Bulls In Charge Early With PPI Data Ahead

On Thursday, stocks gapped modestly higher at the open (up 0.5% in the SPY, 0.4% in the DIA, and up 0.5% in the QQQ).  Then after a 15-minute fade of the gap (except in the DIA), a rally took us to the highs by 10:30 am.  From there, we saw a pullback to the open level in slow narrow-range trading until 1 pm.  At that point, the bulls stepped in for a renewed rally that took us to new highs by 1:45 pm.  However, another selloff took us back to the lows by 2:15 pm.  Finally, price ground along the low end of the day’s range within a tight range.  This action gave us gap-up, white-body, indecisive Spinning Top candles that failed a retest of the T-line (8ema) from below.  None of the 3 major indices has been able to break their short-term downtrend.

On the day, eight of the ten sectors were in the green with the Technology sector (+1.62%) leading the way higher while Energy (-0.74%) and Communications Services (-0.75%) were the weakest sectors. In the meantime, the SPY was up 0.79%, the DIA was up 0.59%, and the QQQ was down 1.18%.  The VXX fell by more than 2% to 14.98 and T2122 has climbed a bit to 34.91.  10-year bond yields were up to 3.489% and Oil (WTI) was off a half of a percent to $71.68 per barrel.  So, Thursday saw a modest gap higher followed by indecision on very low volumes.

In economic news, Weekly Initial Jobless Claims came in exactly on forecast at 230k.  This was 4k higher than last week.  However, continuing claims reached an 11-month high.  Later, Freddie Mac reported that the average 30-year, fixed-rate mortgage fell again this week to 6.33% (down from 6.49% the prior week).  Gasoline prices are also lower than they have been in a year this week, with EIA analysts saying they expect the national average to dip below $3/gallon in the near future. 

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In stock news, Reuters reported that CS has been able to raise $2.39 billion in new capital to help finance its turnaround plan.  Elsewhere, AVY told a conference that it is experiencing a “challenging finish to the year.”  AVY shares plunged on the news.  In other news, Bloomberg reported that the financers behind $13 billion of the money that Elon Musk used to buy Twitter are in discussions to restructure the debt, with Musk putting up TSLA stock as collateral.  In banking news, Reuters reports that multiple sources have confirmed that GS is slashing yearly bonuses for senior employees.  In more hopeful news, the CEO of GM said she expects car sales to rebound by more than 9% in 2023 (15 million units versus 13.7 million in 2022).

In government news, the House overwhelmingly approved (by 350-80) a record $858 billion Defense spending bill for 2023 ($45 billion more than requested by President Biden).  Meanwhile, the FTC voted 3-1 to officially block the MSFT acquisition of ATVI. Later in the day, the FTC announced plans to sue to enforce their decision. Elsewhere, the SEC warned public firms to study and report their exposure to cryptocurrency risks, which have been unreported to this point in general.  Finally, overnight the short-lived Democratic majority in the Senate slipped as AZ Senator Sinema announced she is leaving the Democratic party to become an independent.

In energy news, oil majors XOM and CVX both announced Thursday that they will be significantly expanding CAPEX investments in the US and Canada in 2023.  Finally, oil closed lower for the fifth straight day on Thursday despite the closure of the major Canada-to-US Keystone pipeline (which delivers 622k barrels per day to the US and is operated by TRP).

After the close, AVGO, CHWY, LULU, RH, and DOCU all reported beats on both the revenue and earnings lines.  Meanwhile, COO beat on revenue while missing on the earnings line.  Unfortunately, COST missed on both the top and bottom lines.  It is worth noting that RH and AVGO raised their forward guidance while COO lowered its own guidance.  Then this morning, LI reported misses on both the top and bottom lines.  LI also lowered its forward guidance.

Overnight, Asian markets were mostly green as Chinese covid-easing and a $108 billion Chinese bond sale (to be used for economic stimulus) boosted the region.  Hong Kong (+2.32%), Japan (+1.18%), and Taiwan (+1.05%) led the region higher.  Then in Europe, we see a mixed and modest market at midday.  The FTSE (-0.12%) lags while the DAX +0.32%) and CAC (+0.02%) indicate the mood of the continent 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 +0.18% open, the SPY is implying a +0.32% open, and the QQQ implies a +0.43% open at this hour.  At the same time, 10-year bond yields are down just a tick to 3.485% and Oil (WTI) is up eight-tenths of a percent to $72.07 per barrel in early trading.

The major economic news events scheduled for Friday are limited to November PPI (8:30 am) and Michigan Consumer Sentiment (10 am).  The major earnings reports scheduled for the day include Thursday, we hear from LI before the open.  There are no earnings reports after the close.

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With that background (and remembering that we have Wholesale Inflation data at 8:30 am), it looks like all three major indices are retesting their T-lines (8ema) in premarket trading. Therefore, obviously, over-extension is not a problem either in terms of the T-line (8ema) or the T2122 indicator. The short-term trend does remain bearish (despite yesterday’s green day) within the mid-term bullish trend now broken. However, all three major indices look like they will be testing that short-term downtrend with their open this morning. The QQQ was able to climb back up above its support level (despite a significant test on Wednesday and Thursday). And if the bulls cannot put in a strong rally today, we are headed toward a down week (the first in the DIA in a month). Lastly, remember that its Friday with a weekend news cycle ahead and a Fed meeting next week.

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.


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.

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

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🎯 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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