The Bulls were in control of the market most of the day Thursday.  While all three major index ETFs opened flat and took a half hour to figure out their mood, the rally started at 10 am and did not let up at all until 12:30 pm in the SPY, QQQ, or DIA.  Then, after an hour of midday rest, the bulls took off again rallying almost into the close.  All three major indices closed in the top 10% of their candles.  This action gave us white-bodied candles with tiny wicks in the SPY, QQQ, and DIA.  The QQQ printed a Bullish Harami signal crossing back above its T-line (8ema).  Meanwhile, the SPY is in a tight consolidation (Pop out of the Box) setup and pressing against the top of that range.  For its part, the DIA printed a small J-hook pattern, breaking out Thursday.  All of this happened on a post-pandemic low in volatility (VIX).

On the day, eight of the 10 sectors were in the green as Consumer Cyclical (+0.66%) led the market higher, while Energy and Financial Services (both -0.02%) were the only sectors in the red.  At the same time, SPY gained 0.60%, DIA gained 0.49%, and QQQ gained 1.24%.  The VXX dropped another 2.7% to end at 28.13 and T2122 fell but remains well inside the overbought territory at 91.11.  10-year bond yields spiked to end at 3.797% while Oil (WTI) gained just over 1% to end the day at $72.49 per barrel.  So, Thursday was a bounce-back day with tech reclaiming leadership and the blue-chip industrials taking a step back again.  However, this move came on below-average volume in all three major indices (well below-average in the SPY). 

In major economic news, Weekly Initial Jobless Claims came in significantly above the expected level at 261k, which was an 18-month high, (compared to a forecast of 235k and the prior week’s 233k).  Yet Weekly Continuing Jobless Claims came in under forecast at 1,757k (versus the expected 1,800k and even less than the prior week’s 1,794k).  Later, April Wholesale Inventories fell less than expected at -0.1% month-on-month after upward revision (compared to a forecast of -0.2% but still down from the March 0.0% change).  At the same time, April Wholesale Trade Sales month-on-month increased less than anticipated at +0.2% (versus the forecast of +0.4% but still much better than March’s -2.7% reading).  Then, after the close, the Fed Balance Sheet was reported slightly increased to $8.389 trillion (versus the previous week’s $8.386 billion).  Bank Balances with the Fed were up $100 billion to $3.306 trillion (compared to the prior week’s $3.206 trillion).  This increase came mostly on a surge of borrowing from the Fed’s emergency bank bailout fund that reached its highest level since April.

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In stock news, TM announced Thursday it will be investing $50 million to build a battery research laboratory in MI.  Elsewhere, LCID (partially owned by the Saudi sovereign wealth fund) began delivery of its “Air” sedan in Saudi Arabia.  In other electric vehicle news, F announced that it is on track to reach its goal of producing 150,000 units of its F-150 Lightning this year.  (GM will not introduce an electric version of its Silverado until sometime in 2024.)  During the afternoon, Reuters reported that the CEO of TD said he is confident the bank can resolve the issues with regulators that led to the collapse of TD’s $13.4 billion purchase of FHN.  Then GM announced it is investing $500 million for an expansion of its Arlington TX plant to increase internal combustion SUV production.  (A day after announcing $1 billion to increase ICE truck production at two MI plants.)  In other GM news, CEO Barra said Thursday that GM will join F in adopting the TSLA charging standard and has signed an agreement with TSLA to give GM customers access to the TSLA “supercharger” network.  Meanwhile, HOG suspended production at its York PA plant due to a parts shortage.  This was the second outage at the plant in the last year for the same reason.  Production is now scheduled to resume on June 13.

In stock legal and regulatory news, in Europe, V and MA have won their effort to have class-action lawsuits over fees charged to retailers thrown out.  As a result, each of the hundreds of claimants will need to sue individually.  At the same time, Reuters reported that META’s Instagram and GOOGL’s YouTube (as well as TikTok and Twitter) are the target of a new investigation that may lead to regulatory action by the EU consumer authorities.  This follows a Thursday complaint by a major European consumer group.  The complaint charges advertisers facilitated misleading promotions of crypto assets that have harmed consumers.  EU Internal Markets Commissioner Breton announced he will be meeting with META CEO Zuckerberg on June 23.  In the announcement, Breton demanded that META act immediately against content targeting children and said META’s voluntary “child protection code” is not working and that the meeting is intended to let Zuckerberg explain why and how the problem is being resolved.  Later, MBGAF (Mercedes Benz) beat TSLA to the punch by having its automated driving system (DRIVE PILOT) approved by the CA Dept. of Motor Vehicles (on designated highways under certain road conditions) even without “active driver control of the vehicle.”  (TSLA’s competing “Full Self-Driving” system isn’t approved yet and, thus, still requires a driver constantly supervising the system.)  After the close, the Biden Administration submitted draft legislation to Congress asking that they mandate airlines pay cash compensation for delays of more than three hours when the airline is responsible.

