On Tuesday, the bears had their day.  The SPY and QQQ were in sync, as both those indices gapped lower at the open (down 0.49% in the SPY and down 0.51% in the QQQ).  At that point, both began selling off in a slow, steady fashion for the rest of the day.  Meanwhile, the DIA held up better, gapping down 0.11% at the open.  It then ground sound sideways until 11:20 am.  From that point, DIA joined the other major indices by selling off in a slow, steady way for the remainder of the day.  All three major indices closed very near their lows of the day.  This action gave us three large, black-bodied candles in the SPY, DIA, and QQQ.  All the major indices dropped out of their recent consolidation ranges and at least the SPY and QQQ have broken their uptrends dating back to mid-March. 

On the day, all 10 sectors were in the red with Technology (-2.48%) leading the charge lower (but it was a broad-based selloff) and Utilities (-0.34%) holding up better than the other sectors.  At the same time, the SPY lost 1.57%, DIA lost 1.01%, and QQQ lost 1.89%.  VXX spiked higher by 8.46% to 42.29 and T2122 dropped all the way down well into the oversold territory at 11.72.  10-year bond yields plummeted to 3.396% while Oil (WTI) fell 2.12% to $77.09 per barrel.  So, despite good earnings reports from major companies, markets seemed to focus on the FRC 40% deposit outflow in Q1 that had been reported Monday night as well as that company exploring asset sales to reduce the bank’s liabilities.  As a result, the bears had their way all day.  However, this move happened on less-than-average volume in all three major indices.     

In economic news, March Building Permits came in much better than the Preliminary number reported last week (better than expected) but still down significantly from the blowout number in February.  The reading was 1.430 million (compares to a forecast of 1.413 million but well below the February value of 1.550 million).  This amounted to a 7.7% decrease compared to February, that was significantly better than the preliminary number which was down 8.8%.  Later Conference Board Consumer Confidence came in at 101.3 (compared to a forecast of 104.0 and the previous reading of 104.0).  This was the lowest reading since July 2022.  Meanwhile, March New Home Sales blew away expectations at 683k (versus a forecast of 630k and a February reading of 623k).  This was a one-year high and amounted to a 9.6% month-on-month increase when only a 1.1% increase was anticipated.  Finally, after the close, the API Weekly Crude Stock Report showed a much larger than expected drawdown of 6.083 million barrels (compared to a forecast of a 1.667-million-barrel drawdown and following last week’s 2.675-million-barrel draw of crude stocks).  This was the second consecutive drawdown as well as the fourth in five weeks.

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In stock news, MBGAF (Mercedes) launched what it said will be its last new internal combustion engine car.  The next generation E-class will be available in early 2024.  In other auto news, GM announced it will end the production of its first-generation electric vehicle Chevy Bolt later in 2023 as the company shifts to focus more on zero-emission trucks and SUVs.  In addition, LCID announced it has begun “public road testing” of its next model, a large SUV called Gravity.  The Gravity is not scheduled for release until 2024.  Meanwhile, the Wall Street journal reported that GPS is eliminating hundreds of jobs (reportedly more than the 500 eliminated in September).  Elsewhere, Reuters reported that BIIB said Tuesday that it will “pause or discontinue” four studies focused on potentially lucrative drugs as part of its cost-cutting plan.  For most businesses, cost-cutting is great.  However, in biotech, company value is usually tied closely to its drug pipeline and eliminating studies on new potential drugs thins the potential revenue streams. 

In stock legal and regulatory news, BTI agreed to pay more than $635 million to the US government after its subsidiary pleaded guilty to conspiring to violate sanctions against selling products to North Korea from 2007-2017.  Elsewhere, the US Bureau of Ocean Energy Mgmt. said it has finalized the designation of 10 million acres in the Gulf of Maine for potential offshore wind development.  A 45-day public comment has begun and approval could come later this year.  Companies such as AGR and RWEOY have expressed interest in developing projects in the designated area.  Meanwhile, the EU has singled out 19 tech giants as companies subject to the region’s new online content rules.  This includes the usual suspects (GOOGL, MSFT, AAPL, META, AMZN, SNAP, PINS, BABA, etc.).  Later, Reuters reported that ALB and SQM have begun talks with the government of Chile after the state announced they are nationalizing the lithium mining industry in their country.  (ALB and SQM are the world’s largest lithium miners.)  Theoretically, ALB has a contract to operate in Chile until 2043 but the SQM contract ends this year.  Finally, The Governor of CO signed the nation’s first “right to repair” law into existence Tuesday.  The law requires farm machinery makers (such as DE and CNHI) to provide diagnostic tools, manuals, and parts to farmers who want to repair the machinery they own (as opposed to only being allowed to use exorbitant manufacturer repair services).

