Markets opened higher to start the day Monday.  SPY gapped up 0.31%, DIA opened 0.10% higher, and QQQ gapped up 0.63%.  However, these were Bull traps on a volatile day.  DIA immediately sold off after the open, recrossing its open gap in the first 5 minutes and continuing South to the lows of the day at 1:15 p.m.  Meanwhile, SPY and QQQ held onto their open gaps for 15 minutes before following DIA.  They too reached the low of the day at 1:15 p.m.  At that point, the volatility switched and the Bulls rallied all three major index ETFs the rest of the day (including a strong push the last 5 minutes).  This action gave us black-bodied Hammers in the SPY and DIA with a similar candle in the QQQ (only with a small upper wick).  The SPY retested the T-line (8ema) from above and passed the test on the day.  QQQ gapped above its T-line then retested that level from above…nearly, but not quite, pushing back above at day end.  At the same time, DIA moved toward its T-line but didn’t really test the level Monday.

On the day, seven of the 10 sectors were in the red with Energy (-2.43%) way out in front leading the rest of the market lower (on OPEC+ economic pessimism).  At the same time, Healthcare (+0.59%) held up better than the other sectors.  Meanwhile, SPY gained 0.08%, DIA lost 0.33%, and QQQ gained 0.154%.  VXX fell 0.61% to close at a low 11.46 and T2122 dropped back to the center of its mid-range to close at 46.92.  On the bond front, 10-year bond yields dropped sharply to 4.392% and Oil (WTI) plummeted 3.70% to close at $74.14 per barrel.  So, Monday was a V-shaped whipsaw day that bounced up off a support level from the March/April highs after the morning post-gap selloff.  This happened on well below-average volume all three major index ETFs. 

The major economic news scheduled for Monday included May S&P Global Mfg. PMI, which came in a bit stronger than expected at 51.3 (compared to a 50.9 forecast and a 50.0 April reading).  Later, April Construction Spending was lower than predicted at -0.1% (versus a +0.2% forecast but better than March’s -0.2% value). At the same time, May ISM Mfg. Employment was stronger than anticipated at 51.1 (compared to the 48.5 forecast a 48.6 April reading).  However, the May ISM Mfg. PMI was down at 48.7 (versus the 49.8 forecast and 49.2 April value).  The May ISM Mfg. Prices Index was also down at 57.0 (compared to the 60.0 forecast and 60.9 April reading).   

In significant market news, the NYSE (owned by ICE) found and resolved a major “technical issue” Monday.  This was found to be due to a software update at a data center of the Consolidated Tape Assoc. (which is responsible for distributing real-time price data).  The problem included at least 40 tickers, including the major names BRKB and GOLD (which were both shown to be down more than 99% at one point.  (While NYSE reimbursed traders for losses due to a glitch in February 2023, there was no word on that for this case yet.)

After the close, LVRO reported misses on both the revenue and earnings lines.

In stock news, on Monday, the trade association representing the major airlines said industry revenue forecasts had risen to just under $1 trillion, with profits on target to reach $30.5 billion for 2024.  (This is up from $27.4 billion in 2023 and up dramatically from the group’s $25.7 billion profit forecast released in December.)   At the same time, Saudi Aramco sold $12 billion in stock within hours as it raised funds.  Later, SAM fell Monday after Japanese Brewer Suntory denied it was in talks to acquire SAM.  (SAM was down 10% at one point, but closed down 3.48%.)  At the same time, ADSK said it has concluded its audit / internal investigation that led to restatement of prior financial reports.  (ADSK popped and was up 10% at one point, closing up 4.57%.) Later, SPOT announced it will raise prices in the US for its premium plans as part of a program to increase profit margins.  At the same time, trade publication Beverage Digest reported Monday that the Dr. Pepper (owned by KDP) passed Pepsi (PEP) to become the second most popular soda in the US.  Both have about 8% of market share while Coke (KO) has more than 19% share.  Diet Coke (7.8%) and Sprite (8.1%) are in fourth and fifth pace and are also owned by KO.    

Elsewhere, HZO shares popped Monday on reports that ONEW is in talks to acquire the company.  Later, AMKAF (Maersk, the world’s second largest shipping company) said that significant congestion in Singapore and Dubai ports are causing delays.  As a result, the company will skip two westbound sailings from China and South Korea that had been scheduled to depart in early July.  (This congestion is due to a surge in cargo shipments as well as diversions to avoid the Red Sea because of Houthi attacks.)  Still, AMKAF raised its 2024 guidance on the strong shipping demand.  After the close, MSFT announced it is cutting hundreds of jobs (as many as 1,500 possible) from its Azure cloud computing and augmented reality divisions.  PARA agreed to merger (read acquisition) terms with Skydance.  Shareholders will receive $15/share (PARA closed at $12.80) while PARAA voting shares receive $23/share (closed at $22.14). Finally, GOOGL laid off 100 employees from its cloud computing division.

In stock legal and governmental news, on Monday the New York Times reported that MSTR and its founder (Michael Sayler) agreed to a $40 million settlement with the District of Columbia.  The settlement ends the largest income tax fraud case in D.C. history.  Later, the FDA announced it will vote on whether or not COVID-19 vaccines for 2024-2025 should target the JN.1 variant (currently the most dominant strain).  The news was greeted by a rally in NVAX (which had said last month it would only be able offer its vaccine in the US if the FDA accepted the one it is now manufacturing that is based on JN.1.  (MRNA, PFE, and BNTX are able to more quickly respond due to a different vaccine type.)  At the same time, the Chairman of TM apologized to the government of Japan for years of cheating (manipulating data) on collision safety tests. (At the same time, TM announced they have halted production of Corolla Fielder, Corolla Axio, and Taris Cross models, which were three of the models that TM fudged data to get certified.)  TM competitor MZDAF (Mazda) acknowledged the same type of cheating and also halted production on two of its models. 

