Markets started the day just on the Bearish side of flat (gapping down 0.10% in the SPY, down 0.13% in the DIA, and down 0.13% in the QQQ).  At that point, we saw a modest divergence with DIA rallying sharply for 20 minutes to reach the highs of the day before slowly meandering back down the rest of the day.  Meanwhile, the SPY and QQQ meandered sideways with a very modest Bullish trend until shortly after 11 am.  Then the SPY and QQQ sold off briskly until 1 pm and ground sideways until 3 pm before resuming their move lower.  All three of those major index ETFs went out very near their lows of the day.  This action gave us black-bodied candles with upper wicks in all three. 

On the day, nine of the 10 sectors were in the red with Consumer Cyclical (-1.25%) leading the way lower and Utilities (+0.26%) being the only sector to hang on to the green territory.  At the same time, the SPY lost 0.73%, DIA lost 0.53%, and QQQ lost 1.06%.  VXX gained 1.61% to close at 25.17 and T2122 dropped slightly, further into the oversold area at 5.54.  10-year bond yields continued to climb to 4.27% while Oil (WTI) was down 2.22% to close at $79.19 per barrel. This all took place on less-than-average volume again across all three major index ETFs.  So, the Bears put in some work, following through to the downside after a tepid early attempt to reverse the downtrend by the Bulls.          

The major economic news reported Wednesday included Preliminary July Building Permits, which came in slightly below expectations at 1.442 million (compared to a forecast of 1.463 million and a June reading of 1.441 million).  On a month-on-month basis, this was actually a +0.1% move (versus a forecast of -1.7% and June’s 3.7% fall).  At the same time, July Housing Starts were reported above the predicted amount at 1.452 million (compared to the 1.448 million forecast and the June value of 1.398 million).  On a month-on-month basis, that was a strong +3.9% (versus a forecast of +2.7% and vastly better than June’s -11.7%).  Later, July Industrial Production was a matter of what timeframe you are considering.  On a month-on-month basis, Industrial Production rose more than anticipated at +1.0% (compared to a forecast of +0.3% and June’s 0.80% decline).  However, on a year-on-year basis, July Industrial Production was a bit worse than expected at -0.23% (versus a -0.10% forecast but still significantly better than June’s 0.78% decline).  At midmorning, the EIA Weekly Crude Oil Inventory saw a much bigger drawdown than predicted at -5.960 million barrels (compared to a forecast of -2.320 million barrels and far worse than the prior week’s inventory build of 5.851 million barrels).  The EIA also said that US Oil Production reached a new three-year high of 12.7 million barrels per day on average produced last week.

The July Fed Meeting Minutes came out Wednesday.  They showed a divided FOMC, with “some” members citing the risks of pushing rates too far even as “most” members still prioritizing the fight against inflation over the potential for economic harm.  For example, “a couple” participants called for leaving rates unchanged again in July.  Still, the vote was unanimous to raise a quarter point.  Later, the committee discussed risk management steps that might bear on future rate decisions.  In summary, the minutes showed the group was committed to following the course they had been indicating to markets for some time.  However, at least the written verbiage they want to put out will continue to say everything is “data dependent.”  With that said, they may have tipped their hand as to how the group is leaning when it was agreed that future moves will be dictated by the data which will “help clarify the extent to which the disinflation process was continuing.”  In addition, both staff economists and the committee members now seem to see a potential “soft landing” taking shape.

SNAP Case Study | Actual Trade

In stock news, GM invested $60 million in another battery startup (Mitra Chem), which specialized in using AI to optimize the design and creation of lithium-ion battery parts.   Elsewhere, Bloomberg reported that BAESY is in talks to acquire BALL’s aerospace division for more than $4 billion.  At the same time, MULN announced that it will debut its ultra-high-performance FIVE RS crossover vehicle on August 20.  (The FIVE RS will reportedly do 0-60mph in less than 2 seconds and will have a top speed over 200mph.)  Later, Reuters reported that MT is now considering entering the bidding for X and has brought in investment bankers to help prepare an offer.  After the close, BX (along with a private company and Canada’s second-largest pension fund) struck a deal with BAC. The deal will allow them to buy $1.5 billion worth of solar and wind plants to capitalize on the 2022 Biden green energy funding in the Inflation Reduction Act.  As part of the deal, a private company (Invenergy Renewables) will sell BAC $580 million of tax credits and put the money toward 14 projects being led by AEP.  Overnight, the Wall Street Journal reported that GOOGL’s Health Science unit (Verily) is planning more cost-cutting after losing more money than expected in the last year.  The details are unknown but Verily laid off 200 workers and discontinued some products earlier this year.  At the same time, Reuters reports that TSN is now planning to sell its Chinese poultry business according to three sources.  That unit has $1.1 billion in annual sales revenue.  Also overnight, BAESY did agree to buy BALL’s aerospace unit but for a higher-than-expected $5.55 billion in cash.  Finally, early today Reuters reported that STLA is investing more than $100 million in CA lithium extraction company Controlled Thermal Resources.  (BRKB has struggled to extract lithium in the same area due to large concentrations of silica in the brine from which lithium is extracted.  Controlled Thermal has the technology to remove the silica and other undesirable elements prior to the extraction process.)

