As we begin a new quarter, inflation remains unacceptably high, and everyone wonders what will break first. The economy or the FOMC’s hawkish stance? Today the FOMC has called an emergency meeting. One has to wonder if we are again on the brink of a banking or liquidity crisis. Stay alert for price gyrations as news comes out. The official kick-off of 4th quarter earnings is only 10-days away, so keep an eye out for possible downgrades and warnings with the consumer-facing some difficult decisions as prices continue to rise. The overnight reversal and intraday whipsaws will likely continue, so plan your risk carefully.
Asian markets closed mostly lower, with oil rising and the Hang Seng falling to its lowest level in 11 years. European markets trade primarily lower this morning as Credit Suisse declines sharply. However, as I write this report, the U.S. futures have recovered from overnight lows, pointing to another gap as another premarket pump hopes to inspire the bulls. Watch for the possible pop and drop with so much price resistance above despite the short-term oversold condition.
Economic Calendar
Earnings Calendar
There are no confirmed earnings reports for today.
News & Technicals’
Shares of Credit Suisse plunged nearly 10% in Europe’s morning session after the Financial Times reported that the Swiss bank’s executives are talking with its major investors to reassure them amid rising concerns over the Swiss lender’s financial health. Spreads of the bank’s credit default swaps (CDS), which provide investors with protection against financial risks such as default, rose sharply Friday. They followed reports the Swiss lender is looking to raise capital, citing a memo from its Chief Executive Ulrich Koerner. The U.K government reverses planned tax cuts due to currency fluctuations. It represents a major and humiliating U-turn for new Prime Minister Liz Truss, who was insisting that she was “absolutely committed” to the cut as recently as Sunday. She also revealed the decision was taken by Kwarteng and had not been announced to her whole cabinet.
Markets entered a dangerous new phase in the past week, in which statistically unusual moves across asset classes are commonplace. According to Mark Connors, former Credit Suisse global head of risk advisory, surging volatility in what are supposed to be among the world’s safest fixed income instruments could disrupt the financial system’s plumbing. He said that could force the Fed to prop up the Treasury market. Doing so will likely force the Fed to halt its quantitative tightening program ahead of schedule. The other worry is that the whipsawing markets will expose the weak hands of asset managers, hedge funds, and other players who may have been overleveraged or taken on unwise risks. As a result, margin calls and forced liquidations could further roil markets.
Monthly consumer prices grew by 3.08% and annually by 83.45%. The domestic producer price index was up 4.78% from the previous month and a whopping 151.5% year on year. Inflation for the country of 84 million people has soared in the last two years, particularly as Turkish President Recep Tayyip Erdogan insists on continuing to cut interest rates rather than raise them — deviating from the conventional way of controlling inflation. “My biggest battle is against interest. My biggest enemy is interest. We lowered the interest rate to 12%. Is that enough? It is not enough. This needs to come down further,” Erdogan said during an event in late September.
As we begin a new quarter, indexes remain in a short-term oversold condition, and as of the Friday close, the bears left all but IWM at fresh 2022 lows. Moreover, with the official start of the 4th quarter earnings 10-days away and the mid-term election only 35 days, there is a lot of uncertainty about what comes next. Adding to the concern, the FOMC has called an emergency meeting for today. Could we be on the brink of another banking or liquidity crisis? China is also making concerning moves that may soon trigger a selloff in the dollar to stabilize the Yuan. With so much uncertainty, traders must be ready for just about anything. As a result, overnight reversals and news-inspired intraday reversals are likely to continue. Watch for reports of earnings downgrades and warnings from companies of potential top or bottom line misses as consumers face some complex decisions heading into the winter. September was challenging, but we have not seen full-on panic, so perhaps October will bring us some selling relief.
Stocks gapped down very modestly (0.25% – 0.35%) Friday and followed through for 5 minutes. However, then volatility stepped in to rally us to the highs of the day by 11:15 am. At that point, the market reversed again as the bears led a selloff the rest of the day. This took us to a series of new lows at about 2:30 pm and took us out on the lows. This action has left us with black-bodied, indecisive, inverted hammer-type candles in all 3 major indices. It is also worth noting that all 3 indices are again getting extended from their T-lines.
On the day, 9 of 10 sectors are in the green with Basic Materials (+0.15%) as the only sector able to hold onto a gain and Consumer Cyclical (-1.63%) leading the charge lower. At the same time, SPY was down 1.55%, DIA was down 1.70%, and QQQ was down 1.70%. The VXX gained almost 3% to 21.21 and T2122 has actually risen to 5.06 (which is still deep in the oversold territory). 10-year bond yields are down, but way up off the early morning lows to 3.821%, and Oil (WTI) is down almost 2% to $79.61/barrel. Overall, it was a very volatile and bearish day.
So, with inflation high and the Fed on a super-sized hike cycle (while saying they are not going to let up until inflation is clearly headed to 2%), Mr. Market is not a happy camper. That brought us to the end of a rough week, a brutal month, and a tough quarter. On the week, SPY lost 2.93%, DIA lost 2.89%, and QQQ lost 2.99%. For the month, SPY lost 9.62%, DIA lost 8.98%, and QQQ lost 10.70%. For the quarter, SPY lost 5.32%, DIA lost 6.67%, and QQQ lost 4.65%.
In economic news, the August Month-on-Month PCE Price Index came in at +4.9%, which was above the +4.7% forecast (and the previous reading of 4.7%). In addition, the August Mon-on-Month Personal Spending was up +0.4% (compared to a +0.2% forecast and previous reading of -0.2%). (It is worth noting that core PCE is the Fed’s favorite gauge of inflation and what its 2% target is set against.) Meanwhile, August Year-on-Year PCE Price Index came in a +6.2%, which was better than the previous reading of +6.4%. Then the Chicago PMI came in at 45.7 (versus a 51.8 forecast) and Michigan Consumer Sentiment came in at 58.6 (versus a 59.5 forecast and a previous reading of 59.5). So, that information tells us inflation is up, business is contracting, and the general public is pessimistic.
Speaking of the Fed, Vice Chair Brainard added her full endorsement of the current “higher rates for longer” approach the Fed is undertaking. She went on to say “Monetary policy will need to be restrictive for some time to have confidence that inflation is moving back toward the target.” Earlier, Richmond Fed President Barkin had said there were some promising signs of inflation progress. However, he said that “festering inflation” remains a bigger threat to the economy than us (the Fed) over-correcting.” Earlier, Fed Governor Bowman (a Republican) suggested averaging bank stress tests to determine bank capital requirements (as opposed to setting them every time they are tested). Her generally suggested approach was toward lighter regulation of banks. This stands in stark contrast to Fed Bank Supervisor Barr (Democrat), who has called for more scrutiny of bank risk-taking given the history of financial crises that banks have led the economy into in the past.
