Rally to All-Time Highs On CPI Relief

Wednesday was the Bulls’ Day from open with markets popping and following through on slightly better than expected CPI data.  (It was actually much better than was expected after Tuesday’s worse than expected PPI data.)  SPY gapped up 0.49%, DIA gapped up 0.42%, and QQQ gapped up 0.57%.  From there, all three major index ETFs followed through with a steady rally that lasted all day.  (DIA was a shallower rally than the other two, but steadily gained all the same.)  This action gave us gap-up, large, white-bodied candles in all three.  It is worth noting that all three printed new all-time highs and also closed at new all-time high closes.  Obviously, this means all three remain well above their T-lines (8emas).  This happened on less-than-average volume in the SPY, DIA, and QQQ.

On the day, eight of the 10 sectors were in the green with Technology (+1.99%) way out in front leading the gainers higher.  Meanwhile Energy (-0.26%) was the laggard and only appreciable losing sector.  At the same time, SPY gained 1.23%, DIA gained 0.94%, and QQQ gained 1.56%.  VXX dropped 3.92% to close at 11.52 and T2122 spiked up into the top end of its overbought territory to close at 95.44.  At the same time, 10-year bond yields fell sharply to 4.342% and Oil (WTI) gained another 1.1% to close at $78.88 per barrel.  So, Wednesday was a big win for the Bulls surging higher from the premarket release of CPI data and continuing strong all day.  (There were no even appreciable breaks in the all-day rally).  With that said, having achieved the new all-time highs, markets are extended now.

The major economic news scheduled for Wednesday included April Core CPI (month-on-month), which came in exactly as expected at +0.3% (compared to a +0.3% forecast and down from March’s +0.4% reading).  On an annual basis, April Core CPI was also down exactly as expected at +3.6% (versus a +3.6% forecast and March’s +3.8% value).  On the headline side, April CPI (month-on-month) was better than was expected at +0.3% (compared to a +0.4% forecast and +0.4% March reading).  On the annualized basis, April CPI was in line with predictions at +3.4% (versus the +3.4% forecast and down from March’s +3.5% value).  At the same time, April Core Retail Sales were just as anticipated, down at +0.2% (compared to a +0.2% forecast and far down from March’s +0.9% reading).  On the headline side, April Retail Sales were flat at +0.0% (well down from the +0.4% forecast and March’s +0.6% value).  Meanwhile, the NY Empire State Mfg. came in lower than expected at -15.60 (versus the -9.90 forecast and even from the April -14.30 reading).  Later, March Business Inventories were better (lower) than predicted at -0.1% (compared to a 0.0% forecast and well below the February +0.3% value).  At the same time, March Retail Inventories were also better (lower) than expected at -0.2% (versus the -0.1% forecast and February reading).  On the oil front, EIA Weekly Crude Oil Inventories showed a much larger than expected drawdown of 2.508 million barrels (compared to a 0.400-million-barrel drawdown forecast and even from the previous week’s 1.362-million-barrel drawdown).

Click for video

In Fed speak news, on Wednesday, Minneapolis Fed President Kashkari added his voice to the “higher for longer” FOMC chorus.  Kashkari said, “The biggest uncertainty in my mind is how much downward pressure is monetary policy putting on the economy…that’s an unknown.”  “That (uncertainty) tells me we probably need to sit here for a while longer, until we figure out where underlying inflation is headed.”  He continued, “It seems like there is more resilience in the economy than I had expected.” 

After the close Wednesday, BKKT, CSCO, and CPA all reported beats on both the revenue and earnings lines. 

In stock news, on Wednesday, NFLX announced that its ad-supported subscription tier had reached 40 million users.  (That is up from 5 million one year ago.)  NFLX also said that ad-tier subscribers account for more than 40% of all new sign-ups.  (NFLX has 270 million overall subscribers.) Elsewhere, it was made public that BRKB has been buying CB stock “secretly” over the last two quarters and now holds a $6.7 billion stake with apparent intentions of buying more of the insurer.

