Markets followed Asia and Europe down by gapping lower at the open again.  The SPY opened 0.65% lower, DIA gapped down 0.49%, and QQQ opened 0.80% lower. At that point, SPY meandered sideways following the opening level the entire day. Meanwhile, DIA roamed back and forth across its gap the entire day.  For its part, QQQ sold off after the open but from 10 a.m. until the close it traded in a bullish trend the rest of the day, closing very near the high of the day and inside its morning gap.  This action gave us white-bodied candles in all three major index ETFs.  The SPY printed a gap-down Spinning Top with most of its wick below the body.  DIA printed a larger, white-bodied Spinning Top with most of its wick above the body.  QQQ split the difference, printing a larger white-bodied Spinning Top with most of its wick below the body and retested its T-line (8ema) from below after the gap down.  It did close just above that T-line.

On the day, all 10 sectors were in the red with Utilities (-1.36%) out in front leading the way lower.  At the same time, Consumer Defensive (-0.40%) and Financial Services (-0.46%) held up better than the other sectors.  At the same time, the SPY lost 0.56%, DIA lost 0.25%, and QQQ lost just 0.56%.  Meanwhile, VXX gained 3.65% to close at 15.92 and T2122 dropped even further into the oversold territory at 6.25.  10-year bond yields climbed to 4.102% and Oil (WTI) rose 0.60% to close at $72.83 per barrel.  So, after a significant gap lower, Mr. Market was indecisive with a very modest bias toward the bullish side.  This happened on less-than-average volume in the SPY, and average volume in both the QQQ and DIA.

The major economic news on Wednesday included December Core Retail Sales, which came in much stronger than expected at +0.4% (compared to a forecast and Nov. readings of +0.2%).  For the broader, Dec. Retail Sales things also came in above what was anticipated at +0.6% (versus a forecast of +0.4% and the Nov. value of +0.3%).  At the same time, the December Import Price Index was flat at 0.0% (versus a forecast and November of -0.5%).  In addition, the Dec. Export Price Index fell more than predicted at -0.9% (compared to a -0.6% forecast but in line with November’s -0.9% reading).  Later, Dec. Industrial Production (year-on-year) increased at +0.98% (versus a 2023 reading of -0.62%).  On a month-on-month basis, the Dec. Industrial Production grew more than expected at +0.1% (compared to a 0.0% forecast down also down from November’s +0.2%).  After that, Nov. Business Inventories came in as predicted at -0.1% (versus the -0.1% forecast and October reading).  At the same time, Nov. Retail Inventories were down more than anticipated at -0.9% (compared to a -0.8% forecast but in line with the October -0.9% value).  Then, after the close, the API Weekly Crude Oil Stocks report showed a modest inventory build of 0.483 million barrels (versus a forecast calling for a 2.400-million-barrel drawdown and the prior week’s 5.215-million-barrel drawdown.

In Fed news, the Fed Beige Book showed steady to slightly improved economic activity and employment levels.  This included stable or declining input costs, more than half of the Fed districts having steady employment levels, and retailers adjusting profit margins in response to the changing costs.  Earlier, Fed Governor Bowman said the proposed plan to increase bank capital requirements has some shortcomings.  Still, she was optimistic policymakers and the banking industry advocates could compromise.  (It is worth noting that Bowman had voted against the rules which passed anyway back in July.)

After the close, AA and FUL missed on revenue while beating on earnings.  (It is worth noting that AA’s beat was just less of a loss than expected.)  At the same time, DFS, SNV, and WTFC all beat on revenue while missing on earnings.  However, KMI missed on both the top and bottom lines.

