Markets diverged at the open Tuesday.  SPY opened 0.06% higher, DIA gapped down 0.36%, and QQQ opened 0.08% higher.  From there, SPY and QQQ ground sideways in a very tight range for 35 minutes before selling off sharply for 30 minutes and then moving sideways again until a little after 1 p.m.  From there, those two broader index ETFs sold off again, just much more slowly, for the rest of the day.  For its part, after its gap lower, DIA chopped sideways until 12:30 p.m. and then slowly sold off further all afternoon.  This action gave us large black-bodied Bearish Engulfing candles in the SPY and QQQ.  (QQQ also retested and crossed below its T-line, 8ema.)  Meanwhile, DIA gave us a gap down, black-bodied candle with modest lower wick and a bit larger upper wick.  This happened on average volume in the DIA, slightly-below-average volume in the QQQ, and below-average volume in the SPY.

On the day, six of the 10 sectors were in the red with Energy (-2.91%) way, way out in front leading the market lower as fears over an Israeli retaliatory strike on Iran faded temporarily.  (The thinking is apparently that Israel would wait on a US THAAD missile system to be shipped, installed, and brought on-line by 100 US troops before attacking Iran.)  On the other side, Communications Services (+0.60%) held up better than the other sectors.  Meanwhile, SPY lost 0.78%, DIA lost 0.78%, and QQQ lost 1.34%. VXX gained 3.26% to close at 53.85 and T2122 fell out of its overbought territory to end in the top of its mid-range, closing at 74.65.  At the same time, 10-Year bond yields fell quite a bit to 4.034% while Oil (WTI) plummeted 3.94% to close at $70.92 per barrel.   So, the Bears were in control all day Tuesday.  An accidental day early publication of earnings by ASML (-16.26%), which beat but missed on key segment growth and significantly lowered forward guidance, caused the stock to plummet.  More importantly, that read through into NVDA (-4.69%), AMD (-5.22%), and INTC (-3.33%) among other chipmakers.  (NVDA was the big hit to the overall market since it traded almost $50 billion in stock during the day.) 

The major economic news scheduled for Tuesday was limited to NY Empire State Mfg. Index, which came in much lower than expected at -11.90 (compared to a +3.40 forecast and a September +11.50 value).  Later, September NY Fed 1-Year Inflation Expectations were flat at 3.0% (versus the August 3.0% reading).

In Fed news, on Tuesday, San Francisco Fed President Daly said the FOMC remains on track for more rate cuts this year unless data is unlike than expected. She defended the September half point rate cut, saying that it was “right-sizing.”  Daly described it as, “recognizing the progress we’ve made (on inflation) and loosening the policy reins a bit, but not letting go.” She went on, “even with this adjustment, policy remains restrictive, exerting additional downward pressure on inflation to ensure it reaches 2%.”  Looking forward, Daly said, “I think one or two [rate cuts] this year would be a reasonable thing.”  Regarding quantitative tightening, “Right now, today, I don’t have any signs this is something that needs to change right away.” She concluded saying, “The economy is clearly in a better place (regarding inflation),” … “the risks to our goals are now balanced.”  Later, Atlanta Fed President Bostic told an event that he has penciled in just one more (quarter point) cut to rates in 2024 when he updated his “dot” at the September FOMC meeting. Bostic said, “The median was for … 50 basis points more, above and beyond the 50 basis points that was done in September. My dot was 25 basis points more.”  However, Bostic said he is open to changing his view and it is not set in stone.  Bostic said, “I am keeping my options open.” 

After the close, FULT, HWC, and OMC reported beats on both the revenue and earnings lines.  At the same time, JBHT and UAL missed on revenue while beating on earnings.  On the other side, IBKR beat on revenue while missing on earnings.

