Friday saw a gap lower following a hotter-than-expected PPI number. The SPY gapped down 0.44%, DIA gapped down 0.21%, and QQQ gapped down 0.71%.  However, like the reverse of Thursday, the Bulls stepped in to rally until 10:30 in the QQQ and 10:45 am in the SPY and QQQ.  Both of the large-cap index ETFs recrossed the gap with the DIA traveling triple the distance of that opening gap down.  From that point, all three major index ETFs rode the rollercoaster sideways within a modest range.  This action gave us white-bodied candles across the SPY, DIA, and QQQ.  DIA had the smallest wicks, closing back up across the T-line (8ema) and printing a Piercing candle.  At the same time, the SPY printed a gap-down, Spinning Top and QQQ printed a gap-down, white-bodied Doji, that gapped down through and failed a retest of its 50sma.

On the day, seven of the 10 sectors were in the green with Energy (+0.91%) way out front leading the way higher and Technology (-0.75%) lagged behind the other sectors.  At the same time, the SPY lost 0.06%, DIA gained 0.32%, and QQQ lost 0.64%.  VXX lost almost four percent to close at 23.83 and T2122 climbed slightly and remains in the mid-range at 31.43.  10-year bond yields spiked again to 4.158% while Oil (WTI) was up fractionally to close at $83.04 per barrel. This all took place on average volume in the QQQ and well below average in the large-cap index ETFs.  So, it was a whipsaw day with a gap and a reversal followed by waves the rest of the day.  Once again, after a lot of travel, the SPY, DIA, and QQQ all ended up very near where they started.      

The major economic news reported Friday included July month-on-month PPI came in hotter than expected at +0.3% (compared to a forecast of +0.2% and the June reading of +0.0%). Later, the Preliminary August Michigan Consumer Sentiment came in just a bit better that anticipated at 71.2 (versus a 71.0 forecast but a bit lower than the July value of 71.6).  Meanwhile, the Preliminary August Michigan Consumer Expectations came in a bit lower than expected at 67.3 (compared to a forecast of 68.1 and the July reading of 68.3).  At the same time, Preliminary August Michigan Consumer Inflation Expectations were reported better than predicted at 3.3% (versus to a forecast of 3.8% and better than the July reading of 3.4%). Over the longer term, the Preliminary August Michigan 5-year Consumer Inflation Expectations also came in lower than anticipated at 2.9% (compared to a forecast of 3.0% and a July value of 3.0%).

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In Fed news, Reuters provided a breakdown of current Fed members that may be useful.  Doves include Harker (Philly), Bostic (Atlanta), Daly (San Fran), Logan (Dallas), and Barkin (Richmond).  Those leaning dovish are Goolsbee (Chicago), Cook (Governor), Collins (Boston), and Kashkari (Minny).  Centrists include Williams (NY), Jefferson (Governor), and Barr (Vice-Chair).  Those who lean hawkish are Powell (Chair), Bowman (Governor), and Mester (Cleveland).  Finally, the Hawks are Waller (Governor), and Bullard (St. Louis).

In stock news, the tense and ugly negotiations between the “Big 3” automakers and the UAW continued Friday.  After the UAW threw the latest STLA in the trash the prior week, STLA firmly rejected the UAW counter-offer calling for the union to “focus on reality.”  (The current 4-year deals between the UAW and GM, F, and STLA end on September 14, and a strike has already been authorized by the union.)  Elsewhere, an F joint venture with a Chinese state-owned automaker (owned 50-50) is now planning its own joint venture with that same Chinese state-owned company (Chongqing Chagan Automotive) to launch an electric vehicle manufacturer. This will leave the Chinese state owning 70% of the EV venture.  Later, WYNN announced it is “winding down” its online sports betting platform WynnBET, saying that customer acquisition costs were too high (too much competition) and rules across different states were not clear.  For now, they have ceased operation in AZ, CO, IN, LA, NJ, TN, VA, and WV.

In stock legal and regulatory news, Reuters reported Friday that the SEC has begun an investigation into ILMN’s $7.1 billion acquisition of Grail (a cancer detection test kit maker) in 2021.  Details are not available yet, but the investigation seems to be related to certain management statements and compensation connected to the deal.  (The EU fined ILMN $476 million in July for closing the deal without EU approval.)  Elsewhere, a US District judge dismissed a lawsuit against SBUX on Friday.  The Chief judge of the district called it a frivolous suit by a conservative activist group who were challenging SBUX’s diversity, equity, and inclusion policies.  The judge said the group’s statements in filings clearly show the suit was meant to make political points rather than address any losses from the group’s $6,000 of SBUX stock.  Meanwhile, the US Dept. of Transportation and China have agreed to double the number of flights between the two countries.  UAL, AAL, DAL, CEA, ZNH, and AIRYY are the airlines currently offering flights between the two destinations.

