Stocks gapped down at the open Monday (down 0.63% in the SPY, 0.53% in the DIA, and 0.77% in the QQQ).  From that point, the SPY and QQQ rode the rollercoaster sideways around that opening price.  The DIA did something similar, just at a higher-level floating back and forth inside the morning gap.  This action is giving us inside day, Spinning Top (DIA and QQQ) or Doji (SPY) candles in the major indices (or Bearish Harami in the QQQ).  The QQQ also bounced up off its T-line (8ema) and 200sma while the two large-cap indices did not get low enough to retest the T-line level or any other major averages.  All of this happened on much lower-than-average volume, except in the DIA where money was going to seek shelter.

On the day, eight of the ten sectors are in the red with Energy (+0.65%) way out front in leading the gains while Technology (-1.11%) lagged far behind.  Meanwhile, SPY lost 0.70%, DIA lost 0.33%, and QQQ lost 1.16%.  The VXX was down 1.5% to 17.66 and T2122 fell but remains deep in the overbought territory at 91.75.  10-year bond yields spiked up to 4.054% and Oil (WTI) is down 1.99% to $86.16/barrel.  So, overall, it was an indecisive day as markets get ready to take in heavy earnings and wait on the Fed hike/verbiage on Wednesday.

For the month, DIA led the comeback, posting a huge 13.96% gain (the largest gain in 45 years).  SPY came in second, giving us an 8.13% gain.  However, the beleaguered high-tech QQQ lagged behind, posting only a 4% gain.  It is worth noting that SPY showed significant lower wick for October, printing a Bullish Harami candle.  However, QQQ showed major indecision, printing a white-bodied, Spinning Top Bullish Harami candle for the month.  While the DIA closed above the September candle, none of the 3 major indices has challenged the monthly downtrend yet.

SNAP Case Study | Actual Trade

In economic news, Chicago PMI came in below expectations at 45.2 (compared to a forecast of 47.0 and a September reading of 45.7).  In the afternoon, Bloomberg reported that 37% of US small businesses could not pay their rent in October. Still, this is questionable data from a mailed survey of 4,789 businesses.  (The same survey more than half of MA and 49% of NJ businesses could not make rent.)  During the evening, President Biden said he would ask Congress to implement a tax on “windfall profits” that oil and gas companies have been raking in since the war in Ukraine began.

In stock news, RIVN notified people who have reservations to buy one of their vehicles that R1T “Max Pack” trucks will not start until 2024.  This is far after the original “summer 2023” promised delivery.  In China, China Southern Airlines has canceled the planned return to the use of BA’s 737 Max planes.  This would have been the plane’s first flight in China since 2019.  In other China news, Reuters reports that fearing Covid-19 (after a previous worker lock-in), scores of workers at AAPL’s primary iPhone supplier (Foxconn) climbed fences and fled the main iPhone plant in Zhengzhou.  Meanwhile, AMZN announced it will stop listing products from its largest Indian sellers (Appario).  Recent data is not available, but in 2019 Appario accounted for 35% of AMZN sales in India.  Elsewhere, DAL pilots have voted to authorize a strike if union negotiators can’t reach a deal with the airline.  However, due to the Federal “cooling off period” law, there is not expected to be any impact on Thanksgiving travel.

After the close, AFL, CAR, NXPI, WMB, CVI, BCC, AMKR, LEG, HOLX, AWK, VAC, CNO, ANET, SBAC, STRL, and VNO all reported beats on the revenue and earnings lines.  Meanwhile, TEN, SYK, ACHC, KMT, and CIVI all beat on revenue while missing on earnings.  On the opposite side, CINF, HLF, CHE, and CLW all missed on revenue while beating on the earnings line.  However, GT and FLS both missed on the top and bottom line.

So far this morning, MPC, PSX, EPD, LLY, LEA, LDOS, MPLX, CNP, WEC, AME, SON, XYL, LPX, IT, ARCB, BLD, IDXX, WAT, and CHT have all reported beats to the top and bottom lines.  Meanwhile, TM, UBER, KKR, TAP, HSC, NEM, AIRI, and ARNC reported beating on revenue while missing on earnings.  On the other side, BP, PFE, SONY, ETN, HSIC, WAB, TRI, and SEE all missed on revenue while beating on the earnings line.  Unfortunately, ZBRA, LCII, CTLT, and LGIH missed on both the top and bottom lines.   Note that PFE, AME, XYL, IT, BLD, and SOFI all raised forward guidance.  However, LLY, ZBRA, CTLT, LGIH, WAT, and USAC all lowered their forward guidance.

