Stocks gapped between a half a percent and a percent lower at the open.  From there we had a sideways grind with a slight bullish trend right up until 2 pm, when a selloff kicked in and drove us back to the lows at the close.  With that said, the T-line (8ema) is fighting to hold as support for all 3 major indices.  So, on the daily candles, the DIA and SPY are looking like indecisive Spinning Top or Doji candles while the QQQ is printing a black-bodied candle with a lower wick.  Nine of the 10 sectors are bearish for the day with the Utilities fairing best (barely green) and Consumer Cyclical by far the worst-performing (down almost 3%).  On the day, SPY lost 1.12%, DIA lost 0.55%, and QQQ lost 2.14%.  The VXX gained 1% on the day to 22.21 and T2122 fell into the top of the oversold territory at 18.63.  10-year bond yields fell back below the key 3% level to 2.984% and Oil (WTI) fell a little most than 1% to $103.61/barrel.  All-in-all, Monday was just another lackluster, low-volume day of chop as Mr. Market decides whether or not we’ve put in a bottom.

In energy news, the Texas grid operator (ERCOT) told state residents to curb electric use between 2 pm and 8 pm Monday to avoid major outages.  This comes as the state is experiencing a heatwave with a 110+ degree heat index over the entire Southeast part of the state.  In addition, ERCOT has a variable rate pricing plan.  So, the cost of power has gotten ridiculous again with a single megawatt hour reaching as high as $2,000 at one point Sunday (compared to an average of just $69 year-to-date).  With no market solution (not connected to national grid) and wind production significantly below normal generation levels, ERCOT has no option other than rolling brownouts and blackouts to deal with record electric demand.  However, blackouts were barely avoided Monday as crypto miners across the state all shut down in addition to other usage curbing that allowed ERCOT to narrowly avoid a worst-case scenario. With that backdrop, Bloomberg reports that nationwide, electric utilities are poised for the most profitable summer in two decades as soaring electric rates are outpacing the cost of natural gas and coal.   Among these are AEP, WEC, CMS, AEE, ES, EIX, etc.

In business news, late in the afternoon, Bloomberg reported that RIVN is planning to lay off 5% of its roughly 14,000-member workforce.  However, the report said the cuts would not affect manufacturing.  RIVN stock was down 6.5% during the day.  After the close, GPS announced its CEO is stepping down, effective immediately.  GPS stock fell 4.6% during the day and as much as another 4.25% after-hours on the news.  This morning PEP raised its revenue guidance for the year, but decided to leave earnings guidance as it was due to inflation, recession, and Russia-Ukraine risks.

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In stock news, TWTR got hammered (-11.30%) Monday in reaction to Elon Musk’s electing to walk away from his $54.20 offer to buy TWTR.  The company replied with lawyers saying the termination letter was invalid and they still expect him to close the deal.  Litigation is undoubtedly ensuing.  TWTR closed at $32.65, meaning that if the deal were to somehow go through, a buyer at the close would make 66% on the sale to Musk.  Other tickers that took heavy hits Monday include DISH (-6.92%), MTCH (-6.70%), TSLA (-6.55%), WYNN (-6.46%), and LVS (-6.31%).  So far this morning PEP reported beating on both the revenue and earnings lines.  PTON also announced that it is shutting down all in-house manufacturing and instead will outsource to Taiwanese partner Rexon Industrial. Also this morning, DG announced its CEO will retire and be replaced by the current COO.

On the Russian invasion story, Europe is worried as the planned maintenance shutdown of the Nord Stream 1 gas pipeline began Monday.  The fear is that Russia will hold the resumption of gas shipments hostage and without cheap natural gas, the German economy is at serious threat.  Overnight, the US reported that Iran is set to supply Russia with “weapon-capable” drones (a feature Russian drones have lacked) as early as later this month.  On the ground, Russian forces are making incremental gains around Kharkiv and Donetsk and continue artillery assaults on the supply routes to the cities of Sloviansk and Kramatorsk according to the UK Ministry of Defence.  However, Ukraine announced (propaganda or reality) it is launching a major offensive to liberate Southern Ukraine from Kherson to Mykolaiv.

