Markets gave us a rest or modest rebound on Friday.  The SPY gapped up 0.27%, the DIA opened almost flat at +0.03%, and the QQQ gapped up a respectable 0.55%.  At that point, all three major market index EFS ground sideways for 30 minutes before putting in a modest morning rally that reached the highs of the day at about 11:40 a.m.  Then all three wobbled sideways for an hour.  However, the afternoon saw major whips in both directions, ending the day on the steepest selloff of the day in the last 30 minutes.   This action gave us black-bodied candles with significant upper wicks and tiny lower wicks.  All three major index ETFs remain extended below their T-line (8ema).  The DIA is also approached but not yet testing its 200sma.  This all happened on basically average volume in the SPY, DIA, and QQQ.

On the day, seven of the 10 sectors were in the red with Consumer Defensive (-0.45%), Consumer Cyclical (-0.43%), and Financial Services (-0.42%) leading the other sectors lower.  Meanwhile, Technology (+0.33%) and Energy (+0.25%) held up better than the other sectors.  At the same time, the SPY lost 0.22%, DIA lost 0.29%, and the tech-heavy QQQ gained 0.01%.  VXX gained a quarter of a percent to close at 22.87 and T2122 climbed but remains in the low end of the oversold territory at 4.95.  10-year bond yields fell down to 4.438% while Oil (WTI) gained 0.78% to end the day at $90.33 per barrel.  So, the first half of the day was the pause and modest bounce we might have expected after two strong days of bearish move.  However, then afternoon volatility took over with the Bears getting the best of the action.

The major economic news reported Friday was limited to Preliminary S&P Global Mfg. PMI which came in better than expected at 48.9 (compared to a forecast of 48.0 and the previous reading of 47.9).  However, while better than anticipated, the value below 50 indicates contraction.  At the same time, the S&P Global Services PMI came in a bit below the predicted at 50.2 (versus a forecast of 50.6 and the prior value of 50.5).  Just the opposite of Manufacturing, although the value was below expectation, a reading above 50 indicates expansion in the Services sector.  In addition, the S&P Global Composite PMI was reported at 50.1 (compared to a prior value of 50.2) 

In stock news, investing.com reported Friday that TSLA is in negotiations with the Indian government over opening a battery factory in that country.  At the same time, in non-strike news, SLTA announced it will invest $508 million into their plant in Brazil, in particular in new product development.  Elsewhere, MGM announced it has lost over $52 million in revenue due to the cyberattack suffered more than a week ago.  (This does not include cost to mitigate, instead referring only to lost sales.)  Later, AMZN said it would begin placing ads in Prime Video streaming shows in 2024, selling ad-free access for an extra fee on top of the Prime charge. In other AMZN news, the company said it would hold another two-day “Prime Day” to start on October 10 after previous successes.  After the close, BX announced it was canceling the planned conversion of Class A shares as less than 20% of the needed shares were tendered for conversion.  Meanwhile, GT announced it will cut 700 jobs in its Asia Pacific region, selling 100 retail stores in the process.  After the close, the EEOC sued UPS for disability discrimination in the company’s hiring practices.  After the close, the Wall Street Journal reported that RAD is negotiating with creditors over the terms of its bankruptcy and will liquidate 400-500 stores.  (RAD operates 2,330 stores in 17 states.)  Also after the close, Reuters reported that ORCL has prepaid $104.1 million for CPU chips from startup Ampere Computing according to ORCL’s regulatory filing Friday.  Ampere builds chips based on the newly-IPOed ARM architecture.  Finally, the UK competition watchdog agency signaled Friday that they are willing to approve the MSFT acquisition of ATVI.  This was the final hurdle to the $69 billion deal closing.

In stock government, legal, and regulatory news, a UK-based retail conglomerate (Frasers) has asked a NY court to compel MS CEO Gorman to provide evidence in a UK lawsuit against MS.  (The suit revolves around a $1 billion option position margin call on Frasers.)  Elsewhere, the NHTSA announced Friday they have opened a new investigation into 240k F 2018-2021 EcoSport vehicles over consumer complaints of oil pump failures causing a loss of power while in motion.  At the same time, Politico reported that the FTC will file its long-awaited antitrust suit against AMZN on Tuesday. Later, GS agreed to pay a $6 million fine to the SEC for providing inaccurate and/or incomplete trading data regarding 163 million transactions over a decade.  ($0.036 per error seems like a pretty sweet deal for GS, but what do I know.)  At the same time, private broker/dealer Citadel (famous for buying orders) agreed to pay the SEC $7 million for illegal short sales.  By mid-afternoon, an auto industry group told Reuters that carmakers do not intend to “immediately comply” with an MA law requiring them to share vehicle data with independent repair shops, despite the NHTSA reversing course and saying it was safe for carmakers to do so.  This leaves auto manufacturers open to the possibility of state and federal (FTC) action.

In Autoworker contract talks and strike news, the UAW reported that it had made real progress in talks with F.  However, the union said there was no negotiation progress in talks with GM and SLTA.  As a result, the union expanded its strike to include 38 parts and distribution facilities of GM and STLA across 20 states.  This will increase the number of striking workers from 12,700 to 18,300.  (3,500 of the 5,600 newly striking people work for GM.)  After the UAW invited him, President Biden announced he would visit the picket line Tuesday.  (The leading GOP candidate then said he would visit MI on Wednesday to address autoworkers.)  Later, in a META live event, UAW President Fain detailed the progress that had been made with F including progress on pay, job tiers, profit sharing, and cost of living increases.  (That last issue was significant since the UAW says GM and STLA have not offered any cost-of-living increases over the next contract.  Of course, that is just the UAW side of that issue.)  Then on Sunday, the Canadian union Unifor (Canadian version of UAW) announced its members had voted to approve the tentative agreement the union reached with F last week.

