On Friday, the May CPI came in hotter than expected (8.6% vs 8.3% forecast) and a flat premarket turned into a 1.5% – 1.9% gap down at the open.  From there we saw an hour of follow-through to the downside and then an all-day rollercoaster ride sideways.  We ended the day on a dark pool selloff that just took us to a new low.  This gave us gap-down, big black candles that closed on their lows in all 3 major indices.  For the day, SPY lost 2.90%, DIA lost 2.67%, and QQQ lost 3.53%.  The VXX was flat at 23.33 and T2122 fell well into the oversold territory to 6.90.  10-year bond yields spiked to 3.157% and Oil (WTI) fell two-thirds of a percent to $120.66/barrel.

In Economic news, Friday’s much hotter than expected CPI number is likely to have traders laser-focused on Wednesday’s Fed rate decision, interest rate forecast, and perhaps most importantly Fed Chair Powell’s press conference.  More hawkish analysts and media said the number put a 0.75% rate hike back on the table for this week.  However, a large majority of analysts reacted more like GS, which took Friday’s number as a signal to revise its rate-hike forecast to include a half-percent hike this week, in July, and in September.  (Previously, GS had only forecast a quarter-point hike in September.)  Futures markets have now priced in 2.55% of rate hikes in the Fed’s 5 remaining meetings this year, more than last week. For traders, the short-term implication is that we might see a low-volume, dull market until Wednesday afternoon as traders wait to see if Powell gives guidance on what will happen past July.  However, expectations are for more hikes than expected this year. So, a further selloff is also on the table. As for bond markets, yields spiked by the largest amount in 13 years on Friday in response to the CPI number.

In business news, the airline industry is already back to pre-pandemic traveler levels and got another boost Friday.  The CDC dropped the requirement for travelers coming from abroad to prove a negative covid-19 test before entering the country.  The CDC will re-evaluate this decision after 90 days, but that will be after the summer travel season.  Meanwhile, on the other side of the world, South Korea is now a week into its national trucker strike (protesting pay as their fuel costs surge).  So far, there have been port slowdowns causing serious supply chain problems.  Hyundai had production drop 60% at their largest factory on Friday due to component shortages.  However, so far SSNLF (Samsung Electronics) has seen no disruptions and does not expect near-term stoppages given its materials and component inventories.

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In Crypto news, Bitcoin fell to an 18-month low Friday ($29,000), and fell again over the weekend to $24,000 after failing resistance at $33,000 earlier in the week. Analysts tell Bloomberg they are expecting the fall to continue at least the mid-teen area.  Ethereum price action is also suggesting there may be more pain ahead for digital currencies.  Finally, crypto lender Celsius Network has halted withdrawals, swaps, and transfers on their platform as their coin (CEL) fell 53%.  Rival company Nexo announced plans to acquire assets from Celsius.

S&P 500 stocks sitting at a 52-Week Low INCLUDE (but are not limited to) INTC, MU, DIS, TXN, WFC, GS, MDT, MMM, CCL, ISRG, HCA, EXPE, BSX, SWK, SYK, CFG, SPG, and LH.  Meanwhile, S&P stocks sitting at a 52-Week High are limited to XOM, MPC, VLO, EOG, PSX, and DXCM.

In economic news later this week, on Tuesday we get May PPI.  Wednesday, we get Retail Sales, NY Empire State Mfg. Index, April Business Inventories, Crude Oil Inventories, Q2 Interest Rate Projections, Fed Rate Decision, Fed Statement, and Fed Chair Press Conference.  On Thursday, we see May Building Permits, May Housing Starts, and Philly Fed Mfg. Index.  Finally, on Friday we get May Industrial Production and hear from Fed Chair Powell again.

Overnight, Asian markets were strongly red across the board.  South Korea (-3.52%), Hong Kong (-3.39%), and Japan (-3.01%) led the region lower on China walking back reopening (after lockdown) as well as the nationwide trucker strike in Korea.  In Europe, we see the same picture taking shape as of mid-day.  The FTSE (-1.56%), DAX (-1.78%), and CAC (-2.09%) are typical and lead the region lower in early afternoon trading.  As of 7:30 am, US Futures are pointing to a strong gap down to start the week.  The DIA implies a -1.79% open, the SPY is implying a -2.24% open, and the QQQ implies a -2.92% open at this hour.  10-year bond yields are spiking again at 3.255% and Oil (WTI) is off 1.5% to $118.82/barrel in early trading.

The major economic news events scheduled for release Monday is limited to a Fed Speaker (Brainard at 2 pm).  The only major earnings is ORCL which reports after the close.

On the earnings front, this is a very slow week.  On Tuesday we hear from CNM and ASTL.  Wednesday there are no major earnings reports. On Thursday we get reports from KR, CMC, JBL, and ADBE.  There are no earnings reports on Friday.

Most of the talk is about last night’s Congressional hearings on the January 6 insurrection. However, the big news (and reason for premarket wait-and-see) is the CPI report at 8:30 am. Regardless of how the number comes in, we can expect it to be bad. Consensus forecasts are calling for 8.3% and even if it comes in light that does not mean inflation cannot speed up again. Nonetheless, we can expect a knee-jerk reaction, either way, the report lands…and then a whipsaw back the other direction after reconsideration by traders.

Technically speaking, the bears have the ball now that we have failed down out of the choppy consolidation area. In terms of extension, we are not in the oversold territory yet and while we are a fair way from the T-line after yesterday’s big move, I would not call this over-extended to the downside. If you are a long trader, you need to be very careful as there is room to move before the next support level. However, if you are on the bear side, just keep in mind that the move lower will likely not be in a straight line. With the weekend ahead, this may be a good day to get small, get hedged, or sit on your hands.

Remember to be very careful chasing gaps/moves early. The whipsaw is very real during times when we are thinking about changing trends and as we’ve seen lately, gap-chasers can get hurt. Trading is our job. So, do the work and work the process. Stick with your trading rules, trade with the trend, and consistently take profits when you have them. Always move your stops in your favor. Remember that the first rule of making big money in the market is to not lose big money in the market. So, don’t be stubborn. If you have a loss, just admit you were wrong and take it before it grows. As they say, the best time to have taken a $500 loss is when you are now staring at a $1,500 loss. Finally, remember that you get rich steadily over the long run in Trading…not by striking it rich on one or two trades. So, give up that lottery ticket mentality.

Ed

Swing Trade Ideas for your consideration and watchlist: No tickers today. 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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