In stock news, on Friday, UAL announced it will cancel service from JFK airport as of October because the FAA will not give them additional flights out of that airport. (UAL had only resumed service from JFK in 2021.) Meanwhile, EU regulators announced they would publish a decision on whether to allow (or what mandated stipulations must be met to allow) the MSFT acquisition of ATVI by November 8. Elsewhere, after hours, SWK announced it is cutting 1,000 finance jobs. (It makes you wonder either who will do the books…or why they had so many since they only have 71,000 total employees.) On Sunday, TSLA reported that it delivered 343k new vehicles in Q3 which was about 20k fewer vehicles than analysts had been expecting. However, it was also a 35% increase over Q3 2021. TSLA blamed employee turnover in management positions (after Musk’s “work at least 40 hours per week in the office” decree) and logistics snarls for the shortfall.
After the close, NKE reported beating on both the revenue and earnings lines. However, MU missed on revenue while beating on earnings. MU also lowered its forward guidance. It is also worth noting that despite beating on both lines, NKE reported that they have way too much inventory (44% globally and 65% too much in North America) across multiple seasons of apparel) due to severe supply chain problems. The company said it will be forced to aggressively discount in order to liquidate the excess inventory. Later this morning, CCL reports (9:15 am).
Overnight, Asian markets were mostly in the red. Japan (+1.07%) was a clear outlier to the upside with only one other exchange managing any green. However, Thailand (-1.98%), Shenzhen (-1.29%), and India (-1.21%) led the region lower. Meanwhile, in Europe, we see a similar story taking shape at midday. Russia (+3.43%), Norway (+1.34%), and Portugal (+0.96%) are the only green to be found on the continent. At the same time, the FTSE (-0.56%), DAX (-0.59%), and CAC (-0.88%) are leading the region lower in early afternoon trade. As of 7:15 am, US Futures are pointing toward a mixed start to the day. The DIA implies a +0.57% open, the SPY is implying a +0.42% open, and the QQQ implies a +0.04% open at this hour. At the same time, 10-year bond yields are down to 3.75% and Oil (WTI) is up 4.26% to $82.88/barrel in early trading.
The major economic news events scheduled for Monday is limited to September Mfg. PMI (9:45 am) and Sept. ISM Mfg. PMI (10 am). There are no major earnings reports scheduled for the day.
In economic news later this week, on Tuesday, we get August Factory Orders, August JOLTs, and API Weekly Crude Oil Stocks. Then Wednesday, the Sept. ADP Nonfarm Employment Change, August Imports/Exports, August Trade Balance, Sept. Services PMI, Sept. ISM Non-Mfg. PMI, and EIA Weekly Crude Oil Inventories are reported. Thursday, we get the Weekly Initial Jobless Claims. Finally, on Friday, Sept. Avg. Hourly Earnings, Sept. Payrolls, Sept. Participation Rate, and Sept. Unemployment Rate are reported.
In earnings reports later this week, on Tuesday we hear from AYI. Then on Wednesday, HELE, LW, and RPM report. Thursday, we hear from CAG, STZ, MKC, and LEVI. Finally, on Friday, there are no major earnings reports scheduled.
In late-breaking news from across the pond, the new government of UK PM Truss has scrapped its radical shift to large-scale tax cuts for top-end tax rates and “trickle down” economics. It seems the new PM (who even on Sunday had said she was absolutely committed to her plan) was told to drop it or get out by her fellow Torry party ministers amidst a public backlash, cost of living protests, and market rejection of the plan. The British pound briefly jumped on that news. Elsewhere, Reuters reports that CS is in bad financial health and is seeking to raise capital saw the stock drop 10% at one point during the premarket. Finally, Oil (WTI and Brent) is challenging its downtrend with a major gap this morning. This seems to be driven by rumors coming out of OPEC+ that point to the group announcing major production cuts at their Wednesday meeting.
With this backdrop, and as we start the fourth quarter, markets seem headed toward an inside candle at the open in the large-cap indices and a slight continuation of the down move in the tech-heavy QQQ. Once again, this is not showing a major change in sentiment. The trend remains strongly bearish across the market, but last week’s volatile chop may be continuing. Expect more volatility and even though everything looks bearish early, do not forget that we still need over-extension relief.
Keep in mind that trading is our job. It’s not a hobby. So, treat it that way. Do the work and follow the process. Stick with your trading rules, trade with the trend, and take those profits when you have them. Demonstrate patience and wait for confirmation. Don’t be stubborn. If you have a loss, just admit you were wrong, respect your stop, and take the loss before it grows. When price does move in your direction, always move your stops in your favor (remember the “Legend of the man in the green bathrobe“…it is NOT HOUSE MONEY, it’s all OUR MONEY!). Lastly, remember that you get rich slowly and steadily in Trading…not by striking it rich on one or two trades. So, give up that lottery ticket mentality.
See you in the trading room.
Ed
Swing Trade Ideas for your consideration and watchlist: OXY, VLO, MPC, META, NFLX, BE, EGO, JBHT, TWTR. 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.
🎯 DickCarp: 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.
Hit and Run Candlesticks / Road To Wealth Youtube videos
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.
DISCLAIMER: Investing / Trading involves significant financial risk and is not suitable for everyone. No communication from Hit and Run Candlesticks Inc, its affiliates or representatives is not financial or trading advice. All information provided by Hit and Run Candlesticks Inc, its affiliates and representatives are intended for educational purposes only. You are advised to test any new trading approach before implementing it. Past performance does not guarantee future results. Terms of Service
A negative GDP, hotter than expected jobs market, layoff reports, company downgrades, and currency fluctuations are just some of the issues creating the wide-ranging chop in the indexes. This morning we wait for the FOMC favored inflation report, the Core PCE, after learning the Eurozone hit a new 10% inflation record. Though we are oversold in the short-term and should watch for a possible relief rally, the uncertainty of the path forward will make it difficult for the bulls to find much inspiration and gives the bears very little reason to back off. Expect the challenging price action to continue in the days ahead with the 4th quarter earnings season rapidly approaching.
Asian markets closed mostly lower while we slept, reacting to the SP-500 new year low. However, with European inflation soaring to 10% and the BOE back on the QE train, the eurozone market see modest gains across the board. U.S. futures also point to a bullish open as we wait for the Personal Income and Outlays report. Plan for price volatility and watch out for those big point intraday whipsaws in this wide-ranging chop zone.
Economic Calendar
Earnings Calendar
W have a very light day on the Friday earnings calendar with only one CCL with any noteworthiness.
News & Technicals’
Eurozone inflation spikes to a record 10%, adding pressure on the ECB to act. Moreover, the reading showed price increases broadening out from volatile food and energy prices into nearly all segments of the 19-member bloc’s economy. Energy prices rose 40.8% year-on-year, up from 38.6% in August, followed by food, alcohol, and tobacco at 11.8%, up from 10.6% last month. In addition, federal student loan borrowers whose loans are not held by the U.S. Department of Education will no longer be able to consolidate for forgiveness as of Thursday. Nike’s first fiscal quarter revenue was up 4% to $12.69 billion, beating estimates. However, Nike’s net income was down 22% to $1.5 billion. The sneaker giant said inventory on its balance sheet was up 44% to $9.7 billion, driven by ongoing supply chain issues.
