Friday was another Bullish and yet hesitant or indecisive day.  The SPY gapped 0.19% higher, QQQ gapped 0.47% higher, and DIA was the contrarian again, opening down 0.06%.  At that point, SPY and QQQ put in strong rallies while the DIA put in a milder rally over the first hour of the day.  At that point SPY and QQQ sold off with intermittent relief rallies reaching Thursday’s closing level at about 12:45 pm.  Meanwhile, DIA trod water until about 11:20 am when a sharp, short rally had it back at Thursday’s close by 11:35 am.  From there DIA ground sideways in a very tight range until 1:30 pm.  Then the last rally of the day took DIA two-thirds of the way back to the highs before grinding sideways into the close from 2:30 pm onward.  SPY’s last rally started at 12:45 pm and lasted until 2:30 pm before drifting into the close.  At the same time, QQQ rallied more strongly from 12:45 pm until 2:25 pm before selling off into the close.

This action gave us a gap-up (breakout) Doji in the SPY that could easily be seen as a Shooting Star candle.  QQQ also gave us a gap-up, Doji-like black-bodied candle, but since the open was not above this week’s candle body highs, I hesitate to call it a Shooting Star.  We can at least say it was very indecisive and had a large upper wick on tock of the small black body.  For its part, even though DIA was the laggard, it did put in the most Bullish candle.  Even so, it was more than half upper wick on top of a white body.  All three major index ETFs remain above their T-line (8ema).  So, the trend remains bullish.  This all happened on average volume in the DIA and just below average volume in the SPY and QQQ.

On the day, nine of the 10 sectors were in the red on small moves as Basic Materials (-0.77%) led the market lower, while Technology (+0.30%) was the only sector in the green.  Despite this, the SPY gained 0.18%, DIA gained 0.14%, and QQQ gained 0.38%.  The VXX gained a half of a percent to end at 28.36 and T2122 dropped out of the overbought territory (barely) to 79.67.  10-year bond yields fell to end at 3.743% while Oil (WTI) dropped 1.32% to end the day at $70.35 per barrel.  So, Friday was another day where we saw gaps higher, rallies, and protracted selloffs.  It seemed as if the market was truly undecided as to who was in control.

SNAP Case Study | Actual Trade

The only major economic news Friday was the USDA WASDE Ag report.  The biggest news from that report is that the USDA surprisingly lowered its projected US soybean exports by 15 million bushels.  (The USDA tends to not adjust US crop forecasts in the June report.  So, forecasts were left unchanged and a reduction in forecasted exports is less a reflection on US production at this early stage than it is an expectation of a bumper crop in Brazil and other South American countries.)  The report predicts increases in the year-end US grain inventories for corn (up 35 million bushels), soybeans (up 15 million bushels), and wheat (up 6 million bushels). It’s doubtful that the report reflects the Russian dam attack earlier in the week that leaves 1 million acres of wheat cropland (25% of Ukraine’s acreage) without irrigation.

In stock news, the White House announced that TSLA charging stations will be eligible for federal subsidies as long as the charges include a national standard connection (CCS).  TSLA jumped on the news while charging station competitors (CHPT, EVGO, and BLNK) plummeted 10-13% on the day.  Elsewhere, NFLX reported Friday that sign-ups for new accounts have surged in the first days since it started a crackdown on password sharing in the US.  The company reported more than 100,000 new accounts created in each of the first two days of the clampdown program.  Over the weekend, UBS completed its buyout of rival CS after completing the loss-sharing agreement with the Swiss government at the end of last week.  That deal provides a $10 billion Swiss government backstop for losses.  Monday morning, UK PM Sunak said that Britain had concluded a deal with GOOGL to allow the UK priority access to its DeepMind AI for research purposes.  Meanwhile, NDAQ has agreed to acquire private-equity-owned Adenza software (Risk Management and Regulatory Compliance software for the financial services industry) for $10.5 billion.  At the same time, NVS agreed to acquire KDNY for $3.5 billion in order to build out its late-stage development pipeline.

In stock legal and regulatory news, WBA reached a settlement with the state of NM over opioid crisis claims.  The company agreed to pay the state $500 million to settle the state’s claims.  Elsewhere, a US District judge in Seattle rejected company bids to have a case thrown out, instead ruling that AAPL and AMZN must face a consumer antitrust lawsuit that accuses them of conspiring to inflate the price of iPhones and iPads sold through AMZN.  Meanwhile, a US bankruptcy judge has rejected MMM subsidiary Aearo Technologies’ attempt to avoid liability of 260,000 lawsuits over military personnel hearing loss allegedly caused by faulty MMM earplugs.  The judge ruled Aearo was a well-supported subsidiary of MMM and not otherwise in financial stress.  (The bankruptcy was purely a MMM liability avoidance mechanism based on the “Texas Two-Step” strategy to transfer liability and then declare bankruptcy of the subsidiary.)  At the same time, the FDA advisory panel unanimously backed the full approval of BIIB’s Leqembi Alzheimer’s drug.  (The full FDA approval decision is expected by July 6.)  After the close, the US Chamber of Commerce (acting on behalf of drug giants) sued the US Dept of HHS in an effort to block Medicare’s ability to negotiate drug prices with pharmaceutical companies.  Also after the close, AAL and JBLU asked a US judge to allow them to continue a mutual frequent flyer recognition program even after the judge ruled in May that the companies must end their alliance to “coordinate flights and pool revenue” (which was ruled a defacto merger).

Overnight, Asian markets leaned to the green side on modest moves in both directions.  New Zealand (-0.64%) paced the losses while Malaysia (+0.78%), Shenzhen (+0.74%), and Japan (+0.52%) led the gainers. Meanwhile, in Europe, we see a similar picture taking shape with five exchanges showing any red at all while 10 exchanges show larger, yet still modest moves toward the green at midday.  The CAC (+0.53%), DAX (+0.55%), and FTSE (-0.02%) lead the region as always in early afternoon trade.  In the US, as of 7:30 am, Futures are pointing toward a green start to the morning. The DIA implies a +0.02% open, the SPY is implying a +0.18% open, and the QQQ implies a +0.41% open at this point.  At the same time, 10-year bond yields are up slightly to 3.747% and Oil (WTI) is sharply lower by 2.28% to $68.57 per barrel in early trading.

The only major economic news events scheduled for Monday is limited to the Federal Budget Balance (2 pm).  There are no major earnings reports scheduled for before the open.  However, after the close, ORCL reports. 

In economic news later this week, on Tuesday, May CPI and API Weekly Crude Oil Stocks are reported.  Then on Wednesday, we get May PPI, EIA Crude Oil Inventories, Q2 Fed Interest Rate Projections for the Current year, 1^st year, and 2nd year, FOMC Economic Projections, FOMC statement, Fed Interest Rate Decision, and the Fed Chair Press Conference.  On Thursday, May Retail Sales, May Imports, May Exports, Weekly Initial Jobless Claims, NY Empire State Mfg. Index, Philly Fed Mfg. Index, May Industrial Production, April Business Inventories, and April Retail Inventories are reported.  Then, on Friday, we get Michigan consumer Sentiment, and we have a Fed Speaker (Waller at 7:45 am).

In terms of earnings reports later this week, they will be few and far between. On Tuesday there are no major reports.  Then Wednesday, we hear from LEN. On Thursday, KR, JBL, WLY, and ADBE report.  Finally, there are no reports again on Friday.

In miscellaneous news, the Fed reported Friday that US bank deposits and lending both increased for the third straight week (for the week ending May 31).  Deposits rose $46.6 billion during the week while lending increased $4.6 billion (residential lending rose $0.6 billion while commercial real estate lending was up $3.7 billion, commercial loans also rose $0.6 billion as Consumer loans fell $2.1 billion).  Elsewhere, the Fed has been counting on falling rental and housing prices to help drive disinflation later this year.  However, Bloomberg reported Saturday that there are factors at play that may cause that housing disinflation to not be as strong as the Fed hopes.  Bloomberg said we saw a near-record low number of houses put up for sale this Spring.  (This will tend to prop up home prices and prevent that disinflation.)  In addition, it seems some banks are now abandoning commercial real estate deals as a market over fear of defaults.  The report cited a Houston-area apartment project from Howard Hughes (TX Real Estate Developer). Hughes is proposing an apartment project in an area with strong rental demand.  Yet 48 lenders who have financed such projects in the past refused to even bid on a financing proposal.  Still, that is just one example, the Bloomberg story also admitted that US apartment construction remains at a record pace this year. Finally, the Fedwatch Tool tells us markets have priced in a 76% probability of no change in rates and a 24% chance of a quarter-point hike this week.

With that background, it looks like the Bulls are looking to make another modest push at the open today. Only the IWM is not following suit and even it is looking at a modestly higher open. The SPY looks like it wants to retest the Mid-August 2022 high while QQQ seems to be looking to retest Friday’s high. DIA lags, but also has some room to move before the next potential resistance level. The main takeaway from this for me is that we are not seeing consolidation anywhere except the IWM and the bulls seem to want to run to new highs. None of the major indices ETF tickers are over-extended from their T-line at this point and the T2122 indicator has dropped back just outside the overbought territory. So, we do have some room to run. That all said, it is Fed week. So, we might see a move early but don’t be surprised by a lot of “wait and see” until the Wednesday decision and presser. As always, beware of intraday volatility since we have been quite uncertain of direction lately (we moved, but the candles were indecisive).

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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