Markets gapped higher on Thursday, supposedly in response to MU’s beat and raise from Wednesday night.  SPY gapped 0.79%, DIA gapped up 0.50%, and QQQ gapped up 1.58%.  However, that was about it for the Bulls as the SPY and QQQ sold off until about 1:30 p.m.  At that point those two major index ETFs bounce about half way back to their open by 2 p.m. and ground sideways the rest of the day.  Meanwhile, after its own gap higher, DIA just meandered sideways around that opening level all day.  This action gave us gap-up, black-bodied candles with significant lower wicks in the SPY and QQQ.  It is worth noting that SPT also printed a new all-time high and a new all-time high close. As for DIA, it printed a gap-up, white-bodied, Spinning Top Bull Harami inside its recent consolidation. This all happened on below-average volume in the DIA and QQQ as well as well-below-average volume in SPY.

On the day, eight of the 10 sectors were in the green with Basic Materials (+2.33%) far out in front, leading the rest of the market higher. On the other side, Energy (-1.97%) lagged far, far behind the other sectors. At the same time, SPY gained 0.40%, DIA gained 0.60%, and QQQ gained 0.75%.  VXX closed flat at 48.48 and T2122 spiked back up into the lower half of its overbought territory at 85.90.  At the same time, 10-Year bond yields rose to close at 3.796% while Oil (WTI) dropped another 3.21% to close at $67.45 per barrel. (The drop in oil came on a combination of factors.  Even mor China stimulus, a modest de-escalation in Israeli-Hezbollah attacks, and OPEC+ publishing a highly bullish long-term oil demand forecast.)  So, the three major index ETFs opened divergently, but on small moves.  From there the move happened in the morning with the afternoon being just a dead-money grind sideways. 

The major economic news scheduled for Thursday include Weekly Initial Jobless Claims, which came in a bit lighter than expected at 218k (compared to a forecast of 224k and a previous week value of 222k).  At the same time, the Weekly Continuing Jobless Claims were a bit higher than predicted at 1,834k (versus a 1,828k forecast and the prior week’s 1,821k number).  Meanwhile, Preliminary August Core Durable Goods Orders (month-on-month) came in stronger than anticipated at +0.5% (versus a +0.1% forecast and July’s -0.1% reading).  On the headline side, Preliminary August Durable Goods Orders (month-on-month) were flat at 0.0% (compared to a forecast of -2.8% and well down from July’s blowout +9.9% value).  At the same time, Q2 Core PCE Prices were exactly as expected at +2.80% (compared to a forecast and prior quarter reading of +2.80%).  In terms of Gross Domestic Product, Q2 GDP was +3.0% (versus a +3.0% forecast and well up from Q1’s +1.6%).  On the price side, the Q2 GDP Price Index was down as expected at +2.5% (compared to the +2.5% forecast and Q1’s +3.0% value).  Later, August Pending Home Sales were up, but below the anticipated numbers at +0.6% (versus a +0.9% forecast but much better than July’s -5.5% reading).  Finally, after the close, the Fed Balance Sheet showed a $29 billion contraction for the week, from $7.109 trillion to $7.080 trillion.

In Fed news, Fed Governor Bowman was contrary to what other Fed governors and FOMC members have been touting for months.  She told a Mid-size Bank Coalition of America workshop that “use of the Fed’s discount window is for emergencies, rather than for more usual liquidity needs.”  This is a start contrast to the Chair and her peers who have been trying to get more banks to use the facility more.  Bowman went on to say that she fears “unintended consequences” of banks posting collateral at the Fed Discount Window.  Later, in a pre-recorded opening remarks video for the Annual US Treasury Market Conference, Fed Chair Powell recalled the “flash crash” in 2014 and praised inter-agency cooperation that got us through that as well as the pandemic crisis.  A few minutes later, NY Fed President Williams announced the creation of a new committee at the NY Fed, the Reference Rate Use Committee, to study the use of interest rate benchmarks across various financial markets.  (How the use of reference rates is changing and the underlying markets are changing due to electronic trading and globalization of markets for example.) 

