Markets started the day with a modest gap higher at the open (up 0.29% in the SPY, up 0.20% in the DIA, and up 0.65% in the QQQ).  However, after 30-40 minutes of drift to the side, the bears stepped in to lead a long, slow, all-day selloff.  This took all three major indices out near the lows.  That action gave us Evening Star-type signals in the SPY and QQQ as well as follow-through to Tuesday’s Bearish Harami in the DIA.  The SPY and DIA both crossed below their T-line (8ema) and both came back down to now be testing their 50sma (after the SPY crossed back below its 200sma).  The volume was above average in the large-cap indices and below average in the QQQ.

On the day, all 10 sectors were in the red as Consumer Defensive (-2.46%) led the way lower and Basic Materials (-0.92%) held up best among the sectors.  Meanwhile, the SPY was down 1.55%, the DIA was down 1.81%, and QQQ was up 1.30%.  At the same time, the VXX was up 3.55% to 12.55 and T2122 fell out of the overbought area and back into the mid-range at 64.41.  10-year bond yields fell sharply to 3.372% and Oil (WTI) was down 1.12% at $79.28 per barrel.  So, overall, it was a decisively bearish day within a bullish trend. However, DIA looks in the worst shape while the other two major indices still just look like a pullback in a trend at this point.

In economic news, December PPI came in significantly lower than expected at -0.5% (compared to a forecast of -0.1% and far lower than the November reading of +0.2%).  This shows that inflation is moving in the right direction.  However, December Retail Sales also came in well lower than expected at -1.1% (versus the forecast of -0.8% and the November reading of -1.0%).  While this too showed that the Fed moves may be slowing the economy…it also showed the economy is slowing, which is bad.  Later in the morning, December Industrial Production also came in significantly lower than was expected at -0.7% (compared to a forecast of -0.1% and a November reading of -0.6%).  Again, this showed a slowing economy.  Then November Business Inventories came in right on target at +0.4% (versus a +0.4% forecast and the Oct. reading of +0.2%). November Retail Inventories also came in on target but down at -0.3% (versus the -0.3% in October).  Finally, after the close, API Weekly Crude Oil Stocks were reported, this time showing another large unexpected build.  For the week oil inventories went up 7.615-million-barrels (compared to a forecast of a drawdown of 1.750-million-barrels and following up on the prior week’s massive 14.865-million-barrel inventory build).

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In stock news, OSHA cited AMZN for failing to keep warehouse workers safe (as its warehouses were designed for speed but not safety) as well as 14 recordkeeping violations.  Although the agency called the violations serious, it does not have the legal authority to levy significant fines.  The total fine will be about $89,000.  Elsewhere, NASA awarded BA a $425 grant for a research project on fuel-efficient airliners related to a new wing design.  (One might think they’d already be doing that research for competitive reasons, but a little money from Uncle Sam always helps I guess.)  At the same time, PRTY filed for chapter 11 bankruptcy.  In other legal news, a US district judge has ruled the COST must face a trial for a class-action suit over its advertising of “dolphin-safe tuna” despite the fishing methods used that harm and kill many dolphins.  In a different court, another US district judge has ruled HOOD must face a lawsuit from customers who claim they were misled about “free trading” when the fees were actually being paid by the “payment for order flow” model that didn’t guarantee those customers a ”best price or fastest execution” fill on orders.  Meanwhile, the LUV Pilot Union has called for a strike authorization vote (to take place until May 1) as mediation with the company over contract details is scheduled to resume on January 24.

In energy news, the API report also showed a 2.8-million-barrel build in gasoline stocks but a 1.8-million-barrel drawdown in distillate (diesel and heating oil) inventory. In other energy news, another North Carolina power substation was damaged by gunfire.  No power outages were reported from this attack.  Finally, Reuters reports that at least 15 US oil refineries are planning scheduled outages for maintenance between now and June.  These outages will range between two weeks and 11 weeks in length, impacting 1.4 million barrels of refining capacity per day.  This is twice as many shutdowns as a normal year and will impact units from MPC, VLO, XOM, PSX, BP, and PBF.  Fuel-producing margins are already increasing even ahead of the reduction in capacity as refining capacity is still 8% lower than prior to the Winter storm around Christmas.

