Stocks gapped down between three-quarters and a full percent on Monday in what the bears hoped was the start of follow-through on Friday’s big move down. However, after some early volatility, the bulls stepped in to fill the gap in a protracted rally from 11 am to 2 pm.  Then prices remained near those highs for the next 1.5 hours.  However, late in the day, the bulls took their profits, and all 3 major indices sold off hard in the last 15 minutes. This action is giving us indecisive, Spinning Top type candles (long wicks on both ends of the candle) that are resulting in modest bearish moves overall.  This sets up either a Bearish Doji Continuation (Sandwich) or a Bullish Morning Star Signal in all 3 indices.

Seven of the 10 sectors were red, with Energy being far-and-away the biggest gainer and Technology being far-and-away the biggest losing sector.  On the day, SPY lost 0.67%, DIA lost 0.57%, and QQQ lost 0.99%.  The VXX fell more than 2% to 19.71 and T2122 remains deep in the oversold territory at 10.25.  10-year bond yields are up significantly to 3.11% and Oil (WTI) has surged more than 4% to $96.96/barrel. 

There was no major economic news on Monday.  However, there was a LendingClub survey reported by CNBC that claimed there was a slight decline in the percentage of Americans who are living paycheck to paycheck.  The study found that 59% of Americans fall into that category, down from 61% in June, but also above the 54% number from June.  In somewhat related news, in the face of nine weeks of declining gasoline prices, US oil refiners have recently been really pushing exports of refined products in order to limit domestic supply and increase their recently-record profits.  It has gotten to the point where on Monday Energy Sec. Granholm was basically begging oil refiners to stop increasing those recent record-level distillate and fuel exports.

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In stock and miscellaneous news, MSFT announced it will amend cloud licensing deals as of Oct. 1 in order to stave off round another EU antitrust penalties. The changes will make it easier for rivals (GOOGL, AMZN, and BABA) to compete with MSFT in Europe.  Elsewhere, TSLA was hit with a class action lawsuit over sudden “phantom braking” by the company’s Model 3 when using the “Driver Assist” (Autopilot) mode.  Related to inflation, we’ve received some news lately tending to indicate that inflation has already peaked (especially gas prices). However, the Zumper National Rent Index came out yesterday afternoon and shows that landlords don’t buy that story. The national average rent for a 1-bedroom apartment rose to a record $1,500 in July, up 2% from June and more than 12% from one year ago.

In Russian invasion news, on the ground, Ukraine launched its long-awaited counter-offensive in the Southern Kherson region.  More than six months into the war, Monday, Ukraine recaptured 4 villages in that region and breached the first of 3 Russian defense lines.  Ukraine also initiated a much smaller offensive in the Eastern Izium region.  Elsewhere, Monday evening, EU Commissioner von Der Leyen announced that the EU is planning an “emergency intervention” in the region’s power market.  This plan clearly breaks with the EU’s prior “let the market handle the situation” stance.  Details are lacking, but EU countries have already been granted permission to cap natural gas prices and many are now calling for the same power on electricity prices.  (EU wholesale electricity prices are more than 800% higher than one year ago.)  Finally, a team of UN inspectors has left to visit the Russian-occupied Zaporizhzhia nuclear power plant (the largest in Europe) amidst fear over Russian shelling near the plant and Russia’s cutting the plant off from the electric grid.  (The plant produces more than 20% of all electricity generated in Ukraine.)

After the close HEI reported a beat on revenue, but missed on earnings.  So far this morning, AMWD, BMO, and BBY all reported beats on both the top and bottom lines.  Meanwhile, BIDU, BIG, and FUTU missed on revenue while also beating on earnings.  However, IQ beat on revenue and came in in line with earnings (a loss of $0.04/share).

Overnight, Asian markets were mixed but leaned to the upside.  India (+2.58%), New Zealand (+1.23%), and Japan (+1.14%) led the gains while mainland China showed the only red in the region.  In Europe, we see mostly green at midday.  The FTSE (+0.12%), DAX (+1.84%), and CAC (+1.11%) are leading the region higher in early afternoon trade.  However, Norway (-1.03%) is showing the only appreciable red in the region.  In the US, as of 7:30 am, US Futures are pointing toward a green start to the day.  The DIA implies a +0.69% open, the SPY is implying a +0.83% open, and the QQQ implies a +1.12% open at this hour.  10-year bond yields are back down to 3.058% and Oil (WTI) is starting the day down more than 2.77% to $94.32/barrel.

The major economic news events scheduled for Tuesday include Conf. Board Consumer Confidence and July JOLTs (both at 10 am), API Weekly Crude Oil Stocks (4:30 pm), and a Fed speaker (Williams at 11 am).  The major earnings reports scheduled for the day include AMWD, BIDU, BMO, BBY, BIG, FUTU, and IQ before the open.  Then after the close, AMRK, CHWY, CRWD, HPE, HPQ, and PVH report. 

In economic news later this week, on Wednesday we see ADP Nonfarm Payrolls, Chicago PMI, EIA Crude Oil Inventories, and another Fed speaker (Mester).  On Thursday Weekly Initial Jobless Claims, Q2 Nonfarm Productivity, Q2 Unit Labor Costs, PMI Mfg., and ISM Mfg. PMI are reported.  Finally, on Friday we get Aug Avg. Hourly Earnings, Aug. Nonfarm Payrolls, Aug. Participation Rate, Aug. Unemployment Rate, July Factory Orders.

In earnings later this week, Wednesday we get reports from BF.A/B, CHS, DBI, DCI, and EXPR.  On Thursday, FLWS, CPB, CIEN, GCO, GMS, MOMO, HRL, OLLI, PDCO, SAIC, SIG, TTC, WB, AVGO, JOAN, and LULU report. Finally, Friday there are no major reports.

Coming off a second straight day of losses, futures seem to indicate the bulls are ready to make a stand. The question is whether this is a true reversal, just an over-extension bounce, or even a bull trap. BAC warned this morning that the flow of funds from its account holders has gotten decidedly defensive since Friday. So, given the strength of the selloff the last 15 minutes Monday, we should be very cautious about chasing any gaps or rallies. We were very extended and at this point, the futures move does not look like a major reversal of market sentiment to me. The short-term trend is bearish, the mid-term bullish trend is broken, and the long-term bearish trend is also broken. The bottom line is that we are in a volatile, undecided market.

Demonstrate patience and wait for confirmation. Remember that trading is our job. So, do the work and follow the process. Stick with your trading rules, trade with the trend, and take those profits when you have them. 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: CGC, MCK, META, UEC, KSS, ADM, CAH, X, DBC, WEAT, Z, SPXU, QID, UVXY. 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.

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🎯 Dick Carp: the scanner paid for the year with HES-thank you

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🎯 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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