Stocks gapped slightly higher at the open in all 3 major indices.  Then price chopped back and forth across the gap the first hour before starting a slow, wavy rally that was in effect until a modest pullback the last 10 minutes of the day.  This left us near the highs of the day at the close.  This action has given us large white candles with smaller wicks on both ends across the 3 major indices.  However, only the QQQ managed to reach (retest) their T-line (8ema) yet.

On the day, Utilities (+1.19%) is the laggard, while Energy (+3.97%) and Basic Materials (+3.34%) led the relief rally.  Meanwhile, the SPY was up 1.96%, DIA was up 1.86%, and QQQ was up 1.99%.  The VXX fell 4.2% to 20.07 and T2122 spiked up out of the oversold territory to 51.47 in the mid-range.  After being up over 4% during the premarket, 10-year bond yields are down hard (the most since 2020) to 3.725%, and Oil (WTI) is up 4.4% to $81.97/barrel. So, Wednesday did give us some relief from bearish over-extension.  However, the downtrend remains intact and you would be hard-pressed to even call it a “relief rally” yet.

In economic news, the August Goods Trade Balance came in at -$87.30 billion (as compared to -$90.19 billion in July) largely on a decrease in imports.  This was the fifth straight month of improvements in the trade balance.  Elsewhere, August Retail Inventories were up 0.6% (compared to a July increase of 0.3%).  This might be a clue of economic slowdown with inventories building.  However, contrary to Tuesday’s unexpected large increase in New Home Sales, August Pending Home Sales fell more than expected to -2.0% (versus -1.4% forecast and +0.6% in July).  Finally, EIA Weekly Crude Oil Inventories fell by 0.215 million barrels (compares to a forecast of +0.443 million and last week’s +1.142 million barrels).  What was odd about the EIA number is that it was only 10% of the build reported Tuesday night by the API (+4.150 million barrels).

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In Fed news, Atlanta Fed President Bostic said that a lack of clear progress in inflation reduction means that the Fed needs to remain “moderately restrictive” and that rates should reach 4.25% – 4.50% by year-end. He wasn’t on to say that his baseline outlook remains that the Fed should hike rates 0.75% again at the next meeting in November.  Later, Chicago Fed President Evans said most Fed voters are “penciling in” 4.50% to 4.75% by the end of the year or maybe March of next year.  He went on to say that he worries about global market volatility causing additional restrictiveness, but that the Fed “just really needs to get inflation in check.”  Finally, Fed Governor Bowman told a conference that the framework the Fed uses to assess competition in the banking sector needs to be overhauled.  Her general point was that different service delivery channels and nonbank “competitors” need to be considered rather than just the size of deposits and loan volume when considering the competitive impact.  (This seems to be a positive statement for mergers/acquisitions in the banking sector.)

In stock news, during the day Wednesday, BIIB had a massive day (+39.85%) after it reported surprisingly positive results in a trial of its Alzheimer’s drug.  Even the direct competitors in this niche (LLY and Roche) were up 7% on the day on this news.  In less positive news, BP announced it has laid off almost all of its contractors at a Toledo Ohio refinery (a joint venture with CVE, but run by BP using contractors) after there was an explosion last week.  BP announced that the refinery (which processed 160k barrels of oil per day, making 3.8 million gallons of gasoline and 1.3 million gallons of diesel per day) will be offline for a prolonged period following the explosion and fire which killed two workers.  Then, after the close, Bloomberg reported that AMZN plans to close several US-based call centers.  This is part of their move toward remote work rather than in-office.  No numbers on cost or headcount reductions were provided.  In other news, Reuters also reported that AMZN has told their warehouse employees they have increased the worker’s pay and this initiative will cost just under $1 billion.  Elsewhere, Bloomberg reports that MRK has struck a deal with China to sell its Covid-19 antiviral treatment (molnupiravir) in a first-of-its-kind deal for the country.

In miscellaneous news, after the close, TTE announced it will be spinning off its Canadian Oil Sands operations and listed the new company on the Toronto exchange (TSX).  Some of these assets include a minority stake in a joint venture with SU and another venture with COP.  On the earnings front, after the close, JEF reported a beat on both lines.  However, CNXC and MLKN both reported missing on the revenue line while simultaneously beating on the earnings line.  So far this morning, RAD and WOR both beat on revenue while missing on earnings.  However, BBBY and KMX both missed on the top and bottom lines. Finally, it was reported overnight that the reason the BOE intervened to buy long-dated bonds Wednesday was panicked calls from UK pension funds that were near collapse based on the crashing pound and UK markets following the new government’s unexpected jerk toward “trickle down” economics and massive high-end tax cuts at the same time inflation is running rampant.

After the close, CALM and BB both reported beating on both the revenue and earnings lines.  (However, the BB number was still a loss.)  So far this morning, THO also reported beating on the top and bottom lines.  However, CTAS and PAYX report closer to the opening bell.

Overnight, Asian markets were mixed in more modest trading.  Australia (+1.44%), Japan (+0.95%), and New Zealand (+0.72%) led the gainers.  Meanwhile, Hong Kong (-0.49%), Thailand (-0.43%), and Malaysia (-0.31%) paced the losses.  In Europe, the day is off to more of a red start.  Only Greece (+0.39%) and Norway (+0.43%) are green.  Meanwhile, the FTSE (-0.63%), DAX (-0.97%), and CAC (-0.90%) are leading the region lower in early afternoon trade.  As of 7:30 am, US Futures are pointing toward a down start to the day.  The DIA implies a -0.46% open, the SPY is implying a -0.62% open, and the QQQ implies a -0.92% open at this hour.  At the same time, 10-year bond yields are back up to 3.814% and Oil (WTI) is up four-tenths of a percent to $82.52/barrel in early trading.

The major economic news events scheduled for Thursday include Q2 GDP (3^rd Revision) and Weekly Initial Jobless Claims (both at 8:30 am), and two Fed Speakers (Bullard at 9:30 am and Mester at 1 pm).  The major earnings reports scheduled for the day include BBBY, KMX, RAD, and WOR before the open.  Then after the close, MU and NKE report. 

In economic news later this week, on Friday, we get August PCE Price Index, August Personal Spending, Chicago PMI, Michigan Consumer Sentiment, and 3 Fed Speeches (Mester, Williams, Mester). Meanwhile, in earnings reports later this week, on Friday, BKR and CCL report.

With this backdrop, it again looks like we will see a gap lower. However, today’s premarket candle is still just inside yesterday’s candle. So, this is not showing a major change in sentiment yet. It just looks like more chop in this week’s consolidation. The strong bear trend remains in place in all 3 major indices. Expect more volatility and even though everything looks bearish early, do not forget that the extension relief usually lasts more than one day. As I have said, markets always move in a zig-zag motion and we are definitely in need of more zag to offset the recent strong zig.

Keep in mind that trading is our job. It’s not a hobby. So, treat it that way. Do the work and follow the process. Stick with your trading rules, trade with the trend, and take those profits when you have them. Demonstrate patience and wait for confirmation. 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: No Trade Ideas today. 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.

🎯 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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