Markets were volatile on Tuesday with SPY gapping down 0.44%, DIA gapping down 0.50%, and QQQ gapping down 0.46%.  At that point, we saw divergence as the large-cap index ETFs sold off hard (reaching the lows of the day at 10:30 am).  Meanwhile, QQQ immediately recrossed its gap down to reach the highs of the day at about 9:50 am, only to reverse and catch up to the large caps finding the lows of the day at about 10:30 am.  From there, all three major indices got in sync to rally steadily until 1:30 pm.  Then prices ground sideways with a modest Bearish lean the rest of the day.  This action gave us indecisive candles in all three major index ETFs.  The SPY printed a Doji that bounced up off its T-line (8ema).  At the same time, QQQ printed a white-bodied Spinning Top that also bounce up off its T-line.  DIA printed a black-bodied Spinning Top that closed at the T-line. 

On the day, all 10 sectors were in the red as Energy (-1.54%) led the market lower and Healthcare (-0.11%) held up much better than other sectors.  At the same time, SPY lost 0.52%, DIA lost 0.73%, and QQQ lost 0.28%.  The VXX was flat at 27.35 and T2122 dropped back into the center of the mid-range at 51.35.  10-year bond yields fell to 3.723% while Oil (WTI) fell 1.17% to close at $70.94 per barrel. So, overall, it was an indecisive pullback day, where most of the pullback was found in the opening gap.  This all happened on a bit less-than-average volume with SPY being the least volume relative to its average. 

In major economic news on Tuesday, May Preliminary Building Permits came in hotter than expected at 1.491 million (+5.2%), compared to a forecast of 1.425 million and an April reading of 1.147 million.  At the same time, May Preliminary Housing Starts saw a massive jump (up 21.7% from April, the largest one-month jump since 2016) to come in well above the anticipated level at 1.631 million (versus a forecast of 1.400 million and an April value that was revised down to 1.340 million).  

In Fed-speak news, Vice Chair for Bank Supervision Barr told a panel that the Fed is exploring ways to speed up the bank oversight process.  He said they want to move away from scenario-based “one-size fits all” supervision and move toward a more bank specific “what would it take to break this bank or a large piece of it?” approach. However, he also said this is just an early-days effort.  (Bullard and Williams both spoke, but they gave prepared presentations of research and did not answer questions about FOMC direction.)

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In stock news, on Tuesday, EADSY (Airbus) announced the biggest order of jets ever placed.  The largest Indian airline (IndiGo) gave the company an order for 500 narrow-body jets for delivery starting in 2030.  (Interestingly, this order may be more about bragging rights as it tops the previous record order, placed with BA by India’s second-largest airline earlier this year by just 30 planes…although 70 of the BA planes are just an option to buy.)  Later, Reuters reported that KKR has agreed to buy $44 billion of the loans generated by PYPL’s European “Buy Now, Pay Later” business.  Elsewhere, HPE jumped on the bandwagon by announcing it is launching a cloud computing service designed to power AI systems such as ChatGPT.  (AMZN, MSFT, and GOOGL are already major players in that niche and IBM also recently announced plans to join that market.)  In the auto space, GM continues its parade of major internal combustion investments.  On Tuesday afternoon, the automaker announced a $920 million expansion of a diesel engine plant in OH.  Meanwhile, CIVI said Tuesday afternoon that it will acquire Permian Basin oil and gas operations from a private equity firm for $4.7 billion.

In stock legal and regulatory news, LMT has filed complaints with the FTC and Dept. of Defense related to the LHX $4.7 billion acquisition of AJRD that had been announced in December 2022.  (LMT is AJRD’s largest customer and LHX is an LMT competitor.)  Later the Financial Times confirmed and fleshed out a report I posted yesterday, saying CS (now owned by UBS) faces $128 million in fines from the UK and $300 million in fines from the Fed related to mishandling of Archegos Capital.  The added detail is that CS had only set aside $35 million as a reserve for those fines. Meanwhile, the US Dept. of Justice antitrust division announced plans to revise the DOJ’s bank merger review guidelines (last updated in 1995).  At the same time, GCI filed an antitrust lawsuit against GOOGL over claims of monopoly in how businesses purchase online ads.  Elsewhere, SNY said Tuesday afternoon that the International Chamber of Commerce arbitration court had rejected the claims from rival drugmaker (Boehringer Ingelheim) that SNY had been indemnified BI against lawsuits over cancer risk from the drug Zantac.  This relieves SNY of some legal risk since thousands of cancer-related lawsuits have been filed globally related to Zantac. The decision cannot be appealed.  After the close, the FTC proposed a rule to force cable TV providers such as CMCSA, CHTR, DISH, and others to disclose “all-in” pricing (including fees and separate charges) in promotional materials and on bills.  Finally, Reuters reports that the state of TX Dept. of Transportation will require any charging stations even partially backed by state funds to include a TSLA standard plug.  This move was said to be a response to F and GM adopting that standard recently.

