Monday was an interesting day, both dead and volatile at different times driven by the news that the Fed may raise bank capital requirements on one hand and AAPL product announcements on the other.  The SPY opened flat (up 0.06%), DIA opened up 0.05%, and QQQ opened down 0.05%. Then, markets diverged as the DIA sold off until 11:30 am before rallying slowly and steadily until 1 pm followed by another selloff that went all the way into the close (on the lows).  At the same time, SPY chopped around until 10:30 am before starting a slow, steady rally that reached the highs of the day at about 1:10 pm.  From there SPY saw stronger selling to reach the lows of the day at 3:10 pm before grinding slightly bullish into the close.  Meanwhile, QQQ rallied all morning (in a more volatile wave) reaching the high of the day at about 1:10 pm.  From there it too sold off even more sharply with large black candles at 2:35 pm and 3:05 pm before rallying back up off the lows in the last hour of the day.  This action gave us a white-bodied Shooting Star type candle in the QQQ, a black-bodied Spinning Top type candle (with a larger upper wick) in the SPY, and a Bear Harami candle in the upper third of Friday’s candle in the DIA.

All three major indices remain above their T-line (8ema).  On the day, seven of the 10 sectors were in the red as Industrials (-0.88%) led the way lower, and Communication Services (+0.44%) held up better than other sectors. At the same time, DIA lost 0.57%, SPY lost 0.19%, and QQQ gained 0.07%.  VXX fall 1.83% to end at 30.61 and T2122 fell back just outside the overbought territory at 76.00. 10-year bond yields fell all day (after being up big early) to end at 3.685% while Oil (WTI) also pulled back after very early day gains to end the day flat at $71.86 per barrel.  So, again, Monday was a Dr. Jekyll – Mr. Hyde day where there were periods of dead action, periods of slow and steady trend, intraday reversals, and also 5-minute periods of extreme move in the QQQ.  However, taken from a higher-level view, it was just an indecisive day. All this took place on just below-average volume in the QQQ, just above-average volume in the DIA, and significantly lower-than-average volume in the SPY.

In major economic news, the May S&P Global Composite PMI came in a bit lower than expected at 54.3 (compared to a forecast of 54.5 but still above the April reading of 53.4).  At the same time, the May Services PMI also came in a bit lower than expected at 54.9 (versus a forecast of 55.1 but above the April value of 53.6).  A few minutes later, April Factory Orders were reported well below what was anticipated at +0.4% (compared to a forecast of +1.1% and even below the March reading of +0.6%).  The May ISM Non-Mfg. Employment was also a bit low at 49.2 (versus the forecast of 51.0 and even below the April value of 50.8).  Finally, the May ISM Non-Mfg. PMI was also below expectations at 50.3 (compared to a 51.8 forecast and the April reading of 51.9).  So, overall, we saw several moderately worse-than-expected economic data point on the day.  However, at the same time, all the PMI readings above 50.0 signal economic expansion.  By themselves, they mean little.  The question is whether this data shows enough slowing to influence Fed opinions.

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In stock news, on Monday, UNH made an unexpected $3.26 billion all-cash offer to buy AMED. This news saw AMED gap 13% higher and follow-through to close at the highs, up 15.44% ($91.74).  At the same time, UBS also announced it expects to close its CS takeover by June 12.  Elsewhere in the Finance space, Canadian insurer Fairfax Financial Holdings has agreed to buy 63 real estate construction loans from KW for $2.1 billion.  (This is notable because KW acquired those loans plus 11 others from PACW during the regional bank scare.  KW had paid $2.4 billion which was a $200 million discount.  As part of the deal, Fairfax also gets a $200 million equity position in KW.)  In the auto space, GM said Monday that it will invest more than $1 billion to upgrade internal-combustion pickup truck production capacity at two Flint, MI plants.  In the tech space, AAPL gapped and ran higher (up 2.2% at a point) to an all-time high ahead of its Developer Conference (product announcements). However, markets then sold the news as AAPL went on a bearish tear in the afternoon to close down 0.76%.  Meanwhile, BX announced it has agreed to buy a San Antonio Texas resort from RHP for $800 million.

In stock legal and regulatory news, a US judge has postponed the start of a trial between the city of Stuart FL, and MMM over “forever chemicals” in the city water supply.  This was because the parties said they were nearing a settlement.  The suit had sought more than $100 million in filtration and remediation damages.  Meanwhile, the NHTSA announced that TSLA has agreed to voluntarily recall a small number (a couple hundred) Model Y cars over a safety concern related to a loose fastener on the steering wheel (which could detach completely).  While this was a tiny recall, TSLA Model Y vehicles have had reports of detached steering wheels globally dating back to May 2020 and TLSA said only 105 of its Model Ys could be affected.  Elsewhere, the state of TX won the latest round of its antitrust lawsuit against GOOGL as the case was ordered returned to a federal court in TX on Monday.  (GOOGL had been fighting to have the case moved to NY.)   After the close, NSC filed to ask a US judge to throw out a class action lawsuit brought on behalf of the 500,000 area residents impacted by the toxic chemical spill resulting from the train derailment in East Palestine OH.

