On Thursday, markets started the day a bit higher (gapping up 0.24% on the SPY, up 0.33% in the DIA, and up 0.39% in the QQQ).  However, that was essentially the last we saw of the Bulls for the day.  After that open, the DIA managed to grind sideways in a very tight range until 11 am.  Then it sold off in waves, closing on the lows.  After its gap, the SPY sold off slowly until noon, had a very weak one-hour bounce, and then also sold off all the way into the close.  QQQ immediately sold off harder than the other two major index ETFs for the first hour.  At that point, it modestly bounced until 1 pm before it also sold off hard the rest of the day.  This action gave us large black-bodied candles with tiny wicks in the SPY, DIA, and QQQ.

On the day, nine of the 10 sectors were in the red again with Consumer Cyclical (-1.40%) once more leading the way lower and Energy (+0.83%) holding up much better than any other sector.  At the same time, the SPY lost 0.76%, DIA lost 0.78%, and QQQ lost 1.09%.  VXX gained another 4.81% to close at 26.38 and T2122 dropped even further into the oversold area at 2.86.  10-year bond yields continued to climb to 4.284% while Oil (WTI) climbed to close at $80.39 per barrel. This all took place on slightly less-than-average volume again across all three major index ETFs.  So, the Bulls opened us higher.  However, after that, it was all Bears all the time the rest of the day, even picking up speed in the afternoon.          

The major economic news reported Thursday included Weekly Initial Jobless Claims that came in just a bit below expectation at 239k (compared to a forecast of 240k and the prior week’s 250k reading).  At the same time, the Philly Fed Manufacturing Index was reported dramatically higher than predicted at +12.0 (versus the -10.0 forecast and even further above the July value of -13.5). However, the Philly Fed Employment Index came in well below anticipated at -6.0 (compared to a forecast of -0.7 and even the July reading of -1.0).  Then, after the close, the Fed’s Balance Sheet showed another reduction of $62 billion, down to $8.146 trillion from $8.208 trillion.

The NY Fed released survey results Thursday afternoon.  The survey found that, at least as of just before the late-July Fed meeting, big banks and money managers believed the July rate hike would be the last one for this tightening cycle.  The survey also showed that most “Primary Dealers” believe we will see Fed rate cuts starting in April, while money managers think the cuts will begin in March of 2024.  Furthermore, the big banks expect the Fed to stop reducing its Balance Sheet when it reaches $6.75 trillion (now at $8.146 trillion as reported above and falling at a rate of about $50-$75 billion per week).

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In stock news, Blue Shield of CA made major waves by announcing it will stop using CVS to manage its pharmacy benefits program and will instead work with AMZN and other firms.  (CVS lost 8.14% on the day on this news.)  Elsewhere, PFE announced that its updated COVID-19 vaccine does show “neutralizing activity” against the Eris subvariant in addition to the (still dominant) Omicron variant.  Not to be outdone, MRNA announced the results of an initial study which showed their updated COVID-19 vaccine is “effective” against Omicron, Eris, and Fornax variants.  In the afternoon, troubled electric carmaker MULN launched a $25 million stock buyback program in an effort to boost the stock price and avoid being delisted.  At the same time, private trucking company Estes Express submitted a $1.3 billion bid to purchase the freight terminals of bankrupt YELL.  Meanwhile, F and its partners (a consortium of South Korean firms) announced they will build a $900 million battery factory in Quebec.  In the late afternoon, Bloomberg reported that GS is on a hiring spree, having hired several hundred new staff to address concerns identified by the Fed.  Twitter (“X”) was in trouble yet again Thursday after ads from ADBE, GILD, and several other brands were run beside “pro-Nazi” content.  ADBE and GILD have suspended advertising on X after the latest in the social media platforms series of blunders.

In stock legal and regulatory news, the union for striking Hollywood Writers sent a letter urging the FTC to investigate DIS, AMZN, and NFLX on antitrust grounds.  The Writers Guild of America told FTC Chair Khan that those three companies have amassed too much power in the streaming media industry and are now effectively an oligopoly.  At the same time, GOOGL’s YouTube unit defeated a racial bias lawsuit that had been filed by black and Hispanic content creators.  A US District Judge in San Francisco threw out the case, saying the claims did not come close to suggesting discrimination.  Elsewhere, Reuters reported that US Customs has begun increased inspections of car parts being imported from China in an effort to identify and stop the import of any products produced by supply chains involving forced (Uyghur) labor.  At midday, TSLA notified Core Lithium it will sue the Australian miner in seven days unless the two sides reach a mutual agreement. This comes after the two companies failed to reach an agreement on supply quantities and prices prior to a mutually agreed prior date.  Late in the day, C was subpoenaed by the US House Judiciary Committee (GOP) over alleged data sharing with the FBI without the appropriate legal process prior to that disclosure.  This is part of the effort by the GOP members of the committee to help the January 6 defendants by using subpoena power to provide extra discovery for their defenses. 

