Friday saw another significant gap higher.  The SPY gapped up 1.21%, DIA gapped up 1.28%, and QQQ gapped up 1.75%.  From there, all three major index ETFs wobbled to the side, reentering the gap and crossing above the open, but never straying too far from the opening price. This lasted the entire session.  This gave us gap-up, indecisive candles in all three.   SPY printed a white-bodied Doji, QQQ gave us a white-bodied Spinning Top, and DIA printed a black-body Doji.  All three are now firmly above their T-lines (8emas).  This happened on average volume in the QQQ and DIA as well as just-less-than-average volume in the SPY.

On the day, all 10 sectors were in the green with Technology (+1.86%) far out front (by 0.75%) while Energy (+0.40%) lagged the other sectors.  VXX dropped another 3.47% to close at 12.78 and T2122 climbed to the very top edge of its mid-range at 79.25.  At the same time, 10-year bond yields fell sharply to 4.497% and Oil (WTI) fell 1.08%, to close at $78.10 per barrel.  So, Friday saw all of its move in the opening gap.  Most of the market analysts seemed to think that a decline in jobs increases and a climb in the Unemployment Rate will help clear the way for a Fed rate cut.  After that start to the session, there were some waves but price oscillated in a fairly tight range around that opening price.  It was as if traders had decided to head for the weekend early.

The major economic news scheduled for Friday included April Avg. Hourly Earnings (Year-on-Year) increased less than expected at +3.9% (compared to a forecast of +4.0% and the March increase of 4.1%).  At the same time, April Nonfarm Payrolls increased far less than predicted at +175k (versus the +238k forecast and dramatically less than the March +315k).  Meanwhile, April Private Nonfarm Payrolls also increased less than anticipated at +167k (compared to the +181k forecast and far less than the March +243k reading).  The April Participation Rate remained steady at 62.7% (the same as March’s participation rate).  Together, this gave us an April Unemployment Rate which increased to 3.9% (compared to a forecast and March value of 3.8%). Later, the April S&P Global Services PMI came in higher than expected at 51.3 (versus a 50.9 forecast but down from March’s 51.7).  Combined with Thursday’s Mfg. data this gave us an April S&P Global Composite PMI of 51.3 (compared to a 50.9 forecast and March’s reading of 52.1).  Later, the ISM Non-Mfg. Employment Index was lower than anticipated at 45.9 (versus a 49.0 forecast and the March 48.5 value).  At the same time, the ISM Non-Mfg. PMI also came in low at 49.4 (compared the 52.0 forecast and the March reading of 51.4).  On the cost side, the ISM Non-Mfg. PMI Price Index were significantly higher than expected at 59.2 (versus the 55.0 forecast and a March value of 53.4).

In Fed speak news, on Friday Fed Governor Bowman (a hawk) told an audience of bankers that she supports the current FOMC stance but still fears inflation risks.  “My baseline outlook continues to be that inflation will decline further with the policy rate held steady, but I still see a number of upside inflation risks that affect my outlook, … While the current stance of monetary policy appears to be at a restrictive level, I remain willing to raise the federal funds rate at a future meeting should the incoming data indicate that progress on inflation has stalled or reversed.”  Later, after the close, Chicago Fed President Goolsbee told a conference that the Fed’s “dot plots” (which are published once per quarter, showing the inflation predictions of each Fed member) need more context.  Goolsbee said, “the dot plot is just a collection of opinions without economic content … Because it can’t be connected to the economic conditions the participant thinks will justify that interest rate, there is nothing to tell us why they think this a reasonable choice.”   Instead, Goolsbee proposed “A matrix that anonymously matches the economic forecasts to the rate path for each participant would answer some important questions.”

In stock news, on Friday, ALK announced that it had received $61 million in credit toward future purchases of BA jets (in addition to the $162 million cash ALK got from BA) as compensation for the temporary grounding of all 737 MAX 9 jets earlier this year.  At the same time, Reuters reported that LUV will be forced to reduce the hours (and thus pay) of its pilots later this year as it grapples with a lack of jets due to BA delivery delays.  This is a problem, because LUV, like all major airlines has been trying to increase its pilot staff amidst an industry-wide pilot labor shortage.  Lower pay will hardly help the plans to increase staff.  Later, the New York Times reported that PARA will let its exclusive negotiation deal with Skydance lapse in the face of a competing bid from SONY and APO.  At the same time, XOM told Reuters Friday that after reaching a deal with the FTC for approval of its acquisition of PXD, the oil giant expects it to take between 18 and 24 months to achieve full synergies of the purchase.  (This will push XOM’s Permian Basin oil output by 1.3 million barrels per day with another 700k bpd added by 2027 due to integrating PXD technologies.

