Wednesday saw the market start lower and then trade indecisively.  SPY gapped down 0.25%, DIA opened 0.19% lower, and QQQ gapped down 0.70%.  After the open, all three major index ETFs just chopped sideways in a tight range until the FOMC Minutes were released at 2 p.m.  At that point, all three sold off for about 90 minutes but then rallied hard.  The two large-cap ETFs recrossed the opening gap and QQQ climbed back up into the middle of its opening gap by the close. This action gave us white-body Hammer candles in all three index ETFs.  DIA even managed to cross back above its T-line (8ema).  This happened on average volume in the QQQ and below-average volume in the large-cap index ETFs.

On the day, eight of the 10 sectors were in the green as Energy (+1.71%) was way out in front (by nine-tenths of a percent) leading the way higher and Technology (-0.90%) lagged.  The latter was perhaps due to anticipation of NVDA earnings after the bell.  At the same time, the SPY gained 0.09%, the DIA gained 0.09%, and the tech-heavy QQQ dropped 0.40%. VXX fell 0.87% to close at 14.74 and T2122 climbed but remained in the middle of the mid-range at 57.89.  10-year bond yields jumped up to 4.319% and Oil (WTI) climbed another 1.26% to close at $78.01 per barrel.  So, on Wednesday the market gave us a gap lower, hours of indecision, a knee-jerk reaction lower to FOMC Minutes, and then a strong rally into the close.  All-in-all, the Bulls had the upper hand except for tech where NVDA (pre-earnings) and INTC (-2.36%) drug the QQQ lower. 

The major economic news released Wednesday was limited to the API Weekly Crude Oil Stocks report, which came in with a much larger inventory build than expected at +7.168 million barrels (compared to a forecast calling for a 4.298-million-barrel build but less than the previous week’s 8.520-million-barrel inventory build).  It may also be worth noting that the 20-year bond auction showed a significant increase in yields as the auction came in at 4.595% compared to January’s 4.423% yield.

In Fed news, Richmond Fed President Barkin said Wednesday that inflation data in January made the FOMC’s job harder.  Barking said, “You do worry that when the goods price deflation cycle ends you are going to be left with shelter and services higher than you like.”  He said that 2023’s dramatic inflation reduction while the economy remains strong was “remarkable.”  However, he concluded, “We still have a way to go…we are not on the ground yet.”  Later, January FOMC Meeting Minutes showed the majority of Fed members were worried about cutting rates too soon.  The minutes said, “most participants noted the risks of moving too quickly to ease the stance of policy,” while only “a couple pointed to downside risks to the economy associated with maintaining an overly restrictive stance for too long.”  Beyond this, the minutes noted that “many participants were eager to kick off in-depth discussions at the March 19-20 meeting related to how they will conclude the reduction in the Fed’s bond holdings.”

After the close, ANSS, CENX, CHRD, CHDN, CLW, COKE, ETSY, EXAS, GNW, HST, JACK, KALU, MRO, VAC, NDSN, NVDA, OUT, RRC, SU, TS, TCOM, and TBI all reported beats on both the revenue and earnings lines.  Meanwhile, AGI, AGR, CWH, CAKE, ICLR, NEXA, OGS, RYI, SM, SNPS, and VMI missed on revenue while beating on earnings.  On the other side, BTG, FG, FNF, HUN, MOS, NTR, RIVN, and RUN beat on revenue while missing on earnings.  Unfortunately, APA, BALY, JXN, and WES missed on both the top and bottom lines.  It is worth noting that NVDA and SNPS raised forward guidance.  There were no guidance reductions of note.

The NVDA earnings report last night is worthy of its own mention.  The most widely traded stock (NVDA recently surpassed TSLA in that regard), crushed the consensus earnings estimate with 265% earnings growth, beating estimates by more than 13% ($5.16 versus a consensus of $4.56).  NVDA also beat revenue estimates by more than 9% ($22.10 billion versus $20.24 billion expected).  NVDA stock surged 10.5% in after-hours trading.  The company also said current quarter revenue is expected to be $24 billion (analysts had predicted a $21.9 billion Q1 forecast on average).

