On Friday, the Bulls closed out another week with a strong performance.  SPY gapped down 0.12%, DIA gapped up 0.09%, and QQQ gapped down 0.29%.  At that point, all three major index ETFs ground sideways for the first hour.  However, at that point, all three rallied steadily for 2.5 hours, reaching the highs of the day at 1 p.m.  From there it was a sideways grind in a tight range (perhaps with a slight bearish trend) the rest of the day.  This action gave us large-body white candles in the SPY and DIA as well as a not-quite-bullish-engulfing candle with 50% wick in the QQQ.  QQQ also crossed back above its T-line (8ema) while the other two remained above their own T-lines.  So, DIA and SPY continued their rallies while QQQ continued its Bull Flag pattern.  This took place on above-average volume in the DIA and a bit less-than-average volume in the QQQ.

On the day, all 10 sectors were in the green again with Basic Materials (+2.06%) out in front leading the way higher as Energy (+0.47%) lagged well behind the other sectors.  At the same time, the SPY gained 0.59%, DIA gained 0.85%, and QQQ gained 0.29%. The VXX fell slightly to close at 17.23 and T2122 spiked up to the top of its overbought territory at 99.01.  10-year bond yields dropped to 4.209% (which was the low since mid-September) and Oil (WTI) dropped 2.05% to close at $74.40 per barrel. So, Friday saw the three major index ETFs diverge at the open but then basically move in lockstep the rest of the day.  This came as the Bulls drove the price up to finish a fifth-straight gain on strong white candles in the large-cap index ETFs.  Meanwhile, QQQ also gave us a fifth-straight week of gains but on a much more indecisive Doji-type candle.   

The major economic news reported Friday included November S&P Global Mfg. PMI, which came in just as expected at 49.4 (compared to a forecast of 49.4 and an Oct. value of 50.0).  Later, the November ISM Mfg. Employment Index came in lower than the October value at 45.8 versus October’s 46.8 reading.  At the same time, Nov. ISM Mfg. PMI remained flat at 46.7 (lower than the forecast of 47.6 but in line with the Oct. value of 46.7).  In addition, the Nov. ISM Mfg. Price Index came in significantly higher at 49.9 (versus a forecast of 46.2 and the October reading of 45.1). 

In Fed Speak news, Chicago Fed President Goolsbee said he believes that inflation was “on track” to reach the FOMC’s 2% target.  Goolsbee’s upbeat comments included that (the inflations fight) “It’s working the way we’ve anticipated,” then adding that there is “no evidence” that inflation has stalled or reversed course at 3%.  Goolsbee said, “I still think it’s on track to get back to 2%.”  (Goolsbee was one of six voting members who indicated they think rates have increased enough during the week.)  Later, Fed Chair Powell also said there was a risk of the Fed going too far with rate hikes and that since the economy is slowing, it makes sense for the Fed to become “more balanced” in their approach and the Fed should “move carefully” going forward.  Powell said, “We are getting what we wanted to get (out of the economy), … Having come so far so quickly, the (FOMC) is moving forward carefully, as the risks of under and over-tightening are becoming more balanced.”  However, as he is wont to do, Powell kept to a non-committal path by later saying “We are prepared to tighten policy further if it becomes appropriate to do so.”

In stock news, BK announced Friday that it will raise its minimum wage to $22.50 per hour and expand its health benefits to include mental health.  All this takes effect in March 2024.  Elsewhere, WMT added its name to the growing chorus of major ad buyers who have said they will no longer advertise on X (Twitter) after Elon Musk’s tirade against advertisers boycotting his platform after his recent antisemitic statements.  Later, Reuters reported that the LUV pilots union is very near a new labor deal with the airline.  The report said the few remaining details may take a couple of weeks to iron out, but the basic framework of the agreement is in place.  After the close, it was announced that UBER, JBL, and BLDR would join the S&P500 on Dec. 18.  At the same time SEE, ALK, and SEDG will be removed from the S&P500.  On Sunday it was announced that ALK has also agreed to buy HA in a $1.9 billion deal.  (ALK will pay $18/share for HA as well as taking on $900 million of HA’s debt.  HA closed Friday at $4.86/share.)

In stock government, legal, and regulatory news, the NHTSA announced it had opened an investigation into 73k GM Chevrolet Volt hybrid cars. (The inquiry comes from customer reports that the cars lose power suddenly and unexpectedly.)   Elsewhere, national security interests prompted the US to force Saudi Aramco-backed venture capital firm Prosperity-7 to divest from an AI startup (Rain Neuromorphics).  That startup is backed by OpenAI co-founder and returned CEO Sam Altman (which has led to wide speculations that OpenAI will acquire Rain at some point, which would impact MSFT among others).  Later, the US Dept. of Justice argued with the National Assn. of Realtors in a US Appeals Court Friday.  NAR wanted the court to prevent the DOJ from reopening its antitrust case against realtors in relation to “pocket listings” (properties that are not listed to the public but still sold with the seller charged thousands of dollars in fees).  Late in the afternoon Friday, the NHTSA said it is expanding its investigation into HMC Civic steering issues.  (The probe covers 238k 2022-2023 Honda Civics after 145 reports of loss of steering control while in motion.)  After the close, Reuters reported that BA has been eliminated from the US Air Force competition for an $8.3 billion initial contract (through 2028) to develop a successor to the E-4B Nightwatch (Doomsday Plane).  Also after the close, an NRLB judge found that AMZN as well as consultants hired by AMZN broke several federal labor laws by calling union organizers “thugs” (and other epithets) as well as interrogating employees, sending suspected union sympathizers home early (and changing their shift assignments), confiscating union pamphlets, conducting surveillance of employees at the company’s Staten Island NY distribution facility.

