On Tuesday, stocks gapped modestly lower at the open (down 0.21% in the SPY, down 0.21% in the DIA, and down 0.34% in the QQQ).  At that point, all three major index ETFs followed through to sell off sharply until 10:45 a.m.  However, then we saw some divergence as the two large-cap index ETFs continued in a much slower selloff until 12:50 p.m.  Meanwhile, the QQQ began to rally at 10:45 a.m. and kept it up until 2 p.m.  SPY and QQQ reached their high of the day at 2:45 p.m. while DIA did not quite make it up to the levels of the open.  The last 75 minutes of the day saw all three swing lower and then back higher. This action gave us a black-bodied, long-legged Doji in the SPY, a black-bodied, long-legged Doji in the DIA, and a white-bodied Spinning Top in the QQQ.  All three remain below their T-line (8ema) and 50sma. Perhaps more importantly, all three also dropped just below a potential support level. This all happened on below-average volume in all three major index ETFs.

On the day, nine of the 10 sectors were in the red.  Utilities (-0.59%), Energy (-0.58%), and Industrials (-0.52%) were out in front leading the market lower, as Communication Services (+0.26%) was the only sector to hang onto green territory.   At the same time, the SPY lost 0.21%, DIA lost 0.29%, and QQQ lost 0.21%.  VXX fell 0.49% lower to close at 20.41 and T2122 fell again but remained in the low end of the mid-range at 24.58.  10-year bond yields spiked again to close at 4.365% while Oil (WTI) fell slightly to end the day at $91.66 per barrel.  So, again it was a typical pre-Fed Tuesday where the price whipped back and forth but ended up not changing much.  Everyone is still just waiting on the Fed decision.  However, this time around, the entire market thinks (well 99.0% according to the Fed Futures) they already know the Fed decision.  So, if we are actually waiting on the Fed verbiage and tone of Fed Chair Powell’s statement.

The only major economic news reported Tuesday included Preliminary August Building Permits, which came in above expectations at 1.543 million (compared to a forecast of 1.440 million and a July reading of 1.443 million).  This amounted to a 6.9% increase over the prior month.  At the same time, August Housing Starts were lower than predicted at 1.283 million (versus a forecast of 1.440 million and a previous month 1.447 million).  This was the lowest level since June 2020 and that also amounted to an 11.3% decrease month-on-month.  Finally, after the close, the API Weekly Crude Oil Stocks report showed a larger drawdown than was anticipated at -5.250 million barrels (compared to a forecast of -2.667 million barrels and an increase of 1.174 million barrels last week).

In stock news, MS debuted an AI Investing assistant designed to help investment advisors sift through over 100,000 research reports.  At the same time, NIO announced it plans to sell $1 billion in senior convertible notes.  The market seems to believe most will be converted into shares, diluting existing stockholders.  As a result, NIO dropped more than 17% on the day.  At the other end of the financial strength spectrum, MSFT increased its quarterly dividend by 10% to $0.75/share.  Elsewhere, on Tuesday, HBI announced it was exploring strategic alternatives for the company’s Champion brand.  Later, DIA announced that it expects to make $10 billion in profits from theme park operations up from $2.2 billion a decade ago. At the same time, DIS said it plans to invest $60 billion to expand its theme parks globally as well as to build a DIS brand cruise line.  (That is double what was spent on that business unit in the prior 10 years.)  Later TGT, announced they will hire 100,000 workers for the holiday season and will begin holiday promotions in October.  Reuters reported that the hacking group that breached MGM and before that CZR had also hacked 3 other clients of OKTA.  The article reported that the hackers gained access to MGM’s OKTA identity management account and used it to gain other credentials to further their attacks.  At the same time, INTC held an event where it highlighted that its upcoming new line of CPUs will allow consumers to run their own AI applications rather than buying those as a service from a cloud-computing company.  INTC did not explain what need or application would require on interest consumers in running their own AI models.  However, if they want to, INTC’s line of chips due out in December will be able to do so on the low end of that spectrum.

In stock government, legal, and regulatory news, in Europe, GOOGL made a last-ditch effort to overturn a $2.6 billion EU antitrust fine (imposed for abuses of its shopping service). The company told the 15-judge panel of Europe’s top court that the European Commission had failed to prove GOOGL’s actions were anti-competitive and anyway the fines themselves were abusive and undermined competition by hurting GOOGL.  Later, the IRS approved MULN’s “qualified manufacturer” status, meaning customers who purchase one of two MULN models will qualify for up to $7,500 in tax credits per cargo van bought.  Elsewhere, the SEC and Dept. of Justice have begun investigating whether CS misled investors about its financial health prior to its Swiss-state-backed rescue buyout by UBS.  Reuters reported the two agencies have requested documents from both CS and UBS as well as current and former directors.  At the same time, the CEO of CBOE resigned after a late-August outside investigation found he failed to disclose “personal relationships” with his colleagues.  Later, the Wall Street Journal reported that the Dept. of Justice is investigating perks TSLA CEO Musk has received from the company (including designing a proposed house for him).  The article claims employees were the source of the allegations, including the former CFO.  Meanwhile, LLY announced they are suing 10 medical spas across the US which LLY alleges are selling products claiming to contain the active ingredient in its Mounjaro diabetes drug (which is expected to be approved for weight-loss use later this year).  Later, a federal judge in NY ruled that DASH, GRUB, and UBER can sue New York City over its law capping how much they could charge restaurants for delivering meals.

