New Week, Month, and Quarter

On Thursday, SPY and QQQ opened dead flat while DIA opened up 0.11%.  From that point, SPY traded sideways in a very tight range until 2:45 p.m.  At the same time, DIA recrossed its small opening gap and then traded sideways along the previous close in a tight range until 2:45 p.m.  Meanwhile, QQQ also traded sideways with a little more volatility until noon, and then sold off very modestly until 2:45 p.m.  Then at a quarter to 3 p.m., all three major index ETFs rallied to the highs of the day at 3:30 pm and sold off back down the last 30 minutes of the day.  This action gave us indecisive candles in all three, with a Gravestone Doji in the SPY, a Doji in the DIA, and a small, black-bodied Inverted Hammer in the QQQ.  All three remain above their T-line (8ema) and SPY printed a new all-time high with DIA missing the same by a few cents.  This happened on less-than-average volume in all three major index ETFs.

On the day, nine of the 10 sectors were green as Energy (+1.02%) leading the way up while Technology (-0.14%) oddly again lagged and was the only sector in the red. (Odd in that the market remains bullish and for the last two or more years when that was the case, Tech led the way.)  At the same time, SPY lost 0.02%, DIA gained 0.05%, and QQQ lost 0.18%. VXX gained 1.57% to close at a still very low 12.97 and T2122 pulled back 2.26% but remains in the top half of its overbought territory at 92.87.  10-year bond yields rose to 4.206% and Oil (WTI) rose another 2.16% to $83.11 per barrel.  So, Thursday was an indecisive or treading water day, maybe due to PCE data coming out on a non-trading Friday.  This brought us to a +0.36% week in the SPY, +0.82% week in the DIA, and a -0.53% week in the QQQ.  For the month, SPY gained 2.95%, DIA gained 2.00%, and QQQ gained 1.14%.  On the quarter, SPY gained 10.05%, DIA gained 5.54%, and QQQ gained 8.42%.

The major economic news scheduled for Thursday included Weekly Initial Jobless Claims, which came in just below expectations at 210k (compared to a forecast and previous week reading of 212k).  The ongoing or Weekly Continuing Jobless Claims were just a bit higher than predicted at 1,819k (versus the 1,815k forecast and up from the prior week’s 1,795k).  At the same time, Q4 GDP was stronger than expected at +3.4% (compared to the +3.2% forecast but below a blowout +4.9% reading in Q3). Meanwhile, the Q4 GDP Price Index was a tick higher than anticipated at +1.7% (versus a +1.6% forecast but far down from the Q3 +3.3%).  Later, Chicago PMI was below the expected level at 41.4 (compared to a 45.9 forecast and the 44.0 previous reading).  Later, Michigan Consumer Sentiment was stronger than predicted at 79.4 (versus a 76.5 forecast and a 75.2 February value).  At the same time, the Michigan Consumer Expectations were also stronger than predicted at 77.4 (compared to a 74.6 forecast and February 75.2 reading).  In terms of inflation, the Michigan 1-Year Inflation Expectations were a tick lower than anticipated at +2.9% (versus a +3.0% forecast and a +3.0% February value).  The Michigan 5-Year Inflation Expectations were also a tick lower than expected at +2.8% (compared to the +2.9% forecast and Feb. reading).  Later, the Feb. Pending Home Sales were also strong than expected at +1.6% (versus a +1.4% forecast and far better than the January -4.7% value).  Finally, after the close, the Fed Balance Sheet showed a $29 billion reduction week-on-week at $7.485 trillion (down from the prior week’s $7.514 trillion).

On Friday, despite being a market holiday, the February Core PCE Price Index came in as expected at +0.3% (compared to a forecast of +0.3% but down significantly from January’s +0.5%).  On an annual basis, the February Core PCE Price Index also came in just as expected at +2.8% (versus a forecast of +2.8% and down from January’s +2.9%).  Meanwhile, the headline February PCE Price Index (month-on-month) was down to +0.3% (compared to a forecast and January reading of +0.4%).  On an annual basis, the headline February PCE Price Index was in line with predictions at +2.5% (versus a +2.5% forecast but up a tick from January +2.4% value).  At the same time, the Preliminary Feb. Goods Trade Balance was a bit worse than anticipated at -$91.84 billion (compared to a $-90.10 billion forecast and a -$90.51 billion January reading).  Elsewhere, the Feb. Personal Spending was up significantly at +0.8% (versus a forecast of +0.5% and a January +0.2% number).  Finally, Preliminary February Retail Inventories were up to +0.4% (compared to a January value of +0.3%). 

