Stocks gapped slightly higher (about 0.25%) at the open Monday.  However, that was another bull trap as the bears immediately stepped in to sell off the 3 major indices for the first hour.  The bulls did step back in to rally us back to the highs of the day shortly after 11 am.  Still, that was the end of the bull’s strength as all 3 major indices oscillated lower the rest of the day, closing midway between the lows and the previous day’s close.  This action left us with somewhat indecisive Black Spinning Top type candles across all the major indices. 

On the day, all 10 sectors were in the red with Industrials (-0.01%) just barely below break-even and Energy (-1.35%) leading the market lower.  The SPY lost 0.39%, DIA lost 0.50%, and QQQ lost 0.72%.  This all happened on very slightly above-average volume.  The VXX gained eight-tenths of a percent to 19.25 and T2122 fell even further into the oversold territory at 6.06.  10-year bond yields spiked higher to 3.342% and Oil (WTI) was just south of flat at $86.70/barrel.

In stock news, AIG announced that its upcoming IPO of its Corebridge Financial (CRBG) will be priced between $21 and $24 per share and they expect to raise $1.92 billion on the IPO.  Elsewhere, NWL cut its forward guidance after hours, citing a deteriorating economic climate and inflationary pressure.  Then after the close, Reuters reported that sources tell them that CVS’s weekend acquisition of SGFY is likely to face stiff antitrust regulator opposition from the FTC.  Finally, in an attempt to steal AAPL’s thunder (AAPL holds its iPhone 14 launch event today), Tuesday afternoon GOOGL announced their new Pixel watch and Pixel 7 phones (running Android 13) will go on sale on October 6.

SNAP Case Study | Actual Trade

In miscellaneous news, the dollar continued to be strong and gained against the Euro and Yen after the July ISM Services PMI showed edged higher (56.9 vs. 56.7 in June and Economist forecasts of 54.7).   The Yen reached another 24-year low of 142 Yen per dollar on that move.  Elsewhere, after hours, Reuters reported that CEOs from banks (BAC. TFC, and MTB) all said consumers and businesses are still in good financial shape.  Despite inflation and fear of recession, consumers spent 10% more in August than the same month in 2021.  In addition, bank account balances are higher than even before the pandemic according to those bank CEOs.

In energy news, for the second consecutive day, California narrowly averted blackouts. Scorching temperatures above 100 pushed electrical demand to record levels again. At 5:30 pm Pacific, California’s grid operator ordered its highest level of emergency, warning that blackouts were imminent and the CA Office of Emergency Services then asked people to turn off electrical devices. Within 5 minutes electric demand dropped significantly and the crisis was avoided (at least for the moment). However, this was a tight-run affair and the CA electric demand is very near a crisis that could shut down (or at least slow down) the state’s business operations while electric supply is very tight (read: while the heatwave persists).

In real estate-related news, mortgage demand dropped again as the national average rate for a 30-year, fixed-rate, conforming loan rose from 5.80% to 5.94%.  Refinance loan applications fell another 1% on the week (83% lower than the same week in 2021) and new home purchase loan applications also fell 1% (23% lower than last year).  In other real estate news, the big banks (GS, MS, JPM, etc.) have now removed the final hurdles to full-time employees returning to the office.  There are some exceptions as C is being more flexible in allowing workers to use a hybrid remote / in-office schedule.

So far this morning, NIO beat on revenue while missing on earnings.  KFY and GIII both came in in-line on revenue while missing on earnings.  Meanwhile, REVG came in in-line on revenue while beating on earnings.

Overnight, Asian markets were mixed but leaned to the red side.  Taiwan (-1.82%), Australia (-1.42%), and South Korea (-1.39%) led the region lower as China’s trade data missed expectations amid “Zero Covid” shutdowns in various parts of that country.  In Europe, we see even more red at mid-day.  The FTSE (-0.59%), DAX (-0.39%), and CAC (-0.32%) are leading the region lower with only Spain (+0.55%) showing any significant green in early afternoon trade.  As of 7:30 am, US Futures are pointing toward a flat start to the day.  The DIA implies a +0.09% open, the SPY is implying a +0.12% open, and the QQQ implies a +0.13% open at this hour.  10-year bond yields are down a bit to 3.324% and Oil (WTI) is up a quarter of a percent in early trading.

The major economic news events scheduled for Wednesday are limited to July Import/Exports and July Trade Balance (8:30 am) and Fed Beige Book (2 pm).  However, there are also 3 Fed speakers (Mester at 10 am, Brainard at 12:40 pm, and Vice Chair Barr at 2 pm).  The major earnings reports scheduled for the day include ASO, GIII, KFY, NIO, and REVG before the open.  Then after the close, AEO, CASY, CPRT, and GME report.

In economic news later this week, on Thursday, Weekly Jobless Claims and Weekly Oil Inventories are reported.  Finally, on Friday, there are no major economic reports.

In terms of earnings later this week, on Thursday, we hear from BILI, DOCU, and RH report.  Finally, on Friday, we hear from ABM, KR, and WDH.

In the watch and phone announcement noted above, GOOGL CEO Pichai said he hopes to improve the company’s efficiency by 20% and that could include a headcount reduction. This is just the latest example of companies fearing a recession or at least an economic slowdown. Elsewhere, be aware that analysts are now expecting the Central Bank of Canada to hike interest rates 0.75% at 10 am today. This may have a modest impact on US markets.

The downtrend remains in place, but the extension to the downside also remains extreme. The premarket indices continue to be flat but are just now on the red side of that break-even line. The SPY is sitting at a potential support level, but the DIA and QQQ support is much less discernable. Expect chop and be very careful about chasing any move as it is likely to be a precursor to reversal.

Remember that trading is our job, not a pastime or hobby. So, treat it that way. Do the work and follow the process. Stick with your trading rules, trade with the trend, and take those profits when you have them. Demonstrate patience and wait for confirmation. 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.

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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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