Thursday was the Bull’s day after a down start to the day that saw the SPY gap down 0.21%, DIA gapped down 0.13%, and QQQ gapped down 0.39% at the open.  At that point, all-day rallies started in both the SPY and QQQ.  Meanwhile, DIA meandered sideways, closing near the Wednesday close.  This action gave us Bullish Engulfing candles in the SPY and QQQ.  Both of them also crossed back above their T-line (8ema).  Meanwhile, the DIA printed another white-bodied, indecisive Spinning Top candle.  It is worth noting that SPY did this on significantly lower-than-average volume while DIA and QQQ were near but still below-average volume.

On the day, six of the 10 sectors were in the red with Technology (+0.58%) and Consumer Defensive (+0.56%) leading the way higher while Energy (-1.50%) was by far the worst-performing sector.  At the same time, SPY gained 0.36%, DIA lost 0.03%, and QQQ gained 1.18%.  The VXX dropped 2.39% to 26.15 and T2122 dropped back and remains in the mid-range at 46.67.  10-year bond yields spiked to 3.799% while Oil (WTI) plummeted 4.21% to close at $69.48 per barrel.  So, the two index ETFs that have led all year seemed to be trying to reverse their pullback this week.  Meanwhile, DIA (which has lagged all year) still seems to be trying to move lower in an indecisive way.

In major economic news on Thursday, Q1 Current Account (trade deficit) came in a bit larger than expected at -$219.3 billion (compared to a forecast of -$216.9 billion and a revised Q4 value of -$216.2 billion).  At the same time, Weekly Initial Jobless Claims were also higher than expected at 264k (versus a forecast of 260k but right in line with the prior week’s 264k).  It is worth noting that 264k is a 20-month high.  Later in the morning, May Existing Home Sales came in above the anticipated reading at 4.30 million (compared to a forecast of 4.25 million and slightly above the April reading of 4.29 million).  This amounted to a +0.2% month-on-month increase compared to the April 3.2% decrease over March.  Then EIA Weekly Crude Oil Inventories showed a much larger-than-expected drawdown of 3.831-million-barrels (versus a forecasted inventory build of 1.873-million-barrels and far different from the prior week’s 7.919-million-barrel increase in stocks).  After the close, the Fed Balance Sheet was reported as decreased to $8.362 billion (down $26 billion from the prior week’s $8.388 billion). 

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In Fed Speak news, Fed Governor Bowman said Thursday that although she supported the June pause, she feels “additional policy rate increases will be needed” (to control inflation).  She said the Fed “has made progress in lowering inflation, but … we continue to see unacceptably high levels of inflation.”  (She did not explain how many or what her expected terminal rate would be but she did use the plural to describe increases.)   Later, Fed Chair Powell had his second day of Congressional testimony (this time in the Senate) where he said the Fed would move at a “careful pace” as the FOMC edges toward a stopping point for rate hikes.  He said he did share the broad consensus of Fed members that expects modest economic growth, a small rise in unemployment, and a slowly declining inflation over the rest of the year.  Powell then said, “If all those things happen, we are within a couple of rate hikes of the level we need to get to.”  On a different topic, Powell said banks with over $100 billion in assets will soon face higher capital requirements (he did not specify the amount) as the Fed seeks to strengthen banks and finally bring the US in compliance with the 2017 Basel Committee Agreement.  (However, Reuters reported the major banks are already pushing back against this and have marshaled GOP champions to fight the rule revision.  Oddly, Reuters did not cite which major banks or even which GOP champions.)

In stock news, RIVN acquired Swedish route planning software company Iternio.  As mentioned here previously, it was announced Thursday that GE will jointly make fighter jet engines for the Indian air force with India’s state-owned Hindustan Aeronautics.  Elsewhere, OSTK won the bankruptcy court auction for a portion of the assets of defunct BBBY for $21.5 million.  (OSTK was up as much as 22% on the news but closed up 17.28% to $24.84.)  At the same time, SPR (which is a major supplier to both BA and EADSY) suspended production at its Wichita, KS factory (that makes fuselages) after workers rejected a company-proposed four-year deal and announced they would begin striking on Saturday.  Meanwhile, at the close, Investing.com reported the rumor that TSLA is acquiring German wireless charging company Wiferion.  Later, Bloomberg reported that OWL is rebranding its business units amid growing tensions between the company’s top executives.  (OWL was formed in 2021 via a SPAC that merged Dyal Capital with Owl Rock.)

