Markets gapped lower at the open on Wednesday on fears raised by the closing of yet another major (21 million population) Chinese City due to a covid outbreak.  (The gaps were between half of a percent and nine-tenths of a percent.)  We then saw some follow-through with the 3 major indices reaching the lows of the day by 11 am.  At that point, markets ground sideways for a couple of hours.  The day then ended with a slow protracted 3-hour rally that filled the opening gap and closed very near the highs of the day.  This action gave us white-bodied Hammer-type candles in all 3 major indices. It is worth noting that Thursday saw slightly above average volume in all 3 major indices (and that was the first time that has happened on a green day since August 16).

On the day, seven of the 10 sectors were in the red, with Basic Materials and Energy both down more than 2%.  Healthcare (+0.91%) and Utilities (+0.82%) were by far the leading sectors Wednesday.  Despite the sectors leaning red, the SPY gained 0.31%, DIA gained 0.45%, and QQQ gained 0.04%.  The VXX rose 1% to 19.44 and T2122 remains deeply oversold at 3.57.  10-year bond yields spiked higher to 3.257% and Oil (WTI) plummeted another 3.5% to $86.44/barrel.  Overall, this was a small attempt by the bulls to find their footing (support) after reeling since last Friday’s Jackson Hole inspired bloodbath.

In economic news, Weekly Initial Jobless Claims came in better than expected (232k actual versus 248k forecast and 237k previous week).  Q2 Nonfarm Productivity also came in better than expected, but still down.  The actual was -4.1% while -4.5% was the consensus forecast and last quarter we saw -4.6%.  August Mfg. PMI and August ISM Mfg. PMI also both came in stronger than expected (PMI 51.5 actual vs 51.3 forecast and ISM PMI at 52.8 actual versus 52.0 forecast).  All of these things would indicate the economy is at least slightly stronger than expected…therefore giving the Fed cover for a larger September rate hike.  However, on the other side, Q2 Unit Labor Costs came in lower than expected.  They showed a +10.2% actual versus a +10.7% consensus forecast and last quarter’s +10.8%.  This would tend to indicate that there is less inflationary pressure on labor costs than expected, which would speak against a heavy hand by the Fed.

SNAP Case Study | Actual Trade

In stock news, US military veterans sued MMM to prevent the company from spinning off its healthcare business.  The lawsuit calls the move by MMM a blatant attempt to transfer liability over defective earplugs to another company after a judge had ruled MMM could not use bankruptcy to avoid the damages.  Elsewhere, the UK Antitrust Regulator has ruled that the MSFT acquisition of ATVI (for $69 billion) could harm competition.  This is not likely to derail the deal but should force MSFT to give broader assurances around the not ordering platform exclusivity of games to block rivals SONY and Nintendo from having access to ATVI games.

In energy news, XOM and RDS.A agreed to sell their California oil joint venture operations to German asset manager IKAV for $4 billion.  Elsewhere, the US Dollar reached yet another 20-year high Thursday, providing an additional headwind for oil prices (which are denominated in dollars).  In nuclear news, the California legislature approved a bill to extend the life of the state’s only atomic power plant by 5 years on Thursday.  This reversed the 2016 decision to retire the PCG Diablo Canyon plant by 2025.  The bill also provided PCG with a $1.4 billion loan to keep the plant operational until 2030.

After the close AVGO and LULU both reported beats on the revenue and earnings lines.  Both companies also raised forward guidance.  However, JOAN beat on revenue while missing on earnings.  The company left guidance as-is.

This morning, META and QCOM announced an agreement to jointly develop and produce a chipset META’s Quest virtual reality devices.  The chipset will be based on QCOM’s Snapdragon chip line which is already widely used in Android phones.  This partnership comes just weeks ahead of META launching a new virtual reality headset (set for October).  However, losses have continued to widen in META’s “Reality Labs” division since the company bet its future on virtual reality by rebranding in 2021.

Overnight, Asian markets leaned heavily to the red side on modest moves.  Taiwan (-0.87%), Hong Kong (-0.74%), and Singapore (-0.57%) led the region lower.  In Europe, stocks lean heavily to the upside at midday.  The FTSE (+0.62%), DAX (+1.31%), and CAC (+0.44%) are leading the region higher with only 3 smaller exchanges showing red in early afternoon trade.  As of 7:30 am, US Futures are pointing toward a slightly red start to the session (granted, well ahead of critical data).  The DIA implies a -0.13% open, the SPY is implying a -0.18% open, and the QQQ implies a -0.36% open at this hour. 10-year bond yields are up just slightly to 3.258% and Oil (WTI) is up almost 2% to $88.29/barrel in early trading.

The major economic news events scheduled for Friday include Aug. Avg. Hourly Earnings, Aug. Nonfarm Payrolls, Aug. Participation Rate, and Aug. Unemployment Rate (all at 8:30 am), July Factory Orders (10 am).  There are no major earnings reports scheduled for the day.

Today brings a slew of data before the open, most importantly August Payrolls data. This is widely expected to come in hotter than the consensus forecast (+300k) and most analysts think this will cause the bears to roar (as traders then expect another 0.75% hike later this month). However, US futures are already pricing in an 80% probability of a 0.75% rate hike. So, to me, the risk seems to be to the upside if somehow the Payroll data comes in a bit soft. With that said, the premarket is essentially flat (just on the red side) already while we wait on the data.

Expect volatility at the open as markets react to Payrolls, Unemployment Rate, and Participation. However, with a 3-day weekend ahead, it is very likely we see light volume in the afternoon (perhaps all day) as the big traders head for a long weekend in the Hamptons. So, be careful about initiating any new positions that you might not be able to get out of later in the day. The short-term trend remains strongly bearish, but we did put in candles that suggest the bulls tried to find support Thursday. If nothing else, we are due a pause just to relieve bearish overextension. The bottom line is that we are in a downtrend, but the bulls are trying to hold this level and the bears may have gotten ahead of themselves.

Again, remember it is Friday and we have a 3-day weekend ahead. Prepare yourself by taking profit, hedging, and/or getting smaller in your risk positions. Stick with your trading rules, trade with the trend, and take those profits when you have them. Demonstrate patience and wait for confirmation. Remember that trading is our job. So, do the work and follow the process. Don’t be stubborn. If you have a loss, just admit you were wrong, respect your stop, and take the loss before it grows. When price does move in your direction, always move your stops in your favor (remember the “Legend of the man in the green bathrobe“…it is NOT HOUSE MONEY, it’s all OUR MONEY!). Lastly, remember that you get rich slowly and steadily in Trading…not by striking it rich on one or two trades. So, give up that lottery ticket mentality.

See you in the trading room.

Ed

Swing Trade Ideas for your consideration and watchlist: No trade ideas today, Rick is on vacation visiting a gandbaby. 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.

Hit and Run Candlesticks / Road To Wealth Youtube videos

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.

Free YouTube Education  •  Subscription Plans • Private 2-Hour Coaching

DISCLAIMER: Investing / Trading involves significant financial risk and is not suitable for everyone. No communication from Hit and Run Candlesticks Inc, its affiliates or representatives is not financial or trading advice. All information provided by Hit and Run Candlesticks Inc, its affiliates and representatives are intended for educational purposes only. You are advised to test any new trading approach before implementing it.  Past performance does not guarantee future results.  Terms of Service