US Markets followed Europe and gapped significantly lower Friday (-0.97% on the SPY, -0.89% in the DIA, and -0.90% in the QQQ).  The bears piled on to drive prices lower during the first half of an hour.  All 3 major indices then ground sideways in a tight range until 11:30 am.  The bears got their second wind at that point and droved prices down another percent over the next hour. From 12:30 pm, we resumed a more volatile roller-coaster ride, reaching new lows at about 3 pm and bouncing the last hour. This action left us with large, black-bodied, gap-down, Hammer daily candles that could be seen as working on a Bearish Doji Continuation candle pattern (with a large lower wick) in all 3 major indices.

On, all 10 sectors are in the red with Energy (-6.904%) being by far the biggest loser and Healthcare (-1.17%) holding up best.  Meanwhile, the SPY was down 1.63%, DIA was down 1.55%, and QQQ was down 1.63%.  The VXX was up almost 5% to 19.82 and T2122 can hardly get more oversold at 1.01.  10-year bonds have pulled back from early highs to 3.685% and Oil (WTI) is off 5.5% to $78.89/barrel.  All-in-all, it was a brutal day to end a brutal week.   However, we are getting VERY extended from both the T-line (8ema) and in terms of the T2122 indicator at this point.

In Economic news, the September Mfg. PMI came in a bit above expectation (51.8 vs. 51.1 forecast and 51.5 in August).  In addition, the September Services PMI also came in above the forecast (49.2 vs. 45.0 forecast and well above the 43.7 reading in August).  These indicate a stronger economy than many had expected, but services still show some contraction.  Bloomberg also reported that US government debt is shrinking rapidly in terms of percentage of GDP as inflation increases the GDP.  (Note that debt in dollar terms grows daily, but the inflation increase of GDP has far outstripped the growth in debt.)

SNAP Case Study | Actual Trade

In stock news, on Friday, brokerages popped as the SEC stopped short of banning payment for order flow.  Then, after the close, DB paid $26.25 million to settle a shareholder lawsuit over ties to Jeffrey Epstein and Russian oligarchs.  Another European bank (BCS), was sued for fraud by shareholders (led by two pension funds).  The suit claims the bank sold $17.6 billion more debt than regulators allowed and had been claimed in annual reports.  BCS claims the issue results from an accounting mistake.  Then on Saturday, Bloomberg reported a leaked XOM internal study from 2020 which said that the oil and gas company had overspent $138 billion between 1998 and 2017 (or almost $7 billion per year) on 110 projects likely due to poor planning and mismanagement.  21 of the projects accounted for 93% of the overspending.

In Energy news, on Saturday, both JPM and MS reported that funds (hedge and mutual) massively exited energy stocks, bonds, and futures positions last week.  The big banks reported the exodus this month has been the largest industry retreat by funds from any industry for at least months.  This was, at least in part, the reason oil has fallen to an eight-month low. Elsewhere, German PM Sholz’s just-concluded trip to the Persian Gulf netted him the guarantee of one shipment of LNG from the UAE later this year.  However, German LNG terminals are under construction which would allow for longer-term agreements.  In addition, the UAE and German utility RWE will explore joint offshore Wind energy projects. 

In miscellaneous news, on Sunday, Instacart (which is scheduled to IPO before the end of this year) has cut an unspecified number of staff, including 3 senior-level employees, and has paused hiring ahead of its IPO.  It was previously announced that after the company goes public, the founder (Apoorva Mehta) would be stepping down as Chairman and CEO to leave the company.  Also Sunday, Boston Fed President Bostic said he believes the Fed will avoid “deep pain” while taming inflation.  He said “there is a really good chance that if we have job losses, it will be smaller than in past downturns.”  Finally, Reuters reported Sunday that US businesses borrowing for equipment grew 4% in August according to the Equipment Leasing and Finance Assn.  The ELFA group said US companies had signed up for almost $9 billion in new leases, loans, and lines of credit for equipment procurement in August, up from $8.5 billion one year prior.  Overall, the group said borrowing for this purpose is up 5% so far this year compared to 2021.

