Markets diverged at the opening bell Friday.  SPY opened just 0.01% lower, DIA opened 0.16% higher, and QQQ gapped down 0.39%.  However, regardless of their open, the Bulls stepped in and rallied all three major index ETFs sharply for an hour.  That was about it for the say as the SPY, DIA and QQQ meandered sideways with a slight bullish trend the rest of the day.  This action gave us large white-bodied candles with small profit-taking wicks at the top in all three major index ETFs.  SPY and DIA both printed new all-time highs and new all-time high closes on Doji Continuation Pattern (Doji Sandwich) signals.  Meanwhile, the QQQ gave us the highest close since July 16.  This happened on just above-average volume in DIA, just below-average volume in the SPY, and well-below average volume in the QQQ.

On the day, all 10 sectors were in the green with Utilities (+2.01%) well out in front leading the market higher.  On the other side, Communication Services (+0.30%) was the laggard.  Meanwhile, SPY gained 0.60%, DIA gained 0.96%, and QQQ gained just 0.16%. VXX fell 1.17% to close at 54.07 and T2122 spiked to the top of its overbought territory, closing at 93.98.  At the same time, 10-Year bond yields climbed to close at 4.096% while Oil (WTI) fell 0.47% to close at $75.49 per barrel.  So, the Bulls ruled the roost Friday as a strong morning rally led to a melt-up after the first hour.  Only a little profit-taking the last few minutes of the day stopped the three major index ETFs from closing on the highs.  

The major economic news scheduled for Friday included September Core PPI, which came in down, as expected, at +0.2% (compared to at +0.2% forecast and August’s +0.3% value).  On the headline number, September PPI was down and better than was anticipated at 0.0% (versus a forecast of +0.1% and well down from August’s +0.2%).  Later, Preliminary October Michigan Consumer Sentiment was down to 68.9 (versus a 70.9 forecast and a 70.1 September reading).  In terms of the outlook, the Preliminary October Michigan Consumer Expectations were also down at 72.9 (compared to a 75.0 forecast and September’s 74.4 value). In terms of inflation, the Preliminary October Michigan 1-Year Inflation Expectations popped to 2.9% (versus a 2.7% forecast and previous month value).  On the longer-term, Preliminary October Michigan 5-Year Inflation Expectations were down as expected to 3.0% (compared to a 3.0% forecast and a September 2.7% reading).

In stock news, on Friday, Nippon Steel announced it would sell its 50% stake in a joint-venture steel plant in AL to MT…if the X acquisition succeeds.  Nippon would take a $1.55 billion loss on the joint-venture by selling their stake to MT for one dollar. Later, Bloomberg reported that HON is in advanced talks to sell its face mask (PPE gear) unit to private equity firm Odyssey for about $1.5 billion.  At the same time, Reuters reported that CVS is exiting its “core infusion services” business and plans to close or sell 29 pharmacies as a result.  (CVS had stopped taking new patients in that unit on Oct. 8.)  The unit was purchase in 2013 for $2.1 billion.  Meanwhile, after posting strong earnings, executives from both JPM and WFC commented that the consumers are still in good shape.  JPM’s CFO said “Overall, we see the spending patterns as being sort of solid.”  The CFO of WFC echoed the same sentiment, telling reporters that “spending on credit and debit cards, while down a little from earlier this year, was still quite solid.”  Later, WSR said it will “carefully consider” at $15/share takeover offer from MCB Real Estate.  (WSR stock closed at $14.15 Friday.)

In BA news, the company announced it was cutting 17,000 jobs (about 10% of workforce globally) and will delay the first delivery of its new 777X jet by a year (that plane had been halted prestrike due to cracking in the part connect engines to its wings).  The company cited its dire financial situation as a month-long strike by 33k employees have idled manufacturing and delivery of its most profitable plane. (Years of quality debacles and mismanagement were also massive contributors.)  Analysts say the move, as well as rescinding its most recent contract offer are moves designed to pressure the union into ending the strike. On the other side, credit analysts have BA on credit watch and have already said they will cut the company credit rating to junk unless the strike is resolved “soon.” 

