Markets opened flat on Friday.  At that point, we saw a wave of volatility until 11:30 am.  This was volatility to the upside on the SPY and QQQ and to the downside on the DIA. Then the 3 major indices got into lock-step and steadily rallied in the afternoon until we saw a small pullback at 3 pm. However, the day ended on a run back up near the high of the day.  The QQQ broke out of its “W pattern” resistance level during the day.  This action gave us white-bodied candles with wicks at both ends in the SPY and QQQ.  At the same time, the DIA printed a Dragonfly Doji candle. 

On the day, eight of the ten sectors were in the green with the Consumer Cyclical sector (+2.95%) leading the way higher while the Utility sector (-0.97%) lagged behind.  Meanwhile, the SPY gained 0.97%, the DIA gained 0.16%, and the QQQ gained 1.84%. The VXX was down 1.34% to 16.98 and T2122 remained deep in the overbought territory at 96.26.  10-year bond yields remained lower at 3.811% and Oil (WTI) spiked 2.76% to $88.86 per barrel.  So, all-in-all, Friday saw modest follow-through to Thursday’s CPI rally everywhere other than the DIA where we got a pause.

In miscellaneous news, Friday evening, Reuters reported that EL was close to a deal to buy luxury brand Tom Ford for $2.8 billion and details may be announced as soon as today.  On Sunday, TSLA said it will assist Chinese police in investigating another fatal crash (2 dead, 3 injured) of a Model Y car on November 5.  TSLA has faced claims of brake failure in the past in China and a witness to this crash (a family member of the driver) said the driver was having problems with the brake pedal, but video of the crash showed no brake lights.  In various buyback announcements, ASML authorized $12.43 billion in additional buybacks, PSX approved a $5 billion increase in its buyback plan, TMO authorized $4 billion in buybacks, and STLD added another $1.5 billion to its existing share buyback plans.

SNAP Case Study | Actual Trade

In cryptocurrency news, the crypto world continued to be rocked by the implosion (and Friday bankruptcy) of crypto exchange FTX.  Over the weekend, it was reported that, in addition to the company’s financial woes, FTX was hacked with over $400 million in coins missing.  Even more troubling, recently FTX’s former CEO (Sam Bankman-Fried) moved $10 billion of customer funds from the FTX exchange to his own trading company (Alameda Research). From there, as much as $1.7 billion has gone “missing” in the last couple of weeks.  Meanwhile, in the same space, Crypto.com says it has now recovered $400 million of Ether coins days after that money had been “misplaced” when Crypto.com mistakenly sent 320k Ether coins to a cold wallet owned by Gate.io.  All of this turmoil has caused billions of dollars of withdrawals from crypto exchanges and untold loss of capital in the panic selling of the last week.  This has led many leading analysts in the crypto world to call for strong government regulation to re-establish trust before the entire crypto space implodes.

In energy news, Natural Gas prices plunged (5.5%) Friday as traders were trying to figure out how to interpret a blizzard of tweets that have since been called false and disinformation by the target of the tweets.  Essentially, the original tweet said that the major natural gas terminal (Freeport LNG) would remain offline for at least months due to “cracked pipes” that resulted from a fire back in June.  (Markets had been counting on this major terminal coming back online to reduce inventory.)  If true, this would mean that US export of natural gas would be severely curtailed and US inventories of natural gas would skyrocket, lowering US prices for months.  However, Freeport has now said that tweet was false, the information did not come from them (even though the original tweet was made to look like a company announcement). Meanwhile, in Congress, Coal-backed Senator Manchin has now said he does not intend to hold a re-confirmation hearing for President Biden’s Energy Secretary. This is his petty response to Biden calling for the “end of dirty energy” in the last ten days prior to last week’s election.  Nonetheless, it could leave the Energy Dept. without a head for the foreseeable future.

In dividend news, these were the largest dividend increases for last week.  ADP hiked its dividend by 20.2% to $1.25/share ($5 annualized) to be paid on January 1 for the holders of record on December 8.  MAR raised its dividend by 33.3% to $0.40 ($1.60 annualized) per share payable December 30 for holders as of November 22.  AAON hiked its semi-regular dividend by 26% to $0.24 ($0.48 annualized) payable December 16 for holders of record on November 28.  PFSW declared a special $4.50 dividend payable on December 15 for holders as of November 30.  ROP bumped its dividend by 10.1% to $0.6825 per share ($2.73 annualized) payable Jan. 23 for owners as of January 6.

