The Bears got their revenge Thursday.  SPY gapped up 0.39%, DIA gapped up 0.34%, and QQQ opened 0.15% higher on good premarket data.  At that point, all three major index ETFs saw follow through to the upside, reaching the highs of the day after 30 minutes.  However, then some bad data hit and the Bears sprung their Bull Trap as all three sold off sharply until 3 p.m.  This was only broken by a profit-taking rally the last hour.  This action gave us large, black-bodied, Bearish Engulfing candles (with wicks on both ends), that crossed below the T-line (8ema) in all three major index ETF.  This happened on heavier-than-average volume in the SPY, DIA, and QQQ.

On the day, seven of the 10 sectors were in the red with Technology (-3.07%) out in front of Consumer Cyclicals (-2.45%) and the rest of the sectors.  Meanwhile, the safe haven Utilities (+1.09%) was far ahead of Consumer Defensive (+0.42%) holding up better than the other sectors.  At the same time, SPY fell 1.42%, DIA fell 1.29%, and QQQ fell 2.42%.  VXX spiked 9.21% to close at 50.51.  Meanwhile, T2122 plummeted down below the center of the mid-range at 44.94.  On the bond front, 10-year bond yields dropped below the key 4% level to close at 3.979% and Oil (WTI) fell 1.32% to close at $76.87 per barrel.  So, the Bears got their revenge on Thursday.  Pretty good data in the premarket quickly gave way to fear about Friday’s data.  However, bad data at 10 a.m. led to a strong selloff until 3 p.m. across the market as sentiment turned sharply.  Still, those pesky Bulls stepped in to buy the dip at 3 p.m. and close all three major index ETFs well up off their lows.  SPY climbed back up above the potential support level from the end of June, while DIA and QQQ managed to climb back on top of potential support from May highs.

The major economic news scheduled for Thursday includes the Weekly Initial Jobless Claims were higher than expected at 249k (compared to a forecast of 236k and the prior week’s 235k).  On the ongoing front, Weekly Continuing Jobless Claims were also higher than anticipated at 1,877k (versus a 1,860k forecast and the prior week’s 1,844k value).  At the same time, Preliminary Q2 Nonfarm Productivity was up sharply and was significantly better than predicted at +2.3% (compared to a +1.7% forecast and the Q1 reading of +0.4%).  Mostly, this was probably due to a much lower than expected Preliminary Q2 Unit Labor Cost of +0.9% (compared to an estimated +1.8% and far down from Q1’s +3.8%).  Later, July S&P Global Mfg. PMI was down, but not a tick better than predictions at 49.6 (versus a 49.5 forecast and a June reading of 51.6). A few minutes later, June Construction Spending was slightly improved but nowhere as strong as predicted at -0.3% (compared to a +0.2% forecast and the May -0.4% value).  At the same time, July ISM Mfg. Employment Index was down to 43.4 (versus the expected 49.0 and the June 49.3 reading).  On the PMI side, the July ISM Mfg. PMI was also a bit low at 46.8 (compared to a 48.4 forecast and a June 48.5 value).  To top that off, the July ISM Mfg. Prices Index was up to 52.9 (versus a 51.9 forecast and a June 52.1 value).  Finally, after the close, the Fed Balance Sheet showed a $27 billion reduction for the week, down to $7.178 trillion from the prior week’s $7.205 trillion. 

After the close, ALHC, AAPL, ACA, TEAM, BZH, BKNG, BFAM, ED, DORM, GEN, GDDY, ICFI, LEG, MELI, MTD, MCHP, MSI, NXT, ZEUS, PKIUF, RGA, RMD, RNG, RKT, ROKU, SPNT, TWLO, X, and VTR all reported beats on both the revenue and earnings lines.  Meanwhile, AES, AMZN, AEE, BIO, SQ, CLX, COIN, DKNG, EOG, FND, MATX, MTZ, POST, RYAN, SNAP, and SWN missed on revenue while beating on earnings.  On the other side, AL, CC, DASH, LNT, OPEN, PRU, SEM, and VRTX beat on revenue while missing on earnings.  However, BECN, CE, CIVI, CTRA, HUBG, INTC, OTEX, OEC, TPC, TROX, and WSC missed on both the top and bottom lines. 

