Stocks opened more-or-less flat on Thursday.  For the first hour we saw an uneven, whippy selloff.  At that point be bounced up off of the T-line (8ema) and then the bulls stepped in to steadily rally the market the rest of the day, ending on the highs.  This left us with a Large Bullish Engulf in the SPY and QQQ as well as a strong white candle in the DIA.  Just the opposite of Wednesday, today nine sectors were green with only Energy in the red.  However, it is worth noting that the VXX fell 2.5% to 21.70 while the T2122 surged back up deep into the overbought territory at 94.96.  So, over-extension (especially in the tech names like AMD, FB, NVDA, TSLA, and NFLX) is worth keeping an eye on.  Elsewhere, 10-year bond yields were flat at 2.913% and Oil (WTI) climbed almost 2% (after being down hard earlier in the day) to $117.32/barrel.  All-in-all, the choppy consolidation we’ve seen all week continues.

During the day Thursday, ADP Private Payrolls came in far below forecast (+128k vs. +300k est.).  Then both Weekly Jobless claims and Q1 Productivity came in lower than expected and Q1 Unit Labor Cost came in a full percent higher than estimate (+12.6% vs. +11.6% forecast).  Later in the morning, April Factory Orders came in well below forecast as well.  This may be indicating that the economy is slowing and getting more expensive for companies as the Fed sees months of rate hikes ahead.  Fed Vice-Chair Brainard also told CNBC that “it’s very hard to see the cause (for any rate hike) pause.”  This comes after some of the more dovish members had suggested a fall pause to see if they had raised rated enough.

After the close, LULU, RH, and CRWD all reported beats on both the revenue and earnings lines.  Meanwhile, COO beat on revenue while missing on earnings. However, JOAN missed on both lines. 

SNAP Case Study | Actual Trade

In unhappy business news, TSLA CEO Musk says that he has “a super bad feeling about the economy” and says he wants to cut 10% of the TSLA workforce. As a result, TSLA has stopped new hiring for the time being. At the same time, F announced a new $3.7 billion investment in midwestern plants to increase production of electric F-150 as well as the Mustang vehicles. This will result in increased hiring, nominally in the same industry. Elsewhere, and for the second day in a row, a top JPM executive warned investors that they see the economy facing an “unprecedented number of economic shocks” (and as a result, company profits will suffer and stocks will fall).  Yesterday, JPM CEO Dimon referred to that issue as “an economic hurricane” being highly possible.  Finally, Japan’s largest steelmaker (Nippon Steel) has decided to postpone the firing of its large furnace, originally scheduled for this month. The furnace had been closed for upgrades, but the company has decided not to restart the furnace now due to decreased demand from Japanese Automakers, which are the largest buyer of Nippon steel.

On the Russia story, OPEC+ agreed to increase oil production by 648,000 barrels per day in July and August.  Recently, they had been adding 432,000 barrels/day each month.  So, the net increase was 216,000 barrels per day.  However, the group agreed to keep Russia as an active member. Elsewhere, US General Nakasone confirmed that US military hackers have conducted defensive, informational, and offensive cyber operations in support of Ukraine.  This was the first acknowledgment of US offensive hacking activity and the announcement is seen as a warning to Russia against any cyber-attacks on the US.  Finally, Russia has placed limits on its export of noble gasses (which are key ingredients in the production of semiconductor chips) until the end of 2022.

In miscellaneous news, Bloomberg reports that a survey of Americans who earn at least $250,000/year found that one-third of them report living paycheck-to-paycheck.  (I don’t know about you, but that sounds like a consumption problem to me.)  It was also announced that the Biden Administration will cancel the student debt of about 560,000 students of various Corinthian Colleges (around 100 campuses exited).  The for-profit companies were accused of predatory and unlawful practices and face many lawsuits from the Consumer Financial Protection Bureau.  The company filed for Bankruptcy in 2015 rather than face those lawsuits.

Overnight, Asian markets were mixed but leaned to the green side.  Hong Kong (-1.00%), Malaysia (-0.78%), Thailand (-0.74%) and Taiwan (-0.73%) paced the losses.  Meanwhile, Japan (+1.27%), Australia (+0.88%), and Shenzhen (+0.67%) led the more numerous gainers.  In Europe, stocks are mixed at mid-day.  The FTSE (-0.98%), DAX (+0.29%), and CAC (-0.02%) are typical of the continent with Russia (-1.54%) being an outlier in early afternoon trading.  As of 7:30 am, US Futures are pointing toward a down start to the day.  The DIA implies a -0.45% open, the SPY is implying a -0.68% open, and the QQQ implies a -1.06% open ahead of data.  10-year bond yields are up slightly to 2.924% and Oil (WTI) is off three-quarters of a percent to $115.96/barrel in early trading.

The major economic news scheduled for release Friday we get May Avg. Hourly Earnings, May Nonfarm Payrolls, May Participation Rate, and May Unemployment Rate (all at 8:30 am), May Services PMI (9:45 am), and May ISM Non-Mfg. PMI (10 am).  We also have a Fed speaker scheduled (Brainard at 10:30 am).  The major earnings reports scheduled for release include DOOO before the open. There are no reports scheduled for after the close.

So far this morning DOOO reported a miss on the revenue line while beating on the earnings line.

The chop continues as markets seem to want to open inside the recent up/down range and on a down leg. However, this is all before the Payroll data that all eyes will be watching later this morning. Until that pattern is definitely broken, we have to work with what the chart shows us. And that would be sideways chopping action with intraday volatility. Looked at from a longer-term perspective, this is just consolidation. However, for a Swing Trader, this chop can cut you to pieces. So, be careful. The Payroll data may give the market some direction, but at this moment market indecision is the rule.

Technically speaking, a new uptrend has not yet begun, even if the longer-term downtrend has been broken. We may just be working off some over-extension here with choppy consolidation. However, increasing T2122 levels is not the way we work off over-extension. Finally, with the weekend ahead, this might be a good day to sit on your hands or take off early, unless the Payroll data gives us a clear and sustainable direction. The bottom line is that the market still has to decide whether we’ll see a soft or hard landing of the economy following Fed hikes. Until we know, all I can do is follow the trend (which is flat on the week and down in the longer term) and acknowledge that we are still overbought.

Be very careful chasing any gaps/moves early. Whipsaw is very real during times when we are thinking about changing trends and as we saw yesterday, gap-chasers get hurt. Remember that the first rule of making big money in the market is to not lose big money in the market. Trading is our job. So, do the work and work the process. Stick with your trading rules, trade with the trend, and consistently take profits when you have them. Always move your stops in your favor. Don’t be stubborn. If you have a loss, just admit you were wrong and take it before it grows. As they say, the best time to have taken a $500 loss is when you are now staring at a $1,500 loss. Finally, remember that you get rich steadily in Trading…not by striking it rich on one or two trades.

Ed

Swing Trade Ideas for your consideration and watchlist: No Trade Ideas today. 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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