Markets opened with a small divergence as the large caps gapped slightly lower while the QQQ capped about 0.35% higher.  However, the 3 major indices got back in lock-step immediately as the bulls led a strong rally for the first 30 minutes.  At that point, all 3 went switched to a very slow rally that lasted until 12:20 pm.  Then we saw the first real selling of the day as the indices pulled back between 0.5% and 0.75% over the next hour before rebounding the same amount between 1:30 pm and 2:30 pm.  From there we made another wave, leaving us very near the highs at the end of the day.

On the day, all 10 sectors are in the green with Energy (+0.40%) by a large margin the most lagging sector while Technology (+2.83%) and Consumer Cyclical (+2.82%) led the way higher.  SPY gained 1.60%, DIA gained 1.09%, and QQQ gained 2.07%.  The VXX was down 3.86% to 19.17 and T2122 is now at the extreme overbought territory at 97.67.  10-year bond yields plunged to 4.10% and Oil (WTI) was up 0.38% percent to $84.89/barrel.  This action left us with large white candles having a small wick at the top. All 3 of the major indices have also clearly broken their longer-term downtrend and have begun a new uptrend.  Still, it is worth noting that price is now getting pretty far above the T-line (8ema) on the daily chart and we will need some rest soon.  So, all-in-all, it was a third straight bullish day that is getting a little bit extended at this point.

In economic news, Conference Board Consumer Confidence came in below forecast at 102.5 (versus the expected 106.5 and the previous reading of 107.8).  Then after the close, the API Weekly Crude Oil Stocks reported a major and unexpected build of 4.520 million barrels (compared to a forecasted build of 0.200 million barrels and last week’s drawdown of 1.270 million barrels).

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In stock news, Bloomberg reported that Elon Musk has told bankers that the TWTR deal will close on Friday at $54.20/share (free money since it closed at $52.78 on Tuesday).  Meanwhile, TSLA gained EPA approval to begin delivering their Semi trucks.  Across the pond, PM gained conditional approval from the EU to buy Swedish Match (the largest cigarette alternative maker in Europe).  The conditional part is that PM has pledged to divest Swedish Match’s logistics arm.  In Canada, CGC has formed a US holding company to allow it to expand into the US market.  CGC stock soared 27% on the news.  Finally, AMZN has begun to roll out a new payment method.  Some US users can now pay for purchases via a mobile app owned by PYPL.  This will be available to all US customers before Thanksgiving.

In miscellaneous news, the Chinese Yuan fell to new lows Tuesday (onshore at its weakest position against the dollar since 2009 and offshore at the lowest since its introduction in 2010).  This comes despite the Dollar pulling back significantly Tuesday.  The industry group ELFA reported Tuesday that US companies borrowed 11% more to finance equipment leasing in September compared to the same month in 2021.  Also of note, in their earnings report, CMG said they have seen only “minimal resistance” to price hikes from their customers.  This suggests the consumer is still largely healthy.  On the other side, also in their earnings report, V said they are seeing the growth of spending slowing as consumers are struggling with inflation.  Elsewhere, mortgage demand fell slightly last week, with new purchase applications down 2% and refinance applications down just 0.1%.  However, overall loan demand has fallen to the lowest level since 1997 with the average interest rate up to 7.16% (from 6.94% the prior week) for a 30-year, fixed-rate, conforming loan.

After the close, AMP, AXTA, BYD, CNI, CHX, CB, CSGP, WIRE, ENPH, EQR, FFIV, FE, JNPR, MTDR, MSFT, NBR, RUSHA, TER, TXN, UHS, and V all reported beats on both the opt and bottom lines.  Meanwhile, CC, CMG, HA, MAT, NCR, and NEX all missed on revenue while beating on earnings.  On the other side, AGR and SKX beat on revenue while missing on earnings.  Unfortunately, GOOGL, GOOG, and SPOT missed on both the top and bottom lines.  Among all these, TXN, SPOT, MAT, SKX, and FFIV all lowered their forward guidance.  However, CNI, CHX, HA, and ENPH all raised their forward guidance. 

So far this morning, BG, BMY, GD, TMO, KHC, WM, ADP, GPI, CSTM, SLGN, ROP, HOG, TKR, EVR, CPG, PRG, EXP, CHEF, WNC, DRVN, and EDU all reported beats on the top and bottom lines.  Meanwhile, CME, PAG, OC, OTIS, GRMN, UMC, TMHC, KBR, HLT, ODFL, TDY, and VRT all missed on revenue while beating on earnings.  On the other side, BSX, AVY, and WFRD beat on revenue while missing on earnings.  However, MAS missed on both the top and bottom lines.  It is also worth noting that BG, ROP, TDY, TKR, DHEF, WNC, and EDU all raised forward guidance.  On the other side, OTIS, MAS, and AVY lowered guidance.  (BA, BSBR, IQV, STX, NSC, APH, R, SID, HES, FTV, BCO, MHO, COOP, FSV, GTX, BPOP, and ROL report later this morning.)