Overnight, Asian markets were mixed with 5 in the red, 5 in the green, and 1 is unchanged.  Japan (+0.85%), Taiwan (+0.66%), and Singapore (+0.33%) pacing the gainers.  Meanwhile, Hong Kong (-1.82%), Shenzhen (-0.57%), and Shanghai (-0.54%) led the losses after fears of a liquidation of China Evergrande Group hit the Chinese markets late.  However, in Europe, we nearly see red across the board at midday with only Greece (+0.64%) hanging onto the green territory.  The CAC (-0.47%), DAX (-0.59%), and FTSE (-0.51%) lead the region lower in early afternoon trade.  In the US, as of 7:30 a.m., Futures are pointing toward a start just on the red side of flat.  The DIA implies a -0.04% open, the SPY is implying a -0.05% open, and the QQQ implies a -0.07% open at this hour.  At the same time, 10-year bond yields have jumped back up to 4.491% and Oil (WTI) is just on the green side of flat at $90.10 per barrel in early trading.

The major economic news scheduled for Monday is limited to Fed Member Kashkari speaking after the close at 6 p.m.  There are no major earnings reports scheduled before the opening bell.  However, after the close, THO reports. 

In economic news later this week, on Tuesday we get Building Permits, Conference Board Consumer Confidence, August New Home Sales, API Weekly Crude Oil Stock report, and we have another Fed speaker (Bowman at 1:30 p.m.).  Then Wednesday, August Durable Goods, and EIA Weekly Crude Oil Inventories are reported.  On Thursday, we get Q2 GDP, Q2 GDP Price Index, Weekly Initial Jobless Claims, August Pending Home Sales, Fed Balance Sheet, and Fed Chair Powell speaks.  Finally, on Friday, the August PCE Price Index, August Goods Trade Balance, August Personal Spending, August Retail Inventories, Chicago PMI, Michigan Consumer Sentiment, Michigan Consumer Expectations, Michigan 1-year inflation expectations, Michigan 5-year Inflation Expectations are reported and Fed member Williams speaks.

In terms of earnings reports later this week, on Tuesday, CTAS, FERG, SNX, UNFI, AIR, COST, and MLKN report.  Wednesday, we hear from PAYX, CNXC, FUL, JEF, MU, and WOR.  On Thursday, CAN, KMX, JBL, and NKE report.  Finally, on Friday, CCL reports.

In miscellaneous news, on Friday, House Speaker McCarthy told reporters that he felt no need to reach across the aisle to Democrats, instead saying Republicans have a majority and can solve the budget crisis themselves.  Since he gave the House 4.5 days off this weekend, a government shutdown is now a virtual certainty.  The House returns Tuesday.  The Speaker says the House GOP will rewrite the 12 appropriations bills themselves by lumping them into 4 bills (although decoupling was the whole idea being appropriations bills on top of a total spending amount in the first place) in order to obtain a much more conservative budget prior to entering into negotiations with the Senate…previous agreements and votes during the debt ceiling negotiations in June, be damned.  At the same time, the Dept. of Commerce finalized rules aimed at preventing China from gaining any benefit from the $52.7 billion provided by the Chips and Science Act.  (The rules aim to stop China from benefitting from and research, workforce development…hiring people trained with those funds…or actual production.)  Elsewhere, BAC reported Friday that a record $19 billion was withdrawn from the stock market in the ending then.  At about the same time, the Treasury Dept. reported that over the last year, US household (not institutional) holdings of US bonds have increased from $1 trillion to $2.5 trillion.

In late-breaking news, the Hollywood Writers Union has reached a tentative deal with studios. The hold-up over the weekend had to do with writers being replaced by AI. However, it should be noted that the final contract language is still not written. So, there is still a possibility of disagreement and the union members still have to approve. Regardless, the Actor’s union still remains on strike. Elsewhere, AMZN announced early today that it will invest up to $4 billion into startup AI firm Anthropic (which is a direct competitor to OpenAI that MSFT has put billions into). AMZN will have an unspecified “minority ownership” of Anthropic which recently put out its own AI product named Claude 2. This move will better position AMZN to compete in the AI space with MSFT, GOOGL, and the lesser competitor META. Finally, a senior Japanese Bank (Nomura) executive has been barred from leaving China. He apparently is not under arrest but is not allowed to leave the country. Reportedly, the restriction is linked to a job this executive held prior to joining Nomura in 2018.

With that background, it looks like the Bears have maintained control over the weekend. Premarkets all gapped up modestly but have then sold back down to just below Friday’s closing level, giving us black candles in the early session. So far, that does not seem like a motivated Bear move but the upper hand is still on their side and is picking up a little steam as we start the day. All three major index ETFs remain well below their T-line (8ema) and 50sma. So, for now, the short-term trend is clearly headed lower with a retest of the August and June lows as the apparent next target for the Bears (except in the SPY where those two targets have already been achieved). In terms of extension, as I said, all three major index ETFs are far below their T-line (8ema) and the T2122 indicator is also now at the low end of its oversold range. This tells us we remain stretched, with the possible exception of the stodgy, mega-cap DIA. So, we should see a pause or relief bounce soon.

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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