Markets opened modestly higher on Friday (gapping up 0.17% in the SPY, up 0.30% in the QQQ, and up just 0.12% in the DIA).  However, this open just fueled the Bulls to rally strongly until 11 am in all three major indices. At that point, the two large-cap index ETFs ground sideways (with a very slight bullish trend in the SPY and a slight Bearish trend in the DIA) for the rest of the day.  At the same time, QQQ trended modestly higher from 11 am to 3:15 pm, before taking profit the last 45 minutes of the day.  This action gave us gap-up large white-bodied candles with smaller upper wicks in all three major index ETFs.  The DIA also printed a Morning Star signal (while just failing to close above its T-line (8ema) after a retest.  SPY did cross back above its T-line and QQQ is now very extended above its T-line. 

On the day, all 10 sectors were in the green with Technology (+2.56%) way out front leading the market higher, and Energy (+0.06%) and Healthcare (+0.10%) lagging way behind the other sectors. At the same time, the SPY gained 1.30%, DIA gained 0.94%, and QQQ gained 2.56%.  VXX dropped 3.83% on the day to end at 35.65 and T2122 climbed back up into the mid-range at 50.84. 10-year bond yields fell slightly to 3.81% while Oil (WTI) gained 1.32% to end the day at $72.78 per barrel.  So, Friday was the Tech Bulls’ Day again, with TSLA (+4.72%), AMD (+5.55%), and AMZN (+4.44%) pulling the rest of the QQQ and SPY upward on the promise of AI-based chip sales after a blowout report from MRVL.  Fear of a US Debt Default fell off as all day the reports said a deal was very close.  This all happened on greater-than-average volume in the QQQ and DIA and slightly below-average volume in the SPY.   

In major economic news Friday, April Durable Goods Orders came in much stronger than expected at +1.1% (compared to a forecast of -1.0% but still much weaker than the March reading of +3.3%).  At the same time, the April PCE Price Index also came in stronger than expected on the annual rate at + 4.4% year-on-year (versus a forecast of +3.9% and a March value of +4.2%).  On the month-on-month metric, April PCE Price Index came in right on target at +0.4% (against a forecast of +0.4% but still stronger than the March +0.1% reading).   Meanwhile, the April Personal Spending month-on-month came in very hot at +0.8% (versus the forecast of +0.4% and much higher than the March reading of +0.1%).  On the business side, Preliminary April Retail Inventories showed a decline of 0.1% (compared to the March 0.1% increase).  Later in the morning, Michigan Consumer Sentiment came in higher than anticipated at 59.2 (versus a forecast of 57.9 but still less than the April value of 63.5).  These measures show a stronger consumer than economists have been expecting with a slightly better outlook for the future. 

SNAP Case Study | Actual Trade

In stock news, the IPO of ATMU, Atmus Filtration Technologies (a spinoff of CMI), opened at $21.67 and closed at $22.40 after pricing at $19.50/share on Thursday night.  CMI raised $275 million from the IPO and retains 83% control of the company. Meanwhile, Mexican President Lopez Obrador said Friday that his government may buy up 50% of the stock in Banamex (the C Mexican subsidiary, which C announced Wednesday it would spin off via IPO).  He told the press Mexico has $3 billion for this purchase and if his stock valuation is anywhere near correct it means C will take a major hit on the unit (which it purchased for $12.5 billion in the early 2000s).  On Saturday, MSFT announced it will discontinue some of its hardware products like ergonomic keyboards.  Elsewhere, in a potential blow to major importers (AMZN, DOLE, TGT, WMT, FDP, LOW, HD, etc.) the Panama Canal has ordered ships to lighten their loads and also increased transit fees due to a severe drought lowering the level of lakes used to flood docks over the course of the canal.

In stock legal and regulatory news, a US judge approved $50 million settlement of a class-action lawsuit against AAPL over defective MacBook keyboards.  Elsewhere, MSFT laid out the grounds of its appeal against the British Competition and Markets Authority’s veto of the company’s acquisition of ATVI.  MSFT said its appeal is based on “fundamental errors” in the CMA’s assessment of the company’s cloud gaming services.  At the same time, six major European insurers have quit the Net-Zero Insurance Alliance (aimed at forestalling climate change by committing to reduce greenhouse gases) in the 36 hours prior to the Friday close.  The insurers all cited US Republican political attacks (on behalf of fossil fuel industries) as the GOP has prioritized the financial health of those industries over climate.  Bank of England Governor (and co-chair of the COP26 project) Carney decried the losses and warned the political attacks are now interfering with the Insurance industry’s ability to price climate risk, harming their investors, policyholders, and the local governments that will suffer climate impacts.  Meanwhile, ETRN’s long-delayed Mountain Valley natural gas pipeline (in WV and VA) was dealt another legal blow Friday.  The US District Court in DC ruled that the US Federal Energy Regulatory Commission had “inadequately explained its decision not to prepare a supplemental environmental impact statement” (that would address the) “unexpectedly severe erosion and sedimentation along the pipeline’s right-of-way.”  Later, PFE and MRNA were sued by ALNY over patent infringement related to the two company’s COVID-19 vaccines.  The ALNY suit seeks unspecified damages, but PFE made $37.8 billion and MRNA made $18.4 billion from the sale of the vaccines in question.  Finally, a San Francisco Federal jury awarded SONO $32.5 million in its suit against GOOGL over patent infringement related to wireless audio devices.

