Markets were undecided on Tuesday with SPY opening 0.12% higher, DIA opening 0.17% lower, and QQQ opening 0.17% higher.  From that point, SPY and QQQ traded sideways, wandering back and forth across the open gap until noon.  DIA also traded sideways in a very tight range along the open for 60 minutes.  Then DIA sold off for 90 minutes before resuming its sideways trading.  Then, at noon, all three major index ETFs made a modest (20-degree) rally the rest of the day.  This left all three as indecisive candles.  SPY and QQQ both printed white-bodied Inside Day Hammer candles.  At the same time, DIA printed a gap-down, black-bodied Doji-type candle.  All three remain above their T-line (8ema).  This all happened on slightly above-average volume in DIA and QQQ and slightly below-average volume in the SPY.

On the day, seven of the 10 sectors were in the green with Communication Services (+1.30%) way out in front leading the way higher.  At the same time, Financial Services (-0.14%) and Industrials (-0.10%) were the worst-performing sectors.  Meanwhile, the SPY gained 0.29%, DIA lost 0.27%, and QQQ gained 0.41%.  Meanwhile, VXX was off by 2.90% to close at 14.08 and T2122 climbed a bit but remained in the upper side of its midrange at 73.33.  10-year bond yields climbed back to 4.136% and Oil (WTI) fell just a bit to close at $74.50 per barrel.  So, after a mixed, flat open the market was pretty much undecided and lethargic on the day.  The Bulls had a slight advantage for the afternoon.  (It is worth noting that the big Tech names were all green but only ranged from INTC (+1.39%) to AMD (+0.14%).

The major economic news on Tuesday was limited to the API Weekly Crude Oil Stocks report, which showed a significantly larger drawdown than expected at -6.674 million barrels (compared to a forecasted 3.000-million-barrel drawdown and the prior week’s 0.483-million-barrel increase). 

In Fed news, on Tuesday, Reuters provided a summary of the FOMC voters’ most recent statements.  However, note that some of these quotes are older than others.  Atlanta Fed President Bostic (dove) said, “If we continue to see a further accumulation of downside surprises in the data it’s possible for me to get comfortable to advocate normalization sooner than the third quarter. But the evidence would need to be convincing.”  NY Fed President Williams (centrist) said, “It will only be appropriate to dial back the degree of policy restraint when we are confident that inflation is moving toward 2% on a sustained basis.”  Fed Governor Waller (centrist) has said, “The key thing is the economy is doing well. It is giving us the flexibility to move carefully and methodically.”  Fed Vice-Chair Barr (centrist) has said, “The Fed is at or near the peak of interest rates.”  Fed Vice-Chair Jefferson said, “We are in a sensitive period of risk management, where we have to balance the risk of not having tightened enough, against the risk of policy being too restrictive.” Fed Governor Cook (centrist) has said, “I see risks as two-sided, requiring us to balance the risk of not tightening enough against the risk of tightening too much.”  San Francisco Fed President Daly recently said, “It takes patience. It takes gradualism.”  Cleveland Fed President Mester (hawk) said, “March is probably too early in my estimation for a rate decline.”  Richmond Fed President Barkin (hawk) said, “Getting inflation under control is critically important.”  Fed Governor Bowman (hawk) said, “While the current stance of monetary policy appears to be sufficiently restrictive … I remain willing to raise the federal funds rate further at a future meeting.”  Finally, Fed Chair Powell (centrist) said, “Declaring victory would be premature … But of course the question is when will it become appropriate to begin dialing back?”

After the close, CNI, EWBC, ISRG, LRN, and TXN all reported beats on both the revenue and earnings lines.  At the same time, BKR missed on revenue while beating on earnings.  On the other side, NFLX and STLD both beat on revenue while missing on earnings.  It is worth noting that NFLX raised forward guidance while TXN lowered its guidance.

