Markets just on the green side of flat Tuesday.  All three major indices then chopped sideways for the first 40 minutes of the day.  At that point, the bulls led a modest rally for about 45 minutes.  Then another sideways move (within a very tight range this time) took over until 12:20 pm when the bulls started another modest move higher most of the afternoon.  However, at about 3:10 pm, the bears stepped back in to start some end-of-day profit-taking.  This action gave us large, white-bodied candles, with modest upper wicks and with only the DIA having a lower wick. All three major indices are back above their T-line, the QQQ is back above its 200sma, and the DIA is back above its 50sma.

On the day, all 10 of the sectors are in the green as Basic Materials (+1.50%) leading the way higher and Communications Services (+0.15%) lagging behind the other sectors.  At the same time, the SPY was up 0.81%, the DIA was up 0.53%, and QQQ was up 0.86%.  Meanwhile, the VXX was down almost 2% to 11.36 and T2122 is right back up deep in the overbought territory to 97.61.  10-year bond yields are down to 3.523% and Oil (WTI) was up 1.20% to $79.08 per barrel.  So, on the day, we saw some support from the T-lines as the bulls took control for the day. This all happened on light volume as the markets wait on big-name earnings and especially the Fed news on Wednesday.

In economic news, the Q4 Employment Cost Index came in lower than expected at +1.0% (compared to a forecast of +1.1% and a Q3 value of +1.2%).  This was the smallest increase in labor costs in a year and is more evidence that inflation is heading in the right direction.  Later, the Chicago PMI came in worse than expected at 44.3 (versus the forecast of 45.0 and the December value of 45.1).  This shows that businesses (purchasing managers), at least those in the Midwest, have a declining outlook for the economy.  Then at 10 am, the Conference Board Consumer Confidence Index also came in a bit below expectation at 107.1 (compared to a forecast of 109.0 and the December reading of 109.0).  This too shows a declining outlook for the economy, this one from consumers.  Finally, after the close, the API Weekly Crude Oil Stocks Report came in with a huge, surprise inventory build.  The report showed an inventory increase of 6.330 million barrels (versus an expected drawdown of -1.000 million barrels and following last week’s 3.378 million barrel crude oil stock build).  This is just another in a string of huge inventory builds in recent weeks in the US.

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In miscellaneous news, as we start a new month, we look back at a nice January in the stock market.  SPY gained 6.29%, DIA gained 2.87%, and QQQ led the rally, up 10.64%.  Even small-caps participated as the IWM was up 9.82% for January.  In terms of sectors, Consumer Cyclical was up a whopping 15.80% with several other areas up 12-13%.  Lowly Energy (+0.25% for the month) lagged the other sectors.  However, all was not rosy in January as an NYSE computer system glitch prevented 250 major stocks from opening on time on January 24.  This resulted in unknown losses, but the NYSE has said the claims made already are likely to exceed the pool of funds set aside to cover such losses.

In stock news, TSLA filed updated 10-K risk assessments with the SEC which now includes the risk of Elon Musk needing to sell more stock (to satisfy his other financial commitments).  Elsewhere, PYPL announced it will lay off 7% of its workforce (2,000 employees) as it braces for an economic slowdown.  BA delivered the last of its 747 jets to AAWW on Tuesday afternoon.  The company’s replacement (the 777X) will not be ready to ship until 2025.  After the close, the EU said it is now studying whether the major tech companies (GOOGL, AMZN, AAPL, META, NFLX, and MSFT) should be charged to subsidize telecom network costs.  (Currently, those costs are government subsidized and implemented by Eu-based Telcos like TEF.)  The reasoning is that the six major tech firms account for well more than 50% of Internet traffic.  The tech giants say the idea amounts to an internet traffic tax and would violate the EU “net neutrality” rules requiring all users to be treated equally.

In stock legal and regulatory news, TSLA disclosed Tuesday that the US Dept. of Justice has sought all its internal documents related to the “Full Self-Driving” and “Autopilot” driver-assist systems.  This seems to be related to a criminal investigation over claims the company made about the vehicle driving itself and deaths that resulted from drivers relying on those systems.  Meanwhile, the National Labor Relations Board is issuing a complaint after its investigation found that AAPL workplace rules violate US labor law.  This would just be another among several complaints pending against AAPL for anti-union actions.  Further down the action chain, a US judge found AMZN guilty of illegally threatening New York warehouse workers if they voted to unionize.

