The big banks and especially CPI delivered for the Bulls on Wednesday.  SPY gapped up 1.39%, DIA gapped up 1.48%, and QQQ gapped up 1.57%.  From there, all three major index ETFs saw a follow-through rally for about 40-60 minutes, an hour of selloff, and then a rally that lasted the rest of the day.  Only profit-taking the last 30 minutes prevented the market from going out on the highs.  This action gave us gap-up, white-body candles in all three major index ETFs.  SPY and QQQ had larger bodies, but all three were some form of a Spinning Top.  All three are now above their T-line (8ema).  However, it is worth noting that SPY and QQQ retested and back down from their Bear downtrend line that extends back to the all-time highs in mid-December.

On the day, all 10 of the sectors were in the green with Financial Services (+2.56%) and Technology (+2.26%) leading the way higher.  On the other side, Consumer Defensive (+0.03%) was by far the laggard. At the same time, SPY gained 1.82%, DIA gained 1.67%, and QQQ gained 2.26%.  Meanwhile, VXX plummeted 8.16% to close at 43.55 while T2122 popped up into its overbought range, closing at 86.01.  On the bond side, 10-Year Bond yields plummeted to 4.653% and Oil (WTI) spiked 3.94% to $80.56 per barrel.  So, after the strong gap higher Wednesday, the Bulls won the tug of war, but it was not decisive.  In other words, there was plenty of wick on both ends of all three major index ETF candles. This happened on slightly above-average volume in the SPY, DIA, and QQQ.

The major economic news Wednesday included December Month-on-Month Core CPI, which came in a tick better than expected at +0.2% (compared to a +0.3% forecast and November value).  On the annualized basis, December Year-on-Year Core CPI was also a tick better than expected at +3.2% (versus a +3.3% forecast and November reading).  For the headline numbers, December Month-on-Month was up a tick as predicted at +0.4% (compared to a +0.4% forecast and a +0.3% November number). On an annualized basis, December Year-on-Year CPI was as anticipated at +2.9% (versus a +2.9% forecast but two ticks higher than November’s +2.7% value).  At the same time, the NY Empire State Mfg. Index was way down to -12.60 (compared to a +2.70 forecast and a December +2.10 reading).  Later, EIA Weekly Crude Oil Inventories showed a 1.962-million-barrel drawdown (less than the forecasted 3.500-million-barrel drawdown, but higher than the prior week’s 0.959-million-barrel draw. 

In Fed news, on Wednesday, Richmond Fed President Barkin told reporters that the December CPI “continues the story we have been on, which is that inflation is coming down towards target.”  Barkin continued, “The ‘economy weakening’ argument seems to be decaying … You keep seeing good numbers on retail sales, unemployment, and the like Demand, you are hearing, is good, solid, fine.”  Separately, NY Fed President Williams said, “The process of disinflation remains in train.”  He went on, “Monetary policy is well positioned to keep the risks to our goals in balance.”  However, he also expressed caution based on indecision over the new administration’s policies.  He said, “The economic outlook remains highly uncertain, especially around potential fiscal, trade, immigration, and regulatory policies. Therefore, our decisions on future monetary policy actions will continue to be based on the totality of the data, the evolution of the economic outlook, and the risks to achieving our dual mandate goals.”  Elsewhere, Minneapolis Fed President Kashkari commented that “Tariffs themselves don’t cause inflation, but retaliation does and the whole issue is more complicated.”  Finally, Chicago Fed President Goolsbee said he continues to see progress on inflation and that he is optimistic for a soft landing in 2025. However, he also said the CPI report was both somewhat encouraging and somewhat discouraging in equal measure.  He continues to see continued progress on inflation, but he is also “wary of the seasonal pattern of inflation.”

After the close, CNXC and FUL both reported a miss on revenue while also beating on earnings.  Later, SNV reported beats on both the top and bottom lines.

Overnight, Asian markets were mostly green with 10 of the 12 exchanges above break-even.  Malaysia (-0.42%) was the only appreciable loser.  Meanwhile, Taiwan (+2.27%), Australian (+1.38%), and South Korea and Hon Kong (both +1.23%) led the region higher. In Europe, we see a similar picture with 11 of 14 bourses showing green at midday.  The CAC (+2.00%), DAX (+0.26%), and FTSE (+0.60%) lead the region higher in early afternoon trade.  In the US, as of 7:30 a.m., Futures are pointing toward a mixed start to the morning.  DIA implies a -0.18% open, the SPY is implying a +0.15% open, and QQQ implies a +0.34% open at this hour.  At the same time, 10-Year Bond yields are back up to 4.68% and Oil (WTI) has pulled back 0.94% to $79.28 per barrel in early trading.

The major economic news scheduled for Thursday includes Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, Dec. Export Price Index, Dec. Import Price Index, Philly Fed Mfg. Index, Philly Fed Mfg. Employment, Dec. Core Retail Sales, and Dec. Retail Sales (all at 8:30 a.m.), November Business Inventories and Nov. Retail Inventories (both at 10 a.m.), and the Fed Balance Sheet (4:30- p.m.).  Fed member Williams also speaks again at 11 a.m.  The major earnings reports scheduled for before the open include BAC, FHN, GS, INFY, MTB, MS, PNC, TSM, USB, and UNH.   Then, after the close, JBHT reports.

In economic news later this week, on Friday, Dec. Building Permits, Dec. Housing Starts, Dec. Industrial Production, and Nov. TIC Net Long-Term Transactions are reported.

In terms of earnings reports later this week, Friday, CFG, FAST, RF, SLB, STT, TFC, WBS, and WIT report.

So far this morning, BAC, FHN, INFY, MTB, MS, PNC, TSM, and USB all reported beats on both the revenue and earnings lines.  Meanwhile, UNH missed on revenue while beating on earnings.

With that background, the market seems undecided this morning.  All three major index ETFs gapped higher to start the premarket.  However, all three have also printed black-body candles since that point, with DIA being the only one with significant wicks (and the larges of those is to the upside).  This indicates the market is uncertain that its gap up in the early session was warranted.  With that said, all three do remain above their T-line (8ema) and thus the short-term trend is bullish.  It is worth noting that SPY and QQQ joined DIA (by virtue of their premarket gap higher) in being above their mid-term downtrend line which extends back to mid-December.  So, the downtrends are broken but a new bullish trend (higher-highs and higher-lows) hasn’t been established.  In the long-term all three are bullish.  In terms of extension, none of the three are too extended above their T-line, but they are starting to push things.  For its part, T2122 is now in the overbought range. So, both sides have room to work today.  In terms of the 10 Big Dogs, seven of the 10 are in the green with NFLX (+1.29%) leading the way while META (-1.54%) lags.  Related to volume, NVDA (+0.92%) is leading TSLA (-0.96%) by about 25% with TSLA having traded five times as much as the next closest ticker.

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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