In stock news, on Thursday, Chinese electric vehicle makers NIO, XPEV, and LI reported July delivery figures.  NIO reported a 43.9% increase compared to July 2023, XPEV reported a fifth consecutive month of growth in deliveries, and LI set a new monthly record (which was a 49.4% increase over July 2023).  This seemed to show an improvement in the lower-priced Chinese EV market.  Later, Reuters reported that BNPQY (BNP Paribas) is in exclusive talks to buy French insurer AXA’s Investment unit for $5.50 billion.  At the same time, OXY announced it has closed the $12 billion deal to acquire CrownRock.  In the announcement, OXY said Columbia’s Ecopetrol will not buy a stake in the shale oil producer (the two were in talks for such a stake in order to appease regulators as of July according to a regulatory filing). 

Elsewhere, Reuters reported that GM is changing the performance rating system for salaried workers.  The new plan will put pressure on lower-performers to improve or leave while rewarding the top 5% with 150% bonuses.  (GM has 53,000 salaried employees.)  Meanwhile, LLY told Reuters it expects the shortage of its blockbuster (and very profitable) weight-loss drug Mounjaro to end “very soon.”  LLY CEO Ricks said “I think actually today or tomorrow we plan to exit that (shortage) process.”  After the close, INTC announced it will cut 15% of its workforce (or about 15,000 employees) and eliminate its Q4 dividend as well as reducing capital expenditures.  This came after worse than expected results (a 1% decline in revenue and a swing to a $1,61 billion loss for Q2) and a lowering of forecast.  Also after the close, WBA announced it had sold another $1.1 billion of its stake in COR.  (WBA still as a 10% stake in COR.)

In stock legal and governmental news, on Thursday, CNBC reported that Elliott Mgmt. had offered a settlement (of its shareholder lawsuit) to SBUX that would expand the board and allow CEO Narasimhan to keep his job.  At the same time, the Dept. of Transportation proposed a rule barring airlines from charging additional fees to seat families with young children together.  Later, AAPL asked a US District Judge to throw out the antitrust suit brought by the Dept. of Justice and 19 states (plus the District of Columbia) AGs.  Interestingly, the AAPL motion was not on legal grounds.  Instead, AAPL argued that if the case succeeds, the court would have to redesign its iPhones and the court does not have the expertise to do so. At the same time, WFC made a filing saying it is under investigation over money laundering and facilitating violation of US sanctions by the Justice Dept.  Separately, Reuters reported WFC is also in talks with the SEC in an attempt to resolve a “cash sweep options” violation investigation.  After the close, Politico reported that the US Dept. of Justice is investigating the NVDA acquisition of AI startup Run.ai over antitrust concerns.

Overnight, Asian markets were red across the board as Asia reacts to unprecedented (for at least decades) changes in Japanese monetary policy (including spending $37 billion in July to prop up the Yen and caused the Yen to rise a massive 8% against the Dollar since the July 4 holiday).  The other factor was INTC’s brutal earnings, which was read-through to Japanese, Taiwanese, and South Korean chipmakers.  As a result, Japan (-5.81%), Taiwan (-4.43%), and South Korea (-3.65%) led the region lower Friday.  In Europe, we see the same picture (with far less magnitude) taking shape at midday.  All 15 bourses are in the red as the DAX (-1.61%), CAC (-0.81%), and FTSE (-0.40%) lead the region lower in early afternoon trade.  In the US, as of 7:30 a.m., the Bears are looking to follow up Thursday’s drubbing with a gap lower to start the day.  The DIA implies a -0.84% open, the SPY is implying a -1.04% open, and the QQQ implies a -1.58% open at this hour.  At the same time, 10-Year bond yields are down to 3.939% and Oil (WTI) is flat at $76.37 per barrel in early trading.