In stock news, on Tuesday, BX announced plans to invest $8.2 billion to build data centers in northeastern Spain.  Later, WBA announced it was closing 1,200 stores over the next three years (while simultaneously announcing beats on both lines of its earnings report).  At the same time, AAPL launched a new version of its iPad mini, which includes AI features.  Later, JNJ raised its 2024 sales and profit forecasts on strong cancer drug sales. Meanwhile, BA announced plans to raise $25 billion through the issuance of new stock and another $10 billion through a credit agreement with major lenders.  The move comes as the company looks to shore up its balance sheet to avoid a debt rating cut to junk status amidst a strike that has shut down its most-profitable product line’s production and ongoing regulatory and quality problems.  (For reference, the strike alone is costing BA more than $1 billion per month.)  At the same time, Bloomberg reported that Biden Administration officials “have discussed” capping the sales of advanced AI chips from NVDA, AMD, INTC, etc. on a country specific (read China) basis.  (What this does not mention is that China can buy as much access as they want to the computer power via cloud computing from US-located hardware from GOOGL, AMZN, ORCL, MSFT, etc.  In other words, unless they also ban cloud sales, the same amount of hardware would be sold…just to different destinations.)

Elsewhere, INTC and AMD announced they have formed an “advisory council” (along with smaller hardware and software firms) for the x86 computer architecture. The aim of the group is to steer both x86 chipmakers toward consistent and compatible functions and features.  (This is seen as a way to compete against the ARM and RISC V architectures.  However, it is just as important to prevent incompatibilities such have previously been seen in MSFT’s Windows where one company’s CPU do not perform as well or cannot support the same features.)  Later. Reuters reported that XOM is looking for a buyer for some of its ND (Bakken formation) shale oil assets. The report said XOM is seeking more than $500 million for 137 active wells, 676 non-active, and 49,000 acres of drilling rights.  After the close, NYCB announced it will rename itself “Flagstar Financial” and change its ticker to FLG, effective Oct. 25 as part of the bank’s turnaround efforts.

In stock legal and governmental news, on Tuesday, SCBFF (Standard Chartered bank) won a UK court ruling which allows it to replace the financial benchmark (LIBOR) used to set dividend rates.  Despite investor objections, the court ruled it was acceptable for the bank to use a “reasonable alternative rate.” Later, TSLA announced it had received local German approval for the first stage of a plant expansion (a planned doubling of capacity) at its Berlin-area plant.  At the same time, DLAKY (Lufthansa) agreed to pay a $4 million penalty for discriminating against Jewish passengers attempting to board a connecting flight in Frankfurt in May 2022.  Later, NYT sent a “cease and desist” letter to AI startup Perplexity related to the AI using NYT content.  At the same time, the FCC announced it has opened an investigation of broadband internet providers on why data is capped for some customers and not others as well as how the policies impact consumer prices and competition. Later, the US Supreme Court heard a case involving a NY man fired from his commercial truck driver job for failing a drug test after taking CBD product he alleged was falsely marketer by MJNA as not containing the THC component the employment test measured.  (The man was seeking permission to sue the maker under the CA state RICO Act.) 

Elsewhere, GSK sued MRNA in US federal court, alleging the latter violated the former’s patent rights in the creation of MRNA’s COVID-19 vaccine and RSV vaccine.  Later, a CT jury awarded $15 million to a man who alleged the company’s talc had caused the rare form of cancer he contracted as a result of using JNJ talc for decades.  After the close, the US Dept. of Energy announced it had closed an $861 million loan guarantee to allows AES and TTE to build two solar farms and battery storage systems in Puerto Rico.  At the same time, a US District Judge ruled that META must face lawsuits brought by US states that accuse the company’s products of fueling mental health problems in teens.  (30 states are signed onto one such suit while another suit was brought by the state of FL.) The judge also rejected motions by META, GOOLG, SNAP and others asking to dismiss personal injury lawsuits by individual plaintiffs over the same subject.  Later, a federal judge ordered BA and the Dept. of Justice to provide details on the impact of company Diversity and Inclusion policies on the selection of an independent monitor prior to his deciding whether or not to accept the BA plea deal for violating the 2021 deferred prosecution agreement.