Elsewhere, the US Dept. of Transportation fined four foreign airlines $2.5 million in civil penalties for delays in refunds for flights disrupted by COVID-19.  (Thousands of US passengers were forced to wait months for refunds for flight cancellations.)  At the same time, Bloomberg reported that a former TD bank employee in FL is under inquiry by the US Dept. of Justice.  The report says the employee took $200 bribes to open accounts in order to help move millions of dollars to Columbia while skirting money laundering laws.  (This probe is part of a $653 million drug money laundering probe by the DOJ of TD and other banks.)  Later, AAL told a US Appeals Court that it will consider a new partnership venture with JBLU if it wins its appeal of the case that ended the alliance of the two in the Northeast corridor.  At the same time, PacifiCorp (owned by BRKB) agreed to pay $178 million to resolve 403 claims arising from two 2020 fires (caused by the utility’s equipment).  The NHTSA announced an investigation into 75,000 NSANY (Nissan) 2015 Rogue Select vehicles over unintended deployments of side airbags.

Overnight, Asian markets were mixed with five exchanges in the green and seven in the red. India (-5.93%) was the massive mover while Malaysia (+1.17%) and Shenzhen (+1.05%) were the only other moves of more than a percent.  (Indian markets were spooked by early returns from their long national election process. So far, it is looking as if PM Modi will win again, as he should given the way he stacked the deck, but his party’s margins are looking to be lower than expected.) In Europe, we see red across the board at midday.  The CAC (-0.80%), DAX (-1.05%), and FTSE (-0.49%) lead the region lower in early afternoon trade.  In the US, as of 7:30 a.m., Futures are pointing toward a down start to the day.  The DIA implies a -0.39% open, the SPY is implying a -0.45% open, and the QQQ implies a -0.41% open.  On the bond front, 10-year bond yields are down to 4.383% and oil (WTI) is down nearly 2% to $72.78 per barrel in early trading.

The major economic news scheduled for on Tuesday includes April Factory Orders and April JOLTs Job Openings (both at 10 a.m.), and Weekly API Crude Oil Stocks (4:30 p.m.).  The major earnings reports scheduled for before the open are limited to BBWI, CNM, DBI, DCI, and FERG. Then, after the close, CRWD, HPE, and PVH report.   

In economic news later this week, on Wednesday, May ADP Nonfarm Employment Change, May S&P Global Services PMI, May S&P Global Composite PMI, May ISM Non-Mfg. Employment, May ISM Non-Mfg. PMI, and May ISM Non-Mfg. Prices, and Weekly EIA Crude Oil Inventories are reported.  On Thursday, we get Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, April Imports, April Exports, April Trade Balance, Q1 Nonfarm Productivity, Q1 Unit Labor Cost, and Fed’s Balance Sheet.  Finally, on Friday, May Avg. Hourly Earnings, May Nonfarm Payrolls, May Private Nonfarm Payrolls, May Participation Rate, May Unemployment Rate, and April Consumer Credit.

In terms of earnings reports later this week, on Wednesday we hear from BF.A, CPB, DLTR, DOYU, HIBB, OLLI, REVG, THO, UNFI, FIVE, GEF, LULU, and VSCO.  On Thursday, ABM, BIG, CIEN, GIII, SJM, NIO, TTC, DOCU, NGL, and MTN report.  Finally, Friday, there are no major reports.

So far this morning, BBWI, DCI, and FERG have all reported beats on the revenue and earnings lines.  Meanwhile, DBI missed on both the top and bottom lines.  IT is worth noting that DCI raised its forward guidance.

In miscellaneous news, President Biden is expected to announce an Executive Order that will effectively close the US Southern border immediately.  The order would halt taking asylum requests at the US-Mexico border once the average daily “encounters” at ports of entry hits 2,500.  Taking of the requests would not resume until the average drops to 1,500. Since encounters are well above 2,500 (hitting 4,300 in April) the move would end asylum now. It is worth noting that the last time encounters fell to 1,500 was at the height of the COVID-19 pandemic during the previous administration.)  At the same time, the Associated Press reported that CEO pay increased 12.6% on average in 2023.  (This compares to a 4.1% increase for the average worker.)  This moves the average CEO pay to almost 200 times that of the average employee.  (That data is based on a survey of 382 CEOs from S&P 500 companies.)

With that background, it looks as if the large cap index ETFs gapped down to start the premarket while QQQ opened the early session flat. All three have traded lower since that start, printing black-bodied candles so far this morning. (QQQ is retesting and so far failing its T-line from above in Premarket.) With that said, the Bears are still in control of the market in the short-term. At the same time, the mid-term remains bullish in all three major index ETFs and the longer-term market remains very Bullish in trend. In terms of extension, none of the three are too stretched from their T-line (8ema). The T2122 indicator is also back in the center of its mid-range. So, the bottom line is that the market, has room to run. With regard to those 10 big dog tickers, eight of the 10 are red in premarket with only INTC (+1.58%) making an appreciable move on new AI chip announcements at Computex. (The new Intel Xeon chips are better than their predecessors in performance and power use and will be priced lower than NVDA and AMD competitors. This makes sense since the Xeon chips still are not in the same performance or power efficiency categories as those competing chips.)

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 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 gains are 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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