Markets ended the week with a bullish move. SPY gapped up 0.61%, DIA gapped up 0.40%, and QQQ gapped up 0.93%.  From there, all three major index ETFs chopped sideways with an early afternoon slump followed immediately by a mid-afternoon rally that lasted into the close. This action gave us gap-up, white-bodied candles in all three.  The SPY and QQQ printed white, Spinning Top, Bullish Harami candles.  Meanwhile, DIA just printed a gap-up, strong white-bodied candle that not only closed near the highs, but within nine cents of the all-time high close.  This all took place on average volume in the DIA, as well as slightly below-average volume in the SPY and QQQ.

On the day, all 10 sectors were in the green with Basic Materials (+2.15%) out front leading the way higher.  Meanwhile, even the laggard Consumer Defensive was up 0.65%.  SPY gained 1.05%, DIA gained 1.07%, and QQQ gained 1.08%. VXX dropped 5.98% to close at 45.94% and T2122 spiked back up to the top end of its overbought territory to close at 97.91.  On the bond front, 10-year bond yields fell to 3.799% and Oil (WTI) popped 2.59% to close at $74.90 per barrel.  So, Friday saw a Bull recovery from Thursday’s profit-taking.  This was perhaps on the basis of Thursday’s Fed voter comments indicating a rate cut could be on the way in September or perhaps on the VP Harris DNC performance.  Regardless of reason, after the gap up, markets sold the news from Fed Chair Powell’s presentation (which more or less confirmed what the other Fed members had said Thursday).   However, that did not last long as an afternoon rally took us out higher…especially in the DIA.

The major economic news scheduled for Friday was limited to July Building Permits, which came in a bit stronger than expected at 1.406 million (compared to a forecast of 1.396 million and a June value of 1.454 million).  Later, July New Home Sales came in much stronger than predicted at 739k (versus a forecast of 624k and June’s reading of 668k). 

In Fed news, Fed Chair Powell all but confirmed a September rate cut.  Powell said, “The time has come for policy to adjust. The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.”  On the topic of inflation, he said, “My confidence has grown that inflation is on a sustainable path back to 2 percent.”  On the employment situation, Powell pointed out, “It seems unlikely that the labor market will be a source of elevated inflationary pressures anytime soon. We do not seek or welcome further cooling in labor market conditions.”  Putting the two Fed mandates together, Powell said, “The upside risks to inflation have diminished. And the downside risks to employment have increased.” 

Later, Chicago Fed President Goolsbee also signaled his support for a September rate cut, telling CNBC, “Everything we wanted to happen to get rates down has happened.”  He continued, saying the current policy would be appropriate to cool and overheating economy, but currently the economy “is not overheating.”  He went on to say, “I don’t think inflation will get stuck above 2%.”  He also noted “warning signs” about employment (specifically citing the July Nonfarm Payrolls data).  In a separate interview with Bloomberg, Goolsbee basically flat out said he’ll vote for rate cuts and spent the interview discussing how fast and/or steadily the FOMC will cut.  Goolsbee said, “I don’t think it makes sense to get into a big debate (over 25 basis points versus 50 basis points).”  He continued, “little gradations like that aren’t what matters the most. What matters the most is the longer-run path of policy.” Goolsbee concluded by saying, “What will warrant the speed at which we cut rates, or how much we pause the cutting, will be determined by how the economy performs (during the cutting process).”

In stock news, on Friday, AMZN CEO Jassy said the company’s AI software had saved its software teams “4,500 developer-years.” Later, Reuters reported that MTH is talking with investment bankers exploring the sale of its Columbia Distributing unit for about $2 billion, with potential buyers including Columbia insiders.  At the same time, Reuters provided some background on the NSRGF (Nestle, the world’s largest food maker) CEO leaving Thursday. The report said that CEO Schneider was ousted unexpectedly for underperformance at a board meeting Thursday night.  Later, Chinese smartphone maker Honor (a former Huawei unit) announced it received an undisclosed investment from CHL as Honor gets ready for its planned IPO. 

Meanwhile, technology industry outlet “The Information” reported Friday that META has canceled plans for a premium version of its mixed-reality headset in response to poor sales performance of AAPL’s $3,500 Vision Pro headset.  In unrelated news, Bloomberg reported that AAPL is now targeting September 10 for the launch of new iPhone, watches, and AirPods.  After the dog and pony show, the products will be available for sale on September 20 according to the report.  Later, after the close, NSC announced it had reached a tentative, 5-year collective bargaining agreement with four labor unions.  The agreement covers 30% of NSC’s workforce and will provide 3.5% wage increases each of the next five years, as well as increased vacation, and enhancements in healthcare benefits.  Also after the close, CNBC reported that INTC has retained MS to help it fight off activist investors after the company has lost 60% of its stock value and a board member stepped down.

