Tuesday was the Bull’s day.  After strong earnings from the big banks, we saw a very modest gap lower (down 0.06% in the SPY, down 0.05% in the DIA, and down 0.16% in the QQQ).  However, the two large-cap index ETFs immediately started to rally steadily.  The SPY kept up a 45-degree rally all day long.  Meanwhile, the DIA rallied more sharply until noon and then traded sideways the rest of the way.  For its part, QQQ continued lower for 10 minutes after the open and then ground sideways for an hour, but then it rallied strongly all the way into the close.  There was a small amount of profit-taking in the last 15 minutes of the day in all three major index ETFs.  This action gave us large, white-bodied candles in all three with the QQQ having more wick on both ends than the other two.  It is worth noting that DIA finally broke through the resistance level that had held it down all year while the SPY and QQQ were already at new highs for the year.

On the day, eight of the 10 sectors were in the green with Financial Services (+1.41%) leading the way higher and Utilities (-0.42%) lagging behind the other sectors.  At the same time, the SPY gained 0.73%, DIA gained 1.07%, and QQQ gained 0.82%. The VXX fell 1.63% to 23.48 and T2122 climbed higher into the overbought territory to 94.01.  10-year bond yields fell to 3.783% while Oil (WTI) spiked 2.06% to close at $75.68 per barrel. So, Tuesday saw markets drive higher all day following the strong morning earnings.  This happened on less-than-average volume in the SPY, average volume in the QQQ, and higher-than-average volume in the DIA. 

The major economic news on Tuesday, June Retail Sales (month-on-month) came in below expectation at +0.2% (compared to a forecast of +0.5% and a May reading of +0.5%).  At the same time, June Industrial Production (month-on-month) also came in below what was anticipated at -0.5% (versus a forecast calling for dead flat +0.0% but in line with May’s -0.5%).  This resulted in a very low June Industrial Production (year-on-year) growth of -0.43% (compared to a forecast of +1.10% and the May value of +0.03%). Later, May Business Inventories were reported as expected at +0.2% (versus a forecast of +0.2% and the April reading of +0.1%).  May Retail Inventories came in lower than predicted at -0.1% (compared to a forecast of +0.0% but did not fall as much in April’s -0.2% number).  Then after the close, API Weekly Crude Oil Stocks did not show as big of a drawdown as expected at -0.797 million barrels (versus a forecast of -2.250 million barrels but still far below the prior week’s inventory build of 3.026 million barrels.

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In stock news, the US announced another $1.3 billion in defense aid for Ukraine.  This included significant orders for LHX and AVAV products.  At the same time, WMG has announced it has partnered with TikTok in a broad deal that was the first of its kind, to license WMG music.  Elsewhere, PFE announced it has partnered with venture capital firm Flagship Pioneering to invest $100 million to develop 10 new drugs.  At the same time, META released a commercial version of its artificial intelligence model Llama 2.  Later, MSFT announced a 50% premium for its Office suite with access to a new AI Co-Pilot.  The charge will be $30 per month, per user for the Office 365 Co-Pilot.   In the Auto space, carmaker STLA announced it has secured long-term semiconductor supply contracts with IFNNY, NXPI, ON, and QCOM worth $11.2 billion and running through 2030.  Meanwhile, TDOC told Reuters it is expanding its partnership with MSFT with plans to use the tech giant’s artificial intelligence to automate clinical documentation on its telehealth platform.  In the defense space, LMT raised its full-year guidance on strong sales and profit outlooks from weapons contracts.  After hours, AUR announced it plans to sell $600 million of Class A stock in a private placement to raise capital.  (AUR shares fell 10% in post-market trading on the news.)  Also after hours, Reuters reported that the AAL pilots union has warned that the ratification of the recently agreed contract deal is now in jeopardy after the UAL pilots union got a better deal.  (The AAL deal raises pilot pay 42.5% over four years while the UAL pilot deal offers cumulative pay increases of 34.5% – 40%. The ratification vote is scheduled to start next week.)

In stock legal and regulatory news, the NHTSA announced it has opened another investigation of TSLA following another deadly crash in CA, this time of a 2018 TSLA Model 3 which was operating under “Full Self Driving” mode.  In other TSLA news, in Germany, TSLA faced a grilling from the public in a q-and-a session meant to ease citizens’ minds about the impact of the electric carmaker’s plant expansion to become the largest TSLA factory in the world.  (The plant now makes 5,000 cars per week and is expecting to double capacity and then double again to 1 million cars per year.  The current largest car plant in Germany is VLKAF’s Wolfsburg plant which has the capacity to make 800k cars per year, but now produces 400k a year.)   Back in the US, 22 Republican Congressmen (mostly from the MAGA caucus) wrote and published an open letter to the FTC urging the agency to drop its objections to the MSFT purchase of ATVI, calling the opposition an egregious example of rejecting sound antitrust policy.  (Sound policy would apparently mean not opposing mergers.)  At the same time, YUM’s Taco Bell brand won its bid to bust the trademark on the term “Taco Tuesday” (which had been held by the much smaller and private Taco John’s chain).  Meanwhile, the FTC spearheaded 101 federal and state law enforcement agencies on a crackdown on telemarketing robocalls with one of the main targets being FLNT.  (FLNT previously agreed to pay a $2.5 million fine while three other firms agreed to a total of $15.7 million in fines.)  In lawsuits going the other way news, JNJ added its name to the list of pharmaceutical companies suing the US government in a bid to prevent the US from negotiating drug prices for Medicare.  (All of those cases may have a steep hill to climb since in every instance the companies sell the drugs in question in smaller quantities at lower prices to other countries than what is charged to Medicare.)  After the close, T made a court filing saying that it no longer intends to immediately remove lead cable in the ground in Lake Tahoe that it had previously agreed to remove.  The telecom company says it will now do further analysis before deciding.  (This move mentioned and pushed back against the recent Wall Street Journal article discussing the risks of lead cables to groundwater.)