In stock news, after settling the lawsuit related to how majority owner BRKB was doing valuation accounting, BRKB bought out the remaining 20% of the Pilot Truck Stop business from the Haslam family.  (Terms were not disclosed.)  At the same time, DOOR announced it had ended its bid to acquire PGTI.  Later, ALSN employees voted to ratify the previously tentative contract the UAW had negotiated with the company. (82% voted in favor of the deal, which offers a $20/hour starting wage and a 6%-8% increase in company contributions to 401k accounts.)  At the same time, AMD said it has cut the price of its Radeon RX 7900 XT graphics card by $40 (originally $809, then $749 and now sold at $709) to better compete with NVDA products.  Elsewhere, ALB (the world’s largest lithium producer) announced Wednesday that it will cut jobs, and push off one new project as part of cost-cutting it said was driven by falling lithium prices.  At the same time, VZ announced that it will take a $5.8 billion write-down of its wire-based unit amidst increased competition from wireless services.  Later, TSLA slashed the price of its Model Y cars in Europe (between 8% and 9%).  At the same time, Reuters reported that AAPL topped Korea’s Samsung as the top seller of smartphones.  AAPL had a 20.0% market share in 2023 compared to Samsung’s 19.4%.  (Interestingly, QCOM and Samsung jointly announced a new S24 line of phones that include a QCOM chip and will come with GOOGL generative AI built-in.)

In stock government, legal, and regulatory news, the FAA announced Wednesday that it had completed inspection of the first 40 (of 171 total) BA 737 MAX 9 jets.  (This was just data collection.  The data from the inspection still needs to be reviewed.)  In the UK, British antitrust regulators won a court appeal over data requests to BMWYY (BMW motors) and VLKAF (Volkswagen), which the companies had sought to block.  At the same time, GOOGL announced it will tweak search results in Europe to comply with EU rules to treat rival services and products the same as its own listings.  Later, the NTSB announced that if a partial government shutdown takes effect on Friday, it will be forced to suspend the probe into the ALK airline BA 737 MAX 9 jet losing a portion of its fuselage in flight.  Elsewhere, the US Court of Appeals rejected AAPL’s appeal and ordered the ban on importation of AAPL watches effective at 5 p.m. ET on Thursday.  (Lower courts found that AAPL violated the patent rights of MASI by putting MASI-designed oxygen sensors in their watches without paying MASI.)  Later, a unit of SBGI signed a deal with creditors to emerge from bankruptcy by getting funding from AMZN as part of a streaming sports content deal.  The deal must still be approved by the bankruptcy court, but this is expected since creditors are now on board.  After the close, ARAV announced it will delist from the NASDAQ and dissolve the company by selling company assets to satisfy creditors.

Overnight, Asian markets were mixed.  Shenzhen (+1.00%), Hong Kong (+0.75%), Shanghai (+0.43%), and Taiwan (+0.38%) led the rebound from a tough Wednesday while Malaysia (-0.81%) and Australia (-0.63%) dragged on the rally.  In Europe, with the sole exception of Russia (-0.01%) we see green across the board at midday.  The CAC (+0.94%), DAX (+0.73%), and FTSE (+0.23%) led a broad-based rally in early afternoon trade.  In the US, as of 7:30 a.m., Futures are pointing toward a much better start than earlier in the week.  The DIA implies a flat open at -0.01%, the SPY is implying a +0.42% open, and the QQQ implies a +0.76% open at this hour.  At the same time, 10-year bond yields are down to 4.088% and Oil (WTI) is flat at $72.50 per barrel in early trading.

The major economic news scheduled for Thursday includes Dec. Building Permits, Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, Dec. Housing Starts, and Philly Fed Mfg. Index (all at 8:30 a.m.), EIA Weekly Crude Oil Inventories (11 a.m.), and the Fed Balance Sheet (4:30 p.m.).  We also hear from Fed member Bostic (7:30 a.m. and 11:30 a.m.).  The major earnings reports scheduled for before the open include FAST, FHN, KEY, MTB, NTRS, TSM, and TFC.  Then, after the close, JBHT, and PPG report.

In economic news later this week, on Friday, we get Dec. Existing Home Sales, Michigan Consumer Sentiment, Michigan Consumer Expectations, Michigan 1-Year Inflation Expectations, and Michigan 5-Year Inflation Expectations as well a Fed member Daly speaking.

In terms of earnings reports later this week, on Friday, ALLY, CMA, FITB, HBAN, RF, SLB, STT, and TRV report.

