CPI Number and How it is Spun On Deck

Markets gapped down at the open by about half a percent on Thursday and then just waffled sideways until shortly after 1 pm.  At that point, the bears took over and sold off the market the rest of the day, closing on the lows. This left us with large, black candles with longer upper wicks in all 3 major indices.  All 3 also fell through their T-lines again today, as well as breaking down through the bottom of the recent choppy consolidation range.  All 10 sectors were heavily in the red, with Technology (-2.95%) being the most bearish and Communications (-1.51%) being the least bearish.  On the day, SPY lost 2.36%, DIA lost 1.92%, and QQQ lost 2.68%.  The VXX climbed just under 6% to 23.06 and T2122 dropped hard and is now sitting toward the bottom end of the mid-range at 25.33.  10-year bond yields rose to 3.051% and Oil (WTI) fell three-fourths of a percent to $121.23/barrel.

In business news, in an unexpected move, the CEO of DIS fired its head of TV content, citing that the fired executive (Peter Rice) was not a team player.  SFIX (reporting after the bell Thursday) also announced it is laying off 15% of its salaried workforce in a cost-cutting measure.

After the close, MTN, SFIX, and DOCU all reported beats on revenue while missing on earnings.  In particular, SFIX badly missed posting a much larger loss than expected.  DOCU was down as much as 20%, SFIX was down 17%, but MTN rallied almost 7% in post-market trade.

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On the Russia story, Russian President Putin compared himself to Peter the Great (who led Russia during the conquest of the Baltic coast in the 1700s) and appeared to hint at further territorial expansion in the future.  Elsewhere, Russia cut its key interest rate by 1.5% while also saying that the decline in economic activity (due to sanctions) was smaller than expected in April.  However, the central bank justified the rate cut by saying that inflation was slowing faster than expected.

In international interest rate news, Bloomberg reports that EU area bonds are selling off today after the ECB failed to give guidance on how they would reduce the risk of fragmentation among EU members.  Italy and Greece are leading the selloff while Germany and France remain the strongest.  In Japan, the Finance Minister, Finance Regulator, and Central Bank all put out a joint statement that they would act if needed to prevent the further slide of the Yen.  (Analysts say the Yen weakness, being at a 24-year low, is due to policy divergence of the Bank of Japan and the US Federal Reserve.

The reason for Asian stock weakness is that after a brief reprieve, China will re-implement a city-wide lockdown in Shanghai on the weekend.  This is scheduled to be a brief lockdown and is intended to allow another mass Covid test for all citizens as the case count is rising again. However, the release of this story does not exactly explain why mainland Chinese markets remained green today.

Overnight, Asian markets were red across the board with the exception of mainland China.  Shenzhen (+1.90%) and Shanghai (+1.42%) were the only green in the region.  India (-1.68%), Japan (-1.49%), and Australian (-1.25%) led the region lower.  In Europe, stocks are red all across the region at mid-day.  The FTSE (-1.26%), DAX (-1.42%), and CAC (-1.72%) lead the way as usual on trade volume alone in early afternoon trading.  As of 7:30 am, US Futures are pointing toward a mixed, flat open well ahead of CPI data.  The DIA implies a -0.23% open, the SPY is implying a -0.11% open, and the QQQ implies a +0.16% open at this hour.  10-year bond yields are down slightly to 3.038% and Oil (WTI) is up three-quarters of a percent to $122.45/barrel in early trading.

The major economic news events scheduled for release Friday include May CPI (8:30 am), Univ. of Michigan Consumer Sentiment (10 am), the WASDE Report (noon), and the May Federal Budget Balance (2 pm).  There are no major earnings reports scheduled for the day.

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Most of the talk is about last night’s Congressional hearings on the January 6 insurrection. However, the big news (and reason for premarket wait-and-see) is the CPI report at 8:30 am. Regardless of how the number comes in, we can expect it to be bad. Consensus forecasts are calling for 8.3% and even if it comes in light that does not mean inflation cannot speed up again. Nonetheless, we can expect a knee-jerk reaction, either way, the report lands…and then a whipsaw back the other direction after reconsideration by traders.

Technically speaking, the bears have the ball now that we have failed down out of the choppy consolidation area. In terms of extension, we are not in the oversold territory yet and while we are a fair way from the T-line after yesterday’s big move, I would not call this over-extended to the downside. If you are a long trader, you need to be very careful as there is room to move before the next support level. However, if you are on the bear side, just keep in mind that the move lower will likely not be in a straight line. With the weekend ahead, this may be a good day to get small, get hedged, or sit on your hands.

Remember to be very careful chasing gaps/moves early. The whipsaw is very real during times when we are thinking about changing trends and as we’ve seen lately, gap-chasers can get hurt. 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. Remember that the first rule of making big money in the market is to not lose big money in the market. So, 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 over the long run in Trading…not by striking it rich on one or two trades. So, give up that lottery ticket mentality.


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

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🎯 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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Disclosure: We do not act on all trades we mention, and not all mentions acted on the day of the mention. All trades we mention are for your consideration only.

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