On Tuesday, markets gapped down to start the day.  SPY opened 0.38% lower, DIA opened down 0.32%, and QQQ opened 0.72% lower.  After that, all three major index ETFs traded lower most of the day (interspersed with sideways periods).  However, at 3:30 p.m. all of them rallied the last 30 minutes of the day.  This action gave us gap-down, large black candles with significant lower wicks.  (SPY could also be seen as an Evening Star type of signal.)  All three also crossed below their T-line (8ema) during the day.  This happened on above-average volume in the QQQ, average volume in the DIA, and less-than-average volume in the SPY.

On the day, six of the 10 sectors were in the red again as Technology (-2.17%) was far and away the biggest loser.  Meanwhile, Energy (+0.50%) held up better than the other sectors.  At the same time, Utilities (+1.35%) by far (by 0.80%) held up better than the other sectors.  The SPY lost 1.00%, the DIA lost 1.04%, and the tech-heavy QQQ lost 1.79%.  VXX jumped 4.13% to close at 14.13 and T2122 fell back to the center of its mid-range at 57.48.  10-year bond yields plummeted to 4.139% and Oil (WTI) fell 0.74% to close at $78.15 per barrel.  So, Tuesday was the Bears’ day, gapping down and following through until the last 30 minutes saw some short covering.   

The major economic news on Tuesday included S&P Global Service PMI, which came in above expectation at 52.3 (compared to a forecast of 51.3 but down from the prior month’s reading of 52.5).  At the same time, the S&P Global Composite PMI also came in higher than predicted at 52.5 (versus a 51.4 forecast and above the prior month’s 52.0 value).  Later, January Factory Orders were down 3.6% (compared to a -3.1% forecast and far below the December -0.3% reading).  At the same time, the Feb. ISM Non-Mfg. Employment Index was down to 48.0 (versus a forecast of 51.4 and a January value of 50.5).  Meanwhile, the Feb. ISM Non-Mfg. PMI also came in lower than expected at 52.6 (compared to the 53.0 forecast and the January 53.4 reading).  At the same time, the Feb. ISM Non-Mfg. Price Index also showed a decline to 58.6 (versus a forecast of 62.0 and the prior value of 64.0).  So, ISM Services are giving the Fed what they wanted to see with declining employment, index, and prices.  Later the API Weekly Crude Oil Stocks report showed a smaller-than-expected inventory build of 0.423 million barrels (compared to a forecast of +2.600 million barrels but far less than the prior week’s +8.428 million barrels).

After the close, BBAR, CRWD, JWN, and ROST all reported beats on both the revenue and earnings lines.  (This was a massive 555% beat on earnings by BBAR.)  It is worth noting the CRWD raised forward guidance (more than analysts had expected).

In stock news, on Tuesday, AMZN made an interesting policy change, eliminating data transfer fees for customers who want to transfer their business to a different cloud computing provider.  (The move is intended to eliminate a barrier to getting customers to try their AWS cloud computing service.  It also gets ahead of EU regulations that will require cloud providers to make it easier for customers to change providers.)  At the same time, ACN announced it had agreed to acquire the online learning platform Udacity for an undisclosed amount. (The company also announced it plans to spend more than $1 billion in the technology training and education market in the next three years.)  Later, TSLA halted work (likely until at least early next week) at its German factory near Berlin after a suspected arson attack left the plant without power Tuesday.  (This will cost TSLA hundreds of millions of dollars.)  At the same time, labor unions gave light to the real reason SBUX announced its “framework” for dealing with unions and collective bargaining last week.  A coalition of unions announced an end to their fight for SBUX board seats, withdrawing their three board seat candidates one week before the election.  Elsewhere, Reuters reported that many healthcare providers are still not getting paid by UNH after the insurer’s recent ransomware attack.  The article claims that many smaller providers are running low on cash as they are forced to absorb the upfront costs of being unable to collect payment.  At the same time, CDNS announced it would buy German software company Beat CAE for $1.24 billion ($744 million in cash and the rest in stock).  Later, META reported that both FaceBook and Instagram suffered a two-hour global outage starting at 10 a.m. Eastern Tuesday and caused by technical issues.  At the same time, BOX announced it has enhanced its AI capabilities by integrating into MSFT’s Azure cloud services.  Later, TM announced it would invest $2.22 billion in Brazil in two tranches before 2030.  The investment will result in a new vehicle designed and built in the country.  After the close, TGT joined a crowd of retail companies expanding, announcing it would add 300 new stores.  (WMT announced adding 150, WMT Sam’s 30, etc.)

In stock legal, governmental, and regulatory news, on Tuesday, President Biden put an $8 cap on bank late fees for late credit card payments.  (The current average late fee is $31.  However, it is unclear which banks will see the biggest revenue hit.)  Later, a US federal appeals court unanimously ruled in favor of AAPL, GOOGL, DELL, MSFT, and TSLA, rejecting an appeal by former child miners alleging the companies and their suppliers had used and then obscured the use of “forced child labor” in the production of cobalt and lithium for their batteries.  (The appeals court rules that buying materials from the suppliers, even if knowing supplier practices, did not constitute “participation in the venture.”) At the same time, Republican Senator Rubio called for a $20,000 tariff on cars (Chinese make) brought in from Canada.  He said the vehicle imports are “flooding US auto markets.”  (He said the proposed tariff legislation would also cover Chinese vehicles made in Mexico, but specifically focused on Canada.)  At the end of the day, the latest JNJ talc trial ended in a hung jury in FL, causing a mistrial.  The attorney for the plaintiffs said they intend to file and try the case again.  Elsewhere, an OR state jury ordered BRKB subsidiary PacifiCorp to pay $29.2 million to nine homeowners (and a summer camp) for property damage caused by wildfires sparked by the company’s equipment.  (This was the second of three test cases on the matter by different plaintiffs with overall property damage near $1.9 billion.)  Later, Medicare and Medicaid said they would accelerate payments to healthcare providers in an attempt to partially offset the lack of funds caused by the UNH hack that has stopped many payments for nearly two weeks now.

