Markets gapped higher Thursday on better-than-expected CPI data.  The SPY gapped up 0.54%, DIA gapped up 0.56%, and QQQ gapped up 0.80%.  From there, all three major index ETFs followed through with a rally to the highs of the day at 10 am.  At that point, the Bears took over and led a slow, protracted selloff that saw the SPY, DIA, and QQQ all recross their opening gap.  This led to a 90-minute bounce and a selloff in the last 30 minutes of the day.  This action gave us indecisive, black-bodied, Spinning Top candles (with large upper wicks) in all three major index ETFs.  All three also retested and failed their T-line (8ema) with the QQQ remaining right at its 50sma (testing), while the SPY and DIA are not far above their 50sma and look headed that way.

On the day, six of the 10 sectors were in the red again but not nearly as strongly) with Basic Materials (-0.35%) and Utilities (-0.30%) leading the losses while Communication Services (+0.55%) held up much better than the other sectors.  At the same time, the SPY gained 0.04%, DIA gained 0.17%, and QQQ gained 0.18%.  VXX gained 0.45% to close at 24.80 and T2122 fell a bit but remains in the mid-range at 31.25.  10-year bond yields spiked again to 4.109% while Oil (WTI) lost 1.80% to close at $82.89 per barrel.  This all took place on average volume across all three major index ETFs.  So, it was a whipsaw day with a gap and a little follow-through to the upside, met with a long steady selloff and then a smaller trip up and down.  In the end, after a lot of travel, the SPY, DIA, and QQQ all ended up just above where they started.    

The major economic news reported Thursday included July Year-on-Year CPI, which came in a touch better than expected at +3.2% (compared to a forecast of +3.3% but still worse than the June value of +3.0%).  However, the July Month-on-Month CPI came in exactly as predicted at +0.2% (versus the +0.2% forecast and the +0.2% June reading).  At the same time, Weekly Initial Jobless Claims were higher than forecasted at 248k (compared to a 230k prediction and well above the prior week’s 227k).  Later in the day, the July Federal Budget Balance came in far worse than expected at -$221.0 billion (versus a suspect forecast of -$109.3 billion but slightly better than the June value of -$228.0 billion).  So, markets latched on to the annual CPI number and said it was a beat, gapping higher. However, if you have a more bearish outlook, you saw that it also ticked up versus the June number (and you note July Core Year-on-Year CPI is still +4.7%) and think the Fed still has rate hiking left to do.

In Fed-speak news, San Francisco Fed President Daly told a Yahoo Finance interview (a couple of hours after the CPI release) that it was too early to say whether the Fed has done enough fighting inflation. However, she did seem to hint that there is only one more hike at most in the cards (as other Fed members have implied or said). She said, “Whether we raise another time, or hold rates steady for a longer period — those things are yet to be determined,” Daly went on to say “It would be premature to project what I think would happen because there’s a lot of information coming in between now and our next meeting.”

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In stock news, Reuters reports that INTM is exploring options and in talks to potentially sell the business to buyout firm Madison Dearborn Partners for more than $1 billion.  Elsewhere, SPCE again completed a tourist trip to the edge of space, carrying three customers and a company instructor to 55 miles altitude before returning to its New Mexico base.  (This is the second such commercial trip, with the first taking place at the end of June.)   Later, MULN announced it was doing a reverse 1 for 9 stock split overnight.  (This move is part of the company’s effort to remain listed on the Nasdaq exchange.)  At the same time, an F exec told analysts they expect better software added to the company’s highly-profitable commercial truck/van line will boost revenue by $4,000-$5,000 per unit.  (There was no detail on what this new software would do for truck buyers, but it was said to be related to fleet safety, security, insurance, and partial vehicle autonomy.)  Late in the day, UAL canceled some flights into HI and ALK flagged some HI flights for major delays both citing the wildfires on the Maui island.  After the close, ACHR announced it has completed a $215 million equity offering that included STLA, BA, UAL, and ARKK as investors.

In stock legal and regulatory news, Reuters reported that the FTC investigators looking into the KR $24.6 billion acquisition of ACI are focused on how the deal would squeeze small suppliers and small grocery competitors.  Reuters said the FTC is still undecided on whether or not to oppose the deal.  Later, the US 2^nd Circuit Court of Appeals ruled that a shareholder class action suit against GS cannot go forward.  (The suit alleged GS had misled investors about business practices and conflicts of interest prior to the subprime mortgage crisis.)  Elsewhere, penny stock biotech firm AMRS has filed for bankruptcy.  At the same time, the FDA approved a JNJ antibody-based therapy for hard-to-treat blood cancers.  (JNJ is expecting a $300k price for a typical six-month treatment and says around 36,000 people are expected to be diagnosed with the disease this treat during 2023.)  Meanwhile, another politically conservative group is attacking a corporation.  This time K was targeted in a public letter sent to the EEOC, urging the agency to take action against the cereal maker, alleging a workplace diversity program is illegal.  The letter also claimed K cereal packaging during “Pride Month” sexualized its products (although it is unclear why the EEOC would care about that allegation).  At the same time, the Wall Street Journal reported that AMZN will be “shelving” several of its private-label clothing brands as a way to cut expenses while also appeasing FTC antitrust concerns.  The move will impact 27 of AMZN’s 30 in-house clothing divisions.  Later, the 11th Circuit Court of Appeals ruled 3-0 in favor of HOOD and threw out a proposed class-action lawsuit by meme stock investors who said the broker’s halting of trading meme stocks caused them to lose money.  Late in the day, the NTHSA cited a UAL flight crew for failures that caused a flight to sharply lose altitude shortly after takeoff in December before recovering in HI.  After the close, it was announced that BA and ACHR had settled their mutual lawsuits for undisclosed terms.

