On Tuesday, markets gave us a divergent day.  The DIA opened flat, sold off until 10:30 am, and then rallied back to flat by 12:20 pm when it then traded sideways in a tight range the rest of the day.  Meanwhile, the SPY gapped up 0.40%, sold off until 11:30 am, and rallied back to the prior close level before again trading sideways in a tight range the rest of the day.  For its part, the QQQ gapped up 0.65%, sold off hard to more than fill the gap by 10:30 am, and then traded sideways in a tight range along Monday’s close price all the way into a close.  This action gave us an indecisive Doji candle that retested the T-line (8ema) in the DIA.  Meanwhile, the SPY and QQQ both printed black-body candles with wicks.  QQQ tested and bounced up off its T-line while the SPY did not even get down to test its 8ema.

On the day, six of the 10 sectors were modestly in the green with Basic Materials (+0.38%) leading the way higher while Utilities (-0.70%) lagged behind other sectors.  At the same time, the SPY gained 0.07%, DIA lost 0.04%, and QQQ gained 0.01%.  VXX fell 0.66% to 39.24 and T2122 fell back but remains just inside the overbought territory to 81.82.  10-year bond yields fell a bit to close at 3.576% while Oil (WTI) was flat on the day at $80.85 per barrel.  So, Tuesday was a divergent, yet very indecisive day.  Despite black-bodied candles, the bullish trend remains with the 3ema > 8ema > 17ema > 50sma > 200sma…and the 3ema, 8ema, and 17ema are all rising across all three major indices.  However, this bullish trend continues to be on very low volume (far below average volume in the SPY, DIA, and QQQ).  

In economic news, March Building Permits (Prelim.) came in well below expectations at 1.413 million (compared to a forecast of 1.450 million and a February reading of 1.550 million).  On a month-on-month basis, this as a -8.8% rate versus an anticipated -6.0% rate forecasted and February’s massive +15.8% rate. Meanwhile, Mach Housing Starts came in slightly above expectation at 1.420 million (versus a forecast of 1.400 million and a February reading of 1.432 million).  Then, after the close, the API Weekly Crude Oil Stocks Report showed a very slightly greater than expected drawdown of 2.675- million-barrels (compared to a forecasted drawdown of 2.464-million-barrels and the prior week’s 0.377-million-barrel inventory build). 

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On the Fed talk front, in an interview Tuesday, St. Louis Fed Pres. Bullard (an extreme Hawk) said Wall Street should not be expecting a recession in the next six months.  He said, “The labor market just seems very, very strong…and a strong labor market that feeds into strong consumption…it doesn’t seem like the (right) moment to be predicting that you will have a recession in the second half of 2023.”  He also went on to say his St. Louis Fed stress index is at zero, and “If you were really going to get a major financial crisis out of this, that index would spike up to a four or five.”  From there, he went on to call for more Fed hikes, including a half percent hike at the early May meeting as well as walking back the idea of a pause in hikes.  Shortly after Bullard’s interview, Atlanta Fed President Bostic told CNBC he too foresees the economy avoiding a recession (as his baseline).  He said he’s in favor of one final increase and then holding rates at that level for “quite some time.”  (Bostic did not comment on the size of the last hike, but in the recent past he said he was leaning toward another quarter percent hike.) 

In stock news, Reuters reported Tuesday afternoon that GS is considering the sale of its GSKY fintech unit as it continues to step back from consumer-facing businesses. (GSKY software facilitates consumer home improvement loans.)   Elsewhere, RIDE said it has resumed production and deliveries of its electric pickup trucks “at a very low pace.”  (This comes after the company stopped production and deliveries in March as part of a voluntary recall due to potential propulsion system problems.)  At the same time, BA announced that despite the recently announced problems with supplier SPR (poor quality fuselages) and the stoppage of deliveries of 737 MAX planes, the firm is l comfortable with its buffer inventories and still plans to ramp up production of the jets.  (More details will be given during the Q1 earnings call 4/26.)  In other air-related news, LUV resumed its service after a software-related outage delayed more than 1800 of its flights on Tuesday.  Later in the afternoon, OPEN announced it is cutting roughly 22% (560 jobs) of its workforce, citing a decline in the housing market.  After the close, AAPL and GOOGL raised concerns about AMZN’s Kindle app saying that app could contain sexually explicit material accessible to children and threatening the removal of the popular app (from app stores) unless AMZN strengthens its content moderation (i.e. removes adult content).

In stock legal and regulatory news, on Tuesday, GOOGL convinced a US Court of Appeals to overturn a Texas jury verdict of $20 million (plus ongoing royalties) for having infringed on three anti-malware patents.  The ruling invalidated the plaintiffs’ patents.  Elsewhere, the US Supreme Court heard a case involving a US Postal worker and appears to be leaning toward making it harder for companies to not accommodate employees’ religious practices (such as not working on their Sabbath day).  This would overturn the precedent in place since 1977, which said companies can avoid accommodating employees if the requests caused more than a minimal inconvenience to the company.  Meanwhile, GM reached a settlement with the US Dept. of Justice related to the company’s discrimination against non-citizens.  The agreed fine was just $365,000.  At the same time, a US Senate Committee released a report claiming CS has hampered a multi-year investigation into Nazi clients and Nazi-linked accounts.  The report said, CS simply halted its internal review and fired the ombudsman overseeing the investigation of accounts that may contain assets of Holocaust victims.  Over at the Ninth Circuit Court of Appeals, judges ruled in favor of UL related to a long-running false advertising claim.  The ruling said that “I Can’t Believe It’s Not Butter” spray and similar products should be allowed to use artificially low serving sizes (less than one spray) related to calories and other nutritional facts on their advertising and labeling.  Finally, FOX was able to limit the damage of the Dominion case by admitting it lied about Dominion facilitating any fraud and the media company got off relatively cheaply (given their obvious guilt) by agreeing to pay $787.5 million in damages. At least one other defamation case is still pending against FOX and several groups (January 6th defendants as well as the Officers who were on the other side) are considering filing liability cases based on the now proven and admitted lies and misrepresentations of facts by the supposed news outlet. So, a hurdle was cleared, but FOX may not be out of the woods yet.

