The major index ETFs gapped lower at the open in response to December Payrolls.  SPY gapped down 0.61%, DIA gapped down 0.43%, and QQQ gapped down 0.74%. From there, it was a volatile roller-coaster ride in all three with morning follow-through selloff into noon, a rally back toward the opening level until 2 pm. and the another sell cycle into the close.  This action gave us gap-down, black-body candles in all three major index ETFs.  SPY seemed to bounce up off its trendline dating back to October 2023.  DIA broke out of its recent consolidation dating back to December.  This took place on roughly average volume in all three.

On the day, Friday, nine of the 10 sectors were in the red with Financial Services (-2.50%) was out front leading the market lower.  On the other side, Energy (+0.25%) was the only sector in the green and 1.20% stronger than the rest of the sectors.  At the same time, SPY lost 1.53%, DIA lost 1.60%, and QQQ lost 1.57%.  At the same time, VXX jumped 6.71% higher to 49.45 while T2122 fell back to the lower half of its oversold territory to 8.86.  On the bond side, 10-Year Bond yields popped to 4.763% and Oil (WTI) jumped 3.64% to $76.61 per barrel.  So, Friday was the Bears Day.  The December Payroll Data set the tone and the Bulls never really had an answer.

On the day Wednesday, six of the 10 sectors were in the green as Basic Materials (+0.32%) and Industrials (+0.22%) led the gainers.  On the other side, Technology (-0.37%) and Utilities (-0.32%) paced the losses.  Meanwhile, SPY gained 0.15%, DIA gained 0.19%, and QQQ gained 0.02%.  At the same time, VXX was on the red side of flat at 46.34 while T2122 rose, but remained in the oversold territory at 18.91.  On the bond side, 10-Year Bond yields were at 4.693% and Oil (WTI) fell 1.24% to $73.33 per barrel.  So, Wednesday was an indecisive day.  Markets all opened flat and then went back-and-forth from green to red and back to green all day long.

The major economic news Friday included December Month-on-Month Average Hourly Earnings, which came in as expected at +0.3% (compared to a +0.3% forecast, but down a tick from November’s +0.4%).  On an annualized basis, December Year-on-Year Average Hourly Earnings were down to +3.9% (versus a forecast and November value of +4.0%).  At the same time, Dec. Nonfarm Payrolls were MUCH stronger than expected at +256k (compared to a +164k forecast and a November reading of +212k).  On the private side, Dec. Private Nonfarm Payrolls were also MCU stronger than was predicted at +223k (versus a +135k forecast and a +182k November value).  We also had a Dec. Participation Rate that remained stable at 62.5%.  Altogether, this gave us a Dec. Unemployment Rate that was down a tick to 4.1% (compared to a forecast and November reading of 4.2%).  Later, Michigan Consumer Sentiment came in below the predicted number at 73.2 (versus a 74.0 forecast and December value). Looking ahead Michigan Consumer Expectations fell to 70.2 (compared to a 73.3 December reading). On the inflation side, Michigan 1-Year Inflation Expectations popped to 3.3% (versus a 2.8% forecast and Dec. value).  Further out, Michigan 5-Year Inflation Expectations were also 3.3% (compared to a 3.0% forecast and December reading).  Then, after the close, the Fed’s Balance Sheet showed a $2 billion increase to $6.854 trillion.

After the close, WDFC reported a huge miss on revenue while also beating significantly on earnings.

Overnight, Asian markets were red across the board.  Taiwan (-2.28%) was by far the biggest loser, followed by India (-1.47%) and Australia (-1.23%).  However, losses were wide and significant.  In Europe, a very similar picture is taking shape at midday with just one of the 14 bourses above break-even.  The CAC (-0.71%), DAX (-0.59%), and FTSE (-0.30%) lead the region lower.  Meanwhile, in the US, Futures are pointing toward a gap down to start the day.  The DIA implies a -0.20% open, SPY is implying a -0.70% open, and QQQ implies a -1.06% open at this hour.  At the same time, 10-Year Bond Yields are up at 4.766% while Oil (WTI) is spiking another 2.22% to $78.26 per barrel in early trading.

The major economic news scheduled for Monday is limited to December NY Fed 1-Year Consumer Inflation Expectations (11 a.m.) and Dec. Federal Budget Balance (2 p.m.).  There are no major earnings reports scheduled before the open.  However, after the market close, KBH reports. 

In economic news later this week, on Tuesday, we get Dec. Core PPI, Dec. PPI, and API Weekly Crude Oil Stocks.  Fed member Williams speaks at 3:05 p.m.  Then Wednesday, Dec. Core CPI, Dec. CPI, NY Empire State Mfg. Index, EIA Weekly Crude Oil Inventories, and Fed Beige Book are reported.  We also hear from Fed members Kashkari and Williams.  On Thursday, we get Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, Dec. Export Price Index, Dec. Import Price Index, Philly Fed Mfg. Index, Philly Fed Mfg. Employment, Dec. Core Retail Sales, Dec. Retail Sales, Nov. Business Inventories, Nov. Retail Inventories, and the Fed Balance Sheet.  Fed member Williams also speaks again.  Finally, on Friday, Dec. Building Permits, Dec. Housing Starts, Dec. Industrial Production, and Nov. TIC Net Long-Term Transactions are reported.

In terms of earnings reports later this week, there are no earnings reported scheduled for Tuesday.  On Wednesday, BK, BLK, C, JPM, WFC, CNXC, FUL, and SNV report.  Then Thursday, we hear from BAC, FHN, GS, INFY, MTB, MS, PNC, TSM, USB, UNH, and JBHT.  Finally, on Friday, CFG, FAST, RF, SLB, STT, TFC, WBS, and WIT report.

With that background, the Bears gapped all three major index ETFs lower to start the premarket.  SPY and QQQ followed-through to the downside before joining DIA in a rebound rally.  This leaves the SPY as a black Hammer, QQQ as a white Hammer, and DIA as a white large-body, small-wick candle. However, all three are well below Friday’s close.  All three remain well below their T-line (8ema).  So, the short-term trend is strongly bearish.  The same is true in the mid-term.  However, in the long-term, only DIA has broken its uptrend line.  So, on balance, long-term the market remains Bullish.  In terms of extension, all three of the major index ETFs are now extended too far below their T-line and T2122 sits in the lower half of its oversold area. So, the Bulls have room to run and the market is in need of at least a relief rally. (Still, that does not mean it will come before traders go broke betting on a reversal too soon.)  In terms of the 10 Big Dogs, all 10 are in the red with TSLA (-2.96%) being the worst off and META (-0.39%) holding up best.  For a fourth-straight day, NVDA (-2.73%) leads in dollar-volume traded by about 35% over TSLA (which itself has traded nine times as much as the next most liquid stock).

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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