Markets gapped more than a percent lower at the open Tuesday after a bad earnings report by BBY and a major guidance warning by SNAP, which hurt the big tech names in sympathy.  The selloff continued for the first hour and a half of the day.  However, then the whipsaw took over as we rallied and then sold multiple times the rest of the day.  By day end we had indecisive Spinning Top candles in all 3 major indices with only the DIA managing to get back into positive territory.  On the day, SPY lost 0.76%, DIA gained 0.17%, and QQQ fell 2.13%.  The VXX ended flat at 24.03 and T2122 fell from over 70 down to 27.04, still in the mid-range, but now toward the bottom end.  10-year bond yields fell sharply to 2.754% as investors bought up those bonds in search of safety.  Meanwhile, Oil (WTI) was only fractionally lower to $109.93/barrel.

As mentioned, Thursday evening’s pre-announcement by SNAP hammered big tech on the day.  FB (-7.62%), TWTR (-5.55%), and GOOG (-5.14%) proved just too much of a drag for the rest of the QQQ to hold up.  In terms of sectors, Consumer Cyclical (-3.12%) was not far behind Technology (-3.33%).  The big consumer cyclical losers on the day were TSLA (-6.93%), AMZN (-3.21%), BABA (-5.46%), and DIS (-4.01%).

During the day Tuesday, Manufacturing PMI came in exactly in line with forecasts (but down a bit from April) while Services PMI came in slightly below forecast at 53.5. However, the big economic news was that April New Home Sales were down 16.6%.  This is clear evidence that spiking rates have killed demand while people still remember 3.3% interest rates earlier this year.

SNAP Case Study | Actual Trade

After the close, A, INTU, JWN, CAL, and TOL all reported beats on both the revenue and earnings lines.  However, URBN reported earnings that missed on both lines. JWN also raised its full-year forecast on the strength of momentum from Q1.  In other stock news, WEN spiked over 20% after-hours as its biggest shareholder (hedge fund Trian, which owns 19.4% of the stock) announced it was looking at potential deals to acquire the company.

On the global food story, at the World Economic Forum (Davos) there were several calls for European countries to send warships into the Black Sea in order to break the Russian blockade of Odesa and protect freighters carrying Ukrainian grain. This came the same day a Russian freighter was spotted loading (stealing) grain at the occupied port of Berdyansk. Elsewhere, India is preparing to ban the export of Sugar (on top of last week’s ban on Wheat exports).  India is the second-largest sugar exporter globally.

In economic news, Economists have downgraded the forecast for Chinese growth again.  At this point, they are expecting China to expand at a 4.5% clip for the year.  This is a full percent below the official Chinese growth target.  Meanwhile, in the US, mortgage demand fell again in spite of interest rates falling slightly from 5.49% to 5.46% and origination points also being lowered (from 0.74 to 0.60).  Loan applications for refinancing a home dropped 2% for the week and were 75% lower year on year.  Applications for new home purchase loans were flat on the week, but down 16% year-over-year.

Overnight, Asian markets were mixed again on modest moves.  Shanghai (+1.19%), Taiwan (+0.88%), and Shenzhen (+0.70%) were the biggest gainers.  Meanwhile, New Zealand (-0.66%), India (-0.62%), and Singapore (-0.48%) paced the gainers.  In Europe, stocks are leaning to the upside at mid-day (also on modest moves).  The FTSE (+0.60%), DAX (+0.25%), and CAC (-0.01%) lead the way as usual, with only Norway (+1.23%) moving more than a percent in early afternoon trading.  As of 7:30 am, US Futures are pointing toward a modestly lower start to the day. The DIA implies a -0.34% open, the SPY is implying a -0.31% open, and the QQQ implies a -0.28% open at this hour.  However, those futures are all steadily weakening since earlier in the morning. 10-year bond yields are down slightly at 2.734% and Oil (WTI) is up another 1.4% to $111.26/barrel in early trading.

The major economic news scheduled for release Wednesday is limited to April Durable Goods Orders (8:30 am), Crude Oil Inventories (10:30 am), and the May Fed Minutes (2 pm).  There is also a Fed speaker (Brainard at 12:15 pm).  The major earnings reports scheduled for release include BMO, BNS, BAX, DKS, and DY before the open.  Then after the close, UHAL, CHNG, DXC, ENS, GES, NVDA, SPLK, and WSM report.

So far this morning BNS, BMO, and DY have all reported beats on both lines. 

The major economic news coming later this week includes Q1 GDP, Weekly Initial Jobless Claims, and April Pending Home Sales on Thursday.  Then on Friday we get a Fed speaker (Bullard, twice), April Trade Goods Balance, April PCE Price Index, April Retail Inventories, April Personal Spending, and Michigan Consumer Sentiment.

It looks like we are headed toward a relatively flat open, (down, but only modestly so at this hour) not gapping one direction or the other for a change. This may be a signal that traders are waiting to sift through the tea leaves of the Fed Minutes this afternoon or simply that markets have been so choppy lately that traders need to take a breath. Regardless, the bears still have the trend and the bulls have not capitulated in a crescendo of volume yet. So, uncertainty and stubbornness remain. That means volatility and intraday whipsaw is also likely to continue. If we do break lower, keep an eye on that bear market line (about 384 in the SPY) for the S&P. The bulls have defended that line before, so a bounce there is possible. Be very careful about chasing and remain nimble or hedged. There is no need to predict reversals or fear missing out. The market will still be here after it has given confirmation.

Trading is a job, not a lottery ticket. So, work the process. Stick with your trading rules and manage the things that you can control while trying not to worry about the things you have no control over at all. Trade with the trend, don’t chase, keep consistently taking profits when you have them, and move your stops in your favor. Also, remember that the first rule of making big money in the market is to not lose big money in the market. So, don’t be stubborn, and protect yourself from yourself. Keep in mind that nobody is right all the time. When you’re wrong, just admit it and take your loss. As they say, the best time to have taken a $500 loss is when you are now staring at a $1,500 loss.

Ed

Swing Trade Ideas for your consideration and watchlist: Not trade ideas today. 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.

🎯 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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