Markets opened just on the red side of flat Monday (gapping down 0.21% in the SPY, down 0.08% in DIA, and down 0.22% in the QQQ).  However, the Bulls took over early and rallied all three major index ETFs to highs by 11 am.  Then the doldrums took over to give us a sideways grind in all three major that lasted until 3:55 pm.  Finally, we saw a strong rally the last 5 minutes of the day in SPY, DIA, and QQQ.  This action gave us Morning Star signal candles in the SPY and QQQ with the SPY closing right up against its T-line (8ema).  Meanwhile, DIA was much more indecisive, printing a white-bodied Spinning Top that closed just above the T-line after retesting that level. It’s worth noting that chip stocks (NVDA, MU, MRVL, and AMD) really led the parade Monday.  This all happened on less-than-average volume in all three major index ETFs.

On the day, six of the 10 sectors were in the red with Technology (+1.25%) way, way out front leading the way higher and Utilities (-1.13%) far behind, lagging the other sectors.  At the same time, the SPY gained 0.54%, DIA gained just 0.05%, and QQQ gained 1.12%.  VXX lost 1.68% to close at 23.43 and T2122 fell a bit but remains in the mid-range at 28.02.  10-year bond yields spiked again to 4.201% while Oil (WTI) was down 0.76% to close at $82.56 per barrel. This all took place on average volume in the QQQ and well below average in the large-cap index ETFs.  So, we saw a minor gap lower met with pretty much immediate buying.  However, after that move, markets just treaded water until the end of the day when the Bulls drove us higher into the close.         

There was no major economic news reported Monday.  However, the NY Fed did release its monthly survey of consumer inflation expectations.  The survey found that, on average, in July consumers now expect inflation to be at 3.5% a year from now down sharply from the 3.8% average expectation one month ago (June).  This was the lowest expectation reading since April of 2021.  In addition, 3-year and 5-year inflation expectations also dropped, although not as much, from 3.0% to 2.9%.  The survey also found positive improvements in consumer views on their personal finances and the job market over the next year.  The percentage that expect their personal situation to improve over the next year rose to the highest level since September 2021. Elsewhere, US bank regulators (FDIC, Fed, and Office of the Comptroller) said they will soon propose new regulations that require any bank with more than $100 billion in assets to issue enough long-term debt to cover capital losses in the event they ever fail.

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In stock news, PYPL named current INTU exec. Alex Chriss as its new CEO.  Chriss will take over for the current CEO on September 27.  At the same time, AMC stock gapped sharply lower (closing down 35.55%) while APE (preferred shares of AMC) closed up 16.29%.  This was the result of fear that the recent settlement of shareholder legal challenges will allow AMC to issue more shares, diluting the existing ones.  (Also AMC announced at 10-to-1 reverse split for August 24 with all APE shares converted to common stock on August 25.)  Over in China, shares of electric vehicle makers (LI, XPEV, NIO, and BYDDY) fell as TSLA announced more price cuts as it continues the EV price war.  Later, HE fell 35% based on fear of the electric utilities’ potential liability from the fires on Maui last week.  At the same time, CHK announced Monday it will sell its remaining “Eagle Ford” assets to SBOW for $700 million.  Elsewhere, KHC named insider Carlos Abrams-Rivera as its new CEO. At the same time, BTAI announced it will cut more than 50% of its workforce as it pivots to restructure the business.  By mid-afternoon, FFIE announced it has delivered its first Futurist Alliance 2.0 car (priced at $309k).  This “electric supercar” has more than 1,000 horsepower (doing 0-60mph in 2.27 seconds) and the ability to go 381 miles between charges.  Late in the day, there were two updates to the Monday morning report that X had turned down a CLF offer to buy the steelmaker out.  On Monday, the USW union threw its support behind the CLF offer to buy CLF.  At the same time, privately-held Esmark made an offer of $7.8 billion ($35/share) for X (the rejected CLF offer was $7.3 billion).  After hours, LL announced it has begun exploring “strategic alternatives.”  LL shared plummeted 19% in post-market trading on that news.

In stock legal and regulatory news, GOEV revealed Monday that it has finalized $113 million in incentive agreements with the state of OK and the North American Cherokee Nation.  The deal would allow GOEV to earn $113 million over 10 years if it meets the set performance objectives.  Elsewhere, President Biden called on F, GM, STLA, and the UAW to come together to reach a fair agreement. (No mention was made of the potential to invoke a 30-day non-strike cooling-off period.)  Later, UBS agreed to pay $1.435 billion to settle US charges that the Swiss lender misled investors, leading them to buy distressed mortgage securities in 2008.  (The impressive thing is that UBS managed to drag out the process for 15 years.  For example, CS, which UBS bought in June, paid $5.28 billion for the same crime…but way back in 2017.)  At the end of the day, NKLA recalled all battery-powered trucks it has delivered and stopped sales of new ones after an investigation found battery coolant leaks led to fires.  At the same time, an Australian court fined DELL $6.5 million for misleading customers about discounts for add-on computer monitors.  In addition, the FTC fined EXPGF (Experian) $650,000 for spamming consumers with marketing emails without providing a way to opt-out.  Meanwhile, the FDA approved PFE’s blood cancer therapy named Elrexfio.  At the same time, K won a 3-0 decision by the 9^th Circuit Court of Appeals where plaintiffs had sought to revive a class action suit against K over the label claims on the amount of protein in its cereal.

After the close, GSM and XP both missed on revenue while beating on earnings. So far this morning, CAH and HD reported beats on both the revenue and earnings lines.  Meanwhile, ESLT, IHS, and ONON beat on revenue while missing on earnings.  On the other side, SE missed on revenue while beating on earnings.  Unfortunately, TME missed on both the top and bottom lines.  It is worth noting that IHS lowered its forward guidance.

Overnight, Asian markets were mixed.  Hong Kong (-1.03%), South Korea (-0.79%), and Shenzhen (-0.70%) paced the losses.  Meanwhile, Japan (+0.56%), Australia (+0.38%), and Taiwan (+0.37%) led the gainers.  In Europe, the bourses are leaning heavily toward the bearish side at midday.  The CAC (-1.27%), DAX (-1.04%), and FTSE (-1.45%) are leading the region lower with only two exchanges in the green in early afternoon trade.  In the US, as of 7:30 am, Futures are pointing toward a down start to the day.  The DIA implies a -0.61% open, the SPY is implying a -0.57% open, and the QQQ implies a -0.52% open at this hour.  At the same time, 10-year bond yields are spiking again to 4.231% and Oil (WTI) is down more than one percent to $81.66 per barrel in early trading.

The major economics news scheduled for Tuesday includes July Retail Sales, July Export Price Index, July Import Price Index, and NY Fed Empire State Mfg. Index (all at 8:30 am), June Business Inventories and June Retail Inventories (both at 10 am), June TIC Net Long-Term Transactions (4 pm), and API Weekly Crude Oil Stock Report (4:30 pm).  Fed member Kashkari also speaks at 11 am.  The major earnings reports scheduled for before the opening bell include CAH, ESLT, HD, HIS, SE, and TME. Then, after the close, A, COHR, HRB, JKHY, NU, and LRN report.

In economic news later this week, on Wednesday, July Building Permits, July Housing Starts, July Industrial Production, EIA Crude Oil Inventories, and FOMC Meeting Minutes are reported.  On Thursday, we get Weekly Initial Jobless Claims, Philly Fed Mfg. Index, Philly Fed Mfg. Employment, and the Fed Balance Sheet.  Finally, on Friday, there is no significant economic news scheduled.

In terms of earnings reports, on Wednesday, EAT, JD, PDGC, TGT, TCEHY, TJX, ZIM, AVT, SQM, CSCO, KE, STNE, and SNPS reports.  On Thursday, we hear from ARCO, BILI, DOLE, NICE, TPR, WMT, AMAT, FTCH, GLOB, KEYS, and ROST.  Finally, on Friday, DE, EL, VIPS, XPEV, and PANW report.

In miscellaneous news, Nomura Securities released data from its study of 0DTE (zero days to expiration) options.  The study found that 0DTE contracts are surging in use, accounting for more than 55% on S&P500 Index volume on a single day recently (1.86 million contracts).  The study also found that contrary to the past (when Call options were the most widely used) over the last 20 days 0DTE Put options had about 10% more volume than 0DTE Call options.  Elsewhere, Argentina made some “moves” on Monday, devaluing their currency 18% against the Dollar and hiking their central bank interest rate 21% to a staggering 118%.  Overnight, Russia’s central bank called an “unscheduled emergency meeting” in the hope of stopping the crash of the Ruble. 

In late-breaking news, Fitch announced warnings for dozens of US banks overnight.  This is the primary driver behind the strength of the bears in Europe and in the US premarket.  The warning said that if the industry score were to drop from AA- to A+ (a one-step downgrade), it would be forced to rerate all 70 major US banks it covers.  As of now, Fitch rates BAC, BNY, JPM, and STT as AA-.  It has MS and WFC at A+.  They rate BOKF, C, GS, and UMBF at A.  Fitch has CBU at A-.  COLB, HTH, and WTFC are rated BBB+ by them.  Meanwhile, BKU, EWBC, FINN, SNV, and TRMK are at a BBB rating. Finally, among the investment grade banks, Fitch has WAL at BBB-.  Fitch rates CATY and PACW as “below investment grade” BB+. 

So far this morning, JKS reported beats on both the revenue and earnings lines.  (ERJ has not yet reported.)

With that background, it looks like the bears have gapped the premarket down and have kept the pressure on with black-bodied candles sitting at the low of the early session. DIA has dropped back down through its T-line (8ema). The short-term trend remains bearish, but the long-term trend is still hanging on to a bullish incline but it is starting to be pushed. As far as extension goes, all of the major index ETFs remain close to the T-line and the T2122 indicator is still in its mid-range. So, once again both sides of the market have plenty of room to run…if they can find momentum.

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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