On Wednesday the large-cap pause continued while the techs tried to keep going. The QQQ gapped up just over 0.75% and ground sideways until the Fed announcements. Meanwhile, the large-caps gapped only slightly, then sold off shortly after the open. After the FOMC announcements, volatility reigned with large swings in all 3 indices, closing on a down leg. On the day, the QQQ was up 1.20% (to another all-time high), the SPY was down 0.56%, and the DIA was down 1.07%. VXX was flat at 31.13 and T2122 gave back a bit, but still remains deep in overbought territory at 90.91. 10-year bond yields fell to 0.736% and Oil (WTI) rose slightly to $39.06/barrel.
The FOMC seemed to give something to everyone. The statement promised that rates will remain near zero through at least 2022 (3 years total) and committed to keep on buying assets at the rate of $80 billion in Treasuries and $40 billion in mortgage-backed securities per month. They also forecast a 6.5% decline in GDP this year (2020), but a massive bounce-back to a 5% GDP gain in 2021. On top of this Treas. Sec. Mnuchin said that he backs another stimulus plan. So, traders got everything they could have hoped for…a Fed backstop, unlimited continued easing, and likely more fiscal stimulus to boot.
After the close, GRUB agreed to be purchased by European company Just Eat Takeaway (this was a big loss for UBER who had also been bidding on GRUB). Elsewhere, sources told CNBC that BA expects to make the first 737 Max recertification flight by the end of June. SBUX also said it is closing 400 of its North American stores while adding drive-through and carryout-only operations to many of the remaining locations. In positive news, F says they will return to normal production levels by July 6
On the Virus front itself, the global headline numbers are 7,482,740 confirmed cases and 419,494 deaths. In India, the spread is getting out of control with major cities’ hospitals out of ICU beds even as they continue to open the economy again. In China, high-end good sales have rebounded. For example, Jewelry sales increased by 30% in April and 90% in May compared to the same months in 2019. Other luxury categories report similar results as the Chinese economy is back to normal.
In the US, we now have 2,066,611 confirmed cases and 115,140 deaths reported to date. TX had a third straight day of record coronavirus hospitalizations. In CA, the 9 most populous counties also reported a spike in cases two weeks after Memorial Day. The latest data model projections are now forecasting 170,000 US deaths before October (the mean of model ranges of 133k to 290k). Fear of this resurgence seems to be driving futures today and recoloring the Fed announcements and statements from Wednesday.
Overnight, Asian markets were strongly in the red all across the board. The same is true in Europe, where there is no green to be seen in any of the bourses at this point in their day. At 7:30 am, US futures are going to follow the rest of the world, pointing to a gap down of between 1.5% and 2.5%.
The major economic news for Thursday is limited to May Core PPI and Weekly Initial Jobless Claims (both at 8:30 am). Major earnings reports on the day are limited to ADBE, LULU, PLAY, and PVH all after the close.
It looks like Mr. Market is going to punish those who got too bullish at the open. However, the bulls have been on a tear for weeks now and as we said, a pullback has been due. So, the sky is not falling and the trend continues to point higher as of now. Stay focused on the short-term chart and keep locking in those profits and moving stops as you go. As always, above all don’t chase or predict.
Because of the gap down today we will be posting the Trade Ideas in the trading room and on the Members Only App. Trade your plan, take profits along the way, and smart. Also, don't forget to check for upcoming earnings. Finally, remember that the stocks/ETFs we mention and talk about in the trading room are not recommendations to buy or sell.
🎯 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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