In miscellaneous news, on Tuesday, the FAA opened an “audit” into runway incursion risks at the 45 busiest US airports after a series of troubling near-miss incidents. (For example, air traffic controllers cleared an ALK flight to take off on a Nashville runway where a LUV plane had been cleared to cross the runway last month.)  Elsewhere, the National Retail Federation released its annual holiday sales forecast.  The NRF says it expects retail holiday sales to grow 3.5% in 2024 compared to 3.9% last year.  The forecast also calls for online sales to grow 9% compared to 2023. (These numbers are partially impacted by a shorter window from Thanksgiving to Christmas this year that is forcing sellers to push holiday sales earlier into non-traditional shopping periods.)

In Middle East news, on Tuesday, US Sec. of State Blinken and Sec. of Defense Austin warned Israel to allow at least 300 trucks of aid into Gaza within the next 30 days or risk losing access to US weapons funding.  (Israel has cut humanitarian aid to less than 50% of what it was at its post-Israeli-invasion peak.  Even that peak is said by NGO analysts to not be enough to avoid mass deaths from hunger and the lack of medical supplies.)  At the same time, the UN called for an investigation into an Israeli attack in a northern Lebanon countryside Christian village which killed two dozen (in pursuit of a single mid-level Hezbollah leader).  Meanwhile, US officials leaked to the AP that Israel has promised not to attack Iranian nuclear or oil sites.  Elsewhere, 41 new Lebanese were killed in 146 Israeli attacks Tuesday and the total number of Israeli attacks on that country passed 10k since the beginning of the most-recent hostilities one year ago.

Overnight, Asian markets were heavily red. Thailand (+1.36%) printed the only appreciable green while Japan (-1.83%), New Zealand (-1.55%), and Taiwan (-1.21%) paced the losses.  In Europe, the bourses also lean toward the red with only four of the 14 showing green at midday.  The CAC (-0.52%), DAX (-0.21%), and FTSE (+0.65%) lead the region lower 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 -0.01% open, the SPY is implying a +0.08% open, and the QQQ implies a +0.18% open at this hour. At the same time, 10-Year bond yields are down to 4.01% and Oil (WTI) is off another half percent to $70.20 per barrel in early trading.

The major economic news scheduled for Wednesday includes September Export Price Index and September Import Index (both at 8:30 a.m.), September Federal Budget Balance (2 p.m.), and API Weekly Crude Stocks (4:30 p.m.). The major earnings reports scheduled for before the open include Wednesday, ABT, ASML, CFG, FHN, MS, PLD, SYF, and USB.  Then, after the close, AA, CCI, CSX, DFS, EFX, KMI, LBRT, PPG, STLD, and SNV report.

In economic news later this week, 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 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.

So far this morning, CFG, FHN, MS, SYF, and USB all reported beats on both the revenue and earnings lines.  It is worth noting that MS beat on revenue by 6.7% while crushing earnings by 19%.

With that background, it looks as if all three major index ETFs are very modestly bullish in the premarket. All three have printed small white-body candles inside Tuesday’s black body. QQQ did retest its T-line (and passed so far) from above this morning. The SPY, DIA, and QQQ all remain above their T-line (8ema). So, the short-term trend remains bullish. The mid-term and longer-term trends are also strongly Bull in all three. With regard to extension, none of the major index ETFs are too far extended from its T-line (8ema). In addition, the T2122 indicator is back in (the top of) its mid-range. So, markets have room to run either direction, if traders can find momentum, but the Bears have slightly more slack to work with today. With regard to those 10 big dog tickers, eight of the 10 are in the green this morning. The biggest dog, NVDA (+0.74%) is back to leading that pack in terms of price move and has traded more than three times as much dollar-volume than any other ticker in the early session.

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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