On Monday, markets started just on the red side of flat with SPY gapping down 0.12%, DIA also gapping down 0.12%, and QQQ gapping down 0.14% at the open.  From that point, the large-cap indices ground sideways with the DIA slightly more bullish than SPY until 3:40 pm.  Meanwhile, QQQ had an immediate rally at the open only to sell off strongly from 10:10 am until 12:45 pm.  After that, QQQ ground sideways along the lows in a tight range until 3:40 pm.  However, in the last 20 minutes of the day, all three major index ETFs sold off, taking the SPY and QQQ out very near the lows of the day.  This action gave us a black-bodied Inverted Hammer candle in the SPY (which failed a retest of the T-line at its highs), another white-bodied Doji-type candle in the DIA, and a large, black- candle with significant upper wick (which failed a test of its T-line as well).  This happened on less-than-average volume in the QQQ and significantly less-than-average volume in both the SPY and DIA.

On the day, six of the 10 sectors were in the green with Energy (+1.65%) by far the leading sector while Technology (-0.82%) was the laggard on the day. Meanwhile, SPY lost 0.41%, DIA lost 0.01%, and QQQ lost 1.34%.  The VXX was flat at 26.43 and T2122 climbed back into the center of the mid-range at 55.65.  10-year bond yields fell to 3.715% while Oil (WTI) gained two-thirds of a percent to close at $69.57 per barrel.  So, Monday was an indecisive day for large-cap indices with Bears continuing to drive action in the QQQ.  Overall, nothing is technically broken and all three major index ETFs remain in Bull Flag formations.  However, it is also easy to see that the mega-cap DIA has essentially done nothing since December, chopping sideways for six months.  Therefore, the question remains whether DIA has been a front-runner of a major bearish turn in the market or just the laggard being begrudgingly dragged higher by the more growth-oriented SPY and QQQ. 

The only major economic news on Monday was that President Biden launched the previously-funded (by the 2021 infrastructure law) $42.5 billion program designed to get every home high-speed internet access by 2030.  Each state will get at least $107 million in funding, with Texas getting a massive $3.3 billion, from the program.  Still, the program is extremely likely to go the same way as previous federal telephone and internet programs as a major boon for T, VZ, TMUS, CMCSA, CHTR, SPB, etc. all reaping huge profits from grants and underwritten operations.  In Fed-speak news, NY Fed Pres. Williams argued Sunday (in a panel discussion) that bringing down inflation is of utmost importance and he downplayed the link between central bank monetary policy and financial stability (loss of jobs and/or recession). Williams said, “It’s not clear that monetary policy actions play a central role in affecting the emergence of financial stability vulnerabilities.”  Williams also said, “Restoring price stability is of paramount importance because it is the foundation of sustained economic and financial stability.” 

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In stock news, NVO announced that its late-stage trial of its experimental obesity drug is finding that patients are losing 15% of their body weight under the treatment.  The company hopes for US and European approval later this year.  (PFE discontinued its own obesity drug Monday after liver safety issues were found and LLY’s competing drug, which is still in mid-stage trials, shows similar results with 14.7% of body weight lost over a 36-week treatment.)  The obesity treatment market is expected to reach $100 billion per year by the end of the decade.  Elsewhere, AMED agreed to a $3.3 billion offer ($101/share) to be acquired by UNH.  At the same time, AMZN announced it will invest $7.8 billion in OH and $12.7 billion in India by 2030 to expand its cloud computing division capacity.  Meanwhile, FSR began delivery of its Ocean SUV in the US Monday.  Later in the afternoon, PACW sold a $3.54 billion portfolio of loans to ARES (at an undisclosed discount).  The move strengthened the bank’s balance sheet.  After the close, SLG said it has sold its 50% stake in a New York Office Building for $2 billion.  The sale comes as a slight discount on the 2017 purchase price of the building ($2.21 billion).  So, SLG got rid of 50% of an asset that they acquired when the original buyer defaulted (SLG was one of the 2017 lenders) for slightly less than the whole building was worth in 2017.  (Nice gain is a supposedly bad and weakening commercial real estate market.) Also after the close, Bloomberg reported that BN is close to a deal to purchase AEL.  AEL shares jumped in after-hours trading on the news.  In addition, ILMN announced it has begun job cuts and exiting office space to reduce costs.  In the same vein, the Wall Street Journal reported that HOOD is laying off 150 employees (7% of its workforce).  In addition. CNBC reported Monday night that F had confirmed it will carry out layoffs (mostly Engineering jobs) in both the US and Canada this week.  The number of layoffs was not provided. 

In stock legal and regulatory news, Germany’s highest court ruled that carmakers (such as VLKAF, MBGAF, and others) must pay compensation for having fitted their diesel cars with emissions testing cheating devices and software.  This could cost each company millions of dollars.  Elsewhere, the NHTSA announced that TSLA is recalling 26 different configurations of its Model 3 and Model Y 2023 due to battery defects.  (This fault cannot be resolved via an over-the-air software patch.)  No specific number of vehicles impacted by the recall was given.  Later, the US Supreme Court declined to hear a case brought by AAPL and AVGO challenging the patents owned by Caltech.  This returns the case to a lower court for a re-evaluation of damages after the US Court of Appeals objected to $837.8 million from AAPL and $270.2 million from AVGO as too much.  (Almost all AAPL iPhones, iPads, and MacBook devices use chips based on the infringed patents and AVGO is the major supplier to AAPL of chips that infringe upon those patents.)  Caltech has pending cases against MSFT, SSNLF, DELL, and HPQ over the infringement of the same patents.  After the close, a US judge in Houston signaled that he was ready to auction off the assets of Citgo Petroleum (Venezuelan-owned refiner) with proceeds partially going to COP and SMNEY.  Finally, the US Dept. of Defense said it has chosen GD and RNMBF as the finalists competing for a $45 billion contract (which will begin in 2027) to replace US Bradley fighting vehicles.  OSK and BAESY were among the eliminated bidders.

