Markets gapped higher on Tuesday.  SPY opened 0.42% higher, DIA opened 0.20% higher and QQQ opened 0.55% higher.  At that point, all three major index ETFs sold off for 15 minutes (recrossing the gap) before rallying sharply for 75 minutes. Then all three sold off modestly until 1 p.m. before beginning a more modest but steady rally that lasted the rest of the day, give or take 5 minutes of profit-taking at the very end.  This action gave us strong Bullish Morning Star signals in the QQQ and SPY (closing up all the way above the Friday candle body in SPY).  DIA gave us more of a gap-up, fat-body white Spinning Top.  All three major index ETFs crossed back above their T-line (8ema) on the day.  This happened on average volume in the QQQ, just less than average volume in the DIA, and below-average volume in the SPY.

On the day, eight of the 10 sectors were green as Technology (+1.69%) was way out in front leading markets higher.  At the same time, Utilities (-0.87%) and Communication Services (-0.63%) lagged behind the other sectors on increasing interest rates (very capital-intensive businesses).  Meanwhile, SPY gained 1.08%, the DIA gained 0.61%, and the tech-heavy QQQ gained 1.43%.  VXX plummeted 4.88% to close at 13.63 and T2122 fell back out of overbought territory to 74.29.  10-year bond yields spiked up to 4.153% and Oil (WTI) dropped a modest 0.24% to close at $77.74 per barrel.  So, we saw markets at the very least unphased by the CPI print Tuesday and then we got the same rally we’ve seen for months, led by the high-tech giants (NDVA +7.16%, META +3.34%, MSFT +2.66%, AMD +2.20%, and AMZN +1.99%), which accounted for $100 billion in trades themselves Tuesday.  However, it was not a super thin rally with more than 58% of the SPY components and 65% of the QQQ components in the green.

The major economic news on Tuesday included Feb. Core CPI, which came in at 3.8% (compared to a forecast of 3.7% but down from January’s 3.9%). On a month-to-month basis, Feb. Core CPI stayed steady at +0.4% (versus a forecast calling for a decline to 0.3% but in line with the January +0.4% reading).  On the headline number, Feb. CPI rose to 3.2% (compared to a forecast and January value of 3.1%).  On the month-to-month basis that was up to +0.4% (in line with the +0.4% forecast but a tick higher than January’s +0.3% reading). Later, the February Federal Budget Balance was better than expected at -$296.0 billion (versus a forecast of -$298.5 billion but dramatically higher than the artificially depressed -$22.0 billion in January). After the close, the API Weekly Crude Oil Stocks showed an unexpected inventory drawdown of 5.521 million barrels (compared to a forecasted inventory build of 0.400 million barrels and the prior week’s +0.423 million barrels).

After the close, QFIN reported a beat on both the revenue and earning lines.

In stock news, on Tuesday, MMM announced it had hired outsider Bill Brown, former CEO of LHX, as CEO.  (MMM gapped higher on the news and closed up 4.97%.)  At the same time, BA announced that its plane deliveries slipped to 27 in February (down one from February 2023) bringing the YTD total to 54 (down more than 22% from the first two months of 2023).  Later, Reuters reported that TM is now the most shorted stock in the Asia-Pacific region while SMCI, CMCSA, COF, and WFC are the most shorted large-cap stocks in the US.  Meanwhile, TSLA announced that its Berlin factory has come back online after a week-long closure after arson had caused the plant to be disconnected from the power grid.  At the same time, CPB announced it had finalized its $2.33 billion acquisition of Sovos Brands.  Later, GS announced plans to expand its private credit portfolio by $300 billion over the next five years.  (This is a larger move than competitors MS, which looks to expand by $50 billion in niche, and JPM, which has earmarked $10 billion for its private credit expansion.)  At the same time, ACAD stock plunged after the company reported its Phase 3 trial of a drug to treat schizophrenia had failed to show significant improvement over placebo.  (As a result, the company removed its sales forecast.  ACAD closed down 17.20%.)  Later, GM reported Tuesday that it had produced 20,000 electric vehicles this year that do not qualify for EV Tax Credits before it requalified by changing suppliers.  At the same time, CNBC reported that IBM told its employees it plans to slash an unspecified number of marketing and communications jobs (cutting that staff by 50%) as it replaces workers with AI.  No specific number of jobs were provided.  Later, MINM announced a definitive merger agreement with private e2Companies in an all-stock deal.  Elsewhere, VJET said it intends to delist its stock in the US in a move aimed at reducing the cost of complying with SEC rules.  (The delisting is effective April 1, 2024.)  Later, CRGE filed for chapter 11 bankruptcy after the close.  At the same time, GEHC announced a 13 million share secondary offering.  After the close, the Financial Times reported that CME will apply to begin clearing US Treasury trades later this year.