In stock legal and governmental news, on Friday, the Treasury Dept. gave automakers an extension until 2027 to remove Chinese-sourced trace minerals from electric vehicle batteries and still have their electric vehicles qualify for tax credits. (The announcement attributed the extension to the minerals being hard to source from other sources at this time.)  At the same time, GOOGL and the Dept. of Justice finished closing arguments in the antitrust case the US brought against GOOGL related to web search and related advertising.  Later, the FTC requested more information from NVO relate to its $16.5 billion bid to acquire CTLT.  At the same time, GS announced it had finally reached an agreement in-principle to settle a 2014 class-action lawsuit over GS trading in platinum and palladium.  (No terms were announced.)  Later, AMRX announced it had reached a $270 settlement (payable over 10 years) agreement over its involvement in the US opioid epidemic.

Overnight, Asian markets were mixed but leaned toward the green side with eight of the 12 exchanges in the green.  Shenzhen (+2.00%), Shanghai (+1.16%), and Taiwan (+0.95%) led the region higher.  Meanwhile, in Europe, 13 of the 15 bourses are in the green at midday.  The CAC (+0.76%), DAX (+0.89%), and FTSE (+0.51%) lead the region higher in early afternoon trade.  In the US, as of 7:30 a.m., Futures are pointing toward a green start to the day.  The DIA implies a +0.32% open, the SPY is implying a +0.33% open, and the QQQ implies a +0.23% open at this hour.  At the same time, 10-year bond yields are down to 4.481% and Oil (WTI) is up just less than a percent to $78.86 per barrel in early trading.

The major economic news scheduled for Monday is limited to Fed member Williams speaking at 1 p.m.  The major earnings reports scheduled for before the open on Monday include, AMG, AMR, BRKB, BNTX, CAN, JLL, SAVE, THS, and TSN.  Then, after the close, AAN, ACM, AL, BCC, BWXT, CBT, COHR, COTY, FN, FIS, FMC, GT, IFF, ITUB, JELD, VAC, DOOR, MCHP, NE, OGS, OTTR, PLTR, PARR, PRI, O, RRX, SPG, VRTX, and WMB report. 

In economic news later this week, on Tuesday, we get March Consumer Credit, API Weekly Crude Stocks, and Fed member Kashkari speaks.  Then Wednesday, EIA Weekly Crude Oil Inventories are reported.  On Thursday, we get Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, and the Fed Balance Sheet.  Finally, on Friday, Michigan Consumer Sentiment, Michigan Consumer Expectations, Michigan 1-Year Inflation Expectations, Michigan 5-Year Inflation Expectations, the WASDE report, and April Federal Budget Balance as well as Fed members Bowman and Vice Chair Barr speak.

