Markets opened the week a bit lower.  The SPY and DIA both opened 0.13% lower, and QQQ opened just on the red side of flat.  All three major index ETFs then followed through to the downside, reaching the lows of the day at 10:50 a.m.  At that point, all three reversed and rallied in divergent strengths. QQQ seeing the strongest rally, made it back into the opening gap by 12:40 p.m.  SPY made it back into its own gap at 2:35 p.m.  However, DIA’s shallow rally never got it back to the opening level.  All three of them had a modest selloff during the last hour of the day.  This action gave us black-bodied, Spinning Top Bear Harami candles in the SYP and QQQ.  Meanwhile, DIA printed a black-bodied candle with a good-sized lower wick.  DIA also retested its T-line (8ema) while closing back above while the other two major index ETFs did not even retest their own T-lines.

On the day, nine of the 10 sectors were in the red as Basic Materials (-2.12%) and Utilities (-1.96%) were way out in front leading the market lower.  On the other end of the performance spectrum, Healthcare (+0.27%) was the only sector that managed to stay in the green. At the same time, the SPY lost 0.36%, the DIA lost 0.73%, and QQQ lost 0.13%.  VXX fell almost 4% to close at 14.40 and T2122 plummeted back down into its oversold area to 12.25.  10-year bond yields spiked to 4.164% and Oil (WTI) also recovered to gain 0.77% and close at $72.85 per barrel.  So, great news, especially from META (+20.32%) and strong January Jobs data led to uncertainty and fear in the premarket and at the open.  However, at that point, the Bulls decided good news is good news and rallied all day until they took profits are the end of the session.

The major economic news released Monday included Jan. S&P Global Services PMI, which came in up but a bit below expectation at 52.5 (compared to a forecast of 52.9 and the December 51.4 reading.  At the same time, the S&P Global Composite PMI was also up but a bit below the expected value at 52.0 (versus a 52.3 forecast and a December reading of 50.9).  Later January ISM Non-Mfg. Employment was stronger than was predicted at 50.5 (compared to a 49.4 forecast and strongly higher from the Dec. value of 43.8).  The January ISM Non-Mfg. PMI was stronger than anticipated at 53.4 (versus a forecast of 52.0 and the December 50.5 reading).  The ISM Non-Mfg. Price Index was very hot at 64.0 (compared to the 56.5 forecast and even the 57.4 Dec. value). 

In Fed news, Fed Chair Powell sounded the same notes during his Sunday night 60 Minutes interview that he had the prior Wednesday.  Powell said it was unlikely the Fed would see enough evidence to begin rate cuts at its March meeting.  While not tying the Fed’s hands, this was a rare instance of the Fed specifically saying what is likely to happen (or not happen) at a meeting that is still six months away.  Later, Minneapolis Fed President Kashkari said that inflation is making “rapid progress” toward the Fed’s 2% target.  However, he also said that a resilient economy means the Fed has more time to study data before acting.  Kashkari said, “The implication of this is that…it gives the (Fed) time to assess upcoming economic data before starting to lower the federal funds rate, with less risk that too-tight policy is going to derail the economic recovery.”

After the close, ACM, AMKR, CBT, COHR, FN, ITUB, NXPI, PLTR, SPG, and SKY all reported beats on both the revenue and earnings lines.  At the same time, CHX and HI reported misses on revenue while beating on earnings.  On the other side, SSD beat on revenue while missing on earnings.  However, CCK, FMC, and VRTX missed on both the top and bottom lines.  It is worth noting that AMKR, CCK, and SPG lowered their forward guidance.  Meanwhile, COHR, and VTRX both raised their guidance.

In stock news, EL said it would cut 3% to 5% of its workforce (meaning 1,850 – 3,100 jobs) due to Chinese buyers backing off from higher-priced luxury goods in favor of low-margin alternatives.  At the same time, YNDX (widely known as Russia’s Google) announced a $5.21 billion deal to exit Russia by selling its Russian operation to a group of Kremlin-approved investors.  Later, politics reared its head in the Nippon Steel purchase of X for $15 billion as the ex-President said that, if elected, he would immediately block the deal.  This, theoretically could lead to a revival of a lesser offer from US-based (and Trump ally-backed) CLF.  At the same time, STLA CEO Elkmann denied that the company has any plans for a merger with any other car manufacturers (or specifically French-led PUGOY or Renault).  This denial came after an Italian newspaper said on Sunday was studying a merger between the companies.  Later, BA announced they had found “mis-drilled holes” in the fuselages of 50 of its 737 MAX planes that have not been delivered yet.  This is the latest quality issue for both the company and that product line.  Elsewhere, DOCU shares fell on Monday after reports indicated that acquisition talks with multiple hedge funds have stalled as the sides disagree on price.  At the same time, META’s internal Oversight Board has determined that an AI deep-fake video suggesting the President is a pedophile does not violate the company’s current content rules (and can remain online).  The group went on to say the company’s current rules are too narrow and incoherent related to AI-generated content.  Later, SNAP said it would cut 528 employees (10% of staff) as part of a cost-cutting measure.  At the same time, SAP said that it would stop buying TSLA vehicles.  Later, NSC said Monday that it completed a $1 billion improvement in its infrastructure during 2023.  At the same time, CMS announced it has reached a “definitive agreement” to sell its appliance service plan business to a private firm for an undisclosed amount. After hours, PINC announced a $1 billion share buyback program and a $400 million accelerated share repurchase transaction with BAC.  At the same time NTCO said it is considering splitting into two companies.  Later, NVS announced it will acquire MOR for $2.9 billion. 

