The market gapped lower on Wednesday, opening down 0.41% in the SPY, down just 0.10% in the DIA, but down 0.73% in the QQQ.  From there, the first 45 minutes saw a sideways chop in all three major index ETFs.  However, then the Bears took over and sold the market off (in a jagged fashion) for the rest of the day.  Only a slight bounce in the last 10-15 minutes kept all three index ETFs from closing on their lows.  This action gave us black-bodied candles in all three.  The QQQ printed a larger-bodied, black Spinning Top candle that crossed back down through its T-line (8ema) and 50sma.  The DIA printed a large-body, black candle that crossed back below its T-line and 200sma.  Meanwhile, the SPY printed a large-body, black candle with a bit more wick on each end than the DIA.  SPY also crossed back below its 8ema.  This happened on just slightly above-average volume in all three. 

On the day, nine of the 10 sectors were in the red with Basic Materials (-2.71%) and Industrials (-2.62%) out front leading the way lower.  Meanwhile, Energy (+0.45%) held up much better than the other sectors (by 0.75%).  At the same time, the SPY was down 1.33%, the DIA lost 0.99%, and QQQ lost 1.31%.  VXX gained 6.41% to close at 25.06 and T2122 dropped down into the middle of its oversold territory at 10.61.  10-year bond yields spiked again to 4.911% while Oil (WTI) popped again to close at $88.16 per barrel.  So, Wednesday was the Bear’s day from premarket into the close.

The economic news reported Wednesday included Preliminary September Building Permits which came in better than expected at 1.473 million (compared to a forecast of 1.455 million but less than the August number of 1.541 million).  This amounted to a Preliminary decline of 4.4% month-on-month (versus a 6.8% month-on-month increase between July and August).  At the same time, September Housing Starts came in light at 1.358 million (compared to a forecast of 1.380 million but well above the 1.269 million in August).  That amounted to a 7.0% increase month-on-month in September versus a 12.5% decline between July and August.  Later, EIA Weekly Crude Oil Inventories showed a much larger than expected drawdown of 4.491-million-barrels (versus a predicted draw of 0.300-million-barrels and drastically different than the prior week’s inventory build of 10.176-million-barrels.  Finally, at the close, the TIC Net Long-Term Transactions for August came in worse than expected at +$63.5 billion (versus a forecast of +$76.8 billion but dramatically higher than the July reading of +$9.5 billion…which itself was revised up from the original reporting).

In Fed news, Fed Governor Waller promoted the idea of a cautious approach to any further Fed Funds rate changes in a speech made at a conference in London.  Waller said, “I believe we can wait, watch, and see how the economy evolves before making definitive moves on the path of the policy rate.”  He went on to outline two scenarios (an economic slowdown that brings down inflation and a sustained strong economy requiring more hikes), but said which will happen remains very unclear.  Later, NY Fed President Williams reaffirmed the FOMC mantra that rates will need to be kept higher for longer to tame inflation.  At a Queens College speech, Willams reiterated that progress has been made in bringing down inflation and said he will advocate rate cuts once inflation pressures ease.  “Right now, we need to keep this restrictive stance of policy in place for some time to get inflation down.”  These two positions were reinforced by the Fed Beige Book released Wednesday, which showed little change in economic activity in the 45 days ending October 6.  In other words, despite the anecdotes of some, the hard data continues to show a strong economy.

In Autoworker contract talks and strike news, F announced a management shakeup appointing the head of its combustion vehicle unit as the new COO.  The head of its Ford Blue (gas and hybrid) unit will take over as head of the combustion vehicle unit.

In stock news, on Tuesday, HSBC announced it will ban texting from work phones to hopefully head off future investigations for “off book” communications between traders.  At the same time, BA pledged its support to key supplier SPR, in order to overcome the production problems that have plagued SPR (and therefore BA) for a year.  BA did this by providing an agreement under which it will give SPR financial assistance by adjusting SPR prices upward by $190 million.  By mid-morning, AMZN announced it had brought an automated warehouse in Houston, including a humanoid robot worker.  aimed at reducing labor costs, improving inventory accuracy, and increasing order-filling speed.  By early afternoon, members of a Swedish metal worker’s union called for strikes against TSLA in all (seven) of its service centers across that country.  (Around 90% of TSLA employees in Sweden are covered by a collective bargaining agreement.)  The strike was called over salary and pension concerns.  Elsewhere, BNS announced it will terminate 2,700 employees globally (3% of its workforce).  After the close, PCYG announced it would move its listing from NASDAQ to NYSE and chance to the ticker TRAK “around Nov. 2.”  Also after the close, the CEO of COST (Jelinek) announced he will step down in April 2024.  Shortly after this announcement, COST named the current Operations Chief as the new CEO when Jelinek retires.  At the same time, NFLX announced price increases and that the service had added 9 million new users globally.

In stock government, legal, and regulatory news, the SEC proposed a ban on volume-based transaction pricing.  The measure would target brokerages who are routing orders based on volume contracts with middlemen.  In the major anti-trust case now underway, GOOGL began presenting its defense Wednesday.  It called one of its own VPs to testify about the efforts the company has put into improving its (now terrible due to ad and pay-for-placement) search tool since 2004.  Later, Mexico announced that two Chinese TSLA suppliers will invest $1 billion in the Northern Mexican state where TSLA is building a new factory.  Between the two suppliers, Mexico is also expecting to create 14,000 jobs. After the close, F and the NHTSA announced the carmaker was recalling 35,000 2021-2022 Mustang Mach-E cars because main battery connectors may overheat resulting in a loss of control while the car is moving.  Also after the close, a US Appeals Court revived a shareholder case against META for violating user privacy and concealing the misuse of user data in 2017-2018.