In stock news, on Wednesday, F announced it had reached an agreement with the UAW on local mostly safety issues at its largest and most profitable plant in KY.  This will avoid a threatened strike.  At the same time, LUNR announced it had launched its lunar lander from the orbit of the moon in what is scheduled to be the first US (and private) moon landing in 50 years on Thursday (after the close). Later, CHK said the US nat gas market was “oversupplied” and that it would cut spending on nat gas exploration and production.  At the same time, INTC announced it had signed MSFT as a customer for its custom chip-making unit…and that it is on track to overtake TSM as the maker of the world’s fastest chips in 2025.  Later, Reuters reported that the head of the BA 737 MAX program had “stepped down.”  At the same time, UNP announced a $3.4 billion capital investment plan for 2024.  Later, STRS announced it had rejected an unsolicited bid to acquire the company for $27.18 per share. (STRS closed at $22.50, up 1.26% on the day.)  At the same time, the board of QDEL fired its CEO.  Elsewhere, TTE announced its Port Arthur, TX refinery is operating (at “minimal production levels”) again after having been shut down by plant-wide power outages during 20-degree weather on Jan. 16.  Later, AAPL announced it is rolling out a new version of its iMessage texting platform which the company claims can withstand decryption from even quantum computers.  At the same time, KTOS announced it would offer $300 million of additional common stock (with underwriters having the option to buy another $45 million within 30 days) to help pay down debt.  After the close, CHRD and ERF announced that they had agreed to merge.  (ERF shareholders will get 0.10125 shares of CHRD plus $1.84 cash for each share of ERF.)  Also after the close, Bloomberg reported that ABBV is looking to sell $13 billion of bonds to fund additional acquisitions.

In stock legal, governmental, and regulatory news, the US Supreme Court refused to hear an appeal of a decision in JPM’s (and other large banks’) favor.  This let stand a lower court ruling that a $1.8 billion loan was not a security that should be regulated even though it was chopped up and sold to a group of different investors.  The case had been brought by one of the bankruptcy trustees of one of the buyers of that syndicated loan.  ($1.4 trillion of these leveraged and syndicated loans are sold off by the big banks every year.)  Later, the state of CA put a hold on GOOGL’s Waymo division request to expand its robotaxi fleet until at least June 19.  The company’s application may resume review at that point.  (If not approved then, it can be placed on another 180-day suspension.)  At the same time, a Texas cryptocurrency company sued the SEC Wednesday claiming the agency had no right to regulate digital assets.  The company (Legilex) plans to launch its own exchange (Lejit Exchange) to compete with COIN, which the SEC regulated last year.  Elsewhere, the FDA warned against using smartwatches like those from AAPL to monitor blood glucose levels.  The agency said there was no proof the devices work as well as existing tools (that require a drop of blood) without piercing the skin.  At the same time, the NRLB ruled 3-1 against HD saying that it could not bar a retail worker from wearing a “Black Lives Matter” apron because the company ban came amidst an investigation of complaints against racial discrimination at the store in question.  After the close, the FDA announced it had given clearance to a CLPT software for MRI-guided neurological interventions.

Overnight, Asian markets were nearly green across the board.  Only Malaysia (-0.45%) was in the red while Japan (+2.19%), Hong Kong (+1.45%), and Shanghai (+1.27%) led the region higher.  In Europe, we see a similar picture taking shape at midday.  Only two minor exchanges (of 15) are in the red while the CAC (+1.11%), DAX (+1.47%), and FTSE (+0.18%) lead the region higher in early afternoon trade.  In the US, as of 7:30 a.m., Futures are pointing toward a gap higher to start the day.  The DIA implies a +0.41% open, the SPY is implying a +1.26% open, and the QQQ implies a huge +2.02% open at this hour.  At the same time, 10-year bond yields are up to 4.333% and Oil (WTI) is off slightly to $77.78 per barrel in early trading.

The major economic news scheduled for Thursday includes Weekly Initial Jobless Claims and Weekly Continuing Jobless Claims (both at 8:30 a.m.), S&P Global Mfg. PMI, S&P Global Services PMI, and S&P Global Composite PMI (all at 9:45 a.m.), January Existing Home Sales (10 a.m.), EIA Weekly Crude Oil Inventories (11 a.m.), and Fed Balance Sheet (4:30 p.m.  We also hear from Fed members Harker (3:15 p.m.), Kashkari (5 p.m.), and Waller (7:35 p.m.).  The major earnings reports scheduled for before the open include AMBP, BHC, BLDR, LNG, D, DRVN, ETR, FCN, GFI, GRAB, GVA, HNI, IBP, IRM, KDP, LAUR, LKQ, MRNA, NMRK, NEM, NICE, OPCH, PCG, PXD, POOL, PRMW, PWR, STWD, FTI, TECK, TFX, TEF, TRN, UPBD, VAL, and W.  Then, after the close, AGCO, AEE, COLD, ACA, BMRN, SQ, BKNG, CVNA, CTRA, CPRT, EIX, EOG, WTRG, EVH, EXPI, FND, INTU, LYV, MELI, MODV, NE, NOG, NU, OII, ZEUS, PBA, RKT, RHP, SEM, SWN, SFM, SPXC, VALE, VICI, and WKC report. 

In economic news later this week, on Friday there is no major economic news scheduled.

