Wednesday saw divergence in the market again.  SPY gapped down 1.05%, QQQ gapped down 1.63%, and DIA gapped up 0.24%.  Those opens were an indication of the day ahead for all three major index ETFs.  DIA spent the day slowly and steadily rallying after the gap up.  Meanwhile, QQQ and SPY followed their gaps down with bearish follow-through.  However, all three did bob along their extremes the last couple hours (DIA along the highs and SPY/QQQ along the lows).  This action gave us a large body white candle with a small upper wick in the DIA, a gap-down black-bodied Inverted Hammer type candle that crossed below its T-line (8ema) in the SPY, and a very large gap-down, very-large, black-bodied candle that crossed far below its T-line in the QQQ.  (This was the QQQ’s worst day since 2022, hit by a double whammy of isolationist comments from Trump and a Bloomberg report that the Biden Administration may again tighten export restrictions on tech products being sold to China.)

On the day, six of the 10 sectors were in the red with Technology (-3.48%) way, way out front (by almost 2%) leading the market lower.  On the other side, the Consumer Defensive (+1.14%) sector held up better than the others.  At the same time, SPY fell 1.40%, DIA gained a 0.55%, and QQQ plummeted 2.94%.  VXX gained 3.27% to close at a still extremely low at 10.75.  T2122 fell again but remains in the top half of its overbought territory at 91.48.  On the bond front, 10-year bond yields dropped again to 4.157% and Oil (WTI) spiked 2.67% to close at $82.92 per barrel.  This happened on very heavy volume in QQQ, greater-than-average volume in DIA, and below-average volume in SPY.  So, again Wednesday we saw a divergent day.  DIA powered its way higher, meanwhile Trump’s comments helped crush the big tech stocks that tend to lead the SPY and QQQ.

The major economic news scheduled for Wednesday included June Building Permits, which were about as expected at 1.446 million (compared to a 1.400 million forecast and the May 1.399 million reading).  At the same time, the June Housing Starts were stronger than expected at 1.353 million (versus the 1.300 million forecast and the May 1.314 million reading).  Later, June Industrial Production (Month-on-Month) was down but higher than predicted at +0.6% (compared to a +0.3% forecast but lower than the May +0.9%). On an annual basis, June Industrial Production was up sharply at +1.58% versus May’s +0.34%.  Later, EIA Crude Oil Inventories showed a much larger drawdown than anticipated at -4.870 million barrels (compared to a forecasted -0.900 million barrels and the previous week’s -3.443 million barrels). 

In economic speak news, on Wednesday Fed Governor Waller indicated that a rate cut “is drawing closer.”  However, he also indicates that likely means September or later by saying, “I believe current data are consistent with achieving a ‘soft landing,’ and I will be looking for data over the next couple months to buttress this view.” Waller went on, “While I don’t believe we have reached our final destination, I do believe we are getting closer to the time when a cut in the policy rate is warranted.”  He continued, saying that under the most optimistic scenario, “I could envision a rate cut in the not-too-distant future.”

After the close, AA, OZK, CCI, DFS, EFX, STLD, and SNV all reported beats on both the revenue and earnings lines.  Meanwhile, KMI, LBRT, and UAL missed on revenue while beating on earnings.  On the other side, FNB and WTFC beat on the revenue line but missed on earnings.

In stock news, on Wednesday, Information (Technology trade publication) reported that both GOOGL and MSFT are offering Chinese companies access to NVDA’s high-end chips (illegal to export to China due to sanctions) via cloud services.  At the same time, LLY (-3.82%) and NVO (-03.87%) stocks fell after private Swiss competitor Roche announced positive Phase 1 study results of its oral GLP-1 drug.  Later, DFS said it will sell its student loan portfolio to CG and KKR for up to $10.8 billion.  (This is a premium over the $10.1 billion principal owed on the loans but far below expected total payback if the loans are repaid with interest.  Meanwhile, the Wall Street Journal reported that BYND has initiated debt restructuring discussions with bondholders due to declining liquidity that has resulted from revenue declines.  After the close, DRI announced it has struck a deal to acquire CHUY for $605 million ($37.50 per share).  (CHUY closed at $25.27 per share.)

