Tuesday saw a modestly lower open and Bearish morning.  SPY opened 0.09% lower, DIA opened down 0.17%, and QQQ opened 0.09% lower. At that point, the Bears were in-charge across all three major index ETFs, driving a sharp selloff that reached the lows of the day at 10:15 a.m. in DIA and 11:20 a.m. in the SPY and QQQ.  From there, all three rode a slightly bullish roller coaster sideways the rest of the day.  This action gave us large, black-bodied candles with significant lower wicks in the SPY and QQQ.  Both of them crossed back below their T-line (8ema) and even retested (and passed the test) their 17ema. Meanwhile, DIA printed a black-bodied Spinning Top with most of its wick on the bottom side of the candle.  It too retested its 8ema, but unlike the others, it stayed above its T-line.  This happened on average volume in the SPY and QQQ but above average volume in the DIA.

On the day, seven of the 10 sectors were red with Technology (-1.71%) WAY out in front (by nine-tenths of a percent), leading the rest of the market lower.  On the other side, Energy (+2.02%) was the biggest mover and outperformed the other sectors by more than 1.5%.  Meanwhile, SPY lost 0.88%, DIA lost 0.38%, and QQQ lost 1.39%. VXX spiked 7.72% to close at 53.43 and T2122 dropped back to the middle of its mid-range at 54.67.  At the same time, 10-Year bond yields fell to close at 3.735% while Oil (WTI) spiked on Middle East fears to close at $70.62 per barrel.  So, for the most part, the Bears ruled the morning (mostly on fears over the Israeli invasion of Lebanon and Iran’s retaliatory attack over recent Israeli assassinations conducted in Iran).

The major economic news scheduled for Tuesday included September S&P Global Mfg. PMI, which was down but better than expected at 47.3 (compared to a forecast of 47.0 and an August reading of 47.9).  Later August Construction Spending was up but worse than expected at -0.1% month-on-month (versus a +0.2% forecast and the July -0.5% value).  At the same time, September ISM Mfg. PMI was flat, which was not as strong as predicted at 47.2 (compared to a 47.6 forecast and in-line with the August 47.2 reading).  On the jobs side, Sept. ISM Mfg. Employment Index was down to 43.9 (versus a 47.0 forecast and a 46.0 August value).  Related to costs, September’s ISM Mfg. PMI Price Index was significantly lower at 48.3 (compared to a 53.5 forecast and a 54.0 August reading).  Meanwhile, August JOLTs Job Openings were up at 8.040 million (versus a 7.640 million forecast and a 7.711 million July number).  Later, after the close, API Weekly Crude Oil Stocks were down a little less than anticipated at -1.458 million barrels (compared to the forecast calling for a 2.100-million-barrel drawdown and the previous week’s -4.339 million barrels). 

After the close, CALM and LW reported beats on both the earnings and revenue lines.  At the same time, NKE missed on revenue while beating on earnings.

In stock news, on Tuesday, SLTA announced an extension of their halt in production of the Fiat 500e until at least November 1.  (The halt had initially been planned to end Oct. 11, but was extended three weeks amid slow electric vehicle sales.)  At the same time, Reuters reported that sources tell it that AAPL may need to turn back to China to supply iPhone components after a fire destroyed at Tata Group’s Hosur Indian iPhone component plant.  The weekend fire has caused what is being called “an indefinite production halt.”  Later, EQIX announced it has entered into a $15 billion joint-venture with the Singapore sovereign wealth fund and the Canada Pension Plan Investment Board to build a US data center. (The data center is expected to eventually scale to use 1.5 gigawatts of power.)  At the same time, Bloomberg reported that BA is looking to raise $10 billion by selling new shares.  Later, MSFT announced it has begun rolling out updates to its consumer Copilot software, giving it an AI assistant and a “more amiable” voice.  At the same time, GM reported that its Q3 new vehicle sales fell 2.2% due to fewer sales days in the quarter and lower consumer spending.  TM reported an 8% decrease for the quarter.  (F and STLA have yet to announce sales.) 

