On Friday, markets gapped lower on the better-than-expected September Payroll data (which leads traders to conclude that what the Fed has been saying is true…and the Fed will not be easing up on rate hikes anytime soon).  SPY gapped down 1.1%, DIA gapped down 0.9%, and QQQ gapped down 1.75%.  After that, the Bears followed up with a strong selloff in the first 30 minutes before starting a much slower downtrend that has lasted all the way into a small bounce in the last 30 minutes of the day.  This action has given us gap-down, large black candles with small lower wicks that are starting to get just a little extended below the T-line (8ema).  The QQQ is even nearing the breakout of its bearish “Dreaded h” pattern.

On the day, all 10 sectors are in the red.  Technology (-4.13%) is leading the way lower while Energy (-0.62%) is the laggard in the decline.  At the same time, SPY was down 2.81%, DIA is down 2.08%, and QQQ is down 3.81%.  The VXX is up 4% to 20.91 and T2122 has dropped back into the oversold territory at 8.54. 10-year bond yields are up to 3.883% and Oil (WTI) has spiked 4.76% to $92.66/barrel after a strong Payrolls Report seemed to tell the market demand will remain high while production will go down (based on the upcoming OPEC+ production cuts).  So, it was a “good news is bad news” day that has all 3 major indices working on another dreaded-h pattern.

In economic news, September Nonfarm Payrolls came in above expectation (at +263k versus +250k forecasted and +315k in August).  However, September Avg. Hourly Earnings came in lower than expected at +5.0% versus +5.1% forecasted and +5.2% in August.  That may be partially responsible for the September Participation Rate falling slightly to 62.3% (from 62.4% in August).  With that said, the September Unemployment fell to 3.5% (from 3.7% forecasted and 3.7% in August).  So, both of the headline numbers fall into the category of “things that will not give the Fed reason to start easing their rate hikes.”

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In stock news, on Friday, BP announced that it has boosted spending by $500 million in the North Sea and US Shale Basin in response to oil and gas shortages. However, it does not expect any of those projects to increase production for months.  PEP also said it expects to receive the first of 100 TSLA semi tractors on Dec. 1.  (The trucks have been on order since 2017 and PEP will be the first company to receive the new TLSA Semi.)   NIO announced that it will only lease (not sell) its electric vehicles when they go to market in Europe later this year.  The average lease will be $1,200/month.  Elsewhere, the NHTSA announced it has closed a safety investigation (started in 2017) into tired from GT.  Finally, RIVN has recalled almost all of the vehicles they have built over safety concerns stemming from a bolt that appears not fully tightened during production (on nearly every car).

In warning news, an FDX internal memo reported by Reuters showed that the company is significantly lowering its holiday package volume forecast.  The memo did not give the new number but warned contractor delivery companies to expect a downward adjustment to forecasts soon as major shippers have told FDX executives they are adjusting their own forecasts lower.  On Saturday, SSGFF (Samsung) warned that its profits will take up to a 32% hit for the year due to a slowdown in memory chip sales, meaning its customers like INTC, AMD, NVDA, LNVGY, AAPL, HPE, and DELL must be buying less and their own forecasts could be in jeopardy.

In international news, on Saturday, Russia seized the Sakhalin-1 Oil and Gas Project, which leaves US, Japanese, and Indian investors at risk as the order puts a Russian Operator in charge and authority over whether foreign investors can retain their stakes given to the Russian government.  XOM has/had a 30% stake in the project, while Japan’s Sodeco had a 50% stake.  Elsewhere, also Saturday, Taiwan signaled that it will follow President Biden’s new export controls (issued Friday) which limit the export of semiconductor chips made anywhere in the world using US chipmaking equipment.  This will end exports from TSM (and much smaller UMC) to China.  In France, strikes at oil refineries and storage facilities owned by TOT and XOM have more than 21% of gas stations closed for lack of supply.  TOT announced it will begin wage negotiations with the union this month.  The French government said it has a plan to ration fuel, but the situation has not yet reached that point.

Overnight, Asian markets were red across the board.  Hong Kong (-2.95%), Shenzhen (-2.38%), and Shanghai (-1.66%) led the region lower.  In Europe, markets are mixed but lean to the red side in midday trading.  The FTSE (-0.31%), DAX (+0.64%), and CAC (-0.07%) lead the market, with Russia (-3.21%) being an outlier in early afternoon trading.  As of 7:30 am, US Futures are pointing toward a modestly red start to the day.  The DIA implies a flat -0.06% open, the SPY is implying a -0.15% open, and the QQQ implies a -0.25% open at this hour.  10-yeat bond yields are at 3.888% and Oil (WTI) is down eight-tenths of a percent to $91.90/barrel in early trading.

There are no major economic news events scheduled for Monday (Columbus Day).  Bond markets are closed (although stock markets are open).  However, we do have a Fed speaker (Brainard at 1 pm).  There are no major earnings reports scheduled for the day.

In economic news later this week, on Tuesday we have another pair of Fed speaker (Harker and Mester).  Then on Wednesday we get September PPI, the WASDE Ag Report, September Fed Meeting Minutes, and the API Weekly Crude Oil Stocks report and Fed member Bowman speaks.  Thursday, September CPI, Weekly Initial Jobless Claims, EIA Weekly Crude Oil Inventories, the Federal Budget Balance are reported.  Finally, on Friday, we get September Retail Sales, September Import/Exports, August Business Inventories, Mich. Consumer Sentiment, and August Retail Inventories.

The silly season begins again later this week after a couple of days of reprieve. There are no reports scheduled for Monday or Tuesday.  Then, on Wednesday, both PEP and WIT report.  On Thursday, we hear from BLK, CMC, DAL, DPZ, FAST, INFY, PGR, TSM, and WBA.  Finally, on Friday, the banks really kick off the season with C, FRC, JPM, MS, PNC, USB, UNH, and WFC all report.

With September Payrolls behind us and the Fed chorus continuing to beg us to believe that they will not be easing up on rate hikes anytime soon, dejected traders will start watching for earnings evidence to support their preconceived ideas. The weekend has probably taken care of the Payrolls Report volatility. However, good old-fashioned everyday volatility is likely to remain. Also, keep an eye on Ukraine as Putin is a sore loser and has lost face after 2 lanes of his Kerch Bridge were blown up on Saturday. It appears he is moving another large group of soldiers toward Belarus again, perhaps planning to take another run at Kyiv.

With this backdrop, the premarket action seems pretty mild. (Again, perhaps waiting on earnings to begin.) The market extension (to the downside) is a modest issue but we’ve seen far worse recently. So, I will start to watch for (but not expect today) a consolidation or relief rally. The one thing we know for sure this morning is that the strong bear trend is still in place and again that should be the main directional indicator we heed.

Keep in mind that trading is our job. It’s not a hobby. So, treat it that way. Do the work and follow the process. Stick with your trading rules, trade with the trend, and take those profits when you have them. Demonstrate patience and wait for confirmation. 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: TOST, TWTR, SNOW, RBLX, AAPL, META, SBUX, TSLA, and PYPL. 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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