On Friday, markets started higher (in the premarket), perhaps on the Trump conviction news or just reversal of the week’s action, and then got another boost when PCE inflation came in as expected and even down a tick from March.  However, this initial optimism began to fade as we approached the open.  SPY then gapped up 0.20%, DIA opened 0.17% higher, and QQQ started flat at +0.04%.  From there, the Bulls followed-through for 15 minutes.  However, the Bears took over at that point selling off the SPY and QQQ until the lows of the day were hit at 12:25 p.m.  Meanwhile, the DIA started selling at 9:45 a.m. sold off until 10:15 a.m., recrossing its opening gap in the process.  Then it traded sideways until 12:25 p.m.  When we hit 12:25 p.m., all three major index ETFs began to rally modestly all the way until 3:40 p.m.  From there, the Bulls rampaged with a furious rally the last 20 minutes.  This action gave us a large, white-bodied candle (even a Morning Star if you squint) in the DIA, SPY printed a large, white-bodied Hammer candle that retested and crossed above its T-line (8ema), and QQQ gave us a long-handle, black-bodied Hammer. 

On the day, nine of the 10 sectors were in the green with Communication Services (+2.14%) out in front leading the rest of the market higher.  Meanwhile, Technology (-0.20%) was the only red sector.  At the same time, SPY gained 0.87%, DIA gained 1.59%, and QQQ lost 0.19%.  VXX dropped 3.03% to close at a low 11.53 and T2122 climbed all the way into the top part of its mid-range to close at 73.10.  On the bond front, 10-year bond yields dropped to 4.502% and Oil (WTI) fell 0.83% to close at $77.26 per barrel.  So, Friday was a U-shaped day in the SPY and QQQ while DIA led by virtue of not selling off (instead grinding sideways) all morning.  The most notable portion of the day was the furious (and massive relative to the rest of the day’s move) rally in the last 20 minutes.  Whether this was month-end trades, short covering, share buyback action or what is unknown.  However, it happened like a light switch being turned on and there was no stopping the Bulls once they saw that light. This happened on average volume in the SPY and DIA as well as above-average volume in the QQQ.

The major economic news scheduled for Friday included the Fed’s preferred inflation measure, PCE, which was mostly flat (slowest monthly pace of the year).  The April Core PCE Price Index (month-to-month) came in a tick lower than expected at +0.2% (compared to a +0.3% forecast and March reading).  For the year-on-year basis, April Core PCE Price Index came in flat and exactly as predicted at +2.8%.  The headline numbers (both month-on-month and year-on-year) were also exactly as anticipated at +0.3% on the month and +2.7% annually.  At the same time, April Personal Spending were both down and lower than expected at +0.2% (versus a +0.3% forecast and a +0.7% March value). Later, May Chicago PMI was down and lower than predicted at 35.4 (compared to a 41.1 forecast and 37.9 April reading).  

In a broader sense, SPY was down 0.39% for the week but up 5.06% on the month.  At the same time, DIA was down 0.80% on the week but up 2.49% for the month of May.  For its part, QQQ had the roughest week, down 1.58% but up 6.15% for May. Even the small-cap IWM had a similar pattern, rising 0.84% on the day, falling 0.16% for the week but up 5.04% on the month.

In “the Meaning of May” news, for what it is worth, the Trader’s Almanac reported Friday that a strong May increases the odds of a bullish remainder of the year.  May 2024 was the 10^th best May since 1950.  In addition, only twice during that 73 years did the SPY see greater than 3% gain and then end the year in the red.  During that time, Presidential Election years in 1980 and 2020 saw dramatic gains during the last seven months (up 22% and 23% respectively).  Trader’s Almanac predicts a 70% probability of S&P 500 returns of 8.6% for the rest of the year.  Elsewhere, in T+1 trade settlement news, it was reported the “trade failure” rate for the market was 2.71% Thursday.  This is up significantly from the 1.90% rate for both Tuesday and Wednesday.  The daily average trade failure rate for May (prior to the change to T+1) was 2.01%. SEC Chair Gensler said that despite the increased number of failed trades, “The historic conversion from T+2 to T+1 has gone smoothly thus far.” 