In geopolitical news, after a day of quiet, Wagner boss Prigozhin verbally struck out again, justifying the Wagner position in the conflict, again calling the Russian Defense Minister and Army Chief of Staff criminals and saying that only a handful of his men would join the Russian military (for half the salary).  There were unconfirmed rumors that Prigozhin is currently in a windowless Minsk, Belarus hotel.  Later, Putin released a short video where he thanked Wagner soldiers who did not attack Moscow and then returned to their bases.  He called the dead pilots (who died attacking Wagner forces) heroes.  However, Putin said the rebellion would have been crushed anyway.  Then, without naming them, he called the leaders of the revolt “criminal and treasonous” while saying they will be “brought to justice.”  Presumably he was referring to Prigozhin and perhaps his fellow Wagner founder, GRU Colonel Dmitry Utkin who led the “little green men” forces who took regions of the Donbas in 2014.  Finally (for the Russian story), a short video of Putin meeting with his cabinet (including Defense Minister Shoigu) also apparently meant to send a signal.  Elsewhere, Bloomberg reported overnight that China’s number 2, Li Qiang, told the World Economic Forum that those governments (with the implication being companies headquartered in those countries) that attempt to de-risk away from China will only fragment the global economy.  His speech boosted optimism about Chinese recovery/growth outlook and was the main driver for Chinese markets’ strong day. 

Overnight, Asian markets leaned to the green side.  Hong Kong (+1.88%), Shanghai (+1.23%), and Shenzhen (+0.97%) led the region higher while Taiwan (-1.00%) was by far the biggest loser on the day.  Meanwhile, in Europe, the opposite picture is taking shape at midday.  Twelve of the 15 European bourses are in the red with an undecided CAC (-0.02%), DAX (-0.02%), and FTSE (-0.11%) leading the continent on volume.  Belgium (-1.01%) and Norway (-0.92%) are by far the biggest losers in early afternoon trade.  In the US, as of 7:30 am, Futures are pointing toward a mixed open.  The DIA implies a -0.06% open, the SPY is implying a +0.15% open, and the QQQ implies a +0.38% open at this hour.  Simultaneously, 10-year bond yields are up to 3.727% and Oil (WTI) is down another 1.80% to $68.14 per barrel in early trading.

The major economic news events scheduled for Tuesday include Building Permits and Durable Goods Orders (both at 8:30 am), Conf. Board Consumer Confidence and May New Home Sales (10 am), and API Weekly Crude Oil Stocks (4:30 pm.  The major earnings reports scheduled for Tuesday are limited to KFY, SCHN, and WBA before the open.  Then, after the close, JEF reports.         

In economic news later this week, on Wednesday, Preliminary May Goods Trade Balance, May Preliminary Retail Inventories, EIA Crude Oil Inventories, and Fed Bank Stress Test Results are reported while Fed Chair Powell also speaks.  On Thursday, we get Q1 GDP, Q1 GDP Price Index, Weekly Initial Jobless Claims, and May Pending Home Sales along with Fed speaker Bostic.  Finally, on Friday, May PCE Price Index, May Personal Spending, Chicago PMI, and Michigan Consumer Sentiment are reported.

In terms of earnings reports, on Wednesday, GIS, UNF, CNXC, FUL, MU, and WOR report.  On Thursday, we hear from AYI, GBX, MKC, MSM, PAYX, RAD, and NKE.  Finally, on Friday, STZ reports.

In miscellaneous news, Monday evening SPGI reported that June US auto sales are set to increase, following up on the unexpectedly solid volumes of April and May.  The analyst firm expects to see a 9% increase in sales for 2023 as a whole (compared to 2022).  Elsewhere, a MSFT internal memo from late 2022 came out (during a court hearing over the acquisition of ATVI) Monday night.  The memo has CEO Nadella laying out the goal and expectation for MSFT to double its revenue by 2030 while also delivering in excess of 10% annual returns to shareholders via dividends and share buybacks.  This morning, RIDE filed for Chapter 11 Bankruptcy protection and put the company up for sale.  At the same time, RIDE sued Taiwan-based Foxconn for breaking an agreement to invest $170 million into RIDE.  Meanwhile, DAL said it now expects 2023 earnings to be at the high end of previous forecasts.

So far this morning, KFY reported beats on both the revenue and earnings lines.  At the same time, WBA beat on revenue while missing on earnings.  (SNX and SCHN scheduled to report at 8am.)  It is worth noting that both WBA and KFY lowered their forward guidance. 

With that background, it looks like the bears have shown up in the two large-cap index ETFs during the last 30 minutes. Their premarket candles are now red-bodied. At the same time, QQQ is now printing a gap-up Doji in the premarket. However, from a higher-level view, none of the three is signaling a major move. So, the recent pullback still looks like an orderly move (as opposed to the gappy, huge candle moves we see in a typical major bearish trend reversal. To me at least, this signals that we are still in Bull Flag patterns. (However, I’d be lying if I said I was not starting to get concerned about the Flag’s length.) All three of the major index ETFs are below their T-line (8ema), indicating the short-term trend is bearish while the longer-term trend remains Bullish in all three. In terms of extension, none of the three major index ETFs is far from their T-line and the T2122 indicator is right in the center of its mid-range. So, both sides have room to run if they can muster the energy.

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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