Friday saw an essentially flat open as the SPY gapped 0.10% higher, the DIA gapped 0.09% higher, and the QQQ gapped 0.13% lower.  From that point, both large-cap indices chopped sideways in a fairly tight range, ending the day inside the tiny opening gap.  Meanwhile, the QQQ did something similar but with stronger magnitude swings than the large-caps and ending up on the bullish side of the opening gap.  This action gave us indecisive Doji candles in the SPY and DIA (both of which retested their T-lines all day and ended right on that average) and a white-bodied Spinning Top candle in the QQQ that also retested its T-line (8ema) but failed to break above.  The moving averages are still stacked bullish (3ema > 8ema > 17ema > 50sma > 200sma) in all three major indices with the 3ema, 8ema, and 17ema all rising in the large-cap indices while the 3ema is falling slightly in the QQQ.

On the day, the sectors were split 50/50 with Healthcare (+1.20%) by far the strongest and Basic Materials (-1.52%) by far the weakest sectors.  At the same time, the SPY gained 0.08%, DIA gained 0.05%, and QQQ gained 0.10%.  VXX fell almost 2% to 39.20 and T2122 remained flat in the mid-range at 65.10. 10-year bond yields rose a bit to close at 3.568% while Oil (WTI) rose three-quarters of a percent to $77.95 per barrel.  So, Friday was clearly an indecisive day where trader seemed to ponder better than feared earnings, a seemingly resolute and unfazed Fed, and signs of economic slowdown or maybe even mild recession ahead.  This all happened on average volume in the QQQ with lower-than-average volume in the two large-cap indices.    

In economic news, Preliminary Manufacturing PMI came in slightly above expectation Friday at 50.4 (compared to a forecast of 49.0 and a March reading of 49.2).  (This puts this indicator right at flat since anything above 50.0 indicates growth and anything below this level indicates contraction.)  At the same time, Preliminary Service PMI also came in slightly above the anticipated value at 53.7 (versus a forecast of 51.5 and a March reading of 52.6).  Again, this indicates just a bit of growth in the services sector.  Meanwhile, the S&P Global Composite PMI (also preliminary) was reported at 53.5 (slightly better than the forecast of 52.8 and the March reading of 52.3). These all show very modest economic growth in the US and the world (if the data can be believed). Finally, the Fed’s “Inflation Expectations Index” (a new very broad-based tool the Fed developed in 2020) fell to its lowest level in almost two years as of the end of last quarter.  The IEI stood at 2.22% down from 2.31% at the end of December and below all readings going back to June 30, 2021, when it was at 2.18%. 

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In stock news, Reuters reported Friday that LLY will release results of an Alzheimer’s drug trial before the end of June.  The company told Reuters it expects Medicare to reverse course and fully cover the currently experimental drug (implying the trials went very well).  Rival drugs from BIIB and ESAIY are also scheduled to release studies in the next few months.  In other healthcare news, SWAV shares soared on Friday amid rumors that BSX is looking to takeover the medical device maker.  Elsewhere, China’s aviation regulator published a report telling its domestic airlines they can now take delivery of BA 737 MAX jets, subject to newly prescribed training.  This could be very positive for BA, which has 130 737 MAX jets finished and awaiting delivery to Chinese airlines.  Meanwhile, for the second time in a week, WMT sold off another of its online fashion brands to a private retailer.  This is part of a WMT push to improve margins after having bought the brand (Eloquii) in an attempt to compete with AMZN online.  In South America, Chile (the world’s second-largest producer) announced that it will be nationalizing its lithium industry.  This move will hit ALB and SQM hard and may have ripple impacts on TSLA (major customer of both SQM and ALB).  Finally, in it pays to be the boss news, GOOGL reported late Friday night that CEO Pinchai received $226 million in compensation (including $218 million in stock grants) in 2022 even as the company eliminate 12,000 jobs in January. 