After the close, AMD, DOX, AMGN, CENT, CENTA, MDLZ, OI, RNR, SYK, and SMCI all reported beats on both the revenue and earnings lines.  Meanwhile, CB and UNM both beat on revenue while missing on earnings.  On the other side, CP, EW, JNPR, SNAP, ASH, and HA all missed on revenue while beating on earnings.  However, WDC, EA, and MTCH missed on both the top and bottom lines.  It is worth noting that OI raised its forward guidance.  At the same time, WDC, EA, and SNAP lowered their forward guidance.

Overnight, Asian markets leaned heavily to the upside.  Shenzhen (+1.31%), Hong Kong (+1.05%), South Korea (+1.02%), and Taiwan (+1.01%) led the gains but the increases were widespread.  Only Malaysia (-0.93%) and India (-0.26%) showed any red in that region.  In Europe, we see a similar story taking shape at midday.  The FTSE (+0.20%), DAX (+0.23%), and CAC (+0.25%) lead the way in early afternoon trade.  However, the only red on the continent is Switzerland (-0.46%).  As of 7:30 am, US Futures are pointing toward a modestly down start to the day.  The DIA implies a -0.36% open, the SPY is implying a -0.22% open, and the QQQ implies a flat -0.04% open at this hour.  At the same time, volatile 10-year bond yields are down to 3.488% while Oil (WTI) is up 0.71% to $79.43/barrel in early trading.

The major economic news events scheduled for Wednesday include ADP January Nonfarm Employment Change (8:15 am), Jan. Mfg. PMI (9:45 am), ISM Mfg. PMI and Dec. JOLTs (both at 10 am), EIA Crude Oil Inventories (10:30 am), the FOMC Rate Decision and FOMC Statement (both at 2 pm), and FED Chair Press Conference (2:30 pm).  Major earnings reports scheduled for the day include MO, ABC, ATKR, BSX, EAT, GIB, EPD, EVR, FTV, GSK, HUM, IEX, JCI, MHO, NVS, ODFL, OTIS, PTON, SMG, SR, TMUS, TMO, WRK, and WM before the opening bell.  Then, after the close, 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 report. 

In economic news later in the week, 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 economic news later in the week, on 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 later this week, 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.

So far this morning, ABC, GSK, TMO, MO, OTIS, GIB, EVR, EAT, ATKR, SMG, and SR have all reported beats on both the revenue and earnings lines.  Meanwhile, HUM, NVS, EPD, NVO, JCI, and ODFL all missed on revenue while beating on earnings.  On the other side, BSX, PTON, WM, and IEX beat on revenue while missing on earnings. However, HTHIY (Hitachi) and WRK missed on both the top and bottom lines.  It is worth noting that HUM, PTON, and EAT all raised their forward guidance while none of the reporting companies lowered guidance at this point.

With that background and a heavy day of data (especially the afternoon) ahead, it looks like all three major indices are moving back toward flat in the premarket. All three remain above their T-line (8ema), although the DIA is close above. Once again the SPY is right at the point of a golden cross, with its 50sma kissing up against its 200sma. The QQQ and DIA have resistance levels just above. However, the trend remains bullish in the QQQ, SPY, and to a lesser “inside a wedge” extent in the DIA. Again, remember that 99% of futures bets are expecting a 0.25% rate hike (i.e. the market is certain it knows what the FOMC will do). That means the risk is that the Fed does something unexpected (like a 0.50% rate hike). If that were to happen, I’d expect the bears to roar into action. However, the more likely scenario is that we drift into the report and then look to continue the trend on the comfort of having known what the Fed had been signaling. Another quite possible scenario would have the FOMC do a 0.25% hike, but the statement and Fed Chair Powell both sound very hawkish to dissuade talk of a “March pause” which has been in the financial news the last couple of days. Personally, I won’t try to predict what will happen by trading one way or the other ahead of the Fed.

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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