Friday was a profit-taking day ahead of the long weekend and after a blisteringly strong week.  SPY gapped 0.08% higher, DIA gapped up 0.11%, and QQQ gapped strongly higher, opening up 0.60%. However, after that open the Bears were in control although from 10 am until 1 pm it was more of a sideways grind.  All three major index ETFs closed near their lows.  This action gave us black candles with tiny wicks on both ends.  There were no candle signals according to a strict reading of the chart.  However, the SPY could be seen as having a Dark Cloud Cover sentiment (just missing by an open not above the prior high).  All three remain above their T-line (8ema) and only QQQ could be said to still be over-extended to the upside.

On the day, nine of the 10 sectors were in the red as Communications Services (-0.80%) led the market lower and Utilities (+0.21%) was the only sector to manage to stay in the green.  At the same time, SPY lost 0.71%, DIA lost 0.53%, and QQQ lost 0.63%.  The VXX fell 3.53% to 27.30 and T2122 pulled back modestly but remains in the overbought territory at 87.64.  10-year bond yields climbed to 3.767% while Oil (WTI) gained 1.16% higher to close at $71.44 per barrel.  So, overall, as said above, it was a day for profit-taking.  This can be seen by the very heavy volume in the QQQ (the market leader all year and especially during the week) while SPY and DIA had a bit less-than-average volume, even on a triple witching day.  

For the week, QQQ was up 3.79%, SPY was up 2.22%, and DIA (laggard all year) was up 1.08% even after Friday’s profit-taking.  During those five days, QQQ and SPY had above-average volume while DIA was just above average.  However, none of them had enough volume to call them a “blowoff top.” 

In major economic news on Friday, Michigan Consumer Sentiment came in above the expected number at 63.9 (compared to a forecast of 60.0 and a May reading of 59.2).  At the same time, Michigan Consumer Expectations were significantly higher than was expected at 61.3 (versus a forecast of 56.5 and a May value of 59.2). 

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In stock news, TSP completed its first unmanned road test (39 miles) of its heavy-duty truck in China.  Elsewhere, TSLA also offered new short-term incentives in China for its Model 3 cars.  The incentives offer buyers between June 16 and June 30 discounted interest rates as well as cash subsidies for the customer’s auto insurance.  In other TSLA news, CEO Musk told a French audience that autonomy (full self-driving) was the primary driver of the company’s value.  (Quite an interesting statement given the myriad of legal trouble TSLA faces over claims its “full self-driving” is not autonomous and has failed causing deaths, injuries, and property damage.)  Also on Friday, HUM echoed the UNH Thursday warning about a spike in medical costs due to higher-than-expected demand for surgery.  Later, LLY reported that its migraine drug (which had been approved by the FDA in 2018 for preventative migraine treatment) has failed to prove statistically superior to the competing drug sold by the BVHN and PFE partnership.  Meanwhile, GM continued its “internal combustion investment tour” by announcing it would invest nearly $1 billion in the expansion of production at an OH plant making heavy-duty truck engines.  Construction will begin immediately and will quadruple the plant’s production capacity.  Later, Reuters reported that BALL is now exploring the sale of its aerospace and defense unit for $5 billion with bidders including BAESF, TXT, and private equity firms.  (The goal is to focus on beverage packaging production.)  Finally, Bloomberg reports that MU is very close to signing a deal to build a $1 billion chip packaging plant in India.  This dela may be announced during Indian PM Modi’s state visit to Washington this week.

In stock legal and regulatory news, GOOGL sued a CA man on Friday, charging that he had created 350 fake accounts on its platforms and sold them to real businesses for the purposes of creating 14,000 fraudulent product and service reviews.  Elsewhere, CUBI announced it had bought $631 million worth of loans (formerly belonging to SBNY) from the FDIC at a 15% discount from book value.  Later, WHR announced it had agreed to drop a lawsuit against one of their former Italian executives (whom they had accused of stealing trade secrets when he left to work for a competitor).  At the same time, a US District judge ruled that JPM CEO Dimon will not need to submit to a second deposition related to the US Virgin Island’s lawsuit over the bank’s work for Jeffrey Epstein.  In a tangentially-related story, a US judge preliminarily approved the DB $75 million settlement with the victims of Jeffrey Epstein.  Meanwhile, a federal court in Louisiana dismissed a TSLA complaint against the state restriction on the direct sale of automobiles.  Late Friday the FDA advised COVID-19 vaccine makers (MRNA, PFE/BNTX, NVAX, etc.) to develop new vaccine candidates targeted at the XBB1.5 variant currently circulating.  In fine news, TWNK was fined just under $300,000 by the US Dept. of Labor for safety and training failures that resulted in a preventable partial finger amputation of an employee in December.  Finally, after he close, BMS sued the US Dept. of Health and Humans Services asking the court to declare US government negotiations over drug prices to be unconstitutional.  The specific drug in question is their Eliquis blood thinner.  The ridiculous thing about the suit (and peer suits) is that US patients pay an average of $440 for a dose of Eliquis while the same dose cost $162 in Zurich, $96 in Berlin, and $65 in Johannesburg.  (It’s good to own politicians.)