After the close, AIR, PNFP, and HWC all reported beats on both the revenue and earnings lines.  Meanwhile, OMC reported a miss on revenue while beating on earnings.  On the other side, IBKR and WAL both beat on revenue while missing on earnings.  Unfortunately, JBHT missed on both the top and bottom lines.  The biggest surprises were huge upside revenue shocks from the financials (76% upside from IBKR, 71% upside from WAL, and 80% upside from PNFP). 

Overnight, Asian markets leaned to the green side.  Japan (+1.24%) was by far the leader to the upside while Singapore (+0.64%) and Australia (+0.55%) followed.  On the downside, Taiwan (-0.65%) led the four red exchanges lower.  Meanwhile, in Europe, stocks are in the green as only two of the 15 bourses are in the red at midday.  The FTSE (+1.50%) is far-and-away the leader after a massive reduction in inflation. Thile the CAC (+0.27%) and DAX (-0.04%) lag behind.  In the US, as of 7:30 am, Futures are pointing toward the day starting just on the green side of flat.  The DIA implies a +0.09% open, the SPY is implying a -0.02% open, and the QQQ implies a +0.11% open at this hour.  At the same time, 10-year bond yields are down to 3.764% and Oil (WTI) is just on the green side of flat at $75.87 per barrel in early trading.    

The major economic news events scheduled for Wednesday include Preliminary June Building Permits and Preliminary June Housing Starts (both at 8:30 am), and EIA Crude Oil Inventories (10:30 am).  The major earnings reports scheduled for before the opening bell include ALLY, ASML, BKR, CFG, ELV, FHN, GS, HAL, MTB, NDAQ, NTRS, and USB.  Then, after the close, AA, COLB, CCI, DFS, EFX, IBM, KMI, LVS, LBRT, NFLX, STLD, TSLA, UAL, WTFC, and ZION report.   

In economic news later this week, on Thursday, we get Weekly Initial Jobless Claims, Philly Fed Mfg. Index, June Existing Home Sales, and the Fed’s Balance Sheet.  Then Friday, there are no major economics news scheduled. 

In terms of earnings reports, on Thursday, we hear from ABT, ALFVY, AAL, BX, DHI, EWBC, FITB, FCX, GPC, INFY, JNJ, KVUE, KEY, MAN, MMC, NEM, NOK, PM, POOL, SAP, SNA, SNV, TSM, TRV, TFC, WBS, COF, CSX, ISRG, KNX, PPG, and WRB.  Finally, on Friday, AXP, ALV, AN, CMA, HBAN, IPG, RF, ROP, and SLB report. 

In miscellaneous news, the UK reported 7.9% annual inflation as of June, which is the worst among major economies.  However, that number is down sharply from 8.7% on an annual basis in May.  As a result, UK government borrowing costs also dropped abruptly today and the UK market now sees it less likely that the BoE will deliver another half-percent hike in August as had been expected.  Elsewhere, in the US, YELL (the country’s third-largest less-than-truckload freight carrier) faces a strike by 22,000 teamsters as soon as next week.  This comes after the company failed to make $50 million in contractually-required benefits contributions.  (YELL is on the edge of bankruptcy again, for the fifth time since 2009, after getting lenders to agree to a waiver in June.  YELL had proposed operational changes that were rejected a few weeks ago by the union, which had previously already made concessions on wages, hours, and some benefits.  As an aside, YELL was formed by consolidating large and small trucking companies and has never (dating back to the 1980s) been good at the process of combining.  In recent years, the company has bought non-union firms with the apparent goal of continuing to get more Teamster concessions.  Now 8,000 of the company’s 30,000 employees are non-union.

So far this morning, ASML, ELV, USB, BKR, MTB, FHN, SDVKY, CBSH, NDAQ, and CVNA have all reported beats on both the revenue and earnings lines.  Meanwhile, VLVLY beat on revenue while missing on earnings.  On the other side, HAL, CFG, and WDS all missed on revenue while beating on earnings.  It is worth noting that ASML and ELV both raised their forward guidance.

With that background, it looks like markets are again pausing ahead of economic data and earnings, even after receiving a number of good earnings reports this morning. All three major index ETFs are looking at very small, inside-day, candles at this point. As has been the case all year, DIA looks the weakest of the three while SPY and QQQ are seemingly pausing at the top of their year-long rallies. However, SPY was the laggard Tuesday. All three remain above their T-line and are, so far at least, just giving us a strong uptrend. As far as extension goes, we have been up a very long number of consecutive candles in the QQQ and it is getting a little stretched from its T-line (8ema). However, the two large-cap indices are fine in that regard and have had recent pullback days. The T2122 indicator is again well up into the overbought region. Just remember that markets can stay extended longer than we can stay solvent predicting the reversion to the mean.

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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