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In FOMC-speak news, on Friday, Fed Chair Powell spoke at a San Francisco Fed event.  Powell said, the “inflation is along the lines of what we would like to see.”  In comments about Friday’s February PCE data release, Powell said “(The data was) not as low as most of the good readings we got in the second half of last year, but it’s definitely more along the lines of what we want to see (than January’s values).”…“it is what we were expecting.”  He continued, “The decision to begin to reduce rates is a very, very important one … The economy is strong right now, and the labor market is strong right now, and inflation has been coming down. We can and we will be careful about this decision because we can be.” (Essentially, he continued the Fed’s line that things are good now and there is no need to take chances or rock the boat until the committee is sure.)

In stock news, on Thursday, AMC announced an equity offering, saying the company will “from to time” sell stock with a value up to $250 million.  At the same time, Chinese tech company Xiaomi entered the electric vehicle market by debuting a $30,000 car (cheaper than TSLA Model 3) in China.  The move intensifies the EV market in at the very least in China.  In unrelated news, Reuters reported TSLA deliveries in China fell 5% during Q1 compared to the prior quarter.  (TSLA still delivered 8% more cars in Q1 2024 versus Q1 2023, but down from Q4.)  Later, WBA announced it took a $5.8 billion charge in Q4 relate to its acquisition of VillageMD (160 medical clinics).  At the same time, F told Reuters it is considering producing its new hybrid sports-utility vehicle in Spain.  (This is likely related to EU scrutiny of Chinese EV makers and incentives.)  Later, PM announced it is near to launching its flagship IQOS heated tobacco device in Austin TX.  This will be the first test marketing of that device in the US.  (MO and BTI already offer competitive devices in limited test marketing in the US.)  At the same time, Bloomberg reported that AAPL has ramped up production of its new iPad Pro overseas and will likely launch the new product in May.  (The original launch date was March, but the software for the device is still in development and was pushed back.)  The new model iPad Pro will have AAPL’s newest M3 chip.  Later, NXPI (the largest chip maker for cars) introduced a new platform to simplify and speed the software development of its carmaker customers and their partners such as ACN, BB, QNX, ETAS, SNPS, and several others.  At the same time NTR (largest global potash fertilizer producer) announced it is exploring the sale of its operations in Argentina, Chile, and Uruguay as part of a strategic restructuring.  (NTR took a $465 million impairment on South American operations in 2023.)

In stock legal and governmental news, on Thursday, EU regulators told Reuters they are considering the introduction of tougher rules on “zero tobacco” heat sticks offered by PM and BTI.  The companies currently use materials like nicotine-infused tea in the sticks, which are both addictive and pose potential health risks.  Later, a US district judge mostly dismissed a lawsuit accusing grocery chain Trader Joe’s of misleading and endangering consumers by failing to disclose that its dark chocolate contained harmful levels of heavy metals like lead and cadmium. The judge dismissed five claims while allowing claims brought from IL, NY, and WA to proceed (because those states have more specific laws).  At the same time, the Dutch government announced it would spend $2.7 billion to improve infrastructure in the Eindhoven region to prevent ASML from moving production operations abroad.  Later, REYN was sued for alleged false advertising in that the company’s premier Reynolds Wrap aluminum foil is labeled as “Made in USA” while only a small fraction of its materials (like aluminum) come from the US.  At the same time, a federal judge in CA appeared poised to reject TSLA’s bid to have a racial discrimination and harassment case thrown out.  The judge has not filed her ruling, but disagreed with TSLA counsel’s assertions many times during Thursday’s hearing.  Moreover, the judge seemed to agree the EEOC had included (cited) the relevant evidence in their own filing.  Elsewhere a federal just dismissed seven lawsuits against GS and MS related to misconduct that added fuel to the fire and ended Bill Hwang’s Archegos Capital Management company.  At the same time, the US Dept. of Commerce “asked” US companies to stop shipping goods to more than 600 new foreign parties, based on evidence those entities have been redirecting the shipments to Russia.  Those components have been found inside Russian munitions, machinery (“tank sights”, drone control circuits, data link encryption, etc.) on the battlefield in Ukraine.  Later, the TX Attorney General announced he has launched an investigation into BA and their main supplier SPR.  Also in TX, a federal judge (often sought out by conservatives who are “judge shopping”) threw a surprise into the case over whether the CFPB agency has the right to regulate card fees.  He did this by chiding the plaintiffs and transferring the case to a Washington DC court since no plaintiff lived in his court’s Fort Worth district, all the lawyers from both sides, and the agency being sued all reside in DC.