British Prime Minister Liz Truss and Finance Minister Kwasi Kwarteng met the U.K.’s independent monetary watchdog for talks on Friday. The talks followed a turbulent week for the U.K. economy, including a slump in the pound and gilt yields soaring. The Senate voted 72 to 25 to pass a funding bill to avert a federal shutdown and fund government operations through mid-December. The bill now goes to the House, where it’s expected to pass later this week. It includes an additional $12 billion in aid for Ukraine, $1 billion in heating and utility assistance, and emergency aid for natural disasters.
A negative GDP reading and hotter-than-expected jobless claims quickly reversed the Wednesday rally as the wide-ranging chop filled with uncertainty plagues the indexes. While the FOMC works to reduce inflation, Congress continues to burrow and spend like drunken sailors. This morning Europe reported a new record high of 10% inflation as we wait here in the U.S. for the FOMC favorite indicator, the Core PCE numbers, before the bell. The downgrade of APPL put a lot of pressure on Nasdaq, and I suspect we will see more companies downgrades as we head for the 4th quarter earnings season. Though we remain oversold in the short-term, suggesting a relief rally is due to the pressure in bond yield, and currency fluctuations will likely keep volatility challenging in the days and weeks to come.
Markets gapped lower at the open Thursday (0.65% in the DIA, 1% in the SPY, and 1.25% in the QQQ). All 3 major indices made a strong follow-through move for the first hour. Then we saw a sideways meander until Noon. However, the Bears stepped back in at that point to continue the wavy, gradual ride lower until 2:30 pm when the bulls tried to form a bottom. From there we saw a sideways grind that bobbed along in a channel for the last hour before slightly breaking back out to the upside. This action has given us gap-down, black candles (with a large lower wick).
On the day, Utilities (-3.71%) and Consumer Cyclical (-3.37%) led the charge lower. (Utilities is a very odd leader to the downside as one would think that sector would be a destination for a flight to safety.) Meanwhile, Energy (-0.59%) was the laggard in the decline. The SPY has lost 2.08%, DIA lost 1.52% and QQQ lost 2.81%. The VXX was up almost 3% to 20.62 and T2122 is again deeply oversold at 3.22. 10-year bond yields are back down to 3.778% and Oil (WTI) is down three-quarters of a percent to $81.55/barrel. Overall, just a bearish day in a choppy week all in the middle of a strong bearish trend.
In economic news, the Q2 GDP (2nd revision) came in exactly as expected at -0.6% (compared to Q1 -1.6%). However, the Q2 Price index was revised up to 9.1% (higher than the 8.9% expected this revision) and the 8.3% in Q1. The Weekly Initial Jobless Claims also came in better than expected at 193k (versus 215k forecast and 209k last week). This all means the economy continues to be stronger than expected and inflation remains undaunted by the Fed’s 3 “super-sized” rate hikes this year.
Speaking of the Fed, in Fed news, St. Louis Fed President Bullard said Thursday that the Us is mostly insulated from the turmoil in UK stock and currency markets. The mixed signals the BoE and UK government are sending are essentially a UK problem that will only effect US markets on the edges according to Bullard. Meanwhile, Cleveland Fed President Mester reiterated that “at some point” the Fed will start to consider (economy) growth prospects against inflation. However, she said this will not be until inflation is clearly heading back down toward 2%. Then at the end of the day, Sand Francisco Fed President Daly said the Fed does not need to trigger a recession in order to take the heat out of high inflation. She went on to say that slowing down growth was the right path, but that inducing a deep recession was not necessary.
In stock news, after the close META announced it has paused hiring and warned that it will be restructuring in the face of an uncertain economic outlook. It was also reported that BCS was fined $361 million by the SEC over internal control failures related to the unregistered sale of a massive and unprecedented quantity of securities. Elsewhere, the FTC sued two top pesticide makers for price-fixing through distributors to keep the prices farmers pay artificially high for generic pesticides, herbicides, and fungicides. Privately-owned Syngenta was one and CVTA was the other and the FTC estimates the collusion cost farmers 20% more for the company’s generic products every year. Reuters reports that a senior supply chain exec at AAPL is leaving the company after making an inappropriate remark about fondling women in a TikTik video. Meanwhile, the FCC has asked for more information regarding the sale of TGNA (TV station operator) to hedge fund Standard General (which already owns a number of TV stations). Finally, AMZN (and 5 large book publishers) won a dismissal of two antitrust lawsuits that had accused them of price-fixing on books and e-books.
In energy news, OPEC+ have begun discussions ahead of their production level announcement at the Oct. 5 meeting. Reuters reports that some members question the logic of doing a major production cut (as posed by some) to maintain high oil prices when Russia continues to sell oil at near full capacity (at discounted prices) to major importers China, India, and Turkey. Elsewhere, the 10% of US oil production that was shut down due to Hurricane Ian is expected to reopen in the next day or so after the storm missed the critical energy facilities in the Gulf and in Florida. Meanwhile, in Florida itself, one in four gas stations are out of fuel Thursday afternoon. However, the KMI pipeline and CVX fuel terminal are expected to resume operation Friday. And nearly 200 fuel tanker trucks are already on the road heading toward Southern Florida where the shortages are worse.
After the close, NKE reported beating on both the revenue and earnings lines. However, MU missed on revenue while beating on earnings. MU also lowered its forward guidance. It is also worth noting that despite beating on both lines, NKE reported that they have way too much inventory (44% globally and 65% too much in North America) across multiple seasons of apparel) due to severe supply chain problems. The company said it will be forced to aggressively discount in order to liquidate the excess inventory. Later this morning, CCL reports (9:15 am).
Overnight, Asian markets were mostly in the red. Japan (-1.83%), Shenzhen (-1.29%), and Australia (-1.23%) led the way lower. Meanwhile, India (+1.64%), Singapore (+0.49%), and Hong Kong (+0.33%) were in the green. In Europe, with the exception of Russia (-1.41%), we see green across the board at mid-day. The FTSE (+0.27%), DAX (+0.14%), and CAC (+0.68%) are leading the region higher with Norway (+2.10%) being an outlier to the upside in early afternoon trade. As of 7:30 am, US Futures are pointing toward a modestly green start to the day. The DIA implies a +0.24% open, the SPY is implying a +0.36% open, and the QQQ implies a +0.27% open at this hour. At the same time, 10-year bond yields are back down to 3.698% and Oil (WTI) is up a third of a percent to $81.42/barrel in early trading.
The major economic news events scheduled for Friday include August PCE Price Index and August Personal Spending (both at 8:30 am), Chicago PMI (9:45 am), Michigan Consumer Sentiment (10 am), and several Fed Speakers (Mester at 9 am, Williams at 9 am, Bowman at 11 am, and Williams at 4:15 pm). The major earnings reports scheduled for the day are limited to CCL before the open. There are no earnings scheduled for after the close.
