Markets opened flat to down just a touch on Wednesday.  We then traded sideways in a rollercoaster wave pattern until the Fed announcement at 2 pm.  At that point, we saw a huge spike over 5 minutes in all 3 major indices.  This was followed by a half-hour of sideways chop at the highs and then a massive selloff taking us down 2.5% to 4.5% over the last 90 minutes of the day. This action gave us large black-body candles with large upper wicks.  This also took us far below the T-line (8ema) in the SPY and QQQ while the DIA is just pulling back to the T-line.

On the day, all ten sectors were in the red as Technology (-3.87%) and Basic Materials (-3.60%) led us lower while Communications (-0.75%) lagged behind. Meanwhile, SPY fell 2.53%, DIA fell 1.55%, and QQQ fell 3.43%.  The VXX was up 2.57% to 17.94 and T2122 plunged into the mid-range at 42.33.  10-year bond yields rose to 4.09% and Oil (WTI) is up 0.89% to $89.16/barrel. So, apparently, traders loved the Fed statement and then were scared to death by Chair Powell’s press conference performance.

In economic news, the October ADP Nonfarm Employment Change came in hotter than expected at +239k (compared to a forecast of +195k and September’s +192k number).  EIA Crude Oil inventories showed a larger-than-expected drawdown of 3.115 million barrels (versus the forecast of +0.367 million barrels and last week’s reading of +2.588 million barrels).  However, the big news of the day was from the Fed.  As was expected, the FOMC hiked rates by 0.75% (to a 3.75% – 4% rate).  However, the Bulls took heart from the statement which hinted at softening when it added that in the future they would take “the cumulative tightening” effect into account “which lags monetary policy.”  Those statement additions did seem to be hinting at slowing the rate hikes soon.  However, in his press conference, Fed Chair Powell largely dismissed the idea of pausing soon again reiterating that it will be data-driven and may be soon or further out depending on the data the Fed gets.  This is not what the Bulls wanted to hear and was exactly what the Bears wanted.  Hence, the very strong selloff on this news.

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In stock news, early in the day, the mains iPhone supplier to AAPL “locked in” 200,000 employees for a 7-day Covid quarantine.  This came after employees had been scaling fences and eluding police to escape the plant to avoid Covid.  Early on, OPEN posted a notice that it has cut 18% of its workforce (550 people) due to the poor housing market.  Elsewhere in that arena, CNBC reported the WFC is preparing for major layoffs in their mortgage processing departments as mortgage volume drops.   At mid-morning, CVS, WBA, and WMT agreed to pay $13.8 billion to resolve several thousand state, local, and tribal lawsuits accusing them of mishandling opioid drugs.  This includes $5 billion over 10 years from CVS and $5.7 billion over 15 years for WBA.  WMT will pay $3.1 billion (mostly up front).  In the afternoon, AAL pilots joined peers at UAL and DAL in rejecting the latest contract proposal from their company.  Then, late in the day DD announced it was scrapping its deal to buy ROG due to the failure to get past Chinese Regulatory hurdles.  In other M&A deal news, three state Attorneys General have filed suit to block the KR buyout of ACI (for $25 billion).

In miscellaneous news, French fuel supplies will begin to improve over the next 1-3 weeks.  The strike which had taken 45% of the country’s refining capacity offline for most of October has been resolved and major refineries will slowly come back online starting this week.  XOM and TTE are the main oil companies impacted by shutdowns.  Back in the US, the SEC has implemented new rules for mutual funds.  The rules will require funds to maintain more liquidity (10% of net assets to be highly liquid like cash) as the agency expects the market downturn to cause a flood of redemptions.  The idea is that by requiring the extra cash to be accumulated slowly now, this will avoid market gyrations as funds have to sell in a hurry to meet redemption requests.

After the close, ALL, BKNG, EBAY, ZG, Z, EQIX, APA, WCN, MRO, QRVO, FTNT, FLT, ACA, TTMI, ETSY, QDEL, O, WSC, PTC, WTS, ANSS, RUN, GFL, IR, MKSI, PK, SLF, AFG, VSTO, and CCRN all reported beats on the revenue and earnings lines.  Meanwhile, QCOM, LNC, MGM, HST, WERN, CPE, ES, HHC, MET, OPAD, PDCE, SIGI, SUM, KMPR, TSE, TPC, and ALGT all reported beats on revenue while missing on earnings.  On the other side, CTSH, ALB, EQH, CW, ICLR, PAA, RCII, RIG, WES, and ROKU reported misses on revenue while also beating on earnings.  Unfortunately, LUMN, ATUS, CF, CLR, YELL, NUS, and LHCG all missed on both the revenue and earnings lines.  It is worth noting that CCRN was the only major company to raise guidance.  However, QCOM, TSE, VSTO, MKSI, SUM, ROKU, and ANSS all lowered their forward guidance.

So far this morning, ABC, AER, CI, LNVGY, COP, MAR, TEVA, APTV, REGN, W, SRE, APD, BHC, COMM, INGR, MDU, UAA, PENN, QSR, AER, ADT, APG, EPAM, OGE, H, GIL, ALIT, SRCL, MUR, CROX, BRKR, VIRT, GOLF, MODV, BALL, DLX, ESAB, and UA all reported beats on both the top and bottom lines.  Meanwhile, EXC, JCI, WCC, GOLD, TPX, IRM, ITT, KTB, and WLKP all missed on revenue while beating on earnings.  On the other side, MRNA, TX, and PWR beat on revenue while also missing on earnings.  Unfortunately, FIS, WLK, HII, ZTS, PTON, VNT, WMS, PZZA, MD, and FOCS all missed on both the top and bottom lines.  It is worth noting that CI, INGR, AER, MODV, and ESAB all raised their forward guidance.  However, HII, TPX, PTON, VNT, WMS, and MD all lowered their guidance.

