On Monday, markets opened basically flat, with SPY gapping down just 0.05%, DIA opening dead flat, and QQQ gapping down 0.04%.  At that point, we saw a divergence with the large-cap index ETFs rallying until 10:15 am while the QQQ sold off sharply until 10 am.  After that, the DIA ground sideways not far from the highs, the SPY roamed back and forth around the previous close, and QQQ spent the day bobbing back and forth on the downside of the open.  However, a strong rally during the last 10 minutes of the day took all three major index ETFs out at or near the highs.  This gave us a white-bodied, Bullish Engulfing candle that closed just above its T-line (8ema) in the SPY.  Meanwhile, DIA also printed a large-bodied, white-bodied Bullish Engulfing candle that closed not far below its T-line. Finally, QQQ gave us a Doji-type candle that retested and failed its T-line.

On the day, eight of 10 sectors were in the green with the Industrials (+1.29%) and Healthcare (+1.25%) leading the way higher while Communications Services (-0.82%) being by far the laggard. At the same time, SPY gained 0.25%, DIA gained 0.64%, and QQQ gained 0.03%.  The VXX fell two-thirds of a percent to 25.66 and T2122 climbed into to lower end of the overbought territory at 83.64.  0-year bond yields fell to 3.998% while Oil (WTI) fell 0.64% to close at $73.22 per barrel.  So, Monday was an indecisive day in the tech-heavy QQQ and a Bullish day in the large-cap index ETFs.  With that said, most of the day was a sideways grind in all three major index ETFs.  This all took place on just-less-than-average volume in the QQQ, not too far-below-average volume in the DIA, but far-below-average volume in the SPY.

The only major economic news on Monday came from Fed speakers.  At mid-morning, San Francisco Fed President Daly (not a voter in 2023) repeated that she believes we will see two more Fed rate hikes in 2023. She said, “We’re likely to need a couple more rate hikes over the course of this year to really bring inflation”…“We may end up doing less because we need to do less; … we could end up doing more. The data will tell us.”  Later, Cleveland Fed President Mester (an alternate voter in 2023) told a Univ. of CA forum, “In order to ensure that inflation is on a sustainable and timely path back to 2%, my view is that the funds rate will need to move up somewhat further from its current level and then hold there for a while as we accumulate more information on how the economy is evolving.”  (She also acknowledged that her outlook on the fed funds rate matches or is slightly above the FOMC collective view.)  At noon, Atlanta Fed Pres. Bostic (also an alternate voter in 2023) repeated his position that the FOMC needs to be patient on rates and give previous restrictive policy time to bring down inflation before it raises rates again.  He said there are a “pretty straightforward” set of reasons why inflation could return to the two percent target without further increases.  He went on to say “Spending on goods has stabilized” and “There are a lot of statistics…that suggest it has peaked and it is actually starting to come down in terms of activity.”  Elsewhere, Fed Vice-Chair for Supervision Barr laid out a sweeping plan to increase the capital requirements on the largest banks in the wake of the failures in March.  The plan will impact all banks with more than $100 billion in assets (which will include CFG, FITB, HBAN, and RF among regionals).  Barr rained on the parade of the largest banks who had hoped the plan would ease restrictions on them at the same time as increasing the requirements on somewhat smaller banks.  Barr said the new banks that will be required to increase capital will be able to do so with less than two years’ worth of retained earnings.  (Meaning he thinks they can forego dividends for a couple of years to build up their balance sheets.)

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In stock news, AMZN announced it is partnering with BKNG to offer exclusive travel deals during its Prime Day events July 11-12.  Elsewhere, in another sign of the death of newspapers, NYT announced it has disbanded its sports desk and will rely on The Athletic website it acquired for sports coverage.  At the same time, Carl Icahn said that his company IEP has restructured $3.7 billion in personal loans in order to remove the link between his need to post collateral and the company stock price.  (IEP stock closed up 20.20% on the news.)  Later, MBGAF (Daimler Trucks) raised its revenue and profit guidance, citing an easing of supply chain constraints and strong demand.  By mid-day, the UAW announced it will begin contract negotiation with STLA on Thursday, F on Friday, and GM on July 18 (far ahead of the mid-September expiration of the current contracts).  After the close, it was made public that BRKB has agreed to buy the D stake in a Maryland LNG terminal for $3.3 billion. The move will give BRKB 75% ownership of the terminal (which is one of just seven now operating in the US).

In stock legal and regulatory news, an Indian court rejected an appeal by PEP which has appealed the revocation of its patent for a particular variety of potatoes grown exclusively for the company’s Lay’s potato chips.  (The ruling means that the potato can be grown and used by others, including competing brands of chips.)  Elsewhere, the European Commission announced it reached a new data transfer agreement with the US government on Monday.  (The deal was criticized by privacy advocates in Europe and is likely to be challenged after European courts have struck down the two prior data transfer agreements between the countries.  A lobbying group representing AAPL, AMZN, NOK, GOOGL, and others welcomed the deal.)  After the close, Politico reported that the US Dept. of Justice is near announcing its decision on whether to legally challenge the private equity purchase (and taking private of) FORG. Meanwhile, closing arguments were held in a CA Superior Court in the latest case against JNJ related to its talc baby powder containing carcinogens.  Compensatory damages being sought are only $3.8 million.  However, attorneys urged the jury to award many times that amount in punitive damages for company negligence related to baby products.