In late-breaking news from across the pond, the British pound has managed to hold onto the gains it made after BoE intervention (3 days ago, buying long-dated bonds and stopping the reduction of its balance sheet). This comes amid wide speculation that the new government will be forced to back down from its radical shift to large-scale tax cuts and “trickle down” economics. This came as a report showed that Eurozone inflation has hit a record 10% (well above the 9.7% projections and 9.1% reading in August). If there is any good news in the report, it is that “core inflation” rose only 4.8% with energy (+40.8%) and “Food Alcohol, and Tobacco” up 11.8% doing most of the lifting. (The good news idea being that eventually, energy prices will come under control as replacement sources for Russian oil and gas begin to materialize in the next couple of months.)
With this backdrop, and as the Quarter comes to a close, it again looks like we will see a modest gap higher, inside of Thursday’s candle to start the day. So, this is not showing a major change in sentiment. It just looks like more chop in this week’s consolidation (albeit more volatile consolidation yesterday). The strong bear trend remains in place in all 3 major indices. Expect more volatility and even though everything looks bearish early, do not forget that we still need over-extension relief. Also, do not be surprised if we see some window dressing at the end of Q3 as funds get their portfolios in shape for their Q4 marketing campaigns. Finally, keep in mind that it’s Friday (and that Russia will announce it has annexed parts of Ukraine today). So, prepare your account for the weekend news cycle, which will include the second landfall of Ian.
Keep in mind that trading is our job. It’s not a hobby. So, treat it that way. Do the work and follow the process. Stick with your trading rules, trade with the trend, and take those profits when you have them. Demonstrate patience and wait for confirmation. Don’t be stubborn. If you have a loss, just admit you were wrong, respect your stop, and take the loss before it grows. When price does move in your direction, always move your stops in your favor (remember the “Legend of the man in the green bathrobe“…it is NOT HOUSE MONEY, it’s all OUR MONEY!). Lastly, remember that you get rich slowly and steadily in Trading…not by striking it rich on one or two trades. So, give up that lottery ticket mentality.
See you in the trading room.
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.
🎯 DickCarp: 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.
Hit and Run Candlesticks / Road To Wealth Youtube videos
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.
DISCLAIMER: Investing / Trading involves significant financial risk and is not suitable for everyone. No communication from Hit and Run Candlesticks Inc, its affiliates or representatives is not financial or trading advice. All information provided by Hit and Run Candlesticks Inc, its affiliates and representatives are intended for educational purposes only. You are advised to test any new trading approach before implementing it. Past performance does not guarantee future results. Terms of Service
Although the big bullish bounce on Wednesday raised hopes of a relief rally, the real question is, can the bulls follow through a second day, or was it just a dead cat bounce? A lot will depend on how the market reacts to the GDP and Jobless Claims numbers before today’s bell. Sadly the Wednesday push upward didn’t seem to translate into bullishness in Asian overnight or European markets this morning. Keep in mind that with the uncertainty of 4th quarter earnings just around the corner, its possible we’ve entered a wide-ranging chop zone as we wait.
Asian markets struggled to pick up on the bullish love felt in the U.S., closing the day mixed. European markets see red across the board as the BOE intervention quickly fades. With some name earnings reports, GDP, and Jobless Claims ahead, the U.S. futures look to take back a big chunk of yesterday’s rally at the open. However, a lot could change depending on the reaction to the economic data. Expect another wild morning of whipsaws and reversals.
Economic Calendar
Earnings Calendar
The Thursday calendar is a light one, with just nine confirmed reports. Notable reports include BBBY, MU, NKE, KMX, RAD, & WOR.
News & Technicals’
Beneath all the clamor of Russia’s invasion of Ukraine and the efforts to tamp down inflation, investors are passing over a huge story in China, Jim Chanos said. The nation faces a deepening crisis caused by multiple factors, resulting in the worst plunge in home sales since China started allowing private property sales in the late 1990s. CNBC’s Jim Cramer said Wednesday’s rally would likely reverse course as soon as a Federal Reserve official reminds Wall Street of its hawkish stance against inflation. “The moment some Fed-head explains the obvious, today’s gains will disappear because they’re incompatible with the Fed’s attempts to control inflation,” he said.
Pension fund panic led to the Bank of England’s emergency intervention. To prevent an “unwarranted tightening of financing conditions and a reduction of the flow of credit to the real economy, the FPC said it would buy gilts on “whatever scale is necessary” for a limited time. Central to the Bank’s extraordinary announcement was panic among pension funds, with some of the bonds held within them losing around half their value in a matter of days. Analysts are hoping that a further intervention from Westminster or the City will help assuage the market’s concerns, but until then, choppy waters are expected to persist.
The Wednesday bounce raised hopes for a relief rally, but the real question is, can it follow through for a second day? A lot will depend on how the market reacts to the GDP and Jobless Claims numbers before the bell. While it was nice to get some selling relief, there was no substantive improvement in any chart technicals and changes, nothing in the FOMC inflation-fighting stance. That said, I still hope for a bit more relief to set up short trade positions, but with 4th quarter earnings uncertainty just around the corner, we may have just set the chop range of price action while we wait. The pullback in the U.S. dollar was a big help to the Wednesday rally, but I wouldn’t hold my breath thinking that it continues unless other countries get serious about fighting inflation.
Stocks gapped slightly higher at the open in all 3 major indices. Then price chopped back and forth across the gap the first hour before starting a slow, wavy rally that was in effect until a modest pullback the last 10 minutes of the day. This left us near the highs of the day at the close. This action has given us large white candles with smaller wicks on both ends across the 3 major indices. However, only the QQQ managed to reach (retest) their T-line (8ema) yet.
On the day, Utilities (+1.19%) is the laggard, while Energy (+3.97%) and Basic Materials (+3.34%) led the relief rally. Meanwhile, the SPY was up 1.96%, DIA was up 1.86%, and QQQ was up 1.99%. The VXX fell 4.2% to 20.07 and T2122 spiked up out of the oversold territory to 51.47 in the mid-range. After being up over 4% during the premarket, 10-year bond yields are down hard (the most since 2020) to 3.725%, and Oil (WTI) is up 4.4% to $81.97/barrel. So, Wednesday did give us some relief from bearish over-extension. However, the downtrend remains intact and you would be hard-pressed to even call it a “relief rally” yet.
In economic news, the August Goods Trade Balance came in at -$87.30 billion (as compared to -$90.19 billion in July) largely on a decrease in imports. This was the fifth straight month of improvements in the trade balance. Elsewhere, August Retail Inventories were up 0.6% (compared to a July increase of 0.3%). This might be a clue of economic slowdown with inventories building. However, contrary to Tuesday’s unexpected large increase in New Home Sales, August Pending Home Sales fell more than expected to -2.0% (versus -1.4% forecast and +0.6% in July). Finally, EIA Weekly Crude Oil Inventories fell by 0.215 million barrels (compares to a forecast of +0.443 million and last week’s +1.142 million barrels). What was odd about the EIA number is that it was only 10% of the build reported Tuesday night by the API (+4.150 million barrels).
