On Thursday, markets opened just on the red side of flat with the SPY gapping down 0.11%, DIA opening 0.05% lower, and QQQ gapping down 0.13%.  However, at that point, there was a modest divergence.  SPY immediately recrossed its gap, ground sideways in a tight range until 11 am, rallied until 1 pm, sold off back to the prior close at 2 pm, and then drifted back to the highs of the day at the close.  At the same time, DIA immediately recrossed its gap, rallied until 12:30 pm, and then drifted just a bit lower in a tight range the rest of the day.  However, QQQ continued lower until 10:50 am, rallied hard back to the prior close by 11:30 pm, and slowly drifted lower the rest of the day.  This action gave us large white-body candles in the large-cap index ETFs and a black-bodied Doji Harami in the QQQ.  The DIA (and maybe the SPY is you squint) could also be seen as a Doji Continuation Signal (Sandwich). 

On the day, all 10 sectors were in the green with Financial Services (+1.34%) leading the way higher (after banks aced the stress test) while Technology (+0.07%) lagged behind the other sectors.  At the same time, SPY gained 0.39%, DIA lost 0.75%, and QQQ lost 0.20%.  The VXX gained 2.17% to close at 25.37 and T2122 climbed back higher into the overbought territory at 94.32.  10-year bond yields fell to 3.842% while Oil (WTI) gained 0.37% to close at $69.82 per barrel.  So, Thursday saw divergence with QQQ (which has led all year) showing weakness and indecision at the same time the large-cap ETFs continued to move higher.  The question is whether this might be a result of quarter-end profit-taking in the leading tech names, simply a result of the big banks acing the Fed stress tests, or the portent of a trend change.  This happened on just less-than-average volume in the DIA and less-than-average volume in both QQQ and SPY.

The major economic news on Thursday, overnight Fed Chair Powell said the US bank sector was “strong and liquidity is very, very high.”  However, he also said, “we are very reluctant to say if the sector’s turmoil was over … (because) our job is to worry about things.”  He went on to maintain a more hawkish stance toward Fed policy.  Powell said, “The committee clearly believes that there’s more work to do, that there are more rate hikes that are likely to be appropriate.”  Later (once the sun came up in the US), Q1 GDP was revised much higher to an unexpectedly strong +2.0% (compared to a preliminary reading of 1.3% and a forecast of +1.4% but still weaker than the Q4 +2.6%).  At the same time, the Q1 GDP Price Index came in lower than expected at 4.1% (versus the forecast of 4.2% but still above the Q4 reading of 3.9%).  So, the economy remained strong and inflation was not rising quite as fast as expected.  The Weekly Initial Jobless Claims came in well below what was anticipated at 239k (compared to a forecast of 266k and the previous week’s value of 265k).  So, the labor market remains very strong.  Later, May Pending Home Sales fell more than projected at -2.7% (versus a forecast of -0.5% and the April value of -0.4%).  Finally, after the close, the Fed Balance Sheet showed to have fallen $21 billion on the week from $8.262 trillion to $8.341 trillion as the Fed continues to reduce its asset holdings.  Overall, the bears could only spin this news negatively in the sense that it means the Fed has more work to do…and that may mean a slow-down later.  On the other hand, the bulls (and realists in my mind) would say that so far, we have seen no recession, the economy remains resilient, and the labor market remains strong. Yet inflation has fallen, even if at a slower pace.  Elsewhere, despite Powell’s comments overnight, later Atlanta Fed President Bostic reiterated his belief that the path of inflation will allow the central bank to not raise rates again this year.  Bostic said, “We have reached a level of the nominal federal funds rate that should be sufficient to move inflation toward the 2% target over an acceptable timeframe.”

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In stock news, CGC completed the sale of its California facility on Thursday for $61.10 million.  This is the company’s fifth such deal since April 1 and is part of the company’s attempt to improve its balance sheet.  Elsewhere, Reuters reported that SNAP has hit 4 million paid subscribers ($3.99/mo.) a milestone since the launching its member service one year ago.  At the same time, Reuters also reported that VLKAF (Volkswagen) is in talks to adopt the TSLA standard for their electric vehicle plugs.  In other auto news, TM announced that their May sales jumped 10% from the same month in 2022.  This was mostly driven by hybrid sales which were up 26%.  Later, SPCE completed its first commercial space flight, which topped out at just under 53 miles altitude.  (SPCE says it has a backlog of 800 customers willing to pay between $250k and $450k to make the flight.)  Meanwhile, OSTK announced that after buying the intellectual property of bankrupt BBBY, it will rebrand itself as Bed Bath and Beyond despite not bidding on the defunct retailer’s store locations.  Late in the day, CVX announced it is offering to sell several oil and gas properties located in NM and TX.  The move comes after the oil giant agreed to buy shale firm PDCE last month (which operates in the same region) and continues the CVX trend of divesting properties in West TX and NM).

