Wednesday was about what we (or at least I) had expected. SPY opened up 0.09%, DIA opened up 0.05%, and QQQ gapped up 0.24%. From there, all three major index ETFs immediately crossed back below the prior close before grinding sideways in a tight range for two hours. Then we saw a modest selloff followed by a modest rally back to the same level waiting on the Fed. At 2 p.m. we had a 5-minute rip upward and volatility followed by a drift higher into Chair Powell’s presser at 2:30 p.m. After Powell started, we sold off the rest of the day. This action gave us black-bodied, Inverted Hammer candles in all three major index ETFs. SPY and DIA printed new all-time highs, while QQQ again retested and closed below its downtrend line running back to Mid-July. None of the three retested or crossed below their T-line (8ema). This all happened on slightly below-average volume in SPY, DIA, and QQQ.
On the day, all 10 sectors were in the red, with Utilities (-0.60%) out in front of the others leading the market lower. On the other side, Healthcare (-0.03%), Financial Services (-0.05%), Communications Services (-0.09%) and Consumer Cyclical (-0.09%) were all clustered as laggards. Meanwhile, SPY fell 0.30%, DIA lost 0.26%, and QQQ lost 0.43%. VXX fell 0.83% to close at 49.88 and T2122 fell slightly again but remains in the middle of its over-bought range at 87.50. At the same time, 10-Year bond yields actually gained to close at 3.704% while Oil (WTI) fell 1.55% to close at $70.09 per barrel. So, Wednesday was all about the Fed. the Bulls get their new all-time highs in the large-cap indexes. However, then traders took profits, afraid to hold too much long risk going into tomorrow’s Fed decision, statement, and press conference.
The major economic news scheduled for Wednesday include August Building Permits, which were stronger than expected at 1.475 million (compared to the 1.410 million forecast and a 1.406 million July reading). At the same time, August Housing Starts were strongly higher at 1.356 million (versus a 1.310 million forecast and 1.237 million July value). This was a 9.6% month-on-month increase. Later, Weekly EIA Crude Oil Inventories showed a bigger than anticipated inventory drawdown at -1.630 million barrels (compared to a -0.200 million barrels forecast and the prior week’s +0.833-million-barrel inventory build). Then, at the close, July TIC Net Long-Term Transactions indicated a net inflow of $135.4 billion.
However, the big news of the day came from the FOMC. At 2 p.m. Fed announced a half-percent rate cut (down to the 4.75%-5.00% range) for Fed Funds. At the same time the Current Q3 Interest Rate Projection was down to 4.4% (down from 5.1%). For the 1st-Year Out Q3 Interest Rate Projection (2025) the average estimate is now 3.4% (down from the prior 4.1%). Meanwhile, the 2nd-Year (2026) Q3 Interest Rate Projection is now 2.9% (down from 3.1%). At the same time, the 3rd-Year (2027) Q3 Interest Rate Projection remained steady at 2.9% (from the previous 2.9% forecast). The Longer-Term Q3 Interest Rate Projection was also 2.9% (which was up a tick from the previous average forecast of 2.8%).
In his press conference, Fed Chair Powell said he does not see the risk of economic downturn as heightened. He said, “I don’t see anything in the economy right now that suggests that the likelihood of a recession, sorry, of a downturn, is elevated.” He continued, “You see growth at a solid rate. You see inflation coming down. You see a labor market that’s still at very solid levels. So, I don’t really see that now.” Powell said that there was “broad support” for Wednesday’s half-point cut. However, Fed Governor Bowman (a hawk) dissented, instead calling for a quarter-point cut. Looking forward, at the moment, the Dot Plots indicate two (of 19) board members feel there should be no more cuts in 2024. At the same time, seven of the 19 think one additional quarter point cut will be appropriate. However, the median view is that two more quarter-point cuts will be needed in 2024. On the other end, one of the 19 feels more than half a percent of additional cut in 2024 will be appropriate.
After the close, SCS missed on revenue while beating on earnings.
In stock news, on Wednesday, GM reached a tentative deal with Unifor (the Canadian version of the UAW union) over its Ontario, Canada plant. At the same time, a day after the Dept. of Justice approved the deal, ALK completed the $1.9 billion acquisition of HA. Later, BA began furloughing thousands of workers via a one week off every four weeks scheme. BA announced this will last for the duration of the strike by 33k of its workers in the Pacific Northwest. At the same time, the UAW announced it is considering multiple US strikes against STLA for breaking the contract promises it made a year ago. (The six-week strike a year ago cost the company $834 million.) Later, ROG announce it will buy a controlling stake in the Toronto Raptor’s NBA team and NHL’s Toronto Maple Leafs from BCE for $3.46 billion.
Elsewhere, the UAW said that they have set a September 26 strike deadline for the F River Rouge complex near Dearborn MI. 500 of the complex’s 6,000 workers would participate if a strike takes place. Later, AMZN announced it is raising the pay of its fulfillment and transportation employees by at least $1.50 per hour (and giving them a free Amazon Prime membership) as the company fights unionization and internal pressure for better pay and conditions. At the same time, GM announced it is offering adapters to its electric vehicle owners that would allow them to use the TSLA network of chargers. Finally, TUP did file for bankruptcy Wednesday as was rumored earlier in the week.