Overnight, Asian markets leaned heavily toward the green side.  Only India (-0.42%) and Thailand (-0.26%) were in the red.  Meanwhile, Shenzhen (+1.68%), New Zealand (+1.32%), and Hong Kong (+1.00%) led the region higher.  In Europe, the picture is much more mixed at midday.  The FTSE (-0.32%), DAX (+0.56%), and CAC (+0.06%) lead the region in volume as always.  However, some of the smaller exchanges show bigger moves in early afternoon trade.  As of 7:30 am, US Futures are pointing toward a mixed, red start to the day.  The DIA implies a -0.05% open, the SPY is implying a -0.61% open, and the QQQ implies a -1.53% open as the major indices diverge.  10-year bond yields are dropping again at 4.055% and Oil (WTI) is up four-tenths of a percent to $85.66/barrel in early trading.

The major economic news events scheduled for Wednesday include Sept. Goods Trade Balance and Sept. Retail Inventories (both at 8:30 am), Sept. New Home Sales (10 am), and EIA Weekly Crude Oil Inventories (10:30 am). The major earnings reports scheduled for the day include APH, ADP, AVY, BSBR, BA, BSX, BCO, BMY, BG, CHEF, CME, SID, CSTM, CPG, DRVN, EXP, EVR, FSV, FTV, GRMN, GTX, GD, GPI, HOG, HES, HLT, IEX, IQV, KBR, KHC, MHO, MAS, EDU, NSC, OTIS, OC, PAG, BPOP, PRG, ROL, ROP, R, STX, SLGN, TMHC, TDY, TMO, TKR, UMC, VRT, WNC, WM, and WFRD before the open.  Then, after the close, AEM, ALGN, ALSN, AMED, NLY, AR, ACGL, ASGN, AVT, AXS, BMRN, CACI, CP, CCS, FIX, CYH, DLR, ESI, EHC, EQT, RE, FLEX, F, FBHS, FWRD, ULCC, GGG, INVH, JBT, KLAC, MTH, META, MEOH, MAA, MOH, MUSA, MYRG, ORLY, OII, OLN, OMF, PTEN, PPC, PLXS, RJF, SEIC, NOW, SNBR, STC, FTI, TDOC, TROX, UCTT, URI, VMI, VFC, and WFG report.

In economic news later this week, on Thursday, we get Sept. Durable Goods Orders, Q3 GDP, and Weekly Initial Jobless Claims.  Finally, on Friday, Sept. PCE Price Index, Q3 Employment Cost Index, Sept. Personal Spending, Michigan Consumer Sentiment, and September Pending Home Sales are reported.

This is a huge earnings week as on Thursday, we hear from AOS, ALLE, MO, AEP, AMT, BUD, HOUS, AIT, ARCH, AMBP, ARES, ABG, AN, BAX, BWA, BFH, BC, CRS, CARR, CAT, CBRE, CX, CHKP, CMS, CNX, CMCSA, CS, DAN, DQ, CTE, EME, FAF, FCNCA, FCFS, FISV, FCN, GEO, GOL, GVA, GBX, HTZ, HON, IP, JHG, KDP, LH, LAZ, LII, LECO, LIN, LKQ, MDC, MMP, HZO, MA, MCD, MRK, NOC, OPCH, OSK, OSTK, PATK, PBF, PCG, RS, SPGI, SNDR, SHEL, SHOP, SAH, SO, LUV, SWK, STM, TROW, TECK, TFX, TXT, TNL, TPH, VC, WST, WDC, WEX, WTW, XEL, AMZN, AAPL, ATR, AJG, BSMX, BIO, COF, CSL, COLM, DECK, DXCM, EMN, EW, ERIE, FSLR, GILD, HIG, HUBG, INTC, LHX, LPLA, MTX, MHK, MPWR, NEXA, NOV, ORI, PINS, PXD, PFG, RSG, RMD, SKYW, SWN, SSNC, TMUS, TEX, TXRH, TFII, X, VRTX, VICI, WY,  and INT.  Finally, on Friday, ABBV, AB, AVTR, BBVA, BSAC, BLMN, BAH, CHTR, CVX, CHD, CL, DVA, EQNR, XOM, FMX, FTS, GNTX, IMO, JKS, LYB, NWL, NMRK, NEE, NVT, SNY, and GWW report.

Earnings continue to flood in with, frankly, generally good results. However, at the margins, mega-tech names are showing pressure from corporate IT spending and Marketing budgets. This is pointing toward the recession people have been talking about for months, but which has only materialized slowly and in spots. This is just a data point, some will choose to see it as great news, expecting the Fed to start easing soon. Others will see it as a sign of dread. What’s important is not how you, I, or any individual see it. Instead, how does the overall market react to it…what does price do?

All 3 major indices have also broken out of their crooked type (non-flat neckline) “inverted head and shoulders” (bottoming) patterns. The market extension is getting overdone, but is not completely beyond the pale yet. So, we need a rest or pullback, but it does not have to come today. Continue to show caution and be patient (wait for confirmation). With high volatility and less certainty at the moment, you either need to be able to handle the pain of all that volatility or this may be the time to pursue more cautious trading strategies (options spreads for example), including remaining hedged, quick, and/or small.

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: BITO, NAT, OKTA, MRO, XLE, INTC, XOM, EBAY, VLO, and PFE. 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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Disclosure: We do not act on all trades we mention, and not all mentions acted on the day of the mention. All trades we mention are for your consideration only.

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