Friday saw a gap higher, some midday divergence, a sideways grind and then a Trump Tariff selloff.  SPY afternoon gapped up 0.41%, DIA gapped up 0.30%, and QQQ gapped up 0.71%. At that point, both SPY and QQQ continued to rally until 11:15 a.m.  From there, both ground sideways in a tight range until 1 p.m.  However, then Trump’s Whitehouse announced major tariffs will kick in against Canada, Mexico, and to a lesser extend China on Saturday.  This caused the sharpest move of the day, which was a selloff that lasted into the close.  Meanwhile, after its gap higher, DIA faded its gap immediately before grinding sideways in a very tight range along the previous close until 1p.m.  Unfortunately, just like the other major index ETF.s the Trump tariff news drove a strong selloff the last three hours of the day.  This action gave us large black-body candles in all three.  SPY and QQQ had significant upper wicks, but all three closed near their lows.  SPY was the only one of the three to (barely) cross below its T-line (8ema) although the other two are close above that level.  SPY and DIA both printed Bearish Engulfing candles.

On the day, all 10 of the sectors were in the red with Energy (-2.26%) way out front, by more than a percent, leading the market lower. On the other side, Technology (-0.11%) held up better than the other sectors.  At the same time, SPY lost 0.53%, DIA lost 0.76%, and QQQ lost 0.15%. Meanwhile VXX gained 3.37% to close at 44.12 while T2122 dropped all the way back to just below its centerline to close at 43.86.  On the bond side, 10-Year Bond yields rose to 4.549% and Oil (WTI) gained 1.02% to close at $73.46 per barrel.  So, Friday was literally an up-sideways-and-the-down day for the market. The only thing that seems certain is that the market doesn’t like the uncertainty caused by Trump’s protectionist approach to trade (high tariffs).  This all happened on average volume in DIA and above-average volume in SPY and QQQ.

The major economic news on Friday included the Month-on-Month December Core PCE Price Index, which came in as expected at +0.2% (compared to a +0.2% forecast but up a tick from November’s +0.1% value).  On an annualized basis, the Year-on-Year December Core PCE Price Index was flat at +2.8% (versus a +2.8% forecast and November reading).  For the headline number, the Month-on-Month December PCE Price Index was up as predicted to +0.3% (compared to a +0.3% forecast but up from November’s +0.1% number).  Annualized, the Year-on-Year December PCE Price Index was also up as anticipated at +2.6% (versus a +2.6% forecast and November +2.4% value).  Meanwhile, Month-on-Month December Personal Spending was up to +0.7% (compared to a +0.5% forecast and the November +0.6% reading).  At the same time, the Q4 Employment Cost Index showed an increase to +0.9% (in-line with the +0.9% forecast but up a tick from Q3’s +0.8% number).  Later, Chicago PMI was a bit lower than expected at 39.5 (compared to the 40.3 forecast but up from December’s 36.9 value).

In Fed news, on Friday, Chicago Fed President Goolsbee told CNBC the PCE data released was “a bit better than he expected” and it “gives him comfort that inflation is on a path to the 2% target.”  However, he went on to say that he is worried about Trump’s tariffs, saying “there is a question mark that is coming from policy uncertainty.”  Goolsbee went on to clarify “If it affects prices, it affects us … our signal is getting a little muddied, when things (like tariffs) are happening that drive up prices. … we’re going to have to figure out which part of the inflation is the part that monetary policy should look through and which part is a sign of the economy.”

Overnight, Asian markets were red across the board on fears over Trump’s new trade war.  Taiwan (-3.53%), Japan (-2.66%), and South Korea (-2.52%) paced the losses.  In Europe, we see exactly the same picture taking shape with all 14 bourses in the red at midday.  The CAC (-1.62%), DAX (-1.68%), and FTSE (-1.29%) lead the region lower in early afternoon trade.  In the US, as of 7:30 a.m., Futures are pointing toward a significant gap lower to start Monday. The DIA implies a -1.36% open, the SPY is implying a -1.52% open, and the QQQ implies a -1.72% open at this hour.  At the same time, 10-Year Bond yields are down to 4.506% and Oil (WTI) has spiked 2.62% to $74.43 per barrel in early trading.

The major economic news scheduled for Monday includes S&P Global Mfg. PMI (9:45 a.m.), Dec. Construction Spending, ISM Mfg. PMI, ISM Mfg. Employment, and ISM Mfg. Price Index (all at 10 a.m.).  We also head from Fed member Bostic (12:30 p.m.). The major earnings reports scheduled for before the open include ARLP, IDXX, LVRO, SAIA, and TSN.  Then after the close, BRBR, CBT, CLX, EQR, EG, FN, KD, NXPI, PLTR, DOC, and WWD report. 