In stock legal, governmental, and regulatory news, on Tuesday the Canadian and US governments signed a deal to begin a 2-year study into Canadian coal mine pollution that flows into US waters.  This has been a long-standing border dispute and the US Geological Survey had previously concluded that TECK coalmines are the source of the pollution (TECK recently agreed to sell those mining operations to GLNCY).  At the same time, a US District Judge in OR has agreed to hear the FTC suit to block the KR acquisition of ACI, with an initial hearing on Aug. 26. Later, ADM announced that some of its employees had received subpoenas from the US Justice Dept. and the company is correcting the last six years of financial reports after an internal probe.  At the same time, a federal judge ruled that BRKB-owned Geico Insurance will not have to face a class-action lawsuit alleging the company overcharged policyholders during the COVID-19 pandemic.  Later, a federal whistleblower lawsuit against MCK was revived by a unanimous 3-0 appeal ruling of the 2nd Circuit Court of Appeals.  The suit alleges MCK bribed doctors to get them to buy drugs from their company over competitors.  At the same time, INTC has won over an effort to block the sale of its chips to Chinese tech giant Huawei.  (INTC had been issued a license for the deal during the Trump administration for the chips that had not been developed or produced yet.  The Biden admin had been under pressure to revoke the license but decided to let the sale stand because of the deal made under the Trump-issued license. The deal is worth hundreds of millions of dollars, which rival AMD was blocked from when applying for a license during the Biden administration.)  Later, AAPL made a major concession in its changes to comply with the EU Digital Markets Act, saying developers will be free to distribute their apps directly to consumers…but only in Europe.  (This last step could cost AAPL significant revenue as it will lose 30%, nearly no cost, markup on app store sales.)  Elsewhere, PRPL announced a settlement with competitor TPX related to PRPL’s partnership with The Mattress Firm (which TPX has asked the FTC to approve its acquisition of).  The settlement will extend PRPL’s partnership with The Mattress Firm for at least 12 months if the FTC approves the deal.)  At the same time, a former BA employee was found dead of an apparent suicide.  He was in the middle of a deposition for a whistleblower retaliation lawsuit over actions taken against him (after reporting on the company’s quality and production issues).  After the close, AMC announced that a NY federal court had granted preliminary approval of a settlement of a lawsuit alleging certain investors improperly profited from “short swing” profits trading the stock.  Also after the close, the Dept. of Defense announced the F-35 fighter jet program has reached full-rate production.  The announcement will open up more funds released to LMT as part of the contract’s “progress funding” provisions.

Overnight, Asian markets were mixed but leaned toward the red.  India (-1.51%) and Malaysia (-1.06%) were by far the biggest losers of the seven red exchanges.  On the other side, Singapore (+0.61%) and South Korea (+0.44%) led the five gaining exchanges.  In Europe, we see a mostly green picture at midday with 12 of the 15 bourses above the flat line.  The CAC (+0.50%), DAX (+0.08%), and FTSE (+0.06%) lead the region on volume as usual in early afternoon trade.  Meanwhile, in the US, as of 7:30 a.m., Futures are pointing toward a start just on the positive side of flat.  The DIA implies a +0.09% open, the SPY is implying a +0.08% open, and QQQ implies a +0.03% open at this hour.  At the same time, 10-year bond yields are rising to 4.17% and Oil (WTI) is up 1.38% to $78.63 per barrel in early trading.

