Markets gapped up modestly in all three major indices Thursday, with follow-through to the upside for 30 minutes. However, at that point, the SPY and QQQ had hit resistance and their long-term downtrend lines.  This led to an even stronger snap-back selloff for 30 minutes, followed by a sideways series of tightening waves with a modest overall bullish trend the rest of the day.  The DIA took the worst hit by having the weakest bullish trend in its recovery ride.  This action is giving us indecisive Doji or Spinning Top candles in the SPY and QQQ as well as just a black candle with a lower wick (it was a Dark Cloud Cover at one point) in the DIA.  Interestingly, of the 3 major indices, DIA is showing the highest volume relative to their average daily volume, while the other two did not reach average volume. 

On the day, five of the ten sectors were in the green with the Technology (+0.50%) and Healthcare (+0.49%) sectors leading the market while the Energy sector (-0.97%) lagged.  In the meantime, the SPY was down 0.08%, the DIA was down 0.52%, and the QQQ is up 0.12%.  The VXX fell by 1.88% to 14.64 and T2122 remains well into the overbought territory at 91.75.  10-year bond yields fell sharply to 3.512% and Oil (WTI) is up 0.89% to $81.26 per barrel.  So, Thursday was an indecisive rest day after Wednesday’s explosive rally and in front of Friday’s November Payrolls data.

In economic news, the Fed’s favorite inflation gauge (PCE Price Index) came in slightly below expectations for October at 0.3% (versus 0.5% forecasted and 0.3% in Sept.).  The year-on-year version of that same PCE Price Index data came in at 6.0% (exactly as forecasted, but down 0.3% from the September reading).  At the same time, Weekly Initial Jobless Claims came in lower than expected at 225k (compared to 235k that was forecasted and 241k the previous week).  Later in the morning, Nov, Mfg. PMI came in slightly above expectation at 47.7 (versus a 47.6 forecast and a prior month’s reading of 47.6).  However, the Nov. ISM Mfg. PMI came in lower at 49.0 (compared to a forecast of 49.8 and the Oct. reading of 50.2).  So, overall, inflation may be coming down a bit and unemployment is still better than expected, but Manufacturing expectations are now coming down.

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In stock news, ATUS announced that it has decided to keep its Suddenlink business unit after it underwent a strategic review.  In addition, Bloomberg reported that TSM will be making advanced 4-nanometer chips in its new AZ plant (when it opens in 2024) at the request of major customers AAPL and NVDA.  Elsewhere, the CEO of MS told a conference that the company would make “modest job cuts” but that this was just normal after years of strong growth and really was not due to recessionary pressures.  At the same time, Reuters reports that META has reached out (and continues to do so) in an attempt to settle multiple EU antitrust regulator investigations.  The uncertainty of a potential fine of 10% of global turnover is apparently uncomfortably large for the META board and management team.  ROIV and PFE launched a joint venture on a new inflammatory disease drug which the companies value as a $15 billion opportunity in the US market.  CVX announced that it has purchased ships of Venezuelan crude oil after the Bide n Administration relaxed restrictions on that last week.  Reuters reports that VLO, PBF, and Citgo Petroleum are all vying to purchase portions of those cargos.

In miscellaneous news, the US Dollar slumped hard against major trading currencies as inflation moderates and Fed Chair Powell’s speech was more dovish Wednesday.  Then late on Thursday, NY Fed President Williams (a modest hawk) said he feels “we have a ways to go in terms of the Fed Funds target.”  When asked about the increase increments, Williams did not commit but did say “slowing the pace would simply mean stepping down one step” (implying a 0.50% hike as is widely expected now). However, he also reiterated his Monday statement that the FOMC may have the space to cut rates sometime in 2024.  Finally, after the close, Fed Vice-Chair of Supervision Barr said he is among the central bankers who will back slowing the pace of rate hikes at the Dec. 13-14 meeting.  He went on to say “now that we’re in restrictive territory…I think that it’s smart (to slow the pace of increases) and that would give us (Fed) space to think about how high it needs to be and how long we need to keep it at that rate to get the job done.”

In supply chains news, following up on the House vote to approve the bill, the Senate voted 80-15 to approve a bill forcing unions to accept the September tentative deal and prohibiting a rail strike. The separate bill that amended the deal to add 7 paid sick days to the deal (instead of 1 per year) failed to pass.  (It had already passed in the House.)  So, the bill to avert the strike will go to the President who has already said he will sign it.  Industry analysts suggest that some of the rail workers will quit after receiving back pay that is due to them under the deal since they will not be getting the paid sick time they had demanded.  If that were to materialize in large numbers, it would have the same impact as a strike, potentially stopping 35%-40% of US freight (this number is higher than the normal 30% because the Mississippi River is too low for barge traffic and much more bulk freight like grains and fuel must travel by rail or truck).

After the close, ULTA and VEEV both reported beats on the revenue and earnings lines.  However, MRVL reported misses on both the top and bottom lines.  It is worth noting that ULTA raised its forward guidance while MRVL and VEEV both lowered their forward guidance.

Overnight, Asian markets are red across the board to end the week.  South Korea (-1.84%), Japan (-1.59%), and Singapore (-1.02%) led the region lower. Meanwhile, in Europe, the bourses are mixed but lean to the red side at midday.  The FTSE (-0.25%), DAX (+0.28%), and CAC (-0.20%) are typical with a couple of the smaller exchanges making larger moves in early afternoon trade.  Finland (+1.17%) and Norway (-1.08%) are examples there.  However, as of 7:30 am, US Futures are pointing toward a very modest redstart to the day.  The DIA implies a -0.14% open, the SPY is implying a -0.13% open, and the QQQ implies a -0.22% open at this hour.  10-year bond yields are flat at 3.512% and Oil (WTI) is up again by 0.71% to $81.80/barrel in early trading.

So far this morning, GCO reported beats on both the revenue and earnings lines. However, it also lowered the forward guidance. (CBRL is scheduled to report at 8 am.)

The major economic news events scheduled for Friday include November Avg. Hourly Earnings, Nov. Nonfarm Payrolls, Nov. Unemployment Rate, and Nov. Participation Rate (all at 8:30 am).  The major earnings reports scheduled for the day include CRBL and GCO before the open.  There are no reports scheduled for after the close. 

As we wait on the November Payrolls data, the consensus forecast is calling for a 200k increase in November as well as for the Unemployment rate to hold steady at 3.7%. If that holds true, it would indicate a reduction in job growth (down from +261k in October). However, the question would then be “Is that enough for the Fed, or do they need to see a negative number before taking their foot off the rate-hike accelerator?” The market reaction will tell us what the average trader thinks the answer to that question will be, but we won’t know for sure for another two weeks.

With that background, it looks like premarkets are just treading water until the data dump at 8:30 am. Beyond this, the SPY and QQQ remain at/near a resistance level from prior highs and lows as well as their longer-term downtrend lines. Also, note that we remain extended both in terms of the T-line (8ema) and T2122. So, keep Warren Buffett’s first rule of making big money in the market “Don’t lose big money in the market.” In other words, caution is the better part of valor…be careful.

As always, be deliberate and disciplined…but don’t be stubborn. If you have a loss, admit you were wrong and take that loss before it gets out of hand. And when the price does move in your direction, always move your stops in your favor and take a little profit off the table. You have to keep the “Legend of the man in the green bathrobe” in mind. In a winning situation, it is NOT HOUSE MONEY you’re betting, it’s YOUR MONEY! There is absolutely no reason to keep raising your bet (risk) size just because you’ve had a win. Finally, remember that trading is not a hobby. It’s a job. The money is real and so is the risk. 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. Do the work!

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.

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