SPY Gave Us its 36th All-Time High of 2024

Market started out higher again Tuesday.  SPY gapped up 0.17%, DIA opened just on the red side of flat, down 0.05%, and QQQ gapped up 0.30%.  Fron there SPY ground sideways in a tight range all day.  Meanwhile, QQQ traveled sideways for 45 minutes and then sold off slowly until 1:30 p.m., having crossed the gap in the process and then traded along the previous close level.  Finally, DIA was most volatile, selling off half a percent in the first hour, then rallying 0.90% between 10:30 am and 1 p.m., and selling back off 0.60% in the afternoon.  This action gave us indecisive candles in all three major index ETFs.  SPY and QQQ gave us gap-up, black-body Spinning Top type candles.  Both printed new all-time highs and new all-time high closes.  However, DIA printed a black-bodied Doji type that retested (and passed the tests) both of its 17ema and T-line (8ema).  This happened on well-below average volume in the SPY, just-below average volume in the QQQ, and just-above average volume in the DIA.

On the day, six of the 10 sectors were in the red again with Energy (-0.88%), Basic Materials (-0.68%), and Industrials (-0.66%) leading the way lower. On the other side, Financial Services (+0.51%) was by far the strongest sector.  At the same time, SPY gained 0.10%, DIA lost 0.00%, and QQQ gained 0.09%.  VXX gained just a tad, but it remains extremely low at 10.30 and T2122 fell down to just the edge of its oversold territory at 19.41.  On the bond front, 10-year bond yields was up a bit t0 4.297% and Oil (WTI) fell 0.63% to close at $81.81 per barrel.  So, Tuesday was another “much ado about nothing” day where the Bulls took SPY and QQQ to new all-time highs and all-time high close.  Meanwhile, the Bears were unable to push the DIA lower.  In the end, all three ended up little changed.  It looks as if traders may be waiting on the CPI data on Thursday.

The major economic news scheduled for Tuesday were limited to the EAI Short-Term Energy Outlook, which forecasts record electric use in the US in 2024 and again in 2025.  The EIA projects the percentage generated from natural gas to remain at 42%, while coal-based production continues to fall to 15% this year and 14% in 2025.  On the oil front, EIA expects global oil demand to outstrip production by 0.900 million barrels per day in 2025.  (Current OPEC+ production cuts are just about 6 million barrels per day.  So, this could flip, if OPEC+ decides to discontinue their self-imposed restrictions.)  US oil production is the largest in the world (13.25 million bpd) and will grow by 320k bpd in 2024 as well as climbing again in 2025.  However, US natural gas production will decline in 2024 to 103.5 billion cubic feet per day (from a record 103.8 bcfd in 2023) as producers try to prop up prices.  In addition, Natgas demand will grow from a record 89.1 bcfpd in 2023 to 89.4 bcfpd in 2024 before easing to 89.2 bcfpd in 2025.  Later, after the close, the API Weekly Crude Oil Stocks showed a drawdown that was larger than expected at -1.923 million barrels (compared to a -0.250-million-barrel forecast but far less than the prior week’s -9.163 million barrels).

In economic speak news, on Tuesday, FOMC Vice Chair for Bank Supervision Barr said that the Fed is considering a rule change that could save the US’s eight largest banks billions of dollars in freed-up capital.  (The bank is considering caving to global bank demands of a looser calculation of the capital they must keep on hand.  Those banks held $230 billion in capital on hand in Q1 to offset systemic risks. The change could free up a half percent of capital at each bank, which can then be plowed into lending or trading operations…at the cost of slightly less cushion in the event of a crisis.)   The banks affected include JPM, BAC, C, WFC, GS, MS, BNY, and STT.  Later, Fed Chair Powell told Congress the US economy was no longer overheated. He continued, “We are well aware that we now face two-sided risks, … The labor market appears to be fully back in balance.”  Powell said that he did not want to be seen to be sending any signals about the timing of future policy changes.  This came in response to GOP Senator Cramer saying any move to lower rates prior to the election would be bad.  However, Powell’s headline comment was that keeping rates too high for too long could jeopardize growth.  He said, “Reducing policy restraint too late or too little could unduly weaken economic activity and employment.”  He concluded by saying that more good inflation data would strengthen the case for a rate cut.  At the same time Powell was testifying before the Senate, Treasury Sec. Yellen told a House Committee that the economy has made “tremendous progress” toward reducing inflation.  She said, “I believe that it (inflation) will continue to come down over time. (However,) Rents and housing costs continue to leave it higher than we would ideally like.”