Meanwhile, CVS said it would be laying off 2,900 employees (1% of workforce) as part of a cost-cutting plan. The cuts will primarily be at corporate headquarters in RI.  Later, as with most competent companies, TM announced it had built extra inventory of vehicles and parts ahead of the US port strikes.  At the same time, SCHW announced that its long-time CEO Bettinger will retire on January 1, after 16 years at the helm.  He will be replaced current company President Wurster.  Later, CI, CVS, HUM, CNC, and UNH unveiled their 2025 Medicare Advantage plans.  The companies told Reuters that 83% of enrollees will have access to a $0 monthly premium plan.  At the same time, BRKB announced it had purchase full control of its Energy unit, buying the remaining 8% of stock for $2.37 billion. Later, JNJ announced it will invest more than $2 billion in a new manufacturing facility in NC for the production of biologic drugs and therapies. At the same time, CNBC reported that 500 SBUX locations have voted to unionize as talks between the union and company continue.  (The Starbucks Workers United union now represents more than 11k SBUX employees.) After the close, Bloomberg reported AAPL will launch upgrades to iPhone SE and iPad Air product lines in early 2025. At the same time, NKE withdrew its annual forecast and postponed its planned investor day when it reported earnings.

In stock legal and governmental news, on Tuesday, the CFTC announced BCS agreed to pay $4 million to settle civil charges that it violated US law and CFTC rules requiring accurate and timely reporting on swap transactions.  (BCS failed to report 5 million such swap transactions from 2018 to 2023.)  Later, a US district judge dismissed a shareholder suit against PTON.  The suit had alleged PTON defrauded shareholders by concealing how demand for its exercise machines had fallen as COVID vaccines became available and people were allowed to return to public life.  Later, the NHTSA announced that owners of 154k Jeep hybrid plug-ins should park the vehicle outside and away from buildings or other vehicles until recall repairs are completed. 

At the same time, the Fed announced it had terminated a 2013 enforcement action filed against C related to money laundering. (The enforcement action did not carry a fine but required process and documentations changes.)  In 2023, C announced it planned to split the offending unit from the rest of the bank in the second half of 2024.  At the same time, the NRLB issued a complaint against AAPL for allegedly violating employees right to organize or advocate for better working conditions by maintaining unlawful workplace rules.  (Among the alleged infractions were confidentiality, non-disclose, non-compete, employee misconduct, and off-time social media policies.  Among the prohibited topics were pay, discrimination, and promotion standards.)

In miscellaneous news, on Tuesday evening, the state of MI announced the schedule resulting from a summer major MI State Supreme Court decision that raises the state’s minimum wage by 20% to $12.48/hour at the end of February.  (The first increase will the to $10.56 on January 1 and then to $12.48 on February 21.  It will increase again to $14.97 in February 2028 and then be followed by annual inflation adjustments.)  The court decision ruled that after 280k MI voters signed petitions calling for a ballot issue on the state minimum wage, the GOP legislature passed changes in 2018 and then proceeded to illegally water down the increases to insignificant levels.

In Middle East news, Israel’s ground invasion of Lebanon continued, even as the Lebanese army had fled southern Lebanon.  Reportedly, 60 Lebanese were killed and an unknown number wounded on Tuesday. Meanwhile, Iran chose to take a retaliatory action for last month’s Israeli assassination of Hamas’ top negotiator in Tehran.  Iran fired about 180 missiles toward Israel Tuesday. Many of the missiles were intercepted by Israel’s Iron Dome air defense and US Navy anti-missile systems. However, a few Iranian missiles and a lot of missile fragments did hit southern Israel.  No casualties were reported since Israel had plenty of time to move the public to bomb shelters.  (The closest Iranian hit seems to have been a missile that landed within six-tenths of a mile from Mossad headquarters.)  Israeli PM Netanyahu immediately vowed that “Iran will pay” for its attack.

