Markets opened just on the green side of flat (up 0.11% in the SPY, up 0.12% in the DIA, and up 0.12% in the QQQ).  At that point, we saw a meander sideways dipping up and down until the Fed report.  However, at 2 pm all three of the major indices got very volatile for an hour.  Then a hard selloff took hold for the last hour of the day across the market.  This action gave us black-bodied candles with an upper wick, that closed very near the lows of the day in the SPY, DIA, and QQQ.  If you had squinted and called the prior three candles Evening Stars in those three, then you’d have to say that today we saw bearish follow-through.  All three of the indices are back below their T-line (8ema) with the SPY and DIA back down within 1.5% of their 50sma. 

On the day, eight of the 10 sectors were in the red with Energy (-1.42%) leading the way lower while Healthcare (+0.63%) held up better than the other sectors.  At the same time, the SPY lost 0.69%, DIA lost 0.83%, and QQQ lost 0.65%.  VXX climbed 1.34% to 39.41 and T2122 climbed to just outside of the oversold territory at 20.13.  10-year bond yields dropped again to 3.362% while Oil (WTI) plunged another 4.77% to $68.22 per barrel.  So, to summarize, Wednesday was an undecided, slightly bullish day until the Fed announcement.  Then it got very volatile and the bears took over for good at 3 pm driving us lower into the close.  This all happened on just less than average volume in the SPY and QQQ and right at average in the DIA.     

In economic news, The April ADP Nonfarm Employment Change came in far larger (double) than expected at +296k (compared to a forecast of +148k and the March value of +142k).  Later in the morning, the April S&P Global Composite PMI came in just shy of the anticipated level at 53.4 (versus a forecast of 53.5 but still better than the March reading of 52.3).  At the same time, US April Service PMI also came in just shy of expectation at 53.6 (compared to the 53.7 forecasted but also better than the March value of 52.6).  Then the April ISM Non-Mfg. PMI came in slightly above the anticipated value at 51.9 (versus a forecast of 51.8 and above the March reading of 51.2).  Next, the EIA Weekly Crude Oil Inventories Report showed a slightly larger than expected drawdown of 1.280-million-barrels (versus a forecasted 1.100-million-barrel drawdown but far less than the prior week’s 5.054-million-barrel draw).  However, this was all prelude to the Fed news.

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In Fed news, the FOMC raised rates one-quarter of one percent to a range of 5.00% to 5.25% as was widely expected.  Also, as they have been signaling for some time (to those who want to pay attention), the FOMC opened the door to at least a pause in rate hikes by dropping the language that said “some additional policy firming may be appropriate” and replacing it with “the extent to which additional policy firming may be required would take into account the cumulative tightening of monetary policy.” Then in his press conference, Fed Chair Powell flat out said, “we were no longer saying that we anticipate [some additional policy firming].”  Everything else about the statement and the press conference was normal, always leaving themselves wiggle room and firmly committing to nothing.  However, there were a couple of notable mentions.  Powell said, “The case of avoiding a recession is in my view more likely than that of having a recession.”  Finally, Powell tried to dissuade markets from expecting rate cuts soon by saying “We on the committee have a view that inflation is going to come down not so quickly.” … “It will take some time [for inflation to react to Fed moves that have already been made], and in that world, if that forecast is broadly right, it would not be appropriate to cut rates and we won’t cut rates.”  (Markets seem to be ignoring Powell on that count with Fed Fund Futures pricing in a 70% probability of a rate cut in September.)