In Fed news, Atlanta Fed President Bostic said that a lack of clear progress in inflation reduction means that the Fed needs to remain “moderately restrictive” and that rates should reach 4.25% – 4.50% by year-end. He wasn’t on to say that his baseline outlook remains that the Fed should hike rates 0.75% again at the next meeting in November. Later, Chicago Fed President Evans said most Fed voters are “penciling in” 4.50% to 4.75% by the end of the year or maybe March of next year. He went on to say that he worries about global market volatility causing additional restrictiveness, but that the Fed “just really needs to get inflation in check.” Finally, Fed Governor Bowman told a conference that the framework the Fed uses to assess competition in the banking sector needs to be overhauled. Her general point was that different service delivery channels and nonbank “competitors” need to be considered rather than just the size of deposits and loan volume when considering the competitive impact. (This seems to be a positive statement for mergers/acquisitions in the banking sector.)
In stock news, during the day Wednesday, BIIB had a massive day (+39.85%) after it reported surprisingly positive results in a trial of its Alzheimer’s drug. Even the direct competitors in this niche (LLY and Roche) were up 7% on the day on this news. In less positive news, BP announced it has laid off almost all of its contractors at a Toledo Ohio refinery (a joint venture with CVE, but run by BP using contractors) after there was an explosion last week. BP announced that the refinery (which processed 160k barrels of oil per day, making 3.8 million gallons of gasoline and 1.3 million gallons of diesel per day) will be offline for a prolonged period following the explosion and fire which killed two workers. Then, after the close, Bloomberg reported that AMZN plans to close several US-based call centers. This is part of their move toward remote work rather than in-office. No numbers on cost or headcount reductions were provided. In other news, Reuters also reported that AMZN has told their warehouse employees they have increased the worker’s pay and this initiative will cost just under $1 billion. Elsewhere, Bloomberg reports that MRK has struck a deal with China to sell its Covid-19 antiviral treatment (molnupiravir) in a first-of-its-kind deal for the country.
In miscellaneous news, after the close, TTE announced it will be spinning off its Canadian Oil Sands operations and listed the new company on the Toronto exchange (TSX). Some of these assets include a minority stake in a joint venture with SU and another venture with COP. On the earnings front, after the close, JEF reported a beat on both lines. However, CNXC and MLKN both reported missing on the revenue line while simultaneously beating on the earnings line. So far this morning, RAD and WOR both beat on revenue while missing on earnings. However, BBBY and KMX both missed on the top and bottom lines. Finally, it was reported overnight that the reason the BOE intervened to buy long-dated bonds Wednesday was panicked calls from UK pension funds that were near collapse based on the crashing pound and UK markets following the new government’s unexpected jerk toward “trickle down” economics and massive high-end tax cuts at the same time inflation is running rampant.
After the close, CALM and BB both reported beating on both the revenue and earnings lines. (However, the BB number was still a loss.) So far this morning, THO also reported beating on the top and bottom lines. However, CTAS and PAYX report closer to the opening bell.
Overnight, Asian markets were mixed in more modest trading. Australia (+1.44%), Japan (+0.95%), and New Zealand (+0.72%) led the gainers. Meanwhile, Hong Kong (-0.49%), Thailand (-0.43%), and Malaysia (-0.31%) paced the losses. In Europe, the day is off to more of a red start. Only Greece (+0.39%) and Norway (+0.43%) are green. Meanwhile, the FTSE (-0.63%), DAX (-0.97%), and CAC (-0.90%) are leading the region lower in early afternoon trade. As of 7:30 am, US Futures are pointing toward a down start to the day. The DIA implies a -0.46% open, the SPY is implying a -0.62% open, and the QQQ implies a -0.92% open at this hour. At the same time, 10-year bond yields are back up to 3.814% and Oil (WTI) is up four-tenths of a percent to $82.52/barrel in early trading.
The major economic news events scheduled for Thursday include Q2 GDP (3rd Revision) and Weekly Initial Jobless Claims (both at 8:30 am), and two Fed Speakers (Bullard at 9:30 am and Mester at 1 pm). The major earnings reports scheduled for the day include BBBY, KMX, RAD, and WOR before the open. Then after the close, MU and NKE report.
In economic news later this week, on Friday, we get August PCE Price Index, August Personal Spending, Chicago PMI, Michigan Consumer Sentiment, and 3 Fed Speeches (Mester, Williams, Mester). Meanwhile, in earnings reports later this week, on Friday, BKR and CCL report.
With this backdrop, it again looks like we will see a gap lower. However, today’s premarket candle is still just inside yesterday’s candle. So, this is not showing a major change in sentiment yet. It just looks like more chop in this week’s consolidation. The strong bear trend remains in place in all 3 major indices. Expect more volatility and even though everything looks bearish early, do not forget that the extension relief usually lasts more than one day. As I have said, markets always move in a zig-zag motion and we are definitely in need of more zag to offset the recent strong zig.
Keep in mind that trading is our job. It’s not a hobby. So, treat it that way. Do the work and follow the process. Stick with your trading rules, trade with the trend, and take those profits when you have them. Demonstrate patience and wait for confirmation. Don’t be stubborn. If you have a loss, just admit you were wrong, respect your stop, and take the loss before it grows. When price does move in your direction, always move your stops in your favor (remember the “Legend of the man in the green bathrobe“…it is NOT HOUSE MONEY, it’s all OUR MONEY!). Lastly, remember that you get rich slowly and steadily in Trading…not by striking it rich on one or two trades. So, give up that lottery ticket mentality.
See you in the trading room.
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.
🎯 DickCarp: 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.
Hit and Run Candlesticks / Road To Wealth Youtube videos
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.
DISCLAIMER: Investing / Trading involves significant financial risk and is not suitable for everyone. No communication from Hit and Run Candlesticks Inc, its affiliates or representatives is not financial or trading advice. All information provided by Hit and Run Candlesticks Inc, its affiliates and representatives are intended for educational purposes only. You are advised to test any new trading approach before implementing it. Past performance does not guarantee future results. Terms of Service
Markets gapped higher on Tuesday (1.35% in the QQQ, 1% in the SPY and 0.7% in the DIA). However, that was a bull trap because after meandering sideways for an hour and 45 minutes, all 3 major indices sold off extremely hard for a little over an hour. During this selloff, DIA lost 1.90%, SPY lost 2% and QQQ lost 2.2%. After that, all 3 indices ground sideways in a tight range until 2:30 pm. Then volatility kicked back in as the bulls rallied all 3 major indices for half an hour before pulling back again a bit for the last hour of the day. This action is left us with large black candles that had some significant wicks on both ends (especially the upper wick), which Engulfed the prior candle. (However, these are not truly “Bearish Engulfing” candles because the prior candle bodies were also black.)
On the day, 5 of the 10 sectors are in the red with Energy (+1.49%) by far the largest gainer and Utilities (-1.66%) by far the largest loser on the day. At the same time, SPY was down 0.26%, DIA was down 0.49%, and QQQ managed to gain 0.04%. The VXX gained 1.9% to 20.95 and T2122 was up to a whopping 4.04 (still deeply oversold). 10-year bond yields rebounded from early losses to new highs at 3.976% and Oil (WTI) was up 2.25% to $78.44/barrel. So, while the day started off looking like it would provide some over-extension relief, it ended up with about the same extension as we had on Monday (which is to say a lot of extension).
