On Tuesday, markets opened just on the red side of flat again (down 0.18% in the SPY, down 0.15% in the DIA, and down 0.01% in the QQQ).  However, after the tepid open, the bears stepped in to drive a strong selloff that reached the lows of the day at about 11:30 am in all three major indices.  From that point, the rest of the day was a sideways meander with a modest bullish trend.  This action gave us black-bodied candles with large lower wicks in the SPY, DIA, and QQQ.  The QQQ retested and held above its T-line (8ema) while the two large-cap indices closed just below their 8emas.  It also does not take too much imagination to see all three major indices as an Evening Star-type candle.

On the day, all 10 sectors were in the red with Energy (-4.17%) leading the way lower while Basic Materials (-0.40%) held up better than the other sectors.  At the same time, the SPY lost 1.12%, DIA lost 1.02%, and QQQ lost 0.87%.  VXX climbed 4.43% to 38.89 and T2122 dropped down well into the oversold territory to 11.11.  10-year bond yields plummeted again to 3.435% while Oil (WTI) plunged 5.34% to $71.62 per barrel.  So, to summarize, Tuesday was the bears’ day ahead of today’s Fed decision.  This all happened on a little shy of the average volume in all three major indices.     

In economic news, March Factory Orders came in below expectation at +0.9% (versus a forecast of +1.1% but much better than the February reading of -1.1%).  At the same time, the labor market remained strong as March JOLTs Job Openings came in lower than anticipated at 9.590 million (compared to a forecast of 9.775 million and a February value of 9.974 million).  So, Factory activity continues to grow but at a slow pace, while the labor market is slowly tightening, with 400k fewer openings in March than in Feb.  After the close, the API Weekly Crude Oil Stock Report showed a much larger than expected oil inventory drawdown of 3.939-million-barrels (versus a forecast of a 1.000-million-barrel drawdown but still much less than the prior week’s 6.083-million-barrel drawdown.

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In stock news, regional banks took a beating again Tuesday with PACW closing down 27.78%, WAL down 15.12%, and even much larger USB down 7.01% and TFC down 7.61%. Elsewhere, electric vehicle maker MULN announced that has received a 1,000-truck order ($63 million) with first deliveries scheduled to begin in August.  At the same time, Reuters reported the US will announce another $300 million military aid package for Ukraine as soon as today.  The new package will include air-launched rockets, 155mm shells (both made by GD), HIMARS missiles (from LMT), TOW missiles (from RTX) as well as other miscellaneous munitions.  After the close, PNC bank said it can offer $15 billion of its short-term commercial paper (very liquid and generally secure) to calm market worries over liquidity.  This announcement was made even after the bank reported a rise in deposits and profits during Q1.  Finally, despite a blowout success in its quarterly report Tuesday night, F announced it is cutting the price of the Mustang Mach-E again as the price war with TSLA continues.

In stock legal and regulatory news, VMW lost the retrial of its patent infringement case filed by Densify and will pay $84.5 million in the verdict.  (This is much less than the original verdict of $237 million from 2020 which was thrown out on appeal.) Elsewhere, the US SEC will vote today on whether to adopt new rules increasing transparency from the advisors to hedge and private-equity funds. Meanwhile, after the close, AMGN sued NVS for patent infringement over drugs AMGN has sold $5.6 billion of and NVS has now proposed launching generic versions.  At the same time, the White House has summoned the CEOs of GOOGL and MSFT (as well as others) to a Thursday meeting to discuss AI issues and potential regulation.  In bankruptcy news, CNNWQ received court approval to raise $2.26 billion as part of its exit from bankruptcy.  Finally, the US Dept. of Transportation announced Tuesday that it will not extend the July 1 deadline for plane 5G retrofits as had been requested by airlines.  And Airline industry group said this may cause airline operational disruptions during the peak summer travel season.

