Friday was a very volatile bull trap across all 3 major indices.  SPY gapped up 1.6%, DIA gapped 1.15% higher, and QQQ gapped 2% higher at the open.  However, this was met with an immediate selloff that recrossed the gap in the QQQ, crossed back half the gap in the DIA, and crossed back down two-thirds of the gap in the SPY.  However, then it was the bull’s turn to trap the bears as a strong rally in the second half hour took us to new highs, more than crossing up out of the gap, in all 3 major indices.  At that point, the whipsaw kicked in once again as a very strong selloff ensued for the next 75 minutes.  This process completely recrossed the opening gap again, down to new lows on the day at noon.  From there we saw a smaller sideways rollercoaster centered on the Thursday closing price in the SPY, DIA, and QQQ.  That left us bobbing back and forth between small green and small red moves for the day up until 2:15 pm when the bulls began a strong rally that is driving us back up the rest of the day in all 3 indices.  It left the QQQ about three-fourths of the way back up to the opening price, the SPY 90% of the way back up to the opening price, and the DIA back just above the opening price at the close.

This action is giving us gap-up, indecisive, Spinning Top candles with wick on both ends, but considerably more wick to the downside.  On the day, all ten sectors were in the green with Healthcare (+0.42%) lagging and Basic Materials (+5.26%) by far (like by 3% far) the largest gaining sector.  Meanwhile, SPY gained 1.45%, DIA gained 1.35%, and QQQ gained 1.61%.  The VXX was down 1.25% to 17.35 and T2122 was up but remains in the mid-range at 73.62.  10-year bond yields pulled back from early highs to 4.169% and Oil (WTI) gained 5% to $92.54 per barrel.  So, overall, was a very volatile and indecisive day inside a very bearish and gap-filled week. 

In economic news, October Average Hourly Earnings came in exactly as forecast at +4.7% year-on-year (compared to the expected +4.7% and well below the September value of +5.0%).  This would tend to point toward a lessening of inflationary pressure.  However, October Nonfarm Payrolls came in hot at +261k (versus the forecast +200k, but far below the September value of +315k).  Again, this tends to show we are moving in the right direction…just not as fast as forecast.  The same was true for October Private Nonfarm Payrolls which came in at +233k versus the forecast of +200k, but again far below the September value of +319k.  The October Unemployment Rate was up more than expected to 3.7% (versus a forecast of 3.6% and September’s value of 3.5%).  And finally, the October Participation Rate fell to 62.2% versus the September value of 62.3%.  So, all this data seems to lean toward Fed actions working, inflation pressures starting to lessen, and progress being made…just not as much as we would have hoped/forecast.  This is why markets gapped so strongly higher (the expectation that the FOMC will have cover to lessen hikes soon).

SNAP Case Study | Actual Trade

In stock news, Reuters reported that the US Auditors’ onsite inspection of US-listed Chinese companies has now ended.  The article’s sources said it was too early to tell if the audits met US expectations.  The FAA has approved JBLU’s request to waive the minimum flight requirement.  This allows JBLU to keep the right to keep their gates and runway slots at NY’s JFK and NJ’s Newark airports, even though it does not use them at least 80% of the time.  A state of WA court has blocked ACI from paying out the $4 billion dividend to shareholders prior to the closing of the proposed deal to be acquired by KR.  In related news, the unions representing workers at both KR and ACI, as well as 26 organizations (purported antitrust experts) have urged the FTC to block that merger.  The US Supreme Court has agreed to hear AMGN’s appeal to revive their patents on the cholesterol drug Repatha that were invalidated by legal challenges from REGN and SNY in 2019.

In miscellaneous news, Friday afternoon Bloomberg reported that US commercial property prices have plunged 13% from their peak in May (but only 8% over the last 12 months).  Then Saturday, BRKB reported operating income up 20% year-on-year for Q3, but still managed to post a $2.69 billion net loss for the quarter, mostly from insurance losses (compared to a $10.1 billion gain in Q3 of 2121).  BRKB also spent $1.05 billion on stock buybacks during the quarter (bringing the YTD total to over $5.25 billion of stock repurchased).  Elsewhere, interestingly, the CFTC said after the close Friday that currency speculators have reduced their bets on a strong dollar, with the smallest net long position at the end of October for more than a year.  There was $3.08 billion in net long dollar contracts compared to $10.21 billion net long the week before.  This may have contributed to the Dollar’s pullback versus the Euro and Yen on Friday. Finally, on Saturday, China’s Health Ministry told a press conference that (contrary to recent rumors) China will continue its Zero Covid policy.

So far this morning, BRK.B, BNTX, HE, AMG, and FOUR have all reported beats on both the top and bottom lines.  Meanwhile, NRG, NI, and PLTR beat on revenue while missing on the earnings line.  On the other side, VTRS, and THS both missed on the revenue line while beating on earnings.  However, AMR missed on both the revenue and earnings lines.  It is worth noting that BTNX has raised its forward guidance.