In stock legal and regulatory news, the UK Competition Appeal Tribunal rejected the UK Competition and Markets Authority (regulator) bid to delay an appeal of the MSFT purchase of ATVI.  As a result, the appeal will go ahead as originally scheduled at the end of July.  Elsewhere, AAPL will defend itself against EU Antitrust charges based on music streaming as originally alleged by SPOT. The oral hearings will take place today.  At the same time, a US court approved the CNNWQ (Cineworld) to restructure its debt which should allow the company to emerge from bankruptcy in July.  Meanwhile, the US Supreme Court threw out a $96 million award that had been given to MEI in its case against its former European distributor.  Out in San Francisco, arguments were completed Thursday in the FTC bid for a temporary restraining order against MSFT proceeding with its acquisition of ATVI (while FTC litigation continues).  No timeline has been given for a decision.  In related news, the government of Canada weighed in on the deal agreeing with the FTC and UK Competition Authority.  Ottawa sent a letter to the court hearing the FTC request for a restraining order stating they believe the deal will lessen competition and should be halted until the FTC can prove its case.  In military news, the US State Dept. announced the approval of the sale of 24 F-35 fighter jets to the Czech Republic for $5.62 billion.  The contractors for these planes are LMT, RTN, and BA.  Late in the day, the FDA approved BMRN’s gene therapy for hemophilia A.  The company said it expects about 2,500 patients in the US to be eligible to receive the treatment based on the approval.  (However, it is priced at $2.9 million per patient.)

After the close, NKE beat on revenue while missing by a penny on earnings.  It is worth noting that NKE also lowered its forward guidance.

Overnight, Asian markets were mixed again but leaned to the bullish side.  Malaysia (-0.84%) was the only significant loss with four other exchanges being just on the red side of flat.  On the bullish side, Thailand (+1.59%), India (+1.14%), and Shenzhen (+1.02%) were the leaders among the seven gainers with only Australia (+0.12%) moving less than half of a percent.  Meanwhile, in Europe, with the exception of Russia (-0.31%) we see nothing but green at midday.  The CAC (+1.15%), DAX (+1.17%), and FTSE (+0.70%) lead the region higher in early afternoon trade.  In the US, as of 7:30 am, Futures are pointing toward a strong start to the day at this point.  The DIA implies a +0.31% open, the SPY is implying a +0.39% open, and the QQQ implies a +0.50% open at this hour.  At the same time, 10-year bond yields are surging to 3.876% and Oil (WTI) is just on the red side of flat at $69.81 per barrel in early trading.

The major economic news events scheduled for Friday are limited to May PCE Price Index and May Personal Spending (both at 8:30 am), Chicago PMI (9:45 am), and Michigan Consumer Sentiment (10 am).  The only major earnings report scheduled for Friday is STZ before the open.  There are no reports scheduled for after the close.        

Do not forget that US markets are only open for a half-day on Monday and are closed Tuesday for the Independence Day holiday.

In miscellaneous news, the Fed said Thursday that 57 firms (41 banks and 15 service providers) have been certified to use the “FedNow” instant payments system when it launches in late July.  This includes JPM, BK, USB, and WFC among major banks.  Elsewhere, a former PFE employee and his friend were charged with insider trading related to PFE stock and the COVID-19 vaccine.  On the inflation front, preliminary data showed that Eurozone inflation fell more than expected in June to 5.5%.  This news comes just three days after ECB President Lagarde said inflation was too high and is set to remain there for too long as she announced an unexpected rate hike.  In other European news, the Netherlands formally joined President Biden’s export restrictions of semiconductor chipmaking equipment to China.  This primarily affects ASML which is the leader in chip lithography equipment.  (ASML announced Friday that it does not expect the restrictions to have a material impact on its 2023 financial projections.) Finally, union workers at the SPR Witchita KS plant (the primary fuselage supplier to BA) have approved a new deal. This ends the two-week strike with production to resume on July 5.

So far this morning, RAD and GBX reported beats to both the revenue and earnings lines.  Meanwhile, MKC and AYI both reported misses on revenue while beating on earnings.  On the other side, MSM beat on revenue while missing earnings by a penny.  It is worth noting that RAD and GBX both raised forward guidance.  (There were no guidance reductions at least as of yet.)  RAD (+51%) and GBX (+70%) were the only major surprises reported and significantly neither came against reduced forecasts.

With that background, it looks like all three major index ETFs are looking to move higher to start the last day of the quarter. All three of their premarket candles have large, white bodies and tiny wicks at this point. However, it is early and PCE data lays ahead before the open. Remember that this is the end of the quarter, which may mean window dressing and moves like AAPL pushing for a $3 trillion valuation (which it is very near anyway). In addition, with a half-day market on Monday and the holiday on Tuesday, many money managers plan to take Monday off. Again, this gives them extra temptation to sneak out early today to stretch the off-time into a mini vacation. The point is that volumes may die in the afternoon or even all day long with prices drifting higher into the weekend. (Remember the Trader’s Almanac rule of thumb that markets are happy (bullish) the day before long weekends and sad (bearish) when they have to come back to work after extra time off. As far as extension goes, none of the three major index ETFs is too far from their T-line. However, the T2122 indicator has climbed back up well into its overbought territory. So, while there is some room to move higher (and bear in mind that markets can remain extended longer than we can remain solvent betting on mean reversion), the bears do have the benefit of more slack to run. Remember to pay yourself on payday…take the profits you can and prep your account for the weekend (and perhaps 4-day) news cycle.

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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