In stock legal and regulatory news, Bloomberg reported that V is facing an investigation by the Dept. of Justice over how much it charges merchants for the technology used to safeguard cardholder data.  (That service is called “tokenization” and it replaces the card number used with a computer-generated token.)  The DOJ is investigating the validity of charging merchants more for not using the new tokenization service it offers.  (MA reached a settlement in December with the FTC over the same practice the DOJ investigating V over.)  At the same time, a lawsuit was filed against SBGI, by its bankrupt subsidiary, accusing SBGI of siphoning off $1.5 billion from the bought-out firm, causing the bankruptcy.  Elsewhere, INTC announced it has abandoned the proposed purchase of TSEM after being unsuccessful in getting Chinese authorities to approve the deal.  As a result of killing the deal, INTC owes TSEM $353 million.  At the same time, the NHTSA announced that TM is issuing a recall for 168k 2022-2023 hybrid pickup trucks over a potential fuel leak fire hazard.  In Europe, the Czech government passed a law that will charge multinationals a 15% minimum profit tax for companies with greater than $817.50 million in sales in two of the last four years.  (This is aimed at preventing multinationals from moving profits to a country of the least taxes.)  Back in the US, the state of TX approved the TSLA standard for charging networks in that state to qualify for federal funds.  Meanwhile, officials from seven states wrote to FTC Chair Khan opposing KR’s proposed $24.6 billion acquisition of ACI.  At the same time, Reuters reported that ALL has agreed to pay $90 million to settle a class action suit brought by shareholders who had accused the insurer of lowering underwriting standards (poor risk management) to boost sales growth.  At the close, the FDA announced it has approved a bone disorder treatment from IPSEY.  The drug will have an estimated cost of $400,000 per year and this gives the company a lead over REGN which has a treatment for the same disease still listed as experimental.  After the close, 16 people who witnessed the 2022 Buffalo NY grocery store mass shooting filed suit against three firearms retailers and GOOGL (where the defendant live-streamed the shooting on YouTube).  Also after the close, the FTC approved the EQT acquisition of QMCO for $5.2 billion (announced in September 2022).

After the close, A, HRB, JKHY, NU, and LRN all reported beats on both the revenue and earnings lines.  However, SQM missed on both the top and bottom lines. It is worth noting that A also lowered its forward guidance. So far this morning, JD, TCEHY, and TJX reported beats on both the revenue and earnings lines.  Meanwhile, EAT, PFGC, and TGT missed on revenue while beating on the earnings line.  It is worth noting that TGT cut its full-year guidance.

Overnight, Asian markets were mixed but leaned toward the red side.  Shenzhen (+0.61%), Thailand (+0.61%), and Taiwan (+0.42%) led the gainers.  Meanwhile, Malaysia (-1.06%), New Zealand (-0.95%), and Australia (-0.68%) paced the losses.  However, in Europe, the bourses are leaning strongly to the downside at midday.  The breadth of losses is wide with Finland (+0.31%) being the only appreciable green while the CAC (-0.05%), DAX (-0.07%), and FTSE (-0.13%) are typical of modest losses and lead the region lower in early afternoon trade.  In the US, as of 7:30 am, Futures are pointing toward a modestly green start to the day.  The DIA implies a +0.27% open, the SPY is implying a +0.21% open, and the QQQ implies a +0.18% open at this point.  At the same time, 10-year bond yields are climbing again at 4.302% and Oil (WTI) is 1.12% to $80.25 per barrel in early trading.

The major economics news scheduled for Thursday includes Weekly Initial Jobless Claims, Philly Fed Mfg. Index, and Philly Fed Mfg. Employment (all at 8:30 am), and the Fed Balance Sheet (4:30 pm).  The major earnings reports scheduled for before the opening bell include ARCO, BILI, DOLE, NICE, TPR, and WMT.  Then, after the close, AMAT, FTCH, GLOB, KEYS, and ROST report.

In economic news later this week, on Friday, there is no significant economic news scheduled.

In terms of earnings reports, on Friday, DE, EL, VIPS, XPEV, and PANW report.

In miscellaneous news, the National Futures Assn. approved COIN to sell crypto futures to us investors on Wednesday.  (75% of all global cryptocurrency transactions are done using futures.  However, US investors have not been able to participate in that market until this approval.)  Meanwhile in Washington, as Congress headed home for summer recess there was no movement on the Appropriations bills, which could lead to a government shutdown.  However, an interesting development was hinted at.  House Speaker McCarthy floated the idea of a continuing resolution, kicking the can down the road until December or January.  Democrats, especially in the Senate, were very supportive of the idea.  The “why?” is the interesting part.  Speculation is that some people believe pushing off the decisions until later may see legal developments having weakened one faction’s support from the base and made them more amenable to compromises.  It’s pure speculation, but it might make sense since nothing else is likely to change between the two sides whether the deadline is in 30 days or five months. 

So far this morning, BILI, NICE, and WMT all reported beats on both revenue and earnings.  Meanwhile, DOLE missed on revenue while beating on earnings.  However, TPR and ARCO missed on both the top and bottom lines.  It is worth noting, the BILI and TPR have lowered their forward guidance.  At the same time, WMT raised its forward guidance.

With that background, it looks like markets are looking to give us a modest gap-up, but indecisive start to the morning. The SPY and QQQ are giving us the strongest (white-bodied) premarket candles but that is not saying much. The trend remains bearish with all three major index ETFs below their T-line (8ema). None of the three major index ETFs have a potential support level immediately below at this moment. Of course, the long-term trend is still hanging on to a bullish course but it is being pushed by the Bears over the last three weeks. As far as extension goes, we are starting to get a little bit extended below their T-line (8ema) and the T2122 indicator remains very oversold, but not yet quite pegged to the bottom of its range. So, both sides have some slack to work with. However, the Bulls have much more room to run and we may be in need of a pause or pullup.

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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