Markets gapped up very modestly Monday, but then began a strong rally that slowed midday and ran up to the highs of the day by 1:45 pm.  AMD, TSLA, and NVDA led the charge higher.  So, the fact that those 3 big dog tickers are not included in the DIA is why the mega-cap index lagged the others all day.  However, at 2 pm a strong selloff took over, driving the DIA back to the opening level by 2:55 pm (and the other 2 major indices halfway back).  From that point, we’ve seen a bounce the last half of an hour.  This action gave us white-bodied candles with upper wicks in the SPY and QQQ as well as a white Spinning Top candle in the DIA.  Despite the upper wicks, all three of these candles confirmed Friday’s Morning Star signal in the SPY and QQQ indices.

On the day, all 10 of the sectors were in the green as Technology (+2.55%) led the way higher and Communications Services (+0.03%) lagged the other sectors.  At the same time, the SPY was up 1.17%, the DIA was up 0.75%, and QQQ was up 2.22%. At the same time, the VXX was flat at 12.07 and T2122 has climbed even further into the overbought territory at 97.04.  10-year bond yields rose to 3.525% and Oil (WTI) was up very fractionally to $81.65 per barrel.  So, on the day we saw a bullish move higher, led by big tech names.  However, we still saw some hesitancy or indecision in the market at the highs. 

In M&A news, in another twist to EMR’s hostile takeover bid for NATI, on Monday EMR said it would not nominate board candidates to NATI’s board.  However, EMR said the $53/share bid remains valid and it believed the NATI board had begun a process that will end in the sale of the company to EMR.  (NATI was trading at $40 prior to EMR making the hostile public bid and closed today at $53.83.)  Later in the day, Reuters reported that LAD is in advanced talks to buy Jardine Motors (one of Britain’s largest luxury car dealership groups) from JMHLY.  Elsewhere, SUMO closed up 28.68% after rumors circulated that the company has attracted takeover interest from multiple private equity firms.  Finally, RBA revised its takeover bid for IAA to increase the cash component of the offer.  In doing so, RBA secured the backing of IAA’s largest holder of shares.

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In other stock news, MSFT announced a multiyear, $10 billion investment into AI company OpenAI (maker of ChatGPT).  Elsewhere, NWL announced restructuring plans Monday that include the reduction of 13% of office positions.  (NWL closed up 6.11%.)  Meanwhile, Consumer Reports published an open letter to HSY and MDLZ urging the chocolate makers to commit to removing lead and cadmium from their dark chocolate candies.  (CR found harmful levels of both in 23 or 28 recently tested dark chocolate bars.)  At the same time, the US NHTSA announced it had completed its probe into F Explorer SUVs (over exhaust odors in vehicle compartments).  The agency announced it found no evidence of a safety issue and that carbon monoxide readings were far below the accepted health standards.  Finally, HPK announced after hours that its board has voted to evaluate its “strategic alternatives” potentially including the sale of the company.

In miscellaneous news, Natural Gas sank below $3 before rebounding hard Monday to close up 8.6% to $3.447/mmBtu.  This comes as both US and European weather agencies released forecasts calling for waves of significantly colder temperatures as we approach February.  Meanwhile, the dollar fell against the Euro and Yen Monday as hope for a small Fed rate hike was coupled with ECB President Lagarde saying that ECB rates have to rise “significantly at a steady pace” (to reach levels high enough to tame inflation).  This forex move supported commodity prices on Monday.

After the close, BRO, ZION, and FNB all reported beats on both the revenue and earnings lines.  Meanwhile, CR reported a miss on revenue while beating on earnings.  (LOGI did not report until late at night.)  So far this morning, GE, LMT, TRV, DHR, DHI, HAL, and IVZ have all reported beats on both the revenue and earnings lines.  At the same time, JNJ and RTX both missed on revenue while beating on the earnings line.  On the other side, MMM beat on revenue while coming up short on earnings.  However, VZ missed on both the top and bottom lines.  It is worth noting that JNJ raised its forward guidance while VZ, GE, RTX, and MMM all lowered their forward guidance.  (UNP, PCAR, and ONB report closer to the opening bell.)