In stock news, LLY announced Wednesday that a late-stage trial of its Alzheimer’s drug showed the drug slowed cognitive decline by 35%.  This was a bit better than similar studies from competitors BIIB and ESAIY, whose study found their drug slowed the decline by 27%.  In the car industry, TSLA resumed taking US orders for its Model 3 car at a price that is 18.5% below the August 2022 price.  However, the Model 3 is also eligible for a $3,750 US government tax credit.  Meanwhile, Reuters reported the F is facing another production issue causing three plant closures and an unspecified number of F-150 trucks to be parked unfinished due to a shortage of the correct door handle.  Elsewhere, DRI announced it is purchasing RUTH in an all-cash deal for $715 million.  At the same time, EADSF (Airbus) said Pratt and Whitney (owned by RTX) is having a hard time supplying enough engines and spare parts needed for Airbus to maintain its fleet.  This came after India’s third-largest airline filed for bankruptcy, citing the failure of RTX engines and lack of supplies as a reason. At the close, U announced it will lay off 8% (600 employees) of its workforce.  Also, after the close, OPCH said it is acquiring AMED in an all-stock deal worth $3.6 billion, which would be a 26% premium on the AMED May 2 closing price.  Finally, Bloomberg reported in the early evening that PACW is now “exploring strategic options” as 80% of the regional bank’s loan book is in the commercial and residential real estate markets.  PACW stock fell 60% in post-market trading on the news.

In stock legal and regulatory news, lawyers for HOOD presented arguments in a MA court on Wednesday.  The case is over whether the MA Sec. of State has the right to impose the fiduciary standard that brokers avoid or disclose conflicts of interest to the customer.  (As opposed to “gamifying” trading and selling customer orders to firms that front-run the trades.)  Elsewhere, Britain’s Competition and Markets Authority said on Wednesday that they are investigating the ADBE $20 billion buyout of cloud-based design platform Figma.  A “phase-1 decision” on how to treat the deal is to be announced by June 30.  At the same time, on the side of the pond, the SEC adopted new rules around the transparency of share buyback plans.  Under the new rules, companies will have to disclose average daily share repurchases on a quarterly or semi-annual basis.  Meanwhile, the FTC accused META of misleading parents about protections for children and proposed tightening an agreement with the company that would ban META from profiting off of data from minors.  At day’s end, GOOGL won a jury trial that had accused them of patent infringement related to the retrieval of information from a database.  The jury found the patent invalid since the same technology had been disclosed by others preceding the patent-holders’ claim to that tech.

After the close, ALL, QCOM, AVT, CTSH, CTVA, ZG, APA, WMB, MELI, MRO, EQIX, REZI, OPAD, IR, QRVO, HST, VAC, PSA, CENT, CENTA, VSTO, FLT, CCRN, SEDG, BHE, QGEN, NUS, TTEC, ETSY, CW, ANSS, HUBS, HCC, FG, MMS, MKSI, PARR, QDEL, Z, and SPNT all reported beats on both the revenue and earnings lines.  Meanwhile, ATUS, ATO, GL, ALB, TWI, ULCC, EQH, CODI, and AMED all missed on revenue while beating on earnings.  On the other side, EADSY, MOS, FNF, SIGI, O, WES, CHRD, RUN, and PDCE all beat on revenue while missing on earnings.  Unfortunately, MET, YELL, CPE, GIL, WERN, WES, NVST, TTMI, UGI, and HOUS all missed on both the top and bottom lines.  It is worth noting that QCOM, QRVO, and TTMI lowered their forward guidance, while IR and HST raised their guidance.

Overnight, Asian markets leaned toward the green side on modest moves.  Shenzhen (-0.57%) was the only appreciable loser Thursday while Hong Kong (+1.27%), India (+0.92%), and Shanghai (+0.82%) led the rest of the region higher.  Meanwhile, in Europe, prices are nearly red across the board at midday.  Only Russia (+0.37%) is in the green while the CAC (-0.97%), DAX (-0.83%), and FTSE (-0.83%) lead the region lower in early afternoon trade.  In the US, as of 7:30 am, Futures are pointing toward a modestly red start to the day.  The DIA implies a -0.31% open, the SPY is implying a -0.36% open, and the QQQ implies a flat -0.06% open at this hour.  At the same time, 10-year bond yields continue to fall, now at 3.347% and Oil (WTI) is on the red side of flat at $68.47/barrel in early trading as recession fears weigh on markets.  

