Stocks gapped higher the better part of a percent on Monday after news that President Biden said he is now reconsidering the previous administration’s tariffs on Chinese goods.  After some waffling the first hour, the bulls then stepped in to take us to the highs at mid-day.  The afternoon was spent seesawing sideways not too far from the highs of the day. The SPY and DIA both tested their T-lines (and are still testing at the moment) with the QQQ still having work to do to get to that test.  This action gave us gap-up, white candles with wicks on both ends, but larger wicks on the bottom of the SPY and QQQ.  On the day, SPY gained 1.87%, DIA gained 2.05%, and QQQ gained 1.66%.  All of this happened on low trading volume.  The VXX fell to 24.06 and T2122 climbed to not far outside of the overbought territory (70.09) even though we entered the day well oversold.  So, to the extent this was a relief rally, Mr. Market has now gotten at least some relief.  10-year bond yields rose to 2.866% and Oil (WTI) fell to $110.62/barrel.

As mentioned, President Biden’s statement that he is revisiting Chinese tariffs helped stocks. In particular, big bank stocks across the board shot higher on the news. It is worth noting that JPM CEO Dimon told World Economic Forum (Davos) attendees that he only sees inflation and recession as “big storm clouds in the distance” at this point, continuing to say they may dissipate as the Fed gives more clarity on when the hikes will reach a neutral point. The banks leading the charge Monday included JPM, C, BAC, and WFC who led the way for the DIA and SPY.

After the close, ZM, HEI, and SKY all reported beats on both the revenue and earnings lines.  At the same time, NDSN missed on revenue while beating earnings estimates.   However, AAP reported missing on both lines. ZM was up as much as 21% after-hours after issuing strong guidance on top of their earnings beat. 

SNAP Case Study | Actual Trade

In other stock news, at the end of the day, the National Labor Relations Board ruled there was merit in the claim that ATVI illegally threatened union organizers using the guise of a broad company social media policy that conflicted with employee rights.  This comes hours before the union vote begins for ATVI subsidiary Raven Software.  All of this is happening while the ATVI buyout by MSFT remains not yet closed.  Elsewhere, the CEO of SNAP send an email to all employees after the close telling them that the company will miss its own targets for both revenue and earnings in the current quarter.  SNAP stock plummeted 31% in after-hours trading following that email.  The company also filed a K-8 form reporting the same to the market.

Monday evening, Bloomberg reported that for the third week in a row, insiders have increased the buying of their own company’s stock.  Last week, 897 insiders across 381 companies, bought over $324 million of their company’s stock.  The week prior, we saw 584 insiders across 288 companies buying $188 million of stock.  Insider buys are often part of a scheduled buying plan.  However, last week’s numbers compare to only 190 insiders across 107 companies buying $43 million one year ago.  So, this may be an indication that insiders think markets are oversold, regardless of whether they fall in the short-term or not.

On the Russian invasion story, a Russian diplomat in Switzerland resigned over his country’s 3-month invasion and occupation of Ukraine.  In Ukraine, the first Russian soldier convicted of war crimes was sentenced to life in prison for murdering a civilian.  The European Economic Commission President von der Leyen told World Economic Forum (Davos) participants that Russia was waging war with food as the UK told Sky News UK that it was exploring all options to get 25 million tons of wheat out of Ukraine.  She went on to say that sanctions are hurting Russia and she hopes for agreement on Russian oil sanctions within days.  On the other side of the world, the leaders of the US, Japan, India, and Australia are in 4-way talks over security and sanctions against Russia.  The 3 more western nations are pressuring India to pivot more toward the West and further isolate Russia.  This includes military purchases (where tens of billions is now spent in Russia that might go to western firms like RTX, GD, NOC, LMT, BA, etc.

Overnight, Asian markets were red across the board with China leading the way lower.  Shenzhen (-3.34%), Shanghai (-2.41%), and Hong Kong (-1.75%) paced the losses.  In Europe, stocks are mixed, with the larger exchanges following Asia lower at mid-day.  The FTSE (-0.13%) lags, but the DAX (-0.63%) and CAC (-0.71%) are more typical of the losses across the major exchanges in early afternoon trading.  As of 7:30 am, US Futures are pointing toward a gap down to start the day.  The DIA implies a -0.54% open, the SPY is implying a -0.91% open, and the QQQ implies a -1.47% open at this hour.  10-year bond yields are off slightly to 2.821% and Oil (WTI) is up fractionally to $110.65/barrel in early trading.

The major economic news scheduled for release Tuesday is limited to Mfg. PMI and Services PMI (both at 9:45 am), and April New Home Sales (10 am).  However, Fed Chair Powell also is scheduled to speak at 12:20 pm.  The major earnings reports scheduled for release include ANF, AZO, BBY, CSIQ, DOLE, ESLT, NTES, WOOF, and RL before the open.  Then after the close, QFIN, A, CAL, INTU, JWN, TOL, and URBN report.

So far this morning NTES and AZO have reported beats on both lines.  At the same time, BBY and ESLT beat on revenue while missing on earnings.  On the other side, CSIQ and DOLE missed on revenue while beating on earnings.

The major economic news coming later this week includes April Durable Goods Orders, Crude Oil Inventories, and the May FOMC Minutes on Wednesday.  On Thursday we see Q1 GDP, Weekly Initial Jobless Claims, and April Pending Home Sales.  Finally, on Friday we get a Fed speaker (Bullard, twice), April Trade Goods Balance, April PCE Price Index, April Retail Inventories, April Personal Spending, and Michigan Consumer Sentiment.

The bears are not taking the bulls’ Monday move lightly and are looking to open markets lower today. With a chunk of over-extension taken off the board by yesterday’s action, those bears may have more strength than the bulls at least early. However, volatility and intraday whipsaw is likely to continue. The bulls have not capitulated in a crescendo of volume yet…so uncertainty and stubbornness remain. Remember that the trend is still to the downside, but the bulls seem to want to defend that bear market line for the S&P. So, be very careful about chasing gaps and remain nimble or hedged. Above all, don’t give in to FOMO and feel the need to chase a move or predict a reversal either way.

Trading is a job, not a lottery ticket. So, work the process. Stick with your trading rules and manage the things that you can control while trying not to worry about the things you have no control over at all. Trade with the trend, don’t chase, keep consistently taking profits when you have them, and move your stops in your favor. Also, remember that the first rule of making big money in the market is to not lose big money in the market. So, don’t be stubborn, and protect yourself from yourself. Keep in mind that nobody is right all the time. When you’re wrong, just admit it and take your loss. As they say, the best time to have taken a $500 loss is when you are now staring at a $1,500 loss.

Ed

Swing Trade Ideas for your consideration and watchlist: SHEL, DRE, COP, C, JPM, ZIM, XLE, ARKK, DVN, OXY, UPST. 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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