Overnight, Asian markets were very nearly red across the board in reaction to the US Fed.  Only Thailand (+0.04%) managed to hold onto the green.  Meanwhile, Hong Kong (-3.08%), which halted trading midday due to a typhoon warning, Malaysia (-2.15%), and Australia (-1.84%) led the region lower.  In Europe, we do see red across the board at midday.  The FTSE (-0.58%), DAX (-1.09%), and CAC (-0.76%) lead the region lower with many of the smaller exchanges even further down in early afternoon trade.  As of 7:30 am, US Futures are pointing to a down start to the day in follow-up to the second Fed reaction yesterday.  The DIA implies a -0.45% open, the SPY is implying a -0.66% open, and the QQQ implies a -0.90% open at this hour. 10-year bond yields are spiking to 4.193% and Oil (WTI) is down 1.66% to $88.50/barrel in early trading.

The major economic news events scheduled for Thursday include September Imports / Exports, September Trade Balance, Weekly Initial Jobless Claims, Q3 Unit Labor Cost, and Q3 Nonfarm Productivity (all at 8:30 am), Oct. Services PMI (9:45 am), Sept. Factory Orders and Oct. ISM Non-Mfg. PMI (all at 10 am).  The major earnings reports scheduled for the day include GOLF, ADT, WMS, AER, APD, ALIT, ABC, APG, APTV, ARW, AAWW, BALL, BALY, GOLD, BHC, BCE, BRKR, CQP, LNG, CI, COMM, COP, CROX, CMI, DSEY, DNB, SATS, EPAM, ESAB, EXC, FIS, FOCS, GIL, GTN, GPRE, HII, H, INGR, NSIT, IBP, ICE, IRM, ITT, JCI, K, KTB, MAR, MD, MRNA, MODV, MUR, NGD, OGN, PZZA, PH, BTU, PTON, PENN, PNW, PWR, REGN, QSR, RCL, SRE, SPR, STLA, SRCL, TRGP, TPX, TX, TEVA, VNT, W, WCC, WLK, and ZTS before the open.  Then after the close, AGL, AL, ATSG, AEE, COLD, AMGN, AMN, TEAM, AVB, BECN, SQ, CVNA, CVCO, CE, COIN, CODI, ED, CTRA, CTVA, BAP, CWK, DASH, DBX, DXC, NVST, EXAS, EXPE, FND, FRG, GDDY, IHRT, ILMN, LYV, MTZ, MELI, MTD, MCHP, MNST, MSI, ZEUS, OTEX, OPEN, PYPL, CNXN, PBA, KWR, RGA, RKT, SEM, SVC, SWKS, SM, SBUX, TDS, TS, TWLO, USX, VTR, and WBD report. 

In economic news later this week, on Friday, we get Avg. Hourly Earnings, Oct. Nonfarm Payrolls, Oct. Participation Rate, and Oct. Unemployment Rate.

This huge earnings week comes to an end on Friday, as ADNT, AES, AMCX, AXL, AMRX, BEP, CAH, CNK, D, DUK, ENB, EOG, EVRG, FLR, GTES, GLP, HSY, HUN, IEP, KOP, LAMR, LSXMA, MGA, PBR, PPL, SYNH, TEF, TIXT, and VST report.

Now that the Fed has disappointed dreamers (who expected to hear the worst is over, the Fed is done with big tightening moves, and we’re off to the races) it looks like markets may be headed back down to retest the mid-October lows. The DIA is giving up its T-line in premarket (and was the last major index to do so). China also reiterated that, despite rumors, they are committed to the “Zero Covid” policy of lockdowns. The next shoe to drop may well be the Bank of England rate decision at 8 am Eastern. So, buckle in for a potentially bumpy ride.

The bullish trend is now broken in the QQQ, SPY, and as of premarket the DIA. Extention from the T-line (8ema) is likely not a factor, although the QQQ is very extended below it at this point. However, T2122 says we are have room to run since we are still in the mid-range. Once again, be very careful about chasing. This is not only a very bearish market, but very volatile. And a relief rally might “rip your face off.” So, strongly consider letting the panic settle out before taking any new trades. Emotions will kill a trader! Control your FOMO and your fear in general. I promise you, there will be plenty of money to make after the knee-jerks ease up.

Be deliberate and disciplined. Don’t be stubborn. Remember that it is 100 times more important to avoid big mistakes than it is to pick big winners. If you have a loss, admit you were wrong and take the loss before it gets out of hand. And when price does move in your direction, always move your stops in your favor (remember the “Legend of the man in the green bathrobe“…it is NOT HOUSE MONEY, it’s all OUR MONEY!). Trading is not your hobby. It’s a job. The money is real. 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. I know the Powerball is huge right now, but give up that lottery ticket mentality.

See you in the trading room.

Ed

Swing Trade Ideas for your consideration and watchlist: SQQQ, QID, RIG, BITO, AMD, XLK, AAPL, GM, TDOC, QCOM. 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.

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🎯 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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