In late-breaking news, mortgage demand surged 11% last week. The Mortgage Bankers Assn. said this was primarily due to a rush of new homes hitting the market for the Spring. (There were 15% more homes on the market at the end of February than at the same time in 2023. Of note was the $200k – $350k category where supply rose more than 25% year over year.) Still, the national average mortgage rate did fall slightly to 7.02% (from 7.04%) for a 30-year, fixed, conforming loan. So, that could also have been a modestly contributing factor. (Loan origination points remained the same at 0.67.)

Overnight, Asian markets were mixed but leaned toward the green side with seven of the 12 exchanges in positive territory.  Hong Kong (+1.70%), Singapore (+0.93%), and Thailand (+0.83%) led the gainers while all the losses were a third of a percent or less.  In Europe, with just two modest exceptions, the bourses are all green at midday.  The CAC -0.01%), DAX (-0.04%), and FTSE (+0.30%) lead the region on volume in early afternoon trade.  In the US, as of 7:30 a.m., Futures are pointing toward a green start to the day.  The DIA implies a +0.21% open, the SPY is implying a +0.32% open, and the QQQ implies a +0.61% open at this hour.  Meanwhile, 10-year bond yields have fallen to 4.158% and Oil (WTI) is up just over 1% to $78.97 per barrel in early trading.

The major economic news scheduled for Wednesday includes Feb. ADP Nonfarm Employment Change (8:15 a.m.), Jan. JOLTs Job Openings (10 a.m.), EIA Crude Oil Inventories (10:30 a.m.), and Fed Beige Book (2 p.m.).  Fed Chair Powell testifies (10 a.m.) before the House, Fed member Daly speaks (noon), and Kashkari (3:15 p.m.).  The major earnings reports scheduled for before the open include ANF, CPB, SID, FL, JD, KFY, REVG, THO, UNFI, and YSG.  Then, after the close, SUPV, and VSCO report. 

In economic news later this week, 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 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, major business lobbyist groups (including the US Chamber of Commerce) announced Tuesday they will file suit against the Biden Administration Labor Dept. rule making it more difficult to treat workers as independent contractors to avoid paying minimum wage, overtime, benefits, collecting taxes, and minimum working conditions.  The rule takes effect March 11.  The groups filed suit in Beaumont TX, where they hope the benefit of the extremely conservative federal court and appeals district will make the difference in their favor.  Elsewhere, Bitcoin rose above $69,000 to an all-time high Tuesday but then immediately fell 8% to below $62,000 in very volatile trading.  Meanwhile, Bloomberg reported an interview with the CEO of the National Assn. of Manufacturers Timmons.  Timmons said his members are in desperate need of immigrant labor candidates to ease a severe labor shortage caused by US unemployment rates being below 4% for the first time in more than 60 years.  Timmons said his group’s analysts believe the inability to legally hire migrant applicants (or get other workers at those wages from other sources) could lead to a loss of $1.75 trillion in GDP by the end of the decade.  He also said the government is overwhelmed with applications due to the influx of immigrants.  He called for more funding/staff for those federal agencies. So, manufacturers need more workers, illegal immigrants can’t be hired, and the government can’t approve legal migrants fast enough to supply the demand according to that group.

In unsurprising energy news, Ukraine’s Energy Minister said the country ruled out any deals to allow Russian natural gas to transit their country via pipeline after the current deals expire later this year.  EU sources had been optimistic a deal could be worked out, but Ukraine’s minister told an interviewer at the International Atomic Energy Agency that “There are not any possible solutions” to allowing this to happen.  (Europe still gets 8% of its natural gas from Russia as of the end of 2023, down from over 40% in 2021.) This could pose another opportunity for US (or Middle Eastern) LNG exports by year’s end.

So far this morning, FL, JD, KFY, and REVG have reported beats on both the revenue and earnings lines.  Meanwhile, UNFI missed on revenue while beating on earnings.  Unfortunately, THO missed on both the top and bottom lines.  (ANF, BF.B, CPB, and SID report closer to the opening bell.)

With that background, it looks like the Bulls are trying to rebound in the premarket today. SPY and QQQ have both crossed back above their T-line (8ema) in the early session. Meanwhile, DIA as if the major index ETFs are looking to open lower. DIA is printing the largest (white-body) candle of those three major index ETFs. (DIA is giving us a Bullish Harami so far in the premarket.) So, the SPY and QQQ short-term trends are bullish with prices above a rising T-line in both. However, DIA is more bearish with the price below a falling 8ema. Similarly, the strong bullish longer-term trend persists in the SPY and QQQ while DIA is in a new downtrend. 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 sides have plenty of room to run if they can gather the momentum. Looking at those 10 Big Dog tech names, all 10 are in the green in the early session, with the AI names leading the market higher early on.

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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