Markets gapped strongly higher on Friday (opening up 0.75% in the SPY, up 0.61% in the DIA, and up 1.01% in the QQQ).  From that point, all three major index ETFs gave us a slow, modest rally right up until 3:55 pm when we saw profit-taking the last 5 minutes across the board.  This action gave us gap-up, white-bodied candles in all the major index ETFs.  The DIA is candle was a Spinning Top, while the SPY and QQQ candle bodies were larger.  SPY broke out of the mid-June candle bodies while DIA and QQQ have not quite gotten to a retest of those prior highs. 

On the day, Friday, all 10 sectors were in the green with Technology (+1.25%) leading the way higher while Communications Services (+0.44%) lagged behind the other sectors.  At the same time, SPY gained 1.18%, DIA gained 0.79%, and QQQ gained 1.54%.  The VXX fell 1.46% to close at 25.00 and T2122 climbed even further into the overbought territory at 97.03.  10-year bond yields remained flat at 3.841% while Oil (WTI) climbed slightly to $70.64 per barrel.  This all happened on just average volume in the DIA and greater-than-average volume in both QQQ and SPY.

The major economic news on Friday started with the Fed’s preferred inflation measure showing a significant reduction in inflation.  The May PCE Price Index came in at 3.8% year-on-year (compared to a forecast of 4.6% and the April reading of 4.3%).  The month-on-month version of that May PCE Price Index showed a 0.1% increase which was well below the +0.5% expected and even well below the April +0.4% value.  The May Core PCE Price Index also came in below expectation but not by nearly as much at 4.6% (compared to a 4.7% forecast and a 4.7% April value).  So, overall, inflation is coming down more than anticipated and that was what the Bulls latched onto…gapping stocks higher.  At the same time, May Personal Spending also came in well below what was anticipated at +0.1% month-on-month (versus the forecast calling for +0.2% and the April reading of +0.6%).  Later, Chicago PMI was lower than expected at 41.5 (versus a forecast of 44.0 and better than the May reading of 40.4).  Finally, the Michigan Consumer Sentiment Survey reported a better-than-expected feeling of 61.5 (above the forecasted 61.3 and well above the May value of 55.4).

On Monday, the DIA gapped down 0.22%, the QQQ gapped up 0.16%, and SPY opened down 0.06%.  From there, the large-cap index ETFs put in a slow, modest but steady rally only broken by DIA profit-taking the last 10 minutes of the shortened day.  At the same time, QQQ was more like a roller coaster but also ended modestly higher.  This action gave us a gap-up white-bodied Doji in the QQQ, along with white-bodied candles in the SPY and DIA.  On the day, nine of the 10 sectors were in the green with Consumer Cyclical (+0.91%) leading and only Healthcare (-0.96%) in the red.  The SPY gained 0.12%, DIA gained 0.06%, and QQQ gained 0.24%. Meanwhile, the VXX fell 1% to 24.74 and T2122 dropped slightly but remains deep in overbought territory at 95.83.  This all happened on very low volume even for a 3.5-hour market day.

SNAP Case Study | Actual Trade

In major economic news Monday, Jun Mfg. PMI came in exactly as expected at 46.3 (down from the May value of 48.4).  Later, ISM Manufacturing PMI came in a bit low at 46.0 (compared to a forecast of 47.2 and a May reading of 46.9).  However, June Mfg. Price Index also came in lower than expected at 41.8 (versus a forecast of 44.0 and a May reading of 44.2).  So, overall June Manufacturing was reported in line to slightly below expectations. However, probably the biggest Monday news was that Saudi Arabia announced they will extend their voluntary oil production cuts for at least another month, through August, with the potential to continue on indefinitely. Russia was quick to follow suit. The effect of these cut extensions was offset by reduced US Manufacturing activity and the holiday-shortened day when many traders were not around at all. However, it is likely to be reflected Wednesday.

In stock news, on Friday, F announced they have signed an initial agreement to sell its Saarlouis Germany plant to a group including Chinese electric vehicle company BYDDY.  Elsewhere, TSP stock plummeted when the self-driving startup said Friday, they are considering selling the company’s US operations in order to focus on the Asia-Pacific geography.  At the same time, the CEO of SHEL’s renewables business left the company Friday just weeks after the SHEL CEO announced the company will focus on oil and gas (the more profitable units).  Meanwhile, DIS’s ESPN business unit laid off 20 on-air personalities mid-day Friday.  At the final bell Friday, AAPL closed with more than a $3 trillion market cap for the first time ever. After the close, JPM, WFC, GS, MS, and C all announced they have raised the Q3 dividends after sailing through the Fed stress test.  On Saturday, UAL awarded 30,000 frequent flier points to all passengers that suffered delays due to plane shortages.  UAL CEO Kirby also claimed that the airline would need to reduce flight schedules due to the planes that could not fly (since they do not comply with FAA 5G interference protections).  Later Saturday. TLSA announced it had beaten analyst expectations by delivering 466,140 vehicles and producing 479,700 during Q2.  This was a 10% increase compared to Q1 and 83% higher than Q2 of 2022. 