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In stock news, on Tuesday, BA announced its plane deliveries fell 27% year-on-year in June.  However, BA said the 44 jets delivered was the highest number it has delivered in any month so far in 2024.  Later, a study published in JAMA showed that the LLY weight loss drug Mounjaro/Zepbound provides faster and greater weight reduction than competitor NVO’s Ozempic/Wegovy drugs.  (Both drugs are in the same class, but used different active ingredients.)  NVO stock fell 1.85% on the news while LLY gained 1.58%.  At the same time, Reuters reported that ORCL ended talks on a $10 billion deal to provide Elon Musk’s xAI startup with servers.  (This was a potential expansion of the existing deal where ORCL provides xAI cloud services access to NVDA AI chips.)  After the close, IDC (research firm in tech space) announced that global PC shipments rose by 3% in Q2.  This was the second-straight quarter of increase after two years of decline.  According to IDC data, AAPL computer shipments jumped 20.8% on new product releases compared to Q2 of 2023.  Meanwhile, while on the real PC side (about 85%-90% of the market) Taiwan-based Acer led the gains at 13.7% while DELL saw a 2.4% decline.  Finally, PATH announced it will lay off 10% its workforce (420 jobs) in a restructuring.  PATH stock fell 7% on the news.

In stock legal and governmental news, on Tuesday the US Consumer Financial Protection Bureau announced a $20 million fine of FITB for allegedly opening fake customer accounts and forcing customers to buy auto insurance even though they already had coverage.  At the same time, the NHTSA opened a recall inquiry into 94k STLA Jeep hybrid SUVs over the loss of power while in operation.  (STLA had a recall over the same issue with all-electric Jeep Wranglers in 2022.)  Meanwhile, the NHTSA also announced the LCID is recalling 5,200 of its 2022-2023 Air luxury sedans over a software issue that could cause the same problem as STLA Jeeps face.  Later, the state of MI reduced the incentive package (by almost $600 million) that F will receive for its battery plant in Marshall after the company announced expected production cuts.

Overnight, Asian markets leaned to the green side on modest trading with seven of the 12 exchanges above break-even.  Thailand (+0.99%), New Zealand (+0.80%), and Japan (+0.61%) led the region modestly higher on the day.  In Europe, with the lone exception of Greece (-0.51%) we see green across the board at midday.  The CAC (+0.55%), DAX (+0.50%), and FTSE (+0.58%) lead the region higher in early afternoon trade.  In the US, as of 7:30 a.m., Futures are pointing toward a mostly green start to the day.  The DIA implies a flat open, the SPY is implying a +0.17% open, and the QQQ implies a +0.29% open at this hour.  At the same time, 10-Year bond yields have fallen to 4.273% and Oil (WTI) is down 0.27% to $81.21 per barrel in early trading.

The major economic news scheduled for Wednesday are limited to EIA Weekly Crude Oil Inventories.  However, Fed Chair Powell testifies again (10 a.m.) and Fed Governor Bowman speaks again at 2:30 p.m.  There are no major earnings reports set for before the open.  Nevertheless, after the close, PSMT and WDFC report.

In economic news later this week, on Thursday, we get June Core CPI, June CPI, Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, and June Federal Budget Balance.  Fed member Bostic also speaks.  Finally, on Friday, June Core PPI, June PPI, Michigan Consumer Sentiment, Michigan Consumer Expectations, Michigan 1-Year Inflation Expectations, Michigan 5-Year Inflation Expectations, and the WASDE Ag report are delivered.

In terms of earnings reports later this week, Thursday, earnings start again as we hear from CAG, DAL, and PEP.  Finally, on Friday, BK, C, ERIC, FAST, JPM, and WFC report.

In miscellaneous news, more than 2 million residences and businesses in South Texas remain without power last night.  This comes as the forecast is calling for a heat index of 106 degrees for Wednesday.  Elsewhere, House GOP members introduced and passed bills to roll back Energy Dept. energy efficiency standards for both refrigerators and dishwashers.  The obviously political stunt passed along party lines and will die in the Senate.

With that background, it looks as if markets are slightly bullish in the premarket. All three major index ETFs started the early session flat, but have put in white-bodied candles since then with QQQ leading the way as usual. QQQ and SPY are both testing Tuesday’s all-time high at this point. So, regardless of your timeframe, the market trend (short-term, mid-term, or longer-term) remains very bullish. In terms of extension, QQQ is stretched above its T-line. and SPY is pushing its extension. The T2122 indicator is just in the edge of its oversold range. Therefore, the market still has room to run in either direction, but the Bears have much more slack to work with today. (We are in need of rest or pullback in the QQQ and SPY.) With regard to those 10 big dog tickers, all 10 are in the green early this morning and the biggest dog, NVDA (+1.49%) leads the way on both price move and volume.

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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