Overnight, Asian markets leaned heavily to the upside.  Thailand (-0.17%) was the only exchange in the red. At the same time, Hong Kong (+2.69%), Taiwan (+1.51%), and Japan (+1.21%) led the region higher. In Europe, we see a similar picture taking shape at midday.  The FTSE (-0.22%) is the worst off of the only 2 exchanges showing any red.  Meanwhile, the DAX (+0.84%) and CAC (+0.13%) lead the region higher in early afternoon trade.  As of 7:30 am, US Futures are pointing toward a green start to the day. The DIA implies a +0.54% open, the SPY is implying a +0.48% open, and the QQQ implies a +0.42% open at this hour.  The volatile 10-year bond yields are back down to 4.125% and Oil (WTI) is off more than 1% to $91.65/barrel in early trading.

There are no major economic news events scheduled for Monday.  The major earnings reports scheduled for the day include AMG, AMR, BNTX, CGAU, DK, FNV, DINO, KOS, NI, NRG, THS, and VTRS before the open.  Then, after the close, ACCO, ATVI, ASTL, AEL, ARKO, ASH, BHF, BKD, BWXT, CBT, CENX, CLOV, CAPL, FANG, DIOD, FN, ICUI, IFF, JHX, LYFT, MTW, DOOR, MOS, OSH, PTVE, PRIM, SEDG, TTWO, TWI, VRM, and WELL report. 

In economic news later this week, on Tuesday we have a Fed speaker (Mester at 4:40 am).  On Wednesday, we get EIA Crude Oil Inventories, the WASDE Ag Report, and another Fed speaker (Williams at 4 am).  Then Thursday, October CPI, Weekly Initial Jobless Claims, October Federal Budget Balance, and 2 Fed speakers (Mester at 1:30 pm and George at 2:30 pm) report.  Finally, on Friday, we get Michigan Consumer Sentiment.

It is a bit lighter week of earnings reports as, on Tuesday, we hear from AHCO, BLDR, CG, CLVT, CCO, CNHI, CEG, COTY, DBD, DD, SSP, ELAN, EXPD, GFS, IGT, LITE, NFE, NXST, PRTY, PKI, PRGO, RCM, RPRX, REYN, SCSC, SSRM, SGRY, TAC, VTNR, AMKR, AKAM, AMC, DOX, ANGI, DAR, FNF, GO, GXO, IAC, JKHY, MASI, MRC, NLOK, NVAX, OXY, OSCR, OVV, PRI, SFM, VSAT, and DIS.  Then on Wednesday, BHG, CLMT, CPRI, GIB, COHR, CRBG, DHI, GGB, HBI, HGV, ICL, LTH, MIDD, NOMD, PFGC, RBLX, RCI, SEAS, SWX, SPTN, TRP, TGNA, WEN, WWW, ADV, ATO, BGS, BRFS, CANO, CPNG, CRGY, ENS, FSM, G, JXN, JAZZ, KGC, LNW, MFC, RBT, NGL, RXT, RDFN, RNG, RIVN, STE, TTEK, TTEC, VET, and WYNN report.  On Thursday, we hear from AZN, AZUL, BDX, BAM, CAE, CEPU, EPC, GBTG, KELYA, EYE, NICE, PRMW, RL, SBH, SIX, TPR, TDG, USFD, WRK, WE, YPF, BZH, COMP, EDR, FLO, ITUB, STN, and TOST.  Finally, on Friday, AQN reports.

As mentioned above, there is no scheduled economic news today. However, overnight Bloomberg reported that AAPL is now expecting to make 3 million fewer iPhone 14s than originally anticipated. So, the woes in tech land continue. Probably more importantly, over the weekend, China announced that, despite rumors to the contrary, the second-largest economy in the world is sticking to its strict “Zero Covid” policy. The one olive branch from that press conference was that Chinese officials will discourage “local over-reactions.” (Still, you have to wonder whether a local official whose livelihood and maybe life depend on lowering covid case numbers is going to worry too much about the Health Ministry thinking he “overreacted”). So, it looks like we can expect more lockdowns, Chinese markets, and supply chain disruptions this winter as the covid season kicks into higher gear again.

With that background, it looks like the bulls want to retest the T-line in the SPY, hoping to find strength instead of resistance. However, the QQQ is going to be a big anchor to drag uphill as the mega tech names impact the SPY heavily as well. Even so, it sure looks like the DIA is trying hard to form a bullish J-hook pattern, even as the SPY and QQQ have a fight on their hands just to avoid looking for new lows. That divergence tells us that the market is still seeking the safety of the stodgy mega-cap names in the DIA. Don’t be in a hurry. Let’s see how things settle out after the open before jumping in. Control your FOMO and your fear in general.

Be deliberate and disciplined, but don’t be stubborn. Remember that it is 100 times more important to avoid big mistakes than it is to pick big winners. If you have a loss, admit you were wrong and take the loss before it gets out of hand. And when price does move in your direction, always move your stops in your favor and take a little profit off the table. (You have to remember the “Legend of the man in the green bathrobe“…in that situation, it is NOT HOUSE MONEY you’re betting, it’s all OUR MONEY!). Finally, trading is not your hobby. It’s a job. The money is real. 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. I know the Powerball is huge right now, but give up that lottery ticket mentality.

See you in the trading room.

Ed

Swing Trade Ideas for your consideration and watchlist: VTR, AMAT, FCX, GDX, AAPL. 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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