In stock legal and governmental news, on Friday, BA filed unfair labor practices against the union representing 33k striking workers with the NLRB. The company alleges the union is bargaining in bad faith.  In unrelated news, the US Dept. of Transportation Inspector General said the FAA oversight of BA production was ineffective. The IG said the FAA did not have enough comprehensive presence to identify discrepancies and company non-compliance.  (Of course, that is the entire intent of deregulation, cuts to the size of government, and moves toward company self-certification that has been lobbied for and granted for decades.)  Later, a federal judge in TX criticized the terms of the plea deal BA had taken to avoid prosecution for violations of an earlier consent decree related to two fatal 737 MAX planes.  The judge pressed the Dept. of Justice to justify the leniency of giving that deal to BA. (He later said he would rule on whether the deal was valid in the near future.) 

Elsewhere, the NLRB filed a complaint against AAPL for restricting employee use of social media and messaging apps and doing illegal monitoring of them as a means of discouraging unionization.  Later, a US Appeals Court placed approvals and permits for a KMI gas pipeline in TN on hold by over-riding the Army Corps of Engineers permit and TN Dept. of Environment and Conservations certification.  The court said the stay would give the court time to consider the merits of a lawsuit brought by environmental groups.  On Saturday, GOOGL filed a motion asking the judge to place his final ruling on the fate of “opening up the Google Play Store” following the jury ruling that GOOGL was an illegal monopoly.  (GOOGL ask the judge to place an indefinitely hold on his judgement, which was due by November 1, while the company pursues appeals.)

In miscellaneous news, on Friday, the state of CA confirmed six more human cases of bird flu (four Thursday and two Friday).  The US CDC said that all six cases appear to be due to human contact with animals (as opposed to human transmission) and that the public risk of the flu remains low as a result.  Elsewhere, US and European officials confirmed to Bloomberg that India has become the second-biggest illegitimate supplier of restricted components (like microchips) to Russia, behind China.  This comes as India doubled its export of those items to Russia in both April and May and increased it by more than 50% from those levels in July.  Meanwhile, in Russian invasion news, on Friday multiple journalist outlets, all citing South Korean sources, reported the latter had made intercepts of communication between North Korean military units. Those intercepts indicate North Korea has sent troops to help in missile targeting and is now preparing to send ground troops to Ukraine to fight on behalf of Russia. (Obviously, this could give Russia thousands of trained troops, but may also result in changes to US policy on the use of US arms and potentially changes South Korea’s calculus on providing arms to Ukraine.) Russia denied the reports

In Middle East news, on Friday, the Israeli campaigns in Lebanon and Gaza continued as the Israelis fired on UN troop positions for the second day in a row, injuring another two of the peacekeepers.  Israel also fired on Lebanese government (not Hezbollah) troops.  However, the worse of the Israeli attacks Friday were in a residential section of central Beirut where bombing took out another pair of apartment blocks, a number of shops, as well as a refugee encampment. For their part, Hezbollah fired dozens of rockets into Northern Israel in response. On Saturday, Israel bombed towns in northern Lebanon, ordered the evacuation of 23 villages in “southern” Lebanon (North of Beirut), and also bombed the Bekaa Valley (45 miles Northeast of Beirut).  Further south, Israel laid down heavy bombardment across northern Gaza, killing a few dozen more people. On Sunday, Israel ordered more evacuations in Lebanon, now including fully one-third of that country’s population has been ordered out. (This includes UN peacekeepers, where Israel has attacked and breached two UN bases Sunday, ordering UN troops to leave the country…for their own safety.)

