Markets diverged slightly at the open Friday with the DIA opening flat, the SPY gapping down a quarter of a percent, and the QQQ gapping down a half of a percent.  From that point, we rode a roller coaster the first 90 minutes.  Then the bulls stepped in to lead a steady rally in all three major indices that has lasted up to 3:30 pm.  However, the bears came in as we saw a sharp selloff the last 30 minutes.  This action gave us white-bodied candles with significant upper wicks in the SPY and QQQ as well as a white Doji-type candle in the DIA.  The QQQ has crossed above its 200sma while the DIA bounced up off its T-line (8ema).

On the day, only four of the 10 sectors were in the green as Consumer Cyclical (+1.26%) lead the way higher and Energy (-1.23%) lagged the other sectors.  At the same time, the SPY was up 0.23%, the DIA was up 0.07%, and QQQ was up 1.00%.  Meanwhile, the VXX was down 1.31 to 11.30 and T2122 rose yet again and remains deep in the overbought territory at 97.15.  10-year bond yields were up to 3.509% and Oil (WTI) was down almost 2% to $79.40 per barrel.  So, on the day, we saw a bullish move going into the weekend with heavy profit-taking going into the close.  This all happened on less than average volume in the large-cap indices while the QQQ managed just over average volume.

In economic news, the Dec. PCE Price Index (Fed’s favorite inflation measure) came in lower than expected at +0.1% for the month and at a +5.0% year-on-year (compared to a forecast of +0.2% for the month and +5.5% y-o-y).  That was the third consecutive fall in the number and the lowest annual number in over a year.  December Personal Spending was also down more than was expected at -0.2% (versus a forecast of -0.1% and November’s reading of -0.1%).  Both of those show slowing inflation and activity, which is what the Fed has been wanting to see.  Later, Michigan Consumer Sentiment actually slightly beat expectations at 64.9 (versus a forecast of 64.6 and the December value of 59.7), showing that consumer outlooks are improving.  Finally, December Pending Home Sales came in much better than expected at +2.5% (compared to a forecast of -0.9% and a November value of -2.6%).

SNAP Case Study | Actual Trade

In stock news, GS cut their CEO’s pay by 29% (to $25 million) following a down 2022. At the same time, BA announced it will be hiring 10,000 new workers in 2023 as it ramps up production.  Elsewhere, the Netherlands and Japan joined President Biden’s Chinese export ban, which means ASML, NINOY, and TOELF joined the group of companies agreeing to not sell semiconductor manufacturing machinery to China.  In other news, WMT and CVS both announced they are cutting the pharmacy hours at stores nationwide due to a shortage of labor.  In bankruptcy news, Bloomberg reported Friday that BBBY has failed to find a buyer and is very likely headed to Chapter 11 bankruptcy.  Finally, F recalled nearly half a million vehicles for rear camera display failures.

In stock legal news, on Friday, AMZN won its bid to have a 2021 lawsuit thrown out (the suit had claimed AMZN’s warehouse worker quotas were biased against older employees forcing them to be at greater risk of injury in order to meet the quotas).  At the same time, Reuters reported that the SEC is now investigating Elon Musk’s role in the “self-driving” claims of TSLA.  In a separate Reuters report, it was claimed that the US Dept. of Justice is again investigating V and MA related to anti-competitive debit card practices.

So far this morning, CAJ, PHG, ARLP, and SOFI have all reported beats on both the revenue and earnings lines.  Meanwhile, RYAAY missed on revenue while beating on earnings.  (BEN is scheduled to report at 8:30 am eastern.)

Overnight, Asian markets were mixed with Taiwan (+3.76%) as an outlier to the upside.  Meanwhile, Shenzhen (+0.98%), India (+0.25%), and Japan (+0.19%) led the region higher.  Hong Kong (-2.73%) was an outlier to the downside while South Korea (-1.35%), Singapore (-0.47%), and Australia (-0.16%) rounded out the area’s red exchanges.  In Europe, markets are leaning heavily to the downside at midday.  The FTTSE (+0.06%) is one of only three bourses that are managing any green while the DAX (-0.76%) and CAC (-0.58%) are more typical and are leading the region lower in early afternoon trade.  As of 7:30 am, US Futures are pointing toward a significant gap lower to start the day.  The DIA implies a -0.66% open, the SPY is implying a -0.93% open, and the QQQ implies a -1.23% open at this hour.  At the same time, 10-year bond yields are up to 3.553% and Oil (WTI) is just on the red side of flat at $79.59/barrel in early trading.