After the close, COLB, FNB, LRCX, LVS, LBRT, NFLX, SAP, and ZION all reported beats on both the revenue and earnings lines.  Meanwhile, CCI and PPG both missed on revenue while beating on earnings.  On the other side, AA, DFS, and STLD all beat on revenue while missing on earnings.  Unfortunately, EFX, KMI, and TSLA missed on both the top and bottom lines.  It is worth noting that CCI raised its forward guidance while EFX and NFLX lowered guidance.

Overnight, Asian markets were nearly red across the board.  Only Taiwan (+0.07%) managed to hang onto green territory.  Meanwhile, Hong Kong (-2.46%), Japan (-1.91%), and South Korea (-1.90%) led the region sharply lower.  In Europe, we see a similar picture taking shape at midday.  Only Greece (+0.11%) is in the green as the CAC (-0.59%), DAX (-0.22%), and FTSE (-0.88%) lead the region lower in early afternoon trade.  In the US, as of 7:30 a.m., Futures are pointing toward a mixed open on either side of flat.  The DIA implies a -0.12% open, the SPY is implying a -0.14% open, and the QQQ implies a +0.04% open at this hour.  At the same time, 10-year bond yields are spiking again to 4.971% and Oil (WTI) is down more than one percent to $87.37 per barrel in early trading.

The major economic news scheduled for Thursday includes Weekly Initial Jobless Claims and Philly Fed Mfg. Index (both at 8:30 a.m.), Sept. Existing Home Sales (10 a.m.), and the Fed Balance Sheet (4:30 p.m.).  We also hear from Fed Chair Powell (noon), Bostic (4 p.m.), and member Harker 5:30 p.m.).  The major earnings reports scheduled for before the open ALK, AAL, T, BX, EWBC, FITB, FCX, GPC, KEY, MAN, MMC, NOK, PM, POOL, SNA, SNV, TSM, TFC, UNP, WSO, and WBS.  Then, after the close, CSX, ISRG, KNX, and WAL report. 

In economic news later this week, on Friday, there is no scheduled news.  However, again we hear from Fed member Harker (9 a.m.) and Mester (12:15 p.m.).

In terms of earnings reports later this week, on Friday, AXP, ALV, CMA, EEFT, HBAN, IPG, RF, and SLB report.

So far this morning, T, FITB, KEY, MAN, MMC, POOL, SNA, TSM, TCBI, TFC, WSO, and WBS all reported beats to both the revenue and earnings lines.  Meanwhile, AAL, GPC, and PM missed on revenue while beating on earnings.  On the other side, BKU beat on revenue while missing on earnings.  Unfortunately, ALK, BX, and NOK missed on both the top and bottom lines.  It is worth noting that ALK and MAN both lowered their forward guidance.

In US Congressional news, after a day of bullying tactics (including harassing and then trying to intimidate the wife of a GOP opponent) by right-wing media and Rep. Jordan supporters, Jordan failed in his second vote to be made Speaker of the House.  Jordan lost 3 GOP votes and gained 1 between the first and second votes.  Again, the House adjourned after the single vote when it was clear Jordan would not get the votes to win on Wednesday.  At this point, there is more movement toward expanding the powers of unelected Speaker Pro Tempore McHenry as a stop-gap.  However, there are also some more moderate Republicans who say they won’t support that measure unless it is Jordan himself putting the bill forward (they want their pound of flesh related to the way Scalise was torpedoed).  Finally, another group is now pushing for MI Rep. Bergman (Retired Marine General) to be voted in as Speaker.  Late Wednesday, Bergman made the announcement he would run for the GOP nomination, but would only take the job through the end of this Congress (January 2025).  Jordan announced he plans to stay in the race. For their part, most of the GOP side of the aisle is trying to blame all their problems on the Democrats for not magnanimously crossing the aisle to save McCarthy from MAGA and then not doing the same to elect Scalise as Speaker. Another round of voting is planned for Thursday, but the time was not scheduled.

In miscellaneous news, with the spike in Treasury yields, 30-year, fixed-rate, home loans (after 20% down) hit 8% this morning.  That’s the highest level since the year 2000.  Although there has not been enough time for the market to adjust, demand for loans is expected to plummet in response.  Elsewhere, after a call between President Biden, Sec. of State Blinken, and Egyptian President el-Sissi, the US and Egypt have agreed to open a humanitarian corridor into Gaza from the Egyptian side.  In other Gaza news, Battle Damage Assessment (BDA) tends to indicate that the hospital (parking lot) explosion on Tuesday was caused by a misfire of a Hamas missile.  (The area is burnt, indicating a lot of fuel burned off in/after the explosion.  Israeli air strikes would not contain a lot of fuel.  There was also only a small hole caused by kinetic energy from a falling missile, not a huge crater and collapsed building that would be caused by a bomb explosion.  These indicate it was likely a freshly fired missile from very nearby that malfunctioned and crashed/burned in the hospital parking lot.)

With that background, it looks like we gapped a bit lower in the premarket but since then the Bulls have rallied a bit, giving us white-bodied candles. However, the early session candles are small and indecisive (considerable wick). So, the market does not seem to have made up its mind yet. All three major index ETFs are back below their T-line (8ema). QQQ is also below its 50sma and while the DIA is just below its 200sma in the early session. Economic news today is not likely to rock the boat during premarket and Fed Chair Powell’s speech at noon will also likely cause volatility. Lastly, more drama/news out of Congress could have a say in markets. In terms of extension, none of the three major index ETFs are too far from their T-line (8ema). The T2122 indicator is now back down in the middle of oversold territory. So, we have some slack to the downside, but more slack to the upside if one of the two can gather momentum. Also, remember that the market can stay over-extended a lot longer than you can stay solvent being right too early.

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

🎯 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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