Overnight, Asian markets were mixed but leaned toward the red side with seven of the 12 regional exchanges down on the day.  Hong Kong (-1.09%), Shenzhen (-0.62%), and Japan (-0.60%) paced the losses while India (+2.07%) was by far the biggest gainer.  In Europe, we see a similar mixed picture taking shape at midday.  The CAC (-0.25%), DAX (+0.06%), and FTSE (-0.45%) lead the region in early afternoon trade.  In the US, as of 7:30 a.m., Futures are pointing toward a down start to the day.  The DIA implies a -0.26% open, the SPY is implying a -0.41% open, and the QQQ implies a -0.57% open at this hour.  At the same time, 10-year bond yields are up to 4.259% and Oil (WTI) is off by 0.55% to $73.66 per barrel in early trading.

The major economic news scheduled for Monday is limited to October Factory Orders (10 a.m.). The major earnings reports set for before the open are limited to SAIC. Then, after the close, JOAN reports. 

In economic news later this week, on Tuesday, we get Nov. S&P Global Services PMI, Nov. S&P Global Composite PMI, Nov. ISM Non-Mfg. PMI, Nov. ISM Non-Mfg. Employment, Nov. ISM Non-Mfg. Prices, Oct. JOLTs Job Openings, and API Weekly Crude Oil Stocks.  Then Wednesday, Nov. ADP Nonfarm Employment Change, Oct. Exports, Oct. Imports, Oct. Trade Balance, Q3 Nonfarm Productivity, Q3 Unit Labor Costs, and Weekly EIA Crude Oil Inventories are reported.  On Thursday, we get the Weekly Initial Jobless Claims and the Fed Balance Sheet.  Finally, on Friday, we get, Nov. Nonfarm Payrolls, Nov. Private Nonfarm Payrolls, Nov. Participation Rate, Nov. Unemployment Rate, Nov. Avg. Hourly Earnings, Michigan Consumer Sentiment, Michigan Consumer Expectations, Michigan 1-year Inflation Rate, Michigan 5-year Inflation Rate, and WASDE Ag Report.

In terms of earnings reports later this week, on Tuesday we hear from AZO, CNM, DBI, FERG, GIII, HOV, SJM, NIO, SIG, PLAY, and TOL.  Then Wednesday, BF.A, CPB, KFY, OLLI, THO, UNFI, CHWY, GME, GEF, and VEEV report.  On Thursday, we hear from CIEN, DG, GMS, AVGO, COO, DOCU, LULU, and RH.  Finally, on Friday, there are no major earnings reports scheduled.

In oil news, speaking of algo traders, Bloomberg reported that the roller coaster in oil prices (moving as much as 6% in one day) in the past two months is being increasingly driven by algos.  Oil has traded near $100 and near $70 per barrel during that time, having fallen a net two percent in November.  One analyst told Bloomberg that the bots are trading positions that are larger than BP, SHEL, and Koch…combined.  Right now, nearly 60% of all oil trades are made by algorithm.  Elsewhere, the US imposed more sanctions on Russia in measures intended to reduce the price cap on Russian oil by targeting three entities and three oil tankers.  With the closing of these loopholes, higher-priced Russian oil is removed from the market. Separately, the US, EU, and UK increased oversight of ships carrying Liberian, Marshall Islands, and Panamanian flags after accusing vessels under those flags of violating price-cap sanctions on Russian oil.  Meanwhile, oil prices fell Friday as both analysts and investors were skeptical of OPEC+ additional production cuts after there was no firm schedule or assignment of the amount of cuts that will be made by each OPEC+ member.

In miscellaneous news, Bloomberg reported Friday evening that quant traders had been working under the belief they had discovered a scientific algorithm that could accurately predict US bond markets.  However, a doctoral candidate at the UK’s Warwick Business School discovered that the data used to create and test that model (algorithm) was actually in error.  This caused the professor who originally published the research leading to the bond market algorithm to retract his paper and left several quant funds scrambling to figure out what to do. Finally, in earnings news, SAIC beat on both the top and bottom lines this morning and also raised its forward guidance.

With that background, it looks like all three major index ETFs are starting the day with smaller, black, inside day-type candles. The QQQ is retesting its T-line (8ema) in the premarket session with the DIA again looking the strongest of the three early. The SPY sits above its T-line and the DIA sits comfortably above its own. So, on balance, the Bulls are still in control of both the shorter and the longer-term trends. In terms of extension, only the DIA could in any way be seen as extended from its T-line and that would be a marginal call. However, at the same time, the T2122 indicator is now nearly pegged at the very top of its overbought territory. So, the market needs extension relief in the form of consolidation or pullback. With that said, remember that the market can remain overbought longer than you can remain solvent predicting the turn too early.

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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