After the close, GOOGL, GOOG, MSFT, CB, V, UHS, CMG, OI, ILMN, JNPR, BYD, BXP, NEX, MTDR, CSGP, HA, JBT, LRN, UMBF, and PACW all reported beats on both the revenue and earnings lines.  Meanwhile, TXN, TX, WIRE, ENPH, and ENVA all missed on revenue while beating on the earnings line.  On the other side, AGR, RUSHA, and EQR beat on revenue while missing on earnings.  Unfortunately, TFII and WFG missed on both the top and bottom lines. It is worth noting that V, OI, CSGP, and LRN all raised their forward guidance.  However, NEX and ENPH lowered their forward guidance.  Major surprises included TX (95% upside surprise on earnings), WFG (185% downside surprise on earnings), OI (55% upside earnings surprise), ILMN (300% upside earnings surprise) , WIRE (20% upside earnings surprise), JBT (31% upside earnings surprise), LRN (20% upside earnings surprise), UMBF (46% upside revenue surprise), and PACW (74% upside revenue surprise).

Overnight, Asian markets were mixed on modest moves in both directions.  Malaysia (-0.77%), New Zealand (-0.76%), and Japan (-0.71%) paced the losses.  Meanwhile, Hong Kong (+0.71%), Shenzhen (+0.33%), and India (+0.25%) led the gains.  In Europe, the bourses are mostly in the red on divergent trading at midday.  The CAC (-1.06%), DAX (-0.75%), and FTSE (-0.42%) are leading the region lower in early afternoon trade.  As of 7:30 am, US Futures are pointing to a mixed and divergent start to the day.  The DIA implies a -0.09% open, the SPY is implying a +0.04% open, and the QQQ implies a +0.79% open at this hour.  At the same time, 10-year bond yields are close to flat at 3.396% and Oil (WTI) is off a third of a percent to $76.82/barrel in early trading.

The major economic news events scheduled for Wednesday include March Durable Goods, March Goods Trade Balance, and Preliminary March Retail Inventories (all at 8:30 am), and EIA Crude Oil Inventories (10:30 am) are reported.  The major earnings reports scheduled for the day include 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, and WFRD before the open.  Then, after the close, 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 report.  

In economic news later this week, 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 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.

So far this morning, HUM, GSK, TMO, GD, PAG, ADP, TEL, GPI, OTIS, BSX, ASAZY, AMT, GIB, OC, UMC, MAS, DOV, WAB, HLT, TMHC, CME, TDY, VRT, NAVI, TNL, ALLE, PRG, SF, and TKGSY all beat on both the revenue and earnings lines.  At the same time, BA, ETR, CSTM, and WFRD all beat on revenue but missed on earnings.  On the other side, RCI, AVY, TLSNY, DASTY, SLGN, EVR, and WNC all missed on revenue while beating on earnings.  Unfortunately, CVE, TECK, ODFL, and RES all missed on both the top and bottom lines.  It is worth noting that AMT, ALLE, WNC, and HLT all raised their forward guidance.  Meanwhile, AVY is the only one to lower their forward guidance.  Major surprises included a 30% downside surprise on BA earnings, a 26% upside surprise on OC earnings, a 75% downside surprise on TLSNY revenue, a 38% upside surprise on UMC earnings, a 34% upside surprise on MAS earnings, a 35% upside surprise on TMHC earnings, a 41% upside surprise on VRT earnings, a massive 407% upside surprise on NAVI revenue (and a 21% upside earnings surprise), a 24% upside earnings surprise by EVR, a 32% upside surprise on PRG earnings, and a 131% upside surprise on WNC earnings (so much for regional bank issues).

With that background, it looks like the markets are trying to start the day inside of yesterday’s ugly candles. All three major indices are below their T-line and the T-line is descending. Over-extension is not a terrible problem based on T-line (although QQQ was a little stretched last night, the premarket candle is helping a lot) but we are oversold according to the T2122 indicator. Interestingly, the Fedwatch tool tells us that confidence in a 0.25% rate hike by the Fed next week is fading a bit. We are now down to an 80% probability of that, with the other 20% probability being “no hike.” Right now, the chart tells us the bias has flipped bearish after uptrends were broken yesterday, and since we have formed that lower low. However, we aren’t far from the consolidation range, and with good earnings to give them energy, the bulls are not likely to give in easily.

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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