Monday brought us a gap lower at the open (down 0.38% in the SPY, down 0.38% in the DIA, and 0.39% in the QQQ).  This was followed by 15 minutes of follow-through by the Bears in all three major index ETFs.  However, then the Bulls said “enough” and rallied all three until 1 p.m.  Then it was the Bears’ turn to say “Not so fast, my friend” to lead a selloff the rest of the day.  This action gave us indecisive candles across the board.  All three of the major index ETFs flirted with printing a Piercing Arrow candle before melting back.  The SPY printed a white-bodied Doji-type candle.  At the same time, the QQQ printed a white-bodied Spinning Top candle, and the DIA remained the weakest of the three, printing a black-bodied Inverted Hammer candle. All three remain well below their T-line (8ema).  This happened on just about average volume in the SPY, DIA, and QQQ.

On the day, nine of the 10 sectors were in the red with Technology (+0.04) being the only sector to (barely) remain in the green.  Meanwhile, Energy (-1.44%) was way out front leading the other sectors lower.  At the same time, the SPY was down 0.17% (closing in its opening gap), the DIA lost 0.56% (closing below its opening gap), and QQQ gained 0.30% (closing above its gap down).  VXX fell 3.48% to close at 25.54 and T2122 climbed slightly but remained at the bottom of its oversold territory at 1.89.  10-year bond yields fell significantly to 4.85% (after being above 5.021% early in the day) while Oil (WTI) dropped 2.27% to close at $86.08 per barrel.  So, on Monday the market was a whipsaw.  There was a gap lower at the open, a strong morning rally until 1 p.m., and then a strong selloff the rest of the day.  With that said, there was no change in character for the market and not much change in the major index ETFs.

There was no economic news reported Monday.

In Autoworker contract talks and strike news, the UAW and defense contractor GD reached a tentative labor contract Monday. This deal avoided a strike of GD. In another aside, metal workers in Brazil announced they will strike GM next Monday.  This strike by 4,000 workers comes after 1,200 of their fellow workers were laid off by GM.  (That plant makes engines and gearboxes for S-10 pickup trucks.)  Later, the UAW added roughly 6,800 more STLA workers to the strike, all located at the STLA Ram full-sized pickup plant in a Detroit suburb.  UAW President Fain said STLA’s offer is the weakest among the big three in terms of wage progression (time in a pay tier), temp worker pay, cost of living adjustments, etc.  (UAW negotiators told CNBC that two major issues that STLA has not addressed at all is their discussion to move Ram production from the US to Mexico and the closing of an IL plant earlier this year.)  This was the first expansion of the strike in two weeks.  STLA said it was “outraged that the UAW has chosen to expand its strike action against the company” and going on to cite its recent improved offer.  (Industry analysts say all three of the automakers have roughly 100 days of inventory of their best-selling pickup trucks.)  It is worth noting that GM reported a $3.1 billion quarterly profit and also removed its forward guidance altogether ahead of impacts from the strike.

