Friday saw a half percent gap higher at the open, fading back down to the previous close and then from 11am into the close a strong rally that saw us close near the highs.  For the day, the SPY was up 1.39%, the DIA up 1.17%, and the QQQ up 1.58%.  The VXX closed down to 41.52 and the T2122 4-week High-Low Ratio slid back down to the edge of overbought territory at 79.82.  The 10-yr bond yield fell slightly to 0.606% and Oil (WTI) kept its rally going, closing at $17.18/barrel.  However, for the week, we saw large Doji candles that were down for the first time in 3 weeks across all three major averages.

Over the weekend several major analysts and fund managers commented that they feel the market is over-valued and due for a drop.  These include people like Mohamed El-Erian, Carl Icahn, David Tepper, and others.  They point to four premises for their stance.  First, they feel the market simply has not and cannot grasp how much damage has been done to the economy.  Second, they believe a major debt default crisis is still in the offing.  Third, they feel outbreaks are inevitable during “reopening” and, even if contained, these will cause market fire sales.  Finally, they point to the wrong groups leading the market for a “real” recovery.  (According to them, it should be financials, durable goods, and retail leading the way, not healthcare, technology, and utilities as we’ve actually seen.)  For those reasons, they expect more downdrafts in the short-term and, in the longer-term, feel it will take 3 years to return to “peak earnings” again. Whether these “experts” are right, wrong, or just trying to talk themselves into a better position is irrelevant.  However, the ideas are worth considering when deciding how much of your account to have invested in this market.

On the Virus front itself, the global headline numbers are 3,017,776 confirmed cases and 207,722 deaths.  In Europe, food prices are a concern as Russia has halted wheat exports for now and drought is impacting the current growing season.  However, in Spain there was a ray of hope as they began to allow limited outdoor exercise and say, if the number of new cases keeps falling, it will ease further on May 1.  In Asia, Japan now has the largest number of new daily cases as some of its cities and prefectures have now reinstated lockdowns.  However, India has eased a bit, opening residential-area shops under certain restrictions. 

In the US, we are approaching the million-case mark, with 987,322 confirmed cases and 55,415 deaths.  It’s worth noting that Friday saw the largest number of new cases reported so far in the US.  However, the epicenters of New York and New Jersey continue to show a decline in their new case rate.  Over the weekend, Dr. Fauci (NIH) said that the US needs to double testing before wide-spread reopening happens, but also that he hopes we can do this doubling in the next couple weeks.  In the supply chain, 2 more major meat processing facility closed. So, now about 25% of US meat production is shut due to the virus.  On the other hand, a number of states (mostly along political lines) like Georgia, Mississippi, Oklahoma, and Texas that have started reopening many businesses and up to 20 will have a partial opening by the end of the coming week.

Overnight, Asian markets were mostly green with the exception of India which was just on the red side of flat (-0.25%).  In Europe, markets are strongly green across the board so far today.  And as of 7:30 am, US futures are pointing to a one percent gap higher at the open. 

There is no major economic news scheduled for Monday.  However, on the earnings front, AMG, AWI, CMS, CHKP, CNX, DORM, LECO, IR, report before the open.  Then AVT, AMAT, AMKR, CE, CINF, CNI, FFIV, KDP, NOV, NXPI, PFG, PPG, PKG, SANM, and UHS report after the close.

The uptrend remains intact.  So far, earnings have been “good” against dramatically lowered expectations, but companies continue to cancel guidance and report lower year-on-year earnings.  However, with over 140 of the S&P reporting and the Fed meeting again this week, we may see a holding pattern Monday and Tuesday as traders wait to see which direction the wind is blowing. 

All this is to say we still have a bullish market, at or near resistance, and facing volatile news-driven intraday swings and overnight gaps.  In this environment, traders need to continue to remain focused and either quick (day trade) or slow (long-term holds).  Be very cautious about any swing trades you take in this market unless you can handle significant short-term pain. 

Ed

Trade Ideas for your consideration and watchlist: HII, ABT, ROP, SCHW, DOMO, NLOK, EXPD, CSCO, INTC, HD, TSN. 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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