So far this morning, MT, BAM, AZN, USFD, RWEOY, BDX, NIO, DDS, TDG, KELYA, SBH, SLVM, and NICE all posted beats on both the revenue and earnings lines.  At the same time, AEG, WRK, TPR, EPC, and EYE all missed on revenue while beating on the earnings line.  On the other side, PRMW beat on revenue while missing on earnings.  Unfortunately, WE and SIX missed on both the top and bottom lines.  It is worth noting that USFD and PRMW raised their forward guidance.  However, BDX, NIO, TPR, SBH, WE, and YETI all lowered their forward guidance.

Overnight, Asian markets were mixed.  Hong Kong (+1.70%), Taiwan (+1.19%), and Singapore (+1.01%) were the gainers.  Meanwhile, Japan (-1.065) Thailand (-0.85%), and South Korea (-0.34%) paced the rest of the region lower into losses.  In Europe, we see a similarly mixed picture at midday.  The FTSE (+0.26%), DAX (+0.37%), and CAC (+0.27%) are leading the region modestly higher, while 4-5 smaller exchanges are showing red in early afternoon trade.  As of 7:30 am, US Futures are pointing toward a down start to the day.  The DIA implies a -0.24% open, the SPY is implying a -0.38% open, and the QQQ implies a -0.62% open at this hour.  10-year bond yields are rising again at 3.899% and Oil (WTI) is off 1.34$ to $87.77/barrel in early trading.

There are no major economic news events scheduled for Monday.  However, there are two Fed speakers scheduled (Brainard at 11:30 am and Williams at 6:30 pm). The major earnings reports scheduled for the day are QFIN, ACM, XRAY, and VNTR before the open. Then, after the close, NU reports.   

In economic news later this week, on Tuesday, we get October PPI, NY Empire State Mfg. Index, and API Weekly Crude Oil Stocks report. Then Wednesday, October Retail Sales, October Import/Export Price Indexes, October Industrial Production, September Business Inventories, EIA Weekly Crude Oil Inventories, and a Fed speaker (Williams) report. On Thursday, we get October Building Permits, October Housing Starts, Weekly Initial Jobless Claims, and Philly Fed Mfg. Index.  Finally, on Friday, October Existing Home Sales are reported.

In earnings reports later this week, on Tuesday we hear from ARMK, BERY, ENR, AQUA, HD, SE, TME, VVV, WMT, AAP, and GSM.  Wednesday, ARCO, LOW, TGT, TCEHY, TJX, ZIM, BBWI, CSCO, CPA, HP, HI, NVDA, and SONO report.  Then on Thursday, we hear from BABA, BJ, BV, DOLE, KSS, M, NTES, WB, AMAT, FTCH, GPS, KEYS, PANW, POST, ROST, WSM, and WWD report.  Finally, on Friday, we hear from FL, JD, and SPB.

Over the weekend, it became clear that Democrats will retain control of the Senate, with a chance to expand their margin depending on the December Georgia runoff. In addition, control of the House still remains up in the air. (The expected “red wave” we were supposed to see last week, simply wasn’t a wave at all and while it looks more likely the GOP will control the House, it will be by razor-thin margins at best with 10 more races not decided.) Also, as mentioned above, the cryptocurrency implosion (and massive volatility) also became more clear, with allegations that the CEO of FTX had moved and used $10 billion in customer funds to his own trading company prior to the Friday default. (Criminal investigations are now ensuing.) Then, overnight at the G20 summit, President Biden met with Chinese President Xi in a bid to cool tensions between the two largest economies in the world. In not unrelated news, China announced a 16-point plan to boost its real estate sector on Monday.

With that background, premarkets now look modestly red and are very extended (especially the QQQ). So, do some serious thinking before you chase any bullish moves. We know that price moves in a lightning bolt, zig-zag pattern. And, once again, at the moment, our zig is sorely in need of a zag if this is going to be a sustained move higher. Finally, remember that we get another read on the US consumer this week as the big retail names all report. Markets may wait on that news and give outsized importance to individual retail reports this week. So, beware of volatility.

So, continue to be deliberate and disciplined…but don’t be stubborn. Remember it’s 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 that 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 YOUR MONEY! And there is absolutely no reason to keep raising your bet (risk) just because you’ve had a win. Finally, keep in mind that trading is not a hobby. It’s a job. The money is real. So, you have to 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. Do the work!

See you in the trading room.

Ed

Swing Trade Ideas for your consideration and watchlist: VZ, PFE, FDX, INTC, ANET, NFLX, PLUG, PM. 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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