Well, Monday was a brutal day for Bulls and a volatile day for everyone.  SPY gapped down a massive 4.01%, DIA gapped down 2.97%, and QQQ gapped down a whopping 5.45%. However, the chasers got hammered as all three major index ETFs rallied hard off that open level (in a very volatile way) with SPY reaching a high at 12:30 p.m. that was up 2.31% from the open.  At the same time, SPY was up 1.00% from its open and QQQ was up 4.25% from its open at 12:30 p.m. Then, all three started an afternoon wave down that lasted the rest of the day.  DIA even recrossed below its opening level.  This action gave us huge gap-down, white-bodied candles with large upper wicks in the SPY and QQQ. Meanwhile, DIA gave us a huge gape-down, white-bodied Spinning Top candle.  QQQ also retested (and passed the test) its 200sma on the day.  This all happened on much heavier-than-average volume in all three major index ETFs.

On the day, all 10 sectors were in the red with Technology (-3.02%) leading the charge lower.  Meanwhile, Consumer Defensive (-2.01%) “held up better” than other sectors but clearly the losses were widespread.  At the same time, SPY dropped 2.91%, DIA fell 2.60%, and QQQ dropped 2.98%. VXX spiked a massive 39.22% to close at 87.26 (the highest level it has seen since October 2023).  VXX (and the underlying VIX) had the largest intraday jump ever during the session.  Meanwhile, T2122 plummeted all the way down to the bottom of its oversold territory at 2.11.  On the bond front, 10-year bond yields recovered to close down to 3.777% and Oil (WTI) gained 0.41% to close at $73.81 per barrel.  So, Monday was a brutal day as US markets followed the rest of the world by opening with a huge gap lower.  However, the whiplash was real with a strong (multi-percent) rally off the open and then whipsaw lower in the afternoon hammered the late dip buyers that chased.  In short, there was pain to go around for everybody on Monday with the biggest dose reserved for Bulls that held long going into the weekend.

The major economic news scheduled for Monday included July S&P Global Services PMI, which came in a bit low at 55.0 (compared to a forecast of 56.0 but down just a bit from June’s 55.3 reading).  At the same time, July S&P Global Composite PMI was 54.3 (versus a forecast of 55.0 and down just a bit from June’s 54.8 value).  Later, July ISM Non-Mfg. Employment Index was much stronger than expected at 51.1 (compared to a forecast to 46.4 and a June 46.1 number).  At the same time, July ISM Non-Mfg. PMI was up to 51.4 (exactly on the 51.4 forecast and well up from June’s 48.8 value).   Meanwhile, July ISM Non-Mfg. Prices Index was also hotter than anticipated at 57.0 (versus a 56.0 forecast and a June 56.3 number).

In Fed speak news, Chicago Fed President Goolsbee told the NY Times said he sees the risk of waiting too long to cut rates.  Goolsbee said, “You only want to be that restrictive if you think there’s fear of overheating.” He continued, “These data, to me, do not look like overheating … as you see jobs numbers come in weaker than expected but not looking yet like recession, I do think you want to be forward-looking at where the economy is headed for (in) making the decisions.”  Goolsbee wanted to be clear that he did not care about the stock market and his remarks were based solely on last week’s data.  He said, “The law doesn’t say anything about the stock market; it’s about the employment and it’s about price stability.”  These remarks came after many analysts and talking heads began calling for “emergency rate cuts” prior to the next scheduled (September 18) FOMC meeting.

After the close, ACM, BRBR, BMRN, BCC, BWXT, CBT, CRGY, CSX, FANG, EHC, KMPR, PLTR, PRIM, O, and STRL all reported beats on both the revenue and earnings lines.  Meanwhile, AHR, FG, HUN, JELD, OKE, SUM, VSTO, WMB, and YUMC missed on revenue while beating on earnings.  On the other side, FNF and SPG beat on revenue while missing on earnings.  However, AAN, CAR, and SPR missed on both the top and bottom lines.

In stock news, on Monday, in search of some bad headline relief, INTC announced it is in the process of getting $383 million of ASML’s newest technology “High NA” EUV tools.  At the same time, IQVIA Data published research showing that LLY’s Zepbound has gained ground on NVO’s Wegovy in the lucrative GLP-1 weight-loss drug market.  The report said that LLY’s drug now has about 40% of the market compared to 60% for NVO’s drug.  (Some analysts see this market reaching $150 billion annually in the US by the early 2030s.)  Meanwhile, Reuters reported that private candy giant Mars is considering acquiring K in order to pickup the Rice Krsipy Treat, Pringles Chips, and Pop-Tart brands.  (K surged almost 20% before closing up 16.23% on the news.) At the same time, QMCO announced it will buy Cogentrix Energy from CG for roughly $3 billion.

