Markets opened lower on Tuesday in response to a higher-than-expected Employment Cost Index.  SPY gapped down 0.28%, DIA gapped down 0.33%, and QQQ gapped 0.41% lower.  From there, all three major index ETFs meandered sideways (perhaps lulling the Bulls to sleep) until 10:50 a.m.  At that point, all three began a wavy selloff that lasted the rest of the day and accelerated the last 10 minutes.  (In particular, QQQ had a massive move that last 10 minutes.)  This action gave us large, black-bodied candles with small upper wicks and which closed on the lows in all three major index ETFs.  All three could also be called Evening Star signals if you are a little lenient on the first candle of that 3-candle signal.  All three also crossed back below their T-line (8ema), with DIA even coming into the range of the lows from roughly two weeks ago.

On the day, all 10 sectors were in the red with Energy (-2.92%) far out front leading the rest of the market lower.  Healthcare (-0.28%) held up far better than the other sectors but obviously was also in the red.  Meanwhile, SPY lost 1.58%, DIA lost 1.48%, and QQQ lost 1.89%.  VXX gained more than three percent to close at 13.61 and T2122 plummeted back down into the oversold area at 15.51.  10-year bond yields spiked to 4.682% and Oil (WTI) dropped 1.20% to close at $81.64 per barrel.  So, Tuesday was clearly a day for the Bears.  A gap lower led to treading water for almost 90 minutes but then the selling kicked in and did not stop the rest of the day.  All this happened on a bit less than average volume in all three major index ETFs.

The major economic news scheduled for Tuesday included the Q1 Employment Cost Index, which, as said above, came in higher than expected at +1.2% (compared to a forecast of +1.0% and a Q4 reading of +0.9%).  Later, April Chicago PMI was lower than predicted at 37.9 (versus a 44.9 forecast and a 41.4 March value).  Then, Conf. Board Consumer Confidence also came in a bit low at 97.0 (compared to a predicted 104.0 and a previous reading of 103.1).  After the close, API Weekly Crude Oil Stocks showed a n unexpected 4.906-million-barrel inventory build (versus a forecast 1.500-million-barrel drawdown and the prior week’s 3.230-million-barrel drawdown). 

After the close, AMD, AMZN, ASH, AX, BXP, CACC, FANG, EXR, FBIN, INVH, LFUS, LPLA, MCY, MDLZ, OI, PINS, PK, QUAD, SYK, UMBF, and UNM all reported beats on both the revenue and earnings lines.  Meanwhile, AMCR, CC, CLX, EIX, EQH, HI, MATX, NGD, RNR, RSG, SWKS, SON, and SMCI missed on revenue while beating on earnings.  On the other side, CHK, PRU, and PSA beat on revenue while missing on earnings.  However, CZR, LEG, LUMN, OKE, RYI, SBUX, and WERN missed on both the top and bottom lines.  It is worth noting that AMZN and SWKS lowered their guidance.  At the same time, PINS and SMCI raised their forward guidance.  It is also worth noting that PSNY announced it will delay its earnings reports for a second time.

In stock news, on Tuesday, TLSA announced plans to layoff more of the recently announced 10,000 workers.  This time, CEO Musk fired two senior executives and all of the 500 people reporting up through one of them (the entire “Supercharger group”).  The other senior executive fired was the Director of the New Vehicles program.  At the same time, WMT rolled out a new “house” grocery brand (BetterGoods) while also saying it will close all of its health-care clinics and close its telehealth operation as it gets out of the healthcare field.  Later, CMCSA announced it will raise prices on it Peacock streaming service by $2/month ahead of what it expects to be a large audience draw, the Summer Olympics.  Meanwhile, GOOGL agreed to pay NWSA $5 million to $6 million annually to develop new AI-related content and products with the company (owner of the Wall Street Journal).  Later, Reuters reported that sources tell it that the PARA ousting (“stepping down”) of former CEO Bakish will cost the company “North of $50 million.”

In stock legal and governmental news, on Tuesday BRKB subsidiary PacifiCorp was hit with $30 billion in new claims (from 1,000 plaintiffs) for damages caused by 2020 wildfires started by the utility’s equipment.  (This is four times the amount the company had projected.)  This is on top of the $735 million that PacifiCorp had paid in claims up through February and a $90 million judgement the company lost to 17 victims in a case last year for gross negligence during a windstorm.  Later, the FTC said it will crack down on what it is calling “junk patents” associated with 20 brand-name drugs.  These “junk patents” are minor variations from existing patents that extend price protections.  (NVO’s wildly popular weight loss drugs Ozempic and Wegovy are the major drugs impacted, but they are protected by “legitimate” patents.) 

