Despite the GDP showing a technical recession is underway, markets opened with very minimal gaps (in both directions, QQQ down and large-caps up) on Thursday.  All 3 major indices then sold off 1% or more over the first hour.  However, at 10:30 am, they all reversed and rallied strongly until noon, more than making up for the selloff.  After an hour of rest, the rally resumed, reaching the highs of the day late in the session and closing near the highs.  This is leaving us with large white candles with significant lower wicks (and small upper wicks) in all 3 major indices. 

All 10 sectors were green (with energy down only 0.05% with 30 minutes left in the day.  67% of stocks are now above their 40sma and 27% are above their 200sma. With that said, volume remains below average. We are also looking very overextended in all 3 major indices in relation to the T-line (8ema).  On the day, SPY gained 1.25%, DIA gained 1.00%, and QQQ gained 0.98%.  The VXX fell 2.3% to 20.82 and T2122 remains deep in the overbought territory at 96.31.  10-year bonds fell to 2.672% and Oil (WTI) was just on the downside of flat for the day at $97.18/barrel.

In economic news, regardless of what Fed Chair Powell, Treasury Sec. Yellen, and the White House said just the day before, GDP data Thursday morning showed we are, at least technically, in a recession.  The Q2 GDP came in at -0.9%, far below the consensus estimate of +0.5%.  However, that was slightly better than Q1’s -1.6% growth number.  In the same vein, Weekly Initial Jobless Claims came in slightly higher than expected at 256k (versus 253k forecast).  However, this too was better than the previous week’s 261k number.  So, the time series shows improvements, but we’re still worst off on both measures than we thought we should be.

SNAP Case Study | Actual Trade

In business news, Thursday was the US House’s turn to pass the “Chips and Science” bill (again in a bipartisan vote) and the “law to be” is now headed for President Biden’s signature. The bill provides $52 billion in subsidies along with another $24 billion in tax credits for semiconductor manufacturing in the US.  The House is expected to pass the revised bill later this week.  The bill disproportionately benefits INTC, TXN, and MU. (INTC alone is expected to get $30 billion in subsidies.)  However, chip designers like AMD, QCOM, and NVDA (regardless of the uproar over insider trading claiming they will benefit) are left out in the cold.  This is because the latter group does not make chips.  Instead, they contract out the production to TSM and to a lesser extent Global Foundries.

In energy news, as expected, we’ve seen record profits (if for some reason, not always revenue) across the major oil producers so far this quarter.  However, a dispute is now in place as the US has officially complained about Mexico’s energy policy of tightening control over its oil and electricity markets.  US energy companies see the actions to strengthen the Mexican state-run energy companies at the cost of private investors as a violation of the USMCA (formerly NAFTA) agreement.  (And the Biden Administration has taken up the cause on behalf of those companies.)  This may lead to a trade dispute, as Mexico is so far being defiant and asserting its national sovereignty.  Elsewhere, Europe is scrambling to cut natural gas use, get coal-fired power plants back online, and today France’s President met with Saudi Crown Prince MBS in another bid to get OPEC+ to increase production quotas at their meeting next week.  Examples of European gas-saving measures include the German city of Hanover switching off lighting at public fountains, the illuminations of buildings, cutting off hot water in public buildings, mandating 33% higher room temperatures (daycare excluded), and putting motion-detecting lighting in many public conveniences/buildings. 

After the close, AAPL, LHX, EIX, EMN, CE, KLAC, AJG, TFII, CC, CLR, TBBK, TXRH, ATR, BIO, SKYW, FSLR, DXCM, UTCC, DECK, AUY, MERC, MTD, MTX, INT, and SGEN all reported beats on both the revenue and earnings lines.  Meanwhile, HIG, MHK, OLN, EW, and BZH missed on revenue while beating on earnings.  On the other side, AMZN, X, VFC, ERIE, and ULCC beat on revenue while beating on earnings.  However, INTC, AVTR, DLR, and ROKU missed on both lines.

Overnight, Asian markets were mixed.  Hong Kong (-2.26%) was an outlier while Shenzhen (-1.30%), Shanghai (-0.89%), and Singapore (-0.28%) paced the losses.  Meanwhile, Thailand (+1.50%), New Zealand (+1.45%), and India (+1.35%) led the gainers.  In Europe, stocks are almost green across the board at mid-day.  Portugal (-0.51%) is the only red while the FTSE (+0.58%), DAX (+1.28%), and CAC (+1.42%) lead the region higher in early afternoon trading.  As od 7:30 am, US Futures are pointing toward a green, if divergent, start to the day.  The DIA implies a +0.21% open, the SPY is implying a +0.66% open, and the QQQ implies a +1.02% open at this hour.  10-year bond yields are back up to 2.701% and Oil (WTI) is back up to $98.60/barrel in early trading.

The major economic news events scheduled for Friday include June PCE Price Index, Q2 Employment Cost Index, and June Personal Spending (all at 8:30 am), Chicago PMI (9:45 am), and Michigan Consumer Sentiment (10 am).  The major earnings reports scheduled for the day include ABBV, AB, AON, ARCB, AZN, BLMN, BAH, CRI, CBOE, CHTR, CVX, CHD, CNHI, CL, ENB, XOM, IMO, ITCB, LYB, MGA, NWL, NMRK, NVT, PSX, PG, GWW, and WY before the open.  There are no major earnings scheduled for after the close.

So far this morning, CVX, BNPQY, CHTR, LYB, SMFG, AZN, TAK, MFG, CL, AFLYY, WY, BAH, CHT, BLMN, AB, ARCB, and NVT all reported beats on both the top and bottom lines.  Meanwhile, XOM, PSX, KMTUY, AON, NWL, and CHD all missed on revenue while beating on earnings.  On the other side, PG, MGA, FMS, and ES all beat on revenue while missing on earnings.  So far this morning, there are no reports that missed on both revenue and earnings.

What is turning out to be another strong quarter of earnings (despite the lowering of forward guidance) has lifted market spirits. Today, it will be AMZN, AAPL (both from last night), CVX, and XOM that lead markets higher early. There is more economic data, but of late, Mr. Market doesn’t seem to care about economic data. With that said, expect more volatility as intraday reversals are the norm in recent weeks. We do have an uptrend in progress in all 3 major indices, but resistance is not too far overhead and we have a weekend news cycle starting after the close. Both of those urge caution on the Friday trader’s part. The only thing we know for sure is that low volumes for weeks indicate that the big money and John Q Public are not ready to believe the bottom is in just yet.

Remember that trading is our job. So, do the work and follow the process. Stick with your trading rules, trade with the trend, and take those profits when you have them. Demonstrate patience and wait for confirmation. 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. 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!). 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: CLOV, VLO, V, GD, AAPL, NVDA, GE, NFLX, PYPL, CSCO, WMT, CLF. 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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