In debt ceiling news, on Friday, Treasury Sec. Yellen announced that numbers were refined and it has now been determined that June 5 would be the actual date of default (as opposed to “as soon as June 1”).  However, by Saturday afternoon, the two sides had reached an agreement.  The deal increases the debt ceiling enough to avoid a similar situation for two years.  It raises defense spending by a whopping 11% over 2023 even kicking in an additional (unexpected) 3% while keeping non-defense spending roughly flat in 2024 (versus ’23 levels) and then increasing it by 1% in 2025.  The deal phases in some work requirements for SNAP (food stamps) but then ends those same work requirements in 2030.  It also rescinds about $30 billion in unspent COVID-19 aid (not to include veterans’ medical care or $5 billion for creating the next generation of vaccines and treatments).  The agreement also calls for a “lead environmental agency” to develop new comprehensive environmental reviews intended to appease the oil and gas industry by theoretically speeding up project approvals.  

Nobody wins or loses a negotiation.  However, based on reactions, it appears the MAGA faction of Republicans believes they lost.  There is enough there for them to claim credit (such as reducing IRS staffing).  However, the lack of reality in what they promised “they” would do and the fact that outrage is their political style likely means they were always going to be “the loser” of any deal.  On the other side, many of the most Progressive Democrats may well feel similarly (related to work requirements on SNAP and the loss of funding to increase IRS enforcement on the top one percent).  However, at least as of now, that group has expressed their concerns in a less bombastic way.  For the markets, it is expected that we do see those extremists (maybe both sides, but the GOP side is the one to watch) threaten to kill or at least delay a vote on the deal until there is a default.  Concerningly for us traders, I have heard commentators imply that the President and Speaker are counting on market turmoil to apply pressure to the extremists and get the bill turned into law. That may mean the war of words is not over…or may ramp up this week. Votes are scheduled to begin on Wednesday in the House.

Overnight, Asian markets were mixed and split evenly in number.  South Korea (+1.04%) was by far the biggest gainer while Malaysia (-0.57%) lost the most.  All of the other exchanges fell in the middle on modest moves.  Meanwhile, in Europe, we see a similar story taking shape at midday.  The DAX (+0.56%), CAC (-0.36%), and FTSE (-0.50%) lead a mixed region with on massive moves underway in early afternoon trade.  In the US, as of 7:30 am, Futures are pointing to a green start to the morning.  The DIA implies a +0.14% open, the SPY is implying a +0.55% open, and the QQQ implies a +1.13% open at this hour.  At the same time, 10-year bond yields are down sharply to 3.719% and Oil (WTI) is off 1.13% to $71.85 per barrel in early trading.

The major economic news events scheduled for Tuesday are limited to Conference Board Consumer Confidence (10 am).  The major earnings reports scheduled for the day are limited to ESLT and SKY before the open.  Then after the close, HPE, HPQ, YY, AND UHAL report.  

In economic news later this week, on Wednesday, we get Chicago PMI, April JOLTs Job Openings, Fed Beige Book, API Weekly Crude Oil Stocks Report and two Fed speakers (Bowman and Harker).  Then Thursday, ADP May Nonfarm Employment Change, Weekly Initial Jobless Claims, Q1 Productivity, Q1 Unit Labor Costs, May Manufacturing PMI, ISM May Mfg. PMI, EIA Crude Oil Inventories, Fed Balance Sheet, Bank Balances with the Fed, and a Fed speaker (Harker) are reported.  Finally, on Friday, we get May Avg. Hourly Earnings, May Nonfarm Payrolls, May Private Nonfarm Payrolls, May Participation Rate, and May Unemployment Rate.

In terms of earnings reports later this week, on Wednesday, AAP, CAE, CPRI, CD, DCI, HOV, CHWY, CRWD, NTAP, NGL, JWN, OKTA, PSTG, PVH, CRM, and VEEV report.  Then Thursday, we hear from BILI, DOOO, CAL, DG, HRL, M, SPTN, AVGO, COO, DELL, FIVE, and LULU.  Finally, on Friday, there are no major reports scheduled.

So far this morning, ESLT beat on revenue while missing on earnings.  On the other side, SKY missed on revenue while beating on earnings.  (TNP reports at 8:20 am.)

With that background, it looks like the Bulls are frisky again this morning in the QQQ and SPY. The tech-heavy NASDAQ will be gapping to levels not seen in 14 months with prices now near the overnight highs similar to how they were in premarket Friday. The SPY is gapping as well but has backed off early highs. Still, an open where it sits now will take the main index ETF back to levels not visited since August of last year. However, the stodgy mega-caps remain just in the red and are at their premarket lows. If we open at this level, DIA will be just under its T-line and not giving the follow-through to the Friday Morning Star that the Bulls would have been hoping to get. QQQ is very extended from its T-line while SPY may also be just a bit stretched (both to the upside). Still, the T2122 indicator sits right in the mid-range, telling us we have some room to run. Just remember, the Debt Ceiling may be agreed upon by leaders but there are plenty of people who may decide it is a better political move to throw a wrench in the works (coincidentally getting a lot of headlines in the process) than it would be to get the bill approved and move on to other business. This is particularly true since the deadline has been shown to not hit until June fifth. So, beware of volatility and news risk.

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 absolutely 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 money is 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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