The DIA diverged from the SPY and QQQ at the open Tuesday.  Both SPY and QQQ gapped down half of a percent and then both followed through strongly for 30 minutes to lows where SPY was down 1.20% and QQQ was down 1.75% at 10 am. Meanwhile, DIA gapped down just 0.25 percent and then traded sideways in a very tight range for the first 30 minutes.  However, at 10 am, all 3 got back in lock-step as the bulls started a strong rally that lasted until 1 pm, where we found the highs of the day.  After a little less than 2 hours of grinding slightly lower, the bears really kicked into high gear at about 2:40 pm and drove us to new lows for the day in all 3 major indices at 3:20 pm.  Then the chop continued as the bulls stepped back in to bounce us up off those lows the last 40 minutes of the day.  This action gave us gap-down, indecisive, candles with large upper wicks and smaller lower wicks.  In other words, Spinning Top type candles in all 3 indices.  The DIA retested its T-line (8ema) and failed the test earlier in the day.

On the day, eight of the 10 sectors are in the red with Consumer Defensive (+0.60%) leading the gains and Technology (-1.89%) being by far the sector showing the largest loss.  Meanwhile, SPY lost 0.65%, DIA gained 0.11%, and QQQ lost 1.37%.  The VXX was up 1.5% to 21.76 and T2122 remains in the oversold territory at 12.50.  10-year bond yields rose to 3.937% and Oil (WTI) fell 2.75% to $88.64/barrel.  Overall, it has been a volatile, choppy, and indecisive day across the market.  It may be that markets were really just waiting on inflation and earnings data later this week.

In FOMC news, on Tuesday, Philly Fed President Harker again told an audience he believes the central bank can reduce inflation without triggering a deep recession and causing high unemployment.  However, he did not give additional clues about the size of rate hikes he feels appropriate to do that inflation fight or how long they will continue. Later, Cleveland Fed President Mester told a NY Economic Club audience the Fed needs to continue raising rates.  She reiterated that “at some point, as inflation comes down, then my risk calculation will shift.  But at this point, my concern lies more on the fact we haven’t seen progress on inflation.”  She continued, “Given current economic conditions and the outlook, in my view, the larger risks come from tightening too little.” (She thus implied that she continues to favor at least 0.75% hikes.)

SNAP Case Study | Actual Trade

In stock news, BK announced it will join COIN and BLK in offering cryptocurrency custody services.  Meanwhile, UBER, LYFT, and DASH all slumped Tuesday after a Dept. of Labor proposal was announced that would require any contractor that was “economically dependent” on a company to be classified as an employee by that company.  This would dramatically raise costs.  In union news, AMZN workers in Southern CA have filed a petition with the National Labor Relations Board to have a union election.  At the same time, the voting started in the AMZN upstate NY union vote.  Elsewhere, the US Supreme Court heard arguments on whether or not to overturn a CA law prohibiting the sale of meat (pork) from animals that were kept in tightly confined spaces (which is true for hogs (pork) and chickens and could even be argued for cattle).  Companies that will be directly impacted include TSN, BRFS, HRL, IBA, PPC, and SAFM.  Finally, in “sale news,” AMZN, WMT, and BBY kicked off the holiday sales season with major online sales events (which follow the success of AMZN Prime Day).  Those 2-day sales started Tuesday.

In European economic news, Tuesday afternoon (US time), BoE Governor Baily told UK fund and investors that they had 3 days to get their portfolios fixed before the central bank will withdraw its bond-buying support from the market.  The BoE has stepped in the last 2 weeks with emergency buying to prevent UK bonds from reaching a “self-reinforcing fire sale” situation.  He also implies that this emergency action will delay quantitative tightening by the BoE (which was scheduled to start Oct. 31) until later this year.  Elsewhere, the ECB announced it will wait until interest rates are back close to 2% before it begins to shrink its own balance sheet.

So far this morning, PEP beat on both the revenue (by over $1.13 billion) and earnings (by 7%) lines.  The company also raised its 2022 annual forecast for revenue by 20% (from +10% to +12% for the year).  The company said its revenue rose 20% for Q3 (through price increases) despite a small decline in product volume sold. