We saw divergence on Monday as the DIA gapped up 0.91%, SPY gapped up 0.58%, and the QQQ gapped up just 0.13%.  All 3 indices then faded the gap before starting a slow rally that lasted until the last hour of the day.  During that last hour, a selloff turned into a sideways grind in a tight range the last 30 minutes of the day.  This left us with Bullish Harami candles in the SPY and QQQ, while the DIA printed the strongest white candle (still with significant upper wick) and was the only one of the 3 to be able to close above its T-line (8ema).  On the day, SPY gained 1.15%, QQQ gained 0.79%, and DIA gained 1.90%.  The VXX fell almost 8% to 25.78 and T2122 spiked up into the mid-range at 54.78.  10-year bond yields rebounded from Friday’s sharp drop to spike all the way back up to 1.439% and Oil (WTI) jumped a massive 5.43% to $69.87/barrel.

Bloomberg reports this morning that a GSK Antibody Covid Treatment is effective against the new omicron variant.  In fact, their internal research shows the treatment works against all 37 known mutations of Covid that have been identified.  Sotrovimab (the drug’s name) reduced the risk of hospitalization or death of Covid patients by 79%.  Markets are likely to love this news, but remember that this is only based on studies done by GSK itself.

In miscellaneous business news, the CEO of AAL announced he will retire by 3/31/22 and will be replaced by current AAL President Robert Isom.  INTC also announced that it intends an IPO to spinoff its “Self-Driving Car” unit (which is based on an Israeli company named Mobileye that INTC acquired in 2017).

On Monday, China went against the global trend and decided to loosen lending standards by cutting their bank reserve requirement ratio (RRR). The move pumped $188 billion into their economy, in an effort to offset the problems faced in the Chinese real estate sector. This will make it easier for banks to lend to companies, which can then use the proceeds to pay off bonds. The move was clearly for this purpose because the statement from the Central Bank said “stability is the top priority for the coming year.”

Overnight, Asian markets were heavily on the green side.  Hong Kong (+2.72%), Japan (+1.89%), and India (+1.56%) led the rally.  Only Shenzhen (-0.38%) showed any red.  Two factors led to the massive Hong Kong rally.  First, Evergrande announced it will restructure the company and is being buoyed by China’s most recent move toward easing.  Second, was optimism over omicron being potentially overblown as a threat.  In Europe, markets are green across the board at mid-day.  The FTSE (+1.17%), DAX (+2.07%), and CAC (+2.28%) are typical of the afternoon trading.  However, Finland (+3.27%) is an outlier to the upside.  As of 7:30 am, US Futures are pointing toward the US following the rest of the world higher at the open.  The DIA is implying a +0.98% open, the SPY implies a +1.30% open, and the QQQ implies a +1.84% open at this hour.

The major economic news scheduled for release Tuesday includes Imports/Exports, Trade Balance, Q3 Unit Labor Cost, and Q3 Nonfarm Productivity (all at 8:30 am) and the EIA Short-Term Energy Outlook (at noon).  The major earnings reports scheduled for the day are also limited to AZO, CNM, and DBI before the open.  Then, after the close, CSAY, SFIX, and TOL report.

The bulls are looking to break out of the recent whipsaw range with a significant gap-up open. However, there is still a fair amount of recent resistance to work through if the goal is to get back to the highs. Before you get too excited, remember that gaps are great when they go in your direction…it’s a gift and you should take that gift by locking in some profit. However, remember the other side of the coin. Gaps mean volatility and until a trend is established, you might find the next overnight move goes against you. So continue to be careful.

Stick to your trade rules and on managing the things you can control. (Not trying to force the market to obey your desires.) Consistently taking profits when you have them and moving your stops in your favor should be part of your plan. Trade carefully and continue to think twice before holding through earnings…especially without a hedge.

Ed

Swing Trade Ideas for your consideration and watchlist: WISH, CCL, Z, GPN, CVX, HAL, CHGG, IBM, NCLH, V, VALE, OSCR, GT, SABR, SAM, FGEN, AAPL. You can find Rick’s review of tickers on his YouTube Channel here. 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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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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