Friday saw three moves by the market.  A gap higher, fading of the gap, and a long, protracted rally.  SPY gapped up 0.81%, DIA gapped up 0.58%, and QQQ gapped up 1.21%.  At that point, all three major index ETFs sold off for more than an hour with SPY and QQQ not quite recrossing the gap, but DIA crossing all the way back below its prior close.  However, shortly after 10:30 a.m., all three began a slow, steady rally that lasted right into the last five minutes of the day.  This action gave us indecisive but bullish candles in all three.  SPY and QQQ both printed long-legged Doji type candles that gapped up through and retested from above (passing that test) their T-line (8ema).  At the same time, DIA gapped up through its T-line, retested its T-line from above, and printed a white-bodied Hanging Man type candle that also printed a new all-time high close.  This all happened on below-average volume in the SPY, DIA, and QQQ.

On the day, all 10 sectors were in the green with Financial Services (+1.72%) out in front, leading the rest of the market higher.  On the other side, Utilities (+0.23%) was the laggard.  Meanwhile, SPY gained 0.91%, DIA gained 0.82%, and QQQ gained 1.19%. VXX fell 3.79% to close at 53.00 and T2122 popped up to just outside of its overbought territory to the top of its mid-range at 78.90.  At the same time, 10-Year bond yields spiked to close at 3.969% while Oil (WTI) rose another 1.19% on Middle East fears to close at $74.60 per barrel.  So, the end of the US port strike and great September jobs data showing the economy isn’t falling off a cliff led to a gap higher. At that point the profit-takers ran for an hour.  However, the bulls stepped in to buy the dip and keep slowly buying all day long.

The major economic news scheduled for Friday included Sept. Avg. Hourly Earnings (Month-on-Month), which came in down but better than expected at +0.4% (compared to a forecast of +0.3% but down from August’s +0.5% reading).  On an annualized basis, Sept. Avg. Hourly Earnings were up to +4.0% (versus the +3.8% forecast and August’s annual +3.9% number).  At the same time, September Nonfarm Payrolls were much stronger than anticipated at +254k (compared to +147k forecast and +159k Aug. value).  (It is worth noting that there were also upward revisions to summer payrolls numbers.)  On the private side, September Private Nonfarm Payrolls were also much stronger than predicted at +223k (versus a +125k forecast and August’s +114k number).  Meanwhile, the September Participation Rate remained steady at 62.7% (compared to a forecast and August reading of 62.7%).  Taken together, this gave us a September Unemployment Rate that fell to 4.1% (versus a forecast and August value of 62.7%).  So, the data showed us that the economy remains strong on the jobs side with growing earnings even as other data has shown inflation falling.  That’s as close to a soft landing (the so-called golden path) as you can get. However, the Bears and folks who think they know better than the Fed, saw the data as an omen of either no rate cut in November or at the very least “disappointing the market” with a lesser cut than was expected.  (That latter point overlooks that Fed members, including Fed Chair Powell, all but said were only getting a quarter-point cut in November.)

In Fed news, on Friday morning, Chicago Fed President Goolsbee told Bloomberg the US jobs report was “superb.”  Goolsbee said, “You really couldn’t ask realistically for a better report for the economy, coupled with finding out that the (East Coast and Gulf Coast) port strike is not going to be an extended matter … those are two pieces of very good news for the economy.”  He continued, “If we get more reports like this, I’m going to feel a lot more confident that we are in fact settling in at full employment.”  Goolsbee went on to say there are even some signs that inflation will go lower than the FOMC’s 2% target. He went on to say that despite the strong jobs report, the Fed Funds rate is still far above what most FOMC members see as the eventual “settling point” and that it is appropriate for the Fed to bring the rate down “a lot” over the next 12-18 months.

