PPI Data is On Deck Today

Markets shrugged off the CPI data and gapped higher at the open as the bull desperately tried to follow through on the prior two up days. However, after the gap, we saw whipsaw action that ended near where it opened.  This gave us indecisive black Doji-type candles sitting at or just above the T-line in all 3 major indices.  (Not what I would call clearly breaking any T-line resistance.) On the day, SPY gained 0.31%, DIA gained 0.16%, and QQQ gained 0.44%.  The VXX fell a percent to 17.63 and T2122 remains in the overbought territory at 82.13.  10-year bond yields fell to 1.739% and Oil (WTI) jumped another 1.91% to $82.78/barrel.

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As mentioned, before the open the December Consumer Price Index (CPI) data was released.  It came in a +7.0%, which was right in line with consensus forecasts and was the highest since 1982.  However, the last couple of days talking-heads on the various financial media outlets had been preparing traders for an even higher print.  So, apparently, the market took “in-line, at many-decade highs” as good news.  Later in the morning, crude oil inventories came in down significantly more than expected (-4.55million barrels vs -1.9million barrels est.), which was at least part of the reason for Oil price spikes on the day.

In a follow-up to last year’s Texas electricity crisis, Bloomberg reports there still appear to be problems.  At the start of the year (starting January 2), a cold snap caused the state to lose over 1.3 gigawatts of electric generation.  The losses were related to cold and specifically to their natural gas-fueled power plants.  This lost capacity caused short-term blackouts in areas of the state as the peak demand exceeded capacity by 2.4%.  Since Texas is not connected to the national electrical grids, the state is unable to pull the needed shortfall from other regions of the country. 

Overnight, Asian markets were mixed again.  Shenzhen (-1.96%), Shanghai (-1.17%), and Japan (-0.96%) were the main losses.  Meanwhile, the rest of the region was green, but only on modest moves.  In Europe, stocks are leaning to the downside on modest moves (with the exception of Russia (-2.25%) at mid-day.  The FTSE (-0.06%), DAX (-0.02%), and CAC (-0.61%) lead the region lower, but half a dozen of the smaller exchanges are green by half of a percent or less in early afternoon trading.  As of 7:30 am, US Futures are pointing toward a flat open.  The DIA implies a +0.12% open, the SPY is implying a +0.06% open, and the QQQ implies a +0.06% open at this hour. 10-year bond yields are moving higher again to 1.746% and Oil (WTI) is down slightly in early trading.

The major economic news scheduled for release Thursday is limited to Dec. PPI and Weekly Initial Jobless Claims (both at 8:30 am).  However, there is also a Fed speaker (Brainard testifies before her nomination hearing for the Fed Vice-Chair position at 10 am).  The major earnings reports scheduled for before the market is limited to TSM and DAL.  There are no major reports scheduled for after the close.

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Markets seemed unphased by the CPI data, but indecision quickly set in. All 3 major indices are struggling to break through and free of their T-line as traders contemplate the next move. However, the rotation out of growth and toward value (as well as names with pricing power) sure looks like a longer-term trend as inflation will be the underlying driver of markets for the foreseeable future. Remember that whipsaw action has been the norm. So, don't take positions unless you can handle at least short-term pain.

The first rule of making a lot of money in the market is to not lose a lot of money in the market. So, don't be stubborn. When you're wrong, just admit it and take your loss. (That's why we set stops.) Stick to your trading rules and on managing the things you can control. Don't chase, trade with the trend, keep consistently taking profits when you have them, and move your stops in your favor.

Ed

Swing Trade Ideas for your consideration and watchlist: BUD, TX, CAT, MDLZ, KO, XP, T. You can find Rick's review of tickers on his YouTube Channel here. Trade your plan, take profits along the way, and smart. Also, remember to check for impending earnings reports. Finally, remember that any tickers we mention and talk about in the trading room are not recommendations to buy or sell.

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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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