In stock legal and governmental news, on Friday, Reuters reported that despite US sanctions, 11 Chinese state-linked entities have access to the most advanced chips and AI tools via contracts with AMZN cloud services.  The report states that federal agencies are considering if action can be taken. In addition, the Biden Administration is talking to the House Foreign Affairs Committee on potentially changing legislation to close the loophole.  Later, Reuters reported that JNJ that has halted the count of votes (from plaintiffs on whether or not to accept the terms of the company’s $6.48 billion settlement offer) and resumed negotiations with talc-caused cancer plaintiffs.  This comes a month after the company reported it “had” more than 75% support and would ask the judge to force remaining holdouts to accept the settlement.  After the close, UK newspaper the Telegraph reported that the British NHS is expected to reject the LLY early Alzheimer’s drug donanemab. This comes less than a week after a separate UK agency, Medicines and Healthcare products Regulatory Agency, had said that a different Alzheimer’s drug (Lecanemab) was a poor value for taxpayers.

Overnight, Asian markets were mostly green with only two of 12 regional exchanges in the red.  Hong Kong (+1.06%), India (+0.76%), and Thailand (+0.73%) led the region higher.  In Europe, we see a similar picture taking shape with five of the 15 bourses in the red.  The CAC (+0.15%), DAX (-0.21%), and FTSE (+0.48%) lead the region higher in early afternoon trade.  In the US, as of 7:30 a.m., Futures are pointing toward a start just on the green side of flat.  The DIA implies a +0.13% open, the SPY is implying a +0.16% open, and the QQQ implies a +0.04% open at this hour.  At the same time, 10-Year bond yields are at 3.81% and Oil (WTI) has spiked to $76.79 per barrel in early trading.

The major economic news scheduled for Monday is limited to July Durable Goods and July Core Durable Goods (8:30 a.m.).  The major earnings reports scheduled for before the open is limited to PDD.  Then, after the close, BHP, HEI, and TCOM report.

In economic news later this week, on Tuesday we get Conference Board Consumer Confidence and API Weekly Crude Oil Stock report.  Then Wednesday, EIA Crude Oil Inventories are reported.  We also hear from Fed Governor Waller and Fed member Bostic.  On Thursday, we get Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, Preliminary Q2 GDP, Preliminary Q2 GDP Price Index, July Goods Trade Balance, Preliminary July Retail Inventories, July Pending Home Sales, and the Fed Balance Sheet.  We also hear from Fed member Bostic.  Finally, on Friday, we get July Core PCE Price Index, July PCE Price Index, July Personal Spending, Aug Chicago PMI, Michigan Consumer Sentiment, Michigan Consumer Expectations, Michigan 1-Year Inflation Expectations, Michigan 5-Year Inflation Expectations.

In terms of earnings reports later this week, on Tuesday we hear from BMO, BNS, SCSC, YY, JWN, and PVH.  Then Wednesday, ANF, BBWI, CHWY, DCI, FL, HMY, SJM, KSS, LI, PDCO, RY, AFRM, COO, CRWD, FIVE, GEF, GES, HPQ, NTAP, NTNX, NVDA, OKTA, PSTG, CRM, VEEV, and VSCO report.  On Thursday, we hear from AEO, BBY, BIRK, BF.B, BURL, CPB, CM, DG, GMS, OLLI, PSNY, TITN, AMRK, ADSK, DELL, GAP, LULU, MRVL, and ULTA.  Finally, on Friday, JKS and MNSO report.

So far this morning, PDD missed on revenue while beating on earnings.

In miscellaneous news, on Friday, the UK Maritime Operations agency said three fires have been seen on a Greek-flagged tanker in the Red Sea. The crew of the tanker was evacuated on Thursday after an attack by Yemeni Houthi rebels.  (The tanker contains 150,000 metric tons or 1,050,000 barrels of crude oil.)  Then, on Saturday, NASA made the decision to leave the BA Starliner crew at the International Space Station until they can be retrieved by a by a SpaceX ship in February.  NASA decided that it was too risky to have humans aboard the attempt to return BA’s Starliner to earth.

With that background, all three major index ETFs gapped modestly higher to start the premarket. However, they are diverging just a bit since that start. SPY and DIA both are giving us small white-bodied candles in the early session. Meanwhile, QQQ has printed a slightly larger black-body candle that is fading its premarket gap. All three remain well above their T-line (8ema) and the short-term trend is still strongly bullish. At the same time, the mid-term bearish trend is bullish. In the long-term, we are now clearly back in a Bull trend. In terms of extension, SPY and DIA are a bit stretched above their T-line. At the same time, the T2122 indicator is up at the top of its overbought range. So, the market is in need of more rest or pullback. However, keep in mind that the market can remain overdone longer than you can stay solvents predicting turns. Remember the mantra “follow, don’t lead, but also don’t chase” in mind. (In a volatile market, that may mean sitting on your hands.) With regard to those 10 big dog tickers, they are evenly split, led by the biggest dog NVDA (+0.67%) and lagged by META (-0.63%).

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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