After the close, LZB reported beats on both the revenue and earnings lines.  At the same time, FDX missed on revenue while beating on earnings.  It is worth noting, LZB also reduced forward guidance.  The only major surprise was a 36% upside earnings surprise by LZB.  (It is also worth noting that FDX and LZB both beat had lowered estimates.

Overnight, Asian markets were mixed but leaned toward the downside.  Shenzhen (-2.18%), Hong Kong (-1.98%), and Shanghai (-1.31%) led the region lower.  At the same time, we see the same picture taking shape in Europe at midday.  The CAC (-0.20%), DAX (-0.04%), and FTSE (-0.11%) are leading the way lower while a handful of smaller exchanges remain in the green.  In the US, as of 7:30 am, Futures are now pointing to a start to the day just on the red side of flat.  The DIA implies a -0.06% open, the SPY is implying a -0.05% open, and the QQQ implies a -0.11% open at this hour.  Meanwhile, 10-year bond yields are up to 3.748% and Oil (WTI) is off a tenth of a percent to $71.08 per barrel in early trading.

The major economic news events scheduled for Wednesday is limited to API Weekly Crude Oil Stocks (4:30 pm) and two more Fed Speakers (Chair Powell testifies at 10 am and Mester at 4 pm).  The only major earnings reports scheduled for Wednesday include PDCO and WGO before the open.  Then, after the close, ASTL, KBH, and SCS report.   

In economic news later this week, on Thursday, we get Q1 Current Account, Weekly Initial Jobless Claims, May Existing Home Sales, and three Fed Speakers (Waller, Bowman, and Mester).  Finally, on Friday, Manufacturing PMI, Services PMI, and S&P Global Composite PMI are reported while we hear from three Fed speakers (Bullard, Bostic, and Mester).

In terms of earnings reports, on Thursday, CAN, CMC, DRI, FDS, and GMS report.  Finally, on Friday, we hear from KMX.

In miscellaneous news, the TX state electricity grid (ERCOT) was forced to call for the voluntary conservation of power Tuesday as a heatwave continues across Southern states.   Elsewhere, mortgage demand was flat for the week even as national average mortgage rates for a 30-year, fixed-rate, conforming loan fell from 6.77% to 6.73%.  Refinance loan applications fell two percent while new home purchase applications rose by the same amount.  Finally, the US House Republicans continue their effort to make political points by targeting what funds are allowed to consider when investing money.  They are targeting “woke investing” by proposing an amendment to the Employee Retirement Income Security Act (ERISA) to prohibit qualified funds from investing in anything that is not solely focused on maximizing profit.  The lead author of the bill (Barr from KY) told CNBC “Environmental, social and governance investing has become a cancer and a fraud within our capital markets,” with the unstated part being that government knows what’s best and how people should be allowed to invest.  (Not exactly a libertine position.)

With that background, it looks like markets remain undecided this morning. With no economic data or brand name earnings reports on tap, this could open the door to talking heads to drive markets. Obviously, the semi-annual testimony from Chair Powell has the biggest probability of swinging sentiment. At this point (before his testimony), markets have priced in a 79.4% probability of another quarter-point hike in July. The chart itself looks like the DIA is trying to find support from the T-line. The other major indices may be in the same camp but have not touched the 8ema yet. Overall, the SPY and QQQ simply look like a minor pullback rest in a bull trend. DIA is similar but also the weakest of the three. In terms of over-extension, none of the major index ETFs are far from their T-line and the T2122 indicator is smack in the middle of its range. So, both the Bulls and the Bears have room to run if they can gain the upper hand.

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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