Markets gapped down about half of a percent Tuesday, but then climbed the lightning bolt back to fill the gap mid-afternoon.  However, at about 2:30 pm stocks started selling off hard, perhaps on profit-taking as we wrapped up May.  Regardless, that hard selloff gave back 4.5 hours of bull work in 30 minutes as major indices fell back through the entire gap to get back where they started the day.  This action gave us indecisive, large-wick Spinning Top candles as stocks remained deep in the overbought territory of T2122.  Oddly enough, after a rollercoaster ride, today’s action also leaves us with indecisive, large-wick Doji candles for the month as well across all 3 major indices.  On the day, SPY lost 0.56%, DIA lost 0.56%, and QQQ lost 0.27%.  The VXX was flat at 22.56 and T2122 fell a bit while remaining overbought at 88.46.  10-year bond yields surged up to 2.848% and Oil (WTI) was flat (after being up over 3% during premarket) at $115.20/barrel.

During the day, Chicago PMI came is stronger than expected.  In addition, Conference Board Consumer Confidence also came in above estimates.  (Although it was lower than the April number.)  In addition, President Biden met with Fed Chair Powell and Treasury Sec. Yellen to discuss inflation.  The President told reporters he is going to give the Fed leeway to do their job without interfering and that all 3 agree taming inflation is the number one priority.

After the close, HPQ, CRM, and VSCO all reported beats on both the revenue and earnings lines.  CRM stock was up 8% in post-market trading as it raised its profit guidance for the remainder of the year.  In other stock news, it was reported that FB will be changing to the symbol META prior to the open on June 9.  (Interestingly, FB is buying the symbol from an ETF that is currently using that ticker.)

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The Fed will start Quantitative Tightening (QT) today.  They are starting with an $8.9 trillion portfolio of bonds and security-back mortgages.  The plan is that they sell off $47.5 billion in each of June, July, and August.  After that, the process accelerates to $95 billion per month of sales with a goal of getting down to a $7.5 trillion portfolio by the end of 2023.  The Fed estimates by then, the $1.5 trillion of tightening will be the equivalent of another 0.75% to 1% of rate hikes.

Mortgage demand fell again this week.  That demand has now reached the lowest level since 2018.  On the week, home purchase loan applications fell 1% (14% lower than one year ago).  This came despite rates falling slightly from 5.46% to 5.33% and origination points dropping from 0.60 to 0.51 on average.  The falling demand may well be a sign of consumer fear of economic growth.

On the Russia story, after heavy lobbying by the US and EU, OPEC+ is openly considering whether to suspend Russia from the group.  Elsewhere, President Biden said that the US will provide Ukraine with longer-range MLRS rocket systems.  (The Administration had been hesitant to do so because those longer-range rockets have the ability to strike up to 300km into Russia.)  Predictably, Russia said that the supplying of long-range weapons increases the chance of war between the US and Russia.  Germany also announced it will be supplying Ukraine with its IRIS-T air defense system.

Overnight, Asian markets were mixed, but leaned to the red side.  Malaysia (-1.06%), Taiwan (-0.79%), and Hong Kong (+0.56%) paced the losses.  Meanwhile, Japan (+0.65%), South Korea (+0.61%), and New Zealand (+0.57%) led the gains. In Europe, stocks are also mixed and leaning red at mid-day.  The FTSE (-0.39%), DAX (+0.19%), and CAC (unchanged) lead as always with Russia (+1.22%) posting the biggest gain and Norway (-1.25%) showing the biggest loss in early afternoon trading.  As of 7:30 am, US Futures are pointing toward a flat to slightly green start to the day.  The DIA implies a +0.41% open, the SPY is implying a +0.18% open, and the QQQ implies a dead flat open at this hour.  10-year bond yields are surging again to 2.877% and Oil (WTI) is up 1.2% to $116.04 in early trading.

The major economic news scheduled for release Wednesday includes May ADP Nonfarm Payroll Change (8:15 am), Mfg. PMI (9:45 am), ISM Mfg. PMI and April JOLTs (both at 10 am), and Fed Beige Book (2 pm).  There are also 2 Fed speeches scheduled (Williams at 11:30 am and Bullard at 1 pm).  The major earnings reports scheduled for release include CPRI, DCI, HEPS, and WB before the open.  Then after the close, CHWY GME, HPE, NTAP, PSTG, PVH, and VEEV report.

So far this morning CPRI and WB have reported beats on both lines.  However, DCI beat on the revenue line while missing on earnings.

In economic news later this week, on Thursday we get Weekly Initial Jobless Claims, Q1 Nonfarm Productivity, Q1 Unit Labor Costs, April Factory Orders, Crude Oil Inventories, and another Fed speaker.  Then on Friday, we get May Avg. Hourly Earnings, May Nonfarm Payrolls, May Participation Rate, May Unemployment Rate, May Services PMI, and May ISM Non-Mfg. PMI.

On the earnings front for later this week, on Thursday we hear from CAE, CIEN, DBI, HRL, SPTN, TTC, COO CRWD, JOAN, LULU, and RH.  Finally, on Friday we get a report from DOOO.

As we enter June, Mr. Market is not sure whether we’ve just been in a relief rally for the last week or if the bottom is now in and we simply needed a rest day to end May.  In either case, we have not seen a higher low in any of the 3 major indices. So, technically speaking, a new uptrend has not begun, even if the longer-term downtrend has been broken. With a lot of important news on the docket, this might not be the week to get aggressive. The market still has to decide whether we’ll see a soft or hard landing going into year-end as well as early 2023. If anyone knows exactly how that will shake out, they are wiser than I am. All I can do is follow the trend (which is up in the very short-term and down in the mid and longer-term) and acknowledge that we are still overbought.

Be very careful chasing any moves early. Whipsaw is very real during times when we are thinking about changing trend. Remember that the first rule of making big money in the market is to not lose big money in the market. Trading is our job. So, do the work and work the process. Stick with your trading rules, trade with the trend, and consistently take profits when you have them. Always move your stops in your favor. Don’t be stubborn. If you have a loss, just admit you were wrong and take it before it grows. As they say, the best time to have taken a $500 loss is when you are now staring at a $1,500 loss. Finally, remember that you get rich steadily in Trading…not by striking it rich on one or two trades.

Ed

Swing Trade Ideas for your consideration and watchlist: DTE, HDSN, UNG, PBR, CVS, UPS, SOFI, BITO, PYPL, SAVA, LAC, SO. 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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