On Wednesday, the major indices gapped down (SPY – 0.50%, DIA – 0.40%, and QQQ – 0.70%) at the open.  We then saw a rollercoaster ride that was highlighted by a sharp morning rally (taking us to the highs of the day at 10:30 am), a slow mid-day selloff (taking us to the lows of the day at 1 pm) and a sideways oscillation the rest of the day.  This action left us with gap-down, indecisive, Spinning Top candles (perhaps Doji in the QQQ) across the 3 major indices.  The SPY and QQQ both retested and held their T-lines (8ema) and all 3 traded lower than average volume.

On the day, nine of the ten sectors were in the red with only Energy (+2.13%) in the green.  Meanwhile, Healthcare (-2.23%) and Consumer Cyclicals (-1.98%) led the way lower.  SPY lost 0.71%, DIA lost 0.41%, and QQQ lost 0.36%.  The VXX rose 0.78% to 20.60 and T2122 fell back to the mid-range at 56.35.  10-year bond yields spiked to 4.131% and Oil (WTI) rose 3.36% to $85.63/barrel. Overall, it felt like an indecisive day where the market is waiting on something and can’t make up its mind.

In economic news, September Building Permits came in a bit above expectation (1.564 million versus 1.530 million forecast and 1.542 million in August).  However, Sept. Housing Starts came in below forecast (1.439 million actual versus 1.475 million forecast and 1.566 million in August).  The EIA Weekly Crude Oil Inventories came in well below expectations with a drawdown of 1.725 million barrels (compared to a build of 1.380 million barrels forecast and last week’s massive 9.880-million-barrel build). On the Fed front, Minneapolis Fed President Kashkari (strong hawk) told an audience that the US job market remained too strong and inflation probably has not peaked yet.  He went on to say that the FOMC may need to raise rates above 4.75% this year to fight inflation, but his best guess is that inflation should start to react sometime next year, allowing the Fed to pause its rate hikes.  Then last night, St. Louis Fed President Bullard told an audience that he expects the FOMC to end its “front-loading” of aggressive interest-rate hikes by sometime early next year.  He went on to say that beyond that, the central bank could use “small adjustments” to control the situation as inflation cools.

SNAP Case Study | Actual Trade

In stock news, Bloomberg reports that T is working with MS to fund a joint venture with some unspecified infrastructure partner with the aim of investing billions of dollars in the US fiber-optic network expansion.  Meanwhile, FFIE announced that the company has cut jobs and reduced salaries (in exchange for employees getting equity positions) in order to conserve cash.  However, the company is still in talks to raise cash because the conservation will not sustain its burn rate.  Meanwhile, GOOGL-owned Waymo announced it will launch its self-driving ride-hailing service into Los Angeles soon, but on an unspecified date.  (The service is now available and has operated in Phoenix since 2018.)  GTBIF is teaming up with Canadian convenience store chain “Circle K” to sell marijuana at gas stations (with a separate entrance) in 10 Florida locations starting next year.

In energy news, the US Senate quietly advanced the NOPEC bill aimed at punishing OPEC+ countries for their recent production cuts.  The bill would remove the sovereign immunity that national oil companies now have, allowing them to be sued for collusion on price-fixing.  (It’s unclear how the US could enforce rulings, even if companies like Saudi Aramco were found guilty by a US court.)  Earlier, President Biden announced the release of an additional 15 million barrels of oil from the Strategic Petroleum Reserve as well as a plan to begin replenishing the reserve once oil prices hit $70.  It is also worth noting that the US Dollar gained again Wednesday against all its peer currencies (in lock-step with the spike in bond rates).  This made oil cheaper, yet even so, the fear over supply and reduction in US oil inventories drove oil prices higher.

