Markets gapped up strongly (+1.75% in the SPY, +1.40% in DIA, and up 2.40% in the QQQ) Monday.  We then proceeded to get bullish follow-through the first 45 minutes of the day. However, at that point, it was like we hit a brick wall covered in Velcro and just got stuck right there as price traded sideways in a very tight range the entire rest of the day.  This action gave us white, Harami candles in all 3 major indices, with DIA being a white, Spinning Top Harami.  All 3 now sit on top of their T-line (8ema), but none of them has broken through local resistance or downtrend.

On the day, all 10 sectors are well into the green with Consumer Defensive (+1.37%) lagging and Technology (+3.52%) and Consumer Cyclical (+3.45%) leading the charge higher.  The SPY gained 2.52%, DIA gained 1.77%, and QQQ gained 3.30%. The VXX was down 2.84% to 20.84 and T2122 has spiked up, but remains just outside the overbought territory at 75.56.  10-yr. bond yield also showed great volatility, recovering from an early plunge to recover up to 4.017%.  And Oil (WTI) is just on the red side of flat at $85.50/barrel. So, overall, a gap-up then a dead flat day.

In economic news, the NY Fed Empire State Mfg. Index came in worse than expected at -9.10, compared to a forecast of -4.00 and September’s reading of -1.50. Meanwhile, Bloomberg Economics updated its model on Monday.  The new forecast projects a 100% probability of a recession within the next 12 months.  The previous update of the forecast had placed the probability at 65%.

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In stock news, STLA said Monday it is seriously considering stopping all car production in China as the major carmakers (western) continue to lose Chinese market share to domestic car companies. Elsewhere, Bloomberg reports that CS has begun the sale of its US Asset Management unit.  Sources told Bloomberg that several private equity firms are interested in the unit, which includes a platform for investing in collateralized loan obligations.  Meanwhile, GOOGL’s YouTube platform announced new advertising methods to reach music and podcast listeners on Monday.  Finally, the Wall Street Journal has reported that INTC has dramatically lowered the valuation of their Mobileye (self-driving car) unit, which the tech giant is in the process of spinning off and IPO.  INTC originally expected an IPO price that would give a $50 billion valuation, but now the company is expecting only $20 billion (or less) from the spinoff.  The IPO roadshow for that spinoff is set to kick off today and will eventually trade under the ticker MBLY.

In stock legal news, the US Dept. of Justice has moved to dismiss its antitrust indictment against two former PPC executives after other prosecutions on the price-fixing charges failed to secure a conviction.  On the other side, the Wall Street Journal reports that the FTC has launched an investigation of V and MA over whether they are using their security token standards to limit debit-card routing competition for online payments.  The agency has already been investigating whether the two firms are stopping merchants from routing payments over other debit card networks. Meanwhile, the US DOJ has filed suit against CI, charging that the company over-charged the Medicare Advantage program by submitting false diagnoses (without the tests that would prove the ailments) in order to increase charges between 2012 and 2019.  Finally, CS paid $495 million to settle a case related to mortgage-backed securities that had been brought by the state of New Jersey.  The NJ Attorney General had claimed $3 billion in damages when the case originated in 2013 and the underlying crime had taken place in 2008.

In energy news, the US EIA said on Monday that oil output from the Texas and New Mexico Permian (shale oil) Basin is forecasted to reach a record in November.  The region’s output is forecast to rise by 50,000 barrels per day to 5.453 million barrels per day.  This is part of a nationwide increase of 104,000 bpd forecast to come from all US shale basins in the month.  Elsewhere, XOM said Monday it has now exited Russia completely after Putin expropriated the company’s Russian properties.  XOM values its losses from that expropriation at $4 billion. Finally, Bloomberg reports that the Biden Administration is moving toward releasing another 10-15 million barrels of oil from the strategic petroleum reserve in a bid to keep gas prices under control.

So far this morning, JNJ, GS, and SBNY all reported beats on the top and bottom lines.  Meanwhile, TFC, MLI, and CBSH all reported beating on the revenue line while also missing on the earnings line.  On the other side, LMT missed slightly on revenue while beating on earnings.  However, HAS missed on both the earnings and revenue lines. STT reports later, at 8:50 am.

