Friday was a reversal day in the market.  SPY opened 0.11% higher, DIA opened just 0.05% higher, and QQQ opened 0.06% higher.  After that open, all three major index ETFs rally significantly higher in the first hour.  However, at that point, all three reversed and sold off until 1:45 p.m.  The next reversal saw a significant bounce up off the lows for an hour in the SPY, DIA, and QQQ.  Then, once again, we reversed and all three sold off the last hour of the day.  This action gave us black-bodied candles in all those major index ETFs.  The QQQ printed a Bearish Engulfing candle that crossed back down through its T-line (8ema).  At the same time, SPY gave us a Bearish Engulfing candle with a large upper wick that remained above its 8ema.  Meanwhile, DIA printed a Gravestone Doji-type candle that retested its T-line from below and closed just back below that level.  This happened on above-average volume in the DIA and especially QQQ.  SPY gave us just below-average volume.

On the day, six of the 10 sectors were red as Technology (-1.24%) was way out in front leading the way lower.  Meanwhile, Communications Services (+0.70%) and Consumer Cyclical (+0.65%) held up better than the other sectors.  At the same time, SPY lost 0.60%, the DIA lost 0.12%, and the tech-heavy QQQ lost 1.44%.  VXX rose 2.62% to close at 14.48 and T2122 fell but remained just inside the overbought territory at 83.14.  10-year bond yields fell to 4.077% and Oil (WTI) dropped a.37% to close at $77.85 per barrel.  So, Friday saw the Bulls open the market very modestly higher and try to follow through for an hour.  However, profit-taking in those mega-cap AI names (such as NVDA -5.55%, INTC – 4.66%, and AMD -1.89%) proved too much to fight.  In fact, of the 10 “Big Dog” names, we saw a role reversal as only beaten-down AAPL (+1.02%) and GOOGL (+0.77%) were in the green.  Those tickers alone decide where the market is going on most days.

The major economic news on Friday included Feb. Avg. Hourly Earnings, which grew at a slowing pace at +4.3% (Year-on-Year) compared to a forecast and January reading of +4.4%.  The slowing growth of wages can be seen better on a Month-on-Month basis where they came in at +0.1% (versus a forecast of +0.2% and a January reading of +0.5%).  At the same time, Feb. Nonfarm Payrolls blew past expectations at +275k (compared to a forecast of +198k and even the January +229k).  On the private side, February Private Nonfarm Payrolls also were hotter than predicted at +223k (versus a forecast of +160k and the January value of +177k).  The Feb. Participation Rate remained steady at 62.5% (the same as in January). Interestingly, even with a much larger than anticipated new job growth, the Feb. Unemployment Rate grew to 3.9% (up from January’s 3.7%).  That marks 25 months of unemployment below 4%, which is the longest streak of “full employment” since the 1960s.

In stock news, on Friday, BP announced that its overall carbon emissions climbed in 2023 for the first time since 2019.  However, the company said it still plans to reduce its emissions by 10-15% by 2025 and 20%-30% by 2030 (both compared to the 2019 baseline).   Later, MMM announced the finalization of its plan to spin off its Healthcare business unit (now going by the name Solventum) at the end of March.  On April 1, Solventum will trade under the SOLV ticker.  (MMM will retain 19% ownership of SOLV.)  At the same time, RIVN announced that it has received 68,000 purchase reservations for its recently announced R2 model in less than 24 hours of accepting reservations.  (The R2 will have a base model MSRP of $45,000.)  Later, Reuters reported the consensus of several IT consultancies that it may take months for UNH to make a full recovery from the ransomware attack that shut down its operations 2.5 weeks ago.  (This has had a crippling effect on healthcare providers and patients, who cannot get preapprovals, submit claims, or submit reimbursement requests.  For scale reference, UNH processes about 50% of all medical claims for 900k doctors, 5,500 hospitals, and 600 labs. Many of those providers have already had to seek emergency loans to prevent operational impacts.)  However, UNH said it thinks it will be able to restore its medical claims and payments systems by March 18.  Elsewhere, Reuters reported that GOOGL’s new facility (dedicated to AI) in Mountain View CA, is state of the art…except it has inoperable or at best spotty Wi-Fi coverage.  At the same time, BTTR announced a 1-for-44 reverse split effective March 20.  The move was taken to maintain compliance with NYSE listing rules.  Later, MSFT announced that hackers tied to Russian intelligence are again trying to break into its systems using data stolen from corporate emails in January.