Overnight, Asian markets leaned heavily to the green side.  Only Malaysia (-0.99%) and New Zealand (-0.19%) were in the red.  Meanwhile, Hong Kong (+5.23%), Shenzhen (+3.24%), and Shanghai (+2.62%) roared higher to lead the region to gains.  (The apparent cause for Chinese stocks exploding higher were rumors of talks aimed at reopening the country from Covid restrictions.  However, Chinese PMI also came in slightly better than expected at 49.2.)  In Europe, the exchanges are also nearly (and strongly) green across the board at midday.  Only Greece (-0.24%) is in the red, while the FTSE (+1.63%), DAX (+1.28%), and CAC (+1.74%) are leading a broad-based and strong rally in early afternoon trade. As of 7:30 am, US Futures are pointing toward a gap higher to start November.  The DIA implies a +0.60% open, the SPY is implying a +0.90% open, and the QQQ implies a +1.15% open at this hour.  Meanwhile, 10-year bond yields have plummeted again to 3.949% while Oil (WTI) is up 1.5% to $87.82/barrel in early trade.

The major economic news events scheduled for Tuesday include Mfg. PMI (9:45 am), October ISM Mfg. PMI (10 am), September JOLTs Job Openings (10 am), and API Weekly Crude Oil Stocks (4:30 pm) are reported.  The major earnings reports scheduled for the day include AJRD, AGCO, AME, ARCB, ARNC, BP, CTLT, CNP, CIGI, ETN, ECL, LLY, EPD, FOXA, BEN, IT, HSIC, IDXX, INCY, KKR, LCII, LEA, LDOS, LGIH, LPX, MPC, TAP, MPLX, NEM, PFE, PSX, SEE, SPG, SIRI, SON, SONY, SUN, SYY, TRI, BLD, TM, UBER, WAB, WAT, WEC, XYL, and ZBRA before the open.  Then after the close, AMD, ABNB, AMCR, AIG, ANDE, AIZ, BXC, BFAM, CZR, CWH, CAKE, CHK, CRUS, CLX, CRK, DVN, EIX, EA, ET, ENLC, EXR, FMC, THG, PEAK, LBTYA, LFUS, MTCH, MCK, MDLZ, OI, OKE, PARR, PRU, PSA, RNR, REZI, SCI, SKY, SMCI, TA, UNVR, UNM, VRSK, VOYA, WU, and YUMC report. 

In economic news later this week, on Wednesday, we get ADP Nonfarm Employment, EIA Crude Oil Inventories, FOMC Statement, Fed Rate Decision, and FOMC Press Conference.  Then on Thursday, Imports/Exports, September Trade Balance, Weekly Initial Jobless Claims, Q3 Nonfarm Productivity, Q3 Unit Labor Costs, Services PMI, Sept. Factory Orders, Oct. ISM Non-Mfg. PMI report. Finally, on Friday, we get Avg. Hourly Earnings, Oct. Nonfarm Payrolls, Oct. Participation Rate, and Oct. Unemployment Rate.