In stock legal, governmental, and regulatory news, a bill being floated in the US House targets Chinese biotech firm Wuxi Apptec by forbidding federally-funded drugmakers from dealing with the company (among others).  The mere anticipation of a potential bill has caused a major selloff of the chares of that company.  However, that company is also partners with several western pharma companies, such as PFE, AZN, and GSK.  These western companies have not yet taken a hit but are at risk. Later, Reuters reported that the US Dept. of Justice has opened a probe into the ADM accounting practices based on an SEC inquiry.  At the same time, the US Dept. of Transportation has begun investigations after videos emerged over the weekend showing human drivers wearing AAPL Vision Pro headsets (and gesturing with both hands) while also driving their TSLA vehicles.  Later, a US federal judge set a date of September 9 date for a jury trial in the US DoJ (and a coalition of states) antitrust suit against GOOGL.  At the same time, FNB agreed to pay a $13.5 million settlement with the US Dept. of Justice and the state of NC over charges of redline discrimination.  Elsewhere, RIO is facing criminal worker safety charges after an employee was seriously injured at a Canadian mine. The charges allege RIO failed to implement and maintain reasonable safety practices and procedures.  At the same time, the FAA urged Congress NOT to increase the airline pilot mandatory retirement age prior to the agency conducting more research.  (DAL, AAL, and LUV are among the airlines pushing for this increase.)  In other FAA news, the agency said that 94% of the BA 737 MAX 9 planes have now been inspected and returned to service following the January mid-air emergency.  After the close, the European Medicines Agency granted RARE’s GTX-102 therapy the PRIME (Priority Medicine) status.  At the same time, WBD won a dismissal of a class action brought by the OH Attorney General claiming concealed negative financial information prior to the company’s 2022 merger with T.  Meanwhile, a US appeals court found that BAYRY (Bayer) is not shielded from lawsuits claiming the company’s Roundup weedkiller caused cancer. (BAYRY had claimed federal regulator approval of the product shielded it from lawsuits over product safety.)  At the same time, Reuters reported that RTX was served subpoenas by the SEC related to 2023 disclosures over the use of powdered metals in engines made by its Pratt and Whitney subsidiary.

Overnight, Asian markets were mixed but leaned toward the green side led by a huge Chinese rebound.  Shenzhen (+6.22%) Hong Kong (+4.04%), and Shanghai (+3.23%) led the region higher with only four of the 12 exchanges in the red.  In Europe, things are even more green at midday with only four of 15 bourses in the red.  The CAC (+0.26%), DAX (-0.07%), and FTSE (+0.54%) lead the region higher in early afternoon trade.  In the US, as of 7:30 a.m., Futures are pointing toward a start just on the red side of flat.  The DIA implies a -0.14% open, the SPY is implying a -0.08% open, and the QQQ implies a -0.05% open at this hour.  At the same time, 10-year bonds are unchanged at 4.164% and Oil (WTI) is up six-tenths of a percent to $73.22 per barrel in early trading.

The major economic news scheduled for Tuesday is limited to member Weekly API Crude Oil Stocks (4:30 p.m.) and Fed Mester speaks (noon).  The major earnings reports scheduled for before the open are include AGCO, ALFVY, AME, ARMK, ARCB, BP, CARR, CNC, CHKP, CEIX, CMI, DD, LLY, ENR, FSV, FI, ULCC, IT, GRHC, HTZ, INGR, J, KKR, LEA, LIN, NJR, NVT, PNM, SCSC, ST, SPR, SPOT, TM, WAT, WTW, and XYL. Then, after the close, AMRK, ASTL, AB, AMCR, DOX, AFG, AMGN, AIZ, ATO, EQH, CSL, CMG, CINF, CRUS, CNO, CTSH, EW, PLUS, EXEL, F, FTNT, GILD, IEX, JKHY, KD, LUMN, MASI, NBR, OI, OMC, PRU, QGEN, SNAP, SONO, SNEX, VLTO, VFC, VSAT, WFRD, WERN, WU, and YUMC report.

