Monday was another lackluster day in the market.  The SPY gapped down 0.24%, the DIA gapped down 0.28%, and the QQQ gapped down 0.23%.  The three major index ETFs then vacillated back and forth across their opening gaps until 11:15 a.m., when the Bulls moved the SPY and QQQ back up above the Friday closing level and they traded sideways in a tight range until 3:55 p.m.  Meanwhile, the DIA continued its meandering in the morning gap until 3:55 p.m.  However, the strongest candle of the day for all three was the last 5-minutes which took all three out on their highs of the day.  This action gave us a large, white-body Marubozu (shaved head) in the SPY, a white-bodied Piercing Candle in the QQQ, and what could be seen as a large-body, white Hammer in the DIA.  This all happened on less-than-average volume in all three major index ETFs.

On the day, seven of the 10 sectors were in the green with Energy (+1.20%) way out front leading the other sectors higher.  Meanwhile, Communications Services (-0.93%) was by far the biggest laggard sector.  At the same time, the SPY gained 0.42%, DIA gained 0.12%, and the tech-heavy QQQ gained 0.47%.  VXX was just on the green side of flat to close at 22.90 and T2122 climbed but remains in the oversold territory at 14.13.  10-year bond yields spiked above four-and-a-half percent to 4.531% while Oil (WTI) was just on the red side of flat to end the day at $89.88 per barrel. So, in the first 90 minutes of the day markets were undecided. They then made a small move higher only to be undecided again until the last 5 minutes.  All-in-all, it was a nothing day that did not change the support or resistance levels and did not show much of a change in sentiment.  At best it gave us a little relief from Bearish over-extension.

There was no major economic news reported Monday.  However, MCO (Moody’s) warned that a government shutdown would be bad for the US creditworthiness and the US credit rating would come under pressure.  In the process, MCO essentially issued a stern warning to Congress (in a way to the House GOP since they have decided to not reach across the aisle in the hope of a much more conservative Budget).  MCO is the only rating agency that still gives the US its top credit rating.

In Autoworker contract talks and strike news, less than a day after it ratified its new contract with F (by 54% for versus 46% against), Unifor (Canadian version of UAW) announced that its next negotiation target is GM Canada.  (The F contract provides the reinstatement of defined benefit programs, double-digit percentage raises, and a one-time $10,000/employee bonus.)  Meanwhile, in the US, after the close, F announced it will stop construction work on its planned $3.5 billion battery plant in MI.  The company cited its uncertainty about the ability to remain competitive while locked in contract negotiations.  The UAW responded by calling the move a “thinly veiled threat to cut jobs.”

In stock news, OpenAI announced that its ChatGPT engine now has voice and image interaction capabilities similar to AAPL’s Siri and AMZN’s Alexa services.  These are likely to be quickly added to the MSFT AI assistants built into Office, Bing, and other MSFT products.  SPOT is also using this to translate content into different languages.  Later, analysts began reporting inside information indicating that TSLA will be revising its Q3 delivery numbers in the next few days.  The analysts expect about a 2.5% cut in the number of vehicles actually delivered in Q3.  At the same time, MSTR announced that it has recently purchased another $147.3 million worth of Bitcoin bringing their Bitcoin holdings to $4.68 billion. Elsewhere, PFE announced it has restarted production at its NC plant that was damaged by a tornado on July 19.  PFE says it will have all of the plant restarted by year-end but will continue to see lower-than-previous production until mid-2024.  At the same time, QCOM denied published reports that it is closing its Shanghai China R&D facility.  QCOM admitted it will be reducing headcount but will not close the facility.  Over in Europe, NSANY (Nissan) announced that all new vehicles it sells in Europe will be fully electric by 2030.  After the close, COST announced it is now offering its members access to a $29/visit online primary-care visit, a $72/visit virtual checkup (including a standard lab panel), and a $79 online therapy session.  The service is available in all 50 states.  COST won’t accept health insurance since the service is primarily aimed at uninsured Americans.

In stock government, legal, and regulatory news, a German court ruled that NFLX is infringing on an AVGO patent related to high-efficiency video encoding.  The court then issued an injunction requiring that NFLX quit using the technology in question.  (This could reshape NFLX service performance and/or result in a deal very favorable to AVGO.  Elsewhere, MGM has been named in a class-action lawsuit filed Friday.  The suit alleges the name, address, email address, date of birth, social security number, driver’s license number, and other personal information of MGM loyalty program members were taken by hackers as a result of lax security (no encryption) during the Sept. 7 cyberattack.  At the same time, a subsidiary of DB has been fined $25 million by the SEC for misstating ESG reporting (greenwashing).  Later, the NHTSA said that TM recalled nearly 22k Tundra and Tundra hybrid trucks due to wrongly labeled carrying capacities.  Meanwhile, YELP has asked a judge to disqualify a law firm from defending GOOGL because the firm previously represented YELP on matters related to the YELP suit against GOOGL.  After the close, the NHTSA announced it opened an investigation into a JBLU flight on Monday that experienced severe turbulence, injuring 7 of the passengers and one of the flight crew.  Also after the close, AAL filed an appeal of the court ruling requiring it to end its “alliance” with JBLU.  (JBLU previously said it would not appeal in order to protect its $3.8 billion acquisition of SAVE.)