Elsewhere, the US Dept. of Justice moved to reclassify marijuana out of “schedule three.”  That drug is currently classified the same as heroin and LSD.  The new classification would put it in a group with ketamine and Tylenol with codeine.  Cannabis stocks like TLRY, TCNNF, ACB, CGC, FLGC, and other soared on the news.  Later, the 50 GOOGL workers fired for protesting the company cloud computing contract with the Israeli military and other government departments filed a complaint with the NRLB alleging that the firing was illegal.  At the same time, IBM won its appeal of a $1.6 billion judgement from a suit filed by BMC Software (owned by KKR).  The case will return to the district court after being instructed on how to determine liability.  Later, the first trial over GSK’s drug Zantac potentially causing cancer began in Chicago with jury selection. In late-breaking news this morning, JNJ announced it had reached a $6.5 billion settlement ending 99% of the tens of thousands of “talc-caused cancer” lawsuits the company had pending.

Overnight, Asian markets were mostly in the red with only four of 12 exchanges green.  Australia (-1.23%), Shenzhen (-0.90%), and New Zealand (-0.75%) led the region lower.  Meanwhile, in Europe, we see a sea of red with two bourses, led by Norway (+0.24%), in the green at midday.  The CAC (-0.99%), DAX (-1.03%), and FTSE (+0.02%) lead the region, as always, on volume in early afternoon trade.  In the US, as of 7:30 a.m., Futures are pointing to a red start to the day.  The DIA implies a -0.23% open, the SPY is implying a -0.40% open, and the QQQ implies a -0.65% open at this hour.  At the same time, 10-year bond yields are at 4.684% and Oil (WTI) is down 1.46% to $80.72 per barrel in early trading.

The major economic news scheduled for Wednesday includes the ADP Nonfarm Employment Change (8:15 a.m.), April S&P Global Mfg. PMI (9:45 a.m.), March Construction Spending, April ISM Mfg. Employment, April ISM Mfg. PMI, April ISM Mfg. Price Index, and March JOLTs Job Openings (all at 10 a.m.), EIA Weekly Crude Oil Inventories (10:30 a.m.), FOMC Rate Decision and FOMC Statement (both at 2 p.m.), and Fed Chair Press Conference (2:30 p.m.).  The major earnings reports scheduled for before the open include AER, ARCC, ADP, AVA, AVT, AXTA, GOLD, BLCO, CG, CRS, CDW, COR, CVE, CENX, GIB, CHEF, CLH, CNDT, CVS, DD, ENTG, ESAB, EL, EEFT, FLEX, FTS, GRMN, GTES, GNRC, GSK, GPN, IDXX, NSP, JCI, KKR, KHC, DRS, LTH, MAR, MA, NBIX, NCLH, OGE, PSN, PFE, PPL, SMG, SLGN, SR, STGW, TRN, TTMI, UTHR, VRSK, WEC, WLK, and YUM.  Then, after the close, ACHC, AFL, ALB, ALL, AFG, AIG, AWK, ANSS, CAR, AXS, BALY, BBSI, BZH, BV, CHRW, CWH, CVNA, CF, CMPR, CTSH, CODI, CTVA, CW, DLX, DVN, DASH, EBAY, ENSG, NVST, ETSY, ES, EXPI, FLSR, FNV, GFL, GIL, THG, HLF, HST, JAZZ, KMPR, MRO, MKL, MET, MGM, MAA, MOS, MUSA, MYRG, PGRE, PTEN, PAYC, CNXN, PTC, QRVO, QCOM, RHP, SIGI, SCI, SFM, SUM, TTEK, TWI, TROX, UGI, VMI, VTR, VICI, ZG, and Z report.  

In economic news later this week, on Thursday, we get March Exports, March Imports, March Trade Balance, Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, Q1 Nonfarm Productivity, Q1 Unit Labor Cost, March Factory Orders, and Fed Balance Sheet.  Finally, on Friday, April Avg. Hourly Earnings, April Nonfarm Payrolls, April Private Nonfarm Payrolls, April Participation Rate, April Unemployment Rate, April S&P Global Services PMI, April S&P Global Composite PMI, ISM Non-Mfg. Employment, ISM Non-Mfg. PMI, ISM Non-Mfg. PMI Price Index, and Fed Member Williams speaks.

