It was another roller-coaster day in markets Wednesday as stocks gapped higher (following Europe and Asia on hope around Ukraine).  After an hour of follow-through, stocks ground sideways until 1 pm when a strong selloff took hold and completely erased all of the day’s gains by 2:30 pm.  However, the Fed press conference led to a huge rally the last 90 minutes took stocks out on the highs.  That left us with large white candles with significant lower wicks in all 3 major indices.  On the day, SPY gained 2.21%, DIA gained 1.54%, and QQQ gained 3.71%.  The VXX fell almost 8% to 26.52 and T2122 shot up into the overbought territory at 85.25.  10-year bond yields rose to 2.174% and Oil (WTI) fell almost 1.6% to $94.90/barrel.  (It is worth noting that Oil Inventories came in much higher than expected (+4.35mil vs -1.38mil expected), which could help on the gas price front in the short-term.

During the afternoon, the Fed announced a quarter-percent interest rate hike as was expected. However, they also outlined that they now expect this to be the first of 7 rate hikes, with another 0.25% hike expected each of the 6 remaining Fed meetings this year, which would bring the funds rate to 1.9% by year-end. Only James Bullard (hawk) dissented, as he wanted a half-percent hike today.  This was a better outlook than had been feared and led to a rally.  However, the market was also happy to hear that the Fed will not begin reducing its balance sheet (by selling the $9 trillion of securities it has purchased over the pandemic) until some future meeting.  The dot plot shows that half the Fed members expect they will need more than 7 hikes to resolve the inflation problem, but half believe 7 will be enough.  In general, Chair Powell was upbeat about future growth prospects but also cited unknown variability from the Russian invasion and Supply Chain issues.

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On the Russia front, the country claimed that it made the $117 mil debt payment that was due Wednesday.  However, they did it with funds that were frozen by sanctions (and offered to alternatively pay in rubles to a Russian bank, which raised concerns over default since the owners of that debt were not actually paid in money they can access.  Related to the oil situation, the IEA said that Russian oil production could drop 30% (3 million barrels/day) in April as sanctions have removed 13% of their markets and major oil-producing, trading firms, and shipping companies have all stopped working with Russian oil.  There is enough spare global capacity to make up the 3 million barrels to be lost, but it would take major increases by Saudi Arabia and UAE, which have so far not done so in solidarity with OPEC+ production limits.  Finally, Russia has begun seizing hundreds of jets (worth about $12.4 billion) owned by US and European leasing companies.  Those planes will then be given to Russian airlines. The move will allow Russia to continue to operate its domestic flights using the confiscated planes.

S&P Global reduced its forecast for light vehicle production for 2022 and 2023 by 2.6 million (a 3% reduction globally).  They cited parts shortages due to supply chain problems (presumably related to Covid).  However, the main cause for the cut was the war in Ukraine.  (Ukraine is the source of many European wiring harnesses as well as electrical and communications components.)  The impacts of the war lowered its 2022 European production numbers by 1.7 million, which includes a 1 million cut due to lost demand from the combination of Ukraine and Russia.

After the close, LEN beat on both lines.  Meanwhile, WSM beat on earnings while missing on revenue.  On the other side, EDR missed on earnings while beating on revenue.  However, GES missed on both lines. So far this morning, ACN, CMC, PAGS, OEZVY, SIG, and GIII have all reported beats on both lines.   However, DG, and DBI beat on earnings while missing on revenue.  On the other hand, CSIQ missed on both earnings and revenue.

Overnight, the Asian markets were strongly green across the board again. Hong Kong (+7.04%) again was a dramatic outlier to the upside, making for over 16% gain in 2 days in that exchange as China has said they will support IPOs and are making progress in the US delisting negotiations.  Outside of that, Japan (+3.46%), Taiwan (+3.00%), and Shenzhen (+2.40%) led the region higher.  In Europe, markets are mixed but lean to the upside.  The FTSE (+0.11%), DAX (-0.60%), and CAC (+0.16%) lead the region due to volume, but Denmark (+1.44%) is the biggest gainer in early afternoon trading.  As of 7:30 am, US Futures are pointing toward a modestly lower open.  The DIA implies a -0.27% open, the SPY is implying a -0.32% open, and the QQQ implies a -0.45% open at this hour.  10-year bond yields are down slightly to 2.137% and Oil (WTI) is spiking higher 5% to $99.83 in early trading.

The major economic news scheduled for release on Thursday includes Feb. Building Permits, Feb. Housing Starts, Philly Fed Mfg. Index, and Weekly Initial Jobless Claims (all at 8:30 am), and Feb. Industrial Production (9:15 am).  The major earnings reports scheduled for release before the open include CAN, CSIQ, CMC, DBI, DG, GIII, and SIG.  Then after the close FDX, GME, and JOAN report.

The Fed news was received very well yesterday with no shocks and the minor surprises being taken as positive for markets. However, as usual, after a night to sleep on the news, the market may be looking to swing back the other direction after it has sunk in that nothing has really changed since Tuesday. Remember that we remain in a downtrend and have moved an awful long way in the last 2 days. So, rest or pullback would be the normal expectation, even in an uptrend. Be careful chasing that optimism of a bottom having been put in…we don’t have higher highs and higher lows yet, just hopium at this point.

Stick to your trading rules and manage the things that you can control. Remember that you don’t have to trade every day (or even week) and you definitely don’t need to chase gaps and moves. Trading is a marathon, not a sprint. Trade with the trend, don’t chase, keep consistently taking profits when you have them, and move your stops in your favor. The first rule of making money in the market is to not lose big money in the market. So, don’t be stubborn, and protect yourself from yourself. If you are wrong, just admit it and take your loss. (That’s why we set stops in the first place.)

Ed

Swing Trade Ideas for your consideration and watchlist: FTCI, PNR, XRT, ALDX, FSM, OSH, AG, MRNA, TWTR, XLV, FSLR, AMD, X. 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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