Overnight, Asian markets were green across the board.  New Zealand (+1.75%), Australia (+1.65%), Hong Kong (+1.59%), and Japan (+1.39%) led the region higher.  However, in Europe, markets are much more mixed with only six of 15 bourses in the green at midday.  The CAC (-0.39%), DAX (-0.17%), and FTSE (-0.23%) are leading the region lower in early afternoon trade.  In the US, as of 7:30 a.m., Futures are now pointing toward an open just on the green side of flat.  The DIA implies a +0.05% open, the SPY is implying a +0.07% open, and the QQQ implies a +0.15% open at this hour.  At the same time, 10-year bond yields are down to 4.34% and Oil (WTI) is just on the red side of flat $78.58 per barrel in early trading.

The major economic news scheduled for Thursday includes April Building Permits, April Housing Starts, April Import Price Index, April Export Price Index, Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, and Philly Fed Mfg. Index (all at 8:30 a.m.), April Industrial Production, (9:15 a.m.), and Fed Balance Sheet (4:30 p.m.). We also hear from Fed members Vice Chair Barr (10 a.m.), Harker (10:30 a.m.), Mester (11:30 a.m.), and Bostic (3:50 a.m.).  Major earnings reports scheduled for before the open include BIDU, DE, IQ, JD, NICE, UA, UAA, and WMT.  Then, after the close, AMAT, CPRT, DXC, FLO, GLOB, and TTWO report. 

In economic news later this week, on Friday, April US Leading Economic Indicators Index is reported and we hear from Fed member Waller.

In terms of earnings reports later this week, on Friday, HTHT reports.

So far this morning, WMS, BIDU, DE, DDS, JD, NICE, and WMT all reported beats on both the revenue and earnings lines.  (WMT is of note, specifically reporting gains in online sales and noting an increase of higher-income shoppers.)

In late-breaking news, the European Commission announced META is now under investigation over whether or not the Facebook and Instagram platforms are built to cause addiction related to child safety risks.  (This action specifically noted the “rabbit-hole effect” built into content feeds and algorithms.  This being the case, it is hard to believe that GOOGL is not next in line related to YouTube with TikTok and the former Twitter to follow.)  

With that background, it looks as if the market wants to follow-through on Wednesday’s blowout rally, but is just too uncertain. All three major index ETFs opened the premarket higher. However, all three have also put in flat, indecisive candles since the start of the early session. (Perhaps traders are waiting on Jobless Claims?) As mentioned above, all three are at new all-time highs and well above their T-line (8ema). So, the short-term trend remains very bullish. Meanwhile, the mid-term is also bullish. And the longer-term market remains very Bullish as all three major index ETFs have returned to “fresh air” with no overhead resistance. In terms of extension, the SPY, DIA, and QQQ are all now extended above their T-lines. The T2122 indicator has also pulled back up well into the overbought area. So, a pause or pullback (at the least) are due, just to take profits and gather a new group of Bulls (FOMO money?) for a next wave higher. With that said, we have to remember that markets can, and sometimes do, remain overextended longer than we can stay solvent betting on a turn. In short, don’t predict, follow. With regard to those 10 big dog tickers, nine of the 10 are in the green at this point this morning with only META (-0.51%) falling on its EU investigation news. Remember, there will be 4-5 Fed members speaking today. So, while they tend to follow the party line, any of them could cause a knee-jerk in the market.

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.


LTA Scanning Software
TC2000 Discount

🎯 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.

Hit and Run Candlesticks / Road To Wealth Youtube videos

Disclosure: We do not act on all trades we mention, and not all mentions acted on the day of the mention. All trades we mention are for your consideration only.

Free YouTube Education  •  Subscription PlansPrivate 2-Hour Coaching

DISCLAIMER: Investing / Trading involves significant financial risk and is not suitable for everyone. No communication from Hit and Run Candlesticks Inc, its affiliates or representatives is not financial or trading advice. All information provided by Hit and Run Candlesticks Inc, its affiliates and representatives are intended for educational purposes only. You are advised to test any new trading approach before implementing it.  Past performance does not guarantee future results.  Terms of Service

Comments are closed.