In stock news, on Friday, rumors spread that APO is in advanced talks to acquire B for $45 per share.  (B gapped higher and closed up 12.98% at $45.26 on the news.) Later, TELL announced that shareholders have approved the $1.2 billion acquisition of WOPEY (Australian energy producer Woodside Energy Group).  At the same time, the BA and LMT joint venture (United Launch Alliance) announced it had successfully launched a second mission. (This is another step toward Dept. of Defense certification, which is required prior to carrying commercial contracts for national security payloads.)  Later, META announce two new services aimed at bringing in more young adult users.  The new “Local” and “Explore” tabs are currently being tested in various cities around the US.  At the same time, GM announced it had halted production at two plants (an SUV assembly plant and a truck assembly plant) due to the impact of Hurricane Helen on parts suppliers.

Elsewhere, Reuters reported that GOOGL is experimenting with “verified” check marks in search results. (There is no word on whether or no GOOGL intends to monetize such a feature the way Elon Musk did with the former Twitter.)  At the same time, UAW union workers at STLA’s Los Angeles parts distribution center voted in favor of strike unless the carmaker settled grievances related to company failures to make product and investments as promised in the most recent national contract with STLA.  Later, JNJ announced it will discontinue a mid-stage trial of its experimental pill for the prevention of dengue fever.  The company said this came after reprioritization of its R&D portfolio.  At the same time, Reuters exclusively reported that RIO is in talks to acquire lithium miner ALTM.  If the deal were closed, it would make RIO the third-largest producer of lithium in the world.  (Sources tell Reuters the deal would value ALTM at between $4 billion and $6 billion.)

In stock legal and governmental news, on Friday, Reuters reported TMO repeatedly broke FDA contamination rules at its plant that manufactures infant formula and RSV drugs.  The report cited documents from US FDA inspections.  (TMO makes RSV drugs for SNY and infant formula on behalf of AZN.)  At the same time, the NHTSA announced it has opened a probe into 260k F crossover SUVs over losses of braking due to a brake hose defect.  Later, COIN announced it will delist certain stablecoins in the European Economic Area by year end.  This move was in response to the EU’s landmark crypto regulatory framework which will be fully implemented by December.

Elsewhere, the EU voted to move ahead with tariffs (of up to 45%) on Chinese EVs. The contentious vote passed 10 to 5 with 12 abstentions.  Later, the US Supreme Court agreed to hear an appeal from SWBI (Smith & Wesson) to a $10 billion lawsuit brought by the Mexican government. The suit alleges the company and Interstate Arms Company aided and abetted gun trafficking.  At the same time, STLA sued the UAW union over strike threats stemming from the company’s plans to delay investments promise in the 2023 labor contract.  After the close, the FDA placed a lupus treatment from KZR on hold following the death of four patients, which showed common symptoms and three deaths came soon after administration of the experimental drug.

In miscellaneous news, on Thursday night, the US port strike ended in a tentative deal over wages and benefits.  (The automation negotiations will continue with no further strike until January.)  Then Friday, Longshoreman resumed work at US East Coast and Gulf Coast ports.  This means the port shutdown lasted three days and typically it will take nine days (three days per day of shutdown) to fully recover cargo backlogs.  In France, the European Commission approved funds for the removal of 4% of the grape vines in that country.  Back in the US, estimates now indicate that economic damage from Hurricane Helene will reach $250 billion. However, the insurance industry says that only about $5 billion of that will be covered by policies.  As an immediate response is continuing, the disgraced ex-President and his conspiracy theorist minions (like Elon Musk) continue to sew doubt and deter people from using resources available to them by continually spreading lies, amplifying completely unfounded rumors, and distortions for their political gain.

In Fed prediction news, following Friday’s strong September jobs report, there was a huge shift in the implied probabilities of a November Fed rate cut.  Fed Funds Futures trades now bake in a 97.4% probability of a quarter-point cut at the November meeting with 2.6% betting on no change in rates then.  One week prior, 46.7% were expecting a half percent rate cut and 53.3% of trades expected a quarter point cut.  There were no trades expecting no rate change one week ago.