In China news, on Saturday, Chinese Finance Minister Foan held a press conference in Beijing that was intended to calm markets.  Foan pledged that the government will “significantly increase” debt to revive its sputtering economy.  However, details on the actual amounts left investors guessing about the total size of the stimulus.  (Last week the market had expected massive stimulus, but only got one-fifteenth the amount they had expected.) Foan said programs will offer subsidies for low-income people and also support property markets.  Separately, Bloomberg reported Beijing is now considering injecting $142 billion into the country’s largest banks on top of $284 billion in stimulus (resulting from special sovereign bond sales) this year to be used to spur the economy.  (Half of the $284 billion was to go to local governments and the other half to incentives for buying home appliances and other durable goods.) 

Overnight, Asian markets were mostly green.  Only Hong Kong (-0.75%), and New Zealand (-0.61%) were red while Shenzhen (+2.65%) and Shanghai (+2.07%) paced the 10 gaining exchanges.  In Europe, markets are more mixed at midday with six bourses in the green and eight in the red.  The CAC (-0.30%), DAX (+0.23%), and FTSE (-0.07%) are typical in early afternoon trade.  Meanwhile, in the US, as of 7:30 a.m., Futures are pointing toward a mixed and modest start to the week.  The DIA implies a -0.16% open, the SPY is implying a +0.15% open, and the QQQ implies a +0.27% open at this hour.  At the same time, 10-Year bond yields are at 4.096% and Oil (WTI) is down 2.51% to $73.66 per barrel in early trading.

The major economic news scheduled for Monday are limited to NY Fed 1-Year Consumer Inflation Expectations (11 a.m.) and September Federal Budget Balance (2 p.m.).  However, we also hear from Fed Governor Waller (3 p.m.).  There are no major earnings reports scheduled for either before the open or after the close.

In economic news later this week, on Tuesday, we get NY Empire State Mfg. Index.  We also hear from Fed member Daly.  Then Wednesday, September Export Price Index, September Import Index, and API Weekly Crude Stocks are reported.  On Thursday, we get Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, September Core Retail Sales, Philly Fed Mfg. Index, Philly Fed Mfg. Employment, September Retail Control, September Retail Sales, September Industrial Production, August Business Inventories, August Retail Inventories, Weekly EIA Crude Oil Inventories, and the Fed Balance Sheet.  Finally, on Friday, Preliminary September Building Permits and Preliminary September Housing Starts are reported.  We also hear from Fed Governor Waller.

In terms of earnings reports later this week, on Tuesday, we hear from ACI, BAC, SCHW, C, ERIC, GS, JNJ, PNC, PGR, STT, UNH, WBA, IBKR, JBHT, OMC, and UAL.  Then Wednesday, ABT, ASML, CFG, FHN, MS, PLD, SYF, USB, AA, CCI, CSX, DFS, EFX, KMI, LBRT, PPG, STLD, and SNV report.  On Thursday, we hear from, BX, CMC, ELV, HBAN, INFY, KEY, MTB, MAN, MMC, SNA, TSM, TRV, TFC, WBS, WIT, CCK, ISRG, NFLX, WDFC, and WAL.  Finally, on Friday, ALLY, AXP, ALV, CMA, FITB, PG, RF, and SLB report.

With that background, the SPY and QQQ both opened the premarket flat but have printed white-body candles and are not far from their highs at this point of the early session up in clean air. Meanwhile, DIA opened higher but has put in a black candle so far to be back down slightly in the top of Friday’s candle. All three major index ETFs are above their T-line (8ema). So, the short-term trend remains 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. With regard to extension, none of the major index ETFs are too far extended from its T-line (8ema). However, the T2122 indicator is in the upper half of its overbought range. So, markets have room to run either direction, if traders can find momentum, but the Bears have more slack to work with today. With regard to those 10 big dog tickers, all 10 are in the green this morning. TSLA (+1.12%) leads the way in both price move and volume as it tries to come back from Friday’s robotaxi hammering. INTC (+0.25%) is the laggard among the 10. It is worth noting that TSLA has just slightly more dollar-volume traded than NVDA (+1.08%), which is abnormal (NVDA typically leads all other tickers by at least a factor of 2.5). So, just be aware.

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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