Tax Day Starts Green on GS and MTB Beats

Fridays brought us a gap lower to start the day. SPY gapped down 0.69%, DIA gapped down 0.58%, and QQQ gapped down 0.97%.  At that point, all three major index ETFs chopped sideways in a tight range.  DIA broke out of its sideways mover first, heading South shortly after 10 a.m.  Meanwhile, SPY and QQQ followed DIA by starting their selloffs at 10:30 a.m.  Those selloffs continued in waves the rest of the day in all three with just a modest bounce up off the lows the last 40 minutes.  This action gave us gap-down, black-bodied candles with both upper and lower wicks.  The SPY and QQQ candles also crossed back below their T-lines (8ema).  This all happened on average volume in all three major index ETFs.

On the day, all 10 sectors were in the red with Technology (-2.09%) and Consumer Cyclicals (-2.08%) out in front leading the rest of the market lower.  Meanwhile, it was Utilities (-1.09%) holding up better than the other sectors.  At the same time, SPY lost 1.38%, DIA lost 1.20%, and QQQ lost 1.59%.  VXX spiked 8.83% higher to close at a still historically low 14.79 and T2122 dropped back down the very low end of oversold territory at 2.92.  10-year bond yields dropped to 4.52% and Oil (WTI) gained 0.55% to $85.49 per barrel.  So, Friday was the Bear’s Day.  Markets gapped lower briefly held up and then resumed their move down (albeit in a wavy motion) the rest of the day, ending on a modest up wave.

The major economic news scheduled for Friday included March Export Price Index, which came in lower but as expected at +0.3% (compared to a +0.3% forecast but well down from February’s +0.7% value).  At the same time, the March Import Price Index was higher than anticipated at +0.4% (versus both forecast and February values of +0.3%).  Later, Michigan Consumer Sentiment was lower than predicted at 77.9 (compared to a 79.0 forecast and 79.4 March value).  At the same time, Michigan Consumer Expectations were also down a bit at 77.0 (versus the 77.6 forecast and March 77.4 reading).  Meanwhile, the Michigan 1-Year Inflation Expectations were up to +3.1% (versus a +2.9% forecast and March value).  On a longer timeframe, the Michigan 5-Year Inflation Expectations were also higher at +3.0% (compared to a forecast and March reading of +2.8%).

In FOMC speak, Kansas City Fed President Schmid said inflation was too high for the central bank to cut interest rates.  Schmid said, “With inflation still running above 2 percent and labor markets still tight, it is appropriate that monetary policy remain restrictive.”  He went on to say, “achieving better balance in the labor market will likely be necessary (before cutting).”  Later, Chicago Fed President Goolsbee said, “We’ve had multiple (CPI) inflation readings that were higher than we wanted, but PCE is the better measure…If we start getting better (PCE) readings that show us that arc of inflation coming down…that will make us feel a lot better about where we are…If PCE is reinflating – we will stabilize prices.”  Goolsbee went on to repeat previous comments that housing inflation is the most important and damaging area to watch.  Still later, San Francisco Fed President Daly reiterated that there is no urgency to cut rates.  She said, “Policy’s in a good place right now, and I need to be fully confident that inflation is on track to come down to 2%, which is our definition of price stability, before we would consider a rate cut.”   

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In stock news, on Friday, Reuters reported that sources now indicate that HUBS may be considering a non-GOOGL acquisition suitor.  The sources indicated that potential antitrust opposition and difficulty may force HUBS to go a different route, despite GOOGL having been working with MS to secure financing for an all-cash bid to buy HUBS.  Later, the Wall Street Journal reported that a pet osteoarthritis drug from ZTS has been found to be linked to various adverse health events.  (ZTS gapped lower and closed down 7.84% on the news.)  At midday, despite political and potential regulatory opposition, X shareholders approved the $14.9 billion takeover bid from Nippon Steel.  Later, ROKU said that more than 576k of its customer accounts were impacted by a second cyberattack that the company identified while investigating a different hack of 15,000 customer accounts.  ROKU said that hackers did not gain access to “full credit card numbers” and it has identified only 400 cases where the stolen information was used to make unauthorized purchases of streaming service subscriptions.  At the same time, Reuters reported that SPR is limiting overtime and halted hiring as production declines due to BA’s lower output of 737 MAX planes.  After the close, TSLA said it cut the price of its “Full Self Driving” subscription by more than 50% (from $199/mo. to $99/mo.) as it seeks to drive broader adoption amidst weakening demand.  Also after the close, GOOGL announced it is beginning the process of removing links to CA news articles for CA-located viewers.  This is in response to a CA bill (not passed yet) that would require content providers to pay CA news sites for content.  Then, on Saturday, Reuters reported that CRM is in advanced talks to buy INFA.  (INFA has a market value of $38.48 billion as of Friday.)