In stock legal and governmental news, on Wednesday, GSK announced it has agreed to settle two lawsuits in CA that had claimed its discontinued Zantac heartburn drug caused cancer. (No financial details were released.) Later, the CEO of GME (Cohen) agreed to pay a $1 million penalty to the FTC for failing to disclose that he purchased $100 million of voting shares in WFC in 2018. (He did so not as an investment, but as a way to influence WFC operations and in pursuit of a board seat.) At the same time, GOOGL won a legal challenge against a $1.7 billion fine from EU antitrust regulators. The court agreed with the regulator, but threw out the fine. The antitrust commission can appeal.
Meanwhile, a separate ruling announced at the same time, went against QCOM as it got the court to trim the fine from $269.07 million to $265.40 million. Later, GOOGL asked a UK tribunal to throw out a $9.3 billion lawsuit alleging the company abused its dominance in the online search market. Back in the US, OCFC agreed to pay a $15.1 million settlement for “redlining” via loan discrimination against Black, Hispanic, and Asian loan applicants between 2018 and 2022. At the same time, a second “Zantac trial,” this one against private German firm Boehringer Ingelheim rather than partners GSK, PFE, or SNY ended in a hung jury. Later, FHN agreed to pay $325k to settle SEC charges in relation to the bank’s recommendations of certain products.
In government funding news, Speaker of the House Mike Johnson brought a six-month government funding extension (continuing resolution) including a completely unrelated MAGA voting restriction rider to a vote. (As instructed and demanded by the GOP’s disgraced Presidential candidate.) It failed by a vote of 202-220, as 14 GOP members voted against the ridiculous electioneering stunt. (The main point of the amendment is requiring people to prove their citizenship before voting. This is stupid since it is already illegal for non-citizens to vote and there are only a miniscule number of such cases ever found. This plan would also not even take effect this election cycle as the GOP imply and would like the public to believe. So, it’s an expensive, unfunded, and difficult to implement solution to a non-problem that would not be implemented when the GOP wrongly claims it is needed. In other words, the GOP is happy to risk the economic impact and disruption of government shutdown for yet another attempt to whip up fear and “other” the groups the GOP sees as “they.”) Even more silly is the fact that the whole bill would be dead on arrival in the Senate. Unfortunately, Johnson and other GOP Congressmen then told reporters that the Republicans have no “Plan B” for government funding. So, this does increase the probability of a government shutdown on October 1.
In miscellaneous news, the SEC unanimously (5-0) voted to approve a rule change to allow exchanges to price stocks in half penny increments. There is no word on when such a change might be implemented. However, NDAQ immediately said it would study the matter, but that it would hurt stock markets in the long run (for unspecified reasons). Elsewhere, the US has sued the owner and operator of the Singapore-flagged ship that hit the Baltimore bridge earlier this year, killing six and causing massive damage. The Dept. of Justice is seeking more than $100 million (just for costs incurred in the recovery, expect other suits to cover rebuilding and economic damages) and are alleging the company cut corners on maintenance to save costs, causing the crash.
Overnight, Asian markets were green across the board. Japan (+2.13%), Hong Kong (+2.00%), and Taiwan (+1.68%) led the region higher on the day. Meanwhile, in Europe, with the minor exception of Portugal (-0.31%) we see the same green picture at midday. The CAC (+2.01%), DAX (+1.52%), and FTSE (+1.20%) lead the region higher in early afternoon trade. In the US, as of 7:30 a.m., Futures are pointing toward a gap higher to start the day. The DIA implies a +1.13% open, the SPY is implying a +1.62% open, and the QQQ implies a +2.07% open at this hour. At the same time, 10-Year bond yields are up to 3.713% and Oil (WTI) is up 0.75% to $71.42 per barrel in early trading.
The major economic news scheduled for Thursday includes the Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, Q2 Current Account, Philly Fed Mfg. Index, and Philly Fed Mfg. Employment (all at 8:30 a.m.), August Existing Home Sales and August US Leading Economic Index (both at 10 a.m.), and Fed Balance Sheet (4:30 p.m.). The only major earnings reports scheduled for before the open is CBRL, DRI, and FDS. Then, after the close, FDX, LEN, and MLKN report.
In economic news later this week, on Friday, there is no major news, but Fed member Harker speaks. In terms of earnings reports later this week, on Friday there are no earnings reports of note.
So far this morning, FDS reported beats on both the revenue and earnings lines. At the same time, DRI missed on both the top and bottom lines. (CBRL is scheduled to report at 8 a.m.)
With that background, it looks like the Bulls are running this morning. All three major index ETFs gapped higher to start to premarket and have printed larger, white-body candles since then in the early session. SPY and DIA are sitting at new all-time highs again in the premarket. All three remain well above their T-line (8ema). So, the short-term trend is bullish. The mid-term trend is now also bullish with QQQ the laggard gapping well over its downtrend line going back to July. In the longer-term we still have a strong Bull trend all three major index ETFs. In terms of extension, none of the three major index ETFs are too far extended above their T-lines, but they are starting to get close in the early session today. However, at the same time, the T2122 indicator is still in the middle of its overbought range. So, markets have room to run either direction (if one side or the other can find momentum), but the Bears have a little more slack to work with today. With regard to those 10 big dog tickers, all 10 are strongly green so far this morning. AMD (+334%), NVDA (+3.15%), and TSLA (+3.00%) lead the gains while NVDA and TSLA lead the dollar-volume traded as usual. NFLX (+1.52%) is the “laggard” among those 10 bellwethers.
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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