In late-breaking news, Monday night, MSFT confirmed that it will be eliminating more jobs now that its new fiscal year has begun (in addition to the 10,000 layoffs the tech giant announced in January and completed in the first half).  This move is starting modestly with 276 people from the corporate office in Washington state.  Elsewhere, this morning HCA announced it has suffered a data breach as hackers stole millions of patient’s data (covering more than 20 states) and has put the information up for sale online.  The data includes email addresses, personal data, and some medical records.  Meanwhile, overnight AAPL launched a store on the Chinese online giant TME’s WeChat messaging platform.  (WeChat has 1.2 billion active users, mostly in China and surrounding areas.) 

Overnight, Asian markets leaned heavily to the green side.  New Zealand (-0.03%) was the only red in the region.  Meanwhile, South Korea (+1.66%), Australia (+1.50%), and Taiwan (+1.48%) led the region higher.  In Europe, a similar picture is taking shape at midday.  Only Norway (-0.08%) and the FTSE (-0.14%) are lagging in the red while the other 13 bourses are in the green.  As usual, the CAC (+0.92%) and DAX (+0.43%) lead the region on volume.  In the US, as of 7:30 am, Futures are pointing toward a modestly green start to the day at this point.  The DIA implies a +0.06% open, the SPY is implying a +0.14% open, and the QQQ implies a +0.19% open albeit early.  At the same time, 10-year bond yields are moving lower to 3.968% and Oil (WTI) is up a half of a percent to $73.34 per barrel in early trading.

The major economic news events scheduled for Tuesday are limited to EIA Short-term Energy Outlook and API Weekly Crude Oil Stocks Report (4:30 pm).  Fed member Bullard (9 am) also speaks.  There are no major earnings reports scheduled for Tuesday either before the open or after the close.        

In economic news later this week, on Wednesday, the June CPI, EIA Crude Oil Inventories, WASDE Ag report, and Fed Beige Book are reported.  There are also two more Fed Speakers (Kashkari and Mester).  On Thursday, we get June PPI, Weekly Initial Jobless Claims, June Federal Budget Balance, and Fed Balance Sheet.  Finally, Friday June Import Price Index, June Export Price Index, Preliminary July Michigan Consumer Sentiment, and Preliminary July Michigan Consumer Expectations.        

In terms of earnings reports, on Wednesday, MLKN reports.  On Thursday, CTAS, CAG, DAL, FAST, PEP, PGR, and WIT report.  Finally, on Friday, we hear from BLK, C, ERIC, JPM, STT, UNH, and WFC.        

In miscellaneous news, Turkey did an about-face on Monday with President Erdogan saying he is satisfied and will ask the Turkish Parliament to approve Sweden’s bid to join NATO.  (This literally came a few hours after Erdogan said that he considered Sweden’s membership a bargaining chip, which he might be willing to trade for Turkish admission to the EU.) Elsewhere, Manheim (a used vehicle auction service) reported Monday that US used-car prices by 4.2% in June and were down 10.3% from June 2022 prices.  (This was the largest monthly drop since prior to the Covid-19 pandemic.)  Meanwhile, in state-run media reports Tuesday, China signaled that more economic stimulus is coming soon.  Specifically noted areas for targeted support include the real estate sector (through banking) and the vague “measures to boost business confidence.” 

With that background, it looks like all three major index ETFs are at their premarket highs again today and are all testing their T-lines (8ema) from below. We should remember that we have Fed uber-hawk Bullard speaking this morning, which is very likely to result in talk of larger and more rate hikes than the market expects. Still, the CPI our Wednesday may be a better read-through to Fed action. And, along with earnings starting again later in the week, it would not be surprising to see a “drift day” in the market as traders tread water ahead of those two sets of news. Overall, the pullback in an uptrend continues and only the DIA (laggard all year) is anywhere near putting in a lower-low. So, the trend remains bullish and that’s where the bias should be put when looking for trades. As far as extension goes, none of the three major index ETFs is away from their T-line and the T2122 indicator is just into the lower end of the overbought territory. So, once again, if either the bulls or the bears did find the energy to run today, there is slack (still buyers and sellers available).

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

See you in the trading room.

Ed

🎯 Mike Probst: Rick, Got CTL off the scanner today. Already up 30%. Love it.

🎯 Dick Carp: the scanner paid for the year with HES-thank you

🎯 Arnoldo Bolanos: LTA scanner really works $$, thanks Ed.

🎯 Bob S: LTA is incredible…. I use it … would not trade without it

🎯 Malcolm .: Posted in room 2, @Rick… I used the LTA Scanner to go through hundreds of stocks this weekend and picked out three to trade:  PYPL, TGT, and ZS.   Quality patterns and with my trading, up 24%, 7% and 12%…. this program is gold.

🎯 Friday 6/21/19  (10:09 am) Aaron B: Today, my account is at +190% since January. Thanks, RWO HRC Flash Malcolm Thomas Steve Ed Bob S Bob C Mike P and everyone that contributes every day. I love our job.

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