Markets diverged on Thursday.  SPY gapped up 0.16%, DIA gapped up a whopping 0.58%, and QQQ opened flatish, up just 0.08%.  From there, the SPY traded sideways with a very slight bearish trend until 2 p.m. when it slowly rallied, crossing back across the gap and closing very near the highs of the day.  At the same time, DIA traded sideways from the open with a very slight bullish trend until 2 p.m. when it too began a stronger rally, also closing very near the highs of the day.  Finally, QQQ sold off pretty strongly until noon, traded sideways along the lows until 2 p.m., and then also rallied the last two hours of the day, closing about halfway between the lows and the open.  This action gave us a white-bodied, Bullish Harami Hammer candle in the SPY, a large body white candle that could be seen as a “Best Friend” in the DIA, and a black-bodied Hammer candle in the QQQ.  All three major index ETFs remain above their T-line (8ema) and now-rising 50sma. 

On the day, eight of the 10 sectors were in the green again with Healthcare (+1.02%) and Industrials (+0.98%) out front leading the way higher while Technology (-0.28%) lagged well behind the other sectors.  At the same time, the SPY gained 0.39%, DIA gained 1.51%, and QQQ lost 0.25%. (DIA was led by a massive +9.36% day by CRM.)  The VXX fell 1.54% to close at 17.29 and T2122 rose a bit to the middle of its overbought territory at 89.59.  10-year bond yields rose to 4.33% and Oil (WTI) dropped 2.89% to close at $75.61 per barrel. So, Thursday saw divergence with DIA popping and running to new highs going back to January 2022.  Meanwhile, SPY and QQQ both continued to grind sideways in their consolidations.  This happened on average volume in the DIA and QQQ, as well as less-than-average volume in the SPY.

The major economic news reported Thursday included the October PCE Price Index (month-on-month) which came in lower than expected at 0.0% (compared to a forecasted +0.1% and the September value of +0.4%).  On a year-on-year basis, October’s PCE Price Index was in line with predictions at +3.0% (versus a +3.0% forecast and down significantly from the +3.4% September reading). At the same time, the Oct. Core PCE Price Index was right in line with anticipated values (which means down significantly) as month-on-month at +0.2% (compared to a +0.2% forecast but far lower than September’s +0.7% reading).  On a year-on-year basis, Oct. Core PCE Price Index came in at +3.5% (versus a forecast of +3.5% and down only a bit from September’s +3.7% value).  Elsewhere, the Weekly Initial Jobless Claims came in very near expectation at 218k (compared to a forecast of 220k and up a bit from the prior week’s 211k).  At the same time, October Personal Spending (month-on-month) was at +0.2% (versus a +0.2% forecast and well down from the Sept. reading of +0.7%).  Later, Chicago PMI came in much better than predicted at 55.8 (compared to a 45.4 forecast and the previous value of 44.0).  Then, Oct. Pending Home Sales fell less than expected, down 1.5% (versus a -2.0% forecast but far worse than September’s +1.0%).  Finally, after the close, the Fed Balance Sheet continued its fall, dropping from $7.811 trillion to $7.796 trillion (down $15 billion for the week).

After the close, AMWD, MRVL, and ULTA all reported beats on both the revenue and earnings lines.  Meanwhile, DELL missed on revenue while beating on earnings.  It is worth noting that also DELL lowered its guidance.

In retrospect, November is the best month the market has seen all year. The SPY gained 9.13% (most since July of 2022) for the month. Meanwhile, DIA added 8.93% (the biggest monthly gain it has seen since October 2022). Finally, QQQ saw 10.82% of gains, which was its biggest monthly bullish move since July 2022 as well. At the same time, 10-year bond yields were down nearly 11%.

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.”

Overnight, Asian markets were mixed but leaned to the green side in terms of breadth.  Hong Kong (-1.25%) and South Korea (-1.19%) were by far the biggest movers in the region with India (+0.67%) leading the more numerous green exchanges to gains.  In Europe, with the exceptions of Russia (-0.47%) and Denmark (-0.14%) we see green across the board at midday.  The CAC (+0.38%), DAX (+0.74%), and FTSE (+0.65%) are leading the region higher in early afternoon trade.  In the US, as of 7:30 a.m., the Futures are pointing toward a mixed and modest start to the day.  The DIA implies a +0.12% open, the SPY is implying a -0.07% open, and the QQQ implies a -0.25% open at this hour.  At the same time, 10-year bond yields are up slightly to 4.344% and Oil (WTI) is just on the green side of flat at $76.07 per barrel in early trading.

The major economic news scheduled for Friday includes Nov. S&P Global Mfg. PMI (9:45 a.m.), Nov. ISM Mfg. Employment, Nov. ISM Mfg. PMI, and Nov. ISM Mfg. Price Index (all three at 10 a.m.).  We also hear from Fed Chair Powell at 11 a.m.  The major earnings reports set for before the open are limited to GCO and BMO.  There are no earnings reports scheduled for after the close. 

So far this morning, BMO reported a huge beat ($14 billion vs $6.07 billion estimate) on revenue while coming in just in-line on earnings.  Unfortunately, GCO missed on both the top and bottom lines.

In miscellaneous overseas news, Reuters reports that the third-largest investment bank in China (CICC) has been told not to publish any bearish views on the Chinese economy or markets.  The bank was also told that its staff should not wear luxury brand clothing and accessories or disclose their pay.  Elsewhere, OPEC+ agreed to raise its production cuts by 2.2 million barrels per day for Q1 2024. (The group had already reduced production by five million barrels per day, mostly by Saudi Arabia, to support oil prices.) However, there was major confusion in Oil markets as the group provided no details on which countries were going to cut their output, by exactly how much, or exactly when. The group’s communique just said “early 2024” with individual countries (like UAE, who said “during Q1”, and Saudi Arabia, who said “during 2024”) muddying the waters. Lastly, Bloomberg said Friday that there are signs President Biden’s meeting with Chinese President Xi and the US’s low-key approach to China are bearing some fruit. The report a series of “market opening” measures taken by China since the recent event, including approving joint ventures and mergers as well as allowing visa-free access to citizens of six more countries (five in Europe plus Malaysia). The report also pointed out Chinese intervention to bolster and stabilize its stock markets.

In late-breaking news, PFE announced it has stopped development of a twice-daily version of its experimental weight-loss drug due to high rates of adverse side effects discovered during mid-stage trials. However, PFE said it will still continue development and release data on a once-daily version of the drug (different dosage means different side effects). This is a significant blow to PFE, which was trying to cash in on the wildy popular and fast-growing $10 billion weight-loss drug market now dominated by NVO and LLY. (PFE said it expects the niche to grow to $90 billion per year eventually.)

With that background, it looks like markets are again diverging and are undecided so far in the premarket session. The DIA gapped up in the early session but has sold off steadily to form a black bodied candle that is little changed from Thursday’s close. SPY did the same thing but had gapped up less and sold off more to creat a Bearish Engulfing candle so far this morning. For its part, QQQ opened the premarket flat and has sold off since, now retesting its T-line (8ema) for support. The SPY and DIA remain above their T-line (8ema) and all three are well above their 50smas. So, the Bulls are still in control of both the shorter and the longer-term trend. In terms of extension, the major index ETFs are all near their T-lines (8emas). At the same time, the T2122 indicator has now climbed back up into the center of its overbought territory. So, the Bulls still 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. Lastly, remember that it’s Friday…pay day. So, take some money off the table and get your account ready (lightened up or hedged) for the coming weekend news cycles,

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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