Wednesday started out flat (up 0.06% in the SPY, down 0.03% in the DIA, and up 0.07% in the QQQ).  At that point, the QQQ sold off hard until 11:30 am while the SPY and DIA just ground sideways until 10:45 am before following the QQQ by selling off hard until noon.  From there all three major index ETFs rallied until 2:40 pm and then all three sold off into the close.  This action gave us black-bodied candles in all three with the SPY printing a Bearish Engulfing candle and the DIA printing a black-bodied Spinning Top candle.  The DIA also retested and failed its T-line (8ema) as the QQQ retested its 50sma and closed just on the bottom side of that potential support level.

On the day, six of the 10 sectors were in the red again with Technology (-1.43%) by far the biggest loser while Energy (+1.12%) held up much better than the other sectors.  At the same time, the SPY lost 0.67%, DIA lost 0.48%, and QQQ lost 1.10%.  The VXX lost 0.88% to close at 24.69 and T2122 rose a bit and remains in the mid-range at 42.35.  10-year bond yields dropped again but remain above 4% at 4.01% while Oil (WTI) gained 1.56% to close at $84.21 per barrel.  This all took place on a bit below-average volume again in all three major index ETFs. So, markets opened just on either side of flat.  However, the tech-heavy QQQ (led by chip names VNDA, AVGO, and MRVL) led the markets lower before the Bulls staged a modest bounce back only to run out of steam.  Again, this felt like a lackluster day of drift, perhaps waiting on the CPI number Thursday. 

The major economic news reported Wednesday was limited to the EIA Weekly Crude Oil Inventories which followed the API data from Tuesday night.  EIA showed an unexpected crude inventory build of 5.851 million barrels (compared to a forecasted build of 0.567 million barrels and dramatically higher than the previous week’s drawdown of 17.049 million barrels). 

After the close, APP, CENX, CPA, FLNC, ILMN, JAZZ, LGFA, LGFB, MATV, MFC, NASB, TTD, TTEK, DIS, and WYNN all reported beats on both the revenue and earnings lines. Meanwhile, CACI, CRGY, ENS, and G missed on revenue while beating on earnings.  On the other side, VSAT and PAAS beat on revenue while missing on earnings.  Unfortunately, CDE, NGL, and UHAL missed on both the top and bottom lines.  It is worth noting that TTD, APP, and JAZZ raised their forward guidance.  However, ILMN lowered its forward guidance. 

SNAP Case Study | Actual Trade

In stock news, Reuters reported Wednesday that strong international travel was helping some, but hurting domestic travel companies.  The Air Transport trade group said international travel had reached 90% of the pre-pandemic peak and cruise operators are seeing record demand.  However, a good portion of this foreign travel has come at the expense of domestic travel.  As a result, the average domestic flight ticket is down 8% from the same time in 2022 as airlines compete for passengers.   Elsewhere, the CFO of GM told an investor conference that the company is struggling to produce electric vehicles.  GM had targeted 25,000 of just the Cadillac Lyriq electric SUV this year but had only produced fewer than 2,400 in the first half.  Later, VZ said they will be raising prices again on at least some of its wireless plans.  This follows rival T raising prices in July.  After the close, DIS also announced it will increase the price of its Disney+ service for the second time in less than a year.  This increase will be a whopping 27% (from $10.99 to $13.99).  Finally, in last-minute news, TPR announced it will acquire CPRI for $8.5 billion ($57/share). CPRI shares are soaring in the premarket on the news.

In stock legal and regulatory news, a politically conservative legal group sued TGT (in Florida naturally), alleging that the retailer had misrepresented its risk management system in the wake of conservative cancel culture attacks on LGBTQ merchandise. The suit seeks unspecified damages for the decline in share price which the plaintiff alleges are wholly attributable to the LGBTQ merchandise backlash from conservatives.  Elsewhere, a US federal judge allowed a class action lawsuit against NIO to proceed.  The suit alleges the automaker lied in 2018 about building its own factory in China, which led to a decline in share prices.  Meanwhile, US railroad regulators gave a mixed review of the NSC safety culture following the February derailment (of a train carrying dangerous chemicals) in East Palestine OH.  The review praised NSC for changes made since that derailment but also disclosed it was considering several enforcement actions against the company (which had been focused for years on just meeting the minimum legal safety standards per the report).  The potential actions would be focused on track maintenance, safety inspections, repair practices, and hours of service (employee overwork beyond safe limits).  Late in the day, the FAA announced it has agreed to an industry group request and will extend the deadline until Oct. 28 for meeting the minimum number of flights required at New York City airports (to avoid losing gates and landing slots).  DAL is the primary major airline beneficiary of the change.

