Markets gapped higher on Monday.  SPY gapped up 0.34%, DIA gapped up 0.27%, and QQQ gapped up 0.61%.  However, this was a bit of a Bull trap as SPY and QQQ sold off sharply until just after 10 a.m, chopped sideways along the prior close, and then sold off sharply again at 12:45p.m. That selloff lasted an hour before chopping sideways until 2:45 p.m. when the last and strongest flush of the day took place.  Only a short covering rally the last 15 minutes kept us from going out on the lows.  For its part, after a gap higher, DIA began a modest, undulating selloff that lasted until 2:45 p.m. when a strong selloff took us to the lows over the course of an hour.  Again, only a short-covering rally the last 15 minutes kept us from going out on the lows.  All three major index ETFs printed large, Bearish Engulfing candles with SPY and QQQ retesting and failing their T-line (8ema) and DIA crossing back below its own T-line.  SPY and QQQ also both printed Oreo Cookie (Bear Stick Sandwich) candles. This all happened on just-above-average volume in all three major index ETFs.

On the day, eight of the 10 sectors were in the red as Energy (-2.10%) and Technology (-2.86%) led the way lower.  On the other side, Communication Services (+0.56%) and Consumer Defensive (+0.20%) held up far better than the rest and were the only two sectors in the green.  At the same time, SPY lost 1.74%, DIA lost 1.43%, and QQQ lost 2.14%.  Meanwhile, VXX spiked 7.55% to close at 49.29 and T2122 dropped all the way back up to top edge of its oversold territory at 50.66.  On the bond side, 10-Year Bond yields dropped to 4.165% and Oil (WTI) dropped 1.96% to close at $68.39 per barrel.  So, Monday was a rough day after the open.  Perhaps this was due to info on NVDA exports to Singapore being rerouted to China and the potential dire impact that theoretically could have on the market leader. (Three men were arrested in Singapore for rerouting NVDA shipments to China. In addition, 20% of NVDA profits in 2024 came from sales shipped to Singapore, while less than 2% of customers have locations in Singapore. Thus, raising the specter of massive sanction gaming that could possibly be stopped, killing NVDA sales.)  However, the strongest selloff of the day came when Trump crushed hopes that Canadian and Mexican sanctions would be avoided when he flat out stated they will take effect Tuesday, saying there is “no room for delay.”

The major economic news on Monday includes S&P Global Mfg. PMI, which came in higher than expected at 52.7 (compared to a forecast of 51.6 and January’s 51.2 value).  Later, January Construction Spending was down notably to -0.2% (versus a -0.1% forecast but well down from December’s +0.5% reading).  At the same time, Feb. ISM Mfg. PMI was lower than anticipated at 50.3 (compared to a 50.6 forecast and January’s 50.9 number).  On the jobs side, Feb. ISM Mfg. Employment was down sharply to 47.6 (versus January’s 50.3 value).  On the cost side, the Feb. ISM Mfg. Price Index what SHARPLY higher at 62.4 (compared to a forecast of 56.2 and the January 54.9 reading). 

In Fed news, on Monday, St. Louis Fed President Musalem indicated that inflation is likely continuing to track toward the FOMC’s 2% target in the long-term.  However, there are big short-term inflation concerns and economic uncertainty.  Musalem said, “Near-term inflation expectations have risen substantially over the last few weeks, and that’s something I’m watching closely.”  He continued, “Businesses and households are clearly more sensitive to expectations of higher inflation. … That’s why the risks seem more skewed to the upside, but the baseline is for continued disinflation.” In terms of the strength of the economy, Musalem said, “The outlook for continued solid economic growth looks good, the labor market is healthy, and financial conditions are supportive. But recent data have been weaker than expected, especially consumer spending and housing market data, posing some downside risk to growth.”  He continued, “Recent anecdotal reports from business contacts are more mixed, and some measures indicate that business activity has slowed, suggesting increased caution at least among some firms.”  Musalem said he views the current Fed rate policy as “modestly restrictive” but stressed that the FOMC “needs to be patient” AND “More monetary policy work is needed to achieve price stability.”  Later, the Atlanta Fed released a report indicating the US economy will likely contract 2.8% in Q1. (That was nearly double the prior week’s -1.5% prediction from one week earlier.)

