Markets started Monday in a flat manner.  SPY opened +0.08%, DIA opened up 0.13%, and QQQ opened just 0.01% higher.  From there, all three major index ETFs ground sideways for the better part of an hour.  At that point, all three saw a major volatility event with a 5-minute crash down followed immediately by a 5-minute spike right back up.  Then the Bulls took over, leading a steady rally for the rest of the day with a bullish spike the last 10 minutes in SPY and QQQ.  For its part, DIA’s rally died out at 1 p.m., after which it ground sideways with a modestly bearish trend the rest of the day until it too had a Bull spike the last 10 minutes. This action gave us large white-bodied candles in all three major index ETFs.  SPY and QQQ ended the day on the highs while DIA had a small upper wick.  This happened on well-below average volume in all three major index ETFs.

On the day, all 10 sectors were in the green with Healthcare (+1.98%) well out in front followed by Technology (+1.37%) leading the way higher. On the other side, Consumer Defensive (+0.43%) being the lagging sector.  Meanwhile, SPY gained 0.96%, DIA was up 0.58%, and QQQ gained 1.31%.  VXX fell another 1.44% to close at 44.43 and T2122 jumped back up into the top end of its overbought territory at 96.23.  On the bond front, 10-year bond yields fell to 3.875% and Oil (WTI) dropped 2.86% to close at $74.46 per barrel.  So, Monday was a less volatile but also quite bullish day as traders could not justify bearish trades, but were also afraid to pile in (with heavy volume) on the long side either.  It is worth noting that SPY and DIA closed less than one percent below their all-time high closes.  However, QQQ closed still 4.5% below its all-time high close.  Interestingly, an equal-weighted version of the SPY (where all stocks have the same weight as AAPL) hit a new all-time high Monday.

The major economic news scheduled for Monday was limited to the July US Leading Economic indicators Index, which came in below expectations at -0.6% (compared to a forecast of -0.4% and a June reading of -0.2%).  

In Fed news, on Monday, the Wall Street Journal reported Minneapolis Fed President Kashkari said it was appropriate to discuss potentially cutting interest rates at the FOMC meeting in September.  The article quoted Kashkari as saying, “The balance of risks has shifted, so the debate about potentially cutting rates in September is an appropriate one to have.”  The WSJ went on to say that Kashkari indicated progress has been made on inflation but the labor market has shown some “concerning signs.”  The article quoted him as saying, “I’m still unclear how tight policy is, but the balance of risks in my view have shifted more towards the labor market and away from the inflation side of our dual mandate.”   Elsewhere, Fed Governor Waller did not comment on the economy or monetary policy.  However, he did address say the Fed is looking into the financial stability risks related to stablecoins and non-bank holders.

After the close, FN and PANW reported beats on both the revenue and earnings lines.  It is worth noting that FN raised forward guidance while PANW lowered its guidance.

In stock news, on Monday, Reuters reported that LUV has started a campaign to fight off Elliott Investment Management’s attempt to replace two-thirds of its board members as a prelude to ousting the CEO and the LUV board Chairman.  (Elliott did the same thing at SBUX in the past.)  In a letter to employees, (seeking union and individual employee shareholder support) CEO Jordan said “Don’t be fooled – this is a battle for the heart of our company and our future – your future.”  At the same time, Reuters reported that APA is exploring the sale of its Permian Basis oil and gas properties for roughly $1 billion.  The article said APA has retained two investment banks to help facilitate a sale.  Later, Reuters also reported that ANCTF (operator of the Circle-K convenience stores) has made a preliminary takeover bid for SVNDF (large Japanese 7-Eleven store operator) for roughly $38 billion. 

Elsewhere, GM laid off 1,000 salaried software and services unit employees globally on Monday.  (Roughly 600 of those jobs are located in MI with the rest spread around the world.)  Later, the UAW union said it was filing a number of grievances against STLA and could launch a nationwide strike against the automaker.  The UAW says STLA is not honoring the production (job) commitments it has made in later-2023 contract negotiations.  After the close, GPRO announced it will cut about 15% of its workforce (only 139 jobs) as it seeks to restructure.  At the same time, Reuters reported that BA has grounded its test fleet of 777X jets after inspections found a failure of the engine mounting structure.

In stock legal and governmental news, on Monday, the US State Department approved the sale of $100 million of Javelin missiles (produced by GD) to Australia.  Later, KR sued the FTC seeking to block the regulator from reviewing its proposed $25 billion acquisition of ACI.  In the suit, KR alleges that the FTC is unconstitutional.  After the close, Reuters reported that two dozen state Attorney’s General have amended their lawsuit against LYV.  The new filing shows that the AGs are looking for three times the damages incurred for each customer in the suit they filed in May.  In related news, 10 more states joined the lawsuit Monday, bringing the total to 36 plus the District of Columbia. 