In stock legal and governmental news, on Wednesday, COF announced it will commit $265 billion over 5 years to “lending, philanthropy and investment” (read 99.9% to lending operations and investment).  This was done in an attempt to gain approval of its acquisition of DFS and included a promise to maintain lending operations to low- and-moderate-income communities.  Later, the NHTSA announced BMWYY will recall 1,145 US vehicles over air bag concerns.  At the same time, EU antitrust regulators are soliciting rivals’ opinions on a deal between GOOGL and Korean-based Samsung on AI chatbots.  Later, the NTSB announce it has scheduled 20 hours of hearings related to the BA 737 MAX 9 in-flight door plug blowout on an ALK flight in January.  Hearings will take place August 6-7, with 10 hours each day.

Overnight, Asian markets were mixed but leaned slightly to the green on breadth but with the biggest movers still reeling from Trump’s comments.  Japan (-2.36%) and Tiawan (-1.56%) remain scared of being left to the wolf (China) by a transactional and isolationist MAGA administration.  Meanwhile, India (+0.76%) was by far the biggest gainer in the region.  In Europe, the bourses are mostly in the green with only three of 15 exchanges showing red at midday.  The CAC (+0.48%), DAX (+0.19%), and FTSE (+0.58%) lead the region higher in early afternoon trade.  In the US, as of 7:30 a.m., Futures are pointing toward a mixed start to the session.  The DIA implies a -0.16% open, the SPY is implying a +0.10% open, and the QQQ implies a +0.35% open at this hour.  At the same time, 10-Year bond yields are back up to 4.186% and Oil (WTI) is just on the red side of flat at $82.78 per barrel in early trading.

The major economic news scheduled for Thursday include Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, and Philly Fed Mfg. Index (all at 8:30 a.m.), June US Leading Economic Indicators Index (10 a.m.), and the Fed’s Balance Sheet (4:30 p.m.).  We also hear from Fed member Daly (6:05 p.m.) and Fed Governor Bowman (7:45 p.m.).  The major earnings reports before the open include ABT, ALK, BX, CTAS, CHI, DPZ, HXL, INFY, KEY, MTB, MAN, MMC, NOK, NVS, SNA, TSM, and TXT.  Then, after the close, AIR, ISRG, NFLX, PPG, and SCHL report.

In economic news later this week, on Friday, Fed members Williams and Bostic speak.

In terms of earnings reports later this week, Friday, AXP, ALV, CMA, EEFT, FITB, HAL, HBAN, RF, SDVKY, SLB, TRV, and WIT report.

So far this morning, ABT, BKU, CBSH, CHI, HXL, INFY, KEY, MTB, MAN, NVS, TSM, TELNY, TLSNY, and VIRT all reported beats on both the revenue and earnings lines.  Meanwhile, DPZ, MMC, NOK, and TXT missed on revenue while beating on earnings.  On the other side, BX and TCBI beat on revenue while missing on earnings.  However, SNA missed on both the top and bottom line.

In miscellaneous news, Bloomberg reported Wednesday that US is suffering from a massive natural gas glut.  Projections now expect that by October, inventories are expected to reach the highest level since at least 2016.  This is the reason cited for the collapse of the October-January Futures spread.  Elsewhere, President Biden was diagnosed with COVID-19.  Later, the US Dept. of Education announced adjustments to a prior plan which will forgive another $1.2 billion in student debt (covering 35k public service workers).  Finally, at the RNC Convention, the newly appointed VP candidate Vance blamed US wage losses on China.  Felon Navarro also went directly from prison to the stage.  Rather than his previous anti-China talking points, this time (probably understandably) he continued his GOP victimhood agenda, lying about the 2020 election, his plan to steal it, the January 6 attack on the capital, and his conviction for defying a Congressional subpoena.

With that background, it looks as if the markets are indecisive this morning with none of the three major index ETFs showing a premarket candles that is more body than wick. Overall, the short-term trend is mixed (QQQ and SPY down while DIA is up). We are seeing continued rotation out of tech and into small-caps and the traditional mega-cap names. However, for the mid-term and longer-term, there is no way to look at markets except to say they are extremely bullish. In terms of extension, only DIA is stretched (to the upside). Meanwhile, the T2122 indicator remains well overbought. Therefore, the market may still be in need of more rest or a pullback. (Just remember, the market can stay over-extended longer than we can stay solvent predicting a turn too early.) With regard to those 10 big dog tickers, all 10 are in the green this morning. NVDA (+2.17%) and AMD (+1.88%) trying to mount a comeback by the AI chip leaders.

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 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 gains are 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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