In economic news, August Durable Goods Orders came in slightly better than expected at -0.2% (versus a forecast of -0.4%). However, Conf. Board Consumer Sentiment came in hotter than expected at 108.0 (vs. 104.5 forecast and July’s 103.6 reading). The big surprise of the day was August New Home Sales, which came in MUCH hotter than expected at 685k (versus a forecast of 500k and July’s number of 532k). Then after the close API reported that Weekly Crude Oil Inventories unexpectedly rose by 4.150 million barrels (versus a forecast build of only 0.333 million and last week’s build of 1.035 million barrels).
In Fed news, before the open Tuesday, Fed Chair Powell emphasized the risks and unregulated markets of “DeFi systems.” He called for the Fed (and other Central Banks) to play a major role in the oversight and regulation of cryptocurrencies, in particular speaking to stablecoins and unhosted crypto wallets. Later in the morning, St. Louis Fed President Bullard said that rapid interest rate increases have raised the risk of a recession. However, he maintained that the US economy remains resilient and said the recession is likely to be caused by an external shock rather than Fed policy. He went on to call for more hikes and said not only are the hikes needed to tame inflation but also to defend Fed credibility.
In stock news, Tuesday afternoon, the DOJ asked a Federal Judge to force AAL and JBLU to scrap their “US Northeast” partnership as being anti-competitive. The move also implies the JBLU acquisition of SAVE will face regulatory hurdles. Elsewhere, CS announced the loss of two senior executives, one of which is going to rival C. Then, after the close, the SEC announced it has fined 16 major Wall Street firms a total of more than $1.1 billion for failing to maintain and preserve electronic communications from Whatsapp usage (which their traders used to secretly communicate). This secret communication is a major fear given the recent market-fixing convictions of traders in various asset classes. The fined firms include BARC, BAC, C, CS, GS, MS, and UBS. Also, after the close, F said they are implementing a $700 million plant expansion in KY that will create 500 new hourly jobs. Finally, Bloomberg reports that APO is seriously exploring a takeover of R. Shares of R spiked 15% as the news broke late in the day.
In Energy news, as mentioned above, Oil (WTI) rose 2.25% on Tuesday due to cuts in production in the Gulf of Mexico and fear that Hurricane Ian could potentially temporarily take Florida oil storage and refining capacity offline. A modest pullback in a historically strong Dollar also helped buoy oil prices. Elsewhere, India and China have temporarily halted the purchase of Russian oil in the last week. The reason appears to be demand-related as recession fears are facing both those economies. However, the pause also allows those countries to put more pressure on Russia for price concessions in the face of recent global oil price reductions. Finally, in an odd turn, Senate Minority Leader McConnell (Republican) urged fellow Republicans to vote down a stopgap government funding bill…due to it containing riders intended to appease WV Democrat Manchin. What makes this odd, is that the riders are massively pro-business and anti-environment as they would reduce environmental regulation and shorten project permitting review timelines. This is odd because McConnell is from KY where there is a large coal mining industry that would benefit greatly from the bill. So, this appears to be a just political ploy, calculating that a government shutdown shortly before midterm elections can be blamed on Democrats.
After the close, CALM and BB both reported beating on both the revenue and earnings lines. (However, the BB number was still a loss.) So far this morning, THO also reported beating on the top and bottom lines. However, CTAS and PAYX report closer to the opening bell.
Overnight, Asian markets were red across the board. Hong Kong (-3.41%), Taiwan (-2.61%), Shenzhen (-2.46%), and South Korea (-2.45%) led the region lower. In Europe, stocks are also almost exclusively red at mid-day. The FTSE (-0.45%), DAX (-0.77%), and CAC (-1.15%) are leading the region lower with only Russia (+0.22%) and Switzerland (+0.41%) managing to hang on to green numbers in early afternoon trade. As of 7:30 am, US Futures are pointing to a gap lower to start the day. The DIA implies a -0.45% open, the SPY is implying a -0.69% open, and the QQQ implies a -1.13% open at this hour. 10-year bond yields have backed down slightly to 3.941% and Oil (WTI) is up a third of a percent to $78.76/barrel in early trading.
The major economic news events scheduled for Wednesday include August Goods Trade Balance and August Retail Inventories (both at 8:30 am), August Pending Home Sales (10 am), EIA Weekly Crude Oil Inventories (10:30 am), and many Fed speakers (Bostic at 8:35 am, Bullard at 10:10 am, Chair Powell at 10:15 am, and Bowman at 11 am). The major earnings reports scheduled for the day include CTAS, HEPS, PAYX, and THO before the open. Then after the close, CNXC, JEF, and MLKN report.
In economic news later this week, on Thursday, we see Q2 GDP, Weekly Jobless Claims, and a Fed Speaker (Mester). Finally, on Friday, we get August PCE Price Index, August Personal Spending, Chicago PMI, Michigan Consumer Sentiment, and 3 Fed Speeches (Mester, Williams, Mester).
In earnings reports later this week, on Thursday, BBBY, KMX, RAD, WOR, MU, and NKE report. Finally, on Friday, BKR and CCL report.
In late-breaking news, the Bank of England has decided to scrap plans to sell UK bonds (reduce its balance sheet) and has temporarily begun buying long-date UK bonds instead. This was an emergency move to try to stop the massive surge bond prices (the inverse of yields), which was at their highest price since 1957. AAPL also gave an ominous signal as it canceled planned increases in iPhone production. This came as the company has not seen the surge in new iPhone sales that it had expected. (Who knew you didn’t need a new $1,000 phone every year?) AAPL stocks was down almost 4% in premarket on the news.
With this backdrop, again, don’t be fooled by a gap lower. The recent pattern has been for price to fade the gap (regardless of its direction) as volatility remains high. So, while the strong bear trend remains in place in all 3 major indices, don’t expect a gap lower to just keep running. Instead, expect more volatility and even though everything looks bearish early, do not forget that the market needs some extension relief. Markets always move in a zig-zag motion and we are definitely in need of a zag to offset the recent strong zig.
Keep in mind that trading is our job. It’s not a hobby. So, treat it that way. Do the work and follow the process. Stick with your trading rules, trade with the trend, and take those profits when you have them. Demonstrate patience and wait for confirmation. Don’t be stubborn. If you have a loss, just admit you were wrong, respect your stop, and take the loss before it grows. When price does move in your direction, always move your stops in your favor (remember the “Legend of the man in the green bathrobe“…it is NOT HOUSE MONEY, it’s all OUR MONEY!). Lastly, remember that you get rich slowly and steadily in Trading…not by striking it rich on one or two trades. So, give up that lottery ticket mentality.
See you in the trading room.
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.
🎯 DickCarp: 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.
Hit and Run Candlesticks / Road To Wealth Youtube videos
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.
