Bulls Looking to Start Week With Gap Up

On Friday, markets opened within a half of one percent of the Thursday close.  Stocks then ran higher for half an hour and back down for an hour to the lows of the day.  The rest of the session was spent waffling back and forth between those extremes.  As we headed into the long weekend, this has left us with indecisive, Spinning Top candles in all 3 major indices.  The QQQ version was also a bullish Harami candle.  The biggest move on the day was made by the QQQ indice with the Energy sector far and away the weakest sector with Technology and Consumer Cyclicals leading the gains.  The VXX fell almost 3% to 24.66 and T2122 climbed, but markets remain deeply oversold at 3.66.   10-year bond yields fell sharply to 3.231% and Oil (WTI) got crushed, being down more than 6.5% to $109.85/barrel at day end.

In AMZN news, the New York Times reported an internal AMZN memo.  The memo said the company faces a massive national hiring and retention crisis.  For example, the memo said AMZN Phoenix AZ warehouses have already exhausted the entire “community employee candidate pool” due to massive turnover.  (There are no more people in the Phoenix area who either do not already work for AMZN or who would consider taking (or retaking) a job in an AMZN warehouse.)  So, the facility must either drop standards (eliminating drug and criminal checks), go understaffed, pay to bring in candidates from far away, or find ways to streamline and/or replace workers with robots.  The memo went on to say they project that Central CA (serving the LA region) warehouses will reach that level of labor emergency by year-end.  In addition, and more ominously, the memo said the company will face the same situation nationwide across the AMZN warehouse network by 2024.  The metric given in the memo is that the Amazon warehouses are facing a staggering 3% PER WEEK workforce attrition rate in their warehouses.

In other business news, thousands of US-originating flights were canceled over the weekend as airlines cite labor shortages. Among the airlines impacted, AAL canceled 28% of its flights, DAL canceled 26%, UAL canceled 22%, and LUV canceled 37% of its flights over the weekend.  This follows a similar situation with thousands of canceled flights on Memorial Day weekend.  The bottom line is that it appears US airlines are not going to be able to capitalize on the summer (heaviest) travel season again this year.  Elsewhere, employees of a Maryland AAPL store have voted to unionize.  While only a tiny portion of the overall AAPL workforce unionized, this is the first crack in the dam and the first loss since the company started spending considerable time and money to defeat union votes in other stores (such as Atlanta).

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In cryptocurrency news, all major coins continued their fall this weekend.  On Saturday, Bitcoin briefly fell below $17,750 and Ethereum fell below $900. That represents a 75% fall from the November highs for Bitcoin.  For Ethereum, the carnage is even worse as it has fallen 82% from its own high (also reached in November 2021).  CNBC also reported that a $10 billion Crypto hedge fund (Three Arrows Capital) is on the brink of insolvency.  This has resulted in panic selling by even the crypto die-hards and many supposedly hard-core “keep government out” industry leaders to calling for government regulation (and a government agency responsible for maintaining market liquidity).

In technical analysis news, the S&P500 posted its 10th down week in the last 11.  As a result (and as pointed out by a member of the HRC Trading Room), only 10 of the 502 tickers (1.9%) in the S&P500 are currently above their 50sma.  At the same time, 191 of 502 are trading at their 52-week low, including META, INTC, BAC, JPM, QCOM, HD, MU, ADBE, DIS, CMCSA, TXN, WFC, LOW, AMAT, F, TGT, GS, LRCX, ABT, and MS among others.  There are no members of the S&P500 trading at 52-week highs.

On the Russia story, on Saturday the CEO of Russian oil giant Rosneft (Sechin) told the press that BP remains it’s the company’s largest private shareholder (the Russian government owns a majority). In addition, he said BP has expressed a desire to remain an active participant in Rosneft projects.  In Germany, in an attempt to get ahead of next winter, the government has fast-tracked and utilities are now in the process of reopening coal-fueled electricity generation plants. This will allow the country to refill all its natural gas storage tanks before winter.  Germany, Poland, Italy, Austria, and Slovakia have all reported 40% reductions in gas shipments from Russia…reportedly due to “technical problems,” but clearly in retaliation over the EU sanctions and providing of weapons to Ukraine.  On the ground, the cities of Kharkiv (Northeast) and Mykolaiv (South) are under intense shelling again today as Russia continues its scorched earth approach to its land seizure campaign.  Meanwhile, in previously captured Mariupol the city’s Mayor reports that 100,000 people still have no access to drinking water, gas, electricity, or even sewage drainage.  Russia does provide some water once per week but is even restricting access to food in an effort to drive people to move to a Russian camp (former prison camp).

Overnight, Asian markets were mostly solidly green.  The lone exceptions were mainland China where Shenzhen (-0.51%) and Shanghai (-0.26%) lagged.  Taiwan (+2.35%), Hong Kong (+1.87%), and Japan (+1.84%) paced the gains.  In Europe, a similar story is taking shape at mid-day.  Only Russia (-1.08%) and Portugal (-0.81%) are in the red.  Meanwhile, the FTSE (+0.67%), DAX (+0.81%), and CAC (+1.18%) are headed higher with most smaller exchanges leading the way.  As of 7:30 am, US Futures are pointing toward a strong gap higher early.  The SIA implies a +1.51% open, the SPY is implying a +1.66% open, and the QQQ implies a +1.66% open at this hour.  10-year bond yields are back up to 3.284% and Oil (WTI) is up 1.75% to $109.88/barrel in early trading.

The major economic news events scheduled for release Tuesday are limited to May Existing Home Sales (10 am).  There are no major earnings scheduled for the day.

In economic news coming later this week, on Wednesday Fed Chair Powell testifies before Congress.  On Thursday we get Q1 Current Accounts, Weekly Jobless Claims, Mfg. PMI, Services PMI, Crude Oil Inventories, Fed Bank Stress Test Results, and Fed Chair Powell testifies again.  Finally, on Friday, we get Michigan Consumer Expectations and May New Home Sales.

On the earnings front, this is another very slow week.  On Wednesday, we hear from KFY, WGO, FUL, KBH, SCS, and WOR.  Then on Thursday, CAN, DRI, FDS, GMS, RAD, and FDX.  Finally, on Friday, we hear from KMX and CCL.

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Beware of chasing gaps. After a brutal week and a 3-day weekend to recover, traders look to be gapping the market higher at the open. However, whipsaw action has been the hallmark of markets lately and nothing material has changed since last week. The trend remains strongly bearish and we remain well oversold. If you just can’t help yourself from going long, be sure you are focused, hedged, and/or small. You will need to be quick. Remember, feeling better after an extra day off is no reason to start picking bottoms.

Trading is our job. So, do the work and follow the process. Wait for confirmation. Stick with your trading rules, trade with the trend, and consistently take profits when you have them. Always move your stops in your favor. Remember that the first rule of making big money in the market is to not lose big money in the market. So, don’t be stubborn. If you have a loss, just admit you were wrong, respect your stop, and take the loss before it grows. As they say, the best time to have taken a $500 loss is when you are now staring at a $1,500 loss. Lastly, remember that you get rich steadily over the long run in Trading…not by striking it rich on one or two trades. So, give up that lottery ticket mentality.

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.

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🎯 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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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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