On Wednesday, stocks opened flat and then chopped sideways for an hour before slowly trending lower the rest of the morning.  However, at noon a slight bullish trend took over up until 2pm.  The FOMC Minutes released caused a return to that morning volatility for about a half of an hour before the bullish trend took back over driving us to the highs of the day about 3:30pm and then backing off again into the close.  This left us with white-bodied, indecisive (Spinning Top) candles sitting on top of the T-line in all 3 major indices.  Six of the sectors were in the red and four in the green on what was a risk-off day (growth sectors in the red, value sectors in the green).  This all happened on another low-volume day.  On the day, SPY gained 0.34%, DIA gained 0.23%, and QQQ gained 0.64%.  The VXX fell almost 2% to 22.16 and T2122 stayed in the lower end of the mid-range at 28.40.  10-year bond yields climbed back up to 2.932% and Oil (WTI) fell 1.6% to $97.93/barrel.

In economic news, both Services PMI and ISM Non-Mfg. PMI for June came in above forecast on Wednesday.  At the same time May Job Openings fell from the prior month, but were still above forecast.  More importantly, those openings still outnumber job seekers by a 2-to-1 margin.  (So, wage inflation will remain strong.) There was also nothing of note in the FOMC Minutes from June.  As they have publicly said, they discussed “more restrictive” policy being needed unless inflation abates.  They also said that they expect a 50-75 basis point hike will be needed in July.  (Futures markets have priced in a 75-basis point hike in July.)

In stock news, during the day Wednesday, PTON made a couple of financial gestures in hopes of retaining workers at the beleaguered company.  PTON repriced stock options (which were issued with a $27.62 exercise price) to the July 1 price of $9.13.  The company also accelerated the vesting requirement by one year.  The company also issued one-time cash bonuses to all hourly employees as long as they stay through January 2023.  Elsewhere, after the close, GME announced a 4-for-1 split for holders of record as of July 18.  GME stock surged as much as 10% in after-hours trading on the news.  AMZN also partnered with GRUB to offer a free year of unlimited food deliveries ($9.99/mo. after 12 months).  The deal allows AMZN to take a 2% stake in GRUB with the possibility to acquire up to 15% of GRUB if certain metrics are met by the partnership.  GRUB now trades under the pink sheet JTKWY and was up 14% on the news.  GRUB competitor DOOR was down 1.4% on the news.

SNAP Case Study | Actual Trade

In China news, Bloomberg reports that the Chinese GDP shrank in Q2 for the first time since 2020 (and only the second time on record).  This conclusion was reached after official and unofficial sources showed a large downturn in retail spending, 20% fewer trucks on the roads compared to a year earlier, and a continuing slump in the property sector (which accounts for one-fifth of the economy).  However, Bloomberg also expects the official numbers to hide the slump.  This contraction will be a serious challenge to President Xi Jinping’s ambitious target of 5.5% growth for the year.  The country’s “Zero Covid” policy, with only lockdowns and mass-testing as tools, continues to be another threat to that growth in the months ahead.  In addition, both US and European GDPs are both tied to China (the world’s second-largest economy) by globalization.

In energy news, Oil fell to a 12-week low on Wednesday.  This came as the Dollar reached a new 20-year high and the Euro fell to another 20-year low.  Oil traders seem more and more worried about recession demand destruction in the months ahead.   This came as Reuters forecasts that today’s inventory report will show a reduction of 1.0 million barrels last week.  This came even as the API reported an unexpected inventory build of 3.8 million barrels for the week ended June 30.  (Economists were expecting that 1.0 million reduction noted above.)

In technical analysis news, 10 of the Dow 30 are trading above their 50sma, including MSFT, UNH, JNJ, CRM, KO, MRK, VZ, AMGN, IBM, and MCD.  Exactly half of the 30 are trading above their T-line (8ema) including AAPL, MSFT, UNH, JNJ, V, CRM, KO, HD, MRK, WMT, PG, VZ, AMGN, MCD, and TRV.  CAT is still trading near a 52-week low.

Overnight, Asian markets were mostly in the green.  Taiwan (+2.51%), South Korea (+1.84%), and Japan (+1.47%) led the region higher, but the gains were widespread with only 2 exchanges modestly in the red.  In Europe, stocks are green across the board as of mid-day.  The FTSE (+1.05%), DAX (+1.43%), and CAC (+1.26%) lead the region higher on breadth alone with some of the smaller exchanges moving faster in early afternoon trading.  As of 7:30 am, US Futures are pointing toward a modestly green open ahead of data.  The DIA implies a +0.32% open, the SPY is implying a +0.24% open, and the QQQ implies a +0.34% open at this hour.  Meanwhile, 10-year bond prices are up to 2.937% and Oil (WTI) is up 1% to $99.47/barrel in early trading.

The major economic news events scheduled for release Thursday include June ADP Nonfarm Employment, Imports/Exports, May Trade Balance, and Weekly Initial Jobless Claims (all at 8:30 am), Crude Oil Inventories (11 am), and a couple of Fed speakers (Waller at 1 pm and Bullard at 1 pm).  Major scheduled earnings reports include HELE before the open and then after the close LEVI reports.

In economic news coming later this week, on Finally, get June Avg. Hourly Earnings, June Nonfarm Payrolls, June Participation Rate, June Unemployment Rate, and a Fed speaker.

In a very slow earnings week (with earnings season kicking off at the end of next week) there are no reports scheduled for Friday.

On the Russian invasion story, the Center for Strategic and International Studies released research claiming that Russia is still bringing in $1 billion/day in revenue from oil and gas exports.  (The most recent figures showed they were spending $325 million per day on the war in April.)  GS raised its Natural Gas price forecast, saying that “Russia restoring full flow through Nord Stream 1 pipeline after the maintenance shutdown is no longer the most likely scenario.”

With this backdrop, the bulls look like they want to make another push to start the day. However, ADP Payrolls for June and Weekly Jobless Claims may change that mood (either direction). Remember that intraday reversals and general market chop continues to be the norm. However, the longer-term trend remains bearish and even if we are making the turn in the trend, there is a lot of resistance to work through after the recent protracted move to the downside. So, focus on the trend, support/resistance, and price action. (Also, for swing positions, don’t forget that earnings season starts anew at the end of next week. In addition, we are likely to continue getting pre-reports to manage market expectations every day now.)

Remember that trading is our job. So, do the work and follow the process. Demonstrate patience and wait for confirmation. Stick with your trading rules, trade with the trend, and consistently take profits when you have them. Always move your stops in your favor and remember the “Legend of the man in the green bathrobe“…it’s NOT house money, it’s all our money! (So don’t give very damn much of it back while hoping for a home run.) Another way to put this is Buffett’s first rule of making big money in the market, which is to not lose big money in the market. So, don’t be stubborn. If you have a loss, just admit you were wrong, respect your stop, and take the loss before it grows. Lastly, remember that you get rich slowly and steadily in Trading…not by striking it rich on one or two trades. So, give up that lottery ticket mentality.

See you in the trading room.

Ed

Swing Trade Ideas for your consideration and watchlist: watchlist to come in room 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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Disclosure: We do not act on all trades we mention, and not all mentions acted on the day of the mention. All trades we mention are for your consideration only.

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