Is Inflation or Earnings More Important

Markets gapped slightly lower Tuesday on a hotter than expected June CPI number.  However, they rallied from there to new highs before giving back the gains in the afternoon and closing near the lows.  This left us with Shooting Star-type candles in all 3 major indices.  On the day SPY lost 0.34%, DIA lost 0.29%, and QQQ was dead flat.  The VXX gained over a percent to 29.59 and T2122 fell all the way back to just inside the oversold territory at 19.30.  10-year bond yields spiked sharply to 1.42% and Oil (WTI) gained 1.6% to $75.30/barrel.

As mentioned, the Consumer Inflation numbers jumped the most in years.  However, markets reacted very mildly to the news.  Among the biggest movers by category, Car and Truck rental prices skyrocketed 88% year-on-year while gasoline and used cars both jumped 45% from a year ago.

This morning, weekly mortgage applications for new homes came in 8% above the prior week but were 29% lower than one year ago.  However, refinancing applications spiked 20% on the week as buyers jumped on the recently falling interest rates.

In big bank news, after JPM’s blowout numbers Tuesday, this morning BAC missed expectations on revenue for Q2.  BAC cited a drop in income due to lower interest rates over the quarter. However, the company did far exceed the earnings estimates of analysts ($1.03 actual vs $0.77 est.). On the other hand, C, WFC, BLK, and PNC all followed JPM's lead in beating on both lines for the some cases with blowout beats.

Overnight, Asian markets were red almost across the board.  The only green came from Australia (+0.31%) and India (+0.26%).  However, Shanghai (-1.07%), Shenzhen (-0.88%), and Hong Kong (-0.63%) were more representative of the region.  Europe is following Asia’s lead so far today.  While there are a few barely green exchanges, the FTSE (-0.52%), DAX (-0.17%), and CAC (-0.22%) are typical of the continent.  As of 7:30 am, US Futures are pointing to a green, if mostly flat open.  The DIA is implying a +0.02% open, the SPY implying a +0.10% open, and the QQQ implying a +0.36% open.  10-year bond yields and the dollar are also mildly lower in premarket, which should help commodities.

Major economic news scheduled for Wednesday is limited to June PPI (8:30 am), Crude Oil Inventories (10:30 am), Fed Beige Book (2 pm), and Fed Chair Powell testifies at noon.  The major earnings reports scheduled for the day include BAC, BLK, C, DAL, INFY, PNC, and WFC.  Then, after the close, there are no major reports.

The rest of the world seemingly reacted poorly to yesterday's hot CPI reading in the US. However, US markets mostly ignored the news or maybe gave more weight to the blowout earnings reports yesterday. So far today, earnings news is mostly positive in front of the PPI number. In this setting, markets are showing signs of weakness. If we get some follow-through on the Shooting Star-type candles, don't be surprised by at least a short-term pullback. Markets are still sitting at all-time highs, look extended, and with the higher inflation numbers, we can expect more talk of Fed tapering. However, Bloomberg reported Fed Vice Chair Clarida told them the Fed would not have the new information they value most to adjust posture until year-end.

The odds still favor sticking with the trend in terms of overall posture. And the long and mid-term trends remain bullish. Focus on your open positions first, don't chase new ones, and remain nimble. Stick to your trading rules, taking your profits, moving your stops, and maintaining your discipline. It is all about your decisions. So act mindfully and with intention...don't just react emotionally. Consistency remains the key to long-term success.


Swing Trade Ideas for your consideration and watchlist: CLF, QCOM, BX, VALE, WMT, TZA. 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.

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🎯 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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