Infrastructure Deal and Bank Payouts

Thursday saw another gap higher, but this time the DIA followed-through before grinding sideways all afternoon.  Meanwhile the SPY essentially waffled in a tight range after he gap, but the QQQ ran up and then fell back.  This left the QQQ at another all-time high close, but also printing a Shooting Star type candle.  The SPY printed an indecisive Doji, missing another all-time high by cents.  And the DIA put in a nice bullish candle as it plays catch-up to the other major indices.  On the day, SPY gained 0.60%, DIA gained 0.94%, and QQQ gained 0.62%.  The VXX fell almost 2% to 29.71 and T2122 jumped back up into the overbought territory at 81.18.  10-year bond yields rose slightly to 1.494% and Oil (WTI) gain about a quarter percent to $73.29.

During the afternoon, President Biden and a bipartisan group of Senators announced they had reached a deal on an infrastructure initiative.  However, this does not mean the bill has passed the full Senate yet.  Interestingly, the bill apparently will only include $579 billion in new spending (not much over half of the levels that had been floated as "the best offer" by either side).  So, that has to be called a win for Senate Republicans. In addition, the deal-making group has not yet agreed on how to pay for the bill (the GOP says they will not go along with any tax changes that would be a rollback of the 2017 tax cuts).  Nonetheless, the bill calls for $109 billion to go into roads, $66 billion to go into rail, $49 billion to go into public transport, and $15 billion to go into electric vehicle infrastructure and vehicles.  Other winners in the plan were $73 billion into electric infrastructure, $65 billion for broadband, and $55 billion into fresh water.  You can probably guess which industry’s stocks will gain on that spending (steel, construction, telecom, etc.).   

After the close, and as expected, the Fed said all 23 banks passed their 2021 stress test.  The test scenario tested a “severe global recession,” which is exactly what the banks had experienced last year…so the banks passing was a foregone conclusion. Most analysts expect this announcement will be followed by a spate of dividend increases and buyback programs by most of the major banks.

In stock news, RAD plummeted during the day on mixed earnings and weak guidance as well as the CEO saying she was only “cautiously optimistic” the company would not be hurt by another round of Covid lockdowns.  CCL also fell during the day after they announced they do not anticipate their full fleet sailing before next Spring.  On the other side, MSFT closed above a $2 trillion valuation for the first time on the day they also announced a new version of the Windows operating system.  After the close, NKE posted beats on both the top and bottom lines.  FDX also posted a beat on both lines. Finally, SPCE has been given approval by the FAA to fly passengers to space.

Overnight, Asian markets were solidly green across the board.  Shenzhen (+1.48%), Hong Kong (+1.40%), and Shanghai (+1.15%) led the advancers. However, the gains were wide-spread.  In Europe, markets are mixed on modest moves so far Friday.  The FTSE (+0.12%), DAX (-0.13%), and CAC (-0.07%) show the spread.  However, smaller exchanges are more varied with Sweden and Finland up over 1% at mid-day.  As of 7:30 am, US Futures are pointing to another green open. The DIA is implying a +0.32% open, the SPY implying a +0.12% open, and the QQQ implying a +0.13% open.

The major economic news scheduled for Friday includes May PCE Price Index and May Personal Spending (both at 8:30 am) and Michigan Consumer Sentiment (10 am).  Major earnings reports on the day are limited to KMX and PAYX before the open.  There are no reports scheduled after the close.

With the premarkets up, it looks like the bulls are intent on finishing off the best week since April. However, the DIA still faces overhead resistance, the SPY has not yet completely broken out, and QQQ looked a little tired and indecisive on Thursday. So, remember this is Friday, which means payday, and also that a weekend news cycle lays ahead. It is time to consider taking profits, hedging, or at least moving stops. The fear of inflation (and Fed tightening) still lurk out there in the market.

Follow your trading rules, don't chase, and stick to the trade plan. Remember that consistency is the key to long-term trading success. The odds favor following the trend, but also respecting both support and resistance levels. However, all trends reverse at some point and every S/R level is breached eventually. So, don't just assume trend, support, or resistance will always hold. Keep locking in profits, moving your stops, and maintaining discipline.

Ed

Swing Trade Ideas for your consideration and watchlist: WLL, DGII, EFX, SENS, TMUS, FSLY, LABU, QCOM, AMD, BA. 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.

🎯 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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