On Friday, AMZN announced it will spend $150 billion over the next 15 years on new and upgraded data centers to bolster its cloud services.  (AMZN hold more than twice the market share of MSFT, who is number two in the cloud computing market.)  Later, T announced Saturday that it is investigating an “incident” two weeks ago that has led to more than 65 million of its customer records being published on the dark web.  T reset the passwords of 7.6 million current users, but in addition, the private information (name, address ,phone number, date of birth, and social security number) of all 65 million has been disclosed.

The major economic news scheduled for Monday includes March S&P Global Mfg. PMI (9:45 a.m.), Feb. Construction Spending, March ISM Mfg. Employment, March ISM Mfg. PMI, and March ISM Mfg. Price Index (all at 10 a.m.).  There are no major earnings reports scheduled for before the open.  However, the major reports scheduled after the close are limited to PVH.

In economic news later this week, on Tuesday, we get Feb. Factory Orders, Feb. JOLTs Job Openings, API Weekly Crude Oil Inventories and Fed speakers Mester and Daly.  Then Wednesday, March ADP Nonfarm Employment Change, March S&P Global Services PMI, March S&P Global Composite PMI, March ISM Non-Mfg. Employment, March ISM Non-Mfg. PMI, March ISM Non-Mfg. Price Index, EIA, and Weekly Crude Oil Inventories.  On Thursday, we get Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, Feb. Exports, Feb. Imports, Feb Trade Balance, and Fed member Mester speaks.  Finally, 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 Tuesday, PAYX, CALM, and PLAY report.  Then Wednesday, we hear from AYI, BB, and LEVI.  On Thursday, CAG, LW, RDUS, and RPM report.  Finally, on Friday, we hear from GBX.

In miscellaneous news, on Thursday, the UK government backed the idea of them following the US in its move from a T+2 trade settlement timing to T+1 as the US, Canada, and Mexico will move to starting in May.  (China, India and 55% of global markets already settle using T+1 timing or will do so by the end of the year.)  The UK move puts immense pressure on the EU to follow suit.  On Friday, the Mortgage Bankers Assn. announced that the national average cost of a 30-year, fixed-rate loan fell to 6.79% last week (down from 6.87% the week prior).  Overseas, Chinese tech firm Huawei announced its net profits doubled in 2023, despite US sanctions.  The company saw a 9.6% year-on-year revenue increase and a 145% increase in net profit to $12.3 billion.  (Much of the increase came from their hit “Mate 60” smartphone that caused a 47% increase in phone sales in China in Q4…mostly at AAPL’s expense.)

In federal regulation news, a federal judge in TX (Judge shopped for the filing) struck down the Dept. of Transportation rules calling for states to measure, monitor, set declining goals, and mitigation plans toward those goals relate to greenhouse gas emissions.  Elsewhere, in a joint project, NASA and the EPA analyzed US landfills.  The study, published Thursday in the journal Science, found that landfill release was the third-largest source of release of Methane (a more potent greenhouse gas than CO2).  The study labeled 52% of US landfills as “super-emitters” which means they emit more than 100lbs of methane/hour, 24 hours a day, year after year.

With that background, I’m sorry but I feel like death. I did not want to not post the blog but knew I would not be up for it this morning. So, this is posted Sunday evening. Check the premarkets for yourself. However, none of the three major index ETFs are too extended but the T2122 is still well into the overbought territory. Also, don’t forget to put an eye on the 10 big dog tickers. They will point the way for the rest of the market, at least early.

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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🎯 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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