In stock news, FSR said Tuesday that it expects to deliver the remaining 5,000 vehicles produced in 2023 by the end of Q1, through its new network of 100 dealers in the US, Canada, and Europe.  At the same time, in addition to its earnings, NFLX announced a $5 billion, 10-year deal to broadcast WWE’s weekly program.  Later, SNY agreed to buy INBX in a stock and cash deal worth $2.2 billion.  Elsewhere, GOLD announced that it is accelerating the expansion of its copper mine in Zambia.  This will make that mine one of the largest copper mines in the world.  At the same time, PLUG announced its Georgia “green hydrogen” (liquid hydrogen) plant is now operational.  Later, LUV flight attendants voted to authorize a strike by at 98% margin.  Meanwhile, UAL said it is no longer counting on BA’s 737 MAX 10 jets.  This announcement comes after more BA delays and plane groundings have pushed back delivery schedules that were already years behind schedule.  While UAL did not cancel its orders (at least yet), the airline has removed those planes from its internal plans, saying it believes recent production quality issues will delay certification yet another year.  At the same time, Bloomberg reported that AAPL has reduced the number of features and delayed the release of its “Apple Car” until at least 2028.  (AAPL had previously announced it would develop an autonomous self-driving car by 2026.  The original plan was for a level 4-5 self-driving capability.  The new plan is for level 2+.)  After the close, SAP announced a restructuring that will “impact” 8,000 employees worldwide.  Some of the job cuts will be implemented through voluntary leave programs while many other employees will be “reskilled and transferred” within the company.  Also after the close, Bloomberg reported that WBA is exploring the sale of its “Shields Health Solutions” unit for roughly $4 billion.  Finally, EBAY announced Tuesday evening that it will lay off 9% of its workforce or about 1,000 employees.

In stock government, legal, and regulatory news, the Dept. of Justice requested data from SIX and FUN related to their merger (announced in November).  Later, the FDA asked drugmakers GILD, JNJ, BMY, LEGN, and NVS to add a serious warning label to their cancer therapies that use “CAR-T” technology.  (This comes after recent reports of patients treated with genetically engineered CAR-T technologies developing different cancers than the one the drug was treating.)  Later, AAPL asked a British Competition Tribunal to throw out a $1 billion class-action type lawsuit brought by more than 1,500 app developers alleging AAPL’s 30% fee and monopoly on iPhone app stores are anti-competitive. At the same time, JNJ announced it has reached a tentative settlement to resolve investigations by 42 states and the District of Columbia into whether the company misled consumers about the safety of its talc products. Later, the Wall Street Journal reported that the settlement included a $700 million payment.  The CEO of ALK told NBC news that the company had reported finding many BA 737 MAX 9 planes with loose bolts to the FAA and Dept. of Transportation.  At the same time, ADM was hit with an accounting probe.  This caused ADM shares to plummet 24% on Monday, rebounding slightly (+1.20%) on Tuesday.  Later, NMR was sued by a former employee, claiming she was paid less relative to men, and was fired for insisting that the company stop discriminating against women.  After the close, CACI was awarded a US Army contract for $900 million.  Also after the close, BA announced its CEO will meet with US Senators who are investigating the ALK airline mid-air panel blowout and loose bolts.  Finally, an Oregon jury ordered a subsidiary of BRKB to pay $62.3 million to nine property owners whose properties were damaged by wildfires found to have been caused by the company’s negligence in dealing with power lines.  (This is the first of many trials from 5,000 home and business owners whose properties were damaged by the 2020 fires.)

Overnight, Asian markets were mostly green, with Japan (-0.80%) and South Korea (-0.36%) the only red in the region. Meanwhile, Hong Kong (+3.56%), Thailand (+1.82%), and Shanghai (+1.80%) led the nine gainers.  (China roared back after the PBOC announced policy easing in an attempt to boost their economy.)  In Europe, we see a similar picture with only Russia (-0.59%) and Norway (-0.09%) in the red.  At the same time, The CAC (+0.90%), DAX (+1.27%), and FTSE (+0.39%) lead the region higher.  In the US, as of 7:30 a.m., Futures are pointing toward a gap higher to start the day.  The DIA implies a +0.22% open, the SPY is implying a +0.43% open, and the QQQ implies a +0.70% open at this hour.  Meanwhile, 10-year bond yields are down to 4.107% and Oil (WTI) is off a quarter of a percent to $74.18 per barrel in early trading.