DISCLAIMER: Investing / Trading involves significant financial risk and is not suitable for everyone. No communication from Hit and Run Candlesticks Inc, its affiliates or representatives is not financial or trading advice. All information provided by Hit and Run Candlesticks Inc, its affiliates and representatives are intended for educational purposes only. You are advised to test any new trading approach before implementing it. Past performance does not guarantee future results. Terms of Service
Market uncertainties abound with currency gyrations, weakening economic conditions, a litany of talking head doublespeak, and geopolitical tensions. I suspect that condition will continue today with a few earnings reports, several economic reports, and a blizzard of flip-flopping Fed speak. A substantial bounce is not out of the question from this short-term oversold condition, but we can’t rule out the pile-on effect as data rolls out. Whipsaws and overnight reversals are likely to keep price action challenging, so plan your risk carefully.
Asian markets closed higher with modest gains as the healthcare sector rallied. Across the pond, European markets also trade with modest gains this morning in a choppy price action session. Seeing treasury yields relaxing slightly, U.S. futures point to a substantial gap up ahead of several potential market-moving reports. Hope for a relief rally but be prepared for fast-moving prices that could whipsaw in a heartbeat due to news sensitivity.
Economic Calendar
Earnings Calendar
We have a bit more activity on the earnings calendar for Tuesday, with 15 confirmed reports. Notable reports include BB, CALM, CBRL, JBL, NEOG, PRGS, & UNFI.
News & Technicals’
The sudden sell-off in the pound and U.K. bond markets led economists to anticipate more aggressive interest rate hikes from the Bank of England. In a series of tweets Tuesday morning, Harvard professor Summers said that although he was “very pessimistic” about the potential fallout from the “utterly irresponsible” policy announcements, he did not expect markets to capitulate so quickly. The likening of the U.K. to an emerging market economy has recently become more prevalent among market commentators. Speaking to CNBC’s “Squawk Box Europe” on Tuesday, Evans said he remains “cautiously optimistic” that the U.S. economy can avoid a recession — provided there are no further external shocks. His comments come shortly after a slew of top Fed officials said they would continue to prioritize the fight against inflation, which is currently running near its highest levels since the early 1980s.
The British pound hit an all-time low against the dollar in the early hours of Monday morning, dropping below $1.04, while the U.K. 10-year gilt yield rose to its highest level since 2008. The announcement featured a volume of tax cuts not seen in Britain since 1972 and a return to the “trickle-down economics” promoted by the likes of Ronald Reagan and Margaret Thatcher. However, Vasileios Gkionakis, head of European FX strategy at Citi, told CNBC on Monday that the market was demonstrating an “erosion of confidence” in the U.K. as a sovereign issuer, leading to a “textbook currency crisis.” Bitcoin topped $20,000 on Tuesday, hitting its highest level in more than a week, but is still struggling to break out of its tight trading range. With another U.S. Federal Reserve interest rate out the way, traders may be positioning themselves for a peak in U.S. dollar strength, which would be positive for bitcoin, one analyst said. Bitcoin’s rally happened despite a fall in U.S. stocks, with the S&P 500 closing at its lowest level of 2022 on Monday, a potential sign the correlation between the two asset classes may be lessening.
Uncertainties abound, whipsawing the Monday markets as currencies fluctuate, and a flurry of Fed speakers and talking head doublespeak points fingers of blame though still promoting their positions. Add in the geopolitical issues, and it’s not hard to understand why the market is a mess. Sadly, we now look to the same people that created the mess to clean it up and get things back on track. What could go wrong with that? Technically speaking, the indexes are in a short-term severely oversold condition, suggesting a relief rally could soon occur. Still, we will have to keep a close eye on the deteriorating conditions of our economy and other major economies’ stumbling blocks keeping the bears active. Today we face a blizzard of Fed speakers as well as Durable Goods, Case-Shiller, Consumer Confidence, and New Home Sales reports. Plan for price action to remain challenging. If a relief rally does begin, be willing to hold thorough substantial whips in price or stand aside because the bear market is not likely finished with market-moving surprises.
Stocks gapped down Monday (about 0.40% in the large-cap indices and about 0.20% in the QQQ). After an hour of rallying up to the day’s highs, the selloff to the lows took over from 10:30 am to 2 pm. At that point, we chopped our way sideways with a very slight bullish trend until a massive selloff in the last 5 minutes of the day. This action left us with black-bodied Spinning Top type candles. However, the SPY and DIA closed at the lowest level for a close since December 2020. On the other hand, all 3 of the major indices remain very extended below the T-line (ema).
On the day, all 10 sectors were red, with the Energy (-2.68%) and Utilities (-2.46%) sectors leading the way lower. At the same time, the Consumer Defensive (-0.44%) and Consumer Cyclical (-0.83%) sectors lagged the decline. Meanwhile, the SPY lost 0.95%, DIA lost 1.06%, and QQQ lost 0.41%. The VXX rose by 3.73% to 20.56 and T2122 remains deeply oversold at 1.56. 10-year bond yields spiked to 3.924% and Oil (WTI) fell 2.88% to $76.47/barrel. So, overall, it was an ugly, down but still indecisive day.
In Fed news, Boston Fed President Collins told a New England business group that she expects a more modest economic slowdown as the Fed continues to tighten. She went on to say inflation could be tamed without a pronounced spike in layoffs as part of a “soft landing.” Meanwhile, Atlanta Fed President Bostic told the Washington Post he doesn’t know if the Fed is being too optimistic or pessimistic, but that the important thing is that we need to get inflation under control. He also went on to say the new UK government’s decision to do major tax cuts will cause both further inflation and stoke market volatility more broadly than just in the United Kingdom. (“The key questions will be what this means for ultimately weakening the European economy, which is important for how the US economy will perform.”) Later, Cleveland Fed President Mester told an MIT audience that inflation will continue to be hard to predict and she was going to be very cautious before declaring victory over inflation. She went on to say we need to have rising rates until we see several months of declining inflation and “we can’t avoid pain.”
In stock news, the CEO of UL has announced he will retire at the end of 2023 after a bungled attempt to buy GSK’s consumer healthcare business. Then, after the close, BIIB finalized a $900 million settlement with the US Dept. of Justice for paying doctors kickbacks in return for prescribing BIIB products. Elsewhere, the US Forest Service also started a federal investigation into the “Mosquito” fire. The agency seized some of PCG’s equipment from a transmission pole. PCG said they are fully cooperating. Elsewhere, SBUX sent a letter to the unions that represent employees at more than 230 of its US stores. The company invited the unions to begin contract negotiations in October. In other union news, the Intl. Assn of Machinists and Aerospace Workers filed an application to hold an organizing vote among 3,000 of JBLU’s ground crews. The company opposes having a vote. At the same time, the UAW has sought speedier recognition by GM at a new battery manufacturing facility in Ohio. The faster process would forgo a vote if more than half of the plant employees sign a card requesting union representation.
