On Friday, markets opened higher to start the day.  The SPY gapped up 0.28%, DIA gapped up 0.34%, and QQQ gapped up 0.20%.  All three major index ETFs then took 30 minutes to figure out their direction.  At that point, the Bears stepped in as all three sold off until shortly after 1:30 p.m.  From there, the SPY, DIA, and QQQ all bobbed their way sideways the rest of the day.  This action gave us black-bodied candles in all three. The DIA printed a Spinning Top that retested and closed above its T-line (8ema) while also retesting and failing to break up through its 200sma.  Meanwhile, the SPY and QQQ both printed larger-body black candles with wicks at both ends.  Both closed back below their T-line (8ema) and the QQQ also retested and crossed below its 50sma.  This happened on average volume in the SPY and QQQ as well as well-above-average volume in the DIA.

On the day, six of the 10 sectors were in the red with Technology (-1.73%) far out in front leading the way lower.  Meanwhile, Energy (+1.83%) and Healthcare (+1.50%) were way out front on the bullish side.  At the same time, the SPY lost 0.50%, the QQQ lost 1.26% and DIA gained 0.12%.  VXX popped more than 12% to close at 25.32 and T2122 jumped back up out of the oversold territory (barely) into the very low end of its mid-range at 21.99.  10-year bond yields dropped again, falling to 4.617% while Oil (WTI) spiked sharply again (on the apparent Israeli ground invasion of Gaza) to close at $87.72 per barrel.  So, it was a bearish day on Friday, but not a decisive one.  Markets may be headed South again but it is not a sure bet.

The economic news reported Friday included the September Export Price Index came above expected at +0.7% (compared to a forecast of +0.5% but much better than August’s +1.1%.  At the same time, the September Import Price Index came in well below anticipated at +0.1% (versus a forecast of +0.5% and far better than August’s +0.6%).  Later, Michigan Consumer Sentiment came in well below predicted at 63.0 (compared to a forecast of 67.2 and well down from the prior reading of 68.1).  At the same time, Michigan Consumer Expectations also were reported lower than anticipated at 60.7 (versus a forecast calling for 65.5 and a prior reading of 66.0).  The Michigan 1-year Inflation Expectations made a huge jump coming in at 3.8% (compared to a forecast and prior value of 3.2%).  However, the Michigan 5-year Inflation Expectations rose more slightly to 3.0% (up from a forecast and prior reading of 2.8%). 

In Fed Speak news, Philly Fed President Harker told a virtual Delaware Chamber of Commerce group that he thinks rate hikes are done for this cycle. Harker said, “Absent a stark turn in what I see in the data and hear from contacts … I believe that we are at the point where we can hold rates where they are.”  When asked for details, Harker said that by doing nothing (on rates), the Fed is really doing quite a lot (by continuing to shrink its balance sheet).  He said that he sees “steady disinflation” which he believes will take inflation below 3% this year and back to the Fed’s 2% target in 2024.  On the other side, St. Louis Fed President Bullard (perma-Hawk) told an IMF seminar to watch out for “underappreciated inflation risks.”  He also hinted that he would like to see the Fed Funds Rate immediately hiked 1.25% (to 6.5%) if inflation spikes again.

In Autoworker contract talks and strike news, the UAW did not expand its strike against the Big 3 automakers on Friday. However, the strike anti had already been significantly upped earlier when F’s largest and most profitable plant was struck.  (The companies laid off about 1,000 employees in response, blaming the move on disruptions caused by the strike.)  However, UAW President Fain did say Friday morning that the union is shifting its strike strategy.  From here forward, the union may call for walkouts at any time and without notice.  Later, STLA laid off another 700 workers.  Then, after the close Friday, F announced it was cutting one of three shifts at its MI F-150 EV plant, resulting in 700 layoffs as well.  After the close Friday, Bloomberg reported that the 10 individuals who have been CEOs of GM, F, and STLA had earned more than a cumulative $1 billion in compensation since 2010.  Over that same period, autoworker (union and non-union) pay has declined 17%.  Then on Sunday, Canadian Unifor autoworkers ratified the GM contract agreed after a 12-hour strike last week.

