On Friday, we saw a bit of a Bull trap. SPY gapped up 0.29%, DIA opened 0.13% higher, and QQQ gapped up 0.74%. At that point, all three major index ETFs took 20 minutes to get ready before selling off. SPY sold off recrossing the gap and continuing South self to the lows at 11:15 a.m., and then drifted sideways with a very slight bullish trend, ending up very near the previous close. DIA recrossed its gap more quickly but did not sell off as far, reaching its lows at 12:25 p.m. and spending most of the day meandering along the lows, never getting that afternoon modest rally. Meanwhile, QQQ sold off most sharply but stopped at about 11:10 a.m. before starting a long slow rally back up above the open. This action gave us a black-bodied, large-body Spinning Top candle in the SPY that crossed just back below its T-line (8ema) after having gapped above it. DIA printed the same black-body, large-body, Spinning Top candle but with a smaller gap up. It also printed a seventh-consecutive black and down-close candle. Finally, QQQ gave us a long-legged, technically black-body, Doji that printed a new all-time high and new all-time high close.
On the day, nine of the 10 of the sectors were in the red again as Basic Materials (-1.41%) was far and away the worst-performing sector. On the other side, Technology (+0.15%) held up better than the other sectors and was the only one in the green. Meanwhile, SPY lost 0.01%, DIA lost 0.20%, and QQQ gained 0.77%. VXX was just on the green side of flat to close at 42.50 and T2122 dropped deeper into the oversold territory to close at 7.06. On the bond side, 10-Year bond yields climbed yet again to 4.395% while Oil (WTI) climbed 1.51% to close at $71.08 per barrel. So, once again Friday we saw most of the move happen at the open. After that there was some reversal, but the afternoon was essentially some form of a sideways grind. This all took place on below-average volume in all three major index ETFs.
The major economic news scheduled for Friday were limited to November Export Price Index, which came in flat at 0.0% (compared to a -0.2% but far better than October’s +1.0% reading). On the other side, the November Import Price Index was unchanged at +0.1% (versus a forecasted -0.2% but in-line with October’s +0.1% value).
In Fed news, we have started the quiet period ahead of this week’s FOMC meeting.
Overnight, Asian markets were mixed, but leaned toward the red side. Shenzhen (-1.30%), Hong Kong (-0.88%), and Thailand (-0.83%) paced the nine losers while New Zealand (+0.34%) and Singapore (+0.28%) led the three gainers. In Europe, 13 of the 14 bourses are in the red at midday. The CAC (-0.68%), DAX (-0.27%), and FTSE (-0.29%) are leading the region lower in early afternoon trade. In the US, as of 6 a.m., Futures are pointing toward a modest green start to the day. The DIA implies a +0.08% open, the SPY is implying a +0.17% open, and the QQQ implies a +0.29% open at this hour. At the same time, 10-Year Bond yields are down slightly to 4.381% and Oil (WTI) is off 1.08% to $70.52 per barrel in very early trading.
The major economic news scheduled for Monday includes NY Empire State Mfg. Index (8:30 a.m.), Preliminary December S&P Global Mfg. PMI, Preliminary December S&P Services PMI, and Preliminary December S&P Global Composite PMI (all at 9:45 a.m.). However, there are no major earnings reports scheduled either before or after the market.
In economic news later this week, on Tuesday we get Nov. Core Retail Sales, Nov. Retail Sales, Nov. Industrial Production, Oct. Business Inventories, Oct. Retail Inventories, and the API Weekly Crude Oil Stocks report. Then Wednesday, Preliminary No. Building Permits, Q3 Current Account, Nov. Housing Starts, EIA Weekly Crude Inventories, Fed Interest Rate Decision, FOMC Statement, Q4 Current Year Interest Rate Projection, Q4 1st Year Interest Rate Projection, Q4 2nd Year Interest Rate Projection, Q4 3rd Year Interest Rate Projection, Q4 Longer-Term Interest Rate Projection, and FOMC Chair Press Conference are reported. On Thursday we get Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, Q3 Core PCE Price Index, Q3 GDP, Q3 GDP Price Index, Philly Fed Mfg. Index, Philly Fed Mfg. Employment, Nov. Existing Home Sales, Nov. US Leading Economic Indicator Index, Oct. TIC Net Long-Term Transactions, and the Fed’s Balance Sheet. Finally, on Friday, November Core PCE Price Index, Nov. PCE Price Index, Nov. Personal Spending, Michigan Consumer Sentiment, Michigan Consumer Expectations, Michigan 1-Year Inflation Expectations, and Michigan 5-Year Inflation Expectations are reported.
In terms of earnings reports later this week, on Tuesday we hear from AMTM, HEI, and WOR. Then Wednesday, ABM, BIRK, GIS, JBL, TTC, LEN, MU, MLKN, SCS, and WS report. On Thursday, we hear from ACN, KMX, CTAS, CAG, DRI, FDS, LW, PAYX, BB, FDX, AVO, NKE, and SCHL. Finally, on Friday, CCL and WGO report.
With that background, the market seems bullish although divergently so. All three major index ETFs opened the premarket with a modest gap higher. However, they have diverged in action since that point. SPY has printed a small, white-bodied candle with no wick or Marubozu. At the same time, DIA has printed an uncertain Doji candle inside Thursday’s candle. Finally, QQQ has given us a larger Marubozu candle and now sits at all-time highs in the early session. Once again, SPY and QQQ are above their T-line (8ema) while DIA remains below its own T-line. It is worth remembering that SPY and QQQ still sit at or near all-time highs, but DIA has given back 2%-3% since its highs. With one of the three above its T-line, one right at that 8ema, and one below its T-line, the short-term trend has to be seen as undecided. However, looking further out, obviously the mid-term and longer-term trends also remain bullish sitting at or near those all-time highs. In terms of extension, none of the three major index ETFs are too stretched from their T-lines. Meanwhile, the T2122 indicator is back deep into its oversold territory. So, while both sides of the market have room to move if they can find momentum, the Bulls have more rope to work with today. In terms of the 10 Big Dogs, early, seven of the 10 are in green numbers at this point of the morning. GOOGL (+0.77%) and AMD (+0.57%) pace the winners while NVDA (-0.49%) and NFLX (-0.44%) are the laggards. Once again, TSLA (+0.43%) is leading the dollar-volume traded by about 2.5 times over NVDA with the next closest 8 times less dollar-volume than NVDA.
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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