for Apple Music and Apple TV+.  Later, Reuters reported PARA has entered into exclusive merger negotiations with Skydance, a private equity firm.  (This comes days after PARA received a $26 billion all-cash offer from APO.)  It is worth noting Bloomberg reported Wednesday that PARA’s controlling shareholder has already reached a tentative agreement to sell her stake to Skydance.

In stock legal and governmental news, on Wednesday, Bloomberg reported that the Fed has blocked a push by global banking watchdogs to make climate risk a focus of financial rules.  (The ECB is pushing for the Basel Committee on Banking Supervision to demand lenders make and meet climate commitments in their lending starting January 2026.)  At the same time, the UAW filed allegations with the NLRB, claiming that MBGAF (Mercedes Benz) management have taken “fierce backlash” measures against union organizers at its AL plant.  Later, a federal judge ruled in favor of ABUS and against MRNA in three of four patent disputes.  This will allow a trial over damages to begin in a year (April 2025).  After the close, Reuters reported that the EU will drop its “sovereignty requirement,” which will make it much easier for AMZN, GOOGL, and MSFT to bid on EU cloud computing contracts.  This came after a draft of cybersecurity certification scheme scrapped the requirement that vendors should be “independent from non-EU laws” (meaning EU-based).  Elsewhere, unsurprisingly, T, VZ, CMCSA, and other telecom industry members have filed opposition to the FCC plan to reinstate “net neutrality” rules thrown out by the Trump administration.  Later, the FDA approved an antibiotic for staph infections from BPMUF.

Overnight, Asian markets were evenly mixed.  South Korea (+1.29%) and Malaysia (+1.06%) led the gainers while Hong Kong (-1.22%) and Taiwan (-0.63%) paced the losses.  Meanwhile, in Europe, the bourses are leaning toward the green side at midday with only five of 15 exchanges in the red.  The CAC (+0.06%), DAX (+0.10%), and FTSE (+0.41%) are leading the region higher in early afternoon trade.  In the US, as of 7:30 a.m., Futures are pointing toward a green start to the day.  The DIA implies a +0.25% open, the SPY is implying a +0.32% open, and the QQQ implies a +0.43% open at this hour.  At the same time, 10-year bonds are up slightly to 3.363% and Oil (WTI) is flat at $85.45 per barrel in early trading.

The major economic news scheduled for Thursday, includes Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, Feb. Exports, Feb. Imports, Feb Trade Balance, and Fed member Mester speaks.  The major earnings reports scheduled for before the open are limited to CAG, LW, RDUS, and RPM.  There are no major earnings reports scheduled after the close.

In economic news later this week, on Friday, March Avg. Hourly Earnings, March Nonfarm Payrolls, March Private Nonfarm Payrolls, March Participation Rate, March Unemployment Rate, and Feb. Consumer Credit are being reported.

In terms of earnings reports later this week, on Friday, we hear from GBX.

In miscellaneous news, on Wednesday, the CEO of STLA told an auto industry group that the industry needs to halve the weight of batteries in an electric vehicle over the next decade.  (The average electric vehicle now has 1,000 pounds of battery in it.)  He said he thinks that is achievable with many improvements already in the works.  Still, he said the industry still needs a breakthrough in terms of energy density.  He also commented on hydrogen vehicles, saying that “for the time being” affordability is a showstopper for all except large corporate fleets.  Elsewhere, European authorities released a report saying (the obvious to me) that social media stock tips may influence stock prices in the short term, but have no impact in the long run.  The report went on to say it is important to hold financial media to accuracy standards in news and data reported…but this is not the case for social media since the impacts are “only short term.”  (It is worth noting the meme stock craze drove GME up 1,600 percent at one point.) 

So far this morning, CAG and RPM reported beats on both the revenue and earnings lines.  (RDUS and LW report closer to the open).

With that background, it looks as if markets are looking to gap higher to start the day (ahead of data still). The SPY an QQQ both gapped up across their T-line (8ema) to start the early session. Meanwhile, DIA gapped up close to its own T-line. From there, all three major index ETFs have given us tiny, white-body, indecisive candles so far in the premarket. So the short-term trend is very modestly bullish. Meanwhile, the mid-term remains sideways in a consolidating range. Long-term, it has been and remains all Bulls all the time. In terms of extension, none of the major index ETFs are too far away from their T-line and the T2122 indicator remains in its mid-range. So, both sides still have plenty of room to run if they can find momentum. It may also be worth noting that all three major index ETFs are at or near a potential area of support. In terms of those 10 big dog tickers, nine of the 10 are in the green this morning with only GOOGL lagging in the red. So, expect a bullish start to the day unless Jobless Claims are a major surprise causing a turn-around.

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 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 gains are 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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