In banking news, Reuters reported that despite BAC, JPM, WFC, and C all beating their analyst estimates this quarter, including windfalls from increasing rates, industry leaders are lowering future expectations.  (Combined, the four banks wrote off $3.4 billion in bad consumer loans in Q1, a 73% increase from Q1 2022.) Unnamed industry executives are warning profits will tail off as a recession looms and customer defaults climb.  Industry analysts that Reuters quoted said “normal” card loan delinquencies run 3%-3.5%. However, they now expect branded card delinquencies may reach 5%-5.5% by early 2024.  At the same time, the same article cited an AXP filing on Tuesday which said February card loan write-offs grew slightly from 1.4% to only 1.7%.  The filling also said AXP “past due loan” volumes remained stable between February and March.  In related news, WAL reported a beat (see above) and said that its deposits had stabilized after being the focus of a potential second leg of the “regional banking crisis.”  WAL deposits fell 11.3% in Q1, but have grown more than $2 billion between March 31 and April 14.  The bank also reaffirmed its full-year deposit growth forecast of +13% to +17%.

After the close, OMC, ISRG, FHN, and WAL all reported beats to both the revenue and earning lines.  Meanwhile, NFLX and UAL both missed on revenue while beating on earnings.  On the other side, IBKR beat (by a significant margin) on revenue while missing on earnings.  It is also worth noting that NFLX lowered its forward guidance.

Overnight, Asian markets were again mixed but leaned toward the red side.  Singapore (+0.44%) led the four exchanges that managed to stay green.  Meanwhile, Hong Kong (-1.37%), Shenzhen (-0.84%), and Thailand (-0.82%) paced the losses among the eight exchanges that were in the red.  In Europe, we see a similar picture taking shape as of midday with only three bourses clinging to green while 12 show red.  However, it is worth noting that these are mostly on modest moves as the CAC (-0.03%), DAX (-0.20%), and FTSE (-0.25%) lead the region lower in early afternoon trade.  In the US, as of 7:30 am, Futures are pointing to a down start to the day.  The DIA implies a -0.28% open, the SPY is implying a -0.45% open, and the QQQ implies a -0.69% open at this hour. At the same time, 10-year bond yields are spiking, now up to 3.621% and Oil (WTI) is down nearly 2% to $79.26/barrel in early trading.

The major economic news events scheduled for Wednesday are limited to EIA Crude Oil Inventories (10:30 am) and Fed Beige Book (2 pm).  We also get another Fed speaker, Williams at 7 pm.  The major earnings reports scheduled for the day include ABT, ALLY, ASML, BKR, CFG, ELV, LAD, MS, NDAQ, EDU, SYF, TRV, and USB before the open. Then, after the close, AA, CCI, FDS, EFX, FFIV, IBM, KMI, LRCX, LVS, LBRT, STLD, TSLA, WTFC, and ZION report. 

In economic news later this week, on Thursday, Weekly Initial Jobless Claims, Philly Fed Mfg. Index, and March Existing Home Sales are reported and we get two Fed speakers (Waller and Bowman).  Finally, on Friday, Mfg. PMI, S&P Global PMI, and Services PMI are reported.

In terms of earnings reports later this week, on Thursday, ALK, T, AN, BX, CMA, DHI, EWBC, FITB, GPC, HRI, HBAN, KEY, MAN, MMC, NOK, NUE, PM, POOL, RAD, SNA, SNV, TSM, TFC, UNP, WSO, and WBS report.  Finally, on Friday, ALV, FCX, HCA, PG, RF, SDVKY, SAP, and SLB report.

So far this morning, MS, ABT, TRV, USB, ASML, BKR, NDAQ, EDU, and ELV all reported beats on both the revenue and earnings lines.  Meanwhile, SYF, ALLY, and CFG all beat on the revenue line while missing on earnings.  Unfortunately, LAD missed on both the top and bottom lines.  It is worth noting that ASML and EDU both raised forward guidance.  However, CFG lowered its guidance.  It is also worth noting that some of the revenue beats included large upside surprises, especially among the financial names.  MS surprised on revenue by 60%, CFG by 34%, USB by 32%, NDAQ by 69%, and SYF by 19%.

In miscellaneous last-minute news, TSLA cut prices yet again overnight.  This time on Model 3 and Model Y vehicles.  Elsewhere, the rate for a 30-year fixed-rate conforming loan increased sharply last week from 6.30% to 6.43%.  The origination points charged also increased from 0.55 to 0.63.  This caused a 10% fall in new home purchase loan applications and a 6% decrease in mortgage refinancing applications.

With that background, it looks like the bears are taking all three major indices back down to retest their T-lines (8ema) as support this morning. However, the bullish trend remains in place with the moving averages stacked. Over-extension is obviously not a problem in terms of the T-line for any of the major indices. Meanwhile, the T2122 indicator is just barely in the overbought area as well. We should also realize we are either sitting on or are near above potential support in the SPY, DIA, and QQQ. So, it looks like it could be a bearish start to a day in a bullish trend. Once again, if we can put aside fear and prediction, the chart tells us to maintain a long bias on a swing trading horizon while keeping a sharp eye out for trend breaks. So, be careful and go with the flow.

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 absolutely 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 money is 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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