Friday saw a modest gap lower at the open (0.49% in the QQQ, 0.17% in the DIA, and 0.31% in the SPY).  From that point, we saw a morning swing lower, followed almost immediately by a swing back above the Thursday close.  One last swing lower took us back toward the open.  However, that was the end of the volatility for the day.  The rest of the day saw a very slow, steady, tight range with a slightly bullish trend move for the entire last 5 hours of the day.  This action gave us white-bodied candles with tiny upper wicks and larger lower wicks.  The DIA even managed to print a Bull Engulfing candle. The SPY managed to hold its support level and the DIA managed to hold its 50sma yet again.  All of this happened on lower-than-average volume again.

On the day, all ten of the sectors were in the green with Energy (+2.213.10%) leading the way higher as the Technology (+0.03%) and Healthcare (+0.04%) sectors lagged.  Meanwhile, the SPY gained 0.58%, the DIA gained 0.51%, and the QQQ gained just 0.22%.  At the same time, the VXX fell 2.71% to 14.35 and T2122 has climbed up into the center of the mid-range at 50.96. 10-year bond yields surged up to 3.751% and Oil (WTI) was up 2.40% to $79.35 per barrel.  So, overall, it was a mildly volatile morning that turned into a dead market most of the as traders left early for the long holiday weekend (and to beat the storm).

In economic news, on Thursday, Q3 GDP was revised up to 3.2% (from the previous estimate of 2.9% and far above the Q2 final GDP of -0.5%).  The Q3 Price Index was also revised upward to 4.4% from the prior estimate of 4.3% but far, far below the Q2 reading of +9.0%.  Weekly Initial Jobless Claims also came in slightly better than was forecasted at 216k (versus the expected 222k and a tad above the previous week’s 214k).  Then, on Friday, Nov., Durable Goods Orders fell 2.1% (compared to a forecast of -0.6% and the Oct. reading of +0.7%).  The Nov. PCE Price Index (the Fed’s favorite inflation indicator) came in at 5.5% (well down from the October reading of 6.1%) and showed a second straight month of decline.  November Personal Spending also came in below expectation at +0.1% (versus the forecast of +0.2% and the October reading of +0.9%).  Michigan Consumer Sentiment also beat expectations at 59.7 (versus the forecast of 59.1 and the prior reading of 59.1).  Finally, Nov. New Home Sales were massively stronger than expected at +5.8% (versus a forecast of -4.7% but still well below the October value of +8.2%).  However, this did amount to an actual increase in the homes sold to 640k in November compared to only 605k in October.  So, overall, the economy seems to be stronger than expected, yet inflation is falling some, and consumers are generally feeling better than forecasted.  The FOMC could not have asked for much more than that for Xmas.

SNAP Case Study | Actual Trade

In stock news, on Friday it was announced that GOOGL’s YouTube had won out over rivals AMZN, AAPL, and DirecTV (owned by T and TPG) in the bidding war for NFL Sunday Ticket content.  The price is $2 billion per year for seven years.  Also on Friday, TSLA shares dropped hard as the company announced it has doubled the US discounts for Model 3 and Model Y vehicles.  Elon Musk also pleaded to stop the stock bleeding by saying the will probably not sell any more TSLA stock for two years, but “definitely not in 2023.”  Elsewhere, the US government awarded LMT a $1.05 billion contract for the delivery of F-35 aircraft and awarded a separate $497 million contract to BA for the delivery of CH-47F helicopters. On Saturday it was announced that META will pay $725 million to resolve a lawsuit stemming from its 2016 sale of 87 million American’s data to Cambridge Analytica in support of the Trump campaign.  (However, a judge must still approve the settlement.)  On Monday, TM announced its global car production in November increased by 1.5% to a record 833,104 vehicles.  MA also said that their statistics show US retail sales grew 7.6% this holiday season (well above the 7.1% they had forecasted in September but still below 2021’s 8.5% year-on-year growth).  The bill also guarantees $44.9 billion in military, humanitarian, and economic aid to Ukraine as the Russian war against that country is now in its 11^th month.

