Market Nervous and Down Overnight

Monday gave us a modestly sideways day with little more gain from QQQ than the SPY and DIA.  SPY gapped up 0.28%, DIA gapped up 0.23%, and QQQ opened just 0.17% higher.  From there, all three major index ETFs faded the open, reaching the lows of the day mid-morning.  This was followed by a rally that took SPY and DIA back into the morning gap and QQQ across the gap to new highs in early afternoon.  However, all three spend the afternoon grinding sideways.  This action gave us indecisive candles across the board.  QQQ printed a white-bodied, Hammer, Bullish Harami candle which retested its T-line (8ema) and bounced up off the successful test.  At the same time, SPY printed a black-bodied Dragonfly Doji type candle that also retested and remains above its T-line.  DIA gave us a black-bodied, Spinning Top-type candle with a high wick.  However, DIA also retested and passed the test of its T-line from above.

On the day, six of the 10 sectors were in the red again with Basic Materials (-0.95%) out in front leading the way lower.  Meanwhile, Technology (+0.35%) led the four green sectors.  At the same time, SPY gained 0.21%, DIA gained 0.09%, and QQQ gained 0.58%.  VXX dropped 3.94% to a very low 10.49 and T2122 fell, but again remains in the mid-range, this time just above the oversold territory at 22.15.  On the bond front, 10-year bond yields spiked to 4.269% and Oil (WTI) spiked 2.35% to close at $83.46 per barrel.  This all happened on below-average volume in the SPY, DIA, and QQQ.  So, Monday really was a was a “much ado about nothing” day for the market.  If you look very closely you can see a 4-5 day very modest rally (particularly in the QQQ).  However, you really have to look to see it.

The major economic news scheduled for Monday included S&P Global Mfg. PMI, which came in a tick shy of expectations at 51.6 (compared to a 51.7 forecast but up modestly from the May 51.3 reading).  Later, May Construction Spending was down 0.1% (versus a forecast of +0.3% which was also the April value).  At the same time, the June ISM Mfg. Employment Index was lower than anticipated at 49.3 (compared to a forecast of 50.0 and a May reading of 51.1).  The headline June ISM Mfg. PMI was also lower than predicted at 48.5 (versus a 49.2 forecast and May’s 48.7 number).  The June ISM Mfg. Price Index was lower than expected at 52.1 (compared to a 55.8 estimate and the May 57.0 reading).

In Fed speak news, NY Fed President Williams told a conference Sunday (those comments were not made public until Monday), “I’m confident that we at the Fed are on a path to achieving our 2% inflation goal on a sustained basis.” 

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In stock news, on Monday, BA agreed to buy SPR for $4.7 billion (all stock) with parts of the supplier going to EADSY (Airbus).  As part of the deal, SPR will pay EADSY $559 million.  At the same time, RACE announced two warranty extension plans that will allow owners of their hybrid models to get battery replacements at particular times (the 8th and 16th year of battery life).  Later, UBS announced it had completed it merger (acquisition) of CS in Switzerland.  Meanwhile, DE announced 590 layoffs (280 at an IL plant and 310 at an IA plant), citing declining demand.  At the same time, Reuters reported that AMZN has become the first company to “sidestep” a global standard for verifying carbon offsets.  (This is particularly interesting since AMZN founder Bezos was the founder and Chair of the group that created the standard.)  AMZN claims they still support the standard for verification as a model, but want a new, higher standard.  Later, EADSY announced its plane deliveries rose 2% in the first half of 2024 to 323, including 67 planes in June.  At the same time, BLK announced it will buy British company UK Data Group for $3.23 billion in cash.  Later, GS reported that, during June, global hedge funds sold shares of technology, media and telecom companies at the fastest pace since 2016.  However, GS said this trend (three straight months of such selling) was almost entirely driven by short sellers targeting the all-time highs.  After the close, shareholders of CRM voted to reject the CEO (and other executive’s) compensation plans.  However, the vote is not binding on board action.

In stock legal and governmental news, on Monday, BMY agreed to pay $2.7 million to settle an Israeli anti-trust case over blocking a generic version of its cancer drug Imnovid.  At the same time, the US Supreme Court ruled in favor of a ND convenience store, reinstating its lawsuit against the Fed over a 2011 regulation allowing credit card companies (V and MA) to charge “swipe fees” per transaction up to a maximum $0.21 each.  Following the court throwing out the Chevron Deference, this will be one of the new suits that will challenge agency’s authority to regulate.  Later, Reuters reported that anti-trust regulators in France are set to charge NVDA over anti-competitive practices.  At the same time, Keith Gill (known as “Roaring Kitty”) was sued by GME investors who allege they lost money due to him running a “pump-and-dump” scheme on the stock. Later, a US Appeals Court ruled that part of the new Biden Administration student debt relief plan may resume, reversing an injunction issued by a judge in KS. 