In terms of earnings reports later this week, on Tuesday, we hear from GOLF, AHCO, ALGT, GBTG, ARMK, ATKR, AVNT, BLMN, BP, BLDR, CEIX, CROX, DDOG, DK, DUK, ERJ, ENR, EXPD, RACE, FTRE, GEO, GTN, HSIC, J, KVUE, NJR, NRG, OSCR, MD, PRGO, ROK, SCSC, SRE, SPR, SGRY, TPX, BLD, TDG, UBS, VVX, DIS, KLG, AMRK, AGL, ARKO, AIZ, BTG, BIO, BRFS, BHF, CRC, CHRD, CPNG, EC, EA, GMED, GO, GXO, HY, IAC, ICUI, JKHY, KGC, KD, LYFT, MTW, MASI, MTCH, MCK, OXY, OVV, PR, RYAM, RRR, RNG, RIVN, SU, VIV, TOST, TWLO, and WYNN.  Then Wednesday, AFRM, BUD, BCO, BR, CLVT, SID, SATS, EPC, ELAN, EMR, FWONK, FOXA, GLP, DINO, IEP, INGR, KMT, LCII, LSXMA, LPX, MIDD, EYE, NEUE, NFE, NYT, NI, ODP, PFGC, RCM, REYN, SHOP, SWX, STWD, SUN, TGNA, TEVA, TM, UBER, VSH, VST, AE, ABNB, AMC, APP, ARM, ATO, CE, CENTA, CENT, CAKE, CCU, COMP, CPAY, CAPL, ET, EXAS, FG, FLNC, FNF, FWRD, HLI, HUBS, CART, JXN, MFC, MATV, MMS, MKSI, MRC, NWSA, NTR, PAAS, QDEL, RGLD, SBGI, SSRM, STN, STE, SNEX, RUN, TKO, MODG, TSE, TTEC, VSTO, WTS, and WES report.  On Thursday, we hear from ADV, ALE, AZUL, BERY, CSIQ, CRL, COMM, CEG, EDR, EPAM, EVRG, HBI, HGV, H, ICL, IHRT, IBP, KELYA, NXST, NOMD, PZZA, PLTK, ACDC, RPRX, RBLX, SBH, SN, SOLV, SPB, TPR, TEF, TIXT, VTNR, VTRS, WBD, WMG, AKAM, COLD, AMN, BAP, DBX, SSP, EVH, FIHL, GEN, G, HRB, IAG, IOSP, MTD, PBA, RXT, RBA, and SLF.  Finally, on Friday, AQN, AMCX, CLMT, CPG, CRH, ENB, HMC, and DNOW report.

So far this morning, BRKB, JLL, and L reported beats on both the revenue and earnings lines.  Meanwhile, AMG and TSN missed on revenue while beating on earnings.  On the other side, CNA and THS missed on revenue while beating on earnings.  However, SAVE missed on both the top and bottom lines.

On Saturday, “Woodstock for Capitalists” took place in Omaha.  Warren “The Oracle of Omaha” Buffett spoke and BRKB reported a massive 32% increase (year-over-year) in Q1 operating income.  Yet, the company managed to report a huge 66% drop in net income for the quarter. As of the end of the quarter, BRKB was sitting on a record $189 billion pile of cash-on-hand.  During the quarter, BRKB reduced its holding of AAPL by 13%, down to (a paltry) $135.4 billion.  Still, AAAPL remains the biggest holding in the BRKB portfolio.  During his Q/A session, Warren Buffett said he expects US taxes to rise to tackle the country’s wide federal deficit.  Buffett said, “I think higher taxes are likely.” “They (Congress and the President) may not want to decrease spending and they may decide they’ll take a larger percentage of what we own…and we’ll pay it.”  He continued, “Almost everybody I know pays a lot more attention to not paying taxes than I think they should, we don’t mind paying taxes at Berkshire.”  Later, in answering questions, Buffett made it clear that Greg Abel will succeed him as the head of BRKB, claiming that Abel is already handling almost all of the company business.  Specifically, Buffett said, “The number of calls I get from managers is essentially awfully close to zero and Greg is handling those. I don’t know quite how he does it, but we’ve got the right person, I can tell you that.”

With that background, it looks as if the Bulls are working again this morning. The premarket started a bit higher and all three major index ETFs have printed white-body candles since then in the early session. Only SPY and QQQ show any wick and those are both small upper wicks at this point. All three remain above their T-line (8ema). So, the short-term trend is now bullish again. Meanwhile, the mid-term remains bearish. The longer-term market remains Bullish but under pressure. Overall, the character of the market is indecisive, choppy, and volatile. In terms of extension, none of the three major index ETFs is extended above their T-line. At the same time, the T2122 indicator is now just outside of its overbought area at the top of the mid-range. So, both sides still have room to run if they can gain the momentum to do so. In terms of those 10 big dog tickers, eight of the 10 are in the green with AMD well out in front leading the charge. However, AAPL (-0.26%) is by far the biggest drag (probably on news Buffett reduced the BRKB holdings of AAPL) as the joy of the huge buyback program announcement fades a bit early. Keep in mind that this is not a heavy news week but we do have a lot of earnings reports. Perhaps more importantly, there are several Fed speakers planned and undoubtedly others will also pop off. Any of those statements could rock markets as the Bulls are now dreaming of a rate cut again.

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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