In economic news later this week, on Tuesday we get Dec. Factory Orders, Dec. JOLTs Job Openings, API Weekly Crude Stocks report and we hear from Fed members Bostic and Daly.  Then Wednesday, ADP Nonfarm Employment Change, Dec. Exports, Dec. Imports, Dec. Trade Balance, S&P Global Services PMI, S&P Global Composite PMI, ISM Non-Mfg. PMI, ISM Non-Mfg. Price Index, EIA Weekly Crude Oil Inventories are reported and we hear from Fed member Bowman.  On Thursday, we get Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, Preliminary Q4 Nonfarm Productivity, Preliminary Q4 Unit Labor Costs, Fed Balance Sheet, and we hear from Fed members Waller and Daly.  Finally, Friday, Jan. Avg. Hourly Earnings, Jan. Nonfarm Payrolls, Jan. Private Nonfarm Payrolls, Jan. Participations Rate, Jan. Unemployment Rate, Michigan Consumer Sentiment, Michigan Consumer Expectations, Michigan 1-Year Inflation Expectations, Michigan 5-Year Inflation Expectations, and Dec. Consumer Credit are reported.

In terms of earnings reports later this week, on Tuesday, we hear from AMCR, AME, APO, ARMK, ADM, ATI, ATKR, AXTA, BALL, BERY, CNC, CNH, CMI, ENR, EPD, EL, RACE, FOXA, IT, GPK, HUBB. INGR, J, KKR, LANC, MPC, MRK, MPLX, PYPL, PNR, PEP, PFE, REGN, SPOT, TDG, UBS, WEC, WTW, XYL, AMD, ALGT, GOOGL, DOX, AFG, AMGN, ATO, CSL, CRUS, COLM, DXC, EA, ENVA, FMC, GOOG, THG, JKHY, JNPR, LUMN, MTCH, MAT, MOD, MDLZ, NOV, OI, OMC, OSCR, PRU, SPG, SKY, SNAP, UNM, and WU.  Then Wednesday, ARCC, ARES, BSX, BG, CPRI, CDW, COR, EMR, EQNR, EVR, FSV, FI, GSK, GFF, HOG, IEX, ITW, JCI, NYT, NVO, ODFL, PFGC, REYN, RXO, SR, SWK, TROW, TKR, TM, UBER, VSH, DIS, AFL, ALGN, ALL, ARM, ASGN, AVB, EQH, BV, CENT, CTSH, COHR, CPAY, CTVA, CCK, DLX, ENS, ENSG, NVST, PLUS, F, GL, HI, HOLX, ITUB, KMPR, MCK, MET, MAA, MOH, MUSA, NWSA, ORLY, CNXN, PTC, QGEN, QCOM, RRX, SWKS, STE, SNEX, SU, TTMI, UHAL, UGI, VLTO, WFRD, and WEX report.  On Thursday, we hear from WMS, AGCO, APD, AB, APTV, MT, ARW, AZN, BCE, BDX, BDC, OWL, BWA, BMY, CX, CMS, CIGI, COP, DAR, LLY, ENTG, EFX, GTES, HP, HSY, HLT, HON, HII, NSIT, ICE, IQV, ITT, K, KVUE, LH, LEA, LNC, LIN, MKL, MMS, MDU, NVT, PATK, PTEN, BTU, PTON, PM, RL, RITM, RBLX, SNA, SPB, TPR, TEX, TRI, UAA, WMG, XEL, XPO, YUM, YUMC, ZBH, AMRK, AFRM, AMZN, ATR, BYD, CNO, EHC, EXPE, LION, FTNT, FBIN, G, HUBG, ILMN, MTD, MCHP, MTX, MHK, MPWR, NBIX, OTEX, PINS, POST, PFG, RGA, SKX, SONO, SSNC, TTWO, VSAT, and WERN.  Finally, on Friday, AVTR, CBOE, ROAD, FLO, FTV, ULCC, GPRE, KIM, NWL, PAA, PAGP report.

So far this morning, IDXX SAIA, and TSN reported beats on both the revenue and earnings lines.  However, ARLP missed on both the top and bottom lines.  

With that background, it looks like the Trump tariff tumble is on in the market.  All three major index ETFs opened the premarket with a significant gap lower.  From there, all three have printed large black-body candles with only QQQ even attempting a move higher.  As a result, all three are well below their T-line (8ema) with SPY and QQQ even a bit stretched below that level.  So, the short-term trend is bearish.  The mid-term downtrend remains a mess.  In terms of extension, as mentioned, SPY and QQQ are stretched below the T-line and DIA is headed that direction.  Meanwhile, T2122 is just below its mid-point.  So, both sides have room to work today if they can find momentum.  However, the Bears have are already showing momentum.  In terms of the 10 Big Dogs, all 10 are in the red with NVDA (-4.17%) out in front leading the pack lower.  On the other side, NFLX (-1.20%) is holding up best among that group. As far as liquidity goes, NVDA leads there too followed closely by TSLA, which has traded six times as much as the next closest Big Dog. 

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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