In miscellaneous news, the National Assoc. of Builders reported Wednesday that the confidence of Builders jumped 7 points this month to 44 on its index as optimism flowed from falling mortgage rates and signs of an improving economy.  However, 31% of the surveyed group still reported cutting prices to boost sales.  (That is down from 36% who were cutting price in both December and November.)  Meanwhile, China reported that its population fell in 2023, making it the second consecutive population decline.  The Chinese population now stands at 1.4 billion after a spike to 11.1 million deaths following the lifting of COVID restrictions in that country.  Meanwhile, Chinese births fell 5.6% to 9 million.  (2023 was China’s seventh-straight year of decline in births.)  This leads to concerns over the potential growth of the world’s second-largest economy as faltering demographics point to higher costs for retirement benefits and increasing competition for a shrinking labor pool could also mean higher labor costs.

In Government-related news, on Wednesday, President Biden hosted a negotiation session over the $110 billion package that will include aid to Ukraine, and Israel, as well as funds for the US border.  It was a large meeting with the leadership of both parties in both houses of Congress as well as all the key committee leaders in attendance.  After the meeting, attendees were upbeat and hoped for an agreement soon.  However, House Speaker Johnson made a point of saying there will be no compromise on immigration.  Elsewhere, the Consumer Financial Protection Bureau proposed cutting credit card overdraft fees to a maximum of $3.00.  This is much lower than the current average of $26.00.  Banks immediately responded that they have already cut other fees and there is no reason to cut overdraft fees.  (The bankers did not mention the potential impact on bank profits.)  Meanwhile, the US Supreme Court heard arguments Wednesday on what is called the “Chevron deference.”  This is a long-standing (since 1984) position of the courts that when there is a dispute over the interpretation of a regulation, the deference goes to the regulators (executive agencies) that wrote those regulations.  The case at hand challenges the executive branch’s ability to regulate fishing.  (Specifically, whether fishermen must pay for tracking devices that make sure they were not fishing in protected areas that had been set as off limits to protect fish populations.) The plaintiff seeks to overturn the “Chevron deference” to make it such that only laws and rules explicitly passed by Congress could be enforced by the executive branch.  This would have massive implications, overturning a huge part of government regulation and forcing Congress to visit every single issue and interpretation of every law.  Even with that said, the questioning by justices led many observers to feel that the court is split with many of the conservative-packed court members strongly in favor of stripping all federal agencies of the power to regulate anything not explicitly laid out by Congress.  While it is possible to argue the issue on both sides, the idea of Congress getting into every detail would likely lead to a practical problem of nothing being regulated for a long time.  (Think environment, labor, health, education, energy policy, etc.) After all, it’s been years since Congress could pass even broad department-level budgets, let alone dictating every rule and regulation as well as how each will be interpreted. That would leave litigation and federal courts to decide on the interpretation of every rule and regulation. In other words, who should write and interpret federal regulation details? Congress? The Courts? Or the Agencies that are experts in and are charged with carrying out those regulations? This could be a massive societal change.

So far this morning, FAST, FHN, KEY, NTRS, and TSM all reported beats on both the revenue and earnings lines.  (Some of the banks, in particular, had big beats on revenue, such as NTRS beating revenue by 51% and FHN beating that line by 23%.)  At the same time, MTB, TBCI, and TFC all beat on revenue while missing on earnings.

With that background, all three major index ETFs gapped lower to start the premarket session. SPY gapped down through its T-line, but QQQ again is holding on to that level after an early test. Both SPY and QQQ are giving us white-bodied candles in the early session while DIA is indecisive after the gap down. So, the short-term trend is being challenged and is indeterminate except for DIA which has turned down in the short-term. (If you take a broader look at DIA, it has just chopped sideways for a month.) However, the Bulls remain slightly in control of the short-term trend in at least the QQQ and SPY (market leaders). In the longer term, we are near all-time highs (potential resistance) in the SPY, QQQ, and DIA. In terms of extension, none of the three major index ETFs are far from their T-line (8ema). However, the T2122 indicator is now sitting well inside of its oversold range. So, both sides have room to run if they can gather the momentum to do it. However, the Bulls have more slack to work with. As I’ve been saying, keep watching those Tech Big Dogs. If they make a move as a group, it is almost impossible for the rest of the market to do anything but follow given their trading volumes.

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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