Monday saw a brutal gap down on virus concerns, another big bank scandal, and the political news related to the replacement (or not) of Justice Bader-Ginsberg.  Volatility continued all day with a later afternoon rally driving price back up into the gap.  The result as a strong white candle (if you look past the gap down) in the QQQ, but big indecision in the DIA and a white Hammer in the SPY.  On the day, QQQ gained 0.24%, SPY lost 1.04%, and DIA lost 1.84%.  Oddly, VXX did not shoot higher, rising only to 25.16, but T2122 sank clear to the bottom of the oversold range at 2.28.  10-year bond yields fell to 0.672% and Oil (WTI) also fell 3.5% to $39.65/barrel.

During the day House Speaker Pelosi proposed the Democratic bill for additional stopgap funding to keep the government running past the September 30 deadline.  However, Senate Majority Leader McConnell immediately criticized the bill because it did not contain the additional money for farm aid that the President wanted added.  To be fair, many things were not in the bill, including extra funding for the Democrat favorite food assistance program.  It was not mentioned, but another fundamental difference between the sides is that Republicans want the bill to include funding through January 2021 (when the next Congress is seated) while Democrats want funding only through the election.  In this case, the Democratic bill offered a compromise of funding through December 20.

In the pre-release of Fed Chair Powell’s testimony for today he says “Many economic indicators show economic indicators show marked improvement…Both employment and overall economic activity, however, remain well below their pre-pandemic levels, and the path ahead continues to be highly uncertain,”  He goes on to push for more virus control and stimulus as he also says “The path forward will depend on keeping the virus under control, and on policy actions taken at all levels of government.”  Both he and Treasury Sec. Mnuchin are likely to face questions on the massively unused Fed Main Street Loan program (which stimulus legislation cannot be forgiven) as opposed to the PPP loan program many expect to be forgiven.

On the virus front, in the US, the numbers show we now have 7,046,444 confirmed cases and 204,515 deaths.  The 7-day average of new cases is rising again, now over 41,000 per day.  However, deaths dropped dramatically for some unknown reason to just 388 on Monday.  This dropped the average to just under 800/day.  Republicans in the Senate proposed $28 billion in aid for the airline industry ($3 billion more than asked) in an attempt to stave off 30,000 job cuts now planned in two weeks.  This is likely a DOA proposal since the two parties have not agreed to an overall stimulus plan.

Globally, the numbers rose to 31,517,736 confirmed cases and 970,077 deaths.  In the UK, there were ominous signs Monday.  The country’s 2 top scientists addressed a presser where they said the UK is back to 10,000 new cases per day in a growth rate that may send them to 50,000/day by mid-October unless the spread is arrested (implied as a new national lock-down).  The government then raised the alert level to 4 (transmission if high or rising exponentially).  Level 5 is another national lockdown.  PM Johnson is set to address an emergency meeting, Parliament, and the Public Tuesday where many expect additional measures to be announced.  (JPM says that if another 2-week lockdown were to happen, it would knock another 2% off the UK’s 2020 GDP.)  Elsewhere in Europe, Spain has reentered partial national lockdown (and full lockdown in Madrid) and France cases continue to spike in various cities

Overnight, Asian markets were mostly in the red again.  Japan eked out a small gain while New Zealand and Malaysia managed slightly better, but still modest gains.  However, China, Taiwan, and Hong Kong were all down over 1% and South Korea lost 2.4% on the day.  In Europe, the picture is brighter as we find modest green numbers across the board as of mid-day. Again today, the DAX leads the way, up just under 1% so far.  As of 7:30 am, US futures are mixed.  The Large-Caps are on either side of flat, but the NASDAQ is pointing to a half-percent gap higher at the open.

The major economic news for Tuesday is limited to August Existing Home Sales (10 am) and, as mentioned, Fed Chair Powell testifies (10:30 am).  On the earnings front, the only major announcements scheduled are AZO before the open and KBH and NKE after the close.

Markets may be looking to bounce back from Monday’s ugly start to the week. Possibly Fed Chair Powell’s soothing talk of “more stimulus as long as it’s needed” will do the trick. However, no more progress on the fiscal stimulus side and political rancor will not help. News of the expansion of virus-fighting measures in the UK (and the rest of Europe) is also going to be a damper.

Remember that we’ve seen “gap and fade” or “gap and indecision” for some time. So, be careful chasing unless you are fast or can take the heat. Follow the trend, which is clearly bearish now, don’t think you can pick bottoms, but also don’t chase moves that have gotten away. Stick to your rules, keep locking-in profits, and remember trading is a job for the long-haul…not a get rich quick scheme. 

Ed

Swing Trade Ideas for your Consideration and Watchlist: PENN, NVTA, DDOG, FDX, PGR, LH, TGT, CZR, WHR, DGX, FSLY. Trade your plan, take profits along the way, and smart. Also, remember to check for impending earnings reports. Finally, remember that any tickers 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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