On Friday, markets were essentially dead all day but bookended by volatility.  SPY gapped down 0.50%, DIA gapped down 0.41%, and QQQ opened 0.11% higher.  At that point, all three major index ETFs waffled sideways in a fairly tight range.  SPY spent its day along the opening level.  DIA spent most of the day inside its morning gap.  Meanwhile, QQQ floated sideways above its gap-up open level.  Then the last 10 minutes of the day saw huge volatility as a 5-minute burst higher followed immediately by a 5-minute plummet lower, both on heavy volume, took the market out not far from where it started the day.  This action gave us a gap-down Doji in the SPY, a gap-down white-bodied Spinning Top in the DIA, and a small white-bodied candle with an upper wick in the QQQ.  QQQ gave us an all-time high close with both the large-cap index ETFs closing within a percent of their own all-time high closes.

On the day, nine of the 10 sectors were in the red with Utilities (-1.64%) way out front leading the way lower while Technology (+0.17%) lagged behind the other sectors.  At the same time, the SPY lost 0.57%, DIA lost 0.19%, and QQQ gained 0.48%. The VXX gained 3.33% to close at 16.14 and T2122 dropped down to just outside its overbought territory to close at 79.52.  10-year bond yields fell again to 3.921% and Oil (WTI) was up slightly to close at $71.79 per barrel.  So, on Friday, the large caps relieved some over-extension while the QQQ kept melting higher.  This was punctuated by volatility that was likely caused by triple witching options expiration day.  This happened on heavier-than-average volume in DIA and QQQ while volume in SPY was average.  It is also worth noting that last week was the seventh-straight strongly bullish week in a row in all three major index ETFs.  So, we are due for at least a rest.

The major economic news reported Friday included the NY Fed Empire State Mfg. Index which came in far below expectations at -14.50 (compared to a forecast of +2.00 and a November value of +9.10).  Later, November Industrial Production (month-on-month) came in a tick lower than predicted at +0.2% (versus a forecast of +0.3% but well above the October reading of -0.9%).  On a year-on-year basis, Nov. Industrial Production was lower but well up from one year ago at -0.39% (compared to the 2022 reading of -0.96%).  Later the S&P Global Mfg. PMI was reported lower at 48.2 (versus a forecast of 49.3 and a prior reading of 49.4).  At the same time, S&P Global Services PMI came in higher than anticipated at 51.3 (compared to a forecast of 50.6 and the prior value of 50.8).  This combined into an S&P Global Composite PMI of 51.0 (up from the prior reading of 50.7).

In Fed talk news, on Friday NY Fed President Williams pushed back against rate cuts, saying “we aren’t really talking about rate cuts right now.”  Williams went on to tell CNBC it was “premature” to speculate about cuts at this time.  However, later, Atlanta Fed President Bostic said he believes the FOMC will begin reducing rates during the third quarter of 2024.  Bostic told Reuters, “I’m not really feeling that this is an imminent thing.”  Still, he then went on to say, “The risk that inflation is going to spike has really, I think, declined significantly. It is not zero, but it is lower.”  He also told the interviewer that he expects a soft landing, saying “no one is talking to me as if large job losses are imminent.”  Lastly, he indicated that his current outlook call for two quarter-point rate cuts in 2024 and that this is less than the three cuts envisioned by many colleagues.

In stock news, on Friday, NIO announced they will launch a cheaper brand of their electric vehicles to Europe in 2025.  At the same time, Bloomberg reported that HCSG and ELV are in a bidding war, competing to buy CI’s Medicare Advantage unit.  Later, in an interview with Bloomberg, BLK said it is adapting to the Fed’s recent shift toward easing in 2024 by moving its fixed-income bond investments toward longer-duration positions.  At the same time, PLTR announced it had received a $115 million contract extension from the US Army.  Elsewhere, FSR said it had begun the final over-the-air software update for their electric vehicles in 2023.  Later, the Wall Street Journal reported that DOCU is in the early stages of exploring a sale.  Potential bidders were said to be both private equity as well as technology firms.  After the close, Reuters reported that KKR had purchased a $7.2 billion portfolio of recreational vehicle loans from BMO.  (The price of the deal was not disclosed.)  After the close, Bloomberg reported that China’s ban on AAPL phones by government agencies/contractors has accelerated and expanded.  It said the new policies forbid people from bringing any such phones or devices to their offices. The article said the policy also included “other foreign device makers” but none were specifically mentioned. 

In stock government, legal, and regulatory news, Reuters reported Friday that XOM’s income tax rate has dropped more than 3% over the last 5 years due to massive deductions passed by the Trump Administration.  In fact, accelerated depreciation deductions lowered its rate to 2.5% in last year.  At the same time, the Dutch vehicle authority said that no recall of TSLA vehicles is currently planned in Europe despite the concerns that caused the massive US recall.  Later the NHTSA said it has started an investigation into NSANY (Nissan) related to 455k vehicles over engine failure reports where vehicles have lost power while in motion, raising safety concerns.  Elsewhere, Republicans in the House of Representatives subpoenaed BLK and STT in their effort to prove corporate ESG policies violate antitrust laws.  (BLK responded by saying “Having already produced more than 7,700 documents and 91,000 pages, a subpoena was not necessary but we understand this is the Committee’s practice, and we will continue to cooperate.”  Meanwhile, STT said, “We remain confident that we have not violated any anti-trust laws.”  After the close, Reuters reported that FDA investigators found quality control lapses at MRNA’s main factory, including equipment issues on machines used in the production of COVID-19 vaccines.  The inspections were in September and disclosed Friday as part of a Freedom of Information request.  Later, on Friday evening, a US court struck down the FTC’s order against ILMN’s purchase of Grail (a cancer diagnostic test maker). The three-judge panel ordered reconsideration of the deal.  Finally, Friday night, Reuters reported that ATVI will pay $50 million to settle a 2021 lawsuit by a CA regulator that alleged the company discriminated against women employees.  (The company paid $18 million to settle similar claims brought by the US EEOC.)

