Bears Looking to Roar As Bond Rates Rise

Markets gapped higher and the bulls followed through all morning.  However, this turned into a sideways grind in a tight range followed by a hard selloff in the last 45 minutes of the day.  This left us with a Bullish Harami in the QQQ and gap-up white candles with larger upper wicks in all 3 major indices.  Leading this charge were the FANGMAN stocks that led us lower Monday.  However, none of the indices were able to take out their T-line.  On the day, SPY gained 1.04%, DIA gained 0.92%, and QQQ gained 1.35%.  The VXX fell almost 4% to 26.55 and T2122 remains in the mid-range at 60.68.  10-year bond yields shot higher to 1.531% and Oil (WTI) gained almost 2% to $79.15/barrel.

FB can’t catch a break on the news front.  After a 6-hour outage on Monday, the US Senate spent most of Tuesday hearing testimony from a FB whistleblower (Frances Haugen) and making their own attacks on FB and CEO Mark Zuckerberg. The 4 main takeaways from Haugen’s testimony are that: 1) FB mechanics are designed to aid in the spread of misinformation (because the controversial or salacious draws eyes and clicks); 2) FB knows this and has decided to take the minimum possible steps to curb such posts; 3) FB has research showing the negative impacts of the platform on children and teens (especially young girls), and has decided to mislead the public about the topic rather than admit the problems; 4) FB knows its platform enables exploitation but has prioritized profits over those issues in every case, even when the impact to profit had been deemed tiny by management.  During the day, FB responded with a statement essentially saying that Haugen wasn’t knowledgeable about the things she was claiming and they totally disagree with her characterizations.  Despite the all-day beating in the press, FB stock rebounded to close up 2% from the terrible day it suffered Monday. Then overnight, Zuckerberg responded saying the testimony was not true and the company does not prioritize profits over user safety.

Mortgage rates jumped to an average of 3.14% for a 30-year fixed-rate, conforming loan for the week. This led to a 2% decline in new purchase mortgage applications while refinance applications plummeted 10%.  This came to an overall fall of 7% for loan applications for the week.

STZ reported a miss on earnings but did beat on revenue. However, AYI beat on both lines in this morning's report. News also broke this morning that PLTR has received an Army contract overnight. STX got a downgrade from Morgan Stanley. Finally, SWX announced a deal to a pipeline from D for just under $2 billion in cash and assumed debt.

Overnight, Asian markets are mostly in the red.  South Korea (-1.82%), Japan (-1.05%), and India (-0.99%) led the losses.  However, Indonesia (+2.06%), and Malaysia (+1.89%) bucked the trend.  Mainland Chinese markets remain closed.  In Europe, markets are deeply in the red across the board as of mid-day.  Analysts claim another overnight spike in the US 10-year bond rate led to the European selloff.  The FTSE (-1.79%), DAX (-2.28%), and CAC (-2.17%) lead and are typical of the continent in early afternoon trading.  As of 7:30 am, US Futures are pointing toward a nasty gap down on our side of the pond as well.  The DIA is implying a -0.96% open, the SPY implying a -1.11% open, and the QQQ implying a -1.27% open.  10-year bond yields are up strongly to 1.55% and Oil is mildly lower as the Dollar is up sharply in early trading.

The major economic news scheduled for release on Wednesday includes ADP Nonfarm Employment (8:25 am), Crude Oil Inventories (10:30 am) and Fed member Bostic speaks twice (9 am and 11:30 am).  The major earnings reports scheduled for the day include AYI, RPM, and STZ before the open.  Then after the close LEVI reports.

As mentioned yesterday, calling a bottom can be a very risky business. It looks like the bears are looking to punish anyone who jumped on the rally train Tuesday. With the 3 major indices all near their premarket lows, this could be an ugly open. The trend remains bearish and the resistance overhead remains plentiful. So, be careful, and regardless of the direction you trade, be prepared for heavy volatility and intra-day swings.

Once again, remember that you do not need to trade every day or even week. Cash is a position. So think about waiting, if you want to go long in this market, or at the very least hedging your portfolio. Watch your current positions before looking to add more trades. Focus on your trading process and managing the things you can control. Most importantly, consistently take profits when you have them. Don't let greed (or FOMO) get the better of you. A good trader refuses to let winners turn into losers.

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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