After the close, JOAN reported misses on both the revenue and earnings lines.  The earnings miss was a 59% downside surprise.

Overnight, Asian markets were mixed but leaned to the red side.  Shenzhen (-1.58%), Australia (-1.20%), and Shanghai (-1.15%) paced the losses.  Meanwhile, Japan (+0.90%), South Korea (+0.54%), and Taiwan (+0.28%) led the gainers.  In Europe, we see the same picture taking shape at midday with only four (of 15) bourses in the green.  Greece (+1.56%) is by far the biggest gainer while Russia (-1.88%) is by far the biggest loser.  However, as always, the CAC (-0.27%), DAX (-0.16%), and FTSE (-0.29%) lead the region (this time lower) in early afternoon trade.  In the US, as of 7:30 am, Futures are pointing toward a very modest red start to the day.  The DIA implies a -0.08% open, the SPY is implying a -0.06% open, and the QQQ implies a -0.05% open at this hour.  At the same time, 10-year bonds are down to 3.674% and Oil (WTI) is down nearly 2.34% to $70.46 per barrel in early trading.

The major economic news events scheduled for Tuesday are limited to EIA Short-term Energy Outlook (noon) and API Weekly Crude Oil Stocks Report (4:30 pm).  The major earnings reports scheduled for the day are limited to ABM, ASO, CHS, SIEN, CNM, CBRL, FERG, GIII, SJM, and THO before the open.  The after the close, CASY and PLAY report. 

In economic news later this week, on Wednesday, April Imports/Exports, April Trade Balance, and EIA Crude Oil Inventories are reported.  On Thursday, we get Weekly Initial Jobless Claims, Fed Balance Sheet, and Bank Balances with the Fed.  Finally, on Friday, the WASDE Ag Report comes out.   

In terms of earnings reports later this week, on Wednesday, BF.A, CPB, OLLI, UNFI, GME, GEF, and TCOM report.  On Thursday, we hear from DBI, REVG, SIG, TTC, DOCU, and MTN.  Finally, on Friday, NIO reports.

In miscellaneous news, at its Global Developer Conference, as expected, AAPL announced a new “mixed-reality” headset (for a paltry $3,500 which is about three times the price of the current top-end brands) which will not be launched until sometime in 2024.  At the same time, AAPL announced that the last of its computers will move away from INTC chips to “its own chips” (produced by TSM using the Arm architecture).  In addition, AAPL announced a new iOS 17 for the next generation of iPhones to be announced/offered later this year.  Elsewhere, in Ukraine overnight Russia blew up a dam on the massive Dnipro River, unleashing about 5 billion gallons of water toward 80-100 villages.  While crop production should not be impacted in a huge way, global Wheat prices jumped 3% on the news.  (Obviously, the more important issue for Russia was the terroristic destruction of Ukrainian electric infrastructure (hydro-electric plant), and flooding delaying and encumbering a Ukrainian counter-offensive in the South of the country. Finally, China asked its biggest banks to lower deposit rates again overnight. Theoretically, this would drive more consumer spending and/or possibly support more lending (or at least free up some bank money to cover bad loans). Obviously, the overall goal is to stoke the Chinese economy and help its floundering real estate sector.

So far this morning, FERG, THO, SJM, CIEN, and GIII have all reported beats on both the revenue and earnings lines.  Meanwhile, ABM, CNM, and CHS all missed on revenue while beating on earnings.  (CBRL and ASO report closer to the open.)  There have been no announced guidance changes.  It is worth noting that major surprises came from GIII (a 244% upside earnings surprise) and THO (a 98% upside earnings surprise).  However, even though both were major upside surprises, both were also down sequentially from the prior quarter’s earnings.

With that background, it looks like markets are looking to consolidate a bit more with small, black-body candles just below the prior close in the premarket. However, none of the three major index ETFs appear to be headed to a retest of their T-line (8ema) today, at least at this point. So, the bullish trend remains intact as of now. In terms of over-extension, only the QQQ is extended from (above) its T-line and the T2122 has also dropped back (just) outside of the overbought territory. So, more consolidation or pullback may be in order, but technically we have a little room left to run before we are truly over-extended. As mentioned above, even on small-body indecisive days like Monday, intraday volatility and chop have been the norm. So, again remain alert.

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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