In stock legal and governmental news, on Friday a Brazilian judge suspended the Chairman of PBR over having a conflict of interest now that he also holds the Minister of Energy role in the Brazilian government.  (The court previously suspended another board member citing the company’s failure to comply with company bylaws when appointing that board member.)  At the same time, AAPL lost its motion to dismiss a $1 billion lawsuit in the UK which alleges the company charged 1,500 UK-based app developers unfair commission fees on the purchase of their apps while prohibiting them from selling the apps through other channels.  Later, the EU approved ILMN’s plans to divest cancer diagnostic test maker Grail.  (The EU Competition Committee had ordered the divestiture in 2022, even though ILMN had closed the deal before the EU decision was made.)   At the same time, UBER and LYFT announced they will remains in operation in Minneapolis after the City Council there voted Wednesday to delay implementation of its $15.57/hour minimum wage for rideshare drivers until July 1st.  Later, the US Supreme Court ruled 9-0 throwing out a lower court ruling that will allow a broad group of truck drivers and other transport workers to file employment lawsuits rather than submit to arbitration.  (The lower court had ruled that the plaintiff did not qualify to sue because, even though he was a truck driver, his company sold the goods he delivered rather than transportation services.)  The ruling is a huge blow to AMZN, WMT, and many other companies that employ delivery and transport workers that may have causes for action. 

Elsewhere, the NHTSA announced it is opening an investigation into the F recall of 42,000 SUVs over fuel leak concerns.  F is planning to make a software update rather than replace fuel injectors that may crack and leak.  At the same time, the US Supreme Court ruled 9-0 companies “failing to disclose impactful trends” is not securities fraud.  Later, AAPL denied it has been violating court orders governing its App Store.  AAPL told a US district judge Rogers (who had overseen the Epic Games lawsuit against AAPL) that rather than violating the court orders, it was just trying to prevent AAPL “tools and technologies” from being given to app developers for free.  They went on to say Epic wants the court to micromanage AAPL App Store operations in order to make Epic more profitable.  (Oddly, yes that was the whole point of the original lawsuit.  To force competition in a way that would allow Epic to be more profitable by not paying AAPL 30% of every sale and prohibit them selling through other channels.)  After the close, US House GOP representatives criticized the Biden Administration, blaming the President for somehow allowing INTC to sell chips to Huawei, which allowed the Chinese phone maker to unveil a new laptop powered by an INTC “AI chip.”  (The chips were shipped to China under a 2019, Trump Administration granted, license that were excluded from Trump era sanctions and not subject to Biden-era sanctions.)

Overnight, Asian markets leaned heavily to the red side with only Shenzhen (+1.53%) and Shanghai (+1.26%) in the green.  Taiwan (-1.38%), India (-1.10%), and Singapore (-1.04%) paced the 10 losing exchanges.  Meanwhile, in Europe, we see mostly green at midday.  11 of the 15 bourses are in the green with the CAC (+0.87%), DAX (+0.89%), and FTSE (-0.32%) leading the region higher in early afternoon trade.  In the US, as of 7:30 a.m., Futures are pointing toward a green start to the week.  The DIA implies a +0.34% open, the SPY is implying a +0.46% open, and the QQQ implies a +0.55% open at this hour.  At the same time, 10-year bond yields have spiked back up to 4.581% (perhaps somewhat on a safety trade after the Iran-Israeli weekend news) and Oil (WTI) is off eight-tenths of a percent to $85.00 per barrel in early trading.

The major economic news scheduled for Monday includes March Core Retail Sales, March Retail Sales, and NY Empire State Mfg. Index (all at 8:30 a.m.), Feb. Business Inventories and Feb. Retail Inventories (both at 10 a.m.), and Fed member Daly speaks.  The major earnings reports scheduled for before the open include GS, MTB, and SCHW.  There are no major reported set for after the close.