In stock news, on Friday, MDLZ announced that, after months of repair, it had restarted production of Oreo cookies in a Ukrainian plant. (The plant serves Eurasian countries, as well as Ukraine itself but not Russia.)  Later, Reuters reported that EADSY (Airbus) is facing problems in its attempt to ramp up production as the BA-competitor struggles with parts and labor shortages.  (The article said it is unclear whether this puts plane delivery targets at risk or not, but the pressure and potentially costs are increasing.) At the same time, reports claimed the SUZ bid to acquire IP is increasingly more likely to go through as financing options were being lined up.  Later, Reuters reported that US oil refineries plan to operate at more than 90% of capacity for the remainder of the quarter as summer driving season hits.  MPC (largest US refiner) plans to run at 94% of its capacity (which is 2.9 million barrels-per-day).  This is up from MPC’s 82% of capacity on average in Q1.  Meanwhile, VLO (second largest refiner) plans to operate at 95% of its capacity the rest of Q2.  At the same time, GPS stock soared almost 29% after the retailer lifted its full-year guidance.  Later, Bloomberg reported that activist investor Carl Icahn has taken a significant position in CZR.  (In 2019, Icahn had a 10% stake when he began pushing for the casino to sell itself.  This resulted in the spinoff of CZR resorts for $8.5 billion to ERI.)      

Elsewhere, as a reminder, NVDA will split 10-for-1 on June 7 for owners as of June 6.  Later, the Wall Street Journal reported that PARA’s board special committee had now agreed to recommend the Skydance Media acquisition deal to PARA shareholders.  (The recommendation would come over deal offers from APO and SONY as well as a $30 billion bid from media mogul Byron Allen.)  It is worth noting that Shari Redstone controls 77% of the PARA voting stock and the deal will let shareholders cash out at $15/share (PARA closed at $11.91 on Friday).  At the same time, the Wall Street Journal also reported the SAM is in talks to sell itself Suntory (Japanese brewing and distilling company).  The two companies have partnered on products since 2021.  Later, after the close, META announced its Facebook app is attracting the highest number of young adults that it has attracted in three years.  (META said more than 40 million US and Canadian adults between 18 and 29 now check Facebook daily.)  After the close, LYV disclosed that a hacker has stolen and is seeking to sell Ticketmaster customer data on the dark web.  (LYV says the hack took place on May 20.)  On Saturday, BA scrubbed (for the fourth time) the launch of its first crewed spaceflight of its Starliner spacecraft. The same thing happened Sunday as NASA and BA cancelled another attempt at launching Starliner.

In stock legal and governmental news, on Friday it was confirmed that the FAA still will not allow BA to increase production of its 737 MAX planes.  However, the head of the agency said the 3-hour BA quality improvement plan “checked all the agency’s boxes” (without comment on whether the plan will work).  At the same time, the NHTSA said that TSLA has agreed to recall more than 125k vehicles due to a malfunction in the that could increase the probability of injury in the event of a collision.   Meanwhile, the Dept. of Labor sued HYMLF (Hyundai) over violations of child labor law, including the illegal employing of 13-year-old children that had been kept working 60 hours per week.  Later, the USPS will increase its first-class stamp price to $0.73 (from the current $0.68), effective July 14. The requested 25% rate increase for high-volume shippers (letters and parcels) has not been decided, or at least announced, as of Friday.  Meanwhile, the NTSB announced it has opened an investigation into the Wednesday near-collision between an AAL jet and a smaller airplane at Reagan Washington National Airport.  After the close, Bloomberg reported that TSLA CEO Musk was sued by a shareholder, alleging that Musk had inside information about TSLA production and delivery goal misses when he sold $7.5 billion of stock in 2022. The suit requests that Musk return the proceeds of the sale from his allegedly improper trading.

Overnight, Asian markets were mostly green with nine of the 12 exchanges strongly above break-even.  India (+3.25%), New Zealand (+2.68%), Hong Kong (+1.79%), South Korea (+1.74%), and Taiwan (+1.71%) led the region higher.  In Europe, we see 14 of the 15 bourses in the green at midday.  Only Denmark (-0.11%) is in the red as the CAC (+0.36%), DAX (+0.75%), and FTSE (+0.10%) lead the region higher.  (Note that France had its credit downgraded over the weekend.)  In the US, as of 7:30 a.m., Futures are pointing toward a flat to modestly green start to the day.  The DIA implies a +0.02% open, the SPY is implying a +0.18% open, and the QQQ implies a +0.46% open at this hour.  At the same time, 10-year bond yields are down to 4.467% and Oil (WTI) is just on the green side of flat at +0.14% or $77.10 per barrel.

The major economic news scheduled for on Monday includes May S&P Global Mfg. PMI (9:45 a.m.), April Construction Spending, May ISM Mfg. Employment, May ISM Mfg. PMI, and May ISM Mfg. Prices (all at 10 a.m.).  The major earnings reports scheduled for before the open are limited to SAIC.  There are no major reports set for after the close.      

