Markets gapped down significantly Wednesday and then ground sideways, first in a fairly tight range, but then in a very volatile way to end the day.  This left us with gap-down, indecisive candles in all 3 major indices.  The SPY printed a Doji while the DIA and QQQ printed Spinning Top candles.  On the day, SPY lost 0.99%, DIA lost 0.43%, and QQQ lost 2.17%.  The VXX fell 1% to 24.55 and T2122 dropped to 28.39.  10-year bond yields pulled back over the day but still spiked higher to 2.59% and Oil (WTI) fell 4.85% to $97.02/barrel.

The Fed minutes released Wednesday afternoon told us that the Fed has reached a consensus to begin reducing the FOMC Balance Sheet by $95 billion/month probably starting in May.  This is twice the rate compared to the last time the Fed shrunk its balance sheet and may leave bond markets starved for supply even as traders try to flee to the safety of bonds.  (This will fight against the Fed’s attempt to raise rates since higher bond prices mean lower yields.)  There was also a strong hint that at least some of the interest rate hikes ahead will be 0.50% hikes.  These are clear signs the Fed is now hawkish and will be aggressive in its fight against inflation.  While this caused considerable volatility in the afternoon today, buckle up as the most Hawkish member of the Fed (Bullard) will be speaking today.  (He previously called for a full percentage hike by the first of July.)

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During the day, Oil Inventories came in much higher than expected.  The consensus forecast had called for a 2 million barrel drawdown, but inventories came in showing a 2.4-million-barrel increase.  This came the same day that Congress took turns blasting top executives from major oil companies.  Executives from XOM, CVX, BP, SHEL, PXD, and DVN all took turns being berated for windfall profits as well as increasing their buyback plans and dividends rather than increasing production.  The companies were also blasted for investing in Russian projects after Russia ceased and annexed Crimea.

In other market news, BRKB (Warren Buffett’s Berkshire Hathaway) revealed that it has taken a $4.2 billion position in HPQ, causing the computer and printer company stock to soar as much as 17% in premarket trading.  Elsewhere, Chinese company Tencent has shut down its fledgling rival to AMZN subsidiary Twitch (video game streaming platform).  This comes after Chinese regulators killed a merger between the two video game streaming platforms that Tencent had major stakes in.  This eliminates the only major global rival to AMZN in that growing niche market. Also this morning, CAG reported beats on both lines while STZ beat on revenue at the same time it reported a miss on earnings.

Overnight, the Asian markets red across the board.  Taiwan (-1.96%), Japan (-1.65%), and Shenzhen (-1.65%) led the region lower.  However, losses were widespread and only New Zealand (-0.03%) was anywhere near flat on the day.  In Europe, we see a different story altogether.  Stocks are green across the board with only two minor exceptions of the FTSE (-0.07%) and Norway (-0.27%) at mid-day.  The DAX (+0.71%) and CAC (+0.70%) are typical of the continent with even Russia (+1.17%) gaining in early afternoon trading.  As of 7:30 am, US Futures are pointing toward a slightly green start to the day.  The DIA implies a +0.04% open, the SPY is implying a +0.18% open, and the QQQ implies a +0.31% open at this hour.  10-year bond yields are up slightly to 2.607% and Oil (WTI) is up 2.23% to $98.35 in early trading.

Major economic news scheduled for release on Thursday is limited to Weekly Initial Jobless Claims (8:30 am) and 4 speakers (Fed member Bullard at 9 am, Treasury Sec. Yellen at 10:30 am, Fed member Bostic at 2 pm, and Fed member Williams at 4:05 pm.  The only major earnings reports scheduled for the day are CAG, STZ, and LW all before the open.  There are no major earnings announcements scheduled for after the close.

After a day and a half of markets being spooked by Fed doves, this morning we hear from the staunchest hawk among Fed members. Premarkets are not running scared in the face of this prospect. So, it may be a case of investors already “cooking in” a worst-case and feeling like Bullard’s proposed medicine won’t be so bad. At any rate, stocks are on the green side of flat heading into his talk. That and Weekly Jobless claims are the only news to worry about in premarket. However, we also have 3 other Fed speakers who might rock the boat later in the day. So, maybe markets have found a level to consolidate or find some support. However, expect more volatility as traders continue to try to guess how inflation, rising interest rates, and a potential hard landing will shake out across the market. Trade carefully and position yourself so that shocks in either direction don’t throw you into a panic.

Stick to those trading rules and manage the things that you can control while trying not to worry about the things you have no control over at all. Trade with the trend, don’t chase, keep consistently taking profits when you have them, and move your stops in your favor. Remember that the first rule of making big money in the market is to not lose big money in the market. So, don’t be stubborn, and protect yourself from yourself. If you are wrong, just admit it and take your loss. Trading is a marathon, not a sprint. So, focus on the process and enjoy yourself.

Ed

Swing Trade Ideas for your consideration and watchlist: FIGS, HBIO, PYPL, SQ, DOCU, BABA, MCD, ORCL, PFE, TT. 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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Disclosure: We do not act on all trades we mention, and not all mentions acted on the day of the mention. All trades we mention are for your consideration only.

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