There are no major economic news events scheduled for Monday.  Major earnings reports scheduled for the day include ARLP, BEN, and PHG before the opening bell.  Then, after the close, ARE, CADE, GGG, HP, NXPI, PFG, WHR, and WWD report. 

In economic news later in the week, on Tuesday we get Q4 Employment Cost Index, Chicago PMI, Conference Board Consumer Confidence, and the API Weekly Crude Oil Stocks Report.  Then Wednesday, ADP January Nonfarm Employment Change, Jan. Mfg. PMI, ISM Mfg. PMI, Dec. JOLTs, EIA Crude Oil Inventories, the FOMC Rate Decision, FOMC Statement, and FED Chair Press Conference are reported.  On Thursday, we get Weekly Initial Jobless Claims, Q4 Nonfarm Productivity, Q4 Unit Labor Costs, and December Factory Orders.  Finally, on Friday, Jan Avg. Hourly Earnings, Jan. Nonfarm Payrolls, Jan. Participation Rate, Jan. Unemployment Rate, Services PMI, and ISM Non-Mfg. PMI are reported.

In terms of earnings, on Tuesday, AOS, CAT, GLW, DOV, XOM, GM, HUBB, IMO, IP, KEX, LII, MDC, MAN, MPC, MCD, MCO, MPLX, MSCI, NYCB, OSK, PNR, PFE, PSX, PBI, PII, PHM, ST, SPOT, SYY, UBS, UPS, AMD, DOX, AMGN, ASH, BXP, CP, CENT, CENTA, CB, EW, EA, HA, HLI, JNPR, MTCH, MDLZ, OI, RNR, SNAP, SYK, SMCI, UNM, and WDC report.  Then Wednesday, we hear from MO, ABC, ATKR, BSX, EAT, GIB, EPD, EVR, FTV, GSK, HUM, IEX, JCI, MHO, NVS, ODFL, OTIS, PTON, SMG, SR, TMUS, TMO, WRK, WM, AFL, ALGN, ALGT, ALL, AFG, AVT, BHE, CHRW, CCS, CTVA, DXC, ENVA, GL, THG, HOLX, LSTR, LFUS, MCK, MTH, META, MET, MAA, MOD, MUSA, QRVO, RRX, TTEK, and VSTO.  On Thursday, FLWS, ABB, WMS, APD, ALFVY, ATI, AME, APTV, ARCO, ARW, ABG, AVY, BALL, BCE, BCX, BERY, BMY, BR, BIP, BC, CAH, CMS, CNHI, COP, DB, LLY, EL, RACE, FCFS, HBI, HOG, HSY, HON, ITW, ICE, LANC, LAZ, LEA, MMP, MKL, MRK, NJR, PH, PENN, DGX, RCI, SBH, SNDR, SIRI, SNA, SONY, SWK, TT, GWW, WNC, WEC, GOOGL, AMZN, AAPL, TEAM, BSMX, BZH, BYD, CVCO, CRUS, CLX, CTSH, COLM, DECK, F, GEN, GILD, GOOG, HIG, HUBG, KMPR, LPLA, MEOH, MCHP, MTX, OTEX, POST, QCOM, RGA, SIGI, SKX, SKYW, SBUX, and X report.  Finally, Friday, we hear from AON, ARCB, AVTR, SAN, BSAC, BBU, BEPC, BEP, CBOE, CHD, CI, LYB, MOG.A, NFG, REGN, SAIA, SNY, and ZBH.

In miscellaneous news, Sunday was the 30th anniversary of the first ETF (now called SPY), which began trading on the Amercian Stock Exchange (now NYSE-Market). It began with only $6.5 billion in assets, but now has $375 billion. It remains the largest ETF in what is now a $6.5 trillion market segment. In 2022, nearly $1 trillion was taken out of mutual funds, but at the same time $600 billion was added to ETFs.

With that background, it looks like the SPY and DIA are headed back to retest their T-lines (8ema) as support this morning. It is worth noting that the SPY is very near a “golden cross” (50sma crossing above the 200sma) which is a signal many funds and old-time traders will take heed of. And despite the gap lower at the open, the short-term trend remains bullish in all three major indices with the mid-term trend bullish in the SPY and QQQ while the DIA works in a wedge. Remember we have the Fed announcements on Wednesday and this is a heavy earnings week including many of the market’s big dogs (most active names), especially Thursday. As far as the Fed goes, almost everybody (literally 99.9% of CME Fedwatch probabilities) is expecting a 0.25% hike. While “the safety of the pack” is great, don’t forget that the risk is to the bearish side should the Fed decide to call an audible and do a bigger hike. Just be prepared.

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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