Stocks gapped lower to start the day Tuesday. SPY gapped down 0.29%, DIA gapped down 0.43%, and QQQ gapped down 0.28%. All three major index ETFs then saw 30 minutes of follow through to the downside. However, this was a Bear trap as price reversed and whiplashed higher. QQQ had recrossed it opening gap by 10:45 a.m., at which time SPY was just crossing up into its gap. Then after a sideways grind along the opening level, SPY started to rally again at 1:30 p.m. and broke above its prior close at 2:20 p.m. From there, SPY and QQQ ground sideways until a day-end rally the last 10 minutes took them out on their highs. Meanwhile, a 75-minute morning rally DIA was slower and did not even cross into its opening gap until 2:25 p.m. and from there ground sideways the rest of the day. This action gave us large, white-body candles with lower wicks in the SPY and QQQ while DIA printed a gap-down large-handle white Hammer. DIA crossed back below its T-line (8ema) while SPY printed a new all-time high close, and QQQ printed both a new intraday high and all-time high close.
On the day, nine of the 10 sectors were in the red with Technology (+0.69%) was way out front as the only green sector while Financial Services (-1.07%) was by far the worst performing sector. At the same time, SPY gained 0.24%, DIA lost 0.34%, and QQQ gained 0.68%. VXX was just on the green side of flat, closing at a very low 11.11 again and T2122 fell back into the oversold territory, to close at 15.45. On the bond front, 10-year bond yields fell to 4.400% and Oil (WTI) was just on the green side of flat at $77.83 per barrel. So, Tuesday was a Bear trap with a significant gap lower and then some follow-through. However, then we reversed and give-or-take some periods of consolidation, the rest of the day was a bullish rally. It is worth noting that AAPL (+7.26%) was the major driver behind the performance of QQQ and SPY. (AAPL also traded more than $35 billion of stock on the day, which is more than three times its average. Meanwhile, SPY traded less than half of its average volume and QQQ traded about one-third of its average volume. For its part, DIA traded a little more than half of its average volume.)
The only major economic news scheduled for Tuesday was limited to EIA Short-Term Energy Outlook, which raised its forecast to even higher records of US oil production. The agency now expects the US output to grow by 310k barrels-per-day to 13.24 million bpd. (About a 40k bpd increase in forecast since May’s version.) For reference, EIA expects global average oil production to be 102.6 million bpd. (So, we produce about 13% of the world’s oil.) At the same time, EIA expects US natural gas production to decrease by 1% in 2024 due to low natural gas prices. Then, after the close, the API Weekly Crude Oil Stocks report showed a larger-than-expected drawdown of 2.428 million bpd (compared to a forecasted 1.750 million bpd draw and far lower than the prior week’s 4.052 million bpd inventory build.
After the close, ADSK and CASY both reported beats on both the revenue and earnings lines. Meanwhile, ORCL missed on both lines. (However, ORCL rallied on new deals with GOOGL and OpenAI. CEO Ellison also told the call that he is open to a deal similar to the GOOGL deal with AMZN.)
In stock news, on Tuesday, GM announced its board had approved a new $6 billion stock buyback program. (Later, GM reduced its forecast for 2024 electric vehicle sales from 200k-300k down to 200k-250k.) As mentioned earlier, AAPL had a huge day on optimism that its “AI” projects announced Monday will drive profits. However, Elon Musk criticized AAPL both Monday and the Tuesday morning, threatening to ban AAPL devices from his X (Twitter) platform if they integrate OpenAI ChatGPT into its OS. At the same time, Bloomberg reported SPOT is planning a new, more expensive tier of subscription. Later, Reuters reported that UBS and CS may complete their merger by July 1 according to multiple company executives. At the same time, BA reported plane deliveries that less than half of its May 2023 deliveries (BA delivered 24 in May, down from 50 in May 2023). Later, AFRM announced that its buy-now-pay-later service will be integrated into AAPL’s Apple Pay later this year. Meanwhile, NTIOF announced it is buying CBWBF for $3.6 billion in what will become one of the largest Canadian regional banks.
Elsewhere, Reuters reported that Taiwan-listed chipmaker MediaTek is developing new ARM-based chips which will run MSFT Windows. This will be a direct response to AAPL using ARM-based chips in their computers the last couple of years. (It could threaten INTC and AMD, which are the major x86 platform chipmakers for Windows.) Later, the Wall Street Journal reported that Shari Redstone (inheritor of PARA control) has halted negotiations with Skydance Media after months and is now focusing on deals with companies interested in her company National Amusements, which owns 77% of PARA voting stock. After the close, BA (and NASA) announced a rescheduling of the return of BA’s Starliner space capsule from the Intl. Space Station. The announcement said reasons for the delay are fixing of faulty Starliner components, weather conditions, and ISS schedule issues (such as spacewalks). On Monday evening, NASA had posted that another helium leak was found in the Starliner propulsion system.
In stock legal and governmental news, on Tuesday, ALK lost its appeal of an $160 million trademark dispute with Virgin Group in the UK. At the same time, LVMUY had its Italian unit placed under court administration over labor exploitation after a probe of how its Chinese-owned subcontractors treated employees. Later, JNJ agreed to pay a $700 million settlement to resolve lawsuits by 42 states and Washington DC. (This has no impact on the 61k remaining lawsuits over the same “talc causing cancer” issue, but is a major step forward.) Later, carmakers are facing 1.5 million lawsuits, totaling $7.6 billion dollars, in the UK for allegedly cheating on diesel emissions tests. This includes F, VLKAF, and MBGAF companies as named defendants. At the same time, in Mexico, the Mexican government announced that VLKAF (Volkswagen) is formally under investigation for labor rights violations. Later, a class action lawsuit was filed against RTX, alleging the company discriminates against job seekers who are older than 40 years old. The suit was filed by AARP and two law firms.
