Friday saw an open modestly higher in the market.  The SPY gapped up 0.18%, the DIA opened just 0.01% lower, and QQQ gapped up 0.18%.  However, the Bulls were just getting started in the SPY and QQQ, starting a rally that lasted until 2:30 p.m. with modest profit taking the last 90 minutes of the day.  Meanwhile, DIA sold off the first 30 minutes before starting a more modest rally that lasted until 2:15 p.m.  Like its larger brother index ETFs, DIA took very modest profits in the last 105 minutes.  This action led to gap-up, large white-bodied candles in the SPY and QQQ.  Both could be said to be “Trader’s Best Friend” signals as they gapped up from indecisive, Doji-like candles.  In addition, both broke out of their pullback printing both new all-time highs and new all-time high closes.  At the same time, DIA bounced up off its T-line (8ema) and printed a Bullish Engulfing candle.  DIA did not print a new all-time high but only missed a new all-time high close by two cents.

On the day, eight of the 10 sectors were in the green as technology (+2.94%) way, way out in front (by 1.61%) leading the way higher.  Meanwhile, Utilities (-0.34%) was the only sector really in the red since Consumer Defensive (-0.02%) was more-or-less flat.  At the same time, the SPY gained 0.94%, the DIA gained 0.35%, and the tech-heavy QQQ gained 1.51%.  VXX gained a mere 0.29% to close at 13.60 and T2122 jumped back up into the oversold territory at 88.49.  10-year bond yields fell back to 4.186% and Oil (WTI) gained almost 2% to close at $79.81 per barrel.  So, Friday saw another day of rallies led by AI names.  AMD (+5.25%) and NVDA (+4.00%) did a lot of the lifting, but INTC (+1.79%) and META (+2.48%) helped also. 

The major economic news released Friday included S&P Global Mfg. PMI, which came in stronger than expected at 52.2 (compared to a 51.5 forecast and the previous 50.7 reading).  Later, January Construction Spending was well below anticipated at -0.2% (versus the +0.2% forecast and the December +1.1% value).  At the same time, Feb. ISM Mfg. Employment fell to a 45.9 index (compared to the January 47.1 reading).  As for the headline number, the February ISM Mfg. PMI also came in low at 47.8 (missing the 49.5 forecast and falling from the January 49.1 number).  However, the Feb. ISM Mfg. PMI Price Index also fell to 52.5 (versus a forecast of 53.5 and the January 52.9 index reading).  Meanwhile, the Michigan Consumer Sentiment was below predicted at 76.9 (compared to a 79.6 forecast and the prior 79.0 value).  The Michigan Consumer Expectations were also below what was anticipated at 75.2 (versus a 78.4 forecast and a 77.1 previous reading).  As for the future, the Michigan 1-year Inflation Expectations came in as expected at 3.0% (compared to a 3.0% forecast and up a tick from the previous 2.9% value).  Over the longer term, Michigan 5-year Inflation Expectations remain steady at 2.9% (versus the 2.9% forecast and 2.9% previous reading). 

In Fed news, Cleveland Fed President Mester called for changes to the Fed Discount Window policies (which would impact the entire banking sector). Mester said, “Testing at this time is not mandatory (she meant except for the largest banks), but I support requiring such testing as part of sound liquidity management.”  She continued, “It is also worth considering requiring banks to pre-position collateral at the window in proportion to their short-term runnable funding, including uninsured deposits, so they would be ready to borrow at the discount window should that funding start to run.”  At the same time, Richmond Fed President Barkin told CNBC that it was too soon to predict when rate cuts will begin.  Barkin said, “I’m still hopeful inflation is going to come down and if inflation normalizes then it makes the case for why you want to normalize rates, but to me, it starts with inflation.” He also said he still sees “wage pressures, I still see inflation pressures (and) we just had a high inflation report yesterday.”  Later, Fed Governor Waller indicated that Fed Balance Sheet decisions have nothing to do with rate policy. Waller said, “Balance sheet plans are about getting liquidity levels right.”…“They do not imply anything about the stance of interest rate policy, which is focused on influencing the macroeconomy and achieving our dual mandate.”  At the same time (but a different event), Dallas Fed President Logan said, “When (Fed Balance Sheet) balances approach a low level, it will be appropriate to slow the pace of asset runoff.”  She continued, “(When the balance sheet hits zero) there will be more uncertainty about how much excess liquidity remains.” … “I don’t think we can identify the (right) level in advance. We’ll need to feel our way to it by observing money market spreads and volatility.” Finally, Fed Governor Kugler indicated she sees a soft landing.  Kugler said, “I am cautiously optimistic that we will see continued progress on disinflation without significant deterioration of the labor market.”  She continued, “We have seen inflation cool significantly, falling more rapidly than at any time since the 1980s…Yet unemployment remains near the lowest levels seen only a few times since the 1960s.”

