Powells Speaks and Premarket Flat

Tuesday was another bullish day in the market.  The SPY opened flat, DIA “gapped” down 0.09%, and QQQ gapped up 0.25% at the open.  At that point, all three major index ETFs made a morning rally, with QQQ by far the strongest.  Then after 11 a.m., all three meandered sideways in a fairly tight range the rest of the day, all of the ending on a down wave.  This action gave us white-bodied candles in the SPY, DIA, and QQQ with SPY and DIA printing a Spinning Top and QQQ printing a larger-body candle.  It is worth noting all three are at or have just broken through a potential resistance level.  All three also remain well above their T-line (8ema) although the consolidation in DIA is helping alleviate extension a bit.  This all happened on well-below-average volume in the SPY, DIA, and QQQ.

On the day, six of the 10 sectors were in the red with Energy (-2.36%) leading the way lower while Technology (+1.06%) pulling the rest of the market higher.  At the same time, the SPY gained 0.28%, DIA gained 0.95%, and QQQ gained 0.15%.  The VXX fell another 0.41% to close at 20.39 and T2122 fell again but remained in the middle of its mid-range at 48.88.  10-year bond yields fell to 4.571% and Oil (WTI) plummeted 4.19% to close at $77.45 per barrel.  So, Tuesday gave us a seventh-straight day of gains in the SPY and DIA and the eighth day of gains in the QQQ.  However, again this was another low-volume and indecisive day in the large-caps while things were more bullish in the QQQ. 

The major economic news reported Tuesday included September Exports, which came in higher than August at $261.10 billion (compared to an August value of $255.40 billion).  At the same time, September Imports were also up at $322.70 billion (versus the August value of $314.10 billion).  Together, these gave us a Sept. Trade Balance that came in higher than expected at -$61.50 billion (compared to a forecast of -$59.90 billion and an August reading of -$58.70 billion).

In Fed speak news, Minneapolis Fed President Kashkari again said the Fed may need to do more in a Bloomberg interview Tuesday morning.  Kashkari said, “When activity continues to run this hot, that makes me question if policy is as tight as we assume it currently is.”  He continued, “So if you saw inflation tick back up and you saw continued very strong economic activity in the real side of the economy that would tell me we might need to do more.”  However, shortly afterward, Chicago Fed President Goolsbee told CNBC that the Fed is making progress and reiterated that he continues to see the US as being on a “golden path” where inflation comes down without a recession or much of a slowing.  Goolsbee said, “Over the next couple of months, we might equal the fastest drop in inflation in the last century.”  Goolsbee continued, “So we’re making progress on the inflation rate … and as long as we’re making progress, as I’ve been saying for a while, the moment of arguing how high should the (policy) rate go is going to fade to how long should we keep rates at this level as inflation is coming down.” Later, Fed Governor Waller told a St. Louis Fed seminar (talking about the Q3 GDP data), “This was an outstanding quarter…this big blowout number.”  He continued, “Everything was booming.  So, this is something we are keeping a very close eye on when we think about policy going forward.”

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In stock news, on Tuesday TM informed its dealers that it is reducing production at its joint venture plants in China.  Originally, TM had planned to reduce production in Oct. and Nov.  However, the announcement said production will now be reduced through February as the company tries to reduce an inventory glut.  Later, UAW members working for GD voted to approve the tentative contract agreement reached in October. At the same time, CNHI announced plans to delist in Italy and maintain a single listing on the NYSE as of Jan. 2, 2024.  In addition, CNHI announced a new $1 billion share buyback plan.  Later, Reuters reported that NFE had terminated a joint project with Mexican energy company Pemex to develop a deep-water LNG project in the Gulf of Mexico.  (The same project was canceled in 2016 as being too expensive before being revived in 2019.)  Elsewhere, STLA announced plans to retire its V-8 Hemi engine in Ram pickup trucks starting in 2025 as it moves toward hybrid and electric versions of the truck.  Later, TSLA reported a “notable increase” in new car registrations in China.  The report showed 14,000 insurance registrations of TSLA cars in China for the week ending Nov. 5 versus 10,800 the prior week.  After the close, Reuters reported that sources tell it that GS intends to “offload” the GM credit card business.  Also after the close, Bloomberg reported that AAPL has halted development of software for iPhones, iPads, Macs, and other devices so that developers can focus on finding glitches and bugs in the existing code.  This rare move came after a proliferation of bugs have been reported in recent months.

In stock government, legal, and regulatory news, JNJ announced Tuesday that it will seek FDA clearance for its Ottava robotic surgery system in 2024.  This comes after delays caused by technical issues and COVID-19 disruptions.  (If approved, JNJ’s system will compete with the ISRG and MDT robotic surgery systems.)  Across the pond, the UK government revealed upcoming legislation that will make automakers (not individual vehicle owners) liable for any accidents that happen when self-driving is engaged.  This came at the urging of the insurance industry and may auger events to come in the US.  Back in the US, the CFPB proposed a new rule Tuesday that could extend the agency’s reach to cover nonbank digital wallet providers such as AAPL, GOOGL, and PYPL.  At the same time, GE did settle with the Dept. of Justice for $9.4 million over allegations of selling uninspected and out-of-spec parts to the US Army and Navy.  Elsewhere, by a 2-1 vote, the 9th Circuit Court of Appeals upheld an injunction on the state of CA, preventing them from requiring businesses to warn consumers that the active ingredient in MON’s Roundup weedkiller causes cancer.  Later the FTC sent a letter to ABBV, AZN, and TEVA saying the agency will dispute 110 patents the companies have filed with the FDA to prevent competitors from selling similar products. 