In stock news, LICY plummeted Monday to close down almost 46% after the company suspended construction of its hub in Rochester, NY.  At the same time, FSR said it is significantly cutting the price of its Ocean Extreme SUS.  The announced price cut is 11% ($7,500).  Elsewhere, MSFT announced it will spend $3.2 billion in Australia to expand its AI and cloud computing capacity in that country.  The move is widely seen as a carrot that can be taken back ahead of Australia’s coming AI regulation (which is now in the public comment period).  The announcement said MSFT will train 300k Australians in skills needed to succeed in a digital economy.  At the same time, STLA unveiled 12 “refreshed” electric vans (small, mid-sized, and large).  Sales of these 12 will largely be in Europe where stricter emission laws make them more attractive.  The revised designs will go on sale in mid-2024.  Later, AAPL ramped up its late-to-the-party AI efforts by investing $1 billion to integrate AI tools in Siri, Apple Music, and other programs.  Meanwhile, LMT announced it has ended its partnership with EADSY (Airbus) which was part of the defense contractor’s bid for the project to upgrade the US Air Force’s KC-135 tanker fleet.  This may have been due to the Air Force reducing the project size from 140-160 tankers to just 75.  Regardless, LMT dropped its bid for the project.  Later, Reuters reported that NVDA is in the early stages of developing a line of ARM-based CPUs compatible with MSFT Windows.  (AMD is also developing an ARM-based processor line.)  QCOM already offers an AMR-based chip for laptop products.  (ARM-based chips are much more power-efficient.)  The NVDA move was unknown and all three pose threats to INTC, which along with AMD have been the kings of x86-based CPUs for decades.  (INTC fell 3% on the news and NVDA popped by about the same amount.)  After the close, Bloomberg reported that IFF is working with advisors on the potential sale of its pharmaceutical unit in a deal expected to new in the area of $3.5 billion.  After the close, Reuters reported that on Sunday an ALK plane bound for San Francisco had to make an emergency diversion to Portland OR.  The cause of the diversion was that an off-duty pilot, riding back to his home airport on a cockpit jump seat, attempted to disable the jet’s engines mid-flight.  That pilot was subdued and then arrested in Portland, booked on 83 counts of attempted murder. 

In stock government, legal, and regulatory news, TLSA confirmed that it is under investigation by the Dept. of Justice and has received subpoenas related to benefits paid to/for CEO Musk, marketing claims on vehicle range, and personnel decisions.  Elsewhere, the FDA requested more efficacy data from REGN and SNY related to their joint product called Dupixent.  (The FDA previously reject an initial application, but the drug companies feel the drug has shown significant benefits and are supplying the requested additional data.)  Later, WFC lost a $310 bond deal (was replaced by RJF) for a school district as the state of TX is scrutinizing the bank over its environmental policies.  (The oil and gas-controlled state wants to punish any banks that back climate initiatives such has a “Net Zero Banking Alliance.”)  JPM and BAC are also under investigation by the TX Attorney General (formerly impeached Paxton) for the same reasons.  At the same time, the US State Dept. approved the sale of missile systems from LMT, NOC, and RTX to the UK, Finland, and Lithuania.  The deal pricing were not detailed, but it will be in the $2+ billion region.  Later, CPB announced its $2.33 billion acquisition of private Sovos Brands has been delayed until 2024 after the FTC asked for more details on the deal.  The company said it still expects to close the deal in mid-2024 after the FTC review is complete.  Also after the close, INDV agreed to pay $385 million to settle lawsuits from US drug wholesales that alleged the company had suppressed generic competition to its Suboxone opioid drug.  Finally, JPM’s recent $290 million settlement of a class-action suit related to the bank’s alleged financing of Jeffrey Epstein’s sex trafficking was challenged Monday evening.  The Attorneys General of 16 states plus the District of Columbia jointly objected to the settlement which contained language saying the settlement money would be refunded to the bank if any sovereign or government sought damages arising from the sex trafficking of Epstein or his associates.  This was obviously intended to put the state’s in a position of deciding between hurting the victims who were paid $290 million under the settlement and suing the bank.

After the close, BRO, CDNS, CLF, CR, MEDP, and SSD all reported beats on both the revenue and earnings lines.  Meanwhile, ARE, PKG, TBI, and WRB all missed on the revenue line while beating on earnings.  On the other side, HRI and TFII both beat on revenue while missing on earnings.  Unfortunately, AAN and CCK missed on both the top and bottom lines.  It is worth noting that AAN, CDNS, CCK, and TBI all lowered their forward guidance.  However, ARE, CR, MEDP, and PKG all raised guidance.

Overnight, Asian markets were mixed but leaned toward the green side.  India (-1.34%) and Hong Kong (-1.05%) paced the losses while South Korea (+1.12%) and Singapore (+1.00%) led the more plentiful gainers.  In Europe, we see an even more pronounced lean toward the green at midday.  Four of the bourses are barely in the red (led by the FTSE, -0.02%) while the CAC (+0.70%) and DAX (+0.30%) lead most of the region higher in early afternoon trade.  In the US, as of 7:30 a.m., Futures are pointing toward a solidly green start to the day.  The DIA implies a +0.44% open, the SPY is implying a +0.55% open, and the QQQ implies a +0.65% open at this hour.  At the same time, 10-year bond yields are moving back up to 4.867% and Oil (WTI) is down to $85.86 per barrel in early trading.

