Markets diverged at the open Monday.  SPY gapped down 0.15%, QQQ opened flat (just 0.01% lower), and DIA gapped down a whopping 0.48%.  After that opening, DIA wandered back and forth inside of its gap (above the Monday open but below the Friday close) all day.  Meanwhile, SPY did a similar thing, riding along the smaller gap until a rally at 2:30 p.m. popped it back above Friday’s close, reaching the highs at 3:15 p.m. when a selloff took it back down into the gap at the close.  At the same time, QQQ spent its time wandering sideways in a range below its flat open, rallied back up above the prior close at 2:30 p.m. and sold off at 3:25 p.m., going out on the lows. This action gave us a high-wick, Gravestone Doji, white candle in the SPY.  DIA retested its T-line (8ema) after a gap below but closed back above, also with a high wick on a white candle.  Finally, QQQ printed a black-body Bearish Harami in the top third of Friday’s candle.

On the day, six of the 10 sectors were in the red as Consumer Cyclical (-1.12%) and Communications Services (-1.07%) were out in front leading the way lower.  At the same time, Utilities (+1.35%) by far (by 0.80%) held up better than the other sectors.  Meanwhile, the SPY lost 0.11%, the DIA lost 0.28%, and the tech-heavy QQQ lost 0.36%.  VXX fell 0.22% to close at 13.57 and T2122 fell back out of the oversold area and back into the top of the mid-range at 75.34.  10-year bond yields climbed back up to 4.217% and Oil (WTI) fell 1.51% to close at $78.76 per barrel.  So, Monday saw some major divergence at the open. Then, all three major index ETFs ground sideways for most of the day.  Then we saw an afternoon pop followed by a late-day swoon.  This all happened on well below average volume in all three.

There was no significant economic news on Monday.

In Fed news, Atlanta Fed President Bostic said there was no urgency to cut rates given the “prospering economy and job market.”  Bostic said, “I need to see more progress to feel fully confident that inflation is on a sure path to averaging 2% over time.”  He went on, “Only when I gain that confidence will I feel the time is right to begin lowering the federal funds rate, …The good news is the labor market and economy are prospering, furnishing the (Federal Open Market) Committee the luxury of making policy without the pressure of urgency.”

After the close, CRGY reported beats on both the revenue and earnings lines.  The company crushed on earnings (beating by 173%) on an 8.4% revenue beat. 

In stock news, on Monday, AAL threw a lifeline to BA, placing an order for 115 of the yet-to-be-produced 737-MAX-10 model jets.  (This includes 85 new jets and covers 30 previously-ordered 737-8 jets into 737-10.)  At the same time, AAL ordered 85 EADSY (Airbus) A321neo jets and 90 ERJ (Embraer) E175 planes.  Later, DIS, WBD, and FOX announced that they expect their sports streaming joint venture expects to have five million subscribers in the first five years due to its exclusive broadcast rights to popular sports.  FOX CEO Murdoch said Monday that he sees the addressable market at between 50 and 60 million households (half of the current cable TV market).  At the same time, JBLU and SAVE announced they had canceled their $3.8 billion merger agreement, conceding there was no path forward having been denied by the FTC, then losing its appeal to federal court, and most recently, being denied expedited appeal by the US district court of appeals.  Later, WULF announced it had exercised its option with a joint venture started with a fellow miner (Cumulus Coin) in 2023 and will double its bitcoin mining capacity in PA.  The expansion is expected to come online in 2025.  Elsewhere, ALB announced it is launching an ADR “A share” (each worth 1/20th of a share of ALB) with an initial offering of $1.75 billion worth of the preferred stock.  The new stock will trade under the ALB PR A ticker. (Underwriters will have the right to buy an additional $262.5 million of the new stock within 30 days.)  At the same time, BODI announced the sale of its Van Nuys production facility, using the proceeds to make a partial prepayment on an outstanding loan.  Later, AKRO announced a $300 million IPO, with underwriters having the option to buy another $45 million.  At the same time, CHN, a closed-end investment fund focused on China announced it has cut its management fees in light of economic and market challenges for Chinese securities.  Later, Reuters reported that a senior Nippon Steel executive will meet with the head of the United Steelworkers union this month in an effort to secure the union’s support of the Japanese steelmaker’s $14.9 billion acquisition of X.  After the close, a hacker forum posted that UNH had paid a $23 million ransom in a bid to recover data lost to a hack by the Blackcat ransomware gang.  Later, Bloomberg reported that shipments from TSLA’s Shanghai plant fell to the lowest level in more than a year in February (down 16% month-on-month).  The reduction came amidst renewed discounting by competitors and a sales slump caused by the Lunar New Year holiday.  At the same time, AAPL tried to take the PR sting out of its Monday $2 billion fine from the EU by announcing its new Macbook Air laptop computers (which use a new model of CPU it calls the M3) are now available for order. Finally, F reported that vehicle sales jumped higher in February, up 10.5% compared to February 2023. (89% of the vehicles sold were still traditional, but there was still a huge 81% increase in EV sales and a 32% pop in hybrid sales over the same period a year prior.)