In government news, PIED is facing anger and skepticism from NC state officials in relation to its plans to expand lithium mining in order to supply TSLA.  The state is now concerned that the existing mine is already impacting water levels (causing some wells to run dry) in the area as lithium mining is very water-intensive.  At the same time, officials expressed concern over runoff from an expansion.  PIED announced they would be open to adding a new containment pond but did not address water usage.  In the UK, parliament opened an investigation into the country’s approach to migrating from fossil fuel toward electric vehicles.  The study is aimed to identify things the UK government can do to accelerate and support the transition ahead of the already set 2030 and 2035 deadlines.  The report is to be submitted in September.  At midday, Reuters reported that Amtrak and Texas Central Partners are exploring high-speed rail service between Dallas and Houston, seeking government grants to underwrite the project. Elsewhere, President Biden signed an executive order prohibiting US investments inside China covering three sectors.  Those sectors are semiconductors and microelectronics, quantum information technologies, and artificial intelligence technologies.  (Democrats largely praised the order.  However, the Republican response was mixed with House Foreign Affairs Committee Chair McCaul praising the move even as others including Senator Rubio called the narrowly-tailored ban “almost laughable.”)  The bans are expected to take effect next year after multiple rounds of public comment. 

Overnight, Asian stocks were mixed.  Taiwan (-1.40%) was by far the biggest mover and followed by India (-0.46%) paced the losers.  Meanwhile, Japan (+0.84%), Thailand (+0.33%), and Shanghai (+0.31%) led the gainers.  In Europe, the bourses are leaning to the green side again at midday.  The CAC (+0.94%), DAX (+0.59%), and FTSE (+0.06%) are typical of the spread but four smaller exchanges in the red in early afternoon trade.  In the US, as of 7:30 am, Futures are pointing toward a green start to the day.  The DIA implies a +0.49% open, the SPY is implying a +0.52% open, and the QQQ implies a +0.62% open at this hour.  At the same time, 10-year bond yields remain flat at 4.003% and Oil (WTI) is off a half of a percent to $84.00 per barrel in early trading.

The major economics news scheduled for Thursday includes July CPI year-on-year, July CPI month-on-month, and Weekly Initial Jobless Claims (all at 8:30 am), July Federal Budget Balance (2 pm), and the Fed Balance Sheet (4:30 pm).  Philly Fed President Harker also speaks again at 4:15 pm.  The major earnings reports scheduled for before the opening bell AQN, BABA, AIT, AZUL, TAST, HBI, KELYA, EYE, NVO, ACDC, RL, USFD, and WWW.  Then, after the close, ASTL, BAP, and NWSA report..

In economic news later this week, on Friday, July PPI month-on-month, Preliminary Michigan Consumer Sentiment, Preliminary Michigan Consumer Expectations, Preliminary Michigan 5-year Inflation Expectations, and the WASDE Ag report are delivered.

In terms of earnings reports, on Friday, ACDVF reports.

In US energy news, US oil production is now projected to reach an average of 12.9 million barrels per day later this year according to the EIA data released Wednesday.  (That is a 16% increase in the last two and a half years and an all-time record output.) This 12.9mbpd value represents a 200k barrel per day increase over the last EIA forecast.  US Oil output is also expected to reach 13.1 million barrels per day in 2024, which will be far in excess of the US record and the world’s second-largest oil producer (Saudi Arabia), which now produces less than 10 million barrels per day according to OPEC (after recent self-imposed 1 million bpd reductions).  The downside (for US gas prices at least) is that domestic oil producers are shipping more oil abroad to take advantage of the higher prices in Europe and Asia.  In addition, US domestic oil usage is also near all-time highs at 20.6 million barrels per day (20.8 million barrels per day is the record, set in 2005). 

So far this morning, BABA, AIT, TAST, DDS, EYE, NVZMY, and RWEOY all reported beats on both the revenue and earnings lines.  Meanwhile, HBI, USFD, and YETI missed on revenue while beating on earnings.  On the other side, AQN and WWW beat on the revenue line while missing on earnings.  Unfortunately, NVO and SIX missed on both the top and bottom lines. It is worth noting that HBI and WWW lowered forward guidance while YETI raised guidance.

With that background, it looks like the Bulls are again looking to gap us higher, but are still giving us inside day-type candles in the premarket (at least ahead of CPI data). DIA is retesting its T-line (8ema) from below this morning in the premarket this morning. However, we should also note that all three major index ETFs are giving us small, black-bodied candles in the early session. (Meaning they are off the highs.) So, there is not a lot of conviction. The short-term trend is bearish and the longer-term trend remains Bullish. However, the DIA is testing its 50sma while the SPY and QQQ are not far above their own. So, even longer-term Bulls have to be nervous. As far as extension goes, all of them are close to the T-line and the T2122 indicator remains in its mid-range. So, once again both sides of the market have plenty of room to run…if they can find momentum. That CPI print should cause some premarket volatility and will impact the open. Just be aware.

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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