A huge Bull Trap was in effect at the open Tuesday as markets gapped strongly higher (up 1% in the SPY, up 0.6% in the DIA, and up a massive 1.4% in the QQQ). However, the bears immediately stepped in and sold off all three major indices hard for the first hour, filling the gap in 30 minutes and then continuing South that amount or more in the second 30 minutes.  Once that trap was sprung, the large caps traded sideways near the lows for the rest of the day.  Meanwhile, the QQQ continued a modest selloff over the afternoon as well.  This action gave us Bearish Engulfing candles in the SPY and DIA as well as a large, black, outside day candle in the QQQ.  The action also took the QQQ back below its T-line (8ema).

On the day, eight of the ten sectors were in the green with the red coming from the Technology (-0.52%) and Consumer Cyclical (-0.17%) sectors while Basic Materials (+1.07%) led the pack higher.  At the same time, SPY fell 0.43%, DIA fell 0.31%, and QQQ fell 1.02%.  The VXX is off 0.96% to 17.49 and T2122 remains in the overbought territory at 88.92.  10-year bond yields have recovered from early losses to be at 4.05% and Oil (WTI) is up more than 2% to $88.30/barrel.  So, this was just a “Bull Trap” day that then faded into a ”wait for the fed” mood all afternoon.

In economic news, the October Mfg. PMI came in a bit above forecast at 50.4 (versus 49.9 expected and 49.9 in September).  The same was true for October ISM Mfg. PMI which came in a 50.2 compared to a forecast of 50.0 and the September value of 50.9.  The oddity was October ISM Mfg. Employment came in a 50.0 compared to the forecast of 53.0 and the September reading of 48.7.  The September JOLTs came in well above expectation at 10.717 million (versus the forecast of 10.000 million and the August number of 10.280 million).  This jump may give cause the Fed to act even more aggressively (or at least give cover for the expected 0.75% hike).  Finally, after the close, API Weekly Crude Oil Stocks fell far more than expected.  The actual number was -6.530 million barrels compared to a forecast of +0.267 million barrels and last week’s build of 4.520 million barrels.

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In stock news, TRQ has postponed a shareholder meeting intended to approve the company’s acquisition by RIO.  The delay comes at the request of RIO.  Elsewhere, UAL pilots have voted to reject a new contract offer from the company.  This throws out the tentative deal reached in June and the unions said pilots would immediately begin to picket the airline.  Meanwhile, INTU has halted hiring at its Credit Karma unit per a report from Bloomberg. Bloomberg also reported that TSLA will be bringing 200 engineers from its Chinese factory to its Fremont CA factory in order to increase US production.  This move may face opposition since the Fremont plant has recently laid off staff.  In legal action, the SEC fined KOP $1.3 million for misleading statements and failing to disclose material information. In addition, the state of Ohio sued DG for shelf prices that were substantially lower than what was charged at the register for 16%-88% of its products.  In layoff news, UPST laid off approximately 10% of their staff due to a “challenging economy.”

In miscellaneous news, Reuters reports that the Treasury Dept. repelled cyber attacks from a pro-Russian hacker group (the same one that attacked banks and airports) in early October.  AMZN sold off 5.52% on Tuesday, causing its valuation to fall below $1 trillion for the first time since April 2020.  BP announced an additional $2.5 billion for its stock buyback plan (to be used this year).  This brings the BP total 2022 buyback to $18.5 billion.

After the close, AIG, MDLZ, EIX, DVN, ANDE, CZR, ABNB, VOYA, CLX, PARR, FMC, LFUS, CNDT, SCI, SMCI, BXC, PSA, CHK, CRK, PEAK, CACC, CRUS, EXR, AEIS, UNVR, BFAM, and COKE all reported beats on the revenue and earnings lines.  Meanwhile, MCK, MTCH, PRU, AMCR, CWH, RNR, TA, and EA reported beats on revenue while missing on earnings.  On the other side, OKE, UNM, AIZ, OI, WU, THG, YUMC, and MCY all missed on revenue while beating on earnings.  Unfortunately, ET, AMD, REZI, CAKE, and VRSK missed on both the top and bottom lines.  It is worth noting that MCK, and SMCI both raised their forward guidance.  However, AMD, ABNB, REZI, and EXR all lowered their forward guidance.