In stock legal and regulatory news, the FTS amended its complaint against WMT on Friday, alleging the giant allowed scam artists to use WMT money transfers to defraud consumers.  Elsewhere, the European Commission has demanded that German ga importer UNPRF divest its Dutch business before it will receive regulatory approval of Germany’s bailout of the company.  On this side of the pond, the US Federal Housing Finance Agency said it was considering limiting the ability of the biggest banks to use Federal Home Loan Banks as a financial backstop.  Meanwhile, BRKB-owned BNSF won an appeal of an earlier $228 million award in a case that found the railroad had unlawfully collected the fingerprints of truck drivers.  The Appeals Court ruled that the company had violated the law but also that the company was entitled to a jury-decided award to the plaintiffs (as opposed to the $5,000 per infraction that was assigned by the lower court).  Later, a Federal Judge ruled Friday afternoon that PPC, SAFM, TSN and several smaller companies must face antitrust litigation which accuses them of price fixing to inflate chicken prices.  On Saturday, Bloomberg reported that the FTC is going to bring an antitrust suit against AMZN for its marketplace and related to that platform giving preference to AMZN products.

Overnight, Asian markets leaned heavily toward the downside with only two of the 12 exchanges managing modest green numbers.  Meanwhile, Hong Kong (-1.57%), Shenzhen (-0.91%), and Shanghai (-0.69%) led the rest of the region lower. In Europe, we see the same picture taking shape with only Portugal (+0.26%) in the green at midday.  The CAC (-0.62%), DAX (-0.51%), and FTSE (-0.54%) lead the region lower in early afternoon trade.  In the US, as of 7:30 am, Futures are pointing toward the same type of start to the day.  The DIA implies a -0.46% open, the SPY is implying a -0.46% open, and the QQQ implies a -0.55% open at this hour.  At the same time, 10-year bond yields are up to 3.859% and Oil (WTI) is up 2% to $71.19 in early trading.

The major economic news events scheduled for Wednesday include May Factory Orders (10 am), FOMC June Meeting Minutes (2 pm), API Weekly Crude Stocks Report (4:30 pm) and Fed speaker (Williams at 4 pm).  There are no major earnings reports scheduled for Wednesday either before the open or after the close.        

In economic news later this week, on Thursday we get ADP Nonfarm Employment Change, May Imports/Exports, May Trade Balance, Weekly Initial Jobless Claims, June Services PMI, June S&P Global Composite PMI, June ISM Non-Mfg. PMI, May JOLTs Job Openings, and EIA Crude Oil Inventories.  Finally, on Friday, June Nonfarm Payrolls, June Avg. Hourly Earnings, June Participation Rate, and June Unemployment Rate are reported.

In terms of earnings reports, on Thursday LEVI reports.  Then on Friday, again there are no major earnings reports scheduled.

In miscellaneous news, on Friday, Russian Foreign Minister Lavrov announced the expected, saying “I don’t see what arguments there can be by those who would like to continue the Black Sea initiative.”  However, Lavrov was quick to add, “If the Black Sea Initiative ceases to operate, we will provide grain deliveries of a comparable or larger size to the poorest countries at our own expense, free of charge.” Elsewhere, the WHO (World Health Organization) is widely reported to be very near labeling one of the most widely-used artificial sweeteners (aspartame) to be potentially cancer-causing.  More than 6,000 consumer food products contain aspartame. The most widely cited of these are Diet Coke (KO) and Diet Pepsi (PEP).  On Monday, China imposed restrictions on the export of two metals (germanium and gallium) that are critical to the production of semiconductors. (China is the only major source of gallium, accounting for 94% of global production and also the world’s largest producer of germanium.)  This tit-for-tat move related to semiconductors comes a couple of days prior to the visit of Treasury Sec. Yellen to China for talks.  Finally, Japan announced Monday that they intend to go ahead with plans to dump 1 million tons of radioactive waste water from the Fukushima Daiichi Nuclear Power Plant cleanup (that has now been diluted and filtered to remove “most” radiation) into the ocean. The US has said they are accepting of the move, but all the regional nations (China, both Koreas, Indonesia, Malaysia, and the Philippines are objecting strenuously.

With that background, it looks like all three major index ETFs are looking to open lower today. The SPY and especially the DIA are printing black candle bodies in premarket being near their lows of the early session. QQQ is much more indecisive so far this morning. All three remain above their T-line (8ema) meaning this is at most a pullback in the uptrend, at least as of this point. This is the start of a new quarter. So, do not be surprised if we see funds that were late to the party continue reallocations or see fun inflows as FOMO grips the individual traders who compared their accounts to the major indices over the holiday. Also, remember the old Trader’s Almanac rule of thumb that markets are sad (bearish) when they have to come back to work after extra time off. As far as extension goes, none of the three major index ETFs is too far from their T-line. However, the T2122 indicator remains well up into its overbought territory. So, while there is some room to move higher (and keep in mind that markets can remain extended longer than we can remain solvent betting on mean reversion), the bears do have the benefit of more slack to run. Finally, even though many Fed speakers (including Chair Powell) have spoken multiple times since the June FOMC Meeting, the release of minutes this afternoon may cause some volatility. Just be aware.

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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