In stock legal and governmental news, on Monday, the NHTSA said it is seeking information on a fatal TSLA Cybertruck crash in TX.  This could be part of the ongoing “Full Self Driving” investigation or an unrelated issue.  Later, GOOGL lost the federal antitrust case brought by the Dept. of Justice, 19 states, and the District of Columbia. The ruling found GOOGL had illegally acted to maintain its search engine monopoly by paying AAPL and others to make GOOGL the default search engine in browsers.  GOOGL will undoubtedly appeal.  After the close, MS announced it had received SEC requests for information about its cash balance sweep program where balances are sent to MS affiliate banks.  Separately, MS said it had reached a conditional settlement to resolve a 2017 lawsuit related to the IPO of OW Bunker, which MS had underwrote.

Also after the close, a proposed class action lawsuit was filed against CRWD on behalf of air travelers who had flights delayed or canceled following the recent global IT catastrophe stemming from a CRWD update release.  At the same time, NVS and VTRS were both hit with a lawsuit from the estate of a woman whose tissue samples (cells) were taken in the 1950s and continue to be used in research today.  (A similar lawsuit was filed by the estate against TMO and that case was settled out of court for an undisclosed sum.)  Meanwhile, GSK won the latest trial (in IL) over the claims that its discontinued heartburn drug Zantac caused cancer.  (This is but one of more than 70k cases that are pending on this issue, most of them located in DE.)

Overnight, Asian markets were mixed but leaned toward the green side with some notable major rebounds.  Japan (+10.23%), Taiwan (+3.38%), South Korea (+3.30%), and Malaysia (+2.47%) were the notable major moves higher.  Meanwhile, Singapore (-1.39%) was the rebound laggard.  In Europe, only five of the 15 bourses are in the red at midday but the rebounds are not as strong as Asia either.  The CAC (-0.29%), DAX (+0.01%) and FSTE (+0.04%) lead the region, as always, on sheer volume.  However, Greece (+1.72%) is the largest gainer in early afternoon trade.  In the US, as of 7:30 a.m.) Futures are pointing toward a gap higher, but nowhere near as big a move as Monday’s gap down.  The DIA implies a +0.67% open, the SPY is implying a +0.89% open, and the QQQ implies a +1.02% open at this hour.  At the same time, 10-Year bond yields are also rebounding strongly to 3.859% and Oil (WTI) is up a quarter of a percent to $73.11 per barrel in early trading.

The major economic news scheduled for Tuesday includes the June Exports, the June Imports, and the June Trade Balance (all at 8:30 a.m.), EIA Short-Term Energy Outlook (noon), and API Weekly Crude Oil Stocks (4:30 p.m.).  The major earnings reports scheduled for before the open include FOX, GOLF, AHCO, ADNT, ALIT, ATI, GBTG, AU, ARMK, ATKR, AVNT, BAX, BLMN, BR, BRKR, BLDR, CAT, CLVT, CEG, DK, DUK, EPC, ENR, EXPD, FIS, FOXA, GFS, GPRE, GXO, HSIC, H, IDXX, INGR, J, JLL, KVUE. KNF, LCII, MPC, TAP, MPLX, VYX, NVT, OGN, OC, MD, SRE, SWX, STWD, SGRY, TPX, BLD, TDG, TRMB, UBER, UWMC, VVX, VMC, WLK, KLG, YUM, and ZTS.  The, after the close, AGL, ABNB, AFG, AMGN, ARKO, ASH, AIZ, CRC, CPNG, DVA, DVN, ENLC, PLUS, FTNT, GMED, GO, HY, IAC, ILMN, CART, IFF, LUMN, MASI, MOS, MRC, PR, RIVN, SVC, SKY, STE, SNEX, LRN, SU, RUN, SMCI, TOST, TSE, TRIP, VFC, and WYNN report.

In economic news later this week, on Wednesday, EIA Crude Oil Inventories and June Consumer Credit are reported.  On Thursday we get Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, and the Fed Balance Sheet.  Finally, on Friday, there are no major economic news scheduled.