So far this morning, CVS, HUM, GSK, CVE, NVO, CDW, TEL, TT, ETR, OMI, ZBH, ROK, ODP, VMC, HZNP, SITE, VSH, FUN, SHOO, NYT, UTHR, DNOW, FDP, and RITM all reported beats on the revenue and earnings lines.  Meanwhile, DISH, EL, FYBR, GNRC, and BLCO all missed on revenue while beating on earnings.  On the other side, MKL, YUM, MLM, BR, PSN, and SMG all missed on revenue while beating on earnings.  Unfortunately, VWCRY, CEQP, AVNT, EXPI, TRMB, ENTG, and PARA all missed on both the top and bottom lines.  It si worth noting that CVS, TT, ZBH, HZNP, SITE, and CRL all raised their forward guidance.  However, EL, TEL, MLM, AVNT, TRMB, ENTG, SHOO, and BLCO all lowered their forward guidance.

Overnight, Asian markets were mostly green as China continued to lead the region higher on speculation that Xi will reopen the country from covid lockdowns.  Hong Kong (+2.41%), Shenzhen (+1.34%), and Shanghai (+1.15%) led the gains while India (-0.34%) and New Zealand (-0.30%) were the only appreciable red in the region.  In Europe, the exchanges are mixed with the majors leaning red at midday.  The FTSE (-0.39%), DAX (-0.14%), and CAC (-0.08%) seem to be waiting on the Fed in early afternoon trade.  As of 7:30 am, US Futures are pointing toward a mixed, flat start to the day.  The DIA implies a -0.08% open, the SPY is implying a +0.01% open, and the QQQ implies a +0.15% open at this hour.  10-year bond yields are flat (at least by recent volatile standards) at 4.042% and Oil (WTI) is unchanged at $88.36/barrel in early trading.  Again, it feels like we are all waiting on the Fed announcement, wording, and Q/A session.

The major economic news events scheduled for Wednesday, we get ADP Nonfarm Employment (8:15 am), EIA Crude Oil Inventories (10:30 am), FOMC Statement and Fed Rate Decision (both at 2 pm), and FOMC Press Conference (at 2:30 pm).  The major earnings reports scheduled for the day include ATI, APO, AVNT, BLCO, BDC, EAT, BR, CHRW, CDW, FUN, CVE, CRL, CLH, CEQP, CVS, EMR, ENTG, ETR, EL, EXPI, RACE, FYBR, GNRC, GSK, HZNP, HUM, JLL, MKL, MLM, NYT, NMR, DNOW, ODP, OMI, PARA, PSN, PGR, RITM, ROK, SABR, SMG, SBGI, SITE, SHOO, TT, TRMB, UTHR, VSH, VMC, YUM, ZBH before the open.  Then after the close, ALB, ALGT, ALL, ATUS, AFG, APA, ACA, EQH, BBSI, BKNG, CPE, CF, CHRD, CTSH, CLR, CCRN, CW, EBAY, EQIX, EQX, ETSY, ES, FLT, FTNT, GFL, HST, HHC, ICLR, IR, KMPR, KD, LHCG, LNC, LUMN, MRO, MATX, MET, MGM, MKSI, MOD, NUS, NTR, OPAD, PK, PDCE, PAA, PAGP, PTC, QRVO, QCOM, QDEL, O, RCII, ROKU, RYI, SIGI, SUM, SLF, SU, RUN, RIG, TSE, TTMI, TPC, VSTO, WCN, WTS, WERN, WES, WSC, YELL, and Z report.

