Markets gapped lower at the open Tuesday (down 0.58% in the SPY, down 0.60% in the DIA, and down 0.69% in the QQQ).  This resulted from disappointing international trade data out of China, a surprise windfall profits tax on banks in Italy, and a Moody’s downgrade of 10 US banks (and others put on warning for downgrade). After the open, all three of the major index ETFs followed through until about 11 am.  At that point, the Bulls stepped in and began a slow, steady rally that lasted right into the close.  This action gave us gap-down, white-bodied Hammer candles in the SPY and DIA as well as a gap-down, black-bodied Hammer candle in the QQQ.  Only DIA managed to make it up to its T-line (8ema) closing right up against the underside of that average.

On the day, six of the 10 sectors were in the red with Financial Services (-1.04%) and Technology (-1.02%) leading the way lower while Healthcare (+1.00%) held up much better than the other sectors.  At the same time, the SPY lost 0.43%, DIA lost 0.45%, and QQQ lost 0.85%.  The VXX gained 1.76% to 24.91 and T2122 fell but again but remains in the mid-range at 36.13. 10-year bond yields dropped back again but remain above 4% at 4.024% while Oil (WTI) gained 1.05% to close at $82.80 per barrel.  This all took place on a bit below-average volume in all three major index ETFs.  So, Bears gapped the market lower and had control in the morning.  However, by late-morning the Bulls clocked in and led a slow comeback rally the rest of the day.  Once again, this felt like a news-driven jolt and then a modest drift up on the day.  It felt like the opposite of Monday, with the fall characterized more by a lack of conviction than a true change of direction.

The major economic news reported Tuesday included June Exports, which increased slightly to $247.50 billion (compared to the May value of $247.10 billion).  We also got June Imports, which fell slightly to $313.00 billion (down from the May $316.10 billion).  Together, these gave us a June Trade Balance of -$65.50 billion (a bit below the forecast of -$65.00 billion but better than the May deficit of $68.30 billion).  Then, after the close, the API Weekly Crude Oil Stock report gave us an unexpected oil inventory build of 4.067 million barrels (versus a forecast calling for a drawdown of 0.233 million barrels and far better than the prior week’s 15.400-million-barrel drawdown.  

In Fed-speak news, Philly Fed President Harker (voter) told an event that barring any abrupt change in the direction of recent economic data, the FOMC may be at a stage where it can leave rates where they are for some time.  Harker said, “Absent any alarming new data between now and mid-September, I believe we may be at the point where we can be patient and hold rates steady and let the monetary policy actions we have taken do their work,” … “we will need to be there for a while.”  Meanwhile, Atlanta Fed President Bostic (a non-voter and dove) again said he does not believe any more hikes will be needed.  At the same time, NY Fed President Williams (voter) was quoted in a New York Times interview to say “I think we’re pretty close to what a peak rate would be.”  (However, he did not go so far as to commit to one more hike or not.) 

SNAP Case Study | Actual Trade

In stock news, AAPL and SSNLF (Samsung) will both become “anchor investors” in the IPO of chip designer Arm (which is being spun off by current owner SFTBY (Softbank).  Arm is the chip platform that AAPL chose when dropping INTC chips and going with their so-called “AAPL chip” (Arm-based) chips for AAPL computing products.  NVDA and AMZN are also in talks to become anchor investors but neither were announced Tuesday.  Elsewhere, BA deliveries fell in July with the company supplying 43 aircraft (down from 60 in June and compared to Airbus delivering 65).  At the same time, ADT announced it is selling its commercial security business unit to a private equity firm for $1.6 billion. Meanwhile, negotiations are getting contentious in the auto industry as the UAW threw the latest contract offer from STLA in the trash can after the company proposed cutting vacation days, cutting healthcare coverage, cutting 401(k) contributions, and lifting the cap on temporary workers.  (Current UAW contracts with STLA, GM, and F all expire September 14.)  After the close, DIS made an interesting and odd decision. The family-oriented entertainment company’s ESPN unit agreed to launch a sports betting service under the name “ESPN Bet” in partnership with PENN.  (PENN will pay ESPN $1.5 billion in cash and offer $500 million in warrants to purchase PENN shares over a 10-year period.)

In stock legal, regulatory, and government news, UK media regulator Ofcom said on Tuesday that it has opened an investigation into SNAP for potentially not doing enough to remove underage users (under 13) from its platform.  At the same time, NVO announced that a large study has found its wildly-popular obesity drug Wegovy has also been shown to have clear cardiovascular benefits.  Elsewhere, US regulators fined nine companies a total of $549 million on Tuesday.  WFC and BNPQY received the largest fines and have agreed to pay penalties for having brokerage employees who used off-record communications tools like WhatsApp.  WFC paid $125 million and BNPQY (BNP Paribas) $35 million to the Commodity Futures Trading Commission.  Other firms hit with fines include among others including BMO, MC, and HLI.  Later, a US federal judge ruled against GOOGL, dismissing the company’s bid to have a privacy lawsuit thrown out.  The $5 billion class action suit alleges GOOGL collected users browsing histories without obtaining user consent and without even explicitly telling users it would do so.  At the same time, LUV announced it will appeal a fringe TX federal judge ruling that said three of the airline’s senior attorneys must attend “religious liberty training” held by a TX conservative Christian legal group.  During the afternoon, the NHTSA announced it has opened an investigation into 1.1 million older STLA Dodge Ram 1500 pickup trucks over power steering loss issues.  Near the close, a judge dismissed ABNB’s lawsuit against New York City for what the company had called a “de facto ban” on short-term rentals (because hosts were required to register with the city).  The judge cited 12,000 complaints the city had received about short-term rentals in a 5-year period preceding the law.  After the close, a US Appeals Court panel of judges in OH rejected an appeal by SBUX, ruling that the company must rehire seven employees fired in Memphis for supporting a union.