The major economic news scheduled for Friday include July Avg. Hourly Earnings, July Nonfarm Payrolls, July Private Nonfarm Payrolls, July Participation Rate, and the July Unemployment Rate (all at 8:30 a.m.), and Jun Factory Orders (10 a.m.).  The major earnings reports before the open include ARCB, ARES, ABG, BSAC, BERY, BTSG, BEPC, BEP, CBOE, GTLS, CVX, CHD, CNK, ENB, ESAB, XOM, FLR, FYBR, IMO, LIN, LYB, MGA, NMRK, OMI, PRGO, PAA, PAGP, PPL, TIXT, and USM.  Then, after the close, AMC reports.

In miscellaneous news, on Thursday the Bank of England cut rates a quarter percent from a 16-year high down to 5%.  Meanwhile, the EPA issued an emergency waiver lasting until August 20 for refineries located in MI, WI, IN, and IL.  The waiver suspends anti-smog rules that required refineries to make more difficult (and expensive) “summer blend” gasoline rather than the easier, cheaper, “winter blend.” This came after storm damage (power outages) shut down refineries in that region on July 15, which will not be able to restart until mid-August.  Elsewhere, Freddie Mac announced that the national average 30-year, fixed-rate mortgage fell to the lowest level since February at 6.73% this week.

In geopolitical news, Russia has sent units of their Wagner PMC to Venezuela to help strongman Maduro survive massive national protests, by helping crush demonstrators, following Maduro’s theft of the country’s election last Sunday.  Maduro himself has turned to his hand-picked Venezuelan Supreme Court for the moral authority to persuade the military to put down the protests against his election theft. Elsewhere, Hezbollah confirmed the death of its most senior military commander.  (Israel had claimed they had killed him Wednesday, but it took a day to confirm due to the amount of wreckage of five collapsed floors of the building Israeli missile struck in Beirut.)  In related news, Hamas political leader (and chief negotiator) Haniyeh was buried in Qatar. At the same time, Iran vowed revenge for the missile strike on its soil which killed him. Finally, the massive prisoner swap between Russia (and their corrupt puppet courts) and the West took place. The Biden Administration, Germany, Poland, and Slovenia had been working together to negotiate the historic deal for months. 24 detainees from seven countries were exchanged in Turkey, including 15 released by Russia, 1 released by Belarus (read Russia), and 8 convicts exchanged to Russia for those people.

So far this morning, ASIX, CHD, CRARY, ESAB, XOM, LYB, TIGO, and OMI all reported beats on both the revenue and earnings lines.  Meanwhile, BERY, FLR, LIN, PRGO, and TU missed on revenue while beating on earnings.  On the other side, ARCB, BTSG, BEP, ENB, and FYBR beat on revenue while missing on earnings.  However, ABG, GTLS, CVX, MGA, and TIXT missed on both the top and bottom lines.

With that background, it looks as if the Bears are in control this morning with all three major index ETFs gapping down to start the premarket. After that cap, all three have followed through with black-bodied candles that are mostly body. It is worth noting that all three also gapped down through their T-line (8ema). In short, the awful INTC report after yesterday’s close has global markets scared. Still, SPY (about 5% below) and DIA (about 3.5% below) remain not terribly far below their all-time highs. However, QQQ is now in correction territory, more than 11% below its own all-time high. So, on the big moves from Thursday and premarket, the short-term trend is now clearly bearish as is the mid-term. The longer-term remains bullish. In terms of extension, QQQ is getting stretched below its T-line (8ema) but the other two remain within a reasonable distance below. At the same time, the T2122 indicator is back in the bottom half of its mid-range and likely headed lower on the now expected gap lower at the open. So, there is still room to run either direction, but the Bears have momentum off those INTC earnings and news. With regard to those 10 big dog tickers, nine of the 10 are in the red, led by INTC’s massive 22.38% selloff. AMD (+0.71%) is the only one in the green because INTC’s report showed that it was eating Intel’s lunch. However, NVDA (-4.07%) is reacting in sympathy to INTC and has traded more than 3.5 times as much dollar-volume than any other stock in premarket. The bottom line is beware of the Bear, watch for July Payrolls volatility, and prepare your account for the weekend.

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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