In Middle East news, Israel continued heavy airstrikes on Gaza and Lebanon over the weekend.  (The AP reported more than 30 strikes in Beirut alone on Sunday evening.) The Israeli ground invasion of Southern Lebanon also continued. Reports indicate over 100 Lebanese killed and an unknown number wounded over the weekend alone. One-third of the Lebanese population are now refugees.  Israel confirmed 11 of the IDF ground forces have also been killed. This all comes as it appears Israel is preparing a retaliatory strike on Iran over the 180 missiles that country fired at/toward Israel last week.  From an oil market perspective, the majority of oil flows that has been disrupted or are threatened would go to China. However, if China can’t buy from Iran or the rest of the Gulf can’t ship to China due to war, it will end up buying from other sources.  This will allow US and other producers to sell at a premium.  WTI is up 10% in the last 10 days as of Sunday.

Overnight, Asian markets were mostly green with Japan (+1.80%), Taiwan (+1.79%), and South Korea (+1.58%) pacing the gains.  In Europe, the bourses are mixed at midday.  The CAC (+0.18%), DAX (-0.24%), and FTSE (+0.46%) lead the region in early afternoon trade.  Meanwhile, in the US, as of 7:30 a.m., Futures are pointing toward a down start to the day.  The DIA implies a -0.40% open, the SPY is implying a -0.46% open, and the QQQ implies a -0.62% open at this hour.  At the same time, 10-Year bond yields have spiked again to 4.002% and Oil (WTI) jumped another 2.5% on Israeli fears (continued bombing and invasion with threat of attack on Iran) in early trading.

The major economic news scheduled for Monday is limited to August Consumer Credit (3 p.m.). We also hear from Fed members Kashkari (1:50 p.m.) and Bostic (6 p.m.). There are no major earnings reports scheduled for either before the open or after the close Monday.

In economic news later this week, on Tuesday, we get August Exports, August Imports, August Trade Balance, EIA Short-Term Energy Outlook, and API Weekly Crude Stocks report.  We also hear from Fed member Bostic (12:45 p.m.).  Then Wednesday, EIA Crude Oil Inventories and the September FOMC Meeting Minutes are reported.  However, we also hear from Fed member Bostic and Fed member Daly. On Thursday, we get Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, September Core CPI, September CPI, September Federal Budget Balance, and Fed Balance Sheet. We also hear from Fed member Williams.  Finally, on Friday, September Core PPI, September PPI, Michigan Consumer Sentiment, Michigan Consumer Expectations, Michigan 1-Year Inflation Expectations, Michigan 5-Year Inflation Expectations, and the WASDE Ag report are delivered.

In terms of earnings reports later this week, on Tuesday, PEP reports. On Wednesday, we hear from HELE.  Then Thursday, DAL and DPZ report. Finally, on Friday, earnings season kicks off again in earnest as BK, BLK, FAST, JPM, and WFC report.

With that background, markets look bearish so far in the premarket. All three major index ETFs gapped down to start the early session and have traded lower to retest their T-line (8ema) from above. However, all three are now trading above their T-line (8ema) at the moment. So, the short-term trend remains bullish. The mid-term trend remains bullish. In the longer-term we still have a strong Bull trend in all three major index ETFs and they remain not far from their all-time highs. With regard to extension, none of the major index ETFs are extended above its T-line (8ema). In addition, the T2122 indicator is still in its mid-range (although just outside of overbought territory. So, markets have room to run either direction, if either the Bulls or Bears can find momentum. However, the Bears have a little more slack and the Middle East situation in their corner. With regard to those 10 big dog tickers, nine of the 10 are modestly in the red. AMZN (-1.71%) leads the losses while AMD (+0.49%) is holding up far better than the others. It is worth noting that the biggest dog, NVDA (-0.48%) has traded only 1.5 times the dollar-volume as TSLA (-0.46%). This is typically a factor of three.

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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