The major economic news scheduled for Tuesday includes S&P Global Manufacturing PMI, S&P Global Services PMI, and S&P Global Composite PMI (all at 9:45 a.m.), and API Weekly Crude Oil Stocks (4:30 p.m.).  The major earnings reports scheduled for before the open include MMM, HOUS, ADM, ARCC, ABG, BCS, CNC, KO, GLW, DHR, DOV, DOW, FI, FELE, GTX, GE, GM, HAL, HCA, HRI, ITW, IVZ, KMB, NEE, NHYDY, NVS, NUE, PCAR, PNR, PII, PHM, DGX, RTX, SHW, SPOT, SYF, TECK, TRU, VZ, and XRX.  Then, after the close, GOOGL, BYD, CNI, CHX, CB, CSGP, ENVA, FFIV, GOOG, HA, MTDR, MSFT, RRC, RHI, RUSHA, SNAP, TDOC, TXN, V, WFRD, and WM report.

In economic news later this week, on Wednesday, Building Permits, New Home Sales, and EIA Weekly Crude Oil Inventories are reported.  We also hear from Fed Chair Powell.  On Thursday, we get September Durable Goods Orders, Preliminary Q3 GDP, Preliminary Q3 GDP Price Index, September Goods Trade Balance, Weekly Initial Jobless Claims, Sept. Retail Inventories, Sept. Pending Home Sales, and we hear from Fed member Waller.  Finally, on Friday, Sept. PCE Price Index, Sept. Personal Spending, Michigan Consumer Sentiment, Michigan Consumer Expectations, Michigan 1-year Inflation Expectations, and Michigan 5-year Inflation Expectations are reported. 

In terms of earnings reports later this week, on Wednesday, we hear from ALFVY, APH, ATLKY, ADP, AVY, BA, BOKF, CME, CSTM, EVR, FTV, GD, GBX, GPI, HES, HLT, LTH, LAD, MHO, MCO, MSM, EDU, NSC, ODFL, OMF, OPCH, OTIS, OC, PAG, PRG, RDUS, ROP, R, SLGN, TMUS, TMHC, TDY, TMO, TNL, UMC, VRT, WNC, WAB, AEM, ALGN, ALSN, AMP, NLY, AR, ATR, ASGN, AVB, AGR, BKR, BHE, CACI, CP, CLS, CCS, CHE, CHDN, CMPR, CYH, EW, ESI, EQT, EQIX, EG, FLEX, FLS, FBIN, GL, GGG, ICLR, IEX, IBM, INVH, KALU, KLAC, LSTR, MAT, META, MAA, MOH, MYRG, NBR, NXT, ORLY, OII, PPC, PLXS, RJF, ROL, SEIC, NOW, STC, SUI, TER, TNET, TROX, URI, UHS, VMI, VICI, WCN, WFG, WU, and WHR.  On Thursday, AOS, MO, AMT, AIT, ARCH, AMBP, BSX, BFH, BMY, BC, BG, CRS, CARR, CX, CNP, CMS, CMCSA, CFR, EXP, EME, FAF, FCNCA, FSV, ULCC, FCN, HOG, HAS, HSY, HTZ, HON, IP, KVUE, KDP, KEX, LH, LAZ, LEA, LII, LIN, LKQ, MDC, MAS, MA, MRK, NYCB, NEM, NOC, ORI, OSK, PATK, BTU, PCG, BPOP, RS, RCL, STX, SAH, LUV, STM, FTI, TXT, TTE, TSCO, TPH, UPS, VLO, VLY, VC, VMC, GWW, WST, WEX, WTW, AB, AMZN, AJG, BIO, SAM, COF, CSL, CC, CMG, CINF, COLM, DECK, DXCM, DLR, EMN, EHC, ENPH, ERIE, FE, F, HIG, HUBG, INTC, JNPR, LHX, LPLA, MTX, NOV, OLN, PFG, RSG, RMD, SKX, SKYW, SSNC, TEX, TXRH, X, VALE, WY, and WKC report.  Finally, on Friday, we hear from ABBV, AER, ARLP, AON, ARCB, AN, AVTR, BAH, CBRE, GTLS, CHTR, CVX, CL, DAN, EQNR, XOM, FMX, FTS, GNTX, IMO, LECO, LYB, NWL, NVT, PSX, POR, SAIA, SNY, SWK, TROW, and XEL.

So far this morning, MMM, ARCC, CNC, KO, DHR, DOW, GE, GM, FI, PNR, DGX, RTX, SHW, SPOT, and SYF all beat on both the revenue and earnings lines.  Meanwhile, ADM, BCS, DOV, GTX, HAL, KMB, NHYDY, NVS, PHM, VZ, and XRX all reported missed on the revenue line while beating on earnings.  On the other side, HCA, IVZ, and PACW all beat on revenue while missing on earnings.  Unfortunately, ABG, GLW, PII, TECK, and TRU all missed on both the top and bottom lines.  It is worth noting that GM removed its forward guidance altogether.  At the same time, MMM, AWI, CNC, KO, DHR, FI, and SHW all raised their forward guidance.  However, GLW, DOV, and TRU also lowered their guidance.

In hedge fund news, fund manager Bill Ackman announced Monday that his fund had covered its months-long short on US Treasury Bonds.  Ackman said there is too much risk in the world and he now expects a significant flight to the safety of bonds to bid up their price.  Elsewhere, Reuters reports that both JPM and GS have told them that major hedge funds have trimmed their positions in the mega-cap tech giants ahead of earnings.  The article specifically cited META, GOOGL, AAPL, MSFT, and NVDA as the targets of the position trimming.

In miscellaneous news, in a hopeful sign of progress in the negotiations with Hamas, the group released two more hostages Monday.  Both were elderly women.  However, at the same time, Israel traded artillery fire with Iran-backed Hezbollah across the Irael-Lebanon border.  Elsewhere, Reuters reports that China is set to approve $137 billion in additional sovereign debt Tuesday to raise money for more infrastructure spending and other economic stimulus plans.  Finally, one of the nine GOP House Speaker candidates dropped out of the race after delivering his speech to the GOP Caucus on Monday.  The plan is for the GOP to decide on their favorite candidate today and maybe even get to a floor vote on the position later.  However, the dysfunction has not been overcome with arguments over secret versus public ballots in the caucus as well as whether or not to proceed to another floor vote if the GOP vote is not at least 217 in favor of one candidate.  There is also the matter of half the candidates at least publicly being Trump-aligned and denying the results of the last election. 

In late-breaking news, French President Macron proposed an international coalition to fight ISIS (which Israel and the US have labeled Hamas) during a trip to Israel.  In “It’s not just you who makes bad trades” news, the largest sovereign wealth fund in the world (I had no idea it was Norway), the Norwegian Government Pension Fund said it lost $34 billion in Q3.  (For reference, that fund has $1.4 trillion in assets.)

With that background, it looks like the Bulls are in control of the premarket. All three of the major index ETFs opened higher, have modest lower wicks, and are giving us white-bodied candles that are near their highs of the early session. These are not indecisive candles and indicate a little momentum will be carried into the open, presumably based on good earnings from major players. With that said, it is important to remember that the SPY, DIA, and QQQ are remain well below their T-line (8ema) and even the short-term trend of the last few days has not been completely broken. Again, we have no really major economic news today. So, beware of volatility and don’t be surprised if we wobble into some over-extension relief without really changing anything in the chart. In terms of that extension, all three major index ETFs are starting to get stretched out below the T-line (8ema). The T2122 indicator also remains deep in the bottom of its oversold territory. So, we need a pause or bounce to relieve pressure even if the Bears maintain control. Just remember that the market can stay over-extended a lot longer than we can stay solvent being right too early. So, don’t go betting on “we’re due.”

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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