Markets gapped strongly higher at the open Thursday.  SPY gapped up 1.73%, DIA gapped up 1.39%, and QQQ gapped up a whopping 2.39%.  From that point, all three major index ETFs saw volatility in the first hour, followed by a rally that lasted until about 2 p.m., when a modest selloff took over and lasted the rest of the day.  This action gave us gap-up, indecisive, Doji-type candles.  SPY was a true Doji that printed new all-time high and new all-time high close.  DIA gave us a black Spinning Top that also printed new all-time high and all-time high closes.  Meanwhile, QQQ gave a white Spinning Top that broke its downtrend line (going back to the all-time high in July) and retested, but did not close above, a resistance line running back through the August 22 high.  This all happened on average volume across all three major index ETFs.

On the day, eight of the 10 sectors were in the green, with Technology (+2.73%) out in front of the others leading the rest of the market higher. On the other side, Utilities (-0.21%) and Consumer Defensive (-0.13%) were the only sectors in red.  Meanwhile, SPY gained 1.71%, DIA gained 1.25%, and QQQ gained 2.53%.  VXX fell 4.33% to close at 47.72 and T2122 climbed back into the top half of its over-bought range at 94.74.  At the same time, 10-Year bond yields rose to close at 3.719% while Oil (WTI) popped 1.61% to close at $72.05 per barrel on supply fears caused by Israeli bombing in Lebanon and the Hezbollah Leader saying Israel “crossed red lines” and there would be a reckoning.  So, Thursday was basically a re-think of the Fed policy change resulting in a gap higher.  After that gap, it was just volatility the rest of the day. 

The major economic news scheduled for Thursday included the Weekly Initial Jobless Claims, which came in lower than expected at 219k (compared to the 230k forecast and prior week’s 231k).  On the ongoing front, Weekly Continuing Jobless Claims were also down at 1,829k (versus a forecast of 1,850k and a prior week value of 1,843k). At the same time, the Q2 Current Account was lower at -$266.8 billion (compared to a forecast of -$259.0 billion and a Q1 reading of -$241.0 billion).  Meanwhile, the Philly Fed Mfg. Index was much better at 1.7 (versus a forecast of -0.8 and much better than the August -7.0 value).  At the same time, the Philly Fed Mfg. Employment Index was much higher at 10.7 (compared to August’s -5.7 reading).  Later, August Existing Home Sales were lower than predicted at 3.86 million (versus a forecast of 3.92 million and July’s 3.96 million number).  At the same time, the August US Leading Economic Index was better than anticipated at -0.2% (compared to a forecast of -0.3% and much better than July’s -0.6% value).  Finally, after the close, the Fed Balance Sheet showed a $6 billion decrease at $7.109 trillion (versus the prior week’s $7.115 trillion balance).

After the close, LEN reported beats on both the revenue and earnings lines.  However, FDX and MLKN missed on both the top and bottom lines.  (FDX missed on earnings by more than 25%.)

In stock news, on Thursday, INTC said it has no plans to divest its majority stake in MBLY.  At the same time, BABA accelerated its efforts to compete in the AI market by releasing 100 open-source large language models and text-to-video AI technology.  (BABA’s competitors like BIDU are primarily pursuing a closed-source approach.) Later, the Wall Street Journal reported that DIS is dumping the CRM-owned worker collaboration tool Slack after the recent hack that exposed more than a terabyte of DIS data.  At the same time, GM’s Cruise unit announced it will begin testing up to five autonomous vehicles in the San Francisco Bay area later this fall.  Later, BRKB’s railroad (BNSF) announce it had reached a tentative deal with the SMART union on a 5-year labor contract.  At the same time, KO announced plans to invest $1 billion in Nigeria operations over the next five years.  Later, TLSA rival NIO announced price cuts on its first car, now starting at $21,210 in China.

Elsewhere, the CWA union announced NYT workers had approved a strike, with 95% voting in favor of a strike.  At the same time, NKE announced its CEO (Donahoe) will step down on October 14 and will be replaced by former NKE senior executive Elliott Hill, who had left after 32 years at NKE.  (CNBC reported Donahoe was being forced out as the board seeks to restructure the company.)  Later, MA announced that they forecast holiday spending will grow by 3% again this year during a shorter-than-usual holiday window.  Meanwhile, GOOGL announced that ads will now be able to run, even when a YouTube video has been paused.  This annoyance may well just be intended to increase sales of YouTube Premium subscription accounts ($13.99/month) which avoids ads altogether. Later, after the close, the CEO of MASI was ousted after activist investor Politan won two board seats during a shareholder proxy vote.  Finally, Bloomberg reported the EU has warned AAPL that it must open up its extremely-guarded iPhone and iPad operating systems to rival technologies OR it will face significant (unspecified) fines.  The report says AAPL was given six months to do this before penalties will begin.

