On Wednesday, better-than-expected CPI numbers led to a gap higher (up 0.88% in the SPY, up 0.66% in the DIA, and up 1.15% in the QQQ).  At this point, the SPY and QQQ started a sideways meander centered on that opening level.  DIA started to grind sideways in a very tight range, which was interrupted by a sharp 45-minute selloff that started at about 11:25 am before continuing sideways inside the opening gap.  All three of the major index ETFs continued that sideways move right into the close.  This action gave us gap-up, indecisive candles, above the T-line (8ema) in all three.  The SPY and QQQ printed Dojis, with the SPY breaking out of June/July highs and QQQ closing right at its breakout level.  Meanwhile, the DIA printed a black-bodied Spinning Top that could be seen as failing the June high retest.

On the day, all 10 sectors were in the green with Basic Materials (+1.94%) way out front leading and Industrials (+0.07%) lagging well behind the other sectors.  At the same time, SPY gained 0.80%, DIA gained 0.27%, and QQQ gained 1.26%.  The VXX fell 5.50% to 24.07 and T2122 pulled back slightly but remains at the high end of the overbought territory at 95.60.  10-year bond yields plummeted to 3.861% while Oil (WTI) popped up 1.42% to close at $75.89 per barrel.  So, Wednesday saw a strong gap-up on the lower-than-expected CPI data.  However, after that, markets simply drifted sideways for the rest of the day.  This took place on above-average volume in the DIA and QQQ with slightly less-than-average volume in the SPY.

The major economic news on Wednesday started with the June month-on-month CPI, which came in below expectations at +0.2% (compared to a forecast of +0.3% but above the May reading of +0.1%).  At the same time, June year-on-year CPI was also below anticipated at +3.0% (versus a forecast of +3.1% and well below the May value of +4.0%).  Later, EIA Crude Oil Inventories showed a much larger build that projected at +5.946-million-barrels (compared to a +0.483-million-barrel forecast and the prior week’s drawdown of 1.508-million-barrels).  It may have nothing to do with what the Fed does in two weeks.  However, that data cannot credibly be spun as not showing progress on inflation.  On the Fed speaker front, Minneapolis Fed President Kashkari published an essay more related to supervision than rates.  He said that Central banks (in general) need to bring inflation back down and create anchored (stable) inflation expectations…adding that interest rates may need to raise further.  The rest of his essay was dedicated to ensuring the banking sector is strong enough to handle the potential additional increase in rates.  Kashkari said, “One way supervisors could ensure banks are prepared is to run new high-inflation stress tests to identify at-risk banks and size individual capital shortfalls.”  Elsewhere, Richmond Fed President Barkin sounded a hawkish note, saying “No matter how you cut it, inflation has been too high.”  Barking added that he agreed that overall demand was beginning to slow, but he wants to be “convinced” by incoming data that it will translate into lower inflation.

SNAP Case Study | Actual Trade

In stock news, Reuters reported midday that NVDA is in talks to become the “anchor investor” in an IPO of Arm.  (Arm is a semiconductor designer whose architecture competes with the x86 platform used by INTC and AMD.  The ARM architecture is mostly used in cloud servers and high-end computing servers like those required for AI applications.) Elsewhere, LCID reported that its Q2 production dropped from Q1 while deliveries stayed flat. The LCID stock fell almost 12% on that news. Later, DPZ announced they have reached a deal allowing customers to buy their pizzas via the UBER and Postmates apps.  (DPZ shot 11.10% higher on that news.)  At the same time, Reuters reported that first-day sales of the AMZN Pride Day 6% (to $6.4 billion) from a year ago on heavy discounting according to Adobe Analytics.  Meanwhile, DIS announced after the close that it has extended the contract of CEO Bob Iger for two more years, through the end of 2026.   Also after the close, VSAT announced that there was a problem with the deployment of its “ViaSat-3 Americas” satellite that may well affect the performance of the satellite.  VSAT stock fell 20% in post-market trading on this news.

In stock legal and regulatory news, the EU antitrust watchdog granted conditional approval for AVGO’s $61 billion acquisition of VMW. The condition was altering the deal to help rival MRVL by ensuring interoperability of future products.  However, the UK competition agency and US FTC are also still reviewing the deal. Elsewhere, TSLA announced the US federal tax credits (now $7,500) for its Model 3 cars “are likely to be reduced on Dec. 31.” It provided no additional information and this could be just a marketing ploy.  Still, the US government is implementing more stringent battery rules in the hope of reducing both carbon emissions and dependence on China.  Meanwhile, it was made public Wednesday that META will appeal EU antitrust charges related to its classified advertisements.  (The appeal was announced in a closed-door meeting Friday, but made public yesterday.)  At the same time, ILMN was hit with a record $476 million fine by the EU for closing its takeover of test maker Grail before getting WU antitrust approval.  In leak news, Reuters reported that the NHTSA is close to reaching a decision on whether or not to allow GM to deploy 2,500 self-driving Cruise vehicles.  (Cruise vehicles are essentially Chevy Bolts without a steering wheel, gas, or brake pedals.)  Finally, on Wednesday evening the FTC filed an appeal to the ruling that denied the agency’s request for an injunction against the MSFT acquisition of ATVI.

