US markets gapped down two-thirds to three-fourths of a percent at the open Tuesday and then ground sideways until late morning. The bears took us a leg further down into the speech of Fed Chair Powell, but then the bulls stepped in and gave us a slow rally back up into the close. This left us will indecisive Doji-type candles in all 3 major indices, none of which fell outside the recent trading range.  So, we have an indecisive pullback on greater than average volume.  The VXX rose 3% to 27.20 and T2122 dropped down just outside the oversold territory at 21.86.  10-year bond yields held steady at 1.263% and Oil (WTI) fell three-quarters of a percent to $66.78/barrel.

In economic news, July Retail Sales came in far below expectations before the open yesterday.  This was the proximate cause for the gap down open.  That said, WMT and HD beat on revenue Tuesday while TGT and LOW both beat on revenue already today. So, the slowdown appears to be happening at “Mom and Pop stores” rather than at the big-box chains. Beyond Retail, July Industrial Production almost doubled forecasts, and June Business Inventories came in just as expected.

As mentioned, markets were relieved when Fed Chair Powell spoke Tuesday.  In his speech, he did not touch on either the economy or Fed monetary policy.  Instead, he focused on Covid-19 and its impact on US students, saying the challenges will mold them into an “extraordinary generation.”  During the Q-A portion of the event, he did decry the impact of Covid on economic activity and the pace of vaccinations slowing, as well as talking about how digital currencies are interesting and becoming a more important question that the Fed is considering.

Following up on the Retail theme from yesterday, it appears that big beats on both lines by TGT and LOW are resulting in both premarket volatility and punishment.  TGT in particular reported blow-out numbers but was down well over 5% in premarket trading.  (The cause of this divergence is reportedly fear of slowing sales growth and Covid resurgence hurting next quarter’s numbers.)  Meanwhile, after HD’s post-beat smackdown (losing over 4% yesterday), this morning GS has raised their target for the company above the rest of the analysts covering the name.

Overnight, Asian markets were mostly green as the region rebounded a bit from the Tuesday news of Chinese Internet Antitrust regulations.  Shanghai (+1.11), Taiwan (+0.99%), and Shenzhen (+0.72%) led the gainers, with typical gains more like half of a percent.  In Europe, markets are mixed on modest trading.  The “Big 3” exchanges are all modestly red, but the bulk of the rest of the region are in the green.  The FTSE is down 0.29%, DAX down 0.11%, and CAC down 0.34% at mid-day.  As of 7:30 am, US Futures are mixed and flat.  The DIA is implying a -0.20% open, the SPY implying a -0.08% open, and the QQQ implying a +0.10% open.  10-year bond yields are up slightly to 1.275% and Oil is up almost a percent to $67.23/barrel in early trading on a flat US dollar.

The major economic news scheduled for release on Wednesday includes July Building Permits and July Housing Starts (both at 8:30 am), Crude Oil Inventories (10:30 am), and FOMC Minutes (2 pm).  The major earnings reports scheduled for the day include ADI, EAT, LOW, TGT, TJX, VIPS, WB, and ZIM before the open.  Then after the close, BBWI, CSCO, YY, KEYS, NVDA, SPTN, and SNPS report.

Covid continues to make news as GS reinstituted mask mandates in the office, FB pushed out their return to the office date again, and the TSA extended travel mask mandates through mid-January. This is adding to market fears at the highs. However, we are not yet seeing any panic as we did in March 2020. Earnings continue to be stellar, but mortgage rates hit their highest level in a month (3.06% for a 30-year fixed) as both refinance and new mortgage demand dropped this week. All that said, despite the fear, yesterday’s candles in the major indices show that the bulls are simply not ready to roll over. All 3 major indices closed in the top third of their range, having driven price up off the lows following the gap-down. So, don’t mistake volatility for a changed trend just yet.

Trading rules and discipline are what separates long-term success and failure in trading. Focus on the process and on managing what you can control. Always manage your existing trades before chasing new ones. Trade with the trend until the trend is broken. If you miss a move, just admit it and move on to the next trade. Never chase price on an entry and remember to keep your losses small by managing stops. And always consistently take profits when you have them.

Ed

Swing Trade Ideas for your consideration and watchlist: ALKS, LSI, FOLD, FAS, WBA, NAVI, NVAX, AMRN. 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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