Tuesday was another crazy day for markets as the strong rebound rally continued in the face of major bank earnings misses, companies dropping forward guidance, and mostly “not as bad as expected” news.  The major indices gapped 2% higher and while the large-caps had some volatility, the techs continued to rampage higher.  As a result, the SPY closed up 2.95%, the DIA up 2.39%, and the QQQ up 4.35%.  As expected, the VXX was down again to 37.40.  The 10-year bond yield also fell slightly to 0.747%.  However, Oil (WTI), a major barometer of the economy, got hammered again, down 7.5% to $20.74/barrel. 

In terms of virus treatments, a French study (84 patients) released Tuesday evening found that the malaria drug hydroxychloroquine does not help COVID-19 patients (at least statistically-significantly).  Worse yet, the drug does cause serious side effects.  As a result, the study recommended it should be discontinued as a COVID therapy.  This “should” have a negative impact as markets can cross off another miracle.

In relation to economic recovery, a Harvard paper published in the Journal of Science Tuesday suggested that in the absence of a new treatment or a faster-than-expected vaccine, social distancing, school closures and stay-at-home orders will be needed until 2022, at least on an intermittent basis.  Meanwhile, Dr. Fauci (NIH) said Tuesday afternoon that a May 1 easing target is “a bit overly optimistic.”  In addition, he said any easing will be on a rolling basis, not all at once (due to a lack of testing capacity). 

On that “Opening” front, another regional group of Governors (this one in the Mid-West) has set up a state-level committee to coordinate when and how to ease their lockdowns.  The Governors of California and Connecticut Governors said to ask them again in mid-May what the timeline will be for easing restrictions. However, the President said some will open even before the end of April.  He also acknowledged reality, saying it is up to the states to make their own timing decisions and to do their own testing. He also said they (states) can come to the Federal government for help, regardless, they (states) will open very soon, very powerfully, and he will hold the Governors accountable very strongly. 

In business news, BA announced that customers canceled orders for 150 of the 737 Max planes last month.  AMZN also announced it is slashing affiliate commissions (as much as 63%).  The reason behind this move us unclear, but this is another big revenue hit for publishers, social marketers, and other businesses.  However, on a positive note, AAPL announced it had shipped 2.5 million iPhones in China during March, a sharp rebound after the worst month ever in February.  

In follow-up to Easter’s OPEC+ production cuts, a little clarity may be coming to how President Trump plans to cut US production by 300,000 barrel/day. On Tuesday, the Texas Railroad Commission began discussing production caps for the first time in 50 years.  However, there was immediate fierce pushback from companies such as FANG, which said it would halt all drilling in Texas if the state instituted any caps.

On the virus front itself, the global headline virus numbers crossed 2 million as we now have 2,016,840 confirmed cases and 126,568 deaths.  At the same time, in the US we now have 614,246 confirmed cases and 26,064 deaths. 

Overnight, Asian markets were down across the board, South Korea being the exception. In Europe, markets are heavily in the red (about 2% on average) at this point in their day.  As of 7:45 am, US futures are pointing toward a 1.5% gap lower on heavy earnings misses from major banks.  Oddly all the banks seemed to miss estimates by 45-46%, yet run completely different businesses with different focuses and estimates…funny how that happened.

On Wednesday, major economic news includes Mar Core Retail Sales and Apr. NY Empire Mfg. Index (both at 8:30 am), Mar. Industrial Production (9:15 am), Business Inventories (10 am), and Crude Oil Inventories (10:30 am).  Major earning s reports include ASML, BAC, C, GS, PNC, SCHW, UNH, and USB all before the open.

It appears traders have been smoking that hopium, “pricing markets for perfection” amidst what certainly appears to be massive economic uncertainty.  Meanwhile, the major analysts and economists are saying the downturn will likely be the worst seen since the Great Depression, with literally millions of small businesses at risk of closing and tens of millions of loans at risk of default.  Something has to give…both can’t be right.

While the uptrend continues, we are now in a very uncertain earnings season and the economic news will continue to be bad for some time.  Remember, while it may be time to start dipping your toe in again according to the chart, we need to continue to be very attentive, and either be very fast (day trade) or very slow (long-term holds).  Be very cautious on any swing trades you take.

Ed

No Swing Trade Ideas for your consideration and watchlist today. Trade smart, take profits along the way and trade your plan. Also, don’t forget to check for upcoming earnings. Finally, remember that the stocks/etfs 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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