Overnight, Asian markets were red across the board.  South Korea (-3.02%), Japan (-2.66%), and Taiwan (-2.41%) led the region lower while mainland China and Hong Kong (-0.40%) held up relatively well.  In Europe, Stocks are mostly red with a few minor exchanges holding onto green.  The FTSE (-0.81%) is leading the way lower as the British Pound reached an all-time low against the dollar before recovering a bit as the new government’s tax cuts for corporations and the wealthy has markets scared.  (The Tory party has now called on the Bank of England to act to prop up the pound, but the probability it will fall to parity with the dollar has now risen to 60%.)  Meanwhile, the DAX (-0.10%), and CAC (-0.01%) show relative strength in the region in early afternoon trade.  (It is worth noting that Russia is down almost 7% at this point.)  Across the pond, as of 7:30 am, US Futures are pointing toward another gap lower to start the day.  The DIA implies a -0.71% open, the SPY is implying a -0.80% open, and the QQQ implies a -0.69% open at this hour.  10-year bond yields are back up sharply to 3.791% and Oil (WTI) is down 1% to $77.98/barrel in early trading.

The major economic news events scheduled for Monday are limited to a 2-year bond auction (1 pm) and a Fed speaker (Mester at 4 pm).  There are no major earnings reports scheduled for the day. 

In economic news later this week, Tuesday we get August Durable Goods Orders, Cond. Board Consumer Confidence, August New Home Sales, and API Weekly Crude Oil Stocks. Then Wednesday, August Goods Trade Balance, August Retail Inventories, August Pending Home Sales, EIA Weekly Crude Oil Inventories, and a Fed speaker (Bullard) are reported.  Thursday, we see Q2 GDP, Weekly Jobless Claims, and a Fed Speaker (Mester). Finally, on Friday, we get August PCE Price Index, August Personal Spending, Chicago PMI, Michigan Consumer Sentiment, and 3 Fed Speeches (Mester, Williams, Mester). 

In earnings reports later this week, on Tuesday, CBRL, FERG, JBL, SNX, UNFI, BB, and CALM report.  Wednesday, we hear from CTAS, HEPS, PAYX, THO, CNXC, JEF, and MLKN.  Then Thursday, BBBY, KMX, RAD, WOR, MU, and NKE report.  Finally, on Friday, BKR and CCL report.

Over the weekend, UNC’s Tax Center released a study (based on 2021 financials) that indicates 78 major US corporations will be hit with new tax bills due to the new 15% Corporate Minimum Tax (this is because they paid little or no taxes in 2021). BRKB, AMZN, F, and T are likely to be the tickers hit worst by the new tax. For example, the study estimates BRKB would have paid $8.3 billion to reach that 15% tax level. However, the main story is the US Dollar strength, based on the aggressive Fed rate hikes being juxtaposed to the new British approach of giving away tax cuts to stimulate. UK markets are scared stiff, while the rest of Europe is on edge by the unexpected and sudden lurch from normal/traditional policy to “Reaganomics Trickle Down Theory.” On the other side of the world, Japan has had to intervene to stop the fall of the Yen versus the Dollar. It is this kind of extremely strong dollar that has caused global economic crisis in the past. To top this all off, Russian President Putin made more “I’m not kidding, I’ll Nuke You” threats Sunday and Ukraine says they believe him.

With this backdrop, the strong bear trend remains in place across all 3 major indices. However, again, we are again very extended from the T-line (8ema) and are deeply oversold in terms of the T2122 indicator. The major indices are getting close to testing the lows from June. So, expect volatility and even though everything looks very bearish, do not forget we are extended. Markets moving in zig-zags and there will be a zag coming at some point soon.

Keep in mind that trading is our job. It’s not a 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. 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