In Forex news, the Euro remains on the brink of parity with the Dollar as fear rages in Europe over inflation, recession, and the Ukraine war impacts.  The natural gas supply issue and more talk of tightening out of ECB officials are the most recent driver of this trend.  However, analysts say another “hidden” underlying fear is the increasing number of Covid cases in Chinese cities (and the impact that could have on global supply chains as well as Chinese demand).  So, for now, the dollar safe-haven trade remains in play with the EUR/USD at 1.005.

Overnight, Asian markets leaned heavily to the red side again Tuesday.  Taiwan (-2.72%), Japan (-1.77%), and Shenzhen (-1.41%) paced the losses.  However, the red was widespread, with only Singapore (+0.46%) posting any appreciable gain.  In Europe, again we see a similar story taking shape at mid-day.  With just 3 exchanges barely in the green, the FTSE (-0.60%), DAX (-0.91%), and CAC (-0.46%) are leading the region lower in early afternoon trading.  As of 7:30 am, US Futures are pointing toward another gap down to start the day.  The DIA implies a -0.86% open, the SPY is implying a -0.78% open, and the QQQ implies a -0.52% open at this hour.  10-year bond yields are back up slightly to 2.921% and Oil (WTI) is down hard (almost 5%) on recession fears to $99.03/barrel in early trading.

The major economic news events scheduled for release Tuesday we get the WASDE Report (noon) and the 10-year bond auction (1 pm).  The only major earnings reports scheduled for the day are PEP before the open and AMX after the close.

In economic news coming later this week, on Wednesday, the June CPI, Crude Oil Inventories, the Fed Beige Book, and the June Federal Budget Balance are announced.  On Thursday, we see the June PPI and Weekly Jobless Claims.  Finally, on Friday we get June Retail Sales, June Import/Export Price Index, NY Empire State Mfg. Index, June Industrial Production, May Business Inventories, and Michigan Consumer Sentiment.

In earnings reports later this week, Wednesday we get reports from DAL and FAST.  On Thursday, earnings season kicks off again with reports from CTAS, CAG, ERIC, FRC, JPM, MS, and TSM.  Finally, on Friday we hear from BK, BLK, C, PNC, PGR, STT, USB, UNH, and WFC.  

Earnings season is just a couple of days away and tomorrow we get June CPI. With both inflation and recession at top of mind for traders, it would not be surprising to continue seeing choppy “wait and see” action until we get more clues later in the week. At this point, it looks like a gap down will take us back below the T-line (8ema) in all 3 major indices at the open. However, keep in mind that regardless of how we start the day, intraday reversals and general market chop has been the norm lately. The longer-term trend remains bearish and we have resistance from recent highs and the mid-term downtrend not far overhead.

Demonstrate patience and wait for confirmation. Stick with your trading rules, trade with the trend, and take those profits when you have them. Remember that trading is our job. So, do the work and follow the process. Always move your stops in your favor and remember the “Legend of the man in the green bathrobe“…it is NOT house money, it’s all our money! One way to put this is Buffett’s first rule of making big money in the market, which is to not lose big money in the market. So, don’t be stubborn. If you have a loss, just admit you were wrong, respect your stop, and take the loss before it grows. Lastly, remember that you get rich slowly and steadily in Trading…not by striking it rich on one or two trades. So, give up that lottery ticket mentality. Lastly, remember it is Friday. So, be prepared for the weekend news cycle.

See you in the trading room.

Ed

Swing Trade Ideas for your consideration and watchlist: CHGG, GM, TRGP, IRM, UPRO, OXY, TNA, PXD, CPE. You can find Rick’s review of tickers on his YouTube Channel here. Trade your plan, take profits along the way, and smart. Also, remember to check for impending earnings reports. Finally, remember that any tickers 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

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🎯 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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