In stock legal and regulatory news, on Thursday, the FTC argued in federal court that the MSFT acquisition of ATVI should be halted until a final legal ruling is issued.  The hearing will continue through June 29 with CEOs from both companies called as witnesses.  Elsewhere, the FDA approved SRPT’s gene therapy for muscular dystrophy. (This was a first-of-its-kind approval for this type of therapy and it is worth noting PFE has its own similar gene therapy in development.) Later, the US Dept. of Energy announced plans to provide up to $9.2 billion in loans to a joint venture between F and South Korean listed company SK Innovation for them to build three battery plants.  (The largest ever DoE loan award.)  After the close, META announced it will end access to news on Facebook and Instagram in Canada after the Canadian Parliament approved legislation to compel internet giants to pay local publishers for their news content.  Also, after the close, MMM announced it has reached a tentative $10.3 billion settlement with “many” public water systems over the company’s “forever chemical” pollution.  MMM said the deal would provide the funds over a 13-year period.  In addition, the states of CA, MN, and WI all joined an FTC lawsuit aimed at stopping the AMGN $27.8 billion deal to buy HZNP based on the deal giving AMGN monopoly positions in two eye disease markets.

Overnight, Asian markets were nearly red across the board for the exchanges that were open.  (Chinese markets remain closed for their Dragon Boat holiday.)  Japan (-1.45%), Singapore (-0.96%), and South Korea (-0.91%) paced the losses.  In Europe, we see a similar picture taking shape at midday.  Only Greece (+0.67%) and Switzerland (+0.51%) are in the green as the CAC (-0.22%), DAX (-0.72%), and FTSE (-0.27%) lead the region lower in early afternoon trade.  In the US, as of 7:30 am, Futures are pointing toward a fourth consecutive lower start to the day.  The DIA implies a -0.29% open, the SPY is implying a -0.44% open, and the QQQ implies a -0.57% open at this hour.  At the same time, 10-year bond yields a down sharply to 3.735% (back near where they were yesterday morning) and Oil (WTI) is off another 1.22% to $68.66 in early trading.

The major economic news events scheduled for Friday are limited to Manufacturing PMI, Services PMI, and S&P Global Composite PMI (all three at 9:45 am) and we hear from three Fed speakers (Bullard at 5:15 am, Bostic at 8 am, and Mester at 1:40 pm).   The only major earnings reports scheduled for Friday is KMX before the open.  There are no major reports scheduled for after the close.       

So far this morning, KMX reported beats on both the revenue and earnings lines.  The earnings were a 57% upside surprise, yet was actually down 25.6% quarter-on-quarter.  Revenue was also down 17.4% quarter-on-quarter.

In miscellaneous news, following the meeting between President Biden and Indian PM Modi, the US and India mutually agreed to drop six trade disputes that are pending before the WTO.  In addition, India agreed to drop retaliatory tariffs on certain US ag products.  Elsewhere, this morning, CNBC reports that workers at 150 SBUX stores across 22 states will strike after the company changed policy (in an effort to avoid cancel culture boycotts) and refused to allow “Pride decorations” in their stores.  Meanwhile, Treasury Sec. Yellen told Bloomberg that “my odds of it (a recession), if anything, have gone down.” (She went on to cite the resilient labor market and inflation coming down.) Finally, in a “minor miracle,” Interstate 95 in Philadelphia is opening to traffic again today, less than two weeks after a section of raised six-lane highway collapsed after a fuel truck rolled, caught fire, and melted the steel beams supporting the structure.  This does actually have an economic impact as that highway is normally one of the most heavily traveled truck routes in the nation. Its closure had caused prices in the Philly area to rise over the last couple of weeks ostensibly due to the additional cost of trucking via other routes.

With that background, it looks like the QQQ is retesting its T-line for support while SPY is looking to gap back just below its T-line this morning. Meanwhile, DIA remains in its Bull Flag formation. However, once again, the candles the three major index ETFs have printed so far in this premarket are small, indecisive Dojis. So, it looks like the morning move is uncertain. With that said, the very short-term trend is down and the two large-cap index ETFs are below their T-line on a daily chart. So, the bias is bearish. Meanwhile, the longer-term trend remains Bullish (Weekly chart). In terms of over-extension, none of the major index ETFs are far from their T-line and the T2122 indicator is smack dab in the center of its mid-range. So, both the Bulls and the Bears have room to run if they can gain the upper hand. We do have several scheduled Fed speakers (and likely a couple of others will give their two cents in unscheduled ways). However, the PMIs at 9:45 am are most likely to be external drivers of momentum. Remember that it’s Friday… payday…and time to get your account set for the weekend news cycle.

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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