In stock news, QCOM announced layoffs of approximately 2.5% of its workforce on Friday.  The 1,258 job cuts will take effect on December 13.  Later, BA and SPR stocks both slumped Friday when the companies announced they are expanding their plane inspections into production defects on the 737 Max 8 jet.  After the close, PFE slashed its 2023 full-year revenue forecast by 13% and announced it was introducing a $3.5 billion cost-cutting program.  (The reduction was attributed to lower-than-predicted sales of its COVID-19 vaccine.)  At the same time, BLK announced that its investors pulled $13 billion out of long-term investment funds in favor of cash.  Bloomberg reported that analysts had expected $50 billion in inflows and that this was the first reduction from these funds since the beginning of the Covid pandemic in 2020.

In stock government, legal, and regulatory news, in case you missed it, on Thursday, the US ratcheted up the pressure on Russia by imposing sanctions on the owners of oil tankers that carry crude that is sold for more than the $60 sanction cap price.  That new level of sanction hit XOM on Friday as a ship they chartered was fined by the US Treasury.  At the same time, MSFT said it closed its $69 billion acquisition of ATVI early Friday after getting the approval of the UK’s Competition and Markets Authority.  Despite this news, the FTC said it was pressing ahead with its lawsuit to block the deal.  Later, TSLA asked a Delaware judge to cut the fees requested by the attorneys that defeated TSLA (after a 3-year legal battle) and won a shareholder case which then forced TSLA Board members to return $919 million they had paid themselves.  The attorneys say they intend to sue TSLA over the refusal to pay while the company calls the fees outrageous at over $10k per hour.  Later, the NY State Public Utilities Commission denied Canadian-listed Windfarm ORSTED the ability to raise electricity prices.  This may impact BP and EQNR which are in the same field but are US-listed.  In mid-afternoon, the FDA ordered BTI (RJ Reynolds) to cease the sale of menthol vaping e-cigarettes.  BTI is expected to file a court challenge to the order, even though it complied with previous bans on “berry flavored” vape products. After the close, the SEC said it would not appeal a court decision saying it was wrong to deny Grayscale Investment’s application to create an ETF for the spot price of bitcoin.

Overnight, Asian markets were red across the board as China held short and medium-term rates steady and injected just under $15 billion in liquidity (less than the market wanted).  Japan (-2.03%), Thailand (-1.63%), and Shenzhen (-1.42%) led the region lower.  However, in Europe, we see a much brighter outlook with all but three of the 15 bourses in the green at midday.  The CAC (+0.15%), DAX (+0.04%), and FTSE (+0.39%) lead the region higher on admittedly modest moves in early afternoon trade.  In the US, as of 7:30 a.m., Futures are pointing toward a green start to the day.  The DIA implies a +0.43% open, the SPY is implying a +0.29% open, and the QQQ implies a +0.07% open at this hour. 10-year bond yields have spiked back up to 4.702% and Oil (WTI) is just on the reed side of flat at $87.64 per barrel in early trading.

The major economic news scheduled for Monday is limited to NY Fed Empire State Mfg. Index (8:30 a.m.) and US Federal Budget Balance (2 p.m.).  However, Fed member Harker speaks twice (10:30 a.m. and 4:40 p.m.).  The major earnings reports scheduled for before the open Monday are limited to SCHW (8:45 a.m.).  There are no major earnings reports scheduled for after the close.