In stock legal, governmental, and regulatory news, on Friday, a three-judge panel of the US Court of Appeals ruled unanimously (3-0) that cryptocurrency exchange Binance must face a lawsuit from investors alleging the company violated US securities laws by selling unregistered tokens, which resulting in investor losses when the tokens lost most of their value. Later, the FAA and NTSB announced they are investigating a UAL-operated BA 737 MAX jet that rolled off the runway in Houston.  No injuries were reported, but this was the third (of four) such incidents of a UAL-operated BA plane in the last week. (Saturday a UAL-operated jet was diverted to Los Angeles after a hydraulic problem following take off.)  At the same time, Bloomberg reported that TSM will be awarded $5 billion in federal grants (Commerce Dept.) for setting up chip fabs in AZ.  (TSM is on record saying that it will invest $40 billion in those facilities.)  Later, the FDA delayed LLY’s experimental treatment for Alzheimer’s disease.  (The FDA will hold a meeting of outside experts to discuss safety and efficacy based on clinical trial data.  No date for the meeting has been set.)  That decision was both unexpected and a disappointment to LLY, which expected the drug to get full use approval later this month.  At the same time, AAPL backed down (after a day) in its battle with game maker Epic Games, unlocking Epic developer accounts.  (AAPL’s move, under pressure from EU regulators, cleared the way for Epic to open its own game store on iPhone and iPad devices…but only in Europe.  Later, AMPY responded to reports made to CA environmental regulators about an oil sheen off the coast of Huntington Beach CA.  AMPY pre-emptively announced that there is no evidence the oil slick has any connection to its oil drilling operations in the area.  At the same time, the FDA approved NVO’s Wegovy weight-loss drug for use in lowering the risk of stroke and heart attack in non-diabetic patients.  (Wegovy has a list price of $1,349 for a 1-month supply and the move is expected to help broaden usage approval from insurers.) Later Friday night, BA said it believes the required documents detailing the removal of a key part from its 737 MAX 9 jets were never created.  This comes after BA said it was unable to find documentation on the removal of four bolts from the 737 MAX 9 door plugs.  Executive VP Ojakli told the US Senate, “We have looked extensively and have not found any such documentation” and the company’s working hypothesis was “the documents required by our processes were not created when the door plug was opened.”  At the same time, a TX federal judge (sounds right) issued a ruling striking down a US NLRB rule that required companies to treat many workers as employees rather than independent contractors, requiring the companies to bargain with unions representing those workers.  (The rule was set to take effect today.)  The NRLB is expected to appeal.  Finally, the Wall Street Journal reported Saturday that the US Dept. of Justice had opened a criminal investigation into the ALK blowout involving the BA 737 MAX 9 jet door panel in January.  The investigation is about whether BA complied with an earlier consent decree (settlement) related to the two fatal crashes of 737 MAX jets in 2018 and 2019.

Overnight, Asian markets were mostly in the red but the biggest movers (as a group) were in the green.  Shenzhen (+2.27%), Hong Kong (+1.43%), and Shanghai (+0.74%) led portions on the region higher.  Meanwhile, Japan (-2.19%) and Australia (-1.82%) were the main movers of the eight red exchanges.  In Europe, with two minor exceptions, we see red across the board at midday.  The CAC (-0.24%), DAX (-0.52%), and FTSE (-0.38%) are setting the tone and leading the region lower in early afternoon trade.  In the US, as of 7:30 a.m., Futures are pointing toward a modestly red start to the day.  The DIA implies a -0.22% open, the SPY is implying a -0.19% open, and the QQQ implies a -0.23% open at this hour.  At the same time, 10-year bond yields are at 4.083% and Oil (WTI) is down a half of a percent to $77.64 per barrel in early trading.