Later, Fed Vice Chair for Supervision Barr told the Treasury Market Conference that the Fed is considering new requirements for banks to improve their liquidity. He said, smaller (community) banks would be excluded but that big banks would be required to keep a minimum level of liquid reserves as well as pre-positioned collateral at the Fed Discount Window.  Bass said this would be on a “tiered basis” with larger cash reserve requirements for larger banks. Shortly afterward, Treasury Sec. Yellen said that labor market and inflation data suggest the US economy is on a “soft landing path” as the “last mile” in taming inflation is bringing housing costs down.  She said, “I always believed that there was a path to a soft landing, that it was possible to bring inflation down while maintaining a strong labor market, and to me, that’s what the data suggests has happened.”  She went on to say that U.S. deficit reduction was necessary to keep interest costs manageable over time, but added that the Biden administration thought it important to continue to invest in parts of the economy that would fuel future growth.  She continued by saying that banks are well capitalized but stressed the importance of the Fed Discount Window in ensuring stability during times of stress.

In other Fed news, Fed Governor Cook told an Ohio State University event that she whole-heartedly supported at 50-basis-point rate cut by the FOMC last week.  Cook said, “That decision reflected growing confidence that, with an appropriate recalibration of our policy stance, the solid labor market can be maintained in a context of moderate economic growth and inflation continuing to move sustainably down to our target.”  She continued, “The return to balance in the labor market between supply and demand, as well as the ongoing return toward our inflation target, reflects the normalization of the economy after the dislocations of the pandemic.”  Cook went on, “This normalization, particularly of inflation, is quite welcome, as a balance between supply and demand is essential for sustaining a prolonged period of labor-market strength.”

After the close, BB, COST, and SCHL all missed on revenue while beating on earnings.  It is worth noting that BB and SCHL both had massive misses on revenue.

In stock news, on Thursday, the UAW announced that it had reached a tentative deal with F related to the River Rouge tool and die unit. At the same time, MSFT announced it plans to invest $2.7 billion in Brazil over the next three years to enhance its cloud computing infrastructure.  Later, V agreed to buy British IP Group’s Featurespace unit (which uses AI to provide “payment protection”) for $935 million according to the UK’s Sky News.  At the same time, the CEO of STLA told Reuters that he wants to follow the Chinese “low-cost mindset” in its EV production.  This came even as he attacked the EU tariffs on Chinese EVs, such as those in which STLA has an ownership stake. Later, Reuters also reported that C and APOS have formed a joint-venture $25 billion private credit and direct lending program. At the same time, GOOGL announced it will invest $3.3 billion to build two data centers in SC. 

Elsewhere, IT trade news outlet The Information reported AMZN has already amassed its goal of $1.8 billion in ad-spending pledges for 2025 for its video-streaming service. In marginally noteworthy news, a major insider and top-three shareholders of DJT has sold almost all of his company stock holdings.  Andrew Litinsky sold 7.5 million shares (5.5% of DJT stock), leaving him with 100 shares.  At the same time, LUV, AAL, and DAL canceled over 1,200 flights and delayed more than 4,100 due to Hurricane Helene.  Later, Bloomberg reported that LVMHF founder Arnault had lost $24 billion of his personal fortune this year.  However, on Thursday, China gave the greenlight to massive stimulus, causing traders to bet on sales gains by his LVMHF luxury goods.  The 9.9% stock price increase netted the tycoon a +17 billion day, increasing his net worth to $201 billion.  After the close, MTN announced it will cut 14% of its “corporate workforce” and less than 1% of operational employees, as it seeks to cut $100 million in costs annually by 2026.

In stock legal and governmental news, on Thursday, WFC announced it had sent the Fed a third-party review of its risk and control overhauls.  This is a critical step toward getting the Fed to lift the bank’s $1.95 trillion asset cap, which was imposed because of WFC’s lax controls and fraudulent back-dating of accounts.  Later, the Wall Street Journal reported that SMCI is being investigated by the US Dept. of Justice related to its accounting practices. (The report said the investigation is just in its early, data-gathering stage.) At the same time, the NHTSA announced that GM will recall over 18k vehicles over brake line problems.  Later, East Coast port employers filed a NRLB complaint against the Intl. Longshoreman Assn. for unfair labor practices. The filing alleges the union refuses to resume talks prior to its scheduled strike on October 1.

