Friday gave us a modestly higher open.  SPY and QQQ both gapped up 0.15%, while DIA opened 0.05% lower.  At that point, all three major index ETFs rallied hard for 45 minutes (SPY and QQQ) or 75 minutes in DIA.  This took the SPY and QQQ to new all-time highs.  However, this was a Bull trap as the rug was pulled out from under the market and we saw a strong and steady selloff all the way until 3:35 p.m.  Only a modest bounce during the last 30 minutes kept them from closing on the lows.  This action gave us large, indecisive, black-bodied Spinning Top type candles in SPY, QQQ, and DIA.  SPY and QQQ were also Bearish Engulfing of the prior candle while DIA was a Bearish Harami compared to the prior candle body.  All three retested their T-line (8ema) with QQQ and DIA remaining just above while SPY crossed just below following the test. 

On the day, six of the 10 sectors were in the red with Consumer Cyclical (-0.58%) out in front leading the way lower.  Meanwhile, Communications Services (+0.89%) led the four gaining sectors.  At the same time, SPY lost 0.39%, DIA lost 0.08%, and QQQ lost 0.52%.  VXX climbed just over one percent to close at a still very low 10.92 and T2122 climbed again, but remains in the center of its mid-range at 61.69.  On the bond front, 10-year bond yields spiked to 4.384% and Oil (WTI) fell slightly to close at $81.52 per barrel.  So, Friday was a volatile day that saw a strong early run met with a sustained selling that only ended with some short-covering.  This all took place on a bit below-average volume in SPY, average volume in QQQ, and slightly above-average volume in DIA.

Friday was also month and quarter end.  For June, SPY gained 3.20%, DIA gained 0.93%, and QQQ gained 6.30%.  Over Q2, SPY gained 4.04%, DIA lost 1.67%, and QQQ 7.91%.  So, as has been the case all year, QQQ and SPY lead (mostly on the strength of the AI trade led by NVDA), while the much less techie DIA followed.

The major economic news scheduled for Friday included May Core PCE Price Index, which was down as expected at +0.1% (month-on-month) compared to a +0.1% forecast and April’s +0.3%.  On the Year-on-Year basis, the May Core PCE Price Index was +2.6% (right on the 2.6% forecast and down from April’s +2.8% reading).  The headline on a Month-on-Month basis the May PCE Price Index was also down as predicted at +0.0% (versus a 0.0% forecast and down from April’s +0.3% number).  On the Year-on-Year basis, May PCE Price Index was +2.6%, right on the +2.6% forecast and down a tick from April’s +2.7%.  At the same time, May Personal Spending was up a tick, but below what was anticipated at +0.2% (compared to a +0.3% forecast and April’s +0.1% value).  Later, the June Chicago PMI was significantly stronger than was expected at 47.4 (versus a 39.7 forecast and May’s 35.4 reading).  Then, Michigan Consumer Sentiment was down but a bit higher than predicted at 68.2 (compared to a 65.6 forecast and May’s 69.1 value). On the future prospects side, Michigan Consumer Expectations were up slightly to 69.6 (versus a 67.6 forecast and May’s 68.8 reading).  Further out, the Michigan 1-Year Inflation Expectations were down strongly to 3.0%, versus the 3.3% forecast and prior reading.  On the longer-term, the Michigan 5-Year Inflation Expectations were also 3.0% (better than the 3.1% forecast and the same as the prior month’s 3.0%).

The most important thing that happened Friday was another (terrible) Supreme Court ruling that was a massive win for corporations and big money in the aptly named case “Relentless v. Dept. of Commerce.”  The decision wiped out the 40-year-old “Chevron Deference,” which had held that Congress is incapable of writing perfectly detailed and crystal-clear laws.  In addition, Courts are not subject experts and are likewise unable to devine either the intent or understand and decide the nuances and issues that are involved.  So, under the previous Chevron Deference, if there was a question of nuance or implementation of an aspect of the law, the courts would defer to the interpretation of the experts at the Federal agency in charge of applying that law.  This new ruling throws that out, saying the courts will decide all such issues (or, theoretically, Congress could revisit every law and repass new revisions every time somebody tries to challenge an aspect of the law). On one hand, this decision is a huge, full-employment jobs program for lawyers. More importantly, it is a license to challenge any and every aspect of regulation that is not clearly and explicitly set out in law.  (If there is any possible way to interpret a law differently than federal agencies have interpreted it in the past, it is now up to a court to decide how it should be construed.)  This drastically reduces the power of the Federal government and means that the courts will decide vastly more of the issues regulating business and personal behavior at the expense of real expertise or speed.  So, a ton of guardrails just got removed from food and drug safety, environmental protection, labor protection, etc. and the world just got much slower. Meanwhile, money got more powerful and the courts just got much, much busier.  This was a huge win for those who want less (or no) regulation.  It was also a huge defeat for anyone who does not trust businesses to ALWAYS do the right thing and act in the best interest of society.  Another outcome is that a lot more of the federal budget will be spent on litigation.

