Monday was a day that saw most of the move made at the open.  The SPY gapped down 0.75%, DAI gapped down 0.49%, and QQQ gapped down 0.99% at the open.  At that point, the DIA immediately recrossed the opening gap and then spent the rest of the day meandering back and forth inside that gap area, closing near the top end (near Friday’s close).  Meanwhile, SPY and QQQ traded to the lows of the day at 11 a.m., rallied back to the highs by 1 p.m., and then stayed there in a tight range the rest of the day.  This action gave us a gap-down, white-bodied, large-bodied Hammer-type candle in the SPY. SPY also successfully retested its T-line (8ema) as support during the day.  At the same time, QQQ printed a gap-down, white-bodied, Dragonfly Doji-type candle that crossed back below its T-line.  Finally, DIA gave us a gap-down, white-bodied, inside-day candle.

On the day, six of the 10 sectors were in the red again with Basic Materials (-1.13%) out in front leading the way lower while Healthcare (+0.53%) held up much better than any of the other sectors.  At the same time, the SPY lost 0.52%, DIA lost 0.10%, and QQQ lost 0.93%. The VXX gained slightly (+0.29%) to close at 17.28 and T2122 fell just a touch but remains in the top of its overbought territory at 97.01.  10-year bond yields climbed to 4.253% and Oil (WTI) dropped 1.03% to close at $73.31 per barrel. So, Monday was one of those days where the move was either captured at the open or it was missed.  Surprisingly, DIA was again the strongest of the major index ETFs (with particular strength in MMM) while QQQ was the weakest (with INTC, NVDA, and NFLX dragging the most).  This all happened on average volume in the DIA and below-average volume in the SPY and QQQ.

The major economic news reported Monday was limited to October Factory Orders (month-on-month), which came in well below expectations at -3.6% (compared to a forecast of -2.6% and significantly below a September reading of +2.3%).  However, in the afternoon, the NY Fed released a report (Multivariate Core Trend) which indicated that underlying inflation pressures eased in October (2.6%) compared to September (2.88%).

After the close, JOAN missed on revenue while beating on earnings (albeit still a loss).

In stock news, SPOT announced that it will lay off about 1,500 employees (roughly 17% of the workforce).  (This was SPOT’s third round of cuts, although the other two were much smaller, in 2023.)  At the same time, the Chinese Passenger Car Assn. released date Monday that indicated TSLA sales fell 18% in November (this was TSLA’s worst drop since December 2022).  Later, TWLO also announced it would cut 5% of its workforce.  At the same time, RIOT announced a $290+ million order from a crypto miner.  Elsewhere, F reported a 0.5% decline in US sales in November.  (Sales had dropped 5.3% in October.)  However, F’s electric vehicle sales jumped 43.3% versus the same month a year ago.  Near the close, Bloomberg reported that ZM is in discussion to acquire (via merger) FIVN.  After the close, T announced it has selected ERIC to build a telecom network that uses new technology, a project covering 70% of the US and scheduled to be completed by late 2026.  (ERIC was selected over NOK.)  Also after the close, Bloomberg reported that Mark Zuckerberg’s trust had just sold 682,000 shares of META. 

In stock government, legal, and regulatory news, ATR was awarded an FDA contract for $6 million contract to develop an environmentally-friendly metered-dose inhaler.  At the same time, NIO was given a license to produce electric vehicles in China. In Spain, a group representing 83 Spanish media outlets filed a $600 million lawsuit against META.  The case alleges META engaged in unfair competition in the advertising market.  The case also alleges that META violated EU data protection rules between 2018-2023.  (The worry is that this is a case that could easily be replicated throughout the EU.)  Later, analysts are saying that questioning from the US Supreme Court seems to indicate a divided court in the case involving Purdue Pharma whose bankruptcy filing immunized the Sackler family (Purdue owners, but not declaring bankruptcy) from responsibility in the opioid settlement the company had agreed prior to filing for that bankruptcy.  At the same time, in Asia, VFS is now under investigation following a massive $93.00 to $4.59 share price decline.  Law firms are investigating the company for allegedly disseminating false and misleading statements prior to the decline.  Later, in a re-ignition of tensions, FL Gov. DeSantis’ hand-picked board leveled accusations at DIS and the previous board that controlled the DIS park region.  The new board said DIS controlled the old board via millions of dollars in free tickets, discounted hotel prices, merchandise, and other gifts.  After the close, DHR received court approval to acquire UK firm Abcam plc.  Finally, in another case being heard by the US Supreme Court, the court is hearing arguments Tuesday on whether to preclude Congress and the Executive branch from being able to tax stock holdings, real estate, and other asset appreciation.  In other words, stocks, real estate, art, and commodities owned would not be taxable until or unless sold.  (I am unsure whether the case could make state and local property taxes void as well, but it would certainly seem possible.)

