Markets gapped down, ground sideways, sold off hard, and then ground sideways again on Monday.  SPY gapped down 0.28%, DIA gapped down 0.30%, and QQQ gapped down 0.41%.  At that point, all three major index ETFs chopped sideways not far from the open level for a while.  SPY and DIA started their next leg, a sharp selloff at about 11:30 a.m.  For its part, QQQ kept chopping sideways until 2 p.m. before it too sold off even faster. All three reached the lows of the day at about 3 p.m. before drifting sideways with a modest bullish trend.  This action gave us a black-body candle after an indecisive candle, which crossed back below its T-line (8ema).  All three also have wicks on both end of the candles.  This happened on below-average volume in the SPY, DIA, and QQQ.   

On the day, nine of the 10 sectors were in the red with Utilities (-1.91%) way out front (by almost three-quarters of a percent), leading the rest of the market lower.  On the other side, Energy (+0.37%) held up almost a half percent better than any other sector.  Meanwhile, SPY lost 0.90%, DIA lost 0.90%, and QQQ lost 1.07%. VXX spiked 8.91% to close at 57.72 and T2122 dropped to the bottom side of its mid-range at 44.66.  At the same time, 10-Year bond yields popped up over 4% to close at 4.02% while Oil (WTI) spiked another 3.98% on Middle East fears to close at $77.33 per barrel.  (So, WTI has spiked 14.3% over 7 trading days on Israeli versus the region fears.) 

The major economic news scheduled for Monday is limited to August Consumer Credit which came in at $9.93 billion (compared to a forecast of $11.80 billion and hugely below July’s $26.63 billion reading).  On one hand, this means US consumers are likely in better shape, having less installment debt. However, it also means consumers were not out spending, which could indicate lower consumer confidence.  Either way, it should be read as bearish for the US Dollar.  (And things that are bearish for the Dollar are, by definition, bullish for commodity prices.)  Still, it is worth noting that Consumer Credit figures have always been subject to sizable revisions due to a lack of reporting uniformity or requirements.

In Fed news, on Monday, Minneapolis Fed President Kashkari seemed to say the same thing Chicago Fed President Goolsbee had said on Friday. Namely, the Fed liked the strong September Labor report.  Kashkari said, “It looks like it is still a strong labor market…it’s really good news as we want to keep a strong labor market.” He went on to say, “The balance of risks has shifted away from higher inflation towards maybe higher unemployment.”  … “So that’s a really good fact that the job market has stayed strong while inflation has come down.”  Then early Tuesday, Fed Governor Kugler said she had supported the half-percent rate cut in September.  She said, “While I believe the focus should remain on continuing to bring inflation to 2%, I support shifting attention to the maximum-employment side of the FOMC’s dual mandate as well.” She did go on to note the better-than-expected Payrolls report from Friday and said she now supports a “balanced approach” to future cuts, saying, “The labor market remains resilient, but I support a balanced approach to the FOMC’s dual mandate so we can continue making progress on inflation while avoiding an undesirable slowdown in employment growth and economic expansion.”  Later, NY Fed President Williams had an interview with the Financial Times in London.  Williams said, “The current stance of monetary policy is really well positioned to both hopefully keep maintaining the strength that we have in the economy and the labor market, but also continuing to see that inflation comes back to 2%.” He defended the larger half-percent first cut, saying it was “right in September and right today.” Williams went on to say that the Fed’s Dot Plot (which shows two additional quarter-point rate cuts this year) is a “very good base case.”

In stock news, on Monday, APD surged on reports that activist investor Mantle Ridge had taken a more than $1 billion position.  This set off a chain reaction, including two analyst upgrades.  (APD ended the day up 9.52% after a 7% gap higher at the open.)  At the same time, SRRK announced positive results from its Phase 3 clinical trial for its apitegromab treatment for muscular atrophy. (SRRK gapped up 254% and closed out the day at +361.99%.)  Later, Reuters exclusively reported that UL will invest more than $165 million to improve its European supply chain.  In addition, UL sources said the company’s European homecare unit will increase R&D and promotion spending by 40% in 2025. (No dollar figure was given.)  At the same time, the Wall Street Journal reported that GOOGL’s share of the $300 billion search market is under pressure from AI rivals and other platforms like TikTok offering native Internet search functions.  WSJ reported that GOOGL’s share of that market is expected to end the year at below 50% for the first time in more than a decade. 

Meanwhile, AMZN’s share of that market is expected to reach 22.3% this year.  Later, GM announced it had restarted production at assembly plants following the hurricane-related supplier shortages.  At the same time, CVX announced it is selling its Athabasca oil sands and Duvernay shale assets to CNQ for $6.5 billion (all cash).  CVX expects the deal to close Dec. 6.  (Those two resources produced 84k barrels of oil per day in 2023.)  Later, EQNR announced it had bought a 9.8% stake in Danish offshore wind farm developer ORSTED for $2.5 billion. At the same time, Reuters reported that activist investor Starboard Value had bought about a $1 billion stake in PFE.  (PFE gapped higher on the news and closed near the opening level, up 2.17%.)