In stock legal, governmental, and regulatory news, on Monday, President Biden said that the manufacturers of 10 high-priced drugs have submitted counter offers in the first-ever Medicare drug price negotiations.  (This includes PFE, BMY, and AZN, who lost their legal challenge to negotiations last Friday.)  At the same time, in addition to the $1.95 billion antitrust fine from the EU, a Canadian court approved a $10.6 million settlement in a class-action suit against the tech giant.  (The suit was over AAPL deliberately slowing down iPhone 6 and 7 phones to force sales of new models.) Later, COF won a dismissal by a federal judge in VA related to overcharging cardholders for foreign exchange fees on international transactions.  At the same time, a jury in a US district court in DE gave a mixed verdict on a patent infringement case.  The just ruled partially in favor of AVDL (on a narcolepsy drug patent) and in favor of JAZZ on a second patent.  (ADVL said it would appeal the portion of the case it lost.)  Elsewhere, the FCC announced that its broadband internet subsidy program (used by 23 million mostly rural Americans) will run out of money in May and will cease without additional funding.  T, CMCSA, and VZ called for Congress to extend the program.  Later, the US Dept. of Health and Human Services presented its case to a 5th-circuit court of appeals asking the court to overrule a lower-court order vacating the federal mandate that requires healthcare insurers to offer cancer screenings and HIV-preventing medication at no extra cost to patients.  (A TX-based Christian health insurer had sued to overturn the mandate and won in conservative TX district court.)  If the ruling is upheld, it largely guts the 2010 “Obamacare” mandate.  After the close, the FAA announced that audits of the BA and SPR production operations failed to comply with manufacturing quality control requirements.  (This was a summary announcement and did not include the detailed action plan it will require the companies to implement.)  Also after the close, the state of FL again lost an appeal trying to revive the state’s political ban on any workplace training the state considered “woke.”  As was found by a lower court in 2022, the 11th Circuit Court of Appeals found the state cannot block employers from requiring employees to attend training related to eight concepts the GOP-run state sees as “woke.”  (Two of the three judges on the appeals court panel were conservative Trump appointees.)  In addition, the SEC announced it has further delayed its decision on approval of a new Ethereum spot price ETF.  (The fund request was filed in November and was first put on hold when 11 bitcoin spot-price funds were approved in January.)

Overnight, Asian markets were mostly red.  Hong Kong (-2.61%) was far out front leading the way lower, but only two of the 12 exchanges were even modestly in the green.  In Europe, we see a similar picture taking shape at midday with only five of 15 exchanges showing green and all moves being modest in both directions.  The CAC (+0.03%), DAX (unchanged), and FTSE (-0.01%) leading the mixed picture in early afternoon trade.  In the US, as of 7:30 a.m.), Futures are pointing toward a down start to the day.  DIA implies a -0.15% open, the SPY is implying a -0.25% open, and the QQQ implies a -0.52% open at this hour.  At the same time, 10-year bond yields are back down to 4.186% and Oil (WTI) is off nine-tenths of a percent to $78.02 per barrel in early trading.