In country or government news, China is reeling from Covid with more than 37 million cases (and that is per Chinese government data).  However, on Monday anecdotal reports from Reuters crowded commuter trains in Shanghai and Beijing for the first time in a couple of weeks.  So, even as TSLA was forced to pull forward its previously planned plant shutdown to 12/25/22 – 1/2/23, some businesses are attempting to muddle through the latest wave.  Meanwhile, in the US, the Congress and Senate passed its $1.7 trillion omnibus spending bill to keep the government running through September 2023.  The bill included a 10% increase in Defense spending ($858 billion, well more than requested by President Biden) and a lesser 5% increase in Domestic spending.  Finally, US airlines were forced to cancel over 17,000 flights between Wed. and Monday due to winter storms.  This put a crimp into airline profits on what has been traditionally the third-largest travel weekend of the year.

In miscellaneous last-minute news, LUV is under scrutiny from the US Dept. of Transportation as the company has canceled or delayed 80% of its flights Monday and Tuesday. For comparison, in the same period, DAL has canceled 9% of its flights while UAL canceled just 1%. Meanwhile, in China, a few provinces are reaching the critical level related to available ICU beds in the covid wave that has followed reopening. Specifically, the Zhejiang province near Shanghai now has 1 million active hospitalized cases and forecasts a peak of about 2 million near New Year’s day. Most of these are now elderly patients (50%, up from the normal 20%), which are most likely to turn into ICU cases. This could pose a threat to nearby (and supply chain critical) Shanghai.

Overnight, Asian markets were mixed but mostly green.  Australia (-0.63%) and Hong Kong (-0.44%) were the only red in the region.  Meanwhile, Shenzhen (+1.16%), Thailand (+1.01%), and Shanghai (+0.98%) led the region higher.  In Europe, with the lone exception of Portugal (-0.27%), we see a green picture across the board at midday.  The FTSE (+0.05%) is flat while the DAX (+0.71%) and CAC (+1.00%) lead the region higher in early afternoon trade.  As of 7:30 am, US Futures are pointing toward a green start to the day.  The DIA implies a +0.58% open, the SPY is implying a +0.52% open, and the QQQ implies a +0.29% open at this hour.  At the same time, 10-year bond yields are up to 3.773% and Oil (WTI) is up another half of a percent to $79.92/barrel in early trading.

The major economic news events scheduled for Tuesday are limited to Nov. Goods Trade Balance and Nov. Retail Inventories (both at 8:30 am).  There are no major earnings reports scheduled for before the open or after the close on Tuesday.

In economic news on Wednesday, we get Nov. Pending Home Sales and the API Weekly Crude Oil Stocks Report.  On Thursday, the Weekly Initial Jobless Claims and EIA Weekly Crude Oil Inventories are reported.  Finally, on Friday, we get the Chicago PMI.

This is an extremely light week for earnings as only CALM reports Wednesday.  There are no reports scheduled for either Thursday or Friday.

With that background, it looks like all three major indices are again fading from early premarket bullishness, but will still look to open to the upside. with the DIA looking to retest its T-line (8ema) and the SPY failing its premarket test of that level. Over-extension is not an issue in any of the major indices. The SPY is looking to join the DIA in another test of the T-line (8ema). Both tests come from below as the bulls look to get back above. This holiday-sandwiched short week is likely to be light on volume. So, don’t go chasing too many new positions unless you can get your move very quickly or you are willing to ride the trade through a long weekend and likely dead week to follow.

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

Swing Trade Ideas for your consideration and watchlist: SQQQ, FDX, XLE. 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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Disclosure: We do not act on all trades we mention, and not all mentions acted on the day of the mention. All trades we mention are for your consideration only.

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