The only major economic news scheduled for Wednesday is EIA Crude Oil Inventories (10:30 a.m.).  The major earnings reports scheduled for before the open are limited to ARCO, DLTR, WOOF, ACDC, WSM, and ZIM.  Then, after the close, AE and LEN report. 

In economic news later this week, on Thursday, we get Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, Feb. Core PPI, Feb. PPI, Feb. Retail Sales, Jan. Business Inventories, Jan. Retail Inventories, and Fed’s Balance Sheet.  Finally, on Friday, Feb. Export Price Index, Feb. Import Price Index, NY Empire State Mfg. Index, Feb. Industrial Production, Michigan Consumer Sentiment, Michigan Consumer Expectations, Michigan 1-Year Inflation Expectation, and Michigan 5-Year Inflation Expectation are reported.

In terms of earnings reports later this week, on Thursday, AVAH, CSIQ, DKS, DG, GIII, BEKE, AGCO, ADBE, ALTG, TLNE, and ULTA report.  Finally, on Friday, we hear from ERJ and JBL.

So far this morning, WOOF reported beats on both the revenue and earnings lines.  At the same time, ZIM missed on revenue while beating on earnings.  Unfortunately, DLTR missed on both the top and bottom lines.

In miscellaneous oil news, on Tuesday, Ukraine attacked one of Russia’s largest oil refineries, reportedly taking at least half the facility’s production offline with significant damage. (This refinery processes 6% of Russian crude, 11% of the country’s gasoline, 6.4% of Russia’s diesel fuel, 5.6% of its fuel oil, and 7.4% of Russia’s aviation fuel.  So, while it may not be crippling, it could impact global oil prices as Putin keeps oil inside Russian borders…depending on how long the facilities are offline.)  In other oil news, the US Energy Information Administration raised its 2024 domestic oil output forecast.  EIA now projects an additional 260k barrels per day, reaching 13.19 million barrels per day for 2024.  (This was up 90k barrels per day from the previous forecast.)

In post-CPI market rate expectation news, 99.0% of Fed Funds rate trades are expecting no change in rates next week.  (1% expect a quarter-point rate reduction.)  Meanwhile, 84.4% of traders expect no change on May 1, while 15.5% of trades expect a quarter-point reduction at that meeting.  At the same time, only 33.4% of bets expect no change at the June 12 meeting.  57.1% of trades expect a quarter-point rate cut, while 9.4% expect a half-percent cut by that time.  For the July 31 meeting, only 14.1% expect no change in rates, 43.4% a quarter-point cut, 37.0% expect a half-point cut, and 5.5% anticipate a 0.75% cut by that point.

In late-breaking news, in a landslide vote (523 for, 46 against, 49 abstaining) the EU has passed the world’s first AI regulatory law. The law breaks AI applications into six risk categories, which range from low hazard to unacceptable (which are immediately banned) on the other end. The regulatory body structure, makeup, and processes have not been outlined in reports posted to this point.

With that background, it looks like the Bulls will start the day by leading a very modest move into positive territory. All three major index ETFs opened the premarket slightly higher and have printed tiny white-body candles since that start. All three remain above their T-line (8ema) and all three of those averages are rising. So, the short-term trends are now bullish in all three while the strong bullish longer-term trend is back in play in SPY (and to a lesser extent QQQ) but remains under significant pressure in the DIA. In terms of extension, none of the three major index ETFs is too far from its T-line, and the T2122 indicator is back in its mid-range. This means both sides still have plenty of room to run if they can gather the momentum. Looking at those 10 Big Dog tech names, six are in the red this morning. Of particular note is that TSLA (-2.04%) and INTC (-1.50%) are by far the biggest movers among those 10 names in the early session. It will be hard for the Bulls to gain traction if those 10 names are not leading the way.

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 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 gains are 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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