After the close, ACCO, AKAM, AMC, ARRY, BHF, CLOV, CPNG, DOOR, FG, FNV, GNW, GO, LYFT, OSCR, QGEN, QDEL, RXT, RIVN, SLF, SMCI, and TWLO all reported beats on both the revenue and earnings lines.  At the same time, IOSP, LILA, and MODG missed on revenue while beating on earnings.  On the other side, EDR, FLT, FNF, TTWO, and TOST beat on revenue while missing on earnings.  However, DAR, IAC, and JXN missed on both the top and bottom lines.  It is worth noting that SMCI, TOST, and LYFT raised their forward guidance. 

Overnight, Asian stocks were mixed but leaned toward the green.  South Korea (+1.21%), Malaysia (+0.76%), and Thailand (+0.65%) led the more plentiful gainers while Japan (-0.53%), Shenzhen (-0.53%), and Shanghai (-0.49%) paced the five down exchanges.  Meanwhile, in Europe, we see green across the board at midday.  The CAC (+1.17%), DAX (+1.03%), and FTSE (+0.78%) lead the region but the gains are broad-based in early afternoon trade.  In the US, as of 7:30 am, Futures are pointing toward a start to the day just on the green side of flat.  The DIA implies a +0.09% open, the SPY is implying a +0.13% open, and the QQQ implies a +0.09% open at this hour.  At the same time, 10-year bond yields are up a bit to 4.036% and Oil (WTI) is up another percent to $83.78 per barrel in early trading.

The major economics news scheduled for Wednesday is limited to EIA Crude Oil Inventory (10:30 am).  The major earnings reports scheduled for before the opening bell include BERY, BHG, BCO, BAM, CRL, GEO, HMC, NOMD, OGE, PENN, RBLX, SONY, SWX, SLVM, UWMC, VTNR, VSH, and WEN.  Then, after the close, APP, CACI, CANO, CENX, CDE, CPA, CRGY, ENS, G, ILMN, JAZZ, MFC, NGL, PAAS, TTEK, VSAT, DIS, and WYNN report.

In economic news later this week, on Thursday, we get July CPI year-on-year, July CPI month-on-month, Weekly Initial Jobless Claims, July Federal Budget Balance, and the Fed Balance Sheet.  Finally, on Friday, July PPI month-on-month, Preliminary Michigan Consumer Sentiment, Preliminary Michigan Consumer Expectations, Preliminary Michigan 5-year Inflation Expectations, and the WASDE Ag report are delivered.

In terms of earnings reports, on Thursday, we hear from AQN, BABA, AIT, AZUL, TAST, HBI, KELYA, EYE, NVO, ACDC, RL, USFD, WWW, ASTL, BAP, and NWSA.  Finally, on Friday, ACDVF reports.

In miscellaneous news, President Biden designated almost 1 million acres near the Grand Canyon (AZ) as a national monument Tuesday.  The purported reason was that the lands are sacred to Havasupai and Hopi Native American tribes.  However, the land is also known to hold about one percent of US uranium reserves and this designation will prevent new mining leases on that land, potentially heading off environmental damage to the area.  Elsewhere, Ag analysts expect the US corn crop to be the second-largest on record after rains in July helped a critical growing stage.  The WASDE report comes out on Friday, but the USDA has already increased the percentage of corn cropland rated from good to excellent by four percent.  (Corn prices are down 18% since the end of June.)  Meanwhile, US credit card balances passed $1 trillion in Q2 according to data released by the NY Fed.  This took them to a record $1.03 trillion as Household debt rose 0.1% to $17.06 trillion.

In late-breaking news, China fell into deflation registering a drop in its CPI for the first time in more than two years.  Prices fell 0.3% in China during the month of July while PPI fell for a 10^th consecutive month, contracting 4.4%.  This adds to the pressure on Beijing to add more monetary and fiscal support to its economy.  Elsewhere, US Mortgage demand fell again because interest rates climbed to a 21-year high during the week.  The average 30-year, fixed-rate, conforming loan rate jumped to 7.09% (up from 6.93% the week prior).  This led to a 3% decline in new purchase loan applications and a 4% decline in refinance mortgage applications.

So far this morning, ATS, CRL, EONGY, GEO, HMC, ICL, PENN, VSH, VWDRY, and WE all reported beats on both the revenue and earnings lines.  (Oddly, after beating lowered estimates, WE also warned of possible bankruptcy after going public only in 2021.  They cited the pandemic as hurting the company.)  Meanwhile, ADRNY, NOMD, SONY, and WEN missed on revenue while beating on earnings.  On the other side, VTNR and BCO beat on revenue while missing on earnings.  Unfortunately, BAM and OGE missed on both the top and bottom lines. It is worth noting that GEO also lowered its forward guidance.

With that background, it looks like the Bulls are retesting their T-line (8ema) from below in the premarket this morning and QQQ is not that far below its own. However, we should also note that all three major index ETFs are giving us small, indecisive (Doji-like) candles in the early session. So, there is not a lot of conviction. The short-term trend is bearish and the longer-term trend remains Bullish. As far as extension goes, all of them are close to the T-line and the T2122 indicator remains in its mid-range. So, both sides of the market have plenty of room to run…if they can find momentum. We only have EIA Oil Inventory news scheduled during the day today. So, again, this should be a light news week overall until the CPI print on Thursday.

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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