In stock news, on Friday BA (and NASA) again delayed the possible return trip of the company’s Starliner spacecraft.  The announcement said the problems with the BA spacecraft will require at least a “couple more weeks” of testing by engineers before it can be determined if it is safe to attempt the return trip.  In another classic “own goal” the BA executive on the conference call announcing the decision to reporters criticized the press for reports saying the two astronauts in the Starliner crew were stuck in space.  This led to NASA confirming that if worse comes to worse, they can launch a SpaceX (BA rival) mission to retrieve the crew.  Elsewhere, CNBC reported that F now expects to sell a $30k electric vehicle that is profitable within 2.5 years.  On Saturday, AMZN announced it is doubling the free cloud service credits (to $200k) that is gives to startups.  The move comes in an effort to better compete with MSFT, which is making gains in cloud computing market share. Elsewhere, on Sunday US prosecutors met with BA and families of BA crash victims from 2018 and 2019.  The topic of discussion was on whether the US will prosecute BA for violating their consent decree that allowed them to avoid prosecution over those two crashes.  The contention is that the company did not change and improve quality after the consent decree given the many revelations of the last year or so.  On Sunday evening, CNBC reported that the Dept. of Justice is now seeking a guilty plea from BA over the matter. There was no reply from BA when asked for comment.

In stock legal and governmental news, on Friday, the NTSB and FAA announced they are investigating a LUV flight that took off from a closed airport in ME.  At the same time, EU antitrust regulators announced they will release their decision on the HPS $14 billion acquisition of JNPR by August 1.  Later, the US Dept. of Energy said they are bidding to buy $2.7 billion of domestically-supplied uranium to boost the US nuclear energy supply chain.  This will benefit LEU and a British/Dutch company (Urenco) with uranium mining operations in NM.  At the same time, the NHTSA announced it has opened a recall inquiry into more than 120k HMC Ridgeline trucks over failures of the rearview cameras.

Overnight, Asian markets were mostly green.  Only Australia (-0.22%) and Thailand (-0.12%) fell below break-even while Shanghai (+0.92%), Shenzhen (+0.57%), and India (+0.55%) led the region higher.  In Europe, we see green across the board at midday.  The CAC (+1.46%) seems to love first round election results while the DAX (+0.27%), and FTSE (+0.27%) are also leading the region higher in early afternoon trade.  In the US, as of 7:30 a.m., Futures are pointing toward a modestly green start as well.  The DIA implies a +0.18% open, the SPY is implying a +0.19% open, and the QQQ implies a +0.18% open at this hour.  At the same time, 10-Year bond yields are spiking again up to 4.412% and Oil (WTI) is up another two-thirds of a percent to $82.05 per barrel in early trading.

The major economic news scheduled for Monday includes S&P Global Mfg. PMI (9:45 a.m.), May Construction Spending, June ISM Mfg. Employment, June ISM Mfg. PMI, and June ISM Mfg. Prices (all at 10 a.m.).  There are no major earnings reports set for Monday either before the open or after the close.

In economic news later this week, on Tuesday we get May JOLTs Job Openings, API Weekly Crude Oil Stocks, and Fed Chair Powell speaks (9:30 a.m.).  Then Wednesday, MARKETS CLOSE AT 1 P.M.   In addition, JUNE ADP Nonfarm Employment, Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, May Trade Balance, S&P Global Services PMI, S&P Global Composite PMI, May Factory Orders, June ISM Non-Mfg. Employment, June ISM Non-Mfg. Prices, EIA Weekly Crude Oil Inventories, and FOMC Meeting Minutes are reported.  NY Fed President Williams also speaks.  On Thursday, MARKETS ARE CLOSED.  However, we still get the Fed Balance Sheet.  Then on Friday, June Avg. Hourly Earnings, June Nonfarm Payrolls, June Private Nonfarm Payrolls, June Participation Rate, and June Unemployment Rate are reported.  NY Fed President Williams also speaks. 

In terms of earnings reports later this week, on Tuesday we hear from MSM, PSNY, and RDUS.  Then Wednesday, STZ reports.  There are no earnings reports Thursday or on Friday.

In miscellaneous news, on Friday, Bloomberg reported it has seen an unpublished government report that claims the lithium market is about to change.  Even with huge deposits and despite massive investment from outside the country, Argentina has only had one lithium mine come online in the last 10 years.  However, the report cited by Bloomberg claims that four new lithium mines will come online in Argentina in the next few weeks to months.  This will nearly double the production capacity of that fourth-largest lithium producing country.  Elsewhere, early Monday an SEC filing showed that social media poster (leader of the meme stock movement) has taken a 6.6% ownership position in CHWY. (This confirms the huge volatility caused by his cryptic posting of a dog picture Thursday.)

In foreign election news, polls released Saturday show the UK is headed for its first Labor government since 2010.  With the election set for July 4, the Labor Party is at 40%, the current-government Conservatives are at 20% (and falling), and the Reform Party is at 17%.  Across the English Channel, the first round of the French election took place Sunday.  The far-right National Rally party won 34%, the left-wing New Popular Front won 28.1%, and President Macron’s centrist Ensemble party came in third at 20.3%.  All other parties will be eliminated in next Sunday’s second and final round of voting.  So, between now and next week, the fight will be on to capture the 17%-18% of votes that were cast for parties eliminated yesterday.  (It is worth noting that in just-dissolved Parliament, Macron’s party only had 43% of the seats.  So, he was a coalition President even in the last Parliament.)

With that background, it looks as if markets are starting the premarket modestly stronger. All three major index ETFs retested their T-line in the early session but have made modest moves up off that retest. It is worth noting that SPY and QQQ have printed indecisive Spinning Top-type candles so far this morning. All three major index ETFs remain above their T-line (8ema). Again, remember that despite intraday movement, all three major index ETFs are still quite near their all-time highs. So, the short-term trend is modestly bullish. However, the mid-term and especially the longer-term trend in all three major index ETFs remains very bullish. In terms of extension, none of those three are extended above their T-line and the T2122 indicator is in its mid-range. Therefore, the market has plenty of room to run in either direction. With regard to those 10 big dog tickers, eight of the 10 are in the green this morning. However, the biggest dog of all, NVDA (-1.10%) is one of the two laggards.

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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