The strong economic data put fear into the markets before the open causing the SPY to gap down 1.28%, the DIA to gap down 1.03%, and the QQQ to gap down a huge 1.77%.  However, the bulls stepped right in to start a gradual and wavy rally, working their way back up across the gap all day long until there was a little profit taking the last 30 minutes.  On the day, we saw all 3 indices retest and bounce back up off their 8ema (T-line).  There may also have been a bit of rotation toward mega-cap safety today as the DIA was the least hurt of the three major indices.  This action gave us gap-down, large, white-body candles with modest upper wicks.  And just like early in the week, volume was below average in the SPY, DIA, and QQQ.

On the day, five of the ten sectors were in the green again with the Basic Materials sector (+0.76%) leading the market while the Communications Services sector (-0.54%) lagged.  In the meantime, the SPY was down 0.12%, the DIA was up 0.10%, and the QQQ was down 0.40%.  The VXX fell by 1.78% to 14.38 and T2122 remains well into the overbought territory at 89.36.  10-year bond yields fell to 3.492% and Oil (WTI) was down 1.08% to $80.34 per barrel.  So, Friday started with fear over what the Fed might do in the face of better jobs data, but the bulls immediately responded and kept the pressure on the bears all day long.

In economic news, November Nonfarm Payrolls increased by 263k (compared to the 200k that was forecasted and 284k gained in October after revision). At the same time, Nov. Private Nonfarm Payrolls rose 221k (versus the gain of 190k forecasted and the 248k that was gained in October).  Meanwhile, the Participation Rate fell slightly from 62.2% to 62.1% and the November Unemployment Rate held steady at 3.7%.  In terms of the Annualized Average Hourly Earnings, the November value jumped more than expected at +5.1% (versus the +4.6% forecasted and the +4.9% in October).  So, all in all, this was not information the Fed wanted to hear as jobs growth and wage inflation remain stronger than expected.  (As mentioned above, the fear of Fed reaction was the cause of the premarket crash and the opening gap-down.)

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In stock news, the Wall Street Journal reported that UAL is nearing a deal to order as many as 100 of the 787 Dreamliner jets from BA.  Elsewhere, Reuters reported that MRK is working to change the formulation of its $20 billion per year Keytruda cancer treatment to make it injectable. This would prevent the patents on that drug from beginning to expire in 2028 and prevent competition in the US until at least 2040.  In legal news, after the close, ABB agreed to pay $315 million to the US Dept. of Justice, the SEC, and South African authorities in order to resolve a bribery case related to the South African state-owned energy company.

In miscellaneous news, the Financial Times reported Friday that the state of FL is now considering a reversal of the April decision to strip DIS of the ability to self-govern in the area around its theme parks (after DIS opposed a state GOP culture war bill).  This may or may not be related to new CEO Iger recently saying he was “sorry to see us (DIS) get dragged into the battle.”  It is worth noting that Iger also opposed the bill, but was not a part of DIS at that time.  Meanwhile, ecommerce software vendor BIGC reported that holiday sales are off to a blistering pace this year.  They stated that Thanksgiving Day sales were up 23% and Cyber Week sales were up 32% this year among their customers.

In energy news, the EU agreed Friday to a $60 price-cap on Russian oil shipped via sea.  This comes into effect at the same time as the EU ban on seaborne Russian oil (as of today).  In response, Russia said it will not ship any oil that is subject to that price cap. Then on Sunday, OPEC+ met and decided to “pause” for the moment.  In other words, they will not reduce oil production nor will they increase oil production at this time.  They will wait to see how the new oil sanctions on Russia play out. Finally, the Kuwait delegation to OPEC+ said Sunday that (in a nod to global recession) the oil-importing countries do not plan to import more oil in 2023 than they did in 2022.

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 were mixed but mostly green.  Malaysia (-0.69%), South Korea (-0.62%), and Thailand (-0.41%) were the only red.  Meanwhile, Hong Kong (+4.51%) was an outlier as Shanghai (+1.76%) and Shenzhen (+0.92%) led the region higher.  In Europe, we see a similar story taking shape at midday. The FTSE (+0.19%), DAX (-0.60%), and CAC (-0.53%) are typical with only Russia (+1.11%) being an outlier in early afternoon trade.  As of 7:30 am, US Futures are pointing toward a red start to the day.  The DIA implies a -0.42% open, the SPY is implying a -0.46% open, and the QQQ is implying a -0.34% open.  10-year bond yields are back up to 3.521% and Oil (WTI) is up 2.63% to $82.08/barrel in early trading.

The major economic news events scheduled for Monday are limited to the November Services PMI (9:45 am), as well as Oct. Factory Orders and ISM Non-Mfg. PMI (both at 10 am).  The major earnings reports scheduled for the day include SAIC before the open.  There are no major reports scheduled for after the close. 

In economic news later this week, on Tuesday we get Oct. Imports/Exports, Oct. Trade Balance, and API Weekly Crude Oil Stocks Report.  Then Wednesday, Q3 Labor Cost, Q3 Nonfarm Productivity, and EIA Crude Oil Inventories are reported.  On Thursday we get Weekly Initial Jobless Claims.  Finally, on Friday, November PPI and Michigan Consumer Sentiment are reported.

In earnings later this week, on Tuesday we hear from AZO, FERG, HEPS, SIG, CASY, PLAY, and TOL.  Then Wednesday, ASO, CPB, WLY, THO, UNFI, GME, and GEF report.  On Thursday, we hear from CIEN, GMS, HOV, KFY, AVGO, CHWY, COO, COST, DOCU, LULU, and RH.  Finally, on Friday, we hear from LI.

Overnight news out of China, showed Chinese authorities easing Covid testing requirements and hinting that they may loosen their approach to combatting Covid. This rallied Chinese stocks and combined with a guess that Russia will follow through and cut supply due to the price-caps has Oil traders pushing crude higher. At this point, we have other data coming, but it will all be seen in light of how the market expects the Fed to react to that data. Bulls really want a reduced 0.50% hike next week and every hint that the economy is not falling in recession gives the Bears hope that the FOMC will help them out with a 0.75% hike.

With that background, it looks like premarkets are pulling back about half of a percent from Friday’s close as price continues to wobble around and try to find its next direction after last Wednesday’s huge bullish move. Remember that 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 in terms of the T2122.

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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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.

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