Elsewhere, also after the close, PPC agreed to pay $100 million to settle claims it had conspired with rivals to reduce the pay given to chicken farmers.  (TSN, SAFM, and others had previously settled the same case for much lower amounts.)  At the same time, the FAA issued a airworthiness directive for BA 787 jets after receiving five reports of sudden mid-flight dives.  (The dives were found to be related to movement of the captain’s seat disconnecting the autopilot without notice.)  Meanwhile, IEP and its CEO Carl Icahn settled charges from the SEC of operating a “Ponzi-like scheme.”  In the settlement, IEP agreed to pay $2 million.

Overnight, Asian markets were mixed with five of the 12 exchanges in the red.  Japan (+1.80%) was by far the biggest gainer while Shenzhen (-1.25%) and Shanghai (-0.93%) paced the losses.  In Europe, the picture is a little more red with only four of the 15 bourses in the green at midday.  The CAC (+0.09%), DAX (-0.07%), and FTSE (-0.70%) are leading the region lower in early afternoon trade.  Meanwhile, in the US, as of 7:30 a.m., Futures are pointing toward a mixed and flat start to the morning.  The DIA implies a -0.04% open, the SPY is implying a +0.09% open, and the QQQ implies a +0.11% open at this hour.  At the same time, 10-Year bond yields are at 3.873% and Oil (WTI) is just on the green side of flat at $74.42 per barrel in early trading.

The major economic news scheduled for Tuesday is limited to API Weekly Crude Oil Stocks (4:30 p.m.). Fed members Bostic (1:35 p.m.) and Vice Chair Barr (2:45 p.m.) also speak.  The major earnings reports scheduled for before the open are is limited to RERE, AS, FUTU, HTHT, LOW, MDT, VIPS, and XPEV.  Then, after the close, ALC, SQM, COTY, JKHY, KEYS, LZB, PAGS, TOL, and ZTO report.

In economic news later this week, on Wednesday, we get EIA Weekly Crude Oil Inventories and July FOMC Meeting Minutes. One Thursday, Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, S&P Global Mfg. PMI, S&P Global Services PMI, S&P Global Composite PMI, July Existing Home Sales, and the Fed Balance Sheet are reported.  The Jackson Hole Symposium also starts.  Finally, on Friday we get July Building Permits, and July New Home Sales.  The Jackson Hole Symposium also continues.

In terms of earnings reports later this week, on Wednesday we hear from, ADI, DY, M, TGT, TJX, ZK, A, CAAP, LU, NDSN, SNOW, SNPS, URBN, and ZM.  On Thursday, AAP, BIDU, BILI, BJ, CSIQ, IQ, NTES, PTON, TD, VIK, BMA, INTU, ROST, and WDAY report.  Finally, on Friday, we hear from GFI.

So far this morning, AS, FUTU, and MDT reported beats on both the revenue and earnings lines.  Meanwhile, LOW and XPEV missed on revenue while beating on earnings.  On the other side, VIPS beat on revenue while missing on earnings.  It is worth noting that LOW also lowered its forward guidance.

In miscellaneous news, on Monday, major US freight-forwarder CHRW announced it has begun to divert some US customer ocean cargo away from Canadian ports.  This is being done in anticipation of a Canadian rale strike as soon as August 22.  (Much of ocean cargo continues its journey on rail prior to switching to truck for the last leg of delivery.)  Elsewhere, GS analysts cautioned their clients that next week’s US Non-Farm Payroll data revision is likely to overstate labor market weakness.  GS suggests the overstatement will be due to the quarterly census of Employment which does not account for employment of illegal immigrants.  Secondly, GS says even if it did take immigrants into account, that this census is consistently revised upwardly later.  All told, GS believes the revision will be 300k-500k jobs too low.

With that background, it looks like traders are uncertain early this morning. All three major index ETFs gapped up modestly to start the premarket. However, all three have also sold back down printing small black-body candles in the early session. With that said, all three are still far above their T-line (8ema) and the short-term trend is clearly strongly bullish. Meanwhile, the mid-term bearish trend is broken, though one could argue a new mid-term bullish trend has not formed yet (due to a lack of higher low in the run). In the long-term, we are now clearly back in a Bull trend. In terms of extension, as I mentioned all three are stretched to the upside relative to their T-line. At the same time, the T2122 indicator is now in the top half of its overbought territory. So, the market is in need of a pullback or at least a rest. Just remember that the market can stay overextended a lot longer than we can stay solvent predicting a reversal. So, keep the mantra “follow, don’t lead, but also don’t chase” in mind. With regard to those 10 big dog tickers, seven of them are in the green, led by AMD (+1.10%) again. However, the biggest dog (in terms of dollar-volume traded), is NVDA (-0.39%), which is leading the losers in that group lower.

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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