Markets opened modestly lower Friday (down 0.31% on the SPY, down 0.09% in the DIA, and down 0.70% in the QQQ) well up off the premarket lows.  From that point, we had a bit of divergence as the SPY roller-coastered its way sideways, the DIA had a very modest uptrend, and QQQ put in a volatile bearish trend.  However, during the afternoon all three synced up and trended modestly bullish the rest of the day.  This action gave us gap-down indecisive Doji candle in the QQQ and gap-down white-bodied candles in the two large-cap indices.  All three remain close below their T-line (8ema) and the DIA has held above its 50sma after another retest.  

On the day, seven of 10 sectors are in the green as Energy (+3.43%) led the way higher and Consumer Cyclical (-1.27%) lagged behind the other sectors.  At the same time, the SPY was up 0.23%, the DIA was up 0.49%, and QQQ was down 0.66%.  At the same time, the VXX gained 1.25% to 12.18 and T2122 rose but remains in the midrange at 47.75.  10-year bond yields spiked up to 3.745% and Oil (WTI) is up by 2.23% to $79.80 per barrel.  So, on the day, we saw a gap lower and then indecisive action the rest of the day.  All of this happened on less-than-average volume again.

In economic news, the Michigan Consumer Sentiment Index came above expectations a bit at 66.4 (compared to a forecast of 65.0 and the January reading of 64.9).  Later in the day, the January Federal Budget Balance came in much better than expected at -$39.0 billion (a deficit, versus the forecast of -$63.0 billion and also much better than the December reading of -85.0 billion).  After the close, Philly Fed President Harker said that the strong January Payrolls Report has not changed his view that moving to small (quarter percent) rate hikes was the correct strategy for the FOMC.  Specifically, Harker (a voting member this year) said, “At this point, we can go at a pace of 25 (basis-point rate hikes) and get inflation under control without doing undue damage to the labor market.”  He also added that moving to smaller rate increases is a “risk management” issue for the Fed.  Finally, he opened the door to rate cuts in 2024.  On that topic, he said, “I don’t think that’ll happen this year,” but in 2024 “we could start to see movement downward in the federal funds rate that is likely to be gradual.”

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In stock news, TSLA reversed course in China by raising prices that it just recently cut.  Later, the US Army announced Friday that OSK had lost a $7 billion contract for a tactical vehicle.  At the same time, MGA warned about profits in 2023 citing margin pressure from US automakers.  Along those same lines, WMT publicly warned vendors (companies that sell products through WMT stores) that it can no longer take price hikes and will be pushing their own private-label products more as less-expensive alternatives.  This is normal business for WMT, but it is not common for the company to make public proclamations on the topic.  This move could impact the likes of PG, UL, KHC, CPB, KMB, CLX, and PEP (who all see billions of dollars of products through WMT).  Meanwhile, F announced it had cut its stake in EV company RIVN from 11.4% to 1.15% as part of a predetermined plan.  Elsewhere, Florida Governor DeSantis gained effective control over the board which oversees the DIS special district surrounding DIS theme parks.  I won’t go into the background, but the move cost Florida taxpayers about $1.2 billion and may cause DIS trouble related to its Florida theme park unit.  After the close Friday, F announced a new $3.5 billion battery plant to be built in Michigan as part of a joint venture with a Chinese battery company.  Elsewhere, HOOD won a dismissal of an investor lawsuit claiming the company had misled investors ahead of its 2021 IPO.  Finally, Reuters reported that FIS is preparing to break up its business, spinning off the payment processing unit it had acquired four years ago for $43 billion.   

In miscellaneous news, on Saturday, Indian Finance Minister Sitharaman said that G-20 countries are exploring collective regulation on cryptocurrencies.  No timetable or specifics were offered, but Sitharaman said the discussions are active.  At the same time, Reuters reported that META is not releasing departmental budgets internally as the company plans another round of layoffs.  Meanwhile, major TSLA investor Ross Gerber has launched a campaign to gain a seat on the company board.  His agenda is to reign in Elon Musk (addressing spending too much time on other companies, not having succession plans, and his stock sales).  Oddly, Gerber launched his bid on a Twitter Spaces call.  He said “I’ve kind of had enough…TSLA needs to build its image around Tesla, and not just Elon.  I think it’s time for TSLA to grow up.”  Finally, the balloon story won’t seem to go away as three more (much smaller and more likely weather-related according to analysts guesses) balloons were shot down Friday, Saturday, and Sunday in the ocean off Alaska, over Canada, and over the US side of Lake Huron respectively). Meanwhile, China says that US balloons crossed its own airspace 10 times during 2022. So, that talk will continue.

In energy news, for the first time in eight weeks, Natural Gas gained ground.  The front-month Natty rose 4.3% for the week to close at $2.5140/mmBtu.  At the close of the week, US gas storage stood at 2.366 trillion cubic feet, which is up 10.9% from one year ago.  Elsewhere, CVX said Friday that it has agreed to sell its assets in Myanmar and will exit that country.  Meanwhile, Bloomberg reports that XOM is quietly walking away from a decade-long project intended to create environmentally-friendly biofuels from algae.  XOM had already invested $350 million in the project.  At the same time, the US Treasury Dept. said that it had warned countries and companies located in Turkey and UAE that the US will start cracking down on the facilitators who are helping Russia avoid Western oil sanctions.  Finally, on Saturday, a meeting was held to discuss conditions at the Freeport Texas LNG export facility that was idled by an explosion and fire last June.  Area residents are complaining that regulators are not providing enough oversight and control over the facility as it moves toward coming back online.  (When fully operational, the facility processes 2 billion cubic feet of natural gas per day and is the largest LNG export facility in the US.)