In Autoworker contract talks and strike news, Reuters reported that UAW workers are bracing for more strikes as talks between the union and Big 3 automakers show no sign of significant progress.  However, in hopeful news, F announced late last night that it had reached a tentative deal with its Unifor Canadian auto workers.  The deal still must be ratified by union members and neither the company or the union released and contract details.  (Although it beggars belief that the Canadian and US unions don’t talk.  So, the reason for the obfuscation is not clear.)

So far this morning, GIS beat on both the revenue and earnings lines.  This was a very modest upside surprise on modest 4% growth.  In other morning news, US mortgage demand increased despite interest rates rising.  The US average for a 30-year, fixed-rate, conforming loan rose from 7.27% to 7.31%.  Despite this, refinancing applications jumped 13% compared to the prior week.  The number of new home purchase loans also increased 2% on the week.  Meanwhile, across the pond, the Bank of England has a rate hike pause back in play as a possibility after the UK reported its August CPI fell from 6.8% to 6.7% defying forecasts that had predicted an increase to 7%.

Overnight, Asian markets leaned heavily to the red side.  Only Singapore (+0.04%) and South Korea (+0.02%) were able to hang onto green while India (-1.15%), Thailand (-0.99%), and Japan (-0.66%) led the rest of the region down.  However, in Europe we are seeing the opposite picture taking shape at midday.  Only Russia (-0.58%) and Greece (-0.34%) are in the red.  Meanwhile, The FTSE (+0.77%), DAX (+0.60%), and CAC (+0.42%) lead the 13 green bourses higher in early afternoon trade.  In the US, as of 7:30 a.m., Futures are pointing toward a modestly green start to the day.  The DIA implies a +0.21% open, the SPY is implying a +0.19% open, and the QQQ implies a +0.12% open at this hour.  At the same time, 10-year bond yields have backed down just a bit to 4.347% and Oil (WTI) is off by two-thirds of a percent to $90.64/barrel in early trading. 

The major economic news scheduled for Wednesday include EIA Weekly Crude Oil Inventories (10:30 a.m.), FOMC Rate Decision, FOMC Statement, FOMC Q3 Interest Rate Projection, Q3 1st Year Interest Rate Projection, Q3 2nd Year Interest Rate Projection, Q3 3rd Year Interest Rate Projection, and Q3 Long-Term Interest Rate Projection (all at 2 p.m.), and the Fed Chair Press Conference (2:30 p.m.).  The major earnings reports scheduled for Wednesday include GIS before the open.  Then, after the close, FDX and KBH report.

In economic news later this week, on Thursday, Q2 Current Account, Weekly Jobless Claims, Philly Fed Mfg. Index, Philly Fed Mfg. Employment, August Existing Home Sales, and Fed Balance Sheet.  Finally, on Friday, S&P US Mfg. PMI, S&P U Services PMI, and S&P Global Composite PMI are reported.

In terms of earnings reports later this week, on Thursday, we hear from DRI and FDS.  Finally, on Friday, there are no major earnings reports scheduled.

In miscellaneous news, CART opened Tuesday at $41.38 after pricing its IPO at $30 (a 39% opening gain).  However, the stock sold off the rest of the day to close at $33.70.  In good news, former IN Congressman Buyer was sentenced to 22 months in prison for insider trading.  This trading did not happen while he was in Congress, but his ties to Washington are likely why he was hired by TMUS as a consultant, gained info on their plans to buy Sprint and traded ahead of the news.  Elsewhere, the Institute of International Finance said global debt hit a record $307 trillion in Q2.  This was a $10 trillion increase over year-end 2022 and a $100 trillion increase over the last decade.  The US, Japan, Britain, and France accounted for the largest increases with China, India, and Brazil having the largest increases among emerging markets.  Finally, the in-fighting among the GOP in the House continues.  Speaker McCarthy tried to open debate on revisions to the $886 billion fiscal defense appropriations bill (widely seen as the easiest of the 12 needed funding bills).  However, five of the hardline MAGA GOP members voted against the motion, causing it to fail 214-212.  Those 5 and about 15 of their colleagues are demanding $120 billion (about 12% overall) is guaranteed to be cut out of domestic spending.  However, there are also calls (GOP and Democrat) to increase the $886 billion military spending budget, which would increase the required domestic spending cuts to achieve the same total budget.  With that giant task ahead, there are 7 business days left to resolve all 12 appropriations bills or pass a continuing resolution to avoid a government shutdown.

With that background, markets are little moved again and trading indecisively this morning. All three major index ETFs gapped up to start the early session, but have traded in a very tight range when they traded at all in the premarket. All three remain below their T-line (8ema) but DIA is getting close to a retest from below. So, for now, the trend of the last two weeks continues to be choppy. If you are looking at a very short timeframe, the momentum has switched from bearish to bullish and back several times during that period. In the mid-term the trend is bearish. A longer outlook shows a bullish long-term trend. The premarket session is just up off the obvious potential support levels that were just below the SPY, QQQ, and DIA on the close Friday. In terms of extension, none of the major index ETFs are far from their T-line and the T2122 indicator is now in the lower side of its mid-range. So, there is plenty of slack for either the Bulls or the Bears to make a move.

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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