After the close, AMAT, GLOB, KEYS, and ROST reported beats on both the revenue and earnings lines.  However, FTCH missed on both the top and bottom lines.  It is worth noting that AMAT and ROST raised forward guidance.  On the other side, KEYS and FTCH lowered their guidance. 

Overnight, Asian markets were nearly red across the board with only Australia (+0.03%) barely hanging on to green.  Hong Kong (-2.05%), Shenzhen (-1.75%), and Shanghai (-1.00%) led the region lower.  In Europe, we see a similar picture taking shape at midday with only Russia (+0.64%) appreciably in the green.  Meanwhile, The CAC (-0.81%), DAX (-0.77%), and FTSE (-0.80%) are leading the region lower in early afternoon trade.  In the US, as of 7:30 am, Futures are also pointing to a red start to the day.  The DIA implies a -0.18% open, the SPY is implying a -0.33% open, and the QQQ implies a -0.61% open at this hour.  At the same time, 10-year bond yields are down sharply to 4.223% and Oil (WTI) is off a quarter of a percent to $80.19 per barrel in early trading.

There is no major economics news scheduled for Friday.  The major earnings reports scheduled for before the opening bell include DE, EL, VIPS, XPEV, and PANW.  Then, after the close, there are no major reports scheduled.

So far this morning, DE and EL reported beats on both the revenue and earnings lines.  Meanwhile, VIPS missed on revenue while beating on earnings.  However, XPEV missed on both the top and bottom lines.  It is worth noting that DE raised its forward guidance while EL, VIPS, and XPEV all lowered their guidance.

In miscellaneous news, JPM reported Thursday that hedge funds have slowed down their exit from value and small-cap stocks in the last month.  The study said the flow of funds moving from value to growth stocks in the last month (as “AI fever” hit) has now drawn mostly ended.  This report seems reasonable as the “high growth” QQQ names are down 6.54% since the first of the month.  Elsewhere, China’s largest developer and the world’s most heavily indebted real estate company, China Evergrande, filed for Chapter 15 bankruptcy protection in NY on Thursday.  (Chapter 15 is the foreign entity equivalent to Chapter 11.)  Finally, the Texas electric grid operator (ERCOT) issued a voluntary power conservation request for Thursday, saying it expected to hit its tenth record high demand of the summer in the late afternoon and evening.  NRG (which also serves parts of TX) also requested customer electric conservation for the same reason. 

In late-breaking news, Bitcoin plummeted 9% between 5:30 pm and 5:35 pm Thursday night.  The news came a few hours after SpaceX disclosed it had written down its Bitcoin holdings by $373 million.  The main cryptocurrency recovered about half of the losses by 9:30 pm.  Elsewhere, Reuters reported that last night President Biden approved the sending of F-16 fighters from Denmark and the Netherlands to Ukraine.  These planes will eventually be replaced by F-35 jets from LMT.

With that background, it looks like the Bears are still in control so far in premarket. We see black-body candles trading near the lows of the early session in all three major index ETFs at this point. The trend remains bearish with all three below their T-line (8ema). QQQ and DIA are getting close to their next potential support level this morning. However, SPY still has air below it until it reaches potential support. Of course, the long-term trend is still hanging on to a bullish course but it is being pushed hard by the Bears over the last three weeks. As far as extension goes, we are getting extended below the T-line (8ema) in al three with the SPY and QQQ being especially stretched. The T2122 indicator also remains very oversold, but not yet quite pegged to the bottom of its range. So, we are do for a pause or bounce soon. However, remember the market can remain too extended a lot longer than we can remain solvent betting on a reversal that has not happened yet. Also keep in mind that this is Friday, payday. So, take some profits off the table and prepare your account for the weekend news cycle by lightening up, hedging, or buying some insurance for your positions.

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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