The major economic news scheduled for Wednesday includes S&P Global Mfg. PMI, S&P Global Services PMI, S&P Global Composite PMI (all at 9:45 a.m.), and EIA Crude Oil Inventories (10:30 a.m.).  The major earnings reports scheduled for before the open Wednesday include ABT, APH, ASML, T, BOKF, ELV, FCX, GD, KMB, EDU, PGR, SAP, TEL, TDY, and TXT.  However, after the close, AMP, CACI, COLB, CNXC, CCI, CSX, HXL, IBM, KNX, LRCX, LVS, LVRO, LBRT, PKG, PLXS, RJF, RMD, STX, NOW, TSLA, URI, and WRB report. 

In economic news later this week, on Thursday, Building Permits, Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, Dec. Durable Goods Orders, Q4 GDP, Q4 GDP Price Index, Dec. Goods Trade Balance, Dec. Retail Inventories, Dec. New Home Sales, and Fed Balance Sheet are reported.  Finally, on Friday, we get the Dec. Core PCE Price Index, Dec. PCE Price Index, Dec. Personal Spending, and Dec. Pending Home Sales.

In terms of earnings reports later this week, on Thursday, we hear from ALK, AAL, AIT, BX, BFH, CRS, CMCSA, CFR, DOW, EXP, HUM, HZO, MMC, MKC, MBLY, MUR, NEE, NOK, NOC, ORI, BPOP, SDVKY, SHW, LUV, STM, UNP, VLO, VLY, XEL, XRX, AJG, COF, INTC, KLAC, LHX, LEVI, OLN, TMUS, V, WAL, WDC, AND WY.  Finally, on Friday, AXP, ALV, BAH, CL, FCNCA, GNTX, and NSC report.

In miscellaneous news, on Tuesday, BAC analysts reported that hedge funds were net buyers of stocks last week for the first time in 10 weeks.  The analysis said that the net was $554 million of stock added to hedge fund portfolios.  Elsewhere, bond icon Bill Gross told Bloomberg that the Fed needed to end Quantitative Tightening and begin cutting rates soon.  Gross said the window to do this (to preserve the soft landing) was this year.  Later, Bloomberg reported that India’s stock market has surpassed Hong Kong’s market (by $4.33 trillion versus $4.29 trillion).  This makes India the fourth largest stock market globally, behind the US, China, and Japan.  (Hong Kong, France, and the UK follow those top four.)  Finally, TM Chairman Toyoda told an interview Tuesday that he believes electric-only vehicles will reach a maximum of 30% of the market, with the rest of the market made up of hybrid, hydrogen, and traditional-fuel cars.  Part of his reasoning was explained that 1 billion people in the world still live without electricity (and many, many more without reliable electricity), which makes EV cars a non-starter for that portion of the world.

So far this morning, ABT, ASML, ELV, EDU, and SF all reported beat on both the revenue and earnings lines.  Meanwhile, T and SAP both beat on revenue while missing on earnings.  On the other side, TXT, TDY, and TEL missed on revenue while beating on earnings.  Unfortunately, KMB and GD missed on both the top and bottom lines.  It is worth noting that ELV and EDU both raised forward guidance while ASML, T, and KMB lowered guidance.

With that background, all three major index ETFs gapped higher to start the premarket session. All three are also printing white-bodied candles, which although small, are at the top of their range so far in the early session. The SPY, DIA, and QQQ remain above their T-line (8ema) and sitting at (or near in the case of DIA) all-time highs. So, obviously, the Bulls are in control of the trend in the short term. In the longer term, we are also clearly bullish in all three. In terms of extension, the QQQ is stretched above its T-line after the premarket gap, while the other major index ETFs are still inside the normal range. The T2122 indicator is also still sitting in its midrange. So, both sides have room to run if they can gather the momentum to do it. As I’ve been saying for some time, 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 of 7:45 a.m., all of them are looking to gap higher and all but two of them are printing white-bodied premarket candles.

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 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 gains are 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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