Monday started with a small gap down and then a selloff that more than faded all the progress the bulls had made since Wed.  morning among large-caps.  However, the tech-heavy QQQs bucked the trend by rallying all day after the gap down.  At the end of the day the bulls had pushed back up toward the open to where the SPY was down 0.92%, the DIA down 1.25%, but the QQQ up 1.08%.  The VXX fell again to 40.68 and 10-year bond yield rose to 0.762%.  Oil (WTI) fell despite Sunday’s OPEC+ production cut deal as it closed at $22.60/barrel.  From a technical standpoint, the QQQ printed a bullish engulfing candle and SPY printed a black hammer with both of the large-caps avoiding printing Evening Star signals.

During the day the President felt the need to assert his belief that he had sole power (total power) to ReOpen America Businesses. Contrary to his assertion, the Governors of six Northeast states (NY, NJ, RI, DE, CN, and PA), which actually issued lock-down orders, formed their own state-level working group to coordinate their own decisions on the matter.  Meanwhile, out west, the states of CA, WA, and OR also formed a similar regional working group.  The key take-away is not the President’s belief or even the political struggle. 

The key point is that the President is obviously feeling a lot of pressure from economic advisors and business interests to get the economy up and running again.  However, at the same time, the NY Fed announced Monday that it is starting to scale back its recent emergency interventions (repo operations) “in light of the more stable markets.”  So, it seems the Fed is less jittery about market conditions than the White House (and others) seem to be about the economic situation. Since markets are said to be a discounting machine that front-runs the economy by 3-6 months, maybe this is an indication we are only looking to turn the corner by next year.

However, on the topic of economic pain, Ginnie Mae (FHA and VA loans) reported that its mortgage bailout requests had risen 78% in the last week and are currently at just under 6% of the loans they are servicing.  So far, Fannie Mae and Freddie Mac forbearance requests are still at a much lower 2% level.  So, even at this early point in the economic fallout, mortgage repayments are already showing stress.

On the longer-term outlook, a non-partisan watchdog (Committee for a Responsible Federal Budget) released estimates that the US federal deficit for the year will top $3.8 trillion for 2020…even if Congress does not approve any more stimulus/relief (which they almost certainly will).  That represents almost 19% of the economy and is the highest deficit as a percentage of GDP since 1945.  The same group estimates this will lead to total public debt equaling total GDP by the end of October (roughly $20+ Trillion).  They also warned their numbers may well be on the low side due to using conservative estimates.

On the virus front itself, the global headline virus numbers have now reached 1,936,700 confirmed cases and 120,568 deaths.  In Asia, the number of cases is picking up again, with relatively large increases in places like Singapore.  However, new Chinese cases fell back below 100 again.  In Europe, the UK said it is likely to extend its lockdown as far as late May.  Meanwhile, in Germany, the country’s Health Minister said they have begun plans to implement a gradual recovery in a step-by-step fashion.  As in the US, no timelines have been announced yet and they will be seeking a balance between preventing new outbreaks and economic recovery.

Meanwhile, in the US we now have 587,173 confirmed cases and 23,644 deaths.  The pace of increase in new cases continues to slow in the worst-hit areas like NY, NJ, and MA, which reported a lower number of new cases.  The rate of new deaths is also starting to decline but that statistic continues to lag the reduction in new case rates.

Overnight, Asian markets were green across the board, as China’s March Trade Data came in down, but much better than expected.  (Down 6.6% vs. a 14% drop expected.) In Europe, markets are mixed, but mostly green at this point in their day.  As of 7:45 am, US futures are pointing toward a 1.5% gap higher on early mixed earnings news (JPM earnings way down, but explained it as stockpiling reserves for the virus impact, JNJ cuts outlook but beat on revenue and raises dividend, etc.).

On Tuesday, major economic news is limited to Mar. Imports/Exports (8:30 am).  On the earnings front, DAL, FAST, FRC, JNJ, JPM, and WFC all report before the open.  JBHT will report after the close.

While the uptrend continues, we are now entering a very uncertain earnings season.  Do not be surprised if reports come in spotty (good in some cases, bad in others) as supply and demand pressures hit different industries at different times and some companies spin the story one way while others spin it another. Remember, while it may be time to start dipping your toe in again, we need to continue to be very attentive, and either be very fast (day trade) or very slow (long-term holds).  Be very cautious about any swing trades you take.

Ed

Swing Trade Ideas for your consideration and watchlist: AMD, ATVI, INTC, NVDA, ANSS, BABA, JD, AMGN, BMY. Trade smart, take profits along the way and trade your plan. Also, don’t forget to check for upcoming earnings. Finally, remember that the stocks/etfs we mention and talk about in the trading room are not recommendations to buy or sell.

🎯 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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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.

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