Stocks gapped lower at the open Thursday (0.14% in DIA, 0.44% in SPY, and 0.89% in QQQ).  Price then proceeded to meander sideways in a fairly tight range until 2 pm, when the bears took over to drive the market to new lows at about 3:30 pm.  However, a slight rally in the last 30 minutes took us out not far up off the lows. This left us with black, Inverted Hammer type (maybe you’d call QQQ a spinning Top) candles in the 3 major indices.  In addition, all 3 indices have either broken out of or are now right at the breakout level of, their “dreaded h” patterns.  So, the bears will have the wind at their back on Friday.

On the day, eight of the 10 sectors were in the red.  Healthcare (+0.20%) was really the only sector managing to stay green along with Financial Service (+0.01%) while Energy (-2.33%) and Utilities (-2.32%) were by far the weakest.  The SPY closed down 1.14%, DIA lost 0.54%, and QQQ lost 1.67%.  The VXX ended up 0.31% to 19.15 and T2122 remains in the oversold territory at 13.24.  10-year bond yields are climbing to 3.449% and Oil (WTI) is down just under 4% to $85.09/barrel.  So, overall, it was an indecisive day until the bulls ran out of gas mid-afternoon and the bears took over to take us out near the lows.

In Economic news, August Retail Sales grew 0.3%, but some of that increase was in inflated prices rather than additional purchases.  Weekly Jobless Claims came in a bit lower than expected at 213k (226k forecast).  Meanwhile, both the Philly Fed Mfg. (at -9.9 vs. +2.8 forecast) and NY Empire State Mfg. Index (-1.50 vs -13.00 forecast) came in negative with Philly coming in lower than expected and NY coming in above the expectation.  August Exports were down 1.6% while Imports were down 1.0%.  July Business and Retail Inventories came in as expected.  However, August Industrial Production came in below expectations (-0.2% vs. +0.1% forecast).  So, overall, we had mixed results in terms of what the Fed may make of economic growth (if they were to just look at today’s data).

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In stock news, after hours, FDX withdrew its 2023 forward guidance while saying it expects a global recession next year. The company also warned it will be adversely impacted by global softness in shipments in the current quarter, citing Asia and Europe in particular for economic weakness.  FDX said it now estimates Q1 could come in at $3.44 EPS (far below the current consensus of $5.14).  FDX stock was down 16% in past-market trade on the news.  Elsewhere, 6 companies announced share repurchase plans today.  (TXN announced a dividend increase as well as an additional $15 billion on top of the existing plan of $8.2 billion for share buybacks.  KFRC announced an unspecified repurchase authorization during the period September 16 – November 2, 2022.  MQ authorized $100 million in share buybacks.  ARW added $600 million to its existing buyback program.  OLP declared a $0.45 quarterly dividend and approved a small $5.2 million addition to its remaining $2.3 million repurchase program.  And JG authorized $5 million of share buybacks over the next year.) Meanwhile, the Consumer Financial Protection Bureau announced it will start regulating “buy now, pay later” companies like AAPL, SQ, PYPL, and AFRM.

In Energy news, the deal to avert a rail strike hit oil hard on Thursday.  This caused the “crack spread” (refiner profit margin) to close at its lowest level since March.  Elsewhere, Germany is now in advanced takeover talks with the 3 major gas-importing companies in that country (Uniper SE, CNG AG, and Securing Energy…which was formerly Gazprom Germania).  Finally, on Thursday the Biden Administration announced a plan to accelerate Off-Shore Floating Wind Electrical Generation, setting a new goal of 15 gigawatts of floating offshore capacity by 2035 as part of the broader (and nearer) goal of having 30 gigawatts of offshore wind capacity in production by 2030.  (The latter goal includes floating as well as anchored wind farms.)  Companies in that space include NEE, NEP, GE, WNDY, TPIC, and the etf FAN.

In China news, Asia woke up to a raft of Chinese Economic Reports.  Among these were August Housing Prices (-1.3%), August Industrial Production (+4.2%, beating estimates of +3.8%), August Retail Sales (+5.4%, beating estimates of +3.5%), and August Unemployment (5.3%, down slightly).  These reports did nothing to improve the hopes for a second-half recovery as the Chinese Property slump/debacle and new Covid-19 lockdowns continue to rock the second largest economy in the world.  This came a day after Chinese President Xi Jinping met with Russian President Putin (and reportedly raised concerns over the Russian invasion and losses they have suffered).  Finally, in a bid to bolster US competitive advantage, guarantee sources, and limit the transfer of technologies, President Biden issued an executive order that expanded the regulatory duties and power of the Committee on Foreign Investment in the US.  The order requires them to block foreign acquisitions and investments by countries (especially China) with adversarial aims into US technology firms (especially AI, microelectronics, biotech, quantum computing, clean energy technologies, etc.).  However, the order does not regulate “outbound investment” of American companies in China, which has been a major source of lost intellectual property in the past.  (China requires foreign companies operating in China to turn over trade secrets and data.)

Overnight, Asian markets were nearly red across the board.  The lone holdout was Singapore (+0.01%) which hung onto the green by its fingernails.  Meanwhile, it was  Shanghai (-2.30%), Shenzhen (-2.30%), and India (-1.52%) leading the region lower.  In Europe, a similar picture is taking shape at mid-day.  The FTSE (+0.12%) is the only real green in the region while the DAX (-1.45%) and CAC (-1.30%) are leading the region lower 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 -0.72% open, the SPY is implying a -0.80% open, and the QQQ implies a -0.95% open at this hour.  10-year bond yields are up to 2.469% and Oil (WTI) is up two-thirds of a percent to $85.62/barrel in early trading.

The major economic news events scheduled for Friday are limited to the Michigan Consumer Sentiment (10 am).  Friday is also Quadruple Witching, so watch for pinning action.  There are no major earnings reports scheduled for the day.

Thursday’s action and the futures this morning suggest we are headed down to retest the July lows. However, most eyes are trained on the FOMC and traders are trying to prejudge what the Fed will do next week. Talking heads can’t make up their minds with some calling for a 1.00% increase while others say we need to ease off the increases and go 0.50% or even 0.25% this month. The Fed gets the only vote and all we know for sure is that they have been talking in such a way as to suggest 0.75% and that is what is baked into the Fed Funds Futures.

With that backdrop, we should note that the bears clearly have control. However, the gap lower implied by futures will put us pretty extended from both the T-line and in terms of the T2122 reading. So far, the potential support levels don’t seem to be helping the bulls hold the line and fight bearish momentum. All we can do is trade the chart (the actual price action) and not what you predict will happen. Still, keep in mind that it is Friday and that means it’s time to consider the weekend news cycle. Do you need to take profits, hedge, or reduce your position sizes? Think about it.

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: DXD, JDST, LABD, SPXS, FAZ, ERY, SPXU, DRIP, SQQQ, FNGD, DOG, SDOW, QID, RWM, SQXS, TZA. 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.

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🎯 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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