Overnight, most major Asian markets were closed for the Lunar New Year holiday.  However, Japan (+1.46%) led most of the rest of the region higher with only Thailand (-0.07%) slightly in the red.  In Europe, markets are nearly red across the board at midday.  Only Athens (+0.59%) and Denmark (+0.05%) have hung onto green territory. Meanwhile, the FTSE (-0.30%), DAX (-0.26%), and CAC (-0.01%) are typical of the region in early afternoon trade.  As of 7:30 am, US Futures are pointing toward a down start to the day.  The DIA implies a -0.29% open, the SPY is implying a -0.26%  open, and the QQQ implies a -0.39% open at this hour.  At the same time, 10-year bond yields are down to 3.506% and Oil (WTI) is up a half of a percent to $81.96/barrel in early trading.

The major economic news events scheduled for Tuesday include Mfg. PMI, Global Composite PMI, and Services PMI (all at 9:45 am), and API Crude Oil Stocks (4:30 pm).  The major earnings reports scheduled for the day include MMM, DHI, DHR, GE, HAL, IVZ, JNJ, LMT, ONB, PCAR, RTX, TRV, UNP, and VZ before the opening bell.  Then, after the close, CNI, COF, FFIV, ISRG, MSFT, SLGN, TXN, and WAL report.

In economic news later in the week, on Wednesday EIA Crude Oil Inventories are reported.  On Thursday, we get Dec. Durable Goods Orders, Q4 GDP, Dec. Goods Trade Balance, Weekly Initial Jobless Claims, Dec. Retail Inventories, and Dec. New Home Sales.  Finally, on Friday, Dec. PCE Price Index, Dec. Personal Spending, Michigan Consumer Sentiment, and Dec. Pending Home Sales are reported.

In terms of earnings, on Wednesday, ABT, APH, ASML, T, ADP, BA, BOKF, ELV, FCX, GD, GPI, HES, KMB, NDAQ, NEE, NSC, BPOP, PGR, TTM, TEL, TDY, TXT, USB, AMP, AXTA, AXS, BOOT, CACI, CLS, CCI, CSX, FLEX, IBM, LRCX, LVS, LEVI, LBRT, PKG, PLXS, RJF, STX, NOW, STLD, TER, TSLA, and URI report.  Thursday, we hear from VLVLY, ALK, AAL, AIT, ADM, ATLKY, BX, BFH, BFH, CRS, CNX, CMCSA, CFR, DOW, EXP, EWBC, FCNCA, JBLU, HZO, MMC, MA, MKC, MBLY, MUR, NOK, NOC, NUE, ORI, ROK, SAP, SHW, LUV, STM, TROW, TSCO, VLO, VLY, WBS, XEL, XRX, AJG, EMN, INTC, KLAC, KNX, LHX, OLN, RMD, RHI, V, WRB, and WY.  Finally, on Friday, AXP, ALV, BAH, CHTR, CVX, CL, GNTX, HCA, and ROP report.

In late-breaking news, the US government has presented China with evidence that at least some Chinese-state-owned companies are providing assistance to Russia in its war on Ukraine according to Bloomberg. The sources (unnamed) said this was not lethal military assistance, but does evade sanctions and could potentially trigger new sanctions directly on China unless resolved. Meanwhile, Bloomberg also reports sources at the US Dept. of Justice tell them the agency is poised to sue GOOGL over monopolistic behavior in the digital advertising space. That would be the second time the DOJ has sued GOOGL over antitrust matters. In other “big tech / social media” news, the US Supreme Court has declined to hear two cases brought by big tech against the states of TX and FL over regulating the way META, GOOGL, and Twitter moderate content. This leaves the state laws intact for now and presents the potential for a real “wild west” where every US state could decide what can be posted and how it is moderated to Internet users within their jurisdiction. (Somewhat similar to how China decides what can be shown within its borders, but perhaps in the reverse direction of forcing the companies to display false information without moderation in the guise of free speech.)

With that background, it looks like the premarket indices are not far on the red side of flat and all three major indices remain undecided this morning. The DIA looks like it will retest its T-line (8ema) and 50sma again. There is no extension problem from the T-line, but the T2122 indicator is deep into the overbought territory. The Fed is in a quiet period, so we don’t have to worry about Fed-speak. And there is limited economic data. However, there are several major earnings reports this morning and later this week (as outlined above). So, be careful of earnings dates. However, the market bias is bullish in the SPY and QQQ with the DIA in more of a sideways wedge formation.

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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