After the close, F, SBUX, AMD, MUSA, AIZ, CZR, CLX, CWH, AFG, WELL, THG, AXTA, WU, CHK, RNR, LFUS, CRK, JKHY, BFAM, MTW, HY, and UIS all reported beats on both the revenue and earnings lines.  Meanwhile, OKE, ANDE, EIX, AMCR, UNM, YUMC, UFPI, ENLC, EXPI, MTCH, and CLW missed on revenue while beating on the earnings line.  On the other side, PRU, LUMN, VOYA, HLF, SPG, MCY, EXR, and GPOR beat on revenue while missing on earnings.  Unfortunately, ET, SMCI, BXC, and ASH missed on both the top and bottom lines.  It is worth noting that AMCR, MTCH, and ASH lowered their forward guidance.  However, CLX, SMCI, LFUS, JKHY, and PAYC all raised their forward guidance.  (It is also worth noting that F had 62% upside surprise, YUMC had a 61% upside surprise, AIZ had a 55% upside surprise, CZR had a 50% upside surprise, SWH had a whopping 169% upside surprise, THG had an 86% upside surprise, and BFAM had a 44% upside surprise on earnings.)

Overnight, Asian markets were mixed but mostly red.  Hong Kong (-1.18%), New Zealand (-1.08%), and Australia (-0.96%) led the region lower.  Meanwhile, in Europe, the bourses lean heavily to the green side with only three spots of red on the board at midday.  The CAC (+0.68%), DAX (+0.82%), and FTSE (+0.22%) are leading the region higher in early afternoon trade.  In the US, as of 7:30 am, the Futures are pointing toward a modestly green start to the day.  The DIA implies a +0.11% open, the SPY is implying a +0.15% open, and the QQQ implies a +0.24% open at this hour.  At the same time, 10-year bond yields are down to 3.407% and Oil (WTI) is plummeting again (by 3.07% this time) to $69.47/barrel in early trading.

The major economic news events scheduled for Wednesday include the ADP Nonfarm Employment Change (8:15 am), Services PMI (9:45 am), April ISM Non-Mfg. PMI (10 am), EIA Crude Oil Inventories (10:30 am), FOMC Rate Decision and Fed Statement (both at 2 pm), and Fed Chair Press Conference (2:30 pm).  The major earnings reports scheduled for the day include ADNT, ALGT, AVNT, AVA, GOLD, BDC, BGCP, EAT, BIP, BLDR, BG, CDW, CHEF, CLH, SID, CVS, XRAY, DBD, DRVN, EMR, EL, EEFT, EXC, FTS, GRMN, GNRC, GFF, HBI, HZNP, INGR, JHG, KHC, LPX, MUR, NI, PSN, PSX, RXO, SMG, SBGI, SITE, SR, SPR, STLA, TKR, TT, TRMB, UTHR, VRSK, and YUM before the open.  Then, after the close, ALB, ALL, ATUS, AMED, ANSS, HOUS, APA, ATO, AVT, EQH, BHE, BKH, CPE, CENT, CENTA, CDAY, CHRD, CIVI, COKE, CTSH, CODI, CTVA, CCRN, CW, NVST, EQIX, ETSY, FG, FLT, FNF, ULCC, GIL, GL, HST, IR, IOSP, MRO, VAC, MMS, MELI, MET, MKSI, MOS, NFG, OPAD, PARR, PDCE, PSA, QGEN, QRVO, QCOM, QDEL, O, REZI, SIGI, SEDG, RUN, TWI, TTEC, TTMI, UGI, VSTO, WERN, WES, WMB, XPO, YELL, and Z report.    

In economic news later this week, on Thursday, we get March Imports, March Exports, March Trade Balance, Weekly Initial Jobless Claims, Preliminary Q1 Nonfarm Productivity, Preliminary Q1 Unit Labor Cost, the Fed Balance Sheet, and Bank Reserves with the Federal Reserve.  Finally, on Friday, April Average Hourly Earnings, April Nonfarm Payrolls, April Private Nonfarm Payrolls, April Participation Rate, and the April Unemployment Rate. 