Overnight, Asian stocks leaned heavily toward the red with only two of the region’s 12 exchanges hanging onto the green.  Meanwhile, Hong Kong (-1.58%), Singapore (-1.41%), Japan _1.27%), and Taiwan (-1.25%) led the region lower.  In Europe, we see a much more bullish picture taking shape with nine of the 15 bourses in the green at midday.  The FTSE (-0.31%) lags while the CAC (+0.22%), and DAX (+0.44%) lead the region higher.  However, it should be noted that even with the Russian Ruble falling to a 17-month low against the Dollar, the Russian exchange is up 2.14% in early afternoon trade.  In the US, as of 7:30 am, Futures are pointing toward a modestly green start to the week. The DIA implies a +0.20% open, the SPY is implying a +0.21% open, and the QQQ implies a +0.30% open at this hour.  At the same time, 10-year bond yields have climbed to 4.148% and Oil (WTI) is down four-tenths of a percent to $82.84 per barrel in early trading.

There is no major economics news scheduled for Monday.  The major earnings reports scheduled for before the opening bell include ERJ and JKS.  Then, after the close, GSM and SU report.

In economic news later this week, on Tuesday, we get July Retail Sales, July Export Price Index, July Import Price Index, NY Fed Empire State Mfg. Index, June Business Inventories, June Retail Inventories, June TIC Net Long-Term Transactions, and API Weekly Crude Oil Stock Report.  Fed member Kashkari also speaks.  Then Wednesday, July Building Permits, July Housing Starts, July Industrial Production, EIA Crude Oil Inventories, and FOMC Meeting Minutes are reported.  On Thursday, we get Weekly Initial Jobless Claims, Philly Fed Mfg. Index, Philly Fed Mfg. Employment, and the Fed Balance Sheet.  Finally, on Friday, there is no significant economic news scheduled.

In terms of earnings reports, on Tuesday we hear from CAH, ESLT, HD, HIS, SE, TME, A, COHR, HRB, JKHY, NU, and LRN.  Then Wednesday, EAT, JD, PDGC, TGT, TCEHY, TJX, ZIM, AVT, SQM, CSCO, KE, STNE, and SNPS reports.  On Thursday, we hear from ARCO, BILI, DOLE, NICE, TPR, WMT, AMAT, FTCH, GLOB, KEYS, and ROST.  Finally, on Friday, DE, EL, VIPS, XPEV, and PANW report.

In miscellaneous news, the Fed reported Friday that US large bank deposits rose by $17.60 billion to the $17.36 trillion level in the week ended August 2.  At the same time, US commercial bank lending also rose by $9.3 billion to $12.132 trillion (adjusted) during the same week.  Elsewhere, Refinitiv Lipper reported that investors withdrew $14.96 billion from US equity funds in the week ending August 9.  This was the biggest outflow in seven weeks. Finally, GS economists are now predicting Fed rate cuts starting in Q2 of 2024.

In late-breaking news, on Sunday X announced it has rejected a $7.3 billion unsolicited buyout offer from rival CLF. (This would have been a 43% premium over Friday’s closing price for X.) The X management said it has rejected the offer because CLF was trying to force X to make its decision without doing enough due diligence.  However, X said it is reviewing its strategic alternatives after receiving the offer.  (Bear in mind that any deal is likely to face regulatory pushback since CLF is already the largest steelmaker in the US while X is also in the top four steel producers.)

So far this morning, JKS reported beats on both the revenue and earnings lines.  (ERJ has not yet reported.)

With that background, it looks like premarket action started higher but is indecisive at best since then. The SPY did try to retest its T-line (8ema) from below before backing down. Meanwhile, the DIA remains above its T-line, but close to it, and is printing an indecisive early-session candle. At the same time, QQQ opened up its premarket session higher, testing its 50sma from below, but has faded since then. So, the short-term trend is still bearish and the long-term trend remains bullish, although it is starting to be pushed. As far as extension goes, all of the major index ETFs are close to the T-line and the T2122 indicator remains in its mid-range. So, once again both sides of the market have plenty of room to run…if they can find momentum.

As always, be deliberate and disciplined…but don’t be stubborn. If you have a loss, admit you were wrong and take that loss before it gets out of hand. And when the price does move in your direction, always move your stops in your favor and take a little profit off the table. You have to keep the “Legend of the man in the green bathrobe” in mind. In a winning situation, it is NOT HOUSE MONEY you’re betting, it’s YOUR MONEY! There is absolutely no reason to keep raising your bet (risk) size just because you’ve had a win. Finally, remember that trading is not a hobby. It’s a job. The money is real and so is the risk. So, treat it that way. Do the work and follow the process. Stick to your trading rules, trade with the trend, and take those profits when you have them. Do the work!

See you in the trading room.

Ed

🎯 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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