Overnight, Asian markets were mostly red.  Only Shenzhen (+0.28%) and Shanghai (+0.22%) remained in the green.  Meanwhile, Japan (-1.20%), Malaysia (-1.00%), and Thailand (-0.91%) paced the losses.  In Europe, we see red across the board at midday.  The CAC (-1.42%), DAX (-2.32%), and FTSE (-0.50%) are all strongly lower in early afternoon trade as Neville Trump sold out Ukraine (just as Czechoslovakia was sold out in 1938) going further to prove that US security guarantees are meaningless. In the US, as of 7:30 a.m., Futures are pointing toward a modestly down start to the day.  DIA implies a -0.25% open, the SPY is implying a -0.41% open, and QQQ implies a -0.42% open at this hour. At the same time, 10-Year Bond Yields fell to 4.134% and Oil (WTI) is off another 1.35% to $67.44 per barrel in early trading.

The major economic news scheduled for Tuesday is limited to API Weekly Crude Oil Stocks (4:30 p.m.). However, we do hear from Fed member Williams (2:20 p.m.). The major earnings reports scheduled for before the open include AZO, BBY, PSFE, SE, and TGT.  Then after the close, SQM, CRWD, CTOS, EC, FLUT, INGM, JWN, and ROST report.

In economic news later this week, on Wednesday, we get Feb. ADP Nonfarm Employment Change, Feb. S&P Global Services PMI, Feb. S&P Global Composite PMI, Jan. Factory Orders, ISM Non-Mfg. Employment, ISM Non-Mfg. PMI, ISM Non-Mfg. Prices, EIA Crude Oil Inventories, and Fed Beige Book.  On Thursday, Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, Q4 Nonfarm Productivity, Q4 Unit Labor Costs, Jan. Trade Balance, and Fed Balance Sheet are reported.  We also hear from Fed Governor Waller.  Finally, on Friday, we get Feb. Avg. Hourly Earnings, Feb. Nonfarm Payrolls, Feb. Private Nonfarm Payrolls, Feb. Participation Rate, Feb. Unemployment Rate, Fed. Monetary Policy Report, and Jan. Consumer Credit. We also hear from Fed members Bowman and Williams as well as Chair Powell.

In terms of earnings reports later this week, on Wednesday, ANF, BF.B, CPB, FL, REVG, THO, BBAR, MRVL, MDB, SOBO, VEEV, VSCO, and ZS report.  On Thursday, we hear from BJ, BTSG, BURL, CNQ, CBRL, GMS, JD, KR, M, PSNY, TTC, VG, AVGO, COST, GAP, HPE, and LOMA.  Finally, on Friday, ADV, AQN, GCO, and YPF report.

So far this morning, BBY, ONON, and TGT have reported beats on both the revenue and earnings lines. Meanwhile, SE beat on revenue while missing on earnings. However, AZO and PSFE missed on both the top and bottom lines.

With that background, the market looks to gap down at the open Tuesday.  All three major index ETFs opened the premarket higher, but have reversed and printed strong black candles since then, now sitting not far from the early session lows.  All three are well below their T-line (8ema).  So, the short-term trend is clearly bearish.  Meanwhile, the mid-term trend remains a choppy sideways mess resolving bearishly.  At the same time, the long-term trend remains bullish, but tested.  In terms of extension, with the premarket moves lower, QQQ is not stretched below its T-line with SPY not too far behind.  However, DIA is still relatively close to its 8ema.  At the same time, the T2122 indicator now sits at the upper edge of its oversold territory.  So, both sides have room to work, but the Bulls have a little more slack while the Bears have the momentum.  In terms of the Big Dogs, nine of the 10 are in the red in the premarket.  TSLA (-3.33%) is well out front leading the losers while AAPL (+0.02%) is barely hanging onto green and is the only positive Bid Dog.  As far as liquidity goes, NVDA (-2.30%) leads TSLA by 50% with the next closest ticker having traded one-seventh as much dollar-volume as TSLA (and one-nineth as much as NVDA).

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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