In Energy news, SU announced Monday that it will buy back $1.27 billion in bonds it had previously issued even as S&P had just downgraded SU debt to a BBB rating. In weather-related issues, BP and CVX both shut down Gulf of Mexico oil production Monday as Hurricane Ian bears down on the top-producing area of the gulf. This shutdown accounts for about 15% of US daily oil production. Meanwhile, OXY said it was also implementing its storm protocols “designed to safeguard the environment and personnel safety” (but did not say whether that meant shutting down production). For their part, SHEL said it is closely monitoring the storm, but is not taking action at this point. Finally, European investigators are rushing to identify the cause of mysterious (potentially sabotage) leaks in the Nord Stream One pipeline under the Baltic Sea. Similar leaks were found in the nearby (and not yet opened) Nord Stream Two pipeline. Shipping in the area has been restricted.
In miscellaneous news, during the day, eight State Attorneys General filed cease and desist orders and lawsuits against crypto lending platform Nexo. The AGs charged Nexo with offering customers interest on deposits without filing the paperwork to register as a security or to disclose financial disclosures. Meanwhile, US farmers are lobbying the US government to challenge the looming Mexican ban on importing genetically-modified grain (specifically corn) via the USMCA. The ban is scheduled to be fully implemented by 2024 and would eliminate about $1.65 billion per year in US corn exports. The largest companies impacted would be ADM and BG.
Overnight, Asian markets were mixed but the larger exchanges were green led by China. Shenzhen (+1.94%), Shanghai (+1.40%), and Japan (+0.53%) led the region higher while New Zealand (-1.93%) was an outlier to the downside. In Europe, stocks are mostly green at midday. The FTSE (-0.01%) lags due to continued fear over the new Truss government tax cuts impacts. However, the DAX (+0.73%), and CAC (+0.67%) lead the region higher (with only Russia -0.07% and the FTSE red) in early afternoon trade. As of 7:30 am, US Futures are pointing toward a gap higher to start the day. The DIA implies a +0.85% open, the SPY is implying a +1.08% open, and the QQQ implies a +1.32% open at this hour. 10-year bond yields are down to 3.821% and Oil (WTI) is up 1.36% to $77.75/barrel in early trading.
The major economic news events scheduled for Tuesday include August Durable Goods Orders (8:30 am), Cond. Board Consumer Confidence and August New Home Sales (both at 10 am), and API Weekly Crude Oil Stocks (4:30 pm). There are also 2 Fed speakers (Chair Powell at 7:30 am and Bullard at 9:55 am). The major earnings reports scheduled for the day include CBRL, FERG, JBL, SNX, and UNFI before the open. Then after the close, BB and CALM report.
In earnings reports later this week, on Wednesday, we hear from CTAS, HEPS, PAYX, THO, CNXC, JEF, and MLKN. Then Thursday, BBBY, KMX, RAD, WOR, MU, and NKE report. Finally, on Friday, BKR and CCL report.
So far this morning, FERG reported a beat on revenue while also missing on the earnings line. On the opposite side, UNFI missed on revenue while beating on earnings. JBL, SNX and CBRL all report later, but before the open.
With this backdrop, don’t be fooled by a gap higher. The strong bear trend remains in place across all 3 major indices. So, at this point, this move looks like nothing but relief from over-extension and perhaps a little support from the June Low in the large-cap indices. Expect more volatility and even though everything looks good early, do not forget the trend is not broken. Markets always move in a zig-zag motion and, so far, this doesn’t even qualify as a relief rally. This is just a pause in the run lower until proven otherwise.
Keep in mind that trading is our job. It’s not a hobby. So, treat it that way. Do the work and follow the process. Stick with your trading rules, trade with the trend, and take those profits when you have them. Demonstrate patience and wait for confirmation. Don’t be stubborn. If you have a loss, just admit you were wrong, respect your stop, and take the loss before it grows. When price does move in your direction, always move your stops in your favor (remember the “Legend of the man in the green bathrobe“…it is NOT HOUSE MONEY, it’s all OUR MONEY!). Lastly, remember that you get rich slowly and steadily in Trading…not by striking it rich on one or two trades. So, give up that lottery ticket mentality.
See you in the trading room.
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.
🎯 DickCarp: 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.
Hit and Run Candlesticks / Road To Wealth Youtube videos
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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The technical situation worsened while I was hiking in South Dakota as the Dow fell below the critical psychological level of 30,000. Although the oversold condition of the T2122 indicator suggests the odds of a relief rally are strong, the strong dollar and the weakening worldwide economy will make it challenging to raise bullish sentiment. However, the hope that the 2022 lows of the SPY, QQQ, and IWM can inspire a defense by the bulls could provide some relief from the selling soon.
While we slept, the Asian markets declined across the board as currencies continued to decline against the dollar’s strength. European markets trade flat but mostly lower after the sterling fell to a record low against the dollar. The U.S. futures point to a bearish open though it has rallied substantially off overnight lows. Expect price volatility, and though the overnight rally is hopeful, remember a retest of overnight lows can often occur.
Economic Calendar
Earnings Calendar
Though we have 16 companies listed and only one confirmed report from CHG, I have to say we have no notable reports today.
News & Technicals’
Sterling’s plunge comes after last week’s announcement by the new U.K. government that it would implement tax cuts and investment incentives to boost growth. However, critics say those economic measures will disproportionately benefit the wealthy and could see the U.K. take on high debt levels at a time of rising interest rates. Brent crude fell below $85 a barrel Monday as recession fears weighed and the U.S. dollar surged. Brent futures for November settlement were trading down over 1%, around $84.92 at 8 a.m. London time. West Texas Intermediate futures also fell to trade around $77.93. Apple on Monday said it is assembling its flagship iPhone 14 in India as the U.S. technology giant looks to shift some production away from China. Apple’s main iPhone assembler Foxconn is manufacturing the devices at its Sriperumbudur factory on the outskirts of Chennai. Apple has manufactured iPhones in India since 2017, but these were usually older models. With the iPhone 14, Apple is manufacturing the latest model in its line-up at the device’s launch.
In focusing on raising interest rates to cool inflation, central banks and governments have overlooked the importance of maintaining stable currencies, said Steve Forbes, chair of Forbes Media. “The real cure is to stabilize the currency. You don’t have to make people poor to conquer inflation,” he said. The British pound briefly fell 4% to an all-time low of $1.0382 on Monday in Asia, following last week’s announcement by the new U.K. government that it would implement tax cuts and investment incentives to boost growth. Treasury yields moved higher early Monday, with the 12- month at 4.07%, the 2-year at 4.29%, the 5-year at 4.08%, the 10-year at3.77%, and the 30-year at 3.65%.
Having taken off Thursday and Friday for some time in nature to heal the soul, the technical situation continued to worsen as worldwide economies slowed. As a result, currencies fluctuated substantially overnight as the U.S. dollar continued to strengthen and the 2-year bond yield hit a fresh 15-year high early Monday morning. The Dow fell below a critical psychological level of 30,000 and set new 2022 lows. If there is some good news, the T2122 indicator indicates a relief bounce could occur at any time due to its oversold condition. Also hopeful for the bulls is the 2022 low-price support of SPY, QQQ, and IWM, which may still see a bullish defense. Though the odd of a relief rally is good, I suspect it may only serve to set up more short trading with a challenging 3rd quarter earnings season just around the corner.