In terms of earnings reports later this week, on Friday, AER, ALIZY, BLMN, CLMT, SSP, FMX, FYBR, GTN, HBM, LAMR, RBA, TAC, and WBD report.

In miscellaneous news, the House “Freedom Caucus” sent a letter urging House Speaker Johnson to abandon talks with Senate Democrats on bipartisan spending legislation.  In other words, the 28 MAGA types urged a government shutdown early next month.  Instead of negotiation, they propose a shutdown and triggering of a 1% across-the-board budget cut, which would reduce spending but more importantly, make an absolute mess (likely including US credit downgrades) that they believe they can blame on Democrats.  Elsewhere, Counterpoint Research reported Wednesday that US smartphone sales plunged 10% in January.  The research firm attributed the decline to customers putting off upgrades ahead of the launch of the new Samsung Galaxy S24 series, which hit shelves on Jan. 17.  However, by then the damage was done to the monthly number.  (The firm also said the S24 did well in its first two weeks of availability. At the high end of the market, AAPL continued to gain market share thanks to promotional offers on its new iPhone 15 series.

In legal business news, the US Supreme Court heard a case on Wednesday brought by various industries it was being proposed be forced to take steps to mitigate their pollution drifting into other states with the Westerly winds.  Three issues make this notable and important to corporate interests (in this particular case, pollution-heavy industries) and therefore the broader market.  The first is that, for the third time in two years, the Conservative-packed court has heard a case brought by industry (and states under industry pressure) before the regulations being challenged have even been finalized.  (The regulations were not in effect yet and no impact had be caused. In this case, the rules were not planned to go into effect until 2026.)  The second thing, that proves we now have an activist court, is a change in how the SCOTUS operates.  SCOTUS is meant to rule on legal and constitutional aspects of lower court decisions (not make law or dictate executive regulation). Yet, again in this case (and for the third time in two years), there is no lower court case.  The Conservative justices of the court decided to hear the case with no lower court trials having even started.  (To be fair the cases were filed at the US District level, just not heard, let along having risen through the Appeals level and then potentially reaching SCOTUS.)  This normal process was short-circuited by SCOTUS hearing the case directly on an emergency basis prior to either the rules being in place or initial-level cases even starting.  The third issue that makes this important is that all three of the “direct cases” the court took up were brought to preemptively stop the executive branch from even finalizing regulatory rules.  In other words, it is now a clear pattern that the current SCOTUS is actively seeking to reduce the executive branch’s power to regulate and dictate the extent of regulation from the start.  (Separately, the first two have caused the Federal agencies to go back to the drawing board and have left aspects unregulated despite Congressional requirements to do so.  In the current case, the law requires the sitting Administration to review the cross-state-border pollution (Good Neighbor) rules every few years.  The Trump Administration simply refused to do so.  The Biden Admin. had proposed expanding from covering power plants (as SCOTUS ruled constitutional when challenged in 2014) to include steel mills, cement plants, chemical plants, etc.  For what it is worth, all three cases SCOTUS heard directly were related to some kind of environmental regulation.  In both prior cases, SCOTUS ruled the executive branch it has far more limited authority and it dictated the extent to which the Federal Agencies can regulate. Questioning yesterday leads us to believe the same will happen here again.

So far this morning, BHC, BLDR, CQP, LNG, ENOV, FCN, GCI, GRAB, HNI, IBP, MRNA, NEM, OPCH, PCG, PWR, FTI, TFX, TRN, and UPBD all reported beats on both the revenue and earnings lines.  Meanwhile, DRVN, IRM, KDP, LKQ, POOL, STWD, TECK, VAL, and W all reported missed on revenue while beating on earnings.  On the other side, AMBP and GVA beat on revenue while missing on earnings.  Unfortunately, ETR and PRMW missed on bot the top and bottom lines.  It is worth noting that GRAB and PRMW lowered forward guidance.  However, IRM and NICE raised their guidance.

With that background, it appears the Bulls are looking to put in a raring rally early. SPY has gapped up and is trading at all-time highs in the premarket. The other two major index ETFs are also gapping higher but have not taken out the recent highs yet. All three have given us indecisive candles since their gap to start the early session. However, all three are back above their T-lines in the premarket. So, the short-term trend is bullish and we are looking at a gap higher and likely volatility at the open. Meanwhile, the longer-term steep bullish trend would be back in place in the two large-cap index ETFs and would be being retested in the QQQ if we open here. In terms of extension, none of the three major index ETFs is too far from its T-line and the T2122 indicator is still in its mid-range. So, either side has room to run if they can gather the energy to do so. Continue to watch those 10 Big Dog tech names. As mentioned above, they represent a huge portion of the market and if they move together in one direction, it’s hard for indexes to go the other way. Right now, all 10 are strongly bullish with the biggest of them (NVDA) up almost 14%.

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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