The major economic news events scheduled for Thursday include March Imports, March Exports, March Trade Balance, Weekly Initial Jobless Claims, Preliminary Q1 Nonfarm Productivity, and Preliminary Q1 Unit Labor Cost (all at 8:30 am), the Fed Balance Sheet and Bank Reserves with the Federal Reserve (both at 4:30 pm).  The major earnings reports scheduled for the day include GOLF, ATI, AEP, BUD, APG, APTV, ARNC, ARW, BALL, BHC, BCE, BDX, BERY, BWA, BV, BRKR, CAH, CG, COMM, COP, CEG, DLX, DNB, EQNR, ES, RACE, FOCS, GTES, GPRE, DINO, HII, H, IBP, ICE, IRM, ITT, JLL, K, KTB, MMP, MLM, MDU, MRNA, MODV, NFE, NJR, NVO, DNOW, NRG, OPCH, OGN, PZZA, PARA, PH, PTON, PENN, PCG, PNW, PLTK, PPL, PRMW, PRVA, PWR, RCM, REGN, RCL, SABR, SBH, SRE, SHEL, FOUR, SWK, STWD, TRGP, TFX, TU, BLD, UPBD, VNT, W, WLK, WRK, XYL, and ZTS before the open.  Then, after the close, ATSG, LNT, AIG, COLD, AMN, AAPL, TEAM, BGS, BECN, BIO, SQ, BCC, BKNG, CNQ, CVNA, ED, CTRA, CWK, DASH, DKNG, DBX, ERJ, EOG, EXPE, FND, FTNT, GDDY, GT, LYV, LYFT, MTZ, MATX, MTD, MCHP, MNST, MSI, NCR, ZEUS, OTEX, OPEN, OEC, CNXN, PBA, POST, KWR, RRX, RGA, RKT, SEM, SHOP, TDS, TXRH, TSE, TPC, and USM report.  

In economic news later this week, on Friday, April Average Hourly Earnings, April Nonfarm Payrolls, April Private Nonfarm Payrolls, April Participation Rate, and the April Unemployment Rate.

In terms of earnings reports later this week, on Friday, AES, AMC, AMCX, AEE, AXL, AMRX, BBU, BEPC, BEP, CLMT, CI, CNK, CNHI, D, ENB, EPAM, EVRG, FLR, FYBR, GLP, GTN, HUN, IEP, JCI, LSXMK, LSXMA, MGA, NMRK, OMI, PBF, PAA, PAGP, QRTEA, WBD and BAP report.

So far this morning, SHEL, CAH, EQNR, MT, BUD, DINO, NVO, MRNA, PCG, WRK, BDX, WCC, BCE, APTV, PWR, SRE, W, REGN, HII, ES, ARNC, APG, XYL, BLD, SBH, VNT, BV, TFX, GOLF, BRKR, MODV, DLX, DNOW, LAMR, FOUR, DDOG, GCI, GEL, PARAA, and RITM all reported beats on both the revenue and earnings lines.  At the same time, COP, SWK, WLK, ZTS, IRM, KTB, OGE, RCM, STWD, and BALL all missed on revenue while beating on earnings.  On the other side, NRG, CEG, AEP, BWA, CG, PENN, H, OPCH, PTON, and PRMW all beat on revenue while missing on earnings.  Unfortunately, PARA, BHC, and NFE missed on both the top and bottom lines.  It is worth noting that DDOG made the only guidance adjustment, raising its forecasts.

In miscellaneous news, Bloomberg reports that TD and FHN have agreed to terminate their $13 billion previously agreed merger.  JNJ priced its KVUE IPO at $22/share and increased the number of shares to be offered to almost 173 million (JNJ will still own 90% interest in KVUE after the IPO, which is expected to close Monday, May 8.  CNBC reported a rumor that AAPL will announce a new $90 billion share buyback program for the year (equal to the 2022 buyback amount).  In the previous decade, AAPL spent more than $572 billion on share buybacks.

With that background, it looks like the bears are now in control in the premarket, especially in the large-cap indices. All three major indices are trading below their T-lines again at this point. Over-extension from the T-lines is not really a problem, though DIA is getting a touch stretched to the downside, and T2122 is back up just outside the oversold territory. So, the pressure to rebound is not heavy yet. With the Fed having told traders what we expected and wanted to hear, we’ve now had the overnight to rethink whether the FOMC and Powell painted too rosy a picture, whether a banking crisis will tip us into a recession, or whether the Wednesday reaction went too far (or not far enough). Don’t be surprised if the Bulls pull a reversal, but don’t bet on it either. Follow trend, don’t predict.

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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