In stock legal and regulatory news, the Wall Street Journal reported Friday that the Fed may end the exemption that allowed midsized (regional) banks such as SIVB and SBNY to hide losses on securities they hold.  This would reverse the Trump-era loosening of Fed banking regulation. At the same time, Treasury Sec. Yellen proposed guidelines that would force more nonbank entities (financial institutions that 2019 rules allowed to avoid Dodd-Frank Act reporting and regulation) posing systemic risk to be subject to supervision.  Elsewhere, a US federal judge in Seattle ruled in favor of AMZN related to a consumer class-action lawsuit that accused the company of scheming to curb competition via the “Fulfillment by Amazon” program which then caused consumers to pay more than a free market would have.  (Appeal is expected.)  Meanwhile, a CA jury found that a TSLA autopilot feature did not fail in the first case involving that feature.  The jury could be a good sign as TSLA continues to roll out more advance “Full Self-Driving” features.  In other auto legal news, F defeated an appeal by consumers who had claimed the company cheated on fuel economy tests for Ranger and F-150 trucks.  At the same time, NLST won a $303 million federal jury verdict in TX against SSNLF (Samsung) over computer memory patent infringement.  In an old case, PARA has agreed to pay a $167.5 million settlement to former CBS stock shareholders related to the 2019 merger of Viacom and CBS.

In miscellaneous news, on Sunday, BBBY filed for bankruptcy after failing to raise the money required to save the company.  The filing requested permission to auction off assets even as the firm’s 480 stores are expected to remain open until the assets are liquidated.  However, at the time of the filing, BBBY had stopped paying for the severance of laid-off workers. So, it is unknown if there will be willing employees to keep the doors open.  Elsewhere, CMCSA fired the CEO of its NBCUniversal unit Sunday after he admitted having an inappropriate relationship with a woman at the company.  Meanwhile, overnight, Bloomberg reported than hedge funds have placed the biggest futures short position in history on 10-year bonds (1.29 million contracts).  On its face, this would be a big bet that the US will see a mid-term recession.  However, the article quotes a Treasury Market analyst as saying this could be a bit misleading since hedge funds will often buy cash treasuries and then short the treasury futures in order to arbitrage the difference in price.

Overnight, Asian markets were mixed but leaned to the downside.  Shenzhen (-1.16%), South Korea (-0.82%), and Shanghai (-0.78%) paced the losses while New Zealand (+0.83%), India (+0.68%), and Taiwan (+0.15%) led the gainers.  In Europe, the bourses are also mixed but are leaning modestly toward the green at midday.  The DAX (+0.03%), CAC (-0.02%), and FTSE (-0.05%) lead the region with many of the smaller exchanges moving slightly more to the upside in early afternoon trade.  In the US, Futures are pointing toward a modestly lower start to the day.  The DIA implies a -0.14% open, the SPY is implying a -0.10% open, and the QQQ implies a -0.03% open at this hour.  At the same time, 10-year bond yields are falling to 3.539% and Oil (WTI) is off three-tenths of a percent to $77.64/barrel in early trading.

There are no major economic news events scheduled for Monday.  The major earnings reports scheduled for the day include KO, CS, GTX, and PHG before the open.  Then, after the close, AAN, ARE, AMP, BRO, CDNS, CNI, CHX, CLF, CCK, FRC, NBR, PKG, RRC, SSD, and WHR report. 

In economic news later this week, on Tuesday we get Building Permits, Conf. Board Consumer Confidence, March New Home Sales, and API Weekly Crude Oil Stocks.  Then Wednesday, March Durable Goods, March Goods Trade Balance, Preliminary March Retail Inventories, and EIA Crude Oil Inventories are reported.  On Thursday, we get Preliminary Q1 GDP, Weekly Jobless Claims, and March Pending Home Sales.  Finally, on Friday, Q1 Employment Cost Index, March PCE Price Index, March Personal Spending, Chicago PMI, and Michigan Consumer Sentiment.