In economic news later this week, on Thursday, Imports/Exports, September Trade Balance, Weekly Initial Jobless Claims, Q3 Nonfarm Productivity, Q3 Unit Labor Costs, Services PMI, Sept. Factory Orders, Oct. ISM Non-Mfg. PMI report. Finally, on Friday, we get Avg. Hourly Earnings, Oct. Nonfarm Payrolls, Oct. Participation Rate, and Oct. Unemployment Rate.

This is a huge earnings week as on Thursday, GOLF, ADT, WMS, AER, APD, ALIT, ABC, APG, APTV, ARW, AAWW, BALL, BALY, GOLD, BHC, BCE, BRKR, CQP, LNG, CI, COMM, COP, CROX, CMI, DSEY, DNB, SATS, EPAM, ESAB, EXC, FIS, FOCS, GIL, GTN, GPRE, HII, H, INGR, NSIT, IBP, ICE, IRM, ITT, JCI, K, KTB, MAR, MD, MRNA, MODV, MUR, NGD, OGN, PZZA, PH, BTU, PTON, PENN, PNW, PWR, REGN, QSR, RCL, SRE, SPR, STLA, SRCL, TRGP, TPX, TX, TEVA, VNT, W, WCC, WLK, ZTS, AGL, AL, ATSG, AEE, COLD, AMGN, AMN, TEAM, AVB, BECN, SQ, CVNA, CVCO, CE, COIN, CODI, ED, CTRA, CTVA, BAP, CWK, DASH, DBX, DXC, NVST, EXAS, EXPE, FND, FRG, GDDY, IHRT, ILMN, LYV, MTZ, MELI, MTD, MCHP, MNST, MSI, ZEUS, OTEX, OPEN, PYPL, CNXN, PBA, KWR, RGA, RKT, SEM, SVC, SWKS, SM, SBUX, TDS, TS, TWLO, USX, VTR, and WBD report.  Finally, on Friday, ADNT, AES, AMCX, AXL, AMRX, BEP, CAH, CNK, D, DUK, ENB, EOG, EVRG, FLR, GTES, GLP, HSY, HUN, IEP, KOP, LAMR, LSXMA, MGA, PBR, PPL, SYNH, TEF, TIXT, and VST report.

So, as Fed day starts, it seems the market is expecting a 0.75% rate hike but is hoping to hear a softening of tone and perhaps even a hopeful word that the pace of rate hikes will decrease and end during Q1. Until we hear from the Fed, I would expect a mostly dead market with all the early bets placed and the rest of us waiting to see how things shake out before making new trades.

The bullish trend is not broken and today’s premarket action is very small and indecisive so far. Extention from the T-line (8ema) is not a factor although the DIA remains a bit extended. However, T2122 says we are still in the overbought area. Unfortunately, markets only “tend to react” to overbought or oversold conditions. They can stay extended for quite some time (longer than we can stay solvent as the saying goes). Once again, expect a knee-jerk reaction at 2 pm and perhaps another at 2:30 pm (or shortly thereafter) at a minimum. Do not feel like you have to get your trades on immediately on the Fed news. Let the crazy volatility level out instead of chasing. Control your FOMO I promise you, there will be plenty of money to make after things the crazy volatility settles.

Be deliberate and disciplined. Don’t be stubborn. Remember that it is 100 times more important to avoid big mistakes than it is to pick big winners. If you have a loss, admit you were wrong and take the loss before it gets out of hand. And when price does move in your direction, always move your stops in your favor (remember the “Legend of the man in the green bathrobe“…it is NOT HOUSE MONEY, it’s all OUR MONEY!). Trading is not your hobby. It’s a job. The money is real. 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. I know the Powerball is huge right now, but give up that lottery ticket mentality.

See you in the trading room.

Ed

Swing Trade Ideas for your consideration and watchlist: No trade ideas today. You can find Rick’s review of tickers on his YouTube Channel here. Trade your plan, take profits along the way, and smart. Also, remember to check for impending earnings reports. Finally, remember that any tickers we mention and talk about in the trading room are not recommendations to buy or sell.

🎯 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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