After the close, MLKN reported beats on both the revenue and earnings lines.  However, both numbers were down (13% on revenue and 29% on earnings) from the same quarter of 2022. So far this morning, PEP, DAL, and WIT have all reported beats on both the revenue and earnings lines.  (Interestingly, these were not beats against lowered expectations and showed both revenue and earnings growth quarter-on-quarter.  In fact, it was a record amount of earnings for DAL.)  Meanwhile, CAG and FAST both missed on revenue while beating on the earnings line.  (For FAST, even though the Revenue was a miss, both numbers were increases quarter-on-quarter from the previous report.  However, the CAG miss on revenue actually showed Qtr.-on-Qtr. growth but the beat on earnings actually was a decline Qtr.-on-Qtr.)  It should also be noted that PEP raised its forward guidance while CAG lowered its guidance.  Note that PGR and CTAS report closer to the opening bell. 

Overnight, Asian markets were nearly green across the board.  Only Malaysia (-0.13%) showed any red while Hong Kong (+2.60%), Singapore (+1.99%), and Shenzhen (+1.61%) led the region in a broad and strong rally.  Meanwhile, in Europe, the bourses are mostly green at midday with only three spots of red among the 15 exchanges.  The CAC (+0.78%), DAX (+0.57%), and FTSE (+0.37%) are leading the continent higher in early afternoon trade.  In the US, as of 7:30 am, Futures are pointing toward another move higher.  The lagging DIA implies at +0.15% open, the SPY is implying a +0.30% open, and the QQQ implies a +0.66% open at this hour.  At the same time, 10-year bond yields continue to fall and are at 3.826% while Oil (WTI) is up three-tenths of a percent to $75.97 per barrel in early trading.

The major economic news events scheduled for Thursday include June PPI and the Weekly Initial Jobless Claims (both at 8:30 am), June Federal Budget Balance (2 pm), and Fed Balance Sheet (4:30 pm).  We also have another Fed speaker (Waller at 6:45 pm).  The major earnings reports scheduled include CTAS, CAG, DAL, FAST, PEP, PGR, and WIT all before the opening bell.  There are no major earnings scheduled for after the close.      

In economic news later this week, on Friday, June Import Price Index, June Export Price Index, Preliminary July Michigan Consumer Sentiment, and Preliminary July Michigan Consumer Expectations are reported.      

In terms of earnings reports, on Friday, we hear from BLK, C, ERIC, JPM, STT, UNH, and WFC.      

In miscellaneous news, Reuters reported that the one-month moving average of open interest in VIX calls (in other words, the average of the number of existing options bets that the market will fall, driving the VIX up) was at a record high of almost 13.85 million at the end of June.  It fell to 13.71 on Wednesday afternoon.  The interesting thing is that this moving average was at a 3-year low in mid-June before skyrocketing by the end of the month as traders bet the Bulls could not keep running.  However, so far this month the Bulls have defied that logic.  Elsewhere, ocean temperatures (surface) off Florida reached nearly 97 degrees in some areas Monday according to the National Oceanic and Atmospheric Administration buoy data.  This is the highest temperature on record and poses a significant threat to the health of coral reefs, which in turn pose a risk to fishing grounds.  NOAA said that 70% of Florida’s coral reefs have already been bleached or have been eroded (i.e. have been lost) due to climate change impacts. No specific tickers impacted are available yet. Finally, in dollar news, after the CPI data Wednesday, the US Dollar plunged to a 15-month low.  This indicates that money managers now truly believe US interest rates are at or very near a peak.  (The dollar tends to be correlated with US interest rates.) For the record, the dollar is strongly down again Thursday against the Euro, British Pound, and Aussie Dollar.

With that background, it looks like the Bulls are trying to gap up into fresh air again in the SPY and QQQ. DIA is also positive but is only giving a Bullish Harami so far in the premarket session. It should be noted that all three of the major index ETFs are printing indecisive candles in this early session as traders wait on PPI and the rest of the new round of earnings. Obviously, all three remain above their T-line (8ema) with the June PPI data still an hour from being published. So, the bias is still bullish across the market. It looks like the Bulls are trying to add to the week’s nice gains so far. There may be some premarket volatility (and likely volatility near the open) from the PPI data but truthfully that is usually a lot less than the CPI number that always precedes it by a day. Either way, after the open settles out, eyes will turn toward the financials as the big boys report Friday. All that said, do not be surprised if we drift while we wait. Overall, the SPY and QQQ have broken out of recent highs and have some room to run before the next potential resistance level. However, the DIA has yet to get through and is just below the double-top it failed yesterday. As far as extension goes, only the QQQ (in premarket) is starting to get a bit stretched from its T-line. However, again, the T2122 indicator remains deep into that overbought territory. The old saying stands: “The market can remain overbought longer than we can stay solvent being right too early.” So, once again, if either the bulls or the bears did find the energy to run today, there is a slack available, just more of it available to the Bears.

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.

Hit and Run Candlesticks / Road To Wealth Youtube videos

Disclosure: We do not act on all trades we mention, and not all mentions acted on the day of the mention. All trades we mention are for your consideration only.

Free YouTube Education  •  Subscription Plans • Private 2-Hour Coaching

DISCLAIMER: Investing / Trading involves significant financial risk and is not suitable for everyone. No communication from Hit and Run Candlesticks Inc, its affiliates or representatives is not financial or trading advice. All information provided by Hit and Run Candlesticks Inc, its affiliates and representatives are intended for educational purposes only. You are advised to test any new trading approach before implementing it.  Past performance does not guarantee future results.  Terms of Service