In economic news later this week, on Tuesday we get April Factory Orders, April JOLTs Job Openings, and Weekly API Crude Oil Stocks.  Then on Wednesday, May ADP Nonfarm Employment Change, May S&P Global Services PMI, May S&P Global Composite PMI, May ISM Non-Mfg. Employment, May ISM Non-Mfg. PMI, and May ISM Non-Mfg. Prices, and Weekly EIA Crude Oil Inventories are reported.  On Thursday, we get Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, April Imports, April Exports, April Trade Balance, Q1 Nonfarm Productivity, Q1 Unit Labor Cost, and Fed’s Balance Sheet.  Finally, on Friday, May Avg. Hourly Earnings, May Nonfarm Payrolls, May Private Nonfarm Payrolls, May Participation Rate, May Unemployment Rate, and April Consumer Credit.

In terms of earnings reports later this week, on Tuesday BBWI, CNM, DBI, DCI, FERG, CRWD, HPE, and PVH report. Then Wednesday we hear from BF.A, CPB, DLTR, DOYU, HIBB, OLLI, REVG, THO, UNFI, FIVE, GEF, LULU, and VSCO.  On Thursday, ABM, BIG, CIEN, GIII, SJM, NIO, TTC, DOCU, NGL, and MTN report.  Finally, Friday, there are no major reports.

So far this morning, SAIC beat on revenue while missing on earnings.

In miscellaneous news, the Associated Press reported that Panama will begin vacating an island off its coast this week in the face of sea level rise. The small island is only home for 300 families, but it is the first of 63 islands on Panama’s coast that experts expect to need to be evacuated over the next 5-10 years.  This is a story that US (and all global countries) should learn to expect as the climate keeps warning and ice melt continues to accelerate.  (Theoretically, this might have a small positive effect on the Panama Canal.  Higher oceans require less lift through locks for passage between.)  On Sunday evening, the Wall Street Journal reported that WM is close to a deal to buy SRCL for about $7 billion (which will include debt acquired).  Elsewhere, OPEC+ voted to extend their 3.66 million barrels per day production cuts (which were scheduled to end after December 2024) to the end of 2025.  It also extended the additional 2.2 million bpd cuts by eight members another three months, through September 2024.

In late-breaking news, Taiwan is the focus of the tech industry (and to a lesser extent markets) as the annual big event Computex takes place. NVDA jumped the gun by starting their own presentation separately on Sunday, where CEO Wang announced more corporate-focused (server farm) AI chips as well as free software AI-focused apps that can run on NVDA’s consumer and high-end chips (anything Cuda-enabled). This would let individuals have AI apps that run locally for specific purposes such as chatbots or any of a host of other use cases. This is notable, because it is less than three months since NVDA announced its previous Blackwell version of AI chips. Then overnight (Monday Taiwan time) AMD followed suit by announcing new AI chips (codename Rubin, AMD likes to use artist names). AMD CEO Lisa Su told the audience that AI is the number one priority at AMD. However, unlike NVDA’s focus on corporate cloud-farm AI chips (that are massively profitable, selling in the $30k-$40k range), AMD announced AI-capable laptop (in partnership with MSFT and using the Co-Pilot AI application) and desktop CPUs. AMD alsu unveiled its next version (9000 series) of desktop CPUs, which will be the fastest CPUs for consumer computers (as is typical for AMD). Both AMD consumer product lines will ship starting in July. On the corporate side, AMD also announced corporate-focused chips to compete with NVDA’s cloud-AI offerings which will hit the market in Q4. Elsewhere, meme stock GME is rocketing early after “Roaring Kitty” posted that he has taken a $116 million long position.

With that background, it looks as if the large cap index ETFs opened the premarket flat with SPY moving higher since then. Meanwhile, QQQ opened the early session with a gap up and has followed through since that start to the morning. (QQQ is retesting its T-line from below in Premarket.) With that said, the bears are still in control of the DIA and QQQ in the short-term. At the same time, the mid-term remains bullish in all three major index ETFs and the longer-term market remains very Bullish in trend. In terms of extension, none of the three are too stretched from their T-line (8ema). The T2122 indicator is also in the mid-range, albeit toward the top of that range. So, the bottom line is that the market, has room to run. With regard to those 10 big dog tickers, nine of the 10 are green in premarket with the AI chip names NVDA (+2.97%), AMD (+1.57%), and INTC (+0.52%) leading the way higher.

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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