Once again, the bulls ignored bad news and latched on to questionable hope.  The Q1 GDP shrank by 4.8%, but futures spiked on the news.  Markets opened with a 2% gap higher and then rallied on news of encouraging results from a preliminary trial of a treatment drug for COVID-19.  On the day, the SPY was up 2.60%, the DIA up 2.22%, and the QQQ up 3.55%.  VXX fell to 36.72 (the lowest level it has seen for nearly two months) and the T2122 remains pegged at 99.06. Oil (WTI) rebounded 23% on hope of renewed demand to close at $15.20/barrel and the 10-year bond yield also rose slightly to 0.625%.

During the day, the government jumped on the GILD (remdesvir) news as the FDA isn’t waiting for more proof and announced it will make the drug available to patients just as soon as possible.  This is quite the leap considering the trial showed an improvement in only 50% of patients and even then, only at a certain treatment course (not as much with longer length of treatment).  However, Dr. Fauci (NIH) said it was “quite good news” that the drug can reduce hospitalization from 15 days to 11 days on average and may (data less certain) reduce the mortality rate (from 11.6% to 8%), even if only effective in half the cases.  So, no magic bullet, but a step in the right direction.

The Fed also left rates unchanged and they will continue buying bonds.  This was as expected and the more important point was the forward guidance where Fed Chair Powell said the economy will continue to need Fed support for some time and the Fed will act forcefully to do more as needed.  He also pledged to keep rates near zero until full employment and inflation come back.

On earnings, FB soared after-hours on reporting stable ad revenue and a 18% year-on-year revenue growth, this in spite of a 4 cent earnings miss.  MSFT also rose on a 15% increase in sales and a beat on both top and bottom lines.  The same was true of QCOM, which also beat on both lines, but warned they forecast a 30% drop in phone shipments in Q2.  Bear in mind that many major financial news outlets report that the analyst estimates are worthless this quarter and of even less value for next quarter as most companies have completely dropped forward guidance and major Wall Street Industry Analysts have given up with the gaming.  So, don’t focus on earnings reports as an indication of anything but a news event.  Trade the chart alone and be fast.

On the Virus front itself, the global headline numbers are 3,235,722 confirmed cases and 228,605 deaths. In Italy, 12.4 million workers have asked for emergency funds from their government.  In good news, in China, road traffic in Beijing and Shenzhen is heavier now than it was a year ago while Shanghai is almost the same.  This implies that s economic activity (and oil demand) has resumed at the same pace as before the virus shutdowns.  Meanwhile, in Japan, the government has extended the national emergency for another month (originally to end May 6) as their outbreaks continue.

In the US, we have breached the million-case mark, with 1,064,572 confirmed cases and 61,669 deaths.  However, the priority is now no longer the virus, but economic recovery.  Toward this, the President said that the federal social distancing guidelines will “fade out” when asked about extending them. The VP said they were “very much incorporated” into the voluntary reopening guidelines (that many states and even more people haven’t adopted as they move to reopen more quickly). Still, the President said he is “very much in favor of what they (Governors who are opening up their states) are doing” as you’d expect him to be with his changed focus.

Overnight, Asian markets were green, with the lone exception of India.  However, in Europe, the opposite is true as markets are in the red so far today, with the exceptions of Finland and Denmark.  As of 7:30 am, US futures are mixed, pointing to a 1% gap up in the QQQ, but flat opens in the DIA and SPY. 

The major economic news for Thursday includes Mar. PCE, Q1 Employment Cost Index, Mar. Personal Spending, and Initial Jobless Claims (all at 8:30 am) and April Chicago PMI (9:45 am).  On the earnings front, MO, AAL, ABMD, BAX, CHD, CI, CMCSA, COP, DAN, DOW, ETN, BEN, GPN, HBI, ICE, IDXX, IP, K, KHC, LKQ, MMC, MCD, TAP, MCO, NLSN, PH, PNR, PWR, RMD, SO, SWK, TPR, TFX, TXT, TWTR, VMC, WLTW all report before the open.  Meanwhile, AMZN, AMGN, AAPL, AJG, BMRN, COG, CXO, EMN, EIX, FBHS, FTV, GILD, HP, ILMN, MGM, MOH, PRGO, PSA, SGEN, SYK, UAL, V, WDC, WHR, X all report after the close.  

The 6-day uptrend remains intact, as Bulls clearly are seeing the good and ignoring the bad news.  Gaps and volatility remain the norm and we should expect bad economic news to continue.  So, all we can do is remained focused and trade the chart in front of us.  Just bear in mind we either need to be fast (day trade) or slow (longer-term holds) in a market that does not match the data.  Be very cautious about swing trades, unless you can handle significant short-term pain. 

Ed

No Trade Ideas for today Trade smart, take profits along the way and trade your plan. Also, don’t forget to check for upcoming earnings. Finally, remember that the stocks/etfs 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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