Meanwhile, four FOX board members were subpoenaed in the company’s $2.7 billion defamation lawsuit filed by Smartmatic Voting Systems. At the same time, four more states have joined the original 15 states plus the District of Columbia and the US Dept. of Justice in the antitrust lawsuit against AAPL related to the smartphone app market. At the same time, the Federal Energy Regulatory Commission (FERC) ordered an LNG plant joint venture between BP, SHEL and others to provide customers documents about the mechanical problems that are plaguing the startup of the joint venture LNG plant in Louisiana. The delays have deprived customers (such as BP, ED, REPYY, and others) of billions of dollars in business because they cannot get the LNG to sell. Later, US chemical manufacturing industry groups filed suit against the EPA seeking to block the first-ever rule intended to reduce exposure of drinking water to 15,000 PFAS (so-called forever chemicals). The chemical manufacturers allege that the EPA rule is “arbitrary and beyond the agency’s authority to regulate.” After the close, Elon Musk ask a CA state court to dismiss his lawsuit against OpenAI and its CEO.
Overnight, Asian markets were evenly mixed with six exchanges in the red and six in the green. Taiwan (+1.18%) and South Korea (+0.84%) led gainers while Hong Kong (-1.31%) and Japan (-0.66%) paced the losses. In Europe, the picture is much greener at midday with only two of 15 bourses in the red. The CAC (+0.35%), DAX (+0.53%), and FTSE (+0.58%) lead the region higher in early afternoon trade. Meanwhile, in the US, as of 7:30 a.m., Futures are pointing toward a start that is modestly on the green side of flat. (Remember this is ahead of CPI data.) The DIA implies a +0.10% open, the SPY is implying a +0.13% open, and the QQQ implies a +0.16% open at this hour. At the same time, 10-year bond yields are down to 4.39% and Oil (WTI) is up 1.16% to $78.81 per barrel in early trading.
The major economic news scheduled for Wednesday includes May Core CPI and May CPI (both at 8:30 a.m.), EIA Weekly Crude Oil Inventories (10:30 a.m.), May Federal Budget Balance, FOMC Interest Rate Decision, Fed Statement, FOMC Economic Projections, Q2 Current Interest Rate Projection, Q2 1st Year Interest Rate Projection, Q2 2nd Year Interest Rate Projection, and Q2 3rd Year Interest Rate Projection (all at 2 p.m.), and Fed Chair Press Conference (2:30 p.m.). There are no major earnings reports scheduled for before the open. Then, after the close, AVGO and PLAY report.
In economic news later this week, on Thursday, we get Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, May Core PPI, May PPI, Fed Balance Sheet, and we hear from Fed member Williams. Finally, on Friday, May Import Price Index, May Export Price Index, Michigan Consumer Sentiment, Michigan Consumer Expectations, Michigan 1-Year Inflation Expectations, Michigan 5-Year Inflation Expectations, and the Fed Monetary Policy Report are reported.
In terms of earnings reports later this week, on Thursday, KFY, SIG, ADBE, and RH report. Finally, on Friday, there are no reports scheduled.
In miscellaneous news, news reports said Tuesday that Hamas responded positively to the US-backed cease-fire proposal. However, Hamas is seeking some “amendments” to the terms of the deal. Speculation on the potential impacts of a cease-fire on Red Sea shipping and oil markets began immediately. Elsewhere, the EU announced new tariffs on Chinese electric vehicles. These range from 38.1% for SAIC to 20% for Geely, and 17.4% for BYD. The announcement said that TSLA (which also has a plant in China) will get an “individually calculated” tariff rate at a later stage.
In mortgage news, the US national average for a 30-year fixed-rate conforming loan fell from 7.07% to 7.02% last week. This caused a 16% surge in mortgage applications versus the prior week (and also one year prior). This included a 28% pop in home refinance applications and a 9% increase in new home purchase applications.
With that background, the Bull appear to be in control early in the premarket. Both the SPY and QQQ opened the early session higher and have traded up a bit from there. This puts both of them at new all-time highs (if the market were to open at this price). For its part, DIA is also higher, but on more indecisive action as it retests its T-line (8ema) from below. So, the Bulls have the upper hand in the short-term but certainly not decisively. At the same time, the mid-term remains bullish in all three major index ETFs and the longer-term market remains very Bullish in trend. In terms of extension, QQQ is the only major index ETF far from its T-line and that is on the edge of being called too stretched. Meanwhile, the T2122 indicator is back in the top end of its oversold range. The bottom line is that the market has room to run in either direction but the Bulls have more slack to play with here. With regard to those 10 big dog tickers, seven of the 10 are in the green. NVDA (+0.51%), and MSFT (+0.44%) lead the gainers AAPL (-0.39%), fresh off its huge day Tuesday, is the laggard. Remember, this will all change when traders digest the CPI numbers at 8:30 a.m. Don’t be surprised if we see morning volatility, then drift into 2 p.m. and more volatility (even on no change by the Fed) after the FOMC statement as traders start gaming out the July meeting almost immediately from the tea leaves they get today.
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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