The major economic news scheduled for Tuesday includes Feb. S&P Global Service PMI and Feb. S&P Global Composite PMI (both at 9:45 a.m.), Jan. Factory Orders, Fed ISM Non-Mfg. Employment, Feb. ISM Non-Mfg. PMI, and Feb. ISM Non-Mfg. Price Index (all at 10 a.m.), and the API Weekly Crude Oil Stocks report (4:30 p.m.).  We also hear from Fed Vice-Chair Barr (noon and 3:30 p.m.).  The major earnings reports scheduled for before the open are limited to GBTG, FERG, NIO, TGT, and VVX.  Then, after the close, BBAR, CRWD, JWN, and ROST report. 

In economic news later this week, on 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 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, Reuters reported Monday that several fund managers are now exploring ways to change the currency in which their funds do business.  This is after the SEC adopted a rule, taking effect May 28, that requires funds to settle transactions in one day instead of two.  This makes it harder for funds taking money from foreign investors to exchange the other currency for dollars and buy or sell the equities under the transaction and settle all transactions in one business day.  (Changing to doing all business in dollars, would force the foreign investors to do the currency exchange before sending money to the funds.)  Elsewhere, trucking firm SAIA announced it has seen an increase in LTL (less-than-truckload) freight tonnage in the first two months of the year.  The company said its freight volumes were up 11.8% in January and February versus the same months in 2023.  (Since SAIA is a significant trucking firm this may provide some read-through to the economy.)  Meanwhile, OPEC+ announced it had agreed to extend its 2.2-million-barrel-per-day oil production cuts until the end of June.

In China news, at the opening of the Chinese National (Communist) Party Congress, Beijing announced its 2024 GDP target is for growth “around 5%” with an urban unemployment rate target of 5.5%.  At the same time, China said it was targeting the creation or 12 million new urban jobs and a CPI of “around 3%.”  (For reference, in 2023 the National Bureau of Statistics said China averaged 5.2% unemployment in cities with only +0.2% inflation.)  In addition, China has set its 2024 deficit-to-GDP ratio at 3%, down from a late-2023 upward revision to 3.8%.  This all comes one day after China’s Premier Li Qiang broke a 30-year streak of annual public press conferences.  Finally, retail analyst firm Counterpoint reported that AAPL iPhone sales plunged 24% in the first six weeks of 2024. In particular, the analyst noted strong competition from Hauwei, which is seeing a resurgence based on their new model “Mate 60” smartphone.

So far this morning, NIO and VVX reported beats on both the revenue and earnings lines.  Meanwhile, TGT missed on revenue while beating (significantly) on earnings.  Unfortunately, FERG missed on both the top and bottom lines.  It is worth noting that NIO also lowered forward guidance.

With that background, it looks as if the major index ETFs are looking to open lower. DIA is retesting its T-line (it is below its 8ema at the moment), while QQQ has bounced up off its T-line in the premarket. SPY is lower but has not yet reached its T-line for a test. All three are printing tiny-body, indecisive candles that are mostly wick at this point. However, the strong uptrend line is also under pressure from the move lower. It may be worth noting that the SPY and QQQ T-lines continue to rise while DIA’s 8ema is now flat again. So, the short-term is in question and the longer-term strong bullish trend is under pressure this morning. In terms of extension, none of the three major index ETFs is too far from its T-line and the T2122 indicator is back in its midrange. So, both the Bulls and Bears both have room to run if they can gather the momentum. Looking at those 10 Big Dog tech names, nine of the 10 are in the red in the early session, with only NVDA (+1.08%) defying the move lower at this point.

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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