Wednesday started with a strong bullish gap and then the rest of the day was really a sideways grind punctuated by small rallies and selloffs. The SPY gapped up 0.87%, DIA gapped up 0.92%, and QQQ gapped up 0.86%. However, from there we saw a major divergence with SPY and QQQ continuing to follow through with a rally the first hour before slowly grinding sideways with a slight bearish trend. After the 5-minute reaction to the Fed decision/statement at 2 p.m., SPY was back to its opening level and QQQ was half way back down to that point. The rest of the day was a roller coaster ride for those two leading index ETFs that left them little changed from the 2 p.m. level. Meanwhile, after the gap higher, DIA sold off slowly and steadily all day, recrossing the gap on the Fed 5-minute selloff and then riding waves sideways the rest of the day. DIA retested and failed its T-line (8ema) from below while SPY and QQQ both printed new all-time highs and new all-time high closes.This action gave us Shooting Star type candles in the SPY and QQQ (more body on QQQ’s star) and a gap-up Bearish Engulfing of a Doji in the DIA.
On the day, six of the 10 sectors were in the green with Technology (+1.97%) way out in front (by almost a percent) leading the rest of the market higher. Meanwhile, it was Communications Services (-0.97%) that was lagging well behind the other sectors. At the same time, SPY gained 0.82%, DIA lost 0.07%, and QQQ gained 1.31%. VXX was down almost 2%, closing at a very low 10.89 and T2122 spiked higher but settled back to close in the center of its mid-range at 51.68. On the bond front, 10-year bond yields fell sharply to 4.318% and Oil (WTI) was 0.56% to close at $78.33 per barrel. So, what we saw Wednesday premarket joy at good CPI data and then a drift lower until the Fed data wasn’t terrible. The remainder of the day was a roller coaster ride on every word Powell uttered and the tea leaf reading of dot plots and statement parsing.
The major economic news scheduled for Wednesday included May Core CPI (month-on-month), which came in down and a tick lower than expected at +0.2% (compared to a +0.3% forecast and April reading). On a year-on-year basis, May Core CPI was also a tick lower than expected and two-tenths down from April at +3.4% (versus the +3.5% forecast and +3.6% April value). At the same time, the headline May CPI (month-on-month) was flat at +/-0.0%, lower than the forecasted +0.1% and well down from April’s +0.3% number. On a year-on-year basis, May CPI was down a tick to +3.3% (versus the +3.4% forecast and April reading). Later, EIA Weekly Crude Oil Inventories gave us an unexpected inventory build of 3.730 million barrels (compared to a forecasted draw down of 1.200 million barrels and the prior week’s 1.233-million-barrel build). Later, the May Federal Budget Balance was far higher than predicted at -$347.0 billion (versus a -$279.6 billion forecast and far worse than April’s +$201.0 billion surplus).
However, the big afternoon news was from the Fed, which left Interest Rates unchanged at 5.25%-5.50%. At the same time, the FOMC Economic Projections (dot plots) showed a dramatically higher Q2 Current Year Interest Rate Projection of 5.1% (compared to a Q1 forecast of 4.6% this year and even well above the expected 4.9% value). Meanwhile, the Q2 1st Year Interest Rate Projection was 4.1% (which was dead on the predictions but two ticks higher than Q1’s forecast of 3.9% for 2025). The Q2 2nd Year Interest Rate Projection remained unchanged at 3.1% (in line with the forecast and Q1 estimate for 2026). Finally, the Q2 3rd Year Interest Rate Projection was up, but in line with predictions at 2.8% (compared to a 2.8% forecast of the forecast and up from Q1’s 2.6% average projection for long-term).
In terms of words, the Fed Statement said there has been “modest further progress toward the committee’s 2 percent inflation objective.” It also removed the entire section about reducing the Fed’s pace of decline in reducing its balance sheet. During his press conference, Fed Chair Powell said “Our economy has made considerable progress toward both goals over the past few years.” He continued, “We’ll need to see more good data to bolster our confidence that inflation is moving sustainably toward 2%.” … “We see today’s report as progress and as, you know, building confidence … But we don’t see ourselves as having the confidence that would warrant beginning to loosen policy at this time.” Finally, during questioning, he seemed to indicate that jobs data may be overstated. Still, he said the jobs market remains strong and the cooling is gradual (which is a good thing).
After the close, AVGO reported beats on both revenue and earnings. Meanwhile, PLAY reported misses on both the top and bottom lines. It is worth noting that AVGO also raised its forward guidance.
In stock news, on Wednesday FDX announced it is cutting 2,000 “back office” jobs in Europe amid weak freight demand. Later, CAT hiked its dividend by 8% to $1.30/share and announced an additional $20 billion in stock buybacks. At the same time, LUV CEO Jordan announced that he will not resign in the face of calls for him to do so from activist investor Elliott Investment Mgmt. (Elliott recently announced they’d taken a $1.9 billion position in LUV and openly called for leadership change.) Later, SPCE announced a 1-for-20 reverse stock split to take effect on June 14. After the close, JPM raised its guidance, saying it expects investment banking revenue to jump 25%-30% in Q2.
Elsewhere, just a reminder that the TSLA shareholder meeting and vote on CEO Musk’s $56 billion pay package will be held today.
