Futures Jittery Before New Week

The bulls ran hard on Friday, gapping up over a percent and then, after brief “fade the gap” profit-taking, ran steadily all day.  The "reopen stocks" such as MGM, DIS, and airlines like DAL and AAL led the way.  Prices also closed very near the highs.  On the day the SPY gained 1.65%, the DIA gained 1.97%, and the QQQ gained 1.37%.  The VXX was down briskly to 34.95 while the 4-week High Low Ratio T2122 spiked up into overbought territory again at 91.02.  The 10-year bond yield was up to 0.685% and Oil (WTI) also gained to $24.63/barrel.

As expected, the April jobs number showed heavy job losses (-20.5 million) to raise the unemployment rate to 14.7%. However, this is less than half of the 30% predictions of some unhappy with a shutdown had predicted.  Even if the worse lies ahead, at the very least, the market now seems to have moved well past concern for the economy as all the major indices are up 35% off the lows at the end of March (and QQQ is within 5.5% of all-time highs again). 

For their part, the Fed is comfortable enough with the economic situation (or at least the market) that they will reduce bond-buying to $7 billion per day this week.  Yet, at the same time, on Sunday Fed voter Kashkari said the true unemployment rate is 23-24%.  He said while the Fed will do everything it can, but he still urged the fiscal side (Congress and President) to do more to help the public as he expects a gradual (not rapid) recovery.  Treasury Sec. Mnuchin seemed to agree, saying unemployment is likely higher than reported Friday and he expects things to get worse before they get better.

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However, President Trump and Republicans seem to disagree. Both say now that businesses have the stimulus needed (to survive), they are in no hurry to do additional relief.  The idea is that financial hardship for individuals might help force the high unemployment numbers back down.  In addition, by rejecting CDC guidelines the administration has already removed potential roadblocks to rapid rehiring (at the risk of potential relapse).  Of course, this may just be posturing ahead of more negotiations with Democrats. The Republicans want more tax cuts and the Democrats want both more relief (for State/local governments and another round of payments for the public) as well as an infrastructure bill.

On the Virus front itself, the global headline numbers are 4,200,957 confirmed cases and 284,150 deaths.  In Asian, South Korea reported a new outbreak (nightclub related) and Japan also saw a cluster of cases in Tokyo. However, the good news continues in Western Europe with steady declines in new case rates in most countries.  The outliers are the UK (just now plateauing as the last European country to lock-down), and Russia (which is still in epidemic mode, seeing a new record high number of cases each day).  However, the UK did begin its reopening by “actively encouraging” people to return to work (while also avoiding public transport) as of today. Likewise, France also began its reopening on Monday.

In the US, we have 1,367,963 confirmed cases and 80,787 deaths. The impact of reopening remains unclear at this point. Some states that have at least partially reopened, such as CA, TX, OH, CO, and NC are seeing significant increases in new case rates again.  However, other states doing the same, such as FL and GA, are not seeing increases.  It’s unknown if this anomaly is due to differences in testing or some other variable. On the other hand, there is no hard data yet, but there have been significant anecdotal reports that both public participation in reopening and adherence to guidelines is sporadic nationwide.  So, we have not seen the hoped-for economic impact, nor have we seen a universal strong increase in spread either.

Overnight, Asian markets were mixed on Monday, but with smaller moves.  The exceptions were Japan (+1.05%) and Hong Kong (+1.53%).  In Europe, markets are decidedly in the red so far today.  However, like Asia, more European moves have been smaller as of now, with the exception of France (-1.41%).  As of 7:30 am, US futures are pointing to a half of a percent gap lower at the open.   

There is no major economic news for Monday.   However, AEE, AN, CAH, COTY, ET, ETR, MAR, MGLN, MYL, ON, UA, UAA, UNVR, and ZBH all before the open.

The bulls remained in rally mode last week.  However, resistance is close overhead.  Remember that volatility is a constant now for traders, with a lot of "gap and fade" action.  So, focus on the short-term chart in front of us.  Remain cautious about longer-term swing trades, unless you can take some short-term pain. 

Ed

Trade Ideas for your consideration and watchlist today: GPOR, QRTEA, ITCI, AQST, SHAK, VLO, CRUS, X, LOPE, ARNA, TWTR, BSX. Trade smart, take profits along the way and trade your plan. Also, don't forget to check for upcoming earnings. Finally, remember that the stocks/etfs we mention and talk about in the trading room are not recommendations to buy or sell.

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🎯 Dick Carp: the scanner paid for the year with HES-thank you

🎯 Arnoldo Bolanos: LTA scanner really works $$, thanks Ed.

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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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