After the close, DTEGY, FLO, and PAM reported beats on both revenue and earnings.  Meanwhile, NWS and NWSA missed on revenue while beating on earnings.  However, ASTL and CANO missed on both the top and bottom lines. It’s worth noting that CANO lowered its forward guidance.

Overnight, Asian stocks leaned heavily to the red side.  Japan (+0.84%) was by far the largest gainer of the three green exchanges.  Meanwhile, Shenzhen (-2.18%), Shanghai (-2.01%), and Hong Kong (-0.90%) led the region lower.  In Europe, we see the same picture taking shape with only two smaller bourses hanging onto green at midday.  The CAC (-0.79%), DAX (-0.48%), and FTSE (-1.12%) are typical and lead the way lower in early afternoon trade.  In the US, as of 7:30 am, Futures are pointing toward an open just on the red side of flat.  The DIA implies a -0.01% open, the SPY is implying a -0.11% open, and the QQQ implies a -0.21% open at this hour.  At the same time, 10-year bond yields have backed down very slightly to 4.096% and Oil (WTI) is up another 0.40% to $83.16 per barrel in early trading.

The major economics news scheduled for Friday includes July PPI month-on-month (8:30 am), Preliminary Michigan Consumer Sentiment, Preliminary Michigan Consumer Expectations, and Preliminary Michigan 5-year Inflation Expectations (all three at 10 am), and the WASDE Ag report (noon).  The major earnings reports scheduled for before the opening bell are limited to ACDVF and SPB.  Then, after the close, there are no earnings reports scheduled.

So far this morning, ACDVF beat on both the revenue and earnings lines. Meanwhile, SPB missed on revenue while beating on earnings.

In consumer debt news, the Mortgage Bankers Assn. reported its quarterly survey results.  The survey found that US mortgage delinquency rates reached an all-time low in Q2 at 3.37%.  (Of those, 1.61%, unadjusted, fell into the “seriously delinquent” category which was itself a 23-year low.) This (3.37%) was the lowest rate of mortgage loan delinquencies since the group started the survey in 1979.  It was also down 3.64% year-on-year.  The MBA survey cited a strong job market and low-interest rates as the main cause of the low delinquency rate.  However, Moody’s reported that credit card delinquencies hit 7.2% in Q2 (up from 6.5% in Q1).  At the same time, they say auto loan delinquencies hit 7.3% in Q2 versus 6.9% in Q1. So, apparently, not all debt is of the same priority, or perhaps not all studies are equally valid.

In late-breaking news, CNBC reported this morning that OXY (and two start-ups, one of which is backed by MSFT) are set to gain $1.2 billion as part of the Dept. of Energy plan to create giant vacuums to capture and then wells to sequester carbon from the atmosphere.  So far, the underlying “Direct Air Capture” technology has not scaled up enough to make much difference in fighting climate change.  However, the two projects this money will fund are expected to capture more carbon than all 18 projects of the same type that exist now globally…combined.  The project will remove 2 million metric tons of carbon per year, which is the equivalent of the emissions from 500,000 gasoline cars.  These projects will also create 5,000 jobs in TX and LA.  ($3.5 billion in funding for two additional hub projects is expected to be approved next year.)

With that background, it looks like markets are still undecided this morning, perhaps waiting on the PPI number. If you’re a Bull, the good news is that the major US indices are not following the rest of the world lower, at least yet. However, there is no strength being shown in the premarket as all three major index ETFs are giving us small, black-bodied candles with lower wicks. So, we are up off the early session lows but still below the premarket open. DIA remains right at its T-line (8ema), retesting from below again and QQQ is doing the same thing with its 50sma. The difference is that the DIA T-line is falling while the QQQ 50sma is rising. So, the short-term trend remains bearish and the long-term trend remains bullish, although it is starting to be pushed. 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 PPI print may cause some premarket volatility and impact the open. However, it should not be as bad as with the CPI. Finally, it is Friday, Payday. So, take some profits to pay yourself and prepare for the weekend news cycle.

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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