Stocks gapped higher Wednesday between 0.2% (DIA) and 0.95% (QQQ).  However, once again this was a bull trap.  After about 25 minutes of meandering higher from the open, the bears stepped in and took all 3 major indices on a slow, protracted selloff that lasted the rest of the day and closed on the lows.  This action gave us black-bodied candles with small upper wicks and no lower wick across all those indices.  It could be seen as the completion of the second half of the Bearish Doji Continuation which was started last Friday.

On the day, all 10 sectors were in the red with Basic Materials and Communications Services leading the way lower.  The SPY lost 0.79%, the DIA lost 0.75%, and QQQ lost 0.58% during the session.  The VXX fell another 1.23% to 19.24 and T2122 (4-week New High/Low Ratio) remains deeply oversold at 3.00.  10-year bond yields surged higher to 3.178% and Oil (WTI) fell more than 3% to $88.86/barrel.  All-in-all, it was a slow, methodical, bear day in the market.

In economic news, the Aug. ADP Nonfarm Payrolls added far fewer jobs than was expected or was added in July (+132k vs. +300k forecast and +268k in July).  This indicates a slowing economy.  However, the Aug. Chicago PMI came in slightly better than expected at 52.2 (versus 52.0 forecast and July’s 52.1 number).  Elsewhere, the EIA Weekly Crude Oil Inventories diverged from Tuesday night’s API number.  EIA showed a drawdown of 3.326 million barrels for the week, which was more than twice the expected drawdown (1.483 million barrels) and slightly worse than the prior week’s drawdown of 3.282 million barrels.

SNAP Case Study | Actual Trade

In stock news, after the close, BBBY confirmed what it had leaked.  The retail chain will close 150 stores, cut about 20% of its jobs (roughly 6,400), and change its merchandising strategy by cutting private label lines in favor of national third-party brands.  BBBY also confirmed that it has secured a $500 million loan (to get it through the holiday season) and it now forecasts a 26% drop in sales for Q2.  BBBY stock was down 21% on Wednesday.  Also, after the close, COST reported that its “Same Store Sales” grew 10.1% in July and 15.3% over the same period last year.  Elsewhere, Arm (owned by SFTBY) filed a lawsuit against QCOM.  At issue was that QCOM acquired Nuvia (a chip design firm) last year and neither company informed or gained consent from Arm as required by Arm’s license agreement. Finally, late last night, NVDA reported that the US government has ordered them to stop selling chips to Russia and China. The company had previously gotten export exemptions to continue selling to China, but now doubts that exemption will be extended again. NVDA said it expects to lose $400 million in sales this quarter due to the restriction.

In energy news, on Wednesday, US Gasoline futures fell back below the price they were at when Russia invaded Ukraine in February ($2.59/gallon).  Elsewhere, OPEC+ put out a statement Wednesday that failed to mention production cuts (as had been threatened by Saudi Arabia last week).  Instead, the release hyped up global demand for oil, which analysts read as meaning cuts were the last thing on the minds of OPEC+ members.  In related news, the White House said President Biden has informed Israel about the revival of the 2015 JCPOA nuclear deal with Iran.  (This deal reportedly will allow Iran to ship oil, significantly increasing global supplies.)  In addition, after the close, the White House announced the G7 will be discussing the Biden Administration’s proposal to put a price cap on Russian oil when the group meets Friday.

After the close GEF, PSTG, and VEEV all reported beats on both the revenue and earnings lines.  However, COO beat on revenue while missing on earnings.  FIVE missed on both the top and bottom lines.  GEF and PSTG raised their guidance while COO and FIVE lowered forward guidance.

So far this morning, CPB, SAIC, SIG, GMS, and WB have all reported beats on both the top and bottom lines.  Meanwhile, HRL beat on revenue while missing on earnings.  HRL also lowered its forward guidance.  On the other side, GCO missed on revenue while beating on earnings.  However, PDCO, CIEN, FLWS, and OLLI all reported misses on both lines.  FLWS and GCO also both lowered forward guidance.

Overnight, Asian markets leaned heavily to the downside.  South Korea (-2.28%), Australia (-2.02%), and Taiwan (-1.94%) led the region lower with only two smaller exchanges managing to stay on the green side of flat.  In Europe, stocks are red across the board at mid-day.  The FTSE (-1.38%), DAX (-1.40%), and CAC (-1.25%) are leading the region lower in early afternoon trade.  As of 7:30 am, US Futures are pointing toward a gap lower to start the day.  The DIA implies a -0.48% open, the SPY is implying a -0.50% open, and the QQQ implies a -0.68% open at this hour.  10-year bond yields are surging again, now at 3.20%, and Oil (WTI) is down another 2% to $87.81/barrel in early trading.

The major economic news events scheduled for Thursday include Weekly Initial Jobless Claims, Q2 Nonfarm Productivity, and Q2 Unit Labor Costs (all at 8:30 am), PMI Mfg. (9:45 am), and ISM Mfg. PMI (10 am).  There is also another Fed Speaker (Bostic at 3:30 pm).  The major earnings reports scheduled for the day include FLWS, CPB, CIEN, GCO, GMS, MOMO, HRL, HOV, OLLI, PDCO, SAIC, SIG, TTC, and WB before the open.  Then after the close, AVGO, JOAN, and LULU report.

In economic news later this week, on Friday we get Aug Avg. Hourly Earnings, Aug. Nonfarm Payrolls, Aug. Participation Rate, Aug. Unemployment Rate, July Factory Orders. In terms of earnings, there are no major reports scheduled for Friday.

September looks to be coming in like a bear as the bulls just have not been able to find their footing this week. We remain very extended to the downside at this point (both in terms of the T-line and T2122). However, the futures are not giving the bulls much hope, except that prices have recovered from the overnight lows. Be very careful of chasing any gaps or early moves. Remember that the last two days started with “gap traps” and we want to learn from those examples. The short-term trend remains strongly bearish, the mid-term bullish trend has been broken, and the long-term bearish trend is also broken. Volatility is a high probability and if nothing else we still need a pause to ease overextension. The bottom line is that we are in a downtrend, but the bears may have gotten ahead of themselves with support not far below.

Stick with your trading rules, trade with the trend, and take those profits when you have them. Demonstrate patience and wait for confirmation. Remember that trading is our job. So, do the work and follow the process. Don’t be stubborn. If you have a loss, just admit you were wrong, respect your stop, and take the loss before it grows. When price does move in your direction, always move your stops in your favor (remember the “Legend of the man in the green bathrobe“…it is NOT HOUSE MONEY, it’s all OUR MONEY!). Lastly, remember that you get rich slowly and steadily in Trading…not by striking it rich on one or two trades. So, give up that lottery ticket mentality.

See you in the trading room.

Ed

Swing Trade Ideas for your consideration and watchlist: No trade ideas today, Rick is on vacation visiting a gandbaby. 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.

Hit and Run Candlesticks / Road To Wealth Youtube videos

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.

Free YouTube Education  •  Subscription Plans • Private 2-Hour Coaching

DISCLAIMER: Investing / Trading involves significant financial risk and is not suitable for everyone. No communication from Hit and Run Candlesticks Inc, its affiliates or representatives is not financial or trading advice. All information provided by Hit and Run Candlesticks Inc, its affiliates and representatives are intended for educational purposes only. You are advised to test any new trading approach before implementing it.  Past performance does not guarantee future results.  Terms of Service