Elsewhere, the US Supreme Court punted on cases involving GOP-led states ability to regulate social media.  The court unanimously held that the lower courts had not adequately assessed the impact of the laws in question impact on the social media company’s first amendment rights.  The ruling cast doubt on the TX law (which a lower court had upheld) prohibiting moderation by META, GOOGL, and SNAP among others.  Later, the SEC sued SICP for securities fraud, alleging the crypto-focused company misleads investors about bank secrecy and anti-money laundering compliance programs.  Separately, SICP agreed to pay $63 million to settle probes of the company’s compliance lapses.  At the same time, a federal judge blocked a MS law that required users of social media platforms to verify ages and restricted access by minors without parental consent.

Overnight, Asian markets were mixed but mostly in the red.  Japan (+1.12%) and Singapore (+0.88%) were by far the biggest gainers while Shenzhen (-0.97%) and South Korea (-0.84%) led the more numerous losers.  In Europe, the bourses are mostly red with Russia (+1.39%) the only noteworthy gainer12 of the 15 bourses in the red.  The CAC (-0.83%), DAX (-0.99%), and FTSE (-0.32%) lead the region lower in early afternoon trade.  In the US, as of 7:00 a.m., Futures are pointing toward a move lower to start the day.  The DIA implies a -0.31% open, the SPY is implying a -0.36% open, and the QQQ implies a -0.46% open at this hour.  At the same time, 10-Year bond yields are up to 4.45% and Oil (WTI) is up another 0.73% to $83.99 per barrel in early trading.

The major economic news scheduled for Tuesday is limited to May JOLTs Job Openings (10 a.m.) and the API Weekly Crude Oil Stocks report (4:30 p.m.).  However, Fed Chair Powell speaks at 9:30 a.m.  The major earnings reports set for Tuesday are limited to Tuesday MSM, PSNY, and RDUS before the open.  There are no major reports set for after the close.

In economic news later this week, on Wednesday MARKETS CLOSE AT 1 P.M.   In addition, JUNE ADP Nonfarm Employment, Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, May Trade Balance, S&P Global Services PMI, S&P Global Composite PMI, May Factory Orders, June ISM Non-Mfg. Employment, June ISM Non-Mfg. Prices, EIA Weekly Crude Oil Inventories, and FOMC Meeting Minutes are reported.  NY Fed President Williams also speaks.  On Thursday, MARKETS ARE CLOSED.  However, we still get the Fed Balance Sheet.  Then on Friday, June Avg. Hourly Earnings, June Nonfarm Payrolls, June Private Nonfarm Payrolls, June Participation Rate, and June Unemployment Rate are reported.  NY Fed President Williams also speaks. 

In terms of earnings reports later this week, on Wednesday, STZ reports.  There are no earnings reports Thursday or on Friday.

In miscellaneous news, on Monday the Supreme Court put Presidents above the law for their Article Two powers.  In addition, it gave Presidents a presumptive immunity for all other acts that could be construed as “official” even at the outside limits of their duties.  So, Trump is immune from prosecution for threatening and strong-arming state election officials or calling on his Dept. of Justice to declare an election was fraudulent sans evidence, or take millions of dollars in exchange for a pardon.  However, perhaps most importantly, SCOTUS also put major hurdles on both bringing prosecution of a President (prosecution must first prove bringing such a case would not interfere with the independence or functioning of the executive branch of government) and then tied the hands behind the back of prosecution by saying no evidence can come from a President or their Administration members “official duties” including communications and documents. This means that America is now dependent on the honor, decency, and goodwill of Presidents to not abuse power.  That is a very terrifying prospect given the proven character of the current Republican candidate.

In other news, the headline Euro zone inflation fell to 2.5%.  However, the Euro zone core inflation stayed at 2.9%, missing analyst estimates of 2.8%.  Elsewhere, Bloomberg reports that Wall Street firms such as JPM are telling clients to position for a potential Trump win in November.  They are telling clients that would cause inflation to last longer and result in higher long-term bond yields.  In the short end of the curve, they are telling clients to take profits now on the shorter-dated bonds.  This could be at least a partial cause of the very recent rising low duration bond yields.

With that background, it looks as if markets are signaling a down day. All three major index ETFs opened the premarket lower and have printed black-bodied candles since that point. They have all crossed below their T-line (8ema) on this action. However, remember that despite intraday movement, all three major index ETFs are still near their all-time highs. So, the short-term trend is now modestly bearish. On the other hand, the mid-term and especially the longer-term trend in all three major index ETFs remains very bullish. In terms of extension, none of those three are extended above their T-line and while the T2122 indicator is at the bottom of its mid-range, it is still not in oversold territory. Therefore, the market has room to run in either direction. With regard to those 10 big dog tickers, all 10 are in the red this morning. The biggest dogs, NVDA (-1.04%), TSLE (-1.42%), and AMD (-1.01%) are leading tech and the market lower at least early.

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.


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