In terms of earnings reports later this week, on Thursday, we hear from AGCO, ATUS, AME, APA, APG, APO, APTV, MT, ARES, ARW, BHC, BAX, BCE, BDX, BDC, BWA, BTSG, BRKR, CNQ, CAH, CHD, CI, CNK, CNHI, CIGI, COP, CMI, XRAY, DBD, D, DRVN, DNB, ENOV, NVRI, EXC, ULCC, HWM, HII, NSIT, ICE, IQV, IRM, ITRI, ITT, JHG, K, KTB, LNC, LIN, MCO, MUR, NFG, NVO, ONEW, OGN, PH, PATK, PBF, BTU, PTON, PENN, PNW, PBI, PWR, REGN, RXO, SABR, SNDR, SEE, SHEL, SO, SWK, TRGP, TFX, TRI, UPBD, VAL, VSTS, VMC, W, WEN, WCC, WRK, XYL, ZBH, ZTS, AES, ALHC, AEE, AMGN, AAPL, ACA, BECN, SQ, BKNG, BFAM, CIVI, COIN, ED, CTRA, DVA, DLR, DKNG, EOG, WTRG, EXPE, FND, FTNT, GDDY, HOLX, HUN, ILMN, IR, LYV, MTZ, MODV, MNST, MSI, ZEUS, OTEX, OPEN, OEC, PTVE, PXD, POST, RGA, REZI, RKT, RYAN, SEM, SM, SWN, TXRH, X, and WSC.  Finally, on Friday, ADNT, AXL, AMRX, BEPC, BEP, CBOE, CBRE, GTLS, LNG, CRBG, FLR, FYBR, GPRE, HSY, KOP, MGA, NMRK, NVT, PAA, PAGP, TRP, TAC, TRMB, and XPO report.

So far this morning, AER, ARCC, ADP, AXTA, BIP, CG, GIB, CHEF, DD, ENTG, ESAB, EL, EEFT, GRMN, GNRC, GSK, GPN, KKR, LTH, PSN, PFE, SMG, SHOO, TRN, UTHR, VRSK, and WLK all reported beats on both the revenue and earnings lines.  Meanwhile, GOLD, COR, CVE, FTS, IDXX, JCI, KHC, NYCB, SLGN, and WEC all missed on revenue while beating on earnings.  On the other side, AVA, BLCO, MAR, SITE, and SR beat on revenue while missing on earnings.  However, CDW, CVS, NBIX, OGE, and YUM missed on both the top and bottom lines.  It is worth noting that AXTA raised its guidance while CVS and ENTG lowered forward guidance.

In miscellaneous news, on Tuesday, Oil (WTI) prices closed lower on record US oil production.  US crude output popped by the most since October 2021, reaching 13.15 million barrels per day in February (up from 12.58 million barrels per day in January).  In other oil-related news, Israeli PM Netanyahu vowed this military will continue attacks on Rafah (the last standing city in the Gaza strip) regardless of whether a cease-fire deal is reached or not.  (I’m just a country boy, but a ceasefire without a halt in firing doesn’t seem like much of a ceasefire.)  Netanyahu also vowed to invade Rafa to “finish the job” sooner or later.  (It may be worth noting that Israel has been building tents to house 500k in the desert outside Rafa, presumably as a relocation site for during an invasion.)  In other energy news, the G7 Energy Ministers agreed Tuesday to halt the use of coal in power generation in the first half of the 2030s (10 years).  (In the US, about 15.3% of electricity is currently generated by burning coal.  For the overall G7, 15% of electricity is generated from coal today.)

In other news, the US Labor Dept. urged all western companies to exit from China’s Xinjiang region (it’s a province-sized area but does not have province status).  The reason is that the Labor Dept. says China continues to operate internment camps and forced labor camps in that region focused largely on Uyghurs and other Muslim minority groups.  China made it illegal to conduct human rights audits in that region, although they deny all allegations of abuses or forced labor.  Late in the day, the Insurance Institute for Highway Safety specifically cited AMZN and FDX as needing to implement more safety technologies in their delivery vans.  The group said delivery vans were involved in 935,000 police-reported crashes in 2023, including 98,000 crashes that involved injuries.  The group (funded by auto insurers) said many of the crashes could have been prevented by technologies available in cars like “automated emergency braking” and “collision warning technologies.”

With that background, it looks as if the Bears are looking to follow through on Tuesday’s move, at least early. All three major index ETFs gapped down to start the premarket but have put in indecisive Spinning Top type candles since then. The QQQ in particular has pulled away below its T-line, perhaps on AMD which reported in line and moved guidance as expected but that was not enough for overnight markets. In fact, all three major index ETFs are now below their T-line (8ema). So, the short-term trend is now bearish. Meanwhile, the mid-term remains bearish. The longer-term market remains Bullish but under pressure. In terms of extension, the QQQ is the only one of the major index ETFs that could be called too far extended below their T-line. However, the T2122 indicator is now in the upper end of its oversold range. So, both sides have room to run if they can gain the momentum to do so but the Bulls have much more slack to work with. In terms of those 10 big dog tickers, seven of the 10 are in the red with AMD (-6.38%) out front leading the way lower. Keep in mind that today is a Fed day. So, after the open, we may see a “dead money” market until we get volatility about 2 p.m. and then a second jolt of volatility following after 2:30 p.m.

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 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 gains are 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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