Markets gapped higher between a third and a half of a percent on Tuesday.  However, this was a bull trap as all 3 major indices sold off hard the first 90 minutes of the day. From that point, we saw a sideways grind in a small range (relatively speaking) for the rest of the day.  This action is giving us a Bearish Engulfing candle of a Doji / Spinning Top (or if you prefer the start of the completion of a Bearish Doji Continuation or Doji Sandwich signal).  This made for the third straight down day for all 3 major indices and all this happened on average volume.

On the day, all 10 sectors are down sharply, with the Energy Sector (down 4%) leading the way lower.  The SPY lost 1.05%, DIA lost 0.95%, and QQQ lost 1.11%.  The VXX was also down a percent to 19.48 and T2122 is extremely oversold to 3.35.  10-year bond yields have rebounded from early lows and are back up to 3.112% while Oil (WTI) is down 5% to $92.16/barrel on news out of a Pro-Iran UK television station saying Iran has agreed to a deal with the United States to revive the Trump-killed JCPOA nuclear deal and allow Iran to sell oil.  All-in-all, it’s looking like it will end up a blah, bull trap, one plus percent down day.

In economic news, the Conference Board Consumer Confidence came in a 103.2, well above the consensus forecast (97.9) s well as July’s reading (95.3).  At the same time, July JOLTS (Job Openings) came in higher than expected at 11.293 million (versus a consensus forecast of 10.475 million and a June reading of 11.04 million).   Then, after the close, API reported Weekly Oil Stocks surprised with a modest build (0.593 million barrels) while a modest drawdown (-0.633 million barrels) was expected.  However, this was still much better than the prior week’s 5.632-million-barrel drawdown.

SNAP Case Study | Actual Trade

In Forex / Fed news, the Dollar hit a 20-year high for the second day in a row Tuesday.  This came after the JOLTs report suggested a stronger than expected economy.  In addition to the forex impacts, traders have upped their bets for a 75-basis-point hike in September.  US Futures now have now priced in a 74.5% probability of that 0.75% hike.  After the close, NY Fed President Williams told the Wall Street Journal that he expects rate hikes and balance sheet reduction (quantitative tightening) to continue into 2023.  Specifically, he pushed back against the idea of a rate cut in 2023 (while the futures market still expects a cut in the fall of 2023).  This all just focuses eyes on the August Payrolls report Friday.

In stock news, it was reported Tuesday that SNAP is planning to reduce staffing by 20%.  Elsewhere, after its earnings report, BBY told the earnings call that they are now forecasting that consumers will resume the old pattern by doing most of their holiday shopping late.  (In 2021, consumers did the majority of their holiday shopping early.)  In TWTR news, Elon Musk has asked the judge to postpone the trial over his purchase of TWTR until November (from October 17).  In the filing, Musk cited his subpoena of the newly announced TWTR whistleblower as the reason.

After the close CRWD reported beats on both the top and bottom lines.  The company also raised guidance.  Meanwhile, HPE, HPQ, AMRK, CHWY, and PVH all reported misses on revenue while beating on earnings.  In addition, HPQ, PVH, and CHWY all lowered their forward guidance.  So far this morning, DBI, DCI, and CHS have all reported beats on both the revenue and earnings lines.  Meanwhile, EXPR missed on revenue while beating on earnings.

Overnight, Asian markets were mixed.  Shenzhen (-1.29%), Shanghai (-0.78%), and Singapore (-0.55%) led the way lower on weak PMI data out of China (which actually slightly beat expectations but still came in at only 49.4 for Mfg. while Services PMI was at 52.6).  Meanwhile, India (+2.58%) Taiwan (+0.95%), and South Korea (+0.86%) paced the gainers.  In Europe, markets are mostly in the red at midday with the notable exception of Russia (+3.63%).  The FTSE (-1.08%), DAX (-0.36%), and CAC (-0.48%) are typical for most of the continent with a few smaller exchanges just holding on to the green side of flat in early afternoon trade.  As of 7:30 am, US Futures are pointing toward a flat to modestly green start to the day.  The DIA implies a +0.08% open, the SPY is implying a +0.22% open, and the QQQ implies a +0.58% open at this hour.  10-year bond yields are higher to 3.142% and Oil (WTI) is off 2.68% to $89.17/barrel in early trading.

The major economic news events scheduled for Wednesday include ADP Nonfarm Payrolls (8:15 am), Chicago PMI (9:45 am), EIA Crude Oil Inventories (10:30 am), and a couple of more Fed speakers (Mester at 8 am and Bostic at 6:30 pm).  The major earnings reports scheduled for the day include BF.A/B, CHS, DBI, DCI, and EXPR before the open.  Then after the close, FIVE, PSTG, and VEEV report. 

In economic news later this week, on Thursday Weekly Initial Jobless Claims, Q2 Nonfarm Productivity, Q2 Unit Labor Costs, PMI Mfg., and ISM Mfg. PMI are reported.  Finally, on Friday we get Aug Avg. Hourly Earnings, Aug. Nonfarm Payrolls, Aug. Participation Rate, Aug. Unemployment Rate, July Factory Orders.

In earnings later this week, on Thursday, FLWS, CPB, CIEN, GCO, GMS, MOMO, HRL, OLLI, PDCO, SAIC, SIG, TTC, WB, AVGO, JOAN, and LULU report.  Finally, Friday there are no major reports.

Markets are limping into the last day of August, coming off 3 straight down days. We remain very extended to the downside at this point and futures are giving us a very modest and indecisively bullish indication. Be very careful of chasing any gaps or early moves (especially to the downside). While the short-term trend is bearish, the mid-term bullish trend is broken, and the long-term bearish trend is also broken, volatility and if nothing else a pause to ease extension is a high probability. The bottom line is that we are in a volatile downtrend, but the bears may have gotten ahead of themselves with support not far below.

Stick with your trading rules, trade with the trend, and take those profits when you have them. Demonstrate patience and wait for confirmation. Remember that trading is our job. So, do the work and follow the process. Don’t be stubborn. If you have a loss, just admit you were wrong, respect your stop, and take the loss before it grows. When price does move in your direction, always move your stops in your favor (remember the “Legend of the man in the green bathrobe“…it is NOT HOUSE MONEY, it’s all OUR MONEY!). Lastly, remember that you get rich slowly and steadily in Trading…not by striking it rich on one or two trades. So, give up that lottery ticket mentality.

See you in the trading room.

Ed

Swing Trade Ideas for your consideration and watchlist: BABA, Z, SNOW, CAH, UUP, BIG, WEAT, UEC, SQQQ. You can find Rick’s review of tickers on his YouTube Channel here. Trade your plan, take profits along the way, and smart. Also, remember to check for impending earnings reports. Finally, remember that any tickers we mention and talk about in the trading room are not recommendations to buy or sell.

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🎯 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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