The only major economic news scheduled for Monday is the NY Fed 1-Year Consumer Inflation Expectation Survey at 10 a.m.  The major earnings reports scheduled for before the open are limited to FTRE.  Then, after the close, CASY, ORCL, and MTN report. 

In economic news later this week, on Tuesday we get Feb. Core CPI, Feb. CPI, Feb. Federal Budget Balance, and API Weekly Crude Oil Stocks report.  Then Wednesday, EIA Crude Oil Inventories are reported.  On Thursday, we get Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, Feb. Core PPI, Feb. PPI, Feb. Retail Sales, Jan. Business Inventories, Jan. Retail Inventories, and Fed’s Balance Sheet.  Finally, on Friday, Feb. Export Price Index, Feb. Import Price Index, NY Empire State Mfg. Index, Feb. Industrial Production, Michigan Consumer Sentiment, Michigan Consumer Expectations, Michigan 1-Year Inflation Expectation, and Michigan 5-Year Inflation Expectation are reported.

In terms of earnings reports later this week, on Tuesday, ADM, HIS, IGT, KSS, ONON, QFIN, CLOV, and RXT report.  Then Wednesday, we hear from ARCO, DLTR, WOOF, ACDC, WSM, ZIM, and LEN.  On Thursday, AVAH, CSIQ, DKS, DG, GIII, BEKE, AGCO, ADBE, ALTG, TLNE, and ULTA report.  Finally, on Friday, we hear from ERJ and JBL.

So far this morning, FTRE missed on both the top and bottom lines.  FTRE also lowered its forward guidance.

In miscellaneous news, on Friday evening, the US Senate passed the first six funding bills, sending them to President Biden.  The President signed them into law at the last minute, averting the first partial shutdown of government and funding operations through September. The second shutdown cliff comes March 22. Elsewhere, on Saturday, Reuters reported that Australian farmers had ripped out millions of grape vines after 2023 over-production of wine crushed global wine prices.  (In 2023, Australia produced more than two years’ worth of wine and still has two years’ worth of win in storage.)  Australia is the world’s fifth-largest exporter of wine.  Major wine producers like CG announced plans to focus more on top-end wines and cut back lower-end vintages.

Elsewhere overseas, China announced it is in the process of raising $27 billion to fund its next push into home-grown semiconductor manufacturing.  The money was raised from local governments and state agencies into what is known as “the big fund” as China prepares to sharply escalate curbs on technology-related sales to that country.  This also comes amidst China’s own “AI craze” as it too has recognized that as the next area of arms race for the world.  Meanwhile, the European Central Bank said it could begin lowering interest rates in June.  The ECB now forecasts that European inflation will fall back to its 2% target by next year, but that waiting that long to begin rate cuts would cause a recession.  (This came at the same time US Fed Chair Powell told the Senate that the FOMC is “getting close” to the confidence level needed to begin its own cuts.

With that background, it looks like the Bears will start the week in control. All three major index ETFs gapped down a bit and are printing black-body candles in the premarket. SPY is retesting its T-line from above in the early session while DIA and QQQ both started below that level. It is also worth noting that the SPY 8ema is flat while both the QQQ and DIA T-lines have rolled over. So, the short-term trends is now bearish in all three while the strong bullish longer-term trend is under serious test. In terms of extension, none of the three major index ETFs is too far from its T-line. However, T2122, is sitting just inside of overbought territory. Both sides still have room to run if they can gather the energy. Looking at those 10 Big Dog tech names, six are in the red this morning. Of particular note is that the big AI names (NVDA, AMD, and INTC) are toward the bottom of that group in terms of performance in the premarket.

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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