Energy Crisis and Powell Testimony Lead

Markets gapped down again Monday but rallied again to test the 50sma resistance in all 3 major averages.  Unfortunately for bulls, all 3 indices failed that test.  This left us with Doji candles in the SPY and QQQ as well as a Shooting Star type candle in the DIA. On the day, SPY lost 0.29%, DIA gained 0.21%, and QQQ lost 0.80%.  The VXX rose just a tad to 24.82 and T2122 remains in the mid-range at 69.67.  10-year bond yields spiked up to 1.491% and Oil (WTI) rose to $75.40/barrel.

During the day, two members of the FOMC announced their own early retirement.  Boston Fed President Rosengren claimed his premature departure was due to a kidney illness, but Dallas Fed President Kaplan came out and acknowledged the trading disclosure issue. Those two were the Fed members recently identified as having owned millions of dollars of stock in companies which the Fed then purchased bonds.  These announcements also came a day before Fed Chair Powell testifies before the Senate.  In other Fed news, 3 FOMC members said they are ready to pull back on stimulus, but that they don’t feel any pressure from inflation.  Fed members Brainard, Williams, and Evans all said they expect to see inflation lessening in 2022, but also feel comfortable removing stimulus now if the economy continues its current trajectory. This is another signal of the likely announcement of tapering of bond buying at the October Fed meeting. However, all 3 also stressed that their desire to begin tapering now in no way signals a change in the interest rate policy. 

The global energy crisis continues and has caused Oil to spike as Brent prices soared above $80 on supply concerns.  Part of the cause is supply disruptions in the US resulting from hurricanes Ida and Nicholas that shut down production in the Gulf of Mexico and destroyed rig, refinery, and pipeline infrastructure.  In addition, in Africa, Nigeria and Angola have struggled to achieve their OPEC allotted production quotas due to mismanagement and underinvestment. In China, the problem is on the demand side as their government has implemented painful electric usage limits in order to meet climate emissions goals.  This could be the backdrop for Elon Musk’s recent praise of the Chinese government. Bloomberg reports AAPL phone manufacturing plants are being given special treatment under the new restrictions because AAPL has “played ball” with Chinese officials.  It could be that Musk is simply trying to curry special treatment for TSLA's Chinese plants as well.

Last night F and South Korean firm SK Innovations announced a joint project that includes $11.4 billion in investment to build electric vehicles and batteries.  This is the largest investment in production plants in F history. The project calls for 4 plants in the states of KY and TN, which should result in 11,000 new jobs.

Overnight, Asian markets leaned heavily to the red.  Australia (-1.47%), South Korea (-1.14%), and Taiwan (-0.76%) led the way lower. Hong Kong (+1.20%), Malaysia (+0.90%), and Shanghai (+0.54%) were the only green in the region.  In Europe, markets are also showing red across the board with the lone exception of Russia (+0.44%) who is green on the strength of being a major oil producer.  The FTSE (-0.51%), DAX (-1.34%), and CAC (-1.74%) are leading the continent lower as of mid-day.  The German fall could be partially due to smaller parties (Greens and FDP) being the coalition “king maker” for the next ruling party after a tight election Sunday.  As of 7:30 am, US Futures are pointing toward a significant gap lower. The DIA is implying a -0.43% open, the SPY implying a -0.95% open, and the QQQ implying a -1.73% open.  This comes as the Dollar has popped higher and 10-year bond yields are soaring to 1.537% in early trading.

The major economic news scheduled for release on Tuesday includes August Trade Balance and August Retail Inventories (both at 8:30 am), Conf. Board Consumer Confidence (10 am), Fed Chair Powell testifies (10 am), and two other FOMC speakers (Bowman at 1:40 pm and Bostic at 3 pm).  The major earnings reports scheduled for Tuesday include FERG, INFO, SNX, THO, and UNFI before the open.  Then after the close, CALM and MU report. 

The week started with indecision and failure at resistance. It appears the bears are trying to follow through this morning. Beware of more volatility, especially in the QQQ names, as traders flee from the tech-led recovery trade. Also, remember we are just days from the month and Q3 end. So, the potential for rotation and window-dressing comes into effect. Lastly, Fed Chair Powell testifies before the Senate today and other Fed speakers have their say in public. These words may well stir markets.

Don't worry about the things you can't control. Manage your existing trades before you chase any new ones. Focus on the process and on managing the things you can control. Remember that it's discipline and good trading rules that separate trading success from failure over the long run. Above all, consistently take profits when you have them. A good trader refuses to let greed turn their winners into losers.

Ed

Swing Trade Ideas for your consideration and watchlist: No trade ideas today. 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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