Friday was the Bulls’ Day. It may have been the Debt Ceiling bill passing, a Bullish take on economic data, or just traders being happy that it was Friday.  Whatever the cause, the bulls ruled markets on the day.  This started with a gap higher (up 0.63% in the SPY, up 0.65% in the DIA, and up 0.53% in the QQQ).  This was followed up by a strong rally in the first minutes of the session and then the only tiny bearish wobble of the whole day.  Still, by 10:05 am, the Bulls were running again.  For the QQQ, the run ended shortly after 11 am before a sideways grind in a tight range took over for the rest of the session.  SPY ran up until 11:30 am before grinding sideways with a slightly bullish trend the rest of the day.  DIA led the way for once, continuing its rally until about 2:45 pm before grinding sideways the rest of the way into the close.  This action gave up large white candles with tiny wicks in the DIA and SPY while the QQQ printed a gap-up, white-bodied, Spinning Top candle.  If you had seen Thursday’s candle as having completed a Morning Star signal, Friday was definitely bullish follow-through.s.

All three major indices are back above their T-line (8ema) and DIA broke strongly up through its 50sma.  On the day, nine of the 10 sectors were in the green with Basic Materials (+3.44%), Industrials (+3.15%), and Energy (+3.14%) out in front pulling the rest of the market higher.  Meanwhile, Communications Services (-1.16%) was the only sector in the red on a terrible day for TMUS, T, and VZ.  At the same time, SPY gained 1.45%, QQQ gained 0.75%, and DIA gained 2.15%.  VXX plummeted another 4% to end at 31.18 and T2122 shot up deep into the overbought territory at 96.46. 10-year bond yields rose sharply to 3.698% while Oil (WTI) jumped another 2.52% to end the day at $71.87 per barrel.  So, again, Friday was no day to be a short and no fun at all for the bears.  This all happened on average volume in the SPY and QQQ while DIA had significantly heavier-than-average volume.

In major economic news, the May Nonfarm Payrolls came in smoking hot at +339k (compared to a forecast of +180k and an April reading of +294k). May Private Nonfarm Payrolls were hot also at +283k (versus +160k forecasted and just a little hotter than April’s +253k value).  So, again, our economy continues to produce a lot of jobs…much more than expected.  The May Participation Rate remained the same at 62.6% (which is slightly higher that the predicted fall to 62.5%).  However, the “odd man out” among this data was the May Unemployment Rate, which jumped up to 3.7% (compared to a forecast of 3.5% and the April reading of 3.4%).  That discrepancy given all the newly created jobs leads me to suspect perhaps some seasonal (or other) adjustments are at least partly to blame for the significant rise in unemployment.

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There will be no Fed speak between now and the June 14 announcement.  The Fed entered into its pre-meeting “blackout period” on Friday.  However, in other economic speak Friday, JPM President Pinto (Jamie Dimon’s #2) told investors loan demand is declining even as regional banks are also tightening credit requirements.  He said, “There is no doubt that regional banks and smaller banks … are lending a bit less … I don’t think that the big banks have really changed their lending standards, there is not a huge amount of loan demand in the first place.” 

In stock news, early Friday Bloomberg reported that AMZN is in talks to offer its own wireless service for Prime members.  This caused dramatic falls in stock prices for T, TMU, and VZ.  (The telcos denied that have any talks with AMZN later in the day.)  Then, mid-morning, Reuters reported that the Debt Ceiling agreement “stranded” $16 billion in low-priority Defense spending that has usually always been added to “must pass” bills at the last second.  (Despite this, Congress still raised the Defense budget $80 billion more than the President requested, a trend that has been the norm each year for several years.)  The $16 billion “lost” would have funded tanks from GD, a plane from LMT, and a small ship from HII.  Elsewhere, CBOE announced that it is expanding into allowing cross-listing (US and international listings) which will make it a direct competitor of ICE and Nasdaq.  At the same time, SU told its employees it plans to cut 1,500 jobs (from a base of 16,550) by the end of the year.  In a similar vein, TSN announced its terminating (262 of 500) corporate staff (including key executives) located in South Dakota who chose not to relocate to Arkansas.  Later, GM and PKX announced they are expanding their chemical battery partnership adding another $1 billion to expand capacity at their Canadian plant.  Meanwhile, in another blow to truth, GOOGL said Friday afternoon that its YouTube unit will stop removing content that spreads falsehoods and lies about past US Presidential elections.  For GOOGL, the important aspect is there were rumblings from advertisers over the weekend as a result of the action.  The fear for GOOGL is another mass desertion by advertisers, similar to what was experienced by Twitter when Musk decided to go “free for all” on misinformation.