Overnight, Asian markets were mixed but leaned to the downside. Singapore (-1.07%), Japan (-0.88%), and South Korea (-0.69%) lead the larger number of exchanges lower.  Meanwhile, Shenzhen (+1.14%) and Shanghai (+0.72%) were the only appreciable gainers on the day.  In Europe, stocks are mostly in the green at midday.  The FTSE +0.40%), DAX (+0.43%), and CAC (+0.86%) lead all but two exchanges to the upside in early afternoon trade.  As of 7:30 am, US Futures are pointing toward a green start to the week.  The DIA implies a +0.15% open, the SPY is implying a +0.35% open, and the QQQ implies a +0.66% open at this hour.  At the same time, 10-year bond yields are flat a 3.74%, and Oil (WTI) is also flat at $79.74/barrel in early trade.

There are no major economic news events scheduled for Monday.  Major earnings reports scheduled for the day include CX, CHKP, DDL, and THS before the opening bell.  Then after the close, ASTL, AMKR, ACGL, ANET, CAR, CDNS, ES, FE, IAC, MKSI, MRC, PLTR, and SEDG report. 

In economic news later this week, on Tuesday, we get January CPI and the API Weekly Crude Oil Stock Report and we also get a Fed speaker (Williams).  Then on Wednesday, NY Fed Empire State Mfg. Index, January Retail Sales, January Industrial Production, December Business Inventories, December Retail Inventories, and EIA Weekly Crude Oil Inventories are reported.  On Thursday, we get January Building Permits, January PPI, January Housing Starts, Weekly Initial Jobless Claims, Philly Fed Mfg. Index, and a couple of Fed speakers (Mester, Bullard, and Mester).  Finally, on Friday, January Import Price Index and January Export Price Index are reported.

In terms of earnings later in the week, on Tuesday we hear from CAE, CLF, KO, ECL, ENTG, EXC, FELE, GTX, GEO, GFS, HRI, HWM, LCII, LDOS, MAR, BTU, PKI, QSR, TRU, WCC, ZTS, ABNB, AKAM, ANDE, CLW, CRK, CNDT, DVN, WIRE, ENLC, GDDY, GXO, HLF, MCY, NU, SCI, SU, TX, and WFG.  Then Wednesday, ADI, AVNT, GOLD, BIIB, CHEF, FIS, GNRC, ICL, KHC, LAD, MLM, OC, PSN, RPRX, RBLX, R, SABR, SITE, SAH, SUN, TMHC, TTD, WAB, WAT, ALB, ALSN, AMED, AEE, AIG, AWK, AR, CF, CSCO, SYH, CPA, ET, EQT, EQIX, HST, INVH, KGC, MRO, NEX, NUS, NTR, QDEL, RSG, REZI, RNG, ROKU, ROL, RGLD, RUSHA, SGEN, SHOP, SUM, SPWR, SNPS, TNET, TROX, TWLO, WCN, WELL, and Z report.  On Thursday, we hear from ARCH, BLMN, CVE, CEG, CROX, CNB, ETR, EPAM, FOCS, GGR, GVA, HAS, HSIC, H KBR, KELYA, LH, NSRGY, NGD, NMRK, DNOW, NRG, OGN, PARA, PBF, POOL, POR, RCM, RS, STNG, SO, SCL, SYNH, TOST, USFD, VC, VNT, VMC, WSO, WST, WE, ZBRA, AEM, AL, AEL, COLD, AMN, AMAT, ATR, BIO, BFAM, ED, CLR, DASH, DKNG, DBX, FBIN, GLOB, IAG, TDS, TXRH, USM, and VALE.  Finally, on Friday, ASIX, AMCX, AXL, AN, CNP, CRBG, DE, MD, and PPL report.

So far this morning, FIS, CHKP, and TDC have reported beats on the revenue and earnings lines.  Meanwhile, THS and DDL both reported a miss on revenue while they beat on the earnings line.  (CX has not reported yet.)  It is worth noting that FIS and THS both lowered forward guidance.  However, TDC raised its forward guidance.

With that background, it looks like the bulls are taking all three major indices back up to retest their T-line (8ema) from below this morning. However, neither the SPY or QQQ is to the point of retesting the Bull Flag downtrend they are in (at least in premarket). bears have the momentum coming off yesterday’s candle and with an overnight assist from the Russians. We do have another big earnings week with KO and KHC headlining that group. However, the big driver is likely to be CPI data on Tuesday. Do not be surprised if we drift today as traders wait on that report before betting big this week. The risk remains to the downside as markets are betting on a pause in hikes by the Fed (not March, but soon), inflation to keep coming down, AND the economy to hold up (no hard landing).

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 absolutely 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 money is 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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