Monday saw stock open flat and mixed (down 0.04% in the SPY, down 0.12% in the DIA, and up 0.23% in the QQQ).  However, at that point, all three major index ETFs got in sync and the Bulls led a very slow, steady rally all the way up to 3:30 pm.  Then the last 30 minutes of the day saw modest but steady profit-taking.  This action gave us white-bodied candles in the SPY, DIA, and QQQ.  Specifically, the SPY and DIA both printed Bullish Engulfing candles with upper wicks.  Interestingly, the DIA closed right up against the resistance level it has failed multiple times (including Monday) since mid-June.   Meanwhile, the QQQ could be seen to have completed a Doji Continuation (Sandwich) signal.

On the day, seven of the 10 sectors were in the green with Technology (+1.21%) in the lead and Communications Services (-2.28%) far and away the worst-performing sector.  At the same time, the SPY gained 0.35%, DIA gained 0.20%, and QQQ gained 0.93%. The VXX fell very slightly to 23.87 and T2122 climbed back up into the low end of the overbought territory at 83.72.  10-year bond yields fell to 3.811% while Oil (WTI) also dropped 1.76% to close at $74.10 per barrel.  So, Monday saw follow-through on the strong week and strong premarket earnings.  However, then it was time to lock in profits and get ready for the weekend news cycle. This happened on less-than-average volume in the QQQ and DIA and very-low volume in the SPY.

The major economic news on Monday was limited to NY Fed Empire State Mfg. Index came in above expectations coming in at a barely positive (barely indicating improving conditions relative to overall economic conditions) at 1.10 (compared to a forecast of -4.30 but lower than the June reading of 6.60).  In economic speak news, Treasury Sec. Yellen did an interview with Bloomberg Monday morning (speaking from India where she was attending a G-20 Finance Ministers meeting).  Yellen said, “For the United States, growth has slowed, but our labor market continues to be quite strong. I don’t expect a recession.”  Later she also said, “The most recent inflation data were quite encouraging.”  After being asked, Yellen she expects a new executive order restricting investment in three Chinese sectors (semiconductor, quantum computing, and artificial intelligence).  Elsewhere, the NY Fed released its monthly survey of Consumer Expectations, which looked at the credit markets.  In June, the Fed found consumers were finding it tougher to borrow as credit application rejection rates rose to 21.8% (the highest level since June 2018).  Drilling down, auto loan applications had a 14.2% rejection rate, new mortgages were refused 13.2% of the time, and 20.8% of mortgage applications for refinancing were turned down.

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In stock news, FSR announced it plans to produce 100 limited edition electric SUVs for the Indian market, with deliveries scheduled to being during Q4.  In other EV news, MULN announced they have received a 30-truck order from Newgate Motor Group in Ireland.  Elsewhere, GM executive told Reuters that the carmaker simply can’t make and deliver cars fast enough to keep up with demand at dealerships.  On Monday, the GM President for North America told the news outlet, “At this particular point in time, we could just about sell every product that we can build.”  A week after a Wall Street Journal article identified VZ and T as being among several telecom giants that are guilty of abandoning huge networks of lead cables in the ground across the country, analysts downgraded both companies’ stock on the risk they will be required to pay for the cleanup.  As a result, the whole sector fell sharply with VZ (-7.50%) and T (-6.69%) leading the way.   At midday, MAR signed a 20-year licensing deal with MGM which will allow Marriott rewards members to redeem points to book stays at MGM resorts.  Meanwhile, F announced that they are slashing prices on the F-150 Lightning trucks (by 17%) in hopes of gaining market share amid the current EV price wars.  The move comes after F sales of electric vehicles fell 2.8% in June and also about 36 hours after TSLA said it had produced the first of its long overdue Cyber trucks.

In stock legal and regulatory news, BKI announced it will sell its “Optimal Blue” unit for $700 million in the hope of addressing FTC antitrust concerns.  (The $700 million price tag was much lower than expected in this previously-hinted move.)  The FTC said back in March that it will oppose the ICE’s $11.7 billion acquisition of BKI over monopolistic pricing power concerns.  Elsewhere, the FDA approved a therapy (to treat respiratory syncytial virus) developed by a partnership from SNY and AZN for toddlers and infants.  At the same time, the TSLA board of directors agreed to return $735 million to settle a shareholder lawsuit claiming they had grossly overpaid themselves.  Across the pond, the MSFT appeal of the UK block on the acquisition of ATVI has been placed on hold for two months to “give the parties more time to resolve the issue out of court.”  Back in the US, TSLA filed suit against London-listed CAP-XX, claiming the company violated two patents owned by a TSLA subsidiary.  Meanwhile, a group of individual plaintiffs asked the US Supreme Court to temporarily halt the MSFT acquisition of ATVI after the 9th District US Court of Appeals rejected the FTC bid to get the same injunction at the end of last week.  After the close, the FTC and US Dept. of Justice sued FLNT for allegedly operating massive “consent farms” to trick nearly 1 million people into providing personal information and consent to receive telemarketing calls.  (These farms used deceptive ads promising free rewards from AMZN, WMT, and others as well as interviews for non-existent jobs in order to gain consent.)  At the same time, the CA Supreme Court ruled against UBER saying the company must face a lawsuit claiming it should have covered UberEats driver’s work-related expenses.  Finally, the FAA began an investigation of a UAL flight (flying a BA 767-300 jet) that lost its emergency evacuation ramp prior to landing in Chicago.  (The flight originated in Zurich, Switzerland and the ramp was found in a neighborhood near O’Hare airport.)

