Thursday (virtual Friday) was an interesting day.  Substantial hopes for oil production cuts led to massive strength in the energy names premarket.  Then we got a much worse unemployment number than expected, followed minutes later by the Fed announcing details of a new $2.3 Trillion asset purchase program.  As a result, we gapped higher about 1%, except the oil heavy small-caps which gapped up 3.5%.  However, a volatile day and no completion of the OPEC+ deal left us with “gap-up dojis” across the 3 major indices.  The SPY closed up 1.52%, the DIA up 1.20%, and the QQQ flat at +0.14%.  The VXX was down slightly to 41.57 and the 10-yr. bond yield closed down to 0.729%  Oil was the real roller-coaster as it was up 12% at one point, but the lack of an announced production cut during the session caused a massive all-day selloff that left Oil (WTI) down 7.5% to $23.19/barrel.

Over the weekend, OPEC+ did agree on the expected 9.7mil barrel/day production cut for May and June (about 10% of global production), as well as 8mil barrels per day from July through December and then 6mil barrels per day all of 2021.  As usual, the vast majority of the cuts will come from Saudi Arabia (8.5 billion barrel/day). However, for the first time ever, the US will participate in the cuts, although the mechanism and duration of US cuts are not clear and there are conflicting reports.  The sticking block for a deal was Mexico until Sunday.

Apparently the President agreed that the US will cut approximately 300,000 barrels/day of US production to offset Mexico’s refusal to cut more than 100,000 barrels.  (OPEC had demanded that Mexico cut 400,000 barrels/day.)  Bloomberg reported that the reason the US is participating in the OPEC+ cuts is that Mexico holds a huge block of put options (price insurance) with Wall Street investment banks and US oil companies.  This insurance policy means that low oil prices don’t hurt Mexico but instead pass the pain on to US interests.  Bloomberg estimated (based on prior year data) that Mexico is still receiving about $45/barrel (with the difference between $45 and the market price paid by the US put sellers).  As a result of this hedge, Mexico had no reason to agree to major production cuts.  It also had allies in the US who had pressed the President to do whatever it takes to secure OPEC+ cuts (and they hope, push oil prices back up above $45).

On Sunday, Dr. Fauci (NIH) said he was cautiously optimistic that the virus outbreak in the US is slowing enough that measures could start to be eased IN SOME WAYS AND IN SOME AREAS during May.  However, he said that other areas will take longer and some measures (social distancing) will not end. And, regardless of when easing starts, we need to expect new outbreaks to occur.  In short, life will not return to normal for a long time to come. The important thing is that we have enough testing, immediate isolation and contact-tracing capacity in place in the specific areas eased before the time of easing in order to track down new cases and contain the new outbreaks.

On the virus front itself, the global headline virus numbers have now reached 1,864,555 confirmed cases and 115,099 deaths.  In the UK, PM Johnson was released from the hospital to continue recovery at home.  Both Spain and Italy saw a leveling off of new cases, but their death numbers fluctuate as the toll rose again in Spain after 3 days of decline. Nonetheless, Spain began easing some of its lock-down measures on Monday. On the downside, Russia saw a record number of new cases. And in Asia, Indonesia and Singapore also saw new record numbers of cases, while the number of new cases in China has once again climbed above 100/day again.

Meanwhile, in the US we now have 560,433 confirmed cases and 22,115 deaths.  Over the weekend AAPL and GOOG teamed up to announce a contact tracing platform based on cell phone GPS positioning and Bluetooth connections made.  This is very similar to the mandatory tracking and “social passport” phone app the Chinese have deployed.  Advocates for civil liberties and limitations on governmental power have already voiced concern over the potential for abuse of this new platform in the longer-term.

Overnight, Asian markets were mixed but mostly red with Hong Kong and Australia being the green outliers.  In Europe, markets are also mixed but are mostly green with the majors (DAX, FTSE, CAC) well on the positive side at this point in their day.  As of 7:30 am, US futures are flat, sitting on either side of break-even from Thursday’s close.

There is no major economic news for Monday, although markets may react to Friday’s March Core CPI, which came in slightly lower than estimates or Sunday’s Oil Production Cut announcement.  There are also no major earnings Monday.

Other noteworthy virus-reaction news includes AMZN having stopped accepting new Grocery customers. In addition, JPM has raised its mortgage lending standards to reduce the risk of loan defaults. The new standards include a 700+ credit score and a 20% cash down payment on the purchase. DIS also announced it will furlough 43,000 union workers from its Disney World theme park.

On Sunday, Fed voter Neel Kashkari said he expected a “long and hard road to recovery” with rolling phases of flare-up and that expectations of a V-shaped economic recovery are too optimistic.  So, the uptrend continues, but fears remain palpable.  The good news is that the market tends to lead the economy by 3-6 months.  Remember, while it may be time to start dipping your toe in again, we need to continue to be very attentive, and either be very fast (day trade) or very slow (long-term holds).  Be very cautious about any swing trades you take.

Ed

There are no Swing Trade Ideas for your watchlist today. Trade smart, take profits along the way and trade your plan. Also, don’t forget to check for upcoming earnings. Finally, remember that the stocks/etfs we mention and talk about in the trading room are not recommendations to buy or sell.

🎯 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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