Overnight, Asian markets were mostly red.  Japan (-2.13%) was well out front followed by South Korea (-1.22%) and Malaysia (-1.03%) leading the losses.  In Europe, we see a similar picture taking shape as 11 of the 14 bourses are modestly in the red at midday.  The CAC (-0.12%), DAX (-0.59%), and FTSE (+0.18%) lead the region lower in early afternoon trade.  In the US, as of 7:30 a.m., Futures are pointing toward a down start to the day.  The DIA implies a -0.38% open, the SPY is implying a -0.26% open, and the QQQ implies a -0.23% open at this hour.  At the same time, 10-Year bond yields are up to 3.756% and Oil (WTI) has spiked another 3.62% on Middle East fears to $72.35 per barrel in early trading.

The major economic news scheduled for Wednesday includes September ADP Nonfarm Employment Change (8:15 a.m.), and EIA Weekly Crude Oil Inventories (10:30 a.m.).  We also hear from Fed Governor Bowman at 11 a.m.  The major earnings reports scheduled for before the open are limited to CAG and RPM.  Then, after the close, LEVI reports. 

In economic news later this week, on Thursday, we get Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, September S&P Global Services PMI, September S&P Global Composite PMI, August Factory Orders, September ISM Non-Mfg. Employment, September ISM Non-Mfg. PMI, September ISM Non-Mfg. PMI Price Index, and Fed Balance Sheet.   We also hear from Fed member Bostic at 10:40 a.m.  Finally, on Friday, September Avg. Hourly Earnings, September Nonfarm Payrolls, September Participation Rate, September Private Nonfarm Payrolls, and September Unemployment Rate.  We also hear from Fed member Williams.

In terms of earnings reports later this week, on Thursday, we hear from STZ.  However, on Friday, there are no earnings reports scheduled.

In economic news later this week, on Wednesday, September ADP Nonfarm Employment Change, and EIA Weekly Crude Oil Inventories are reported.  We also hear from Fed Governor Bowman at 11 a.m.  On Thursday, we get Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, September S&P Global Services PMI, September S&P Global Composite PMI, August Factory Orders, September ISM Non-Mfg. Employment, September ISM Non-Mfg. PMI, September ISM Non-Mfg. PMI Price Index, and Fed Balance Sheet.   We also hear from Fed member Bostic at 10:40 a.m.  Finally, on Friday, September Avg. Hourly Earnings, September Nonfarm Payrolls, September Participation Rate, September Private Nonfarm Payrolls, and September Unemployment Rate.  We also hear from Fed member Williams.

In overnight news, a chlorine chemical cloud in Atlanta has triggered a new series of shelter-in-place orders for that major city.  This is the fallout of Sunday’s fire at the BioLab chemical plant in Conyers, GA (25 miles Southeast of Atlanta).  Multiple counties have had such shelter-in-place orders since the fire, but now the impact is being felt in a major urban population center.  Elsewhere, early this morning, LLY announced it will build a $4.5 billion research, development, and manufacturing facility located near Lebanon, IN.

So far this morning, RPM reported a miss on revenue while also beating on earnings.  However, CAG reported misses on both the top and bottom lines.

With that background, markets look indecisively bearish so far in the premarket. All three major index ETFs opened the early session lower and have printed mostly wick since that point. All three are now trading below their T-line (8ema). So, the short-term trend is now bearish. The mid-term trend remains bullish. In the longer-term we still have a strong Bull trend in all three major index ETFs and they remain not far from their all-time highs. With regard to extension, none of the major index ETFs are extended above its T-line (8ema). In addition, the T2122 indicator is back in the center of its mid-range. So, markets have room to run either direction, if either the Bulls or Bears can find momentum. However, the Bears have what momentum exists on the back of the Middle East situation and the US East and Gulf port strike. With regard to those 10 big dog tickers, eight of the 10 are modestly in the red. AAPL (-0.58%) leads the losses while META (+0.18%) and NFLX (+0.12%) are holding up better than the others. It is worth noting that the biggest dog, NVDA (-0.35%) has traded only a little more than 2 times the dollar-volume as TSLA (-0.31%). This is typically a factor of at least two to three.

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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