Markets were indecisive on Wednesday after gapping higher (opening up 0.18% in SPY, up 0.24% in the DIA, and up 0.27% in the QQQ).  At that point, all three major index ETFs did some version of just moving sideways until 12:15 pm.  Then we saw a selloff that lasted until 2 pm, modest in the SPY and DIA and more pronounced in the QQQ (which recrossed its morning gap).  However, the bulls righted the ship, rallying until 3:30 pm when we saw modest selling in the last 30 minutes.  This action gave us indecisive candles in all three major index ETFs.  The DIA printed what could easily be seen as a Shooting Star of Gravestone Doji-type candle.  At the same time, the SPY printed a gap-up Doji of its own and the QQQ printed a black-bodied Spinning Top candle.  All three remain comfortably above their T-line (8ema).

On the day, eight of the 10 sectors were in the green with Communications Services (+1.90%) leading the way higher and both Technology (-0.34%) and Basic Materials (-0.33%) lagging behind the other sectors.  At the same time, the SPY gained 0.22%, DIA gained 0.32, and QQQ lost 0.02%.  The VXX climbed 1.79% to 23.90 and T2122 climbed even higher into the overbought territory to 96.79.  10-year bond yields fell to 3.746% while Oil (WTI)was down 0.63% to close at $75.27 per barrel.  So, Wednesday was an indecisive day after the earnings-driven modest gap higher.  It seems traders are getting wary of whether the Bulls can keep up the momentum of the last 7 days of action and are thinking better of chasing at the current highs.  This happened on less-than-average volume in the SPY and QQQ, and above-average volume in the DIA. 

The major economic news on Wednesday included Preliminary June Building Permits, which came in below expectations at 1.440 million (compared to a forecast of 1.490 million and a May reading of 1.496 million).  At the same time, June Housing Starts also came in light at 1.434 million (versus a forecast of 1.480 million and a May value of 1.559 million, which was admittedly a blowout high number).  Later in the morning, the EIA Crude Oil Inventories showed a smaller-than-anticipated drawdown of 0.708 million barrels (compared to a forecast of -2.440 million barrels but well down from the prior week’s number which showed a 5.946-million-barrel increase in inventories.

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In stock news, Bloomberg reported Wednesday that AAPL is working on artificial intelligence tools to rival OpenAI, GOOGL, META and others.  However, reportedly, AAPL has not yet developed a clear strategy for AI offerings. Elsewhere, after criticism related to the recent allegedly Chinese hacks, MSFT is expanding the suite of free security tools it offers customers.  At the same time, NFLX announced it will scrap its cheapest ad-free plan in order to boost the number of ad-supported members it has on the books.  Meanwhile, AAL and its pilots have resumed negotiations to improve their previously agreed tentative contract (after the UAL offer to its own pilots was sweeter).  AAL pilot voting is set to begin on Monday.  After the close, HCCI announced it has agreed to be bought by private equity firm J.F. Lehman for $1.2 billion in case ($45.50 per share).

In stock legal and regulatory news, on Wednesday, ATVI announced that it agreed to extend the deadline for closing the purchase by MSFT to October 18.  (Previously the deadline was August 29 and if the deal was not completed by that date MSFT owed ATVI $3 billion.  Along with the extension, the walk-away fee increases to $3.5 billion.) This extension was done to help secure UK approval for the acquisition.  Elsewhere, a federal judge in NY ordered TSLA to turn over emails from CEO Musk to JPM as part of a lawsuit over a bond contract (related to Musk saying “he had secured funding to take TLSA private in 2018”).  In other bank news, the Fed fined DB $186 million for failing to address previously identified money laundering.  At the same time, 200 US lawmakers said that they will not intervene if Teamsters go on strike against UPS.  (Although, truthfully, Congress has no power to intervene anyway other than to ask the President to invoke a cooling-off period prior to the strike.)   In related news, after-hours UPS said it would return to the negotiating table and sweeten its offer to the Teamsters.  Meanwhile, in Delaware, the Governor has signed a new law that will enable NKLA to double the number of shares from 800 million to 1.6 billion.  NKLA will resume its shareholder meeting on August 3 and with the new law will have the votes to offer new shares despite non-insider shareholder objections.  After the close, the SEC reported that it has accepted six ETF applications for the spot price of Bitcoin.  There was no schedule announced for any approval decisions.