In stock legal and regulatory news, the NHTSA fined STLA and GM a combined 363 million on Friday for average fuel economy violations.  Friday morning, CC, DD, and CTVA a $1.185 billion settlement agreement with the water systems that serve the vast majority of US citizens related to “forever chemicals” that got into drinking water.  This avoids a federal trial that was set to begin today.  Later, Bloomberg reported sources told them that MMM had reached a tentative $10 billion settlement over the same issue with the same entities.  (However, the MMM settlement has not been confirmed by the two sides publicly.)  Elsewhere, a US District judge in Seattle approved a $415 million settlement of a class action lawsuit involving IGT and an unlisted co-defendant.  At the same time, a District of Columbia judge dismissed a 2018 lawsuit brought against META by the Washington DC government (which had claimed the company misled users over the Cambridge Analytica scandal).  Later Friday, a judge in MA threw out motions that had been filed by F, GM, TM, etc. in an attempt to prevent a law from taking effect which forces automakers to allow “right to repair” access to all auto data needed to repair vehicles.  (In other words, prohibiting automakers from forcing repairs and parts to only come from the automakers.)

Overnight, Asian markets were mostly green.  Japan (+2.20%), Australia (+1.00%), and Hong Kong (+0.84%) led the winners.  Meanwhile, the only three exchanges in the red were Shenzhen (-0.47%), New Zealand (-0.30%), and Malaysia (-0.13%).  In Europe, we see a very similar picture taking shape at midday with only two spots of red on the board.  The CAC (-0.07%), DAX (+0.17%), and FTSE (+0.55%) are leading the way in early afternoon trade.  In the US, as of 7:30 am, Futures are pointing toward a mixed, flat start to the day.  The DIA implies a +0.09% open, the SPY is implying a +0.07% open, and the QQQ implies a -0.10% open at this hour.  At the same time, 10-year bonds are spiking higher at 3.751% and Oil (WTI) is up just over 2% to $73.18 per barrel in early trading. 

The major economic news events scheduled for Monday include May S&P Global Composite PMI and May Services PMI (both at 9:45 am), April Factory Orders and May ISM PMI (both at 10 am).  The major earnings reports scheduled for the day are limited to SAIC before the opening bell and JOAN after the close.  

In economic news later this week, on Tuesday we get EIA Short-term Energy Outlook and API Weekly Crude Oil Stocks Report.  Then Wednesday, April Imports/Exports, April Trade Balance, and EIA Crude Oil Inventories are reported.  On Thursday, we get Weekly Initial Jobless Claims, Fed Balance Sheet, and Bank Balances with the Fed.  Finally, on Friday, the WASDE Ag Report comes out.   

In terms of earnings reports later this week, on Tuesday we hear from ABM, ASO, CHS, SIEN, CNM, CBRL, FERG, GIII, SJM, THO, CASY, and PLAY.  Then Wednesday, BF.A, CPB, OLLI, UNFI, GME, GEF, and TCOM report.  On Thursday, we hear from DBI, REVG, SIG, TTC, DOCU, and MTN.  Finally, on Friday, NIO reports.

In miscellaneous news, analyst firm Refinitiv said Friday that much stronger than expected recent earnings (covering 494 of the S&P 500) have led it to raise its estimate of Q1 earnings to flat versus the same quarter of 2022.  This is after the firm had forecast a 5.1% drop in earnings for the quarter as late as the start of April.  On Sunday, OPEC+ decided to stay with their current production levels with the Russian delegate telling the press that the level will be extended through 2024 (they were to expire at the end of 2023).  However, Saudi Arabia announced it will implement an additional voluntary, one-month reduction of 1 million barrels per day in July (which it could voluntarily extend for additional months). Finally, the Wall Street Journal reported early today that large banks may face a 20% increase in required capital holdings as early as this month. The report said this would only impact banks with more than $100 billion in assets (lowering that definition threshold from $250 billion in assets). This would cause significant changes to lending standards and investment approaches, which might act as a “rate hike by other means.”

So far this morning, SAIC was the only report and it beat on both the revenue and earnings lines.  The company also raised forward guidance.

With that background, it looks like the market is undecided early this Monday morning. All three major index ETFs are above their T-line (8ema) and sitting at Friday’s strong closing level. All three could be seen as sitting not far below, just above, or at a potential resistance level. All three could also be seen as a bit extended above their T-lines, with QQQ (market leader) being the most extended. T2122 also tells us the market is deep in the overbought territory. So, keep your eye open for consolidation or pullback. As usual, intraday volatility and daily-level chop have been the norm…again be aware. Lastly, AAPL is expected to announce new products and product lines mid-day today. Frankly, I don’t think much of the market potential of augmented reality glasses (GOOGL tried and failed and META has been desperately and not very successfully trying to sell the same thing for years). Then again, I never thought AAPL’s phone would take the world by storm either all those years ago. So, just be aware and see if AAPL can fire up the QQQ and SPY.

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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