After the close, DOCU reported beat on both the revenue and earnings lines.  It also raised its forward guidance.  Meanwhile, MTN missed on both the top and bottom lines.  MTN also lowered forward guidance.  The only significant surprise was a 31% upside earnings surprise by DOCU.

Overnight, Asian markets were mostly green.  India (-0.38% was the biggest loser, while Japan (+1.97%), South Korea (+1.16%), and Taiwan (+0.91%) led the region higher.  However, in Europe, we see a much more mixed picture taking shape at midday. Five of the bourses are modestly green while the CAC (-0.36%), DAX (-0.31%), and FTSE (-0.51%) lead 10 exchanges modestly lower in early afternoon trade.  In the US, as of 7:30 am, Futures are pointing toward a mixed start to the day.  DIA is the largest mover, implying a -0.22% open, while SPY implies a -0.03% open and QQQ implies a +0.09% open at this hour.  At the same time, 10-year bond yields were down strongly overnight but are now rebounding to 3.751% while Oil (WTI) was also down hard overnight only to rebound four-tenths of a percent to $71.58 per barrel in early trading.

The only major economic news events scheduled for Friday is the WASDE Ag Report (noon).  The major earnings reports scheduled for the day are limited to NIO before the open.  There are no reports scheduled for after the close. 

So far this morning, electric vehicle maker NIO missed on both the revenue and earning lines.  The company also lowered its forward guidance.  The NIO earnings miss was a 64% downside surprise even after expecting a $0.22 loss per share prior to the report.

In miscellaneous news, the Fed reported that American household wealth rose by $3 trillion in Q1 to $149 trillion, mostly on the back of stock market gains and despite a $600 billion reduction in real estate values.  However, this is still almost $4 trillion below the $152.6 trillion peak in Q1 of 2022.  The same report noted that the growth of household debt slowed, expanding 2.2% in the quarter (compared to a 7.6% increase during the same quarter of 2021).  Elsewhere, the Chinese inflation rate remained near zero in May which has analysts calling for a rate cut.  This comes less than 24 hours after China held a large investor conference in Shanghai attempting to convince global financiers to invest in Chinese business (claiming the country is much more open, free of corruption, and market-based now and moving forward).  So, this is a test of how responsive China is to market pressures.  Will it take its own (Xi’s) counsel or accept the advice of “economic experts” at large financial institutions (which might invest in the country)?  Finally, a large talking point will be the 7-count (so far) South Florida Federal grand jury indictment of ex-President Trump on criminal charges.  The charges may be unsealed today, but for now, the specifics are unknown.  We do know that this case is related to his removal, hiding, and failure to return (even after subpoena) classified documents.  His arraignment will be Tuesday afternoon, which is the latest charges could be unsealed.  While it will make headlines and be a major topic of discussion, there is no indication at this point that the news will drive markets today.

With that background, it looks like markets are again basically undecided this morning. The SPY remains at the top of its week-long tight consolidation. QQQ is trying to move higher but has a potential resistance level just overhead (one that it did repeatedly test recently). Meanwhile, DIA has come back down slightly and is back to the J-hook breakout level for a retest (after Thursday’s breakout). None of the major indices ETF tickers are over-extended from their T-line. However, the T2122 indicator still points toward markets being overbought. Overall, both of the large-cap index ETFs can still best be described as being in a tight consolidation, while the QQQ is trying to recover from its one-day pullback. Remember this is Friday. So, it’s time to pay yourself, lock in some profits, and hedge for the weekend. Also, expect a lot of hot air (on both sides) from the Trump story, which may or may not have a market impact. So, as usual, expect intraday volatility.

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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