In stock news, on Friday, VSTO confirmed that it had received an unsolicited $35 per share ($2.9 billion) takeover offer from MNC Capital.  At the same time, BA announced it would delay plans to ramp up 737 production.  In another BA development, it was reported Friday that BA is in talks to buy its struggling fuselage supplier (and former subsidiary) SPR in an attempt to resolve some of its 737 MAX quality problems.  At the same time, Reuters reported that NSANY (Nissan) is in advanced talks on investing $400 million in electric vehicle maker FSR.  At day end, NVDA closed above the $2 trillion market cap for the first time.  Meanwhile, CNI announced it had reached a tentative 3-year deal with the United Steelworkers union covering 2,500 of its employees.  At the same time, CVX announced it would idle two midwestern biodiesel plants due to poor market conditions.  (The plants were part of 11 plants bought in 2022 with the purchase of REGI for $3.15 billion.)  Later, NVDA CEO Huang told a conference that he believes, based on the current rate of development, AI “general intelligence” could arrive in five years or less.  Specifically, Huang said, “If I gave an AI every single (human) test that you can possibly imagine, you make that list of tests and put it in front of the computer science industry, and I’m guessing in five years’ time, we’ll do well on every single one.”  After hours Friday, SMCI was chosen to join the S&P500, replacing WHR.  At the same time, it was announced that DECK will also join, replacing ZION.  On Saturday, an NSC freight train derailed in PA, spilling diesel fuel and plastic pellets into the nearby Lehigh River.

In stock legal, governmental, and regulatory news, on Friday, BA agreed to pay $51 million for violating export controls over military technology.  The violations included employees in China downloading sensitive data from numerous aircraft (including the AH-64 Apache attack helicopter) and missiles.  At the same time, both SPOT and industry groups told the EU competition regulators that AAPL’s proposed changes to its app store policies disregard EU law and simply amplify its dominance over app developers.  Later, AAPL countered by telling Reuters that “both government agencies and users have concerns about the non-app store loading of apps causing security issues.” At the same time, the FDA announced it would allow GIS and DANOY (and other dairy companies) to advertise the claim that yogurt may reduce the risk of type 2 diabetes.  Later, the FAA announced it would mandate a fix for a BA 737 MAX design flaw that may disable the jet’s engine anti-ice system.  At the same time, a federal judge upheld a law that requires drugmakers to negotiate prices with Medicare, rejecting the challenge of AZN.  Later, ADM reported to the SEC that it expects to correct financial statements that previously misstated interunit sales by March 15.  At the same time, the NHTSA announced that GM is recalling 820k (570k in the US, 240k in Canada) 2020-2024 pickup trucks related to an issue with their tailgates.  Later, the FDA gave full approval to a JNJ lung cancer chemotherapy.  At the same time, a US district court dismissed a 2022 class-action lawsuit that had been brought against MOLN.  After the close, the state of CA approved a GOOGL Waymo proposal to expand its robotaxi fleet in the Los Angeles and San Francisco markets.  Later, the WTO won approval for its moratorium on tariffs on digital transmissions (e-commerce) until 2026.  This was a huge win for GOOGL, MSFT, AMZN, AAPL, and others.  Elsewhere, a US appeals court ruled that the federal government can swap thousands of acres of land with RIO.  The swap will enable RIO to build a copper mine on what Native Americans consider sacred land.  At the same time, BAYRY (Bayer) won a lawsuit brought by an AR family who claimed the mother had developed cancer from exposure to the company’s Roundup weedkiller.  Later, a TX homeowner filed suit against XEL, alleging that the utility’s equipment had started the wildfire raging across the Texas panhandle.  At the same time, the FL Gov. vetoed a bill banning social media for anyone under 16 years old.  Meanwhile, a US District judge ruled GOOGL must face a proposed class-action lawsuit claiming it monopolizes the ad exchange market.  Late Friday, the European Commission said BKNG (along with Musk’s X and TikTok) may be designated gatekeepers, subjecting it to strict rules.  (GOOGL, AMZN, AAPL, META, and MSFT were given that designation in 2023.)

Overnight, Asian markets were mixed but leaned toward the green side.  Taiwan (+1.95%) and South Korea (+1.21%) were by far the biggest movers in the region as Singapore (-0.43%) was the biggest loser.  Meanwhile, in Europe, the bourses lean toward the red side with just five of the 15 exchanges in the green at midday.  The CAC (+0.09%), DAX (-0.07%), and FTSE (-0.49%) lead the region lower in early afternoon trade.  In the US, as of 7:30 a.m., Futures are pointing toward a mixed open not far from flat.  The DIA implies a -0.26% open, the SPY is implying a -0.13% open, and the QQQ implies a +0.04% open at this hour.  At the same time, 10-year bond yields are up to 4.205% and Oil (WTI) is down two-thirds of a percent to $79.46 per barrel in early trading.