In economic news later this week, on Tuesday we get March Building Permits, March Housing Starts, March Industrial Production, and API Weekly Crude Oil stocks.  Then on Wednesday, EIA Weekly Crude Oil Inventories and the Fed Beige Book are reported.  We also hear from Fed Members Mester and Bowman.  On Thursday, we get Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, Philly Fed Mfg. Index, Philly Fed Mfg. Employment, March Existing Home Sales, US Leading Economic Indicator Index, Fed Balance Sheet, and three Fed speakers (Bowman, Williams, and Bostic twice).  Finally, there are no major economic news scheduled for Friday.

In terms of earnings reports later this week, on Tuesday we hear from BAC, BK, ERIC, JNJ, MS, NTRS, PNC, UNH, AMX, IBKR, JBHT, OMC, and UAL.  Then Wednesday, ABT, ASML, CFG, FHN, PLD, TRV, USB, AA, CCI, CSX, DFS, EFX, KMI, LVS, LBRT, SNV, and WTFC report.  On Thursday, we hear from ALK, AALY, BX, CMA, DHI, ELV, GPC, INFY, KEY, MAN, MMC, NOK, SNA, TSM, ISRG, NFLX, PPG, and WAL.  Lastly, on Friday AXP, FITB, HBAN, PG, RF, SLB, and WIT report.

So far this morning, GS and MTB reported beats on both the revenue and earnings lines.  (SCHW reports closer to the open.)

In geopolitical news, on Saturday, as expected, Iran launched over 300 drones, cruise, and ballistic missiles toward Israel.  This attack was Iran’s retaliation for Israel’s April 1 airstrike destroying a building of the Iranian embassy in Syria.  (That Israeli strike killed 16 people, including two Iranian Revolutionary Guard Generals.) The US shot down 75 of the Iranian drones and missiles with Israel shooting down the vast majority of the rest.  It is interesting that Iran signaled the attack beforehand (by telling the US to get out of the way so they don’t get hit) and had already announced that they consider the matter complete unless Israel retaliates…making that announcement before most of the drones and missiles had even reached Israeli airspace.  There were no deaths and one injury from the Iranian attack as well as minimal damage to the air base from which the Israeli April 1 attack was launched.  President Biden spoke to Israeli PM Netanyahu urging him to “take the win” (two major Iranian military commanders killed, versus no Israeli deaths at all AND another public demonstration of the power of Israeli air defenses).  Biden also led G7 leaders to making a public statement of unconditional support for Israel without any mention of the Israeli strike in Damascus.  As of Sunday, these efforts had won the day with PBS reporting that Israeli War Cabinet resources said an immediate retaliatory strike had been called off following the Biden call.  Still, Netanyahu has publicly vowed Israeli retaliation at a later time.   In short, diplomacy is in control in the short term.  However, tensions are high and oil markets, while calming, are still likely to be on edge.

In late-breaking news, AAPL iPhone sales saw their steepest decline since COVID hit.  Chinese sales in particular fell sharply as Huawei, Xiaomi, Transsion, and OPPO made significant market share gains.  Later, Reuters reported sources and an internal TSLA memo during premarket that said TSLA plans to lay off 10% of its workforce globally.

With that background, it looks as if the Bulls have gapped all three major index ETFs higher to start the premarket. However, all three are also printing indecisive, small-body candles after the gap up. QQQ is retesting its T-line (8ema) from below. However, SPY, DIS, and QQQ remain below their T-line. So the short-term trend is bearish. Meanwhile, the mid-term remains sideways in a choppy consolidating range in the SPY and QQQ, where it is fair to say the Bulls are under strong pressure from the Bears. The DIA has already turned Bearish in the mid-term. Longer-term, markets remain Bullish but clearly under pressure. In terms of extension, none of the major index ETFs are too far away from their T-line. However, the T2122 indicator is now deeply in its oversold range. So, both sides could run if the find some momentum, but the Bulls have much more slack to work with at this point. In terms of those 10 big dog tickers, eight of the 10 are in the green this morning with only AAPL (-0.60%) and TSLA (-1.54%) pushing to the downside on bad premarket news.

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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