BA Pleads Guilty With Market At Record Highs

The markets on Friday started modestly higher and never looked back.  SPY opened 0.06% higher, DIA opened 0.08% higher, and QQQ gapped up 0.19%. From that point, SPY and QQQ steadily rallied the rest of the day, closing near the highs.  Meanwhile, DIA meandered sideways in waves until 12:45 p.m., when it rallied steadily the rest of the day.  This action gave us large, white-bodied candles in the SPY and QQQ.  Both printed new all-time highs and ended at new all-time high closes.  At the same time, DIA retested its T-line (8ema) before printing a white-bodied Hammer-type candle that closed above its T-line.  This happened on well below-average volume in all three.

On the day, seven of the 10 sectors were in the green again with Healthcare (+0.82%), Technology (+0.79%), and Consumer Defensive (+0.78%) leading the way higher. On the other side, Industrials (-0.60%) was by far the worst-performing sector. At the same time, SPY gained 0.58%, DIA gained 0.21%, and QQQ gained 1.04%.  VXX actually gained slightly (+0.38%) to a still extremely low 10.46 and T2122 fell but remains in its mid-range at 30.88. On the bond front, 10-year bond yields dropped sharply to 4.277% and Oil (WTI) fell 0.72% to close at $83.28 per barrel.  So, for the traders that showed up Friday (and there weren’t many), it was the Bull’s day from the start.  On a steadily rallying day, the Bears simply never came back, instead opting for a four-day weekend.

The major economic news scheduled for Friday included, June Avg. Hourly Earnings, which came in down as expected at +3.9% Year-on-Year (compared to forecast of +3.9% and down from May’s +4.1% reading).  On a Month-on-Month basis, June Avg. Hourly Earnings were also down as expected at +0.3% (versus the +0.3% forecast and down from May’s +0.4% value).  At the same time, June Nonfarm Payrolls were also down but higher than predicted at +206k (compared to a forecast of +191k but down from May’s +218k number).  On the private side, June Private Nonfarm Payrolls were far lower than anticipated at +136k (versus a forecast of +160k and particularly lower than May’s +193k reading).  Note that the prior two months values on Nonfarm Payrolls were revised downward 100k jobs.  At any rate, this gave us a June Unemployment Rate that came at 4.1% (versus a forecast and May value of 4.0%).  This all came on a June Participation Rate of 62.6% (which was in-line with the 62.6% forecast and up a tick from May’s 62.5% reading).

In Fed speak news, on Friday, NY Fed President Williams (well before the employment data release) told an Indian central bank audience that the Fed still has “a ways” to go before reaching their 2% inflation goal.  Williams said, “We have seen significant progress in bringing it down, … But we still have a way to go to reach our 2 percent target on a sustained basis.  We are committed to getting the job done.”  He continued, “We must accept that uncertainty will continue to define the future.” (This last remark was in reference to the fact that economists and analysts simply aren’t able to deliver accurate forecasts of exactly how much time at a given Fed Funds rate or how much quantitative tightening will deliver exactly how much improvement in each of many different inflation and employment metrics.  In other words, Williams was saying its not math, there is a lot of art to central banking.

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In stock news, on Friday, SHEL announced it will take a charge of $2 billion related to the sale of a Singapore refinery and halting the construction of a biofuel plant in the Netherlands.  At the same time, Epic Games announced that AAPL has again (for the second time) rejected applications to create a European store for use with Epic iPhone apps.  (European courts and regulators had ordered AAPL to allow this.)  Later, the Wall Street Journal reported that JPM has begun warning customers that they need to prepare to pay for checking accounts.  At the same time, CG announced they are in exclusive talks to acquire BAX’s kidney care spinoff unit (Vantive) for more than $4 billion, which includes unspecified debt takeover.  Meanwhile, Reuters reported that VYX (NCR) is exploring the sale of its digital banking business, hoping to raise $3 billion.  After the close (and after the reports noted above), AAPL reversed course and approved Epic Games marketplace app for iPhones and iPads.  Elsewhere, KOSS has become the latest meme stock, spiking more than 205% just on Wednesday and Friday.  This comes after social media posters decided that a “Roaring Kitty” post of a picture of a microphone with a US Flag background.  Meme traders took this to mean that Roaring Kitty was leading a short-squeeze play on KOSS around the July 4 holiday.  (The thing that makes this scary is that KOSS doesn’t make microphones, it sells headphones.)

In stock legal and governmental news, on Friday, the European Commission (acting as Europe’s antitrust regulator) announced that V and MA agreed to extend the caps on their fees on tourist card use through 2029. (The caps are a 0.2% fee on non-EU debit card use and 0.3% fee limit on non-EU credit card settlements.  For “card not present” or online commerce, the fee limits will remain 1.15% for debit cards and 1.5% for credit cards.)  Later, the PSWR announced it had received a subpoena from SEC back in February related to company accounting practices.  At the same time, NVO was given a reprimand from UK regulators for failing to disclose the fees and expenses paid to individual and organizations in the British healthcare sector (who could either use or prescribe NVO products).  Later, a court in Australia fount that PYPL used unfair contracts with small businesses.  At the same time, the European Commission said it had “requested: more information from AMZN on the measures the company has taken to comply with the European Digital Services Act.  (In the past, such requests have led to rulings and might lead to significant fines.) Later, Reuters reported that a trade group representing miners has been strongly lobbying for the revival of the Bureau of Mining (which was closed in 1996).  Perhaps oddly, the business group is claiming that adding a dedicated agency would speed up and streamline mining policy and approvals (at the cost of additional federal jobs).  Meanwhile, a federal judge threw out a central claim of the FTC in the agency’s lawsuit against WMT.  The suit alleges that WMT turned a blind eye to scam artists using its money transfer services to swindle customers out of millions of dollars.  (The ruling rejects the claim that WMT owes monetary damages for violating the federal Telemarketing Sales Rule.) In later-breaking news, early Monday BA decided to plead guilty to fraud related to the two crashes of 737 MAX jets in 2018 and 2019 after violating the 2021 consent decree settlement that had allowed the company from facing prosecution then.