After the close, AA, DFS, and FHN all reported beats on the revenue and earnings lines.  Meanwhile, TCBI and WTFC both beat on revenue while missing on earnings.  On the other side, KMI missed on revenue while reporting inline on earnings. However, FUL missed on both the top and bottom lines.  It is worth noting that KMI raised its forward guidance while FUL lowered its forward guidance.

So far this morning, PG, TFC, FITB, MTB, FAST, CMA, and SNV have all reported beats on both the revenue and earnings lines.  Meanwhile, KEY beat on the revenue line while missing on the earnings line.  However, NTRS reported misses on both the top and bottom lines.

Overnight, Asian markets were mixed but leaned to the green side on modest moves.  Japan (-1.44%) was an outlier again, this time to the downside.  Meanwhile, Shenzhen (+0.87%), Australia (+0.57%), and South Korea (+0.51%) led the region higher.  On the other hand, in Europe, we see red across the board at midday.  The FTSE (-1.12%), DAX (-1.65%), and CAC (-1.63%) are leading the region lower in early afternoon trade.  As of 7:30 am, US Futures are pointing toward a gap lower to start the day.  The DIA implies a -0.70% open, the SPY is implying a -0.74% open, and the QQQ implies a -0.81% open at this hour.  At the same time, 10-year bond yields are up slightly to 3.388% and Oil (WTI) is off seven-tenths of a percent to $78.92/barrel in early trading.

The major economic news events scheduled for Thursday include December Building Permits, Dec. Housing Starts, Weekly Initial Jobless Claims, and Philly Fed Mfg. Index (all at 8:30 am), and EIA Weekly Crude Oil Inventories (11 am).  We’ll also get another Fed speaker (Williams at 6:35 pm).  The major earnings reports scheduled for the day include CMA, FAST, FITB, KEY, MTB, NTRS, PG, SNV, and TFC before the opening bell.  Then after the close, CNXC, NFLX, PPG, and SIVB report.

In economic news later in the week, on Friday, we get Dec. Existing Home Sales and two Fed speakers (Harker and Waller).  In terms of earnings, on Friday, we will hear from ALLY, ERIC, HBAN, RF, SLB, and STT.

In late-breaking news, AMZN announced that it is ending its charity donation program (known as AmazonSmile) next month. The program donated a portion of the proceed from the sale of eligible products to a customer’s favorite charity. However, while AMZN felt it had the money in boom times, heading into a tough economy it saw the need to cut the expense in addition to the massive layoffs. Elsewhere, HTZ added to the momentum of electric vehicles when it announced a partnership with the city of Denver to bring 5,000 electric vehicles to its Denver-area fleet as well as install charging stations at the Denver airport and throughout the city. Finally, in a sign of potential optimism, the US Census Bureau has reported that more than 5 million new business license applications were filed in 2022. (That amounts to 14,000 per day, every day of last year.) While statistics show that most of those businesses will fail, for our purposes the takeaway is that, in general, you don’t start a new business if you are expecting a bleak economic future.

With that background, it looks like premarkets are in the red this morning. The QQQ is retesting its T-line (8ema), while SPY is retesting a support level, and all three major indices would open below their 50sma if the market were to open at this moment. Extension is no problem with T2122 in its midrange and only the DIA being any real distance from its T-line. So, the bears have a little room to run. It looks like DIA may be headed down to retest its 200sma and the SPY may be headed to retest support in the 378-380 area. Be very cautious taking any longs (avoid catching a falling knife) this morning and remember we have data coming at 8:30 am. With that said, we have not yet put in a lower low or lower high in any of the three major indices. So the bias is still to the upside.

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

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.

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🎯 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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