Markets diverged Friday after a modest start.  SPY opened 0.15% higher, DIA opened 0.16% higher, and QQQ opened up 0.13%.  However, at that point QQQ rallied sharply the first 50 minutes before trading sideways with just a slight bullish trend the rest of the day.  For its part, after its open, DIA immediately began a long slow 5-hour selloff before ending the day trading sideways in a very tight range along the lows. Meanwhile SPY was somewhere between the other two major index ETFs, grinding sideways all day after its open.  This action gave us a white-bodied Spinning Top in the SPY, that delivered a new all-time high and new all-time high close.  At the same time, DIA printed a big-bodied, black candle that crossed back below its T-line (8ema).  Finally, QQQ printed a large, white-bodied candle that also delivered a new all-time high and new all-time high close. 

On the day, seven of the 10 of the sectors were in the red as Energy (-1.99%) was far out front leading the pack lower.  On the other side, Consumer Cyclical (+1.21%) was by far the strongest sector.  At the same time, SPY gained 0.19%, DIA lost 0.34%, and QQQ gained 0.89%. VXX fell mor than 1.5% to close at 41.76 and T2122 dropped into the lower half of its mid-range to close at 33.33.  Meanwhile, 10-Year bond yields fell again to 4.149 while Oil (WTI) dropped 1.65% to close at $67.17 per barrel. So, Friday saw some divergence in the market that is sitting at or near all-time highs.  Thursday was basically a day of consolidation.  That was the first such day in a while for SPY and QQQ, but a continuation of a consolidation process that has lasted 1.5 weeks in DIA.  This all happened on well below-average volume in the SPY, well-below-average volume in the DIA, and average volume in the QQQ.

The major economic news scheduled for Friday included Month-on-Month November Average Hourly Earnings, which was a tick stronger than expected at +0.4% (versus a forecast of +0.3% but in-line with October’s +0.4% reading).  On an annualized basis, November Average Hourly Earnings were also a tick higher than expected at +4.0% (compared to a 3.9% forecast but in-line with the +4.0% October value).  At the same time, Nov. Nonfarm Payrolls were considerably stronger than predicted at +227k (versus a +202k forecast an +36k October reading).  On the private side, Nov. Private Nonfarm Payrolls were also significantly higher than anticipated at +194k (compared to a +160k forecast and far stronger than October’s -2k number).  The Nov. Participation Rate fell two ticks to 62.5% (versus a 62.7% forecast and even down from October’s 62.6% reading).  Altogether, this led to a Nov. Unemployment Rate that was 4.2% (compared to a 4.2% forecast but up a tick from October’s 4.1%).  Later, Michigan Consumer Sentiment was up to 74.0 (versus a 73.1 forecast and November’s 71.8 reading).  At the same time, Michigan Consumer Expectations came in down quite a bit to 71.6 (compared to November’s 76.9).  Looking further out, Michigan 1-Year Inflation Expectations were up two ticks to 2.9% (versus a 2.7% forecast and much higher than November’s 2.6% survey result).  In the longer-term, Michigan 5-Year Inflation Expectations were 3.1% (compared to a 3.1% forecast and down a tick from the 3.2% November value). Later, October Consumer Credit was sharply higher at $19.24 billion (versus a $10.10 billion forecast and September’s $3.21 billion number).

In Fed news, on Friday, Fed Governor Bowman (the most hawkish voter) said she is worried about inflation.  Bowman said, “I continue to see greater risks to the price stability side of our mandate, especially when the labor market continues to be near full employment.”  She continued, “We’ve seen progress in lowering inflation but that progress seems to have stalled this year.” So, she concluded, “I would prefer that we proceed cautiously and gradually in lowering the policy rate, as inflation remains elevated.”  Later, new (as of August) Cleveland Fed President Hammack said, “I believe we are at or near the point where it makes sense to slow the pace of rate reductions.” Hammack continued, “Moving slowly will allow us to calibrate policy to the appropriately restrictive level over time given the underlying strength in the economy.”  Meanwhile, the more dovish Chicago Fed President Goolsbee said “I’m hopeful that conditions continue to evolve such that we can get in close to the (neutral, neither restrictive or expansionary rate) range.”  (Goolsbee would not specifically answer on what he felt was a neutral rate, but he did say it was “around 3%” (which is 1.5%- 1.75% below the current Fed rate.) 

Overnight, Asian markets were mixed but leaned toward the red side.  South Korea (-2.78%) paced the losses (by 2%) after their President survived an impeachment after his failed martial law and arrests of opposition.  Hong Kong (+2.76%) led the gaining exchanges by 2.5%.  In Europe, the picture is much greener with 10 of the 14 bourses above break-even at midday.  The CAC (+0.61%), DAX (-0.04%), and FTSE (+0.50%) lead the region higher in early afternoon trade.  Meanwhile, in the US, Futures are pointing toward a mixed and slightly down start to the day.  The DIA implies a +0.04% open, the SPY is implying a -0.03% open, and the QQQ implies a -0.17% open at this hour.  At the same time, 10-Year bond yields set at 4.18% and Oil (WTI) is up 1.34% to $68.10 in early trading.

The major economic news scheduled for Monday is limited to the NY Fed 1-Year Consumer Inflation Expectations survey (9 a.m.).  There are no major earnings reports scheduled for before the open.  Then, after the close, CASY, MDB, ORCL, and TOL report.

In economic news later this week, on Tuesday we get Q3 Nonfarm Productivity, Q3 Unit Labor Costs, WASDE Ag Report, and API Weekly Crude Oil Stocks report.  Then Wednesday, Nov. Core CPI, Nov. CPI, EIA Weekly Crude Oil Inventories, and the Nov. Federal Budget Balance are reported.  On Thursday, we get Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, Nove. Core PPI, Nov. PPI, and the Fed Budget Balance.  Finally, on Friday, Nov. Export Price Index and Nov. Import Price Index are reported.

In terms of earnings reports later this week, on Tuesday we hear from ASO, AZO, DBI, FERG, GIII, HEPS, OLLI, UNFI, and GME.  Then Wednesday, M, REVG, ADBE, and NDSN report.  On Thursday, we hear from, CIEN, AVGO, COST, and RH.  There are no reports scheduled for Friday.

With that background, market is looking undecided in the premarket.  All three major index ETFs opened the early session slightly higher, but have printed small black-body candles with more with than body so far.  They all three remain close to flat.  Keep in mind that the SPY, DIA, and QQQ all still sit very near all-time highs.  Two of the three are also still above their T-line (8ema). So, the short-term trend is now slightly bullish.  Looking further out, obviously the mid-term and longer-term trends also remain bullish sitting at or near those all-time highs.  In terms of extension, QQQ is again getting a bit stretched above its T-line, but the other two are close enough.  Meanwhile, the T2122 indicator is in the bottom half of its mid-range. So, both sides of the market have room to move today if they can find momentum.  In terms of the 10 Big Dogs, seven of the 10 are in red numbers at this point of the morning.  NVDA (-1.86%) and AMD (-1.67%) are 1.25% in front of other losers as China threatens an anti-monopoly investigation. At the same time, TSLA (+2.18%) is a full 2% ahead of the other two very modest gainers in early trading. TLSA is also leading in terms of dollar-volume traded, sitting at a about 1.5 times as much traded than NVDA, which itself has traded almost 6.5 times as much as the next one of the big dogs.  

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 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 gains are 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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