So far this morning, BAC, LMT, MS, NVS, PNC, BK, and SYF have all reported beats to both the revenue and earnings lines.  (SCHW reports at 8 am.)  The big banks in particular showed tremendous quarter-on-quarter growth with BK giving the market 87% revenue growth and 20% earnings growth, BAC delivering 72% revenue and 21% earnings growth, and PNC showing 45% revenue growth.  It is worth noting that PNC did lower its forward guidance. 

Overnight, Asian markets were mostly in the red.  Hong Kong (-2.05%) was by far the biggest loser, followed by Taiwan (-0.61%) and South Korea (-0.43%).  Meanwhile, in Europe, the bourses are mostly green at midday.  While leading on volume, the CAC (-0.01%), DAX (-0.07%), and FTSE (+0.07%) are lagging the smaller exchanges on their moves. It should be noted that Russia (+1.13%) is the biggest gainer in early afternoon trade.  In the US, as of 7:30 am, Futures point toward a start to the day just on the red side of flat.  The DIA implies a -0.01% open, the SPY is implying a -0.05% open, and the QQQ implies a -0.11% open at this hour.  At the same time, 10-year bond yields are lower again to 3.768% and Oil (WTI) is up a half of a percent to $74.52 per barrel in early trading.

The major economic news events scheduled for Tuesday include June Retail Sales (8:30 am), June Industrial Production (9:15 am), May Business Inventories and May Retail Inventories (both at 10 am), and API Weekly Crude Oil Stocks (4:30 pm).  The major earnings reports scheduled for before the opening bell include Tuesday, we hear from BAC, BK, SCHW, LMT, MS, NVS, PNC, PLD, and SYF.  Then, after the close, AIR, IBKR, JBHT, and WAL report.  

In economic news later this week, on Wednesday, Preliminary June Building Permits, Preliminary June Housing Starts, and EIA Crude Oil Inventories are reported.  Thursday, we get Weekly Initial Jobless Claims, Philly Fed Mfg. Index, June Existing Home Sales, and the Fed’s Balance Sheet.  Then Friday, there are no major economics news scheduled.   

In terms of earnings reports, on Wednesday, ALLY, ASML, BKR, CFG, ELV, FHN, GS, HAL, MTB, NDAQ, NTRS, USB, AA, COLB, CCI, DFS, EFX, IBM, KMI, LVS, LBRT, NFLX, STLD, TSLA, UAL, WTFC, and ZION report.  On Thursday, we hear from ABT, ALFVY, AAL, BX, DHI, EWBC, FITB, FCX, GPC, INFY, JNJ, KVUE, KEY, MAN, MMC, NEM, NOK, PM, POOL, SAP, SNA, SNV, TSM, TRV, TFC, WBS, COF, CSX, ISRG, KNX, PPG, and WRB.  Finally, on Friday, AXP, ALV, AN, CMA, HBAN, IPG, RF, ROP, and SLB report. 

In miscellaneous news, GS cut its estimate of the probability of a recession within the next 12 months to just 20%.  GS Chief Economist Hatzius said “The main reason for our cut is that the recent data have reinforced our confidence that bringing inflation down to an acceptable level will not require a recession.”   Elsewhere, delayed filings with the SEC showed that BRKB reduced its holdings of ATVI from 6.7% to 1.9% during Q1.  (This was before recent MSFT victories that have the company inching closer to closing the acquisition of ATVI.)  Meanwhile, Bloomberg reported that CUBI (PA-based regional bank) has become the darling bank of the crypto industry, serving hundreds of digital-asset companies since Silvergate Capital, SBNY, and Silicon Valley banks failed in March.  This includes several crypto exchanges, market-makers, and stablecoin issuers.  There was no word on whether Fed or other regulators have (yet) expressed any interest in CUBI.

With that background, it looks like markets are again unsure ahead of economic data, even after we received blowout earnings reports this morning. All three major index ETFs are looking at very small, inside-day, black candles at this point (ahead of data). As has been the case all year, DIA looks the weakest of the three while SPY and QQQ are seemingly pausing at the top of their year-long rallies. All three remain above their T-line and are, so far at least, just giving us a pullback within an uptrend. As far as extension goes, QQQ may be getting a little stretched from its T-line (8ema) but the two large-cap indices are fine in that regard. However, the T2122 indicator has climbed back up to the bottom of the over-bought region. So, once again, there is room to run (available buyers/sellers) in either direction. Nonetheless, also note that volume has been decreasing as a trend. There is a chance that means the big pool of traders is drying up now that we are three weeks into the new quarter.

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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