After the close, THO reported beats on both the revenue and earnings lines.  However, despite being significant sales and earnings beats, the numbers showed a quarter-on-quarter decline of 28%.  So far this morning, FERG beat on both the revenue and earnings lines.  However, UNFI missed on revenue while beating on earnings.  It is worth noting that FERG raised its forward guidance while UNFI lowered guidance.  (SNX and CTAS report closer to the opening bell.)

Overnight, Asian markets were nearly red across the board with only Malaysia (+0.15%) hanging onto green territory.  Meanwhile, Hong Kong (-1.48%), South Korea (-1.31%), Japan (-1.11%), and Taiwan (-1.07%) led the rest of the region lower.  In Europe, we see a similar picture taking shape at midday.  Only Greece (+0.40%) and Denmark (+0.26%) are in the green while the CAC (-0.78%), DAX (-0.73%), and FTSE (-0.01%) lead the region lower.  In the US, as of 7:30 a.m., Futures are pointing toward a down start to the day.  The DIA implies a -0.39% open, the SPY is implying a -0.46% open, and the QQQ implies a -0.54% open at this hour.  At the same time, 10-year bond yields are back down to 4.493% and Oil (WTI) is off two-thirds of a percent to $89.08 pre barrel in early trading.

The major economic news scheduled for Tuesday includes Building Permits (8 a.m.), Conference Board Consumer Confidence and August New Home Sales (both at 10 a.m.) and API Weekly Crude Oil Stock report (4:30 p.m.).  We also have another Fed speaker (Bowman at 1:30 p.m.).  The major earnings reports scheduled before the opening bell are limited to CTAS, FERG, SNX, and UNFI.  Then after the close, AIR, COST, and MLKN report. 

In economic news later this week, on Wednesday, August Durable Goods, and EIA Weekly Crude Oil Inventories are reported.  On Thursday, we get Q2 GDP, Q2 GDP Price Index, Weekly Initial Jobless Claims, August Pending Home Sales, Fed Balance Sheet, and Fed Chair Powell speaks.  Finally, on Friday, the August PCE Price Index, August Goods Trade Balance, August Personal Spending, August Retail Inventories, Chicago PMI, Michigan Consumer Sentiment, Michigan Consumer Expectations, Michigan 1-year Inflations Expectations, Michigan 5-year Inflation Expectations are reported and Fed member Williams speaks.

In terms of earnings reports later this week, on Wednesday, we hear from PAYX, CNXC, FUL, JEF, MU, and WOR.  On Thursday, CAN, KMX, JBL, and NKE report.  Finally, on Friday, CCL reports.

In miscellaneous news, Bloomberg reported that the major exchanges quietly changed the waiting period between listing and options being allowed to trade.  The waiting period was reduced from four to two days after listing to chase the volume.  (Options trading volume has more than doubled since 2019.)  Elsewhere, Reuters reported Monday that the SEC has collected WhatsApp, Signal, and other messaging service communications for thousands of major investment firm employees.  The report said the “illegal off-channel” communication investigation is expanding.  CG, APO, KKR, TPG, and BX, are among the listed companies involved in the expansion.  Meanwhile, financial services firm AON released a report saying that the pension plans of the largest US companies are the healthiest they have been in 12 years after years of record corporate profits.  The report said the average “funded ratio” of S&P 500 companies was 102% as of last Thursday.  (This is the highest ratio since prior to 2011.)

In late-breaking mortgage news, industry analyst Insider Intelligence reported this morning that META Threads is struggling to grow.  The report said Threads ranks above only Tumblr among the social media platforms in terms of US users.  In politics, Congress returns from the 4.5-day weekend they were given when the right-wing part of the GOP caucus killed Speaker McCarthy’s move for a continuing resolution last Thursday.  McCarthy said yesterday that the House will vote again on a 45-day CR and budget bills today with a government shutdown looming Saturday.  Elsewhere, President Biden will join the UAW on the picket line today (with the former President expected Wednesday so that he can counter-program the next GOP debate instead of participating).  Elsewhere, a senior AAPL VP will be testifying today in the GOOGL antitrust trial.  Sr. VP Cue will testify about how and why AAPL chose GOOGL as its default search engine for iPhones.

With that background, it looks like the Bears are gapping us down in premarket. So far in the early session, we are seeing small-bodied, white, indecisive, “inside day” candles in all three major index ETFs. All three remain well below their T-line (8ema) and 50sma. So, for now, the short-term trend is clearly headed lower with retests of the August and June lows as the apparent next target for the Bears (except in the SPY where those two targets have already been achieved). In terms of extension, as I said, all three major index ETFs are far below their T-line (8ema) and while the T2122 indicator is also in its oversold range, it has climbed up off the extreme end of that 20-point span. This tells us we remain a bit stretched, but the bounce Monday reduced the pressure at least a little.

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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