On Thursday markets gapped down roughly a percent after traders had rethought their opinion of the Fed Markets opened Friday with a gap down of roughly two-thirds of a percent.  They then went on a wild up-and-down whipsaw ride that lasted the rest of the day in all 3 major indices.  This left us with large-legged, indecisive candles in all three with a Doji in the SPY and Spinning Top candles in the DIA and QQQ.  On the day, SPY lost 0.59%, DIA lost 0.38%, and QQQ lost 1.20%.  The VXX was flat at 27.07 and T2122 fell deeper into the oversold territory to 7.48.  10-year bond yields spiked to 3.132% and Oil (WTI) rose almost 2% to $110.42/barrel.  This also capped the first 5-week losing streak that was the longest since 2011 in the SPY and since 2012 for the QQQ.

With essentially no economic news until Wednesday, two topics are likely to dominate the start of the week.  The first of these are various opinions about what the Fed has done (or will do) wrong and what that will mean for the economy and by extension the market.  The second topic is the market selloff that has been underway all year and just how much further it will fall before the bottom is reached.  On the latter subject, BAC put out a report this weekend saying that the average of the 19 last bear markets saw the average stock decline 37.3% from their 52-week high and lasted 289 days.  According to their analysis, 49% of Nasdaq stocks are already 50% below their 52-week high, 58% of them are down more than that 37.3% bear market average decline benchmark, and 77% of them are down at least 20%.

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CNBC reported that F is selling more than 8 million shares of RIVN (through GS) as the lock-up ended Sunday.  JPM also plans to sell between 13 million and 15 million shares on behalf of an unknown seller.  Elsewhere, Reuters reported Sunday that Shanghai has tightened and extended its lockdowns in hope of reaching a “zero Covid” goal by late May.  This is causing supply chain chaos for companies like AAPL, which has multiple major suppliers in the city.  One of those (Quanta) saw riots Thursday when rumors circulated around the factory of cases on the factory floor of that facility which houses 40,000 employees with as many as 12 people per room.  Hundreds of Quanta employees overpowered security and broke through containment fences in an attempt to escape the factory living conditions.

On the Russian invasion story, related to food prices/availability, the UN called for an end to the Russian blockade of the port of Odesa.  The stated reason is the need for Ukraine to be able to ship 25 million tons of grain, which has been waiting to be shipped since the start of the war.  At the other end of the Ag cycle, Ukraine announced this weekend that it was only able to plant about 48% of its crops this spring.  Roughly 25% of the Ukrainian grain crops normally stay in the country to feed that nation.  This means that best case, Ukraine expects to be able to export only one-third of the country’s normal grain exports…if it can ship any at all.  On the EU oil sanctions, pro-Putin Hungary continues to block bans on Russian oil despite being offered exemptions.  However, Saudi Arabia dropped prices for Asian and European customers by about $5/barrel for the month of June.  This is seen as a concession to Western pressure and a way to capture market share while offering an alternative to Russian crude. Reuters reported Sunday that LMT and RTX are now planning to nearly double (4000/year vs 2100 prior plan) the production of Javelin missiles.  The US has already sent many of those $176,000 units to Ukraine and this move is in anticipation of orders to replenish US stockpiles.

The economic news coming later this week includes 5 Fed speakers on Tuesday.  Then on Wednesday, we see Apr. CPI, Crude Oil Inventories, 10-year Bond Auction, and Apr. Fed. Budget Balance.  On Thursday we get Apr. PPI, Weekly Initial Jobless Claims, the WASDE Report, and a Fed speaker.  Finally, Friday we see Apr. Imports/Exports, Michigan Consumer Sentiment, and a couple of Fed speakers.

Overnight, Asian markets were nearly all in the red, with only Shanghai (+0.09%) managing any green at all.  Hong Kong (-03.81%), Japan (-2.53%), and Taiwan (-2.19%) led the region lower.  In Europe, we see red across the board at mid-day.  The FTSE (-1.87%), DAX (-1.78%), and CAC (-2.09%) are typical with some of the smaller exchanges down more in early afternoon trading.  As of 7:30 am, US Futures are pointing toward a nasty gap lower at the open.  The DIA implies a -1.65% open, the SPY is implying a -1.98% open, and the QQQ implies a -2.49% open at this hour.  10-year bond yields are spiking again to 3.177% and Oil (WTI) is down 2.3% to $107.21 in early trading.

There is no major economic news scheduled for release on Monday.  However, FOMC member Bostic does speak at 8:45 am. Major earnings reports scheduled for the day include ACM, ALIT, AZUL, BNTX, CANO, CLVT, COTY, CINO, DUK, ELAN, ENR, WTRG, EXC, HGV, JLL, SPTN, TGNA, THS, TSN, and VRTV before the open.  Then after the close, AMC, EQH, BHF, BWXT, CLOV, CAPL, DNB, HI, IAC, ICUI, IFF, MCHP, MRC, NVAX, OVV, PRIM, RNG, SPG, SWX, SU, UNVR, VVV, VRM, XPO, and ZNGA report.

So far this morning WTRG, ELAN, ACM, DINO, COTY, BRPHF, KOS, and ENR have all reported beats on both revenue and earnings.  Meanwhile, CLVT missed on revenue while beating on earnings.  On the other side, DUK, PLTR, and THS have reported beating the estimates on revenue but missed on the bottom line.  Finally, IFNNY, PRTY, and VRTS reported misses on both lines.

Inflation and the fear of Central Bank and government actions to tame it seems to be the proximate cause of the hard selloff that started in Asia overnight and has spread worldwide as of premarket Eastern time. The bears have all the momentum and this feels like the market might be building towards a selling crescendo that might signal a bottom is near. We are oversold, so a bounce is possible. However, this morning feels a little like capitulation. So, smart money is not expecting that bounce. Either way, caution is still the smart play since intraday chop and volatility have been the norm recently. Don’t get caught chasing moves and be nimble enough to change your positioning quickly as needed.

Staying hedged, nimble, and measured are good things…not bad. Remember that the first rule of making big money in the market is to not lose big money in the market. So, don’t be stubborn, and protect yourself from yourself. You also don’t need to be in the market all the time. If this isn’t a market condition you thrive in, then get out of the way. It will settle out at some point and it’s far better to wait and have money for your market than to force yourself to trade now and be busted when things do turn. Keep in mind that nobody is right all the time. If you’re wrong, just admit it and take your loss. Just focus on your process and enjoy yourself. Stick with your trading rules and manage the things that you can control while trying not to worry about the things you have no control over at all. Trade with the trend, don’t chase, keep consistently taking profits when you have them, and move your stops in your favor.

Ed

Swing Trade Ideas for your consideration and watchlist: UVXY, SQQQ, SPXS, QID, MDLZ, KHC, MDT, PRU, JPM, GE, FAS, CCJ. 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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Disclosure: We do not act on all trades we mention, and not all mentions acted on the day of the mention. All trades we mention are for your consideration only.

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