Elsewhere, the FTC issued the previously-rumored consent decree which approves the CVX $53 billion acquisition of HES.  However, as a condition of the approval, the HES CEO is barred from taking a board seat on CVS.  Later, the NTSB issued an urgent safety recommendation on rudder control systems for some BA 737 airplanes after an investigation of a February incident involving a jammed rudder on a UAL 737 MAX 8.  At the same time, the SEC announced that DKNG has agreed to pay a $200k penalty to settle charges of selectively disclosing of material non-public information via social media. After the close, the TX Public Utility Commission unanimously approved an expansion of its ERCOT electric grid to improve access for COP, XOM, FANG, CVX, and DVN.  (This is of note because the TX electric grid is already stretched and the pre-approval report said it expects the oil and gas drillers could account for almost one-third of the state’s summer electric usage by 2038.

In miscellaneous news, on Thursday, BAC analysts released a report claiming that certain sectors outperform in a steepening yield curve environment such as should be created by a Fed rate-cutting cycle.  BAC said, Healthcare and rising momentum lead sector performance during a Bull Market steepening.  On the other side, BAC said Basic Resources and High Risk stocks tend to outperform during Bear Market yield curve steepening.  Elsewhere, Reuters reported OPEC+ plans to go ahead with oil production increases (180k barrels per day) in December. Saudi Arabia was committed to the increase and Russia strongly opposed. In addition, OPEC+ will drop its unofficial $100/barrel price target in order to win back market share (from the US, Canada, China and Brazil).  Meanwhile, silver closed at its highest level since 2012 and gold hit a record level on Thursday.

In geopolitical news, Reuters reported Thursday that a senior Pentagon official said that China’s newest nuclear-powered submarine sank earlier this year.  Apparently, the first-in-class Chinese nuclear attack sub sank alongside its pier sometime between May and June.

Overnight, Asian markets were mixed but leaned toward the red with seven of the 12 regional exchanges under break-even.  Even so, the big moves were all on the plus side as Shenzhen (+6.71%) was WAY OUT FRONT followed by Hong Kong (+3.55%), Shanghai (+2.88%), and Japan (+2.32%).  In Europe, the picture is mostly green with only three of 14 bourses in the red.  The CAC (+0.29%), DAX (+0.84%), and FTSE (+0.54%) lead the region higher in early afternoon trade.  In the US, as of 7:40 a.m., Futures are pointing toward a start just on the red side of break-even.  The DIA implies a -0.01% open, the SPY is implying a -0.05% open, and the QQQ implies a -0.14% open at this hour.  At the same time, 10-Year bond yields are down a bit to 3.789% and Oil (WTI) is just on the green side of flat at $67.79 per barrel in early trading.

The major economic news scheduled for Friday includes the August Core PCE Price Index, August PCE Price Index, August Personal Spending, August Goods Trade Balance, and August Retail Inventories (all at 8:30 a.m.), Michigan Consumer Sentiment, Michigan Consumer Expectations, Michigan 1-Year Inflation Expectations, and Michigan 5-Year Inflation Expectations (all at 10 a.m.).  There are no major earnings reports scheduled for either before the open or after the close.

With that background, it looks like the Bulls are pushing back after a gap down to start the premarket. All three major index ETFs gapped lower to start the early session, but all three have also put in decisive white-body candles since that open to get back to even. Obviously, all three remain above their T-line (8ema). So, the short-term trend is still bullish. The mid-term trend is now also bullish with QQQ the laggard but now well over its downtrend line going back to the July all-time high. In the longer-term we still have a strong Bull trend all three major index ETFs and remain near all-time highs. With regard to extension, none of the major index ETFs are extended above its T-line (8ema) after Thursday’s gap and then black-body candle. However, the T2122 indicator is back up in the lower half of its overbought range. So, markets have room to run either direction, but the Bulls still clearly have momentum and the Bears have more slack to work with today if they can reverse sentiment. With regard to those 10 big dog tickers, they are evenly split with five in the red and five in green. It is worth noting that the biggest dog, NVDA (-0.56%) leads the losses and has twice the dollar-volume of the next closest, which is TSLA (+0.83%) and that second dog is leading the gainers. Finally, remember it is Friday and the next to last trading day of the month. So, prepare your account for the weekend news cycle and don’t forget to pay yourself…lock-in profits where you can.

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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