Overnight, Asian markets were mostly in the red.  Only Taiwan (+1.37%) and Thailand (+0.80%) were green.  Meanwhile, Hong Kong (-1.55%) and Shenzhen (-1.54%) led 10 of the regions 12 exchanges lower.  In Europe, the outlook is much rosier are midday with 11 of the 15 bourses in the region green.  The CAC (+0.215), DAX (+0.34%), and FTSE (+0.21%) lead the region higher in early afternoon trade.  In the US, as of 7:00 a.m., futures point toward a start just on the red side of flat.  The DIA implies a -0.04% open, the SPY is implying a -0.05% open, and the QQQ implies a -0.03% open at this hour.  At the same time, 10-Year bond yields are up to 4.299% and Oil (WTI) is down more than one percent to $82.29 per barrel in early trading.

The major economic news scheduled for Monday is limited to NY Fed 1-Year Consumer Inflation Expectations (11 a.m.) and May Consumer Credit (3 p.m.).  There are no major earnings reports set for before the open.  However, after the close, HELE  reports (the only report of note).

In economic news later this week, on Tuesday we get the EAI Short-Term Energy Outlook and API Weekly Crude Oil Stocks report.  We also hear from Fed Vice Chair Barr, Fed Chair Powell Testifies before Congress, and Fed Governor Bowman.  Then on Wednesday, EIA Weekly Crude Oil Inventories are reported.  Fed Chair Powell also continues his testimony and Fed Governor Bowman speaks again.  On Thursday, we get June Core CPI, June CPI, Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, and June Federal Budget Balance.  Fed member Bostic also speaks.  Finally, on Friday, June Core PPI, June PPI, Michigan Consumer Sentiment, Michigan Consumer Expectations, Michigan 1-Year Inflation Expectations, Michigan 5-Year Inflation Expectations, and the WASDE Ag report are delivered.

In terms of earnings reports later this week, there are no earnings reports scheduled for Tuesday. Then Wednesday, PSMT and WDFC report. On Thursday, earnings start again as we hear from CAG, DAL, and PEP.  Finally, on Friday, BK, C, ERIC, FAST, JPM, and WFC report.

In miscellaneous news, on Friday, the UK seated its new Labour Prime Minister and ministers (cabinet) after that party’s landslide victory in Thursday’s election. (Labor won 63%, or 412, of the 650 seats in UK House of Commons. That gives them the biggest majority since Tony Blair’s win in 1997. Meanwhile, the Conservatives, aka Tories, won just 121, a dramatic fall from their previous 365 seats.)  In France, on Sunday, voters rallied to reverse the first round of voting and keep the far-right out of power.  A record turnout (not seen since 1978), gave a significant majority of seats in the parliament to a grand alliance against the far-right in the second, final round. Contrary to the first round of voting, the left-wing New Popular Front took 182 seats (plus another 13 left-wing seats from other parties), President Macron’s centrist Ensemble party took 168 seats, (the alliance of those parties two having well more than the 289 needed to have a majority and elect a leader).  At the same time, the right-wing extremist National Rally was limited to 143 seats (after having been projected at more than twice that number after the first round of voting).  Other parties fill out the remaining 71seats.

In other overseas news, on Friday, reports came out that Hamas had finally agreed to the conditions of the cease fire plan for Gaza that President Biden outlined at the end of May.  However, Israel immediately came back with new conditions and Israeli PM Netanyahu told the press “It should be emphasized that there are still gaps between the sides.” Then on Sunday, Netanyahu doubled down by saying he won’t agree to a cease fire until “Israel has achieved all its military objectives.  Further North, on Friday Russian flunky and Hungarian autocrat Victor Orban visited Moscow and Putin while “uninviting” German Chancellor Scholz from a state visit to Hungary.  In other news, on Saturday, the Wall Street Journal reported that Chinese ecommerce websites Shein and Temu (AMZN and BABA competitors) appear to be growing fast outside of Asian.  They quoted the CEO of DHL (a major airfreight shipper owned by DHLGY) as saying the two companies have grown to take up 30% of cargo space on many shipping routes.  (This is significant because neither company sells perishable or high-value goods typical of air freight.)  In June, this caused Chinese shipping rates to increase 40% as e-commerce bid up airfreight rates and is now causing manufacturers and retailers to buy up space early for upcoming holiday shipments.

With that background, it looks as if markets are undecided, sitting here at the all-time highs in SPY and QQQ as well as DIA being less than 2% from its own all-time high. All three major index ETFs opened flat and (at least early) have printed small, indecisive candles so far in the premarket. All three remain above their T-line (8ema). So, regardless of your timeframe, the market trend (short-term, mid-term, or longer-term) remains very bullish. In terms of extension, QQQ is a bit stretched above its T-line. However, the T2122 indicator remains in the lower end of its mid-range. Therefore, the market has room to run in either direction, but the Bears have more slack to work with today. With regard to those 10 big dog tickers, they are evenly split between gainers and losers in the premarket. INTC (+3.44%) is by far the biggest mover, but TSLA (-0.94%) and NVDA (+0.64%) have traded nine and eight time (respectively) the dollar-volume of stock as INTC in the premarket.

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.


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