The major economic news scheduled for Monday is limited to Fed member Harker speaking at 11 a.m.  The major earnings reports scheduled for before the open are limited to SE.  Then, after the close, CRGY and SAIC report. 

In economic news later this week, on Tuesday we get Feb. S&P Global Service PMI, Feb. S&P Global Composite PMI, Jan. Factory Orders, Fed ISM Non-Mfg. Employment, Feb. ISM Non-Mfg. PMI, Feb. ISM Non-Mfg. Price Index, and the API Weekly Crude Oil Stocks report.  We also hear from Fed Vice-Chair Barr (noon and 3:30 p.m.).  Then Wednesday, Feb. ADP Nonfarm Employment Change, Jan. JOLTs Job Openings, EIA Crude Oil Inventories, and Fed Beige Book are reported. Fed Chair Powell testifies, and Fed member Daly also speaks.  On Thursday, we get Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, Jan. Imports, Jan. Exports, Jan. Trade Balance, Final Q4 Nonfarm Productivity, Final Q4 Unit Labor Costs, Jan. Consumer Credit, Fed Balance Sheet.  Fed Chair Powell also testifies and Fed member Mester speaks.  Finally, on Friday, Feb. Avg. Hourly Earnings, Feb. Nonfarm Payrolls, Feb. Private Nonfarm Payrolls, Feb. Unemployment, Feb. Participation Rate, and the WASDE Ag report are delivered.  Fed member Williams also speaks.

In terms of earnings reports later this week, on Tuesday, we hear from, GBTG, FERG, NIO, TGT, VVX, BBAR, CRWD, JWN, and ROST.  Then Wednesday, ANF, CPB, SID, FL, JD, KFY, REVG, THO, UNFI, YSG, SUPV, and VSCO report.  On Thursday, we hear from ABM, AEO, BIG, BILI, BJ, BURL, CIEN, YMM, KR, TTC, AVGO, COST, DOCU, GPS, LVRO, MRVL, PBR, and RBT.  Finally, on Friday, AQN and GCO report.

In miscellaneous news, social media company Reddit is seeking a $6.5 billion valuation from its upcoming IPO.  The company announced plans to initially price shares between $31 and $34 per share according to the Wall Street Journal.  (Reddit will list under the ticker RDDT when the IPO goes live.)   Elsewhere, the Senate and Congressional leader unveiled the first six (of 12) spending packages (budgets) that are meant to fund half the government through September 30.  Both Houses have until Friday to pass these six (1,050 pages) to avoid the first of Speaker Johnson’s “two cliffs.”  On the geopolitical front, the US began airdrops of humanitarian (mostly food) aid to Gaza over the weekend.  The first successful “test drop” included 38,000 meals.  For reference, there are at least 650k people without food in Gaza with the potential of that growing to as much as 2.3 million if the Israeli invasion and associated restrictions on aid continue.  The point is, we would need to do at least 20 such drops per day to stop the famine now taking place.

In late-breaking news, the European Commission fined AAPL $1.95 billion early today for its antitrust practices related to its app store over 10 years.  The original plaintiff was SPOT and industry groups representing numerous other app developers.  (The EU investigation began in 2019, indicating the behemoth tech company’s ability to stall.)  The appeal of this fine could last months.  

So far this morning, SE reported beats on both the revenue and earnings lines.  It is worth noting that while the company still reported a loss, the earnings were almost 35% better than expected.

With that background, it looks as if there is indecision among the three major index ETFs this morning. The QQQ is printing a small, white-body candle in the premarket and looking to add to Friday’s record prices. The DIA is the worst of the three and although it too is printing a small-body candle in the early session, it gapped lower and looks like it wants to retest the T-line from above again. Meanwhile, the SPY is somewhere in between, giving us a small-body, white candle inside the top of Friday’s record-breaking candle body. It may be worth noting that the T-line of all three are rising again. So, the short-term trend remains bullish and the longer-term strong bullish trend continues to hang on (despite being tested). In terms of extension, none of the three major index ETFs is too far from its T-line, but the T2122 indicator is in the middle of its overbought range. So, both the Bulls and Bears both have room to run if they can gather the momentum. However, the Bears have more slack to work with. Looking at those 10 Big Dog tech names, the Bulls have a slight edge so far this morning. Six of the 10 are green with NVDA, AMD, and INTC leading the way. As you might expect, based on the late-breaking fine news, AAPL is leading the pack lower along with TSLA.

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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