Durable Goods and Earnings Lead the News
Monday was all about Chinese startup DeepSeek calling US tech leader investments into AI into question. SPY gapped gown 2.16%, DIA gapped down 0.80%, and QQQ gapped down 3.52%. From that point, SPY and QQQ chopped along the bottom end of the opening gap the rest of the day. Meanwhile, after its much smaller gap, DIA rallied modestly all day long. This action gave us a large gap-down, white-bodied, near Marubozu candle in the SPY. The post-gap rally got SPY back in the area of its T-line (8ema), but did not result in a retest. At the same time, QQQ gave us a huge gap-down Inverted Hammer type candle where price rallied off the lows, but then failed from the highs. Finally, DIA printed the strongest candle, gapping down (but staying above its T-line), but then rallied all day to give us a large white Bullish Engulfing candle.
On the day, five of the 10 of the sectors were in the green with Consumer Defensive (+2.27%) way out front among the gainers. On the other side, Technology (-4.05%) took a huge hit and was by far the biggest losing sector. Meanwhile, SPY lost 1.41%, DIA gained 0.68%, and QQQ lost 2.91%. At the same time, VXX popped 6.59% to close at 44.49 while T2122 dropped but remained in (the lower part of) its overbought range, closing at 82.47. On the bond side, 10-Year Bond yields fell back to 4.534% and Oil (WTI) dropped 2.09%, closing at $73.10 per barrel. So, Monday was a market response (overreaction?) to an impressive Chinese startup AI that has been claimed to have been developed fast (two years by a handful of very good guys as a side gig) and trained very cheaply ($6 million) on supposedly lower-end hardware (since embargoes supposedly prevent China from getting the high-end AI cards). This made the market question the literal hundreds of billions of dollars western tech giants have plowed into AI development and training. However, this was later tempered by second-thoughts on whether the Chinese government might have secretly footed a hugely larger bill or if the performance was really as good as it appears. The result was a big gap lower and then a rethink rebound with some rotation into big defensive names thrown in.
The major economic news on Monday was limited to December Building Permits which came in slightly below expectations at 1.482 million (versus to a 1.483 million forecast but down a bit from November’s 1.493 million reading). Later, December New Home Sales came in higher than expected at 698k (compared to a 669k forecast and Nov. 674k value).
There was no Fed news Monday as they prepare for Wednesday’s FOMC meeting. (That meeting is expected to be a hold by most analysts and 99.5% of Fed Futures traders.)
After the close, BRO, CR, NUE, SANM, WRB, and WAL all reported beats on both the revenue and earnings lines. Meanwhile, ARE missed on revenue while meeting on earnings. On the other side, AGNC beat on revenue while missing on revenue. However, GGG missed on both the top and bottom lines.
Overnight, Asian markets were mixed with many exchanges still closed for Lunar New Year. In Europe, we see green with 12 of the 14 bourses above break-even at midday. The CAC (+0.26%), DAX (+0.63%), and FTSE (+0.41%) lead the region higher in early afternoon trade. In the US, as of 7:40 a.m., Futures are pointing toward a flat start to the day. DIA implies a -0.08% open, the SPY is implying a +0.06% open, and QQQ implies a +0.08% open at this hour. At the same time, 10-Year Bond yields are up to 4.565% and Oil (WTI) is up 0.72% to $73.70 per barrel in early trading.
The major economic news scheduled for Tuesday includes Preliminary December Durable Goods Orders (8:30 a.m.), January Conf. Board Consumer Confidence (10 a.m.), and the API Weekly Crude Oil Stocks report (4:30 p.m.). The major earnings reports scheduled for before the open include ADNT, BA, GM, IVZ, JBLU, KMB, LMT, PCAR, PII, BPOP, RCL, RTX, SYF, SYY, and XRX. Then after the close, BXP, CB, FFIV, HLI, LFUS, LOGI, NXT, PKG, QRVO, RNR, SAP, SBUX, LRN, and SYK report.
In economic news later this week, on Wednesday, Preliminary December Goods Trade Balance, Preliminary December Retail Inventories, EIA Weekly Crude Oil Inventories, FOMC Interest Rates Decision, FOMC Statement, and Fed Chair Press Conference are reported. On Thursday, we get Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, Preliminary Q4 Core PCE Prices, Preliminary Q4 GDP, Preliminary Q4 GDP Price Index, December Pending Home Sales, and Fed Balance Sheet. Finally, on Friday, December PCE Price Index, December PCE Price Index, December Personal Spending, Q4 Employment Cost Index, and Chicago PMI are reported.
In terms of earnings reports later this week, on Wednesday, AIT, ASML, ADP, AVT, EAT, GIB, GLW, DHR, EXP, FLEX, GD, GPI, HES, LII, MHO, MSCI, NDAQ, NSC, OTIS, PGR, SLGN, SF, TMUS, TEVA, VFC, AMP, AXS, CHRW, CP, CLS, CCS, CMPR, IBM, LRCX, LSTR, LVS, LEVI, LBRT, MTH, META, MEOH, MSFT, NFG, RJF, RHI, SEIC, SIGI, NOW, TER, TSLA, TTEK, URI, WDC, WHR, and WM report. On Thursday, we hear from FLWS, AOS, MO, ABG, AVY, BBVA, BX, BFH, BC, CAH, CRS, CAT, CHKP, CI, CMCSA, CFR, DOV, DOW, IP, KEX, LHX, LAZ, MAN, MMC, MA, MBLY, MUR, NOK, NOC, OSK, PH, PHM, DGX, RCI, ROP, SNY, SCSC, SNDR, SHW, SIRI, LUV, STM, TMO, TSCO, TT, UPS, VLO, AAPL, AJG, TEAM, BKR, BOOT, CNI, CACC, DECK, EMN, GEN, HIG, INTC, KLAC, LPLA, OLN, PFSI, PPG, RMD, SKYW, X, V, and WY. Finally, on Friday, ABBV, AON, ARCB, ALV, BSAC, BAH, BR, BEPC, BEP, CHTR, CVX, CHD, CL, ETN, XOM, BEN, GNTX, IMO, JHG, LYB, NVS, OMF, PSX, RVTY, VSTS, and GWW report.
So far this morning, GM, IVZ, JBLU, KMB, PII, BPOP, RTX, SAP, and SFY have all reported beats on both the revenue and earnings lines. Meanwhile, ADNT, and XRX beat on revenue while missing on earnings. On the other side, LMT and RCL missed on revenue while beating on earnings. However, BA missed on both the top and bottom lines.
With that background, markets look undecided so far this morning. SPY is retesting its T-line (8ema). However, both SPY and DIA are giving us Doji candles in premarket. For its part, QQQ gapped higher but has sold off in a black-body candle since then in the early session. SPY and QQQ remain below their T-line (8ema). With that said, the short-term trend is on the bearish side of mixed. The mid-term downtrend is now a mess and can best be described as broad-range chop. In the long-term all three are bullish. In terms of extension, only QQQ is now extended below its T-line. Meanwhile, T2122 is back in the lower end of its overbought range. So, both sides have room to work, but the Bulls have slightly more slack. In terms of the 10 Big Dogs, six of the 10 are in the green with NVDA (+2.53%) far out in front on a rebound from Monday’s drubbing. On the other side, AMZN (-0.57%) leads the four losers lower early. As far as liquidity goes NVDA leads the way, having traded eight times as much dollar-volume as TSLA, which itself has traded twice as much as AAPL.
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.
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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