In terms of earnings reports later this week, on Tuesday,  MMM, ABB, ALFVY, ADM, ARCC, ABG, BIIB, CNC, GLW, DHR, DOW, FISV, GEHC, GE, GM, GEO, HAL, HUBB, IVZ, JBLU, KMB, LH, LTH, MCD, MCO, MSCI, NEE, NTRS, NVS, OMF, PCAR, PEP, PII, PHM, RTX, ST, SHW, SPOT, SCL, THC, TRU, UBS, UPS, VZ, XRX, GOOGL, AGR, BXP, BYD, CMG, CB, CSGP, WIRE, ENVA, ENPH, EQR, GOOG, HA, ILMN, JBT, JNPR, MTDR, MSFT, NEX, OI, RUSHA, TX, TXN, TFII, UHS, V, and WFG reports.  Then Wednesday, we hear from ALLE, AMT, APH, ADP, AVY, BA, BOKF, BSX, CVE, GIB, CME, CSTM, DOV, ETR, EVR, FSV, FTV, GD, GPI, HES, HLT, HUM, NSP, MHO, MAS, NSC, ODFL, OTIS, OC, PAG, BPOP, PRG, RCI, RES, R, SLGN, TMHC, TEL, TECK, TDY, TMO, TNL, UMC, VRT, WNC, WAB, WFRD, ACHC, AFL, ALGN, AB, AWK, NLY, AR, ACGL, ASGN, AVB, AXS, BMRN, CHRW, CACI, CP, CLS, CCS, CHDN, CMPR, FIX, EBAY, EW, ESI, EQT, FBIN, GGG, HELE, ICLR, IEX, KLAC, LSTR, MKL, MAT, MTH, META, MEOH, MAA, MOH, MYRG, NOV, ORLY, OII, PPC, PXD, PLXS, PTC, RJF, RHI, ROKU, ROL, NOW, SNBR, STC, SUI, TDOC, TER, TNET, TROX, TYL, URI, WCN, WSC, and WM.  On Thursday, AOS, ABBV, MO, AAL, AIT, ARCH, AMBP, AZN, BAX, BFH, BMY, BC, CRS, CARR, CAT, CBRE, CNP, CHD, CMS, CNX, CMCSA, CROX, CRF, DQ, DPZ, DTE, LLY, EME, FIS, FAF, FCFS, FCN, GOL, HOG, HAS, HP, HSY, HTZ, HGV, HON, IP, IPG, IQV, KDP, KEX, LEA, LII, LECO, LIN, LKQ, HZO, MA, MRK, NEM, NOC, ORI, OSK, PATK, PTEN, BTU, PNR, DGX, RS, ROK, ROP, SPGI, SNY, SNDR, SIRI, SAH, SO, LUV, SAVE, SRCL, STM, FTI, TXT, TTE, TSCO, TPH, VLO, VLY, VC, GWW, WST, WEX, WTW, WIT, XEL, ATVI, AEM, ALSN, AMZN, AMGN, ATR, ACA, AJG, BZH, COF, CSL, SS, SINF, COLM, DXCM, DLR, EMN, EHC, ERIE, FLSR, FE, GFL, GILD, HIG, PEAK, HUBG, INTC, LHX, LPLA, MTX, MHK, MDLZ, OLN, PINS, PFG, RSG, RMD, SGEN, SKX, SKYW, SM, SNAP, AWN, SSNC, TMUS, X, WY, and INT report.  Finally, on Friday, AON, ARCB, ARES, AVTR, BLMN, CCJ, GTLS, CHTR, CVX, CL, DAN, XOM, FMX, GNTX, IMO, JKS, LAZ, LYB, NYCB, NWL, NHYDY, NVT, POR, SAIA, and TRP report.

In what BUD hopes will end the recent conservative indignation and boycott over a (small by BUD standards) Bud Light line advertising campaign featuring a “trans online influencer”, the company has taken action related to the incident. BUD placed the Bud Light VP of Marketing and her boss on leave. Sales figures show that Bud Light sales fell 10.7% the week following the uproar. However, there was a somewhat corresponding uptick in other BUD brand sales. BUD stock has fallen 1% over the weeks since the campaign made news, meaning that no impact from the uproar is apparent in the market value of the company at least yet. In unrelated news, TAP took a hit over the weekend as Belgium customs destroyed thousands of Miller High Life beers. Like the American conservatives, Belgium apparently (suddenly) took offense that Miller High Life labels itself “the Champagne of beers.” (Although what that has to do with Belgium, as opposed to France, or why the outrage manifested itself now, after decades of Miller using that slogan, beats me.)

So far this morning, KO, CS, and PHG all reported beats on the revenue and earnings lines.  Meanwhile, GTX beat on revenue while missing on earnings.  Oddly, the biggest shock was a 43.2% upside revenue surprise from CS (despite it having been sold to avoid failing during the quarter).  PHG also had a 26% upside surprise on earnings but GTX had a 38% downside surprise on the same line. 

With that background, it looks like all three major indices have climbed back to flat and will be thinking about retesting their T-lines this morning. The consolidation or modest pullback seem to remain underway. Even though more than 90% (according to Fedwatch) of the market is sure there will be just a quarter-point hike at the next Fed meeting a week from Wednesday, uncertainty still abounds. Over-extension is obviously not a problem in terms of the T-line or the T2122 indicator. SPY and QQQ seem to be testing a potential support level but DIA does not have that obvious level helping it below. Right now, the chart tells us to maintain a long bias but be wary of weakening bulls and keep an eye out for trend breaks.

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

🎯 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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