After the close, TSLA, UAL, LVS, CCI, WTFC, and FNB all reported beats on both the revenue and earnings lines.  Meanwhile, AA, EFX, IBM, KMI, and NFLX all missed on revenue while beating on earnings.  On the other side, COLB, DFS, and ZION all beat on revenue while missing on earnings.  Unfortunately, LBRT and STLD missed on both the top and bottom line.  It should be noted that CCI and EFX lowered their forward guidance.  However, UAL raised its forward guidance.

Overnight, Asian markets mostly in the red.  Japan (-1.23%), Shenzhen (-1.06%), and Thailand (-1.01%) paced the losses.  On the green side, India (+0.74%) was by far the biggest gainer.  Meanwhile, in Europe, the bourses are mostly green at midday.  The CAC (+0.40%), DAX (+0.25%) and FTSE (+0.64%) lead the region mostly higher in early afternoon trade.  In the US, as of 7:30 am, Futures are pointing toward a mixed start to the day.  The DIA implies a +0.10% open, the SPY is implying a -0.17% open, and the QQQ implies a -0.74% open at this hour.  At the same time, 10-year bond yields are up sharply to 3.787% and Oil (WTI) is on the green side of flat at $75.46 per barrel in early trading. 

The major economic news events scheduled for Thursday include the Weekly Initial Jobless Claims and Philly Fed Mfg. Index (both at 8:30 am), June Existing Home Sales (10 am), and the Fed’s Balance Sheet (4:30 pm).  The major earnings reports scheduled for before the opening bell include 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, and WBS. Then, after the close, COF, CSX, ISRG, KNX, PPG, and WRB report.    

In economic news later this week, on Friday, there are no major economic news scheduled.

In terms of earnings reports, on Friday, AXP, ALV, AN, CMA, HBAN, IPG, RF, ROP, and SLB report.

In miscellaneous news, Russia announced that starting today it is setting up a shipping lane in an attempt to continue its own grain exports.  However, at the same time, it said any ships traveling to Ukrainian ports will be assumed to be carrying military cargo.  (The obviously implied threat being the ships would be captured or sunk.)  Elsewhere, Elon Musk may have put a scare into TSLA investors, hinting that more price cuts may be coming and seeming much less concerned about profits now than self-driving as a potential profit engine in the future.  Musk said “The short-term variances in gross margin and profitability really are minor relative to the long-term picture. Autonomy will make all of these numbers look silly.”  Meanwhile, overnight, TSM beat but also made less revenue than a year prior (for the first time in 4 years).  It also revised its forecast, now expecting a 10% drop in revenue for the year. The world’s largest chipmaker cited weak global demand for everything from cars to cell phones.  (Oddly, carmakers have been saying sales continue to be very strong.)  However, TSM also cited high demand for high-end chips to support artificial intelligence as offsetting some of the weakness.

So far this morning, AAL, ABT, BX, DHI, FITB, JNJ, KVUE, MMC, PM, SNA, TSM, and TCBI all reported beats on both the revenue and earnings lines. Meanwhile, ALFVY and GPC missed on revenue while beating on earnings.  On the other side, INFY, KEY, TRV, and TFC all beat on revenue while missing on earnings.  Unfortunately, ELUXY, NEM, NOK, and POOL all missed on both the top and bottom lines.

With that background, markets are looking to diverge in the premarket (ahead of data and more earnings). All three major index ETFs are looking at very small premarket candles at this point. However, the QQQ is gapping down strongly on last night’s NFLX report and TSLA. Nonetheless, all three remain above their T-line. So, at this point, it is looking a pause or pullback with no indication trend has changed. As far as extension goes, with the morning pullback in QQQ, none of the major index ETFs are too far away from their T-line, but the T2122 indicator is again deep into the overbought region. Just remember that markets can stay extended longer than we can stay solvent predicting the reversion to the mean.

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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