After the close, AKAM, DVA, DVN, EC, GILD, IAC, JHX, JKHY, KD, MBC, OXY, PRI, PRIM, RXT, and TOST all reported beats on both the revenue and earnings lines.  At the same time, AMRK, CIVI, COTY, CPNG, EBAY, PLUS, EXR, MOS, PR, RIVN, and STE beat on revenue while missing on earnings.  On the other side, AEL, BHF, CAPL, FG, FNF, GO, GXO, IOSP, MASI, HOOD, MRC, TKO, and VTRS missed on revenue while beating on earnings.  Unfortunately, ANDE, DAR, DOOR, OVV, PAAS, and SNBR missed on both the top and bottom lines.  It is worth noting that DVA, EBAY, and JKHY raised their forward guidance.  However, GO, MASI, and SNBR lowered their forward guidance.

Overnight, Asian markets were mixed with Singapore (-1.39%) and South Korea (-0.91%) pacing the seven losing exchanges while Taiwan (+0.33%), Australia (+0.26%), and Thailand (+0.25%) lead the five gaining exchanges.  Meanwhile, in Europe, we see a similar mixed picture at midday.  The CAC (+0.13%), DAX (-0.09%), and FTSE (unch) are typical of the region in early afternoon trade.  In the US, as of 7:30 a.m., Futures are pointing toward a similar flat and mixed start to the day.  The DIA implies a +0.01% open, the SPY is implying a -0.03% open, and the QQQ implies a -0.11% open at this hour.  At the same time, 10-year bond yields are up slightly to 4.587% and Oil (WTI) is down another nine-tenths of a percent to $76.69 per barrel in early trading.

The major economic news scheduled for Wednesday are limited to EIA Crude Oil Inventories (10:30 a.m.).  We also hear from Fed Chair Powell (9:15 a.m.) as well as Fed member Williams (1:40 p.m.).  The major earnings reports scheduled for before the open include ADNT, BIIB, GIB, CRL, CCO, SID, EDR, GTN, IBP, BEKE, K, MIDD, NFE, NYT, NXST, ODP, PTEN, PFGC, PLTK, PSNY, RL, RPRX, REYN, RBLX, SEAS, FOUR, SWX, SPTN, STWD, SHOO, TRP, TEVA, UAA, UWMC, VSH, WBD, and KLG.  Then, after the close, AE, AFRM, ALTG, AMC, APP, ASH, ATO, GBS, ATG, CENX, CTVA, ENS, FLT, G, HP, HUBS, JXN, JAZZ, KGC, LYFT, MFC, MATV, MGM, SU, TTWO, MODG, TTEC, TWLO, UHAL, VSAT, and DIS report. 

In economic news later this week, on Thursday, we have the Weekly Initial Jobless Claims, WASDE Ag Report, and Fed Chair Powell speaks again.  Finally, on Friday, Michigan Consumer Sentiment, Michigan Consumer Expectations, Michigan 1-Year Inflation Expectations, and Michigan 5-Year Inflation Expectations are reported.

In terms of earnings reports later this week, on Thursday AEE, MT, BDX, CLMT, TAST, COMM, DBD, EPC, GLP, GRAB, HBI, HE, HBM, IHRT, KELYA, LI, EYE, NOMD, ACDC, RCI, SN, SCSC, SONY, SLVM, TPR, TDG, USFD, WRK, WWW, YPF, CANO, CPRI, FLO, HOLX, ILMN, LNW, MTD, NWSA, NGL, PBR, RBA, STN, TTD, TPC, U, and WYNN report.  Finally, on Friday, AQN, AU, and STNE report.

In miscellaneous news, the NY Fed reported Tuesday that US credit card debt has now topped $1 trillion to reach a record $1.08 trillion at the end of Q3.  That amounted to a $154 billion increase year-over-year.  It is worth noting that the average annual rate for US credit cards is not over 20% (also an all-time high).  Elsewhere, the Mortgage Brokers Assn. reported that the rate of the average US mortgage plunged by a quarter of a percent last week from 7.86% to 7.61%.  As a result, mortgage demand picked up with refinance loan applications rising 2% for the week and new home purchase loan applications increasing 3% versus the prior week.  Overall loan applications were up 2.5% on the week.

So far this morning, ADDYY, BIIB, EDR, GIB, CRL, CRZBY, FOUR, EONGY, ICL, BEKE, KNBWY, ADRNY, NYT, REYN, TEVA, and SHOO all reported beats on both the revenue and earnings lines.  Meanwhile, GTN, NFE, and PTEN all beat on revenue while missing on earnings.  On the other side, MIDD, ODP, PFGC, SEAS, STWD, and UAA missed on revenue while beating on earnings.  Unfortunately, ADNT, CCO, PLTK, RPRX, and SPTN missed on both the top and bottom lines.

With that background, it looks like yet again Mr. Market is undecided early in the day. The Premarket started flat and mixed in all three major index ETFs. From that point, all three have printed small, indecisive, and mixed-color candles during the early session. All three remain well above their T-line (8ema) and 50smas. So, the Bulls still have control of the short-term trend. Keep in mind that all three remain 4%-5% below their summer highs. So, the Bears remain in control of the longer-term trend. In terms of extension, all three remain a bit stretched from their T-line but the T2122 indicator has dropped back into its mid-range. So, while there is some room to run in either direction, the market remains in need of a pause or pullback to relieve extension. Remember that we’ve had quite a string of gains in a row. So we’re stretched to the upside. (However, also remember that the market can stay stretched longer than we can stay afloat knowing it has to turn soon.) So, be aware of that potential volatility.

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.


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