After the close, IBM, EFX, STLD, KALU, LRCX, LBRT, and CCI reported beats on both the revenue and bottom lines.  Meanwhile, TSLA missed on revenue while beating on earnings.  On the other side, KMI, UMPQ, and PACW beat on revenue while missing on earnings.  At the same time, LSTR beat on revenue and came in inline on earnings. However, PPG, AA, KNX, and LVS all missed on both the top and bottom lines.

So far this morning, T, PM, DOW, AAL, DHR, ERIC, GPC, DGX, ALK, POOL, SNA, MSM, and SNV all reported beats on both the revenue and earnings lines.  At the same time, ABB, FITB, KEY, and HRI all beat on revenue while missing on earnings.  On the other side, NOK, BX, MMC, TSCO, and DOV all missed on revenue while beating on earnings.  At this point, there have been no companies that reported misses on both lines today.  (NUE, FCX, UNP, MAN, and WSO report closer to the opening bell.)

Overnight, Asian markets were mixed but leaned heavily to the downside.  Hong Kong (-1.40%), Australia (-1.02%), and Japan (-0.92%) led the move lower.  Only Malaysia (+1.60%), India (+0.30%), and Thailand (+0.25%) managed to stay green in the region.  In Europe, we have a more mixed picture at midday.  The FTSE (+0.01%), DAX (-0.37%), and CAC (+0.44%) are typical of the widely split continent in early afternoon trade.  As of 7:30 am, US Futures are pointing toward a modest gap higher to start the day (ahead of data).  The DIA implies a +0.51% open, the SPY is implying a +0.36% open, and the QQQ implies a +0.15% open at this hour.  10-year bond yields are down slightly to 4.128% and Oil (WTI) is up 1.67% to $86.98/barrel in early trading.

The major economic news events scheduled for Thursday include Weekly Jobless Claims and Philly Fed Mfg. Index (both at 8:30 am), Sept. Existing Home Sales (10 am) and a pair of Fed Speakers (Harker at noon and Bowman at 2:05 pm).  The major earnings reports scheduled for the day include ABB, ALK, AAL, T, BX, DHR, DOV, DOW, EWBC, ERIC, FITB, FCX, GPC, HRI, KEY, MAN, MMC, MSM, NOK, NUE, PM, POOL, DGX, SNA, SNV, TSCO, UNP, WSO, and WBS before the open. Then, after the close, SAM, CSX, RHI, SNAP, SIVB, UFPI, WAL, and WHR report. 

In economic news later this week, on Friday, Fed member William speaks.  In earnings reports later this week, on Friday, we hear from AXP, ALV, EEFT, HCA, HBAN, IPG, RF, SLB, and VZ.

In late-breaking international news, the UK government is in turmoil after PM Truss fired another key cabinet member (and again replaced them with someone who did not support her) and the Tory party whip had to use literal force to make Tory members vote the way the PM wanted them to vote. So, the UK media is now openly handicapping who will replace Truss. Meanwhile, in China, the government is weighing whether or not to cut the quarantine time for foreign visitors. At the same time, the top Chinese technology official has summoned Chinese semiconductor companies to an emergency meeting on how to counter President Biden’s chip sale restrictions. Finally, in Ukraine, the Russian use of Iranian “kamikaze drones” to attack both cities and general and electrical infrastructure, in particular, has caused enough damage that President Zelenzkyy has imposed nationwide electric use restrictions.

With that backdrop, the bearish trend continues while all 3 major indices flirt with printing an inverted head and shoulders (bottoming) pattern. Market extension is not a factor, either in terms of the T-line or T2122. Still, the intraday reversals and daily chop remain serious concerns. So, continue to be cautious and show patience (wait for confirmation). With high volatility and less certainty, this may be the time to pursue more cautious trading strategies, including remaining hedged, quick, and/or small.

Don’t be stubborn. If you have a loss, just admit you were wrong and take it before it grows. And 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!). Also, keep in mind that trading is not a hobby. It’s a job. So, treat it that way. Do the work and follow the process. Stick to your trading rules, trade with the trend, and take those profits when you have them. 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 out). 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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