In stock legal and governmental news, on Thursday, the SEC announced that MQBKY (investment advisor) had agreed to pay $79.8 million to settle charges of overvaluing collateralized mortgage obligations held in its advisory accounts between 2017 and 2021.  At the same time, the Bureau of Land Mgmt. published a key environmental report, which was the last step to approval of IONR’s Rhyolite Ridge lithium mine in NV.  (The mine will produce enough lithium for 370k electric vehicles per year.  F and TM have both agreed to buy lithium from that mine.)  Later, Reuters reported that a criminal investigation is underway at the ET natural gas liquids plant that exploded and has been burning in La Porte TX since Monday. (A body was found in the car that hit the pipeline.)  At the same time, the FDA approved ELAN’s skin disease treatment for dogs.  After the close, the Anti-Defamation League joined a lawsuit alleging INTC has a hostile workplace and has wrongfully discriminated and terminated a former Israeli employee, after that employee accused two executives of openly posting anti-Semitic propaganda tied to the Israeli-Hamas war.

In miscellaneous news, on Thursday, Reuters reported that pro-Ukraine congressional leaders and the Biden administration are very near an agreement to extend expiration of $6 billion in military aid for Ukraine.  The report indicated that the deal would extend the period during which the President us able to drawdown US military supplies and use the $6 billion to replenish.  If not extended, the $6 billion expires at the end of the month.  Elsewhere, not waiting on the dysfunctional GOP House, the Senate Majority Leader moved a placeholder stop-gap bill through procedural hurdles.  This will allow the Senate to vote on a government funding continuing resolution almost immediately, if the House can get one passed and send it to the Senate.  Meanwhile, Freddie Mac reported Thursday that the national average 30-year, fixed-rate, conforming mortgage rate dropped to 6.09% (down from 6.20% a week prior). 

In Fed rate forecasting, the day following the Fed’s 50-basis-point cut, the Fed Funds Futures market closed while expecting a quarter-point cut in early November and then a half point cut in mid-December.  Specifically, 60.9% of trades expect a quarter-point cut in September, with the other 39.1% predicting a half percent cut at that meeting.  For December, 29.0% forecast a cut to 4.25%-4.50% (a total of a half of a percent lower than the current rate) while 50.5% expect 4.00%-4.25% (three-quarters of a percent lower than current), and 20.5% of trades predict a cut to 3.75%-4.00% (a full percent lower than current, or in other words, expect two cuts of half a percent during the last two meetings of the year).

Overnight, Asian markets were mixed, but leaned toward the green side with just four of the 12 exchanges in the red in that region.  (Note that the Bank of Japan held rates steady.) However, in Europe, we see red across the board at midday after the Bank of England and Norway’s central bank both held rates steady in contrast to the Fed’s big cut Wednesday.  The CAC (-0.72%), DAX (-0.86%), and FTSE (-0.49%) lead the region lower in early afternoon trade.  In the US, as of 7:15 a.m., Futures are pointing toward a mixed but down start to Friday.  The DIA implies a +0.03% open, the SPY is implying a -0.25% open, and the QQQ implies a -0.43% open at this hour.  At the same time, 10-Year bond yields are at 3.732% and Oil (WTI) is off 0.43% to $71.64 per barrel in early trading.

The only major economic news scheduled for Friday is Fed member Harker speaking at 2 p.m.  There are also no major earnings reports scheduled for either before the open or after the close.

In overnight news, MBGAF (Mercedes Benz) gave a profit warning and lowered its guidance, citing slow sales in China.  The CEO of Mercedes promised a sales push in China, presumably meaning a lowering of prices as well as introducing new “products” to the Chinese market.  Also, after their bad report, FDX is down more than 12% in premarket trading.  Early Friday, CEG announced it will restart the Three-mile Island nuclear power plant and have contracted to sell the power produced to MSFT.

With that background, it looks like the Bears have control early Friday. All three major index ETFs gapped modestly lower and have printed black-bodied candles since then in the premarket. However, all three remain well above their T-line (8ema). So, the short-term trend is still bullish. The mid-term trend is now also bullish with QQQ the laggard but now well over its downtrend line going back to the July all-time high. In the longer-term we still have a strong Bull trend all three major index ETFs. With regard to extension, none of the three major index ETFs are too far extended above their T-lines given the premarket action, but they were getting close as of Thursday’s close. However, the T2122 indicator is back in the top half of its overbought range. So, markets may have room to run either direction, but the Bears definitely have more slack to work with today. With regard to those 10 big dog tickers, eight of the 10 are in the red with the two remaining just barely holding onto green territory. NVDA (-0.87%) and INTC (-0.85%) lead the losses while NVDA and TSLA (-0.72%) lead the dollar-volume traded as usual. GOOGL (+0.16%) is holding up better than the other big dogs. Also, bear in mind that today is Friday, pay day, and also triple witching day. So, prepare your account for potential volatility in the afternoon as well as the weekend news cycle.

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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