Bulls Looking to Gap Again on Friday

On Thursday, markets gapped modestly lower (a half of a percent in the large-cap indices and nine-tenths of a percent in the QQQ) on fears generated by fewer than expected new Jobless Claims and Fed Chair Powell’s premarket speech.  However, the bulls stepped in immediately and rallied markets until 11 am.  From there, the roller coaster was on with action oscillating back and forth between the opening lows and the 11 am highs.  This roller-coaster ended on an up wave.  This action tested the T-line (8ema) in all 3 major indices, but only the SPY managed to close above to pass the retest.  All 3 indices printed white-bodied Spinning Top candles.

On the day, seven of the 10 sectors ended up in the green.  The largest movers were Healthcare (+1.93%) and Financial Services (+1.38%).  Communications Services (-0.76%) was the largest losing sector on the day.  The SPY closed up 0.65%, the DIA up 0.60%, and the QQQ up 0.52%.  The VXX is off 1.56% to 18.26 and T2122 remains in the mid-range at 38.60.  10-year bond yields came back up to 3.323% and Oil (WTI) is up 1% to $82.74/barrel.  All-in-all, this was an indecisive day where the bears could not regain control, but the bulls also had no appetite for a fight.

In economic news, before the open, the ECB raised its rates 0.75% as expected.  Meanwhile, in the US, Weekly Initial Jobless Claims came in lighter than expected (222k versus 240k forecast) and Fed Chair Powell vowed to continue raising rates until inflation is under control.  He stressed that job growth is still very strong and therefore, inflation is job number one for the Fed.  Later in the day, EIA Weekly Crude Oil Stock (Inventories) shot higher with an 8.844 million barrel build (compared to a 250k barrel drawdown expected). Elsewhere, Treasury Sec. Yellen was politicking Thursday, touting the economic positives, calling for higher taxes on the rich as well as an increase in public assistance for the poor. However, on economy-related questions, she said that the cap on Russian oil prices will be a net positive for the global economy as well as the US.

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In big tech news, the White House announced 6 principles to guide “big tech reform” (which will be aimed at META, TWTR, AAPL, GOOGL, and AMZN).  The effort has broad bipartisan support (although for varying reasons) in Congress.  These principles were enhancing competition, robust privacy protections, rescinding company legal protections, increasing algorithm transparency, ending discriminatory algorithmic decision-making, and improving content moderation.  As you would expect, the tech giants are expected to spend tens of millions of dollars in campaign contributions and lobbying efforts to water down, control, or kill these legislative efforts.

In other stock news, Supreme Court Justice Gorsuch denied the appeal of ET against a $155 million award for not paying interest on late payments to various Oklahoma well owners.  Elsewhere, Reuters reported that TWTR agreed in June to pay whistleblower Zatko $7 million to settle a compensation dispute after TWTR terminated him.  Zatko (who goes by “Mudge”) is in the news for his congressional whistleblowing report and for being subpoenaed by Elon Musk in the trial over Musk’s TWTR buyout deal.  After the close, TMUS announced that it has authorized a $14 billion stock repurchase program to last through September of 2023. Finally, this morning TSLA announced it is “considering” building a lithium processing plant (to make battery materials) on the gulf in Texas. This announcement may have been a deflection as the company also replaced its leadership and set new facility goals at the TSLA Nevada “Gigafactory.”

In energy news, oil rose Thursday despite a large and unexpected rise in crude oil inventories after a 7.5-million-barrel outflow from the US Strategic Petroleum Reserve. US Gasoline inventories also rose 33k barrels (versus an expected drawdown of 1.67 million barrels.)  The primary cause for Thursday’s oil price rise was Russian President Putin threatening to end exports to the West should there be real action on the G-7 proposed “Russian oil price cap.”  Finally, a Wisconsin judge ruled that an ENB pipeline is trespassing on Indian tribal land (due to expired easements) and that the tribe is due financial compensation.  However, he also ruled the pipeline will remain in operation to avoid economic impacts and in recognition of Canada invoking a treaty.  The pipeline imports 540k barrels per day of Canadian oil for Wisconsin refineries.

Overnight, Asian markets were green across the board.  Hong Kong (+2.63%) was an outlier, while Taiwan (+1.20%), Shenzhen (+1.11%), and Singapore (+0.91%) led the region higher.  In Europe, stocks are following Asia at mid-day as we see green across the board.  The FTSE (+1.54%), DAX (+1.48%), and CAC (+1.62%) are leading a broad-based rally in early afternoon trade.  As of 7:30 am, US Futures are pointing toward a green start to the day in the US as well.  The DIA implies a +0.78% open, the SPY is implying a +0.85% open, and the QQQ implies a +1.08% open at this hour.  10-year bond yields are back down to 3.268% and Oil (WTI) is up almost 2% to $85.19/barrel in early trading.

There are no major economic news events scheduled for Friday.  However, we do have 3 more Fed members scheduled to speak (Evans at 10 am, Waller at noon, and George at noon).  Major earnings reports scheduled for the day are limited to ABM, KR, and WDH before the open.  There are no major earnings reports after the close.

After the close, DOCU and RH reported beats on both the top and bottom lines.  DOCU was up a whopping 18% in after-hours trading.  However, RH, while it did have a 10% after-hours range was flat as to 5 pm. So far this morning, ABM has reported beats on both the top and bottom lines while leaving guidance as previously stated.

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As we start the day, the dollar has retreated after reaching an all-time record high. The ECB rate hike has given the Euro the fuel it needed to climb back just above parity and the Yen rallied on frustration over how weak it has become recently. In CA, EIX warned residents that is likely to need to cut power to 50,000 residents, not over power shortages but due to the risk of starting wildfires. However, this is not to say the temperatures have not caused power supply issues as the state grid operator is in its fourth straight day of grid emergency status. In Ukraine, the fighting is heating up as the Ukrainian army has recaptured over 400 square miles of territory due to new offensives in both the East (Izium area) and South (Kherson region). In a related story, EU states (and other G-7 members) are continuing to work on Russian oil price caps, despite Putin’s escalating threats. And, of course, all eyes seem to be focused on the British royals after the Queen passed away Thursday afternoon.

With that backdrop, we should note the market is still in a downtrend and that downtrend line has not yet been reached for a test of resistance by any of the 3 major indices. Yesterday’s candle turned more positive late after being pretty indecisive most of the day. And, again, we saw a reversal after the opening gap. So, be prepared for volatility, at least early in the day. The T-line (8ema) remains a key level for all 3 indices today as the bulls test their strength and the same will be true of the downtrend when we reach those levels. So, keep an eye on those tests as well.

Remember that today is Friday and its time to pay yourself if you have profits. It’s also time to prepare for the weekend news cycle with appropriate position resizing, hedging, and/or flattening. Bear in mind that trading is our job, not a pastime or 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 new 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

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

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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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