Overnight, Asian markets leaned heavily to the downside.  Shenzhen (-1.97%), Hong Kong (-1.91%), Shanghai (-1.67%), and Japan (-1.37%) led the region lower. However, in Europe, markets are leaning to the upside (on mostly modest moves) at midday. The CAC (+0.28%), DAX (+0.24%), and FTSE (-0.57%) lead the region on volume with Greece (-0.99%) being by far the biggest mover in early afternoon trade.  In the US, as of 7:30 a.m., Futures are pointing toward another lower start to the day.  DIA implies a -0.25% open, the SPY is implying a -0.33% open, and the QQQ implies a -0.48% open at this hour.  At the same time, 10-year bond yields are back down to 4.234% and Oil (WTI) is just on the red side of flat at $72.90 per barrel in early trading.

The major economic news scheduled for Tuesday includes Nov. S&P Global Services PMI and Nov. S&P Global Composite PMI (both at 9:45 a.m.), Nov. ISM Non-Mfg. PMI, Nov. ISM Non-Mfg. Employment, Nov. ISM Non-Mfg. Price Index, and Oct. JOLTs Job Openings (all at 10 a.m.), and API Weekly Crude Oil Stocks (4:30 p.m.).  The major earnings reports set for before the open are limited to AZO, CNM, DBI, FERG, GIII, HOV, SJM, NIO, and SIG.  Then, after the close, PLAY, and TOL report. 

In economic news later this week, on Wednesday, Nov. ADP Nonfarm Employment Change, Oct. Exports, Oct. Imports, Oct. Trade Balance, Q3 Nonfarm Productivity, Q3 Unit Labor Costs, and Weekly EIA Crude Oil Inventories are reported.  On Thursday, we get the Weekly Initial Jobless Claims and the Fed Balance Sheet.  Finally, on Friday, we get, Nov. Nonfarm Payrolls, Nov. Private Nonfarm Payrolls, Nov. Participation Rate, Nov. Unemployment Rate, Nov. Avg. Hourly Earnings, Michigan Consumer Sentiment, Michigan Consumer Expectations, Michigan 1-year Inflation Rate, Michigan 5-year Inflation Rate, and WASDE Ag Report.

In terms of earnings reports later this week, on Wednesday, BF.A, CPB, KFY, OLLI, THO, UNFI, CHWY, GME, GEF, and VEEV report.  On Thursday, we hear from CIEN, DG, GMS, AVGO, COO, DOCU, LULU, and RH.  Finally, on Friday, there are no major earnings reports scheduled.

In miscellaneous news, in China, a court granted China Evergrande Group (the troubled and bankrupt real estate developer) an extension until January 29 to revise its offshore debt restructuring plan.  Evergrande has $300 billion in liabilities.  Meanwhile, the White House announced Monday that it is essentially out of funds to support Ukraine’s defense (more than 90% of which are actually paid to US corporations and not sent abroad).  A letter from the White House to Congress said the funds would be exhausted by the end of the month.  In Asia, Japan announced that Japanese CPI fell more than expected in November (flat) after a +0.4% gain in October.

So far this morning, AZO, FERG, and SIG have reported beats on both the revenue and earnings lines.  Meanwhile, GIII, SJM, and NIO missed on revenue while beating on earnings.  Unfortunately, DBI missed on both the top and bottom lines.  It is worth noting that DBI and NIO lowered their forward guidance.  At the same time, GIII raised its guidance.

With that background, it looks like all three major index ETFs are continuing their consolidation or pullback. The DIA started the premarket lower and is printing a small, black-bodied, “inside day” candle in the early session. At the same time, SPY also opened the premarket lower and is printing a small black-bodied candle that is now retesting its T-line (8ema). Meanwhile, the QQQ is following the DIA’s lead, but its “inside day” premarket candle is inside Monday’s long lower wick (instead of inside of Monday’s candle body). So, on balance, the Bulls are in control of the longer-term trend but the short-term trend is consolidating or sideways. In terms of extension, none of the three major index ETFs is extended too far from its T-line. However, at the same time, the T2122 indicator remains at the high end of its overbought territory. So, the market may still need some relief from extension in the form of more consolidation or pullback. With that said, remember that the market can remain overbought longer than you can remain solvent predicting the turn too early. So, don’t be too quick to predict a turn is underway. In the long run, successful traders follow trend while those who predict reversals have a few big winners while getting beat to death most of the time.

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

🎯 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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