In economic news later this week, on Wednesday we get Dec. Exports, Dec. Imports, Dec. Trade Balance, Weekly EIA Crude Oil Inventories, Dec. Consumer Credit, and Fed member Bowman speaks.  On Thursday, Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, WASDE Ag report, and Fed Balance Sheet are reported.  Then Friday there is no major news planned.

In terms of earnings reports later this week, on Wednesday, ADNT, BABA, ATS, ARCC, BERY, BAM, BG, CDW, CVS, EPC, EMR, EQNR, EEFT, FOXA, GPRE, GFF, HAIN, HLT, KMT, NBIX, NYT, OMF, PAG, PFGC, REYN, RBLX, SEE, TTMI, UBER, VSTS, VSH, XPO, YUM, ALL, ARM, ASGN, BKH, CENTA, CENT, CPA, CXW, COTY, EHC, ENS, NVST, EFX, EG, FAF, FLT, GL, MAT, MMS, MCK, MAA, MKSI, MOH, MUSA, NWSA, ORLY, OSCR, PYPL, RRX, STE, SLF, SU, UHAL, DIS, and WYNN report.  On Thursday, we hear from WMS, APO, MT, ARES, ARW, ABG, AXTA, BAX, BCE, BDC, BWA, CCJ, CX, CIGI, COP, DTE, DUK, GTES, HOG, HSY, HMC, NSP, ICE, IPG, ITT, K, KVUE, LNC, MAS, MDU, NFG, PATK, BTU, PM, RL, RXO, SPGI, SNA, SPB, SAVE, TROW, TPR, TPX, THC, TRI, TDG, UA, UAA, WMG, WEX, ZBH, AFRM, ATR, BYD, CPRI, BAP, DXCM, EXPE, FE, FLO, G, PEAK, ILMN, LEG, MTD, MHK, MSI, NGL, PINS, TTWO, TEX, and TFII.  Finally, on Friday, AMCX, CTLT, ENB, FTS, MGA, NWL, PEP, PAA, PAGP, and TIXT report.

So far this morning, ARMK, CNC, CHKP, CEIX, LLY, ENR, FI, GEHC, J, KKR, LIN, MLI, WAT, WTW, and XYL all reported beats on both the revenue and earnings lines.  At the same time, AME, ARCB, CARR, DD, ULCC, IT, INGR, NVT, and PNM missed on revenue while beating on earnings. On the other side, LEA and ST beat on revenue while missing on earnings.  Unfortunately, ALFVY, BP, NJR, and SPOT missed on both the top and bottom lines.  It is worth noting that DD, ST, and SPOT lowered their forward guidance.  However, NJR raised its forward guidance.

In Global news, on Monday, China’s securities regulator said it would tighten scrutiny of margin financing and short selling to stabilize their stock markets. The group also said it would be providing new guidelines to brokers, giving investors more time to answer margin calls.  At the same time, Chinese brokers who buy mainland shares for their offshore units were forbidden from reducing their positions.  Some hedge funds were banned from placing sell orders completely while others were just barred from cutting stock positions in their leveraged market-neutral funds.  These were the primary reasons behind Tuesday’s massive rebound rally. At the same time, in Germany, the government unveiled a $17 billion plan to subsidize the conversion of natural gas power plants to hydrogen fuel to supplement the country’s intermittent renewable power generation program. Over the longer term, this could impact both US LNG exports to Europe and the leverage Russia holds over European energy demands. Finally, despite missing on both the top and bottom lines, BP helped UK stocks rally when it announced it will buy back $3.5 billion of its stock during the first half of 2024.

With that background, it looks like all three major index ETFs are looking to open little changed from Monday’s close. DIA is giving us the smallest body (true Doji) but is retesting its T-line in the early session. Meanwhile, SPY is printing another inside-day type Spinning Top in the premarket. QQQ is giving us the largest (black) candle body in the early session but again is little changed from Monday’s closing price. All three remain above their T-line (8ema). So, the Bulls remain in control of the trend in both the long and short term. However, we are also in a consolidation of the rally at the very least. In terms of extension, none of the three is far from their 8ema. However, T2122 is now back down in it oversold region. This means the market has slack to work with to run in either direction, but the bulls may have a little more room to work. With that said, it is worth noting that the market can stay oversold longer than we can stay solvent predicting reversals too early. So, be careful and follow the trend.

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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