Overnight, Asian markets were green with only Shanghai (-0.13%) below break-even.  At the same time, Hong Kong (+1.82%), Australia (+1.72%), and Japan (+1.42%) led the region higher with most exchanges gaining over one percent.  In Europe, we see a similar story taking shape at midday.  Portugal (-0.53%) is the only red in the region while the FTSE (+1.00%), DAX (+1.30%), and CAC (+0.83%) lead the continent higher.  As of 7:30 am, US Futures are pointing toward another gap higher to start the day.  The DIA implies a +1.36% open, the SPY is implying a +1.59% open, and the QQQ implies a +1.84% open at this hour.  10-year bond yields are back down to 3.998% and Oil (WTI) is off a quarter of a percent to $85.22/barrel in early trading.

The major economic news events scheduled for Tuesday are limited to Sept. Industrial Production (9:15 am) and API Weekly Crude Oil Stocks Report (4:30 pm).  The major earnings reports scheduled for the day include ACI, GS, HAS, JNJ, LMT, SBNY, STT, and TFC before the open. Then, after the close, AMX, FHN, IBKR, ISRG, JBHT, NFLX, OMC, UAL, and WTFC report.

In economic news later this week, on Wednesday, we see Sept. Building Permits, Sept. Housing Starts, EIA Weekly Crude Oil Inventories, Fed Beige Book, Fed member Bullard speak. On Thursday, Weekly Jobless Claims, Philly Fed Mfg. Index, and Sept. Existing Home Sales are reported.  Finally, on Friday, Fed member William speaks.

In earnings reports later this week, on Wednesday, we hear from ABT, ALLY, ASML, BKR, CFG, CMA, ELV, LAD, MTB, NDAQ, NTRS, PG, PLD, SCL, TRV, UNF, WGO, AA, CCI, EFX, IBM, KALU, KMI, KNX, LRCX, LSTR, LVS, LBRT, PPG, STLD, TSLA, and UMPQ.  On Thursday, ABB, ALK, T, BX, DHR, DOV, DOW, EWBC, ERIC, FITB, FCX, GPC, HRI, KEY, MAN, MMC, MSM, NOK, NUE, PM, POOL, DGX, SNA, SNV, TSCO, UNP, WSO, WBS, SAM, CSX, RHI, SNAP, SIVB, UFPI, WAL, and WHR report.  On Friday, we hear from AXP, ALV, EEFT, HCA, HBAN, IPG, RF, SLB, and VZ.

Overnight gaps seem to be all the rage lately, perhaps revealing a clue to big fund action (manipulation?) in the shadows. And although Monday was a dead tape after 10 am, volatility is still a major concern given the intraday action we saw last week. The premarket seems to indicate we want to test a recent resistance level and has us there now. Don’t get caught up in emotions, especially FOMO. Remember the bull trap on Friday and the bear trap on Thursday that ripped the face off those who chased the gap on those days. Once again, the prudent trader will let things settle out for a while before adding any new positions.

Market extension still is not a factor, either in terms of the T-line or T2122. However, chop and intraday reversal are serious concerns. This will be a big earnings week (see above) and Fed speakers are also likely to cause gyrations as traders keep trying to outguess the FOMC. Remember that the downtrend remains intact in all the major indices. So, be cautious and demonstrate patience (wait for confirmation).

Don’t be stubborn. If you have a loss, just admit you were wrong and take it before it grows. And when price does move in your direction, always move your stops in your favor (remember the “Legend of the man in the green bathrobe“…it is NOT HOUSE MONEY, it’s all OUR MONEY!). Also, keep in mind that trading is not a hobby. It’s a job. 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. Lastly, remember that you get rich slowly and steadily in Trading…not by striking it rich on one or two trades. So, give up that lottery ticket mentality.

See you in the trading room.

Ed

Swing Trade Ideas for your consideration and watchlist: No trade ideas today (Rick is out). 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.

🎯 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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