In stock legal and governmental news, on Wednesday, the NHTSA announced that FSRN (Fisker electric vehicles) will recall 18,000 cars due to faulty software that cause the cars to act “in non-compliance with safety standards.” Later, a US appeals court threw out a lower court order that had agreed with the NRLB ruling prohibiting AMZN from firing union supporters. The ruling essentially allows AMZN to fire employees it thinks support unions or unionization of AMZN facilities. At the same time, thousands of AMZN “flex drivers” (who work like UBER drivers) classified as contractors have filed arbitration claims. The 15,800 drivers submitted claims, seeking to be treated as full-time employees, paid overtime, and reimbursed for work-related expenses like mileage and cell phone use. (453 similar cases are being litigated in courts.)
Meanwhile, a lawsuit was filed against CAG alleging the company has been deceiving consumers by both “short weighting” its packages and shipping frozen fish products that were not 100% fish. At the same time, Reuters reported that the NHTSA is seeking information from GOOGL related to a series of incidents involving the Waymo (the company’s self-driving vehicles unit). The investigation stems from 22 reports the NHTSA received in May related to 17 collisions.) Later, after the close, the FAA Administrator (head) Whitaker told the Senate that it will maintain increased in-person oversight of BA and SPR for the foreseeable future.
Overnight, Asian markets were mixed again but leaned to the green side with eight of the 12 exchanges above break-even. Taiwan (+1.19%), New Zealand (+1.11%), South Korea (+0.98%), and Hong Kong (+0.97%) paced the gains. However, in Europe, we see red across the board at midday. The CAC (-1.23%), DAX (-1.05%), and FTSE (-0.45%) lead the region lower in early afternoon trade. Meanwhile, in the US, as of 7:30 a.m., Futures are pointing toward a mixed to green open. The DIA implies a -0.29% open. However, SPY implies a +0.13% open and QQQ implies a +0.66% open at this hour. At the same time, 10-year bond yields are at 4.316% and Oil (WTI) is off by 0.65% to $77.99 per barrel in early trading.
The major economic news scheduled for Thursday includes Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, May Core PPI, and May PPI (all at 8:30 a.m., and Fed Balance Sheet (4:30 p.m.). We also hear from Fed member Williams (noon) and Treasury Sec. Yellen (noon). There major earnings reports scheduled for before the open include Thursday, KFY and SIG. Then, after the close, ADBE and RH report.
In economic news later this week, on Friday, May Import Price Index, May Export Price Index, Michigan Consumer Sentiment, Michigan Consumer Expectations, Michigan 1-Year Inflation Expectations, Michigan 5-Year Inflation Expectations, and the Fed Monetary Policy Report are reported.
In terms of earnings reports later this week, on Friday, there are no reports scheduled.
So far this morning, SIG and KFY reported beats on both the revenue and earnings lines.
In miscellaneous news, AAPL’s two-day rally Tuesday and Wednesday (following its “AI-heavy” developer’s conference) has taken it back to the top spot as most valuable (largest market cap) in the world. AAPL was worth $3.29 trillion at the close mid-week. Elsewhere, the US Treasury expanded sanctions on Russia Wednesday. The new sanctions forced Russia to halt all Dollar-based and Euro-based trading on its main stock exchange. Meanwhile, the head of the Consumer Financial Protection Bureau testified before Congress that it has reported that JPM and PYPL intend to use their customer’s payment data to allow targeted advertising. Chopra called on Congress to pass laws preventing this financial transaction data from being sold for marketing purposes. Finally, an EPA study found the air in southeast Louisiana (Chemical alley) is toxic, containing a thousand times higher levels of ethylene oxide than is considered safe. Long-term exposure to this chemical is known to cause cancer. (Dangerous levels start at 11 parts per trillion, but measured levels reached 40 parts per billion.)
In Fedwatch news, following Wednesday’s announcements and statements, the Fed Funds futures show 91.7% of traders expect no cut in July. The probabilities also show a 61.5% chance of a September cut, a 74.3% probability of a cut by the meeting in November, and a 93.5% likelihood of a cut by the December meeting. With that said, the average of the Fed dot plots now expects one rate cut this year.
With that background, the Bulls gapped QQQ and to a lesser extent SPY higher to start the premarket. (Mostly on an Elon Musk tweet that he is confident he has the votes to get his $56 billion pay package approved later today.) Meanwhile, DIA gapped lower to start the early session. All three of the major index ETFs have printed indecisive black-bodied candles since that start to the morning. Again, SPY and QQQ sit at all-time highs as they wait for the open. So, we have a mixed picture in the short-term, but on numbers, the Bulls have the upper hand, just certainly not decisively. At the same time, the mid-term remains bullish in all three major index ETFs and the longer-term market remains very Bullish in trend. In terms of extension, QQQ is now extended far above its T-line and is badly in need of rest or pullback. Neither of the others are extended from their T-line. However, the T2122 indicator is back in the the center of its mid-range. So, the bottom line is that outside of the QQQ, the market has room to run in either direction. With regard to those 10 big dog tickers, six of the 10 are in the red this morning. However, TSLA (+6.86%) and NVDA (+2.08%) are two of the four in the green (and remember those two trade much more stock than any others on average…many times more in fact). Remember, that we do get PPI numbers and Jobless Claims this morning and that has the potential to move markets (although usually not as much as yesterday’s CPI numbers). So, beware of volatility early.
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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