Markets gapped up on Friday but immediately began a volatile selloff that more than faded that gap.  This left us with large Bearish Engulfing candles in the SPY, QQQ, and IWM as well as a Bearish Dark Cloud Cover in the DIA.  All 4 of these indices gapped up through and then failed the test of their T-lines (8ema) during the day.  Again, all this happened on less than average volume.  On the day, SPY lost 1.25%, DIA lost 0.58%, QQQ lost 2.07%, and IWM lost 1.60%.  The VXX rose 2% to 26.34 and T2122 fell to 25.85 (at the lower end of the mid-range).  10-year bond yields were essentially flat at 1.995% and Oil (WTI) rose another 3.15% to $109.36.

On the Russia story, on Friday President Biden revoked Russia’s “Most Favored Nation” trade status.  This opens the door to more trade restrictions such as tariffs and import bans.  In the EU, the Parliament voted to phase out various “investment for citizenship” programs (especially in Cyprus, Malta, and Bulgaria) that allow Russian oligarchs to hide/move assets through dual-citizenships.  On Saturday, the Russian Central Bank extended the halt on stock trading through Friday 3/18.  On Sunday it was reported by Bloomberg that Russia has bombed within 11 miles of NATO member Poland, has asked China for military aid, and has killed an American journalist.  However, over the weekend, both Putin and Ukrainian PM Zelensky mentioned that there has been at least some progress in cease-fire talks. DB added its name to the list of banks leaving Russia in a U-turn from their announcement Thursday. (DB is also one of the major lenders to Russia.)

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Despite the situation in the US, on Sunday, China placed the entire city of Shenzhen on lockdown after 66 cases of Omicron were reported.  This city is China’s technology center, home to manufacturing and headquarters for most is the country’s technology companies. The city of Shanghai also restricted all, but essential travel. Both lockdowns are likely to further exasperate global supply chain problems. Both cities are also home to the two major mainland China stock exchanges (as reflected in the fear shown in those exchanges below).

The economic news for this week includes no news on Monday.  Tuesday, we get the Feb Core PPI and NY Empire State Mfg. Index.  Wednesday will be the big news day, with Feb. Import/Exports, Jan. Retail Inventories, Crude Oil Inventories, the Fed Rate decision, announcements and Interest Rate Projections (dots).  Thursday will bring Feb. Housing Starts, Feb. Industrial Production, and Philly Fed Mfg. Index.  Friday rounds out the week with Feb. Existing Home Sales and Fed speakers.

Overnight, the Asian markets were mixed but leaned to the red side.  Hong Kong (-4.97%), Shenzhen (-3.08%), and Shanghai (-2.60%) led the region lower as covid cases in China have picked up significantly.  However, it was not all red as India (+1.45%), Australia (+1.21%), and Japan (+0.58%) led the gainers.  In Europe, stocks are varied, but mostly green at mid-day.  The FTSE (+0.28%), DAX (+2.89%), and CAC (+1.49%) are typical of the spread across the continent with a couple exchanges in the red and Russia still closed.  As of 7:30 am, US Futures are pointing toward a gap higher at the opening bell.  The DIA implies a +1.04% open, the SPY is implying a +0.84% open, and the QQQ implies a +0.53% open at this hour.  10-year bond yields are up to 2.066% and Oil (WTI) is plummeting 5.7% to $103.09/barrel in early trading.

There is no major economic news scheduled for release on Monday.  The major earnings reports scheduled for release before the open Monday is limited to GOL.  Then after the close MTN reports.    

Volatility still reigns as we are seeing another gap take shape for the open today. This move comes on without any particularly good news, other than the rumor of progress in peace talks, but also in the face of more Covid problems in China. So, remember that the pattern lately has been either to fade the gap or at least have a wild roller-coaster ride after the gap. Also, keep in mind that with the Fed news coming Wednesday, we may see a “wait and see” mood take over the market, especially after the morning gap settles. We’ve seen a lot of chop on decreased volumes lately and the trend remains bearish. So, trade carefully.

Remember that you don’t have to trade every day (or even week) and you definitely don’t need to chase gaps and moves. Trading is a marathon, not a sprint. So, stick to your trading rules and manage the things that you can control. Trade with the trend, don’t chase, keep consistently taking profits when you have them, and move your stops in your favor. The first rule of making money in the market is to not lose big money in the market. So, don’t be stubborn, and protect yourself from yourself. If you are wrong, just admit it and take your loss. (That’s why we set stops in the first place.)

Ed

Swing Trade Ideas for your consideration and watchlist: APPH, HTZ, NET, XRT, CAR, WMT, SBUX, ON, CRSP, CHPT, URA, SQQQ, CLOV. 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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Disclosure: We do not act on all trades we mention, and not all mentions acted on the day of the mention. All trades we mention are for your consideration only.

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