In economic news later this week, on Tuesday we get September Retail Sales, Sept. Industrial Production, August Business Inventories, August Retail Inventories, TIC Net Long-Term Transactions, and API Weekly Crude Oil Stocks Report.  We also get two Fed speakers (Williams at 8 a.m. and Bowman at 9:20 a.m.).  Then Wednesday, Sept. Building Permits, Sept. Housing Starts, EIA Weekly Crude Oil Inventories, and the Fed Beige Book are reported.  We also hear from Fed members Waller (noon), Williams (12:30 p.m.), Bowman (1 p.m.) and Harker (3:15 p.m.).  On Thursday, we get Weekly Initial Jobless Claims, Philly Fed Mfg. Index, Sept. Existing Home Sales, and the Fed Balance Sheet.  We also hear from Fed Chair Powell (noon), Bostic (4 p.m.), and member Harker 5:30 p.m.).  Finally, on Friday, there is no scheduled news.  However, again we hear from Fed member Harker (9 a.m.) and Mester (12:15 p.m.).

In terms of earnings reports later this week, on Tuesday, ACI, BAC, BK, ERIC, GS, JNJ, LMT, PLD, IBKR, JBHT, OMC, UAL, and WTFC.  Then Wednesday, ABT, ALLY, ASML, CFG, ELV, FHN, MTB, MS, NDAQ, NTRS, PG, STT, TRV, USB, WGO, AA, COLB, CCI, DFS, EFX, KMI, LRCX, LVS, LBRT, NFLX, PPG, SAP, STLD, TSLA, and ZION report.  On Thursday, ALK, AAL, T, BX, EWBC, FITB, FCX, GPC, KEY, MAN, MMC, NOK, PM, POOL, SNA, SNV, TSM, TFC, UNP, WSO, WBS, CSX, ISRG, KNX, and WAL.  Finally, on Friday, AXP, ALV, CMA, EEFT, HBAN, IPG, RF, and SLB report.

In US Congressional news, the dysfunctional GOP House members voted to nominate right-wing Rep. Jordan as House speaker, 124-81 (16 either not present or abstaining) over last-minute candidate Rep. Scott.  However, a second vote asked, “Would vote for Jordan in the full house as a fellow Republican?” On that measure, Jordan got 152 votes but 55 still voted “no, they won’t support Jordan.”  Obviously, that means the extremist candidate will find it hard to get to the 217 votes needed (given 2 vacant seats in the House) since their caucus only had 221 members to start.  So, as the House GOP broke for the weekend, they were no closer to a viable Speaker candidate that could actually be confirmed than they had been when they ousted McCarthy two weeks prior.  On Sunday, it was announced that the House will vote on Jim Jordan’s House Speaker nomination at noon Tuesday.  However, at the same time (midday Sunday), CNN reported a top Republican told it there are still 40 “hard no” votes against Jordan on the GOP side.  As a reminder, there are 32 calendar days left (Nov. 17 is the last day) as of today until the existing CR ends and we get a government shutdown.  Meanwhile, Ukraine has urgent military needs now and Israel (which has no real military need) has US political reasons that it will require House support action even before Nov. 17. (National Security Advisor Sullivan said Sunday that President Biden will push for an aid package for Ukraine and Israel of “significantly more than $2 billion” this week.

In miscellaneous news, on Friday, the SEC adopted new rules requiring transparency on short-selling.  These rules require institutional investors to report short positions and brokers who lend shares for short sales to report then activity to FINRA.  (S3 Partners analysts report that US market institutional short interest is about $927 billion at the moment.)  Elsewhere, RAD filed for bankruptcy late Sunday night in the face of opioid lawsuits and weakening sales.  Finally, AMC reports that the Taylor Swift concert movie raked in $96 million in US sales and $32 million abroad.  This makes the Era Tour the highest-grossing concert movie in history…much to AMC’s delight.

With that background, it looks like the Bulls are very modestly leading the way in the premarket. The two large-cap index ETFs are up above their T-line while the QQQ is retesting that 8ema level from below. All three are now printing white-bodied candles and are at their highs of the early session. DIA is also retesting its 200sma from below again. With heavier news coming later in the week, including earnings, don’t be caught off guard if today is a drifting day in the market. However, there is potential for new in the House Speaker debacle or from the geopolitical front. In terms of extension, none of the three major index ETFs are too far from their T-line (8ema). The T2122 indicator is back at the bottom of its mid-range (but is not oversold yet). So, again we have room to run in either direction.

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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