In terms of earnings reports later this week, on Wednesday, ADV, BCO, BAM, CRL, CCO, SID, CNDT, CRH, CVS, DBD, DDL, EMR, ENOV, GEO, GLP, GPN, GFF, HLT, HMC, IEP, KMT, LPX, LYFT, NEUE, NYT, NI, NOMD, NVO, DNOW, ODP, OGE, OSCR, PLTK, RCM, RL, REYN, ROK, RXO, SHOP, SONY, SUN, TGNA, PRKS, VSTS, VSH, DIS, ZBH, AE, ALTG, DOX, APP, ATO, BHF, CACI, CENT, CENTA, CF, CHRD, CPA, CPAY, CPAY, CAPL, CW, EFXT, ET, ENS, NVST, EQIX, FWRD, HG, HI, HUBS, ICUI, JXN, LNW, MTW, MFC, MRO, MATV, MMS, MCK, MKSI, MODV, MNST, NTR, OXY, PRI, HOOD, RGLD, SBGI, SM, STN, TALO, MODG, UGI, VSAT, WBD, WTS, WES, ZG, and Z report.  On Thursday, we hear from WMS, COLD, AVAH, AVT, AZUL, FUN, CQP, LNG, COMM, DDOG, ELAN, LLY, EDR, EPAM, FWONK, ULCC, GTN, HBI, HGV, IHRT, KELYA, KOP, LAMR, LSXMK, LSXMA, MLM, MUR, NXST, NRG, PZZA, PH, PENN, ACDC, RPRX, QSR, SBH, SEE, SN, SPB, TKO, UAA, UA, USFD, VTNR, VTRS, VST, WMG, ATSG, AKAM, AMN, BTG, CIB, CPRI, CENX, BAP, DBX, DXC, SSP, EVH, EXPE, G, GILD, IAG, NWSA, NGL, PAAS, PARAA, PARA, PBA, PBI, RXT, REZI, SOLV, TTWO, TTD, and TTEC.  Finally, on Friday, AQN, AMCX, AXL, AMRX, CLMT, ROAD, ERJ, EVRG, and NFE report.

So far this morning, AHCO, AU, ARMK, AVNT, BAX, BRKR, CELH, CEG, DK, DUK, GFS, KVUE, KNF, LCII, MPC, TAP, MPLX, TDG, UBER, WLK, and ZTS all reported beats on both the revenue and earnings lines.  Meanwhile, BR, BLDR, CAT, CLVT, EPC, ENR, FIS, HSIC, H, INGR, J, NVT, OC, MD, STWD, TPX, and YUM missed on revenue while beating on earnings. On the other side, GXO and IDXX beat on revenue while missing on earnings.  However, GOLF, ADNT, ATKR, BLMN, GPRE, VYX, and BLD missed on both the top and bottom lines.

In Fed Rate Cut Expectation news, on Friday, the Fed Fund Futures market has now moved even further than Friday.  After the close Friday, 69.0% expected a half percent rate cut and 31.0% expected a quarter point cut at the September meeting.  However, after Monday’s market bloodbath, only 17.0% expect a quarter-point cut while 83.0% now expect a half-percent cut in September.  There are absolutely no bets that rates will remain the same or increase at the next meeting.  After the November meeting, 9.4% of trades anticipate a three-quarters of a percent cut (down to a 4.5-4.75% rate), while 53.6% now expect a full percentage cut by then and 37.0% expect to have had 1.25% in cuts following the November 7 meeting.

In miscellaneous news, on Monday, the Wall Street Journal reported that mortgage financing firms Fannie Mae and Freddie Mac are set to impose stricter rules on commercial; property lenders and brokers.  The new rules will require lenders to independently verify borrower’s financial information for borrowers of multi-family properties.  In addition, tougher cash on hand and income source requirements will apply.  Elsewhere, a Fed survey released Monday reported that US banks saw the best commercial and industrial loan demand in Q2 that had been seen in two years.  This came as the percentage of banks reporting tighter C&I loan standards fell to the lowest level in two years.  (In other words, banks were not tightening requirements and loan demand was up.)  Meanwhile, Reuters reported that unplanned outages at both SCHW and Fidelity made the morning gap worse as nearly 20k traders were unable to access their accounts until the trading day was already underway Monday.

With that background, it looks as if the Bulls are making a move toward a tepid rebound early. All three major index ETFs gapped higher to start the premarket. (Not like Monday’s gap down, but still a decent gap up nonetheless.) However, from there we have seen indecision as SPY and QQQ have printed black-body candles with large wicks and DIA has printed a long-legged, white-body Spinning Top for the early session. The short-term trend remains clearly bearish as is the mid-term trend. However, while the bullish trend line is broken, the longer-term charts are not yet bearish. (For example, look at a Monthly chart. There is no way to call SPY, DIA, or QQQ bearish based on those monthly charts.) In terms of extension, all three major index ETFs are now well over-stretched to to downside from their T-line (8ema) and are in need of relief. At the same time, the T2122 indicator is at the bottom of its oversold range. So, the market is in need of a pause or relief bounce at the very minimum. (Just remember, the market can stay oversold longer than we can stay solvent predicting a reversal.) With regard to those 10 big dog tickers, nine of the 10 are in the green this morning with NVDA (+2.69%) leading the rebound both in terms of gain and dollar-volume traded. The bottom line is that markets are tentative and undecided…and therefore volatile…at the moment. The prudent approach is to either be very fast or very cautious in the trades you take. The Bears have momentum, but have used up a lot of their energy. It would not take too much to panic them in a short squeeze. However, it would also not take much selling to scare off those dip buyers trying to do the squeeze. Caution is the word of the day.

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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