Overnight, Asian markets leaned toward the red side with only three of 12 exchanges in the green.  Shenzhen (-1.13%) and Hong Kong (-0.97%) were by far the biggest movers in the region.  In Europe, markets are mixed but also lean toward the red at midday.  The CAC (-0.28%), DAX (-0.30%), and FTSE (+0.59%) lead a region with six bourses in the green and nine in the red in early afternoon trade.  In the US, as of 7:30 a.m., Futures are pointing toward a start to the day on the green side of flat.  The DIA implies a +0.18% open, the SPY is implying a +0.22% open, and the QQQ implies a +0.09% open at this hour.  At the same time, 10-year bond yields are down a bit to 3.911% and Oil (WTI) is up three-quarters of a percent to $71.97 per barrel in early trading.

There is no major economic news scheduled for Monday.  There are also no major earnings reports scheduled for before the open.  Then, after the close, HEI reports.

In economic news later this week, on Tuesday we get Nov. Building Permits, Nov. Housing Starts, TIC Net Long-Term Transactions, and the API Weekly Crude Oil Stocks.  Then Wednesday, Q3 Current Account, Conf. Board Consumer Confidence, Nov. Existing Home Sales, and EIA Crude Oil Inventories are reported.  On Thursday, we get Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, Q3 GDP, Q3 GDP Price Index, Philly Fed Mfg. Index, and the Fed Balance Sheet.  Finally, on Friday, Nov. PCE Price Index, Nov. Core PCE Price Index, Nov. Durable Goods, Nov. Personal Spending, Michigan Consumer Sentiment, Michigan Consumer Expectations, Michigan 1-year Inflation Expectations, Michigan 5-year Inflation Expectations, and Nov. New Home Sales are reported.

In terms of earnings reports later this week, on Tuesday, ACN, FDS FDX, SCS, and WOR report.  Then Wednesday we hear from GIS, TTC, WGO, MU, and MLKN.  On Thursday, KMX, CCL, CTAS, PAYX, AIR, NKE and WS report.  There are no earnings reports on Friday.

In positive miscellaneous news, Quiver Quantitative reported Friday that the Fed pivot during 2024 will unlock an enormous $6 trillion in cash currently stashed in money markets and short-term bonds.  The analyst suggests that this could be the driver for another leg of rally as “dry powder” is put to work seeking higher returns.  BLK data shows that this has been the case in post-hike periods.  In other somewhat hopeful news (in terms of keeping consumers, the engine of the economy, above water), gasoline prices have reached a new low since early 2021.  In addition, mortgage rates are heading in the same downward direction, albeit much more slowly than gas, which could help home buyers. 

In negative miscellaneous news, mining magnate Friedland (who founded IVPAF and IVN.TO) told Bloomberg Friday that copper prices need to reach $15,000/ton before mining firms will build new mines to expand the supply.  He expects demand from new cleaner energy transitions to increase copper prices to $9000 per ton in 2024.  (Up from the current $8470/ton.)  However, according to Friedland, this is nowhere near what is needed to justify expanding operations.  Elsewhere, in the wake of recent Houthi missile attacks, shipping giants AMKAF (Maersk) and HLAGF (Hapag-Lloyd) have suspended shipping through the Red Sea (meaning also through the Suez Canal).  This means shipping routes become longer, slower, and more expensive as ships are now being routed around the horn of Africa instead.  (It is worth noting, that prior to the Israel-Hamas war, 12% of global trade passed through the Red Sea.) In late-breaking news, oil giant BP joined the list of companies rerouting all shipments away from the Suez Canal and Red Sea to reduce risk (at the cost of greatly increased shipping expense and time).

In last-minute news, overnight Japan’s Nippon Steel announced it had agreed to buy X for $14.9 billion. That amounts to $55 per share. X has skyrocketed in premarket trading but remains $5 below the offer price at this point. Elsewhere, LUV has agreed to pay a $35 million fine and $115 million in passenger compensation for last December’s massive spate of thousands of flight cancellations which left two million passengers stranded.

With that background, it looks like all three major index ETFs are looking to move modestly higher in premarket action. The SPY and QQQ are giving us very small, white-bodied candles so far in the early session. However, DIA is printing by far the largest and black-bodied candle, having faded most of its premarket gap up. All three remain well above their T-line (8ema) this morning. So, overall, the Bulls remain well in control of both the longer-term trend and the short-term trends. In terms of extension, none of the three major index ETFs are too far extended above their T-lines. However, the T2122 indicator sits just barely outside of its overbought range. This could mean the Bulls need more rest and consolidation to avoid exhaustion. However, strictly speaking both the Bulls and Bears have some room to run if they gather the momentum to do so.

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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