This is a huge earnings week as on Wednesday, ATI, APO, AVNT, BLCO, BDC, EAT, BR, CHRW, CDW, FUN, CVE, CRL, CLH, CEQP, CVS, EMR, ENTG, ETR, EL, EXPI, RACE, FYBR, GNRC, GSK, HZNP, HUM, JLL, MKL, MLM, NYT, NMR, DNOW, ODP, OMI, PARA, PSN, PGR, RITM, ROK, SABR, SMG, SBGI, SITE, SHOO, TT, TRMB, UTHR, VSH, VMC, YUM, ZBH, ALB, ALGT, ALL, ATUS, AFG, APA, ACA, EQH, BBSI, BKNG, CPE, CF, CHRD, CTSH, CLR, CCRN, CW, EBAY, EQIX, EQX, ETSY, ES, FLT, FTNT, GFL, HST, HHC, ICLR, IR, KMPR, KD, LHCG, LNC, LUMN, MRO, MATX, MET, MGM, MKSI, MOD, NUS, NTR, OPAD, PK, PDCE, PAA, PAGP, PTC, QRVO, QCOM, QDEL, O, RCII, ROKU, RYI, SIGI, SUM, SLF, SU, RUN, RIG, TSE, TTMI, TPC, VSTO, WCN, WTS, WERN, WES, WSC, YELL, and Z report.  On Thursday, GOLF, ADT, WMS, AER, APD, ALIT, ABC, APG, APTV, ARW, AAWW, BALL, BALY, GOLD, BHC, BCE, BRKR, CQP, LNG, CI, COMM, COP, CROX, CMI, DSEY, DNB, SATS, EPAM, ESAB, EXC, FIS, FOCS, GIL, GTN, GPRE, HII, H, INGR, NSIT, IBP, ICE, IRM, ITT, JCI, K, KTB, MAR, MD, MRNA, MODV, MUR, NGD, OGN, PZZA, PH, BTU, PTON, PENN, PNW, PWR, REGN, QSR, RCL, SRE, SPR, STLA, SRCL, TRGP, TPX, TX, TEVA, VNT, W, WCC, WLK, ZTS, AGL, AL, ATSG, AEE, COLD, AMGN, AMN, TEAM, AVB, BECN, SQ, CVNA, CVCO, CE, COIN, CODI, ED, CTRA, CTVA, BAP, CWK, DASH, DBX, DXC, NVST, EXAS, EXPE, FND, FRG, GDDY, IHRT, ILMN, LYV, MTZ, MELI, MTD, MCHP, MNST, MSI, ZEUS, OTEX, OPEN, PYPL, CNXN, PBA, KWR, RGA, RKT, SEM, SVC, SWKS, SM, SBUX, TDS, TS, TWLO, USX, VTR, and WBD report.  Finally, on Friday, ADNT, AES, AMCX, AXL, AMRX, BEP, CAH, CNK, D, DUK, ENB, EOG, EVRG, FLR, GTES, GLP, HSY, HUN, IEP, KOP, LAMR, LSXMA, MGA, PBR, PPL, SYNH, TEF, TIXT, and VST report.

In late-breaking news, JNJ announced they will buy ABMD at $380/share (a 50% premium to Monday’s closing price of $252.08). The $16.6 billion deal will strengthen JNJ’s cardiovascular business. The other news is the big lift China has given to global markets overnight. Just be careful, because at this point it seems to be based on rumor or opening which could evaporate like mist. Beyond those, the main news continues to be the flood of earnings data. Results are shown above, but in general, I would characterize them as pretty good (especially when you consider the constant mantra of “inflation and recession” we have heard for months). With that said, continue to be cautious, and don’t be in a hurry to chase a gap this morning. Wait until the market open has settled. Remember that rotation continues to be in play among sectors and asset classes (capitalization). You need look no further than the massive DIA performance in October to show that rotation. (When was the last time the stodgy, mega-cap, DIA components led a rally this way? I’ll tell you, it’s been 45 years.)

The trend remains bullish across the market indices and today’s premarket action is looking for a gap back up to retest Friday’s highs (so far). Extention from the T-line (8ema) is not really a factor although the DIA is just a bit extended. However, T2122 says we are still overbought. Unfortunately, markets only tend to react to overbought or oversold conditions. They can stay extended for quite some time (longer than we can stay solvent as the saying goes). Finally, don’t forget the Fed announces Wednesday and this is likely another time where the wording of the statement and exactly how Powell answers questions will be at least as important as the rate hike size. So, a pause until the Fed announcement may well be in the cards.

Be deliberate and disciplined. Don’t be stubborn. Remember that it is 100 times more important to avoid big mistakes than it is to pick big winners. If you have a loss, admit you were wrong and take the loss before it gets out of hand. And when price does move in your direction, always move your stops in your favor (remember the “Legend of the man in the green bathrobe“…it is NOT HOUSE MONEY, it’s all OUR MONEY!). Trading is not your hobby. It’s a job. The money is real. 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. I know the Powerball is huge right now, but give up that lottery ticket mentality.

See you in the trading room.

Ed

Swing Trade Ideas for your consideration and watchlist: FCX, GDX, MARA, AI, TSLA, AMAT, LTHM, QCOM, AAPL, JNK. You can find Rick’s review of tickers on his YouTube Channel here. Trade your plan, take profits along the way, and smart. Also, remember to check for impending earnings reports. Finally, remember that any tickers 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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