In terms of earnings reports later this week, on Thursday, we hear from GOLF, ATI, AEP, BUD, APG, APTV, ARNC, ARW, BALL, BHC, BCE, BDX, BERY, BWA, BV, BRKR, CAH, CG, COMM, COP, CEG, DLX, DNB, EQNR, ES, RACE, FOCS, GTES, GPRE, DINO, HII, H, IBP, ICE, IRM, ITT, JLL, K, KTB, MMP, MLM, MDU, MRNA, MODV, NFE, NJR, NVO, DNOW, NRG, OPCH, OGN, PZZA, PARA, PH, PTON, PENN, PCG, PNW, PLTK, PPL, PRMW, PRVA, PWR, RCM, REGN, RCL, SABR, SBH, SRE, SHEL, FOUR, SWK, STWD, TRGP, TFX, TU, BLD, UPBD, VNT, W, WLK, WRK, XYL, ZTS, ATSG, LNT, AIG, COLD, AMN, AAPL, TEAM, BGS, BECN, BIO, SQ, BCC, BKNG, CNQ, CVNA, ED, CTRA, CWK, DASH, DKNG, DBX, ERJ, EOG, EXPE, FND, FTNT, GDDY, GT, LYV, LYFT, MTZ, MATX, MTD, MCHP, MNST, MSI, NCR, ZEUS, OTEX, OPEN, OEC, CNXN, PBA, POST, KWR, RRX, RGA, RKT, SEM, SHOP, TDS, TXRH, TSE, TPC, and USM.  Finally, on Friday, AES, AMC, AMCX, AEE, AXL, AMRX, BBU, BEPC, BEP, CLMT, CI, CNK, CNHI, D, ENB, EPAM, EVRG, FLR, FYBR, GLP, GTN, HUN, IEP, JCI, LSXMK, LSXMA, MGA, NMRK, OMI, PBF, PAA, PAGP, QRTEA, WBD, and BAP report. 

In miscellaneous news, fear of another potential pandemic (and potential threat to the poultry supply) is taking shape in the UK.  Thousands of dead wild birds litter England.  The problem is so bad the British government has warned dog walkers to keep their animals on leashes at all times to keep the dogs from eating birds or bird droppings.  The avian flu isn’t contained to the UK either as the USDA has reported at least 170 confirmed cases of mammals (mostly cats and dogs) picking up the disease in the US from this latest wave.  This comes after more than 60 million chickens and turkeys died or were culled to prevent the spread of the last wave in 2022. The good news is that dating back to 1997, there are less than 900 confirmed cases of humans contracting the earlier variants of the avian flu.

So far this morning, CVS, PSX, KHC, BLDR, EXC, EMR, TT, GOLD, FTS, NI, AVNT, GRMN, CLH, GNRC, TKR, EAT, XRAY, PSN, SR, VRSK, JHG, BDC, MUR, CHEF, DRVN, HSC, FDP, and QUAD have all reported beats on both the revenue and earnings lines. Meanwhile, CDW, BIP, INGR, SMG, LPX, TRMB, and UTHR all missed on revenue while beating on earnings.  On the other side, BG, EL, YUM, BLCO, SITE, EEFT, and ALE beat on revenue while missing on the earning line.  Unfortunately, SPR, HZNP, DBD, and AVA missed on both the top and bottom lines.  It is worth noting that CVS, BLDR, and TRMB lowered their forward guidance.  However, KHC, EMR, INGR, TKR, CHEF, and HSC all raised their forward guidance.

With that background, it looks like the large-cap indices are retesting their T-lines (8ema) in the premarket and the tech-heavy QQQ is pushing up away (a bit) from its own. We all know that today will be all about the Fed. So, don’t be surprised with either a dead market or chop going back and forth in an indecisive way right up to 2 pm. Over-extension from the T-lines is not a problem and while T2122 is well into the oversold territory, it is not extremely extended. Don’t get caught predicting the reaction to the FOMC. And, also remember that there tends to be a knee-jerk, followed by a re-reaction…and then an “on second thought” move the next morning when there is a Fed announcement. 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

🎯 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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