In stock legal and governmental news, on Monday, the US Supreme Court declined to hear an appeal by UBER and LYFT, which were seeking to avoid lawsuits from the state of CA on behalf of drivers.  (The drivers had been forced to sign agreements to keep legal disputes in arbitration rather than court.)  Later, a Seattle-based US District Judge unsealed his Sept. 30 ruling that the FTC case against AMZN for antitrust violations will proceed to trial.  (It is worth noting that a few of the co-plaintiff states, namely NJ, PA, MD, and OK, had their claims dismissed.)  At the same time, the US State Dept. approved the sale of $965 million in arms to Romania and Italy.  RTX is the maker of the $285 million of arms sold to Romania while BAESY produced the $680 million sold to Italy. Later, a US District judge ruled that GOOGL must offer alternatives to its Google Play store for downloading and paying for apps on Android phones on antitrust grounds.  (The order restricts GOOGL from paying phone makers to preinstall the Google Play store or from sharing Play store revenue with other app distributors.) For its part, GOOGL immediately vowed to appeal the decision.  

Elsewhere, STLA filed eight additional lawsuits against the UAW union, alleging the union violated its labor contract by threatening to strike over the company’s delaying of investments it promised in the contract. Later, a group representing drug compounders sued the FDA over its decision to remove LLY’s bestselling weight-loss and diabetes drug from the “shortage list” last week. Thereby hurting drug compounder’s ability to sell their own version of the drugs Zepbound and Mounjaro. The suit alleges that those drugs are still in short supply.  (If left on the list, it would require rationing of the drugs by LLY to any given buyer and give generic compounders a leg-up since they are not bound by the list rules.)  Finally, Mexico’s antitrust regulator made a preliminary finding Monday saying that GPAGP (tortilla-maker Gruma) holds unacceptable price-fixing power in the corn tortilla market in Mexico.

In miscellaneous news, on Monday, the CBOE announced it will list “hedged ADRs” that Us investors can use to buy foreign-listed stocks while limiting impacts from any currency fluctuations. Initially, these will include ADRhedged offerings for AZN, HSBC, and SHEL.  However, 14 other hedgedADR offerings will follow quickly.  Elsewhere, Hurricane Milton quickly went from Category 3 to Category 5 Monday.  This caused at least one oil and gas platform (owned by CVX) to shutdown.  Meanwhile, some FL ports have also begun restricting navigation or planning for Tuesday closure.

In Middle East news, Yemen’s Houthi rebels got in on the Middle East fighting again on Monday.  The Houthi claim to have fired two missiles at Jaffa, Israel.  (The IDF claimed to have shot down one of the two.)  Meanwhile, the Israeli bombing campaign in Beirut and Southern Lebanon as well as the Israeli ground invasion of Lebanon continued. For his part, Israeli PM Netanyahu said they were fighting a “war of resurrection” and they are in the process of changing the security reality of the region and their attacks will not stop until all their goals are achieved.  Perhaps in response, French President Macron called on an arms embargo of Israel in the face of 42k Palestinians and more than 2,000 Lebanese killed in Israeli actions over the last year. With this as the backdrop, oil markets continue to reflect big fear over the threatened, and likely coming, Israeli retaliation to Iran’s recent 180 missile barrage.  (Analysts are speculating Israel will attack Iran’s oil infrastructure to damage its economic output and cause maximum pain to domestic.) 

Overnight, Asian markets were mixed as China resumed trading after a week-long national holiday.  Mainland China remained “crazy strong” as they were right before their break with Shenzhen (+9.17%) and Shanghai (+4.59%) by far the biggest gainers.  On the other side, Hong Kong (-9.41%) and Japan (-1.00%) stood out among losers.  Meanwhile, in Europe, we see red across the board at 7:15 a.m.  The CAC (-0.64%), DAX (-0.22%), and FTSE (-1.15%) lead the region lower in early afternoon trade on Chinese responses to the EU tariffs on Chinese electric vehicles. In the US, as of 7:15 a.m., Futures are pointing toward a green start to the morning.  The DIA implies a +0.13% open, the SPY is implying a +0.41% open, and the QQQ implies a +0.50% open at this hour.  At the same time, 10-Year bond yields are essentially flat from the Monday close at 4.024% and Oil (WTI) is actually down 1.58% to $75.90 per barrel in early trading.

The major economic news scheduled for Tuesday includes August Exports, August Imports, and August Trade Balance (all at 8:30 a.m.), EIA Short-Term Energy Outlook (noon), and API Weekly Crude Stocks report (4:30 p.m.).  We also hear from Fed member Bostic (12:45 p.m.).  There are no major earnings reports scheduled for before the open.  However, after the close, PEP reports.

In economic news later this week, on 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 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.

So far this morning, PEP missed on revenue while beating on earnings.  PEP also cut its full-year forecast, citing weakness in US snack sales and the repercussions from its Quaker Foods recalls in North America.

With that background, markets look modestly bullish so far in the premarket. All three major index ETFs opened the early session roughly flat, but have printed white-bodied candles with tiny upper wicks at this point. SPY and QQQ have crossed back above in a retest of their T-line (8ema). However, the DIA has not quite reached its T-line yet. So, the short-term trend is back to modestly 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 from its T-line (8ema). In addition, the T2122 indicator sits in the center of its mid-range. So, markets have room to run either direction, if either the Bulls or Bears can find momentum. With regard to those 10 big dog tickers, eight of the 10 are in the green this morning. The biggest dog, NVDA (+2.06%) leads that pack higher on both price move and volume. On the other side, INTC (-0.40%) is the laggard among that group. It is worth noting that the biggest dog, NVDA has traded 3.5 times the dollar-volume as next-closest ticker TSLA (+1.14%). This is typical for a bullish day in recent months.

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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