In overnight news, BABA announced a six-way restructuring, replacing its chairman in the process with an insider (a long-time confidant of Jack Ma).  Elsewhere, Bloomberg reports UBS is facing large fines (maybe $300 million) from the Fed as well as others from UK regulators (maybe $128 million).  These fines related to CS dealings with Archegos Capital prior to its implosion.

Overnight, Asian markets were mixed but leaned (on movement size) toward the red.  Hong Kong (-1.54%) and Thailand (-1.24%) paced the gainers while Australia (+0.86%), India (+0.33%), and New Zealand (+0.33%) led the gainers.  Meanwhile, in Europe, we see a different story taking shape with just two exchanges barely hanging onto the green at midday.  The CAC (-0.26%), DAX (-0.56%), and FTSE (+0.01%) lead the way on volume but most of the smaller bourses have moved more to the downside in early afternoon trade.  In the US, as of 7:30 am, the Futures are pointing to a surprisingly similar start to the week among the major indices. The DIA implies a -0.31% open, the SPY is implying a -0.33% open, and the QQQ implies a -0.34% open at this hour.  At the same time, 10-year bond yields are down to 3.763% and Oil (WTI) is up a bit to $72.09 per barrel in early trade.

The major economic news events scheduled for Tuesday are limited to May Building Permits and May Housing Starts (both at 8:30 am), and two Fed Speakers (Bullard at 6:30 am and Williams at 11:45 am).  The only major earnings reports scheduled for Tuesday are FDX and LZB after the close.  

In economic news later this week, on Wednesday, API Weekly Crude Oil Stocks are reported and we two more Fed Speakers (Chair Powell and Mester).  On Thursday, we get Q1 Current Account, Weekly Initial Jobless Claims, May Existing Home Sales and three Fed Speakers (Waller, Bowman, and Mester).  Finally, on Friday, Manufacturing PMI, Services PMI, and S&P Global Composite PMI are reported while we hear from three Fed speakers (Bullard, Bostic, and Mester). 

In terms of earnings reports, on Wednesday we hear from PDCO, WGO, ASTL, KBH, and SCS.  Then Thursday, CAN, CMC, DRI, FDS, and GMS report.  Finally, on Friday, we hear from KMX.

In miscellaneous news, the US Dept. of Energy received two ransom requests at a nuclear waste disposal site and Oak Ridge Laboratories on Friday.  This followed the MOVEit security flaw recently found in PRGS software.  Despite this, the Russian hacker group responsible for the hacks posted on their website “WE DON’T HAVE ANY GOVERNMENT DATA” saying that if they mistakenly did get government data “WE STILL DO THE POLITE THING AND DELETE ALL.”  Elsewhere, on Saturday, Bloomberg reported that T recently told 60,000 managers to return to the office.  The catch was that they have sharply reduced the number of offices.  So, many of those ordered back to the office would be required to relocate or quit.  (Bloomberg says sources tell this was seen as a way to reduce the costs of severance incurred had they been forced to lay off many of those people.)  Finally, Sec. of State Blinken met with Chinese leaders, including Chinese President Xi over the weekend.  Both sides made nice, saying a stable relationship is important and inviting Blinken’s Chinese counterpart to Washington for a reciprocal meeting.  However, there were no deals made or changes announced for example related to US sanctions or Chinese policies.

With that background, it looks like the Bears are looking to follow through early on Friday’s pullback. The DIA looks headed to retest its T-line (8ema) as support. However, all three major index ETFs remain above their T-lines at this point. So, the market trend remains bullish. In terms of over-extension, none of the major index ETFs are too far above their T-line but the T2122 indicator remains in the lower half of the overbought territory. So, both the Bulls and the Bears have some room to run if they can manage the momentum.

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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