Huge volatility was the rule Thursday. Stocks gapped sharply lower at the open (-2% in the SPY, -1.8% in the DIA, and -2.9% in the QQQ) after a hot September CPI number. However, as I had warned in the morning blog, whiplash immediately kicked in as the bulls led a huge rally until 11:45 am. Over those 2.25 hours, the SPY gained a massive 5%, DIA gained a staggering 4.5%, and QQQ gained an incredible 6%.  However, that was not the end of the huge volatility.  The rest of the afternoon, we saw a couple more big moves to the downside (and the resulting even larger whips back to the upside). Still, it is important to note that the volume on those later swings began to fade as the day ground on.  In the end, we closed not too far from the highs of the day. 

This action gave us huge, heavy volume, Bullish Engulfing candles (with small wicks on both ends) in all 3 major indices.  The SPY and DIA managed to cross and close above their T-lines (8ema), but the QQQ failed that test (at least for the day).  All 10 sectors are green with Energy (+3.67%) leading the charge and the Consumer Cyclical sector (+1.22%) lagging.  The SPY gained 2.61%, DIA gained 2,84%, and QQQ up 2.32%.  Meanwhile, the VXX fell 2.6% to 20.98 and T2122 has jumped from oversold up into the mid-range at 65.15.  10-year bond yields have spiked to 3.96% and Oil (WTI) was up 2.13% to $89.13/barrel.

In economic news, as mentioned above, the September Month-on-month CPI reading came in at +0.4% (versus +0.2% forecast and +0.1% in August).  That took the September Annualized CPI to +8.2% (versus +8.1% that had been forecast and +8.3% as of August).  So, inflation fell slightly on an annual basis, but not as much as expected.  The Weekly Initial Jobless Claims also came in slightly above expectations at 228k (versus 225k forecast and 219k last week).  Finally, in the late morning, the EIA Crude Oil Inventory showed a massive 9.880 million barrel increase in stocks (versus a forecast 1.750 million barrel build forecast and a drawdown of 1.356million barrels last week).

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In stock news, AAPL and GS launched a joint “high yield savings account” product for holders of the AAPL credit card.  Bloomberg reported that KR is in talks to buy smaller rival ACI.  ACI spiked 11.5% on the news and KR also closed up 1.15%.  Elsewhere, NFLX announced its long-planned “with Ads” tier service for $6.99/mo. starting Nov. 3.  Later, STLA (Dodge/Jeep parent) announced it is cutting one of its three shifts at its Warren MI plant due to a persistent shortage of chips.  Meanwhile, the Chairman of C told a conference that higher capital requirements for big banks (as proposed for the banks entering into riskier cryptocurrency business) might curb lending and make the “potential coming recession” worse.  Finally, a Brazilian court has fined AAPL $19 million and ordered that the iPhones the company sells in that country must come with chargers.

In trading news, on Thursday afternoon, Reuters reported that 24×7 stock trading is likely coming to the US within 5 years.  The report cited sources at several brokers, electronic exchanges, as well as the CBOE exchange, all speaking at the Security Traders Assn. Annual Conference.  There was no specific mention of Options, but one would assume that if the underlying assets were trading 24×7, the options on them would as well.  So, traders may need to study the trading processes and approaches being used in the Forex and Cryptocurrency markets today for a heads-up on how we may be trading stocks in the not-too-distant future.

In Energy news, despite the overall large build in US oil inventories last week, there was a disturbing drawdown in Diesel and Heating Oil stock.  The EIA reported that Distillates stocks, fell 4.9 million barrels for the week to the lowest level since May.  With Winter fast approaching this should be upsetting news for consumers that appear will get the shaft as low inventories allow dealers to charge higher prices.  This news was partially responsible for oil’s 2% rise on Thursday, despite a 10 million barrel increase in oil inventories and a 2 million barrel increase in gasoline stockpiles.

Overnight, Asian markets leaned heavily to the green side. Only Thailand (-0.12%) and Singapore (-0.03%) were in the red.  Meanwhile, Japan (+3.25%), Shenzhen (+2.81%), and Taiwan (+2.48%) led the gainers.  In Europe, we are seeing a similar push to the upside at midday.  Only Russia (-0.79%) is showing red, while the FTSE (+1.25%), DAX (+1.21%), and CAC (+1.77%) lead the region higher in early afternoon trade.  As of 7:30 am, US Futures are pointing toward a modestly green open after Thursday’s volatile, large gain.  The DIA implies a +0.47% open, the SPY is implying a +0.32% open, and the QQQ implies a +0.08% open at this hour.  10-year bonds are showing their own volatility, plunging back down to 3.887% while Oil (WTI) is off just over 1% to $88.13/barrel in early trading.

The major economic news events scheduled for Friday include September Retail Sales and September Import/Export Price Indexes (both at 8:30 am), August Business Inventories, Mich. Consumer Sentiment, and August Retail Inventories (all at 10 am). The major earnings reports scheduled for the day include C, FRC, JPM, MS, PNC, USB, UNH, and WFC before the open.  There are no major reports scheduled for after the close.

So far this morning, UNH, JPM, WFC, C, USB, PNC, and FRC all posted beats on both the top and bottom lines.  JPM beat on revenue by almost $9 billion while the other large banks had significant revenue beats as well.  However, MS reported a miss on both revenue and earnings, which they attributed to a collapse of its investment banking business.  In addition, note that USB and FRC both lowered forward guidance after posting their beats.  Finally, KR (second only to WMT among US grocers) announced it has reached the previously mentioned deal to buy ACI (the fourth largest US grocer) for $34.10/share or $24.6 billion.

After yesterday’s extreme volatility and bullish reaction to CPI, as well as a dose of great earnings this morning, the overall mood is likely to be bullish, but leery early in the day. It is less likely the data we get today will reverse markets from any move, but it could dampen or amplify what Mr. Market is doing at that time. With that said, volatility remains a very big concern unless you have the stomach to ride out big swings.

With this backdrop, the premarket action seems to show some modest optimism. Extension isn’t a factor today, either in terms of the T-line or T2122. However, that T-line (8ema) will be a level to watch as we see whether it can hold as support for the large caps or resistance for the QQQ. Today we know three things for sure. First, the strong bear trend is still in place. Second, volatility and huge intraday reversals were off the charts yesterday. And third, the weekend, when we can’t adjust while the market is closed, lies just ahead. So, consider whether you need to take some money off the table or add hedges today. (Remember, the first rule of making big money is to not lose big money.)

So, don’t be stubborn. If you have a loss, just admit you were wrong and take it before it grows. And when the price does move in your direction, always move your stops in your favor (remember the “Legend of the man in the green bathrobe“…it is NOT HOUSE MONEY, it’s all OUR MONEY!). Also, keep in mind that trading is a job. It’s not a hobby. 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. Demonstrate patience and wait for confirmation. Lastly, remember that you get rich slowly and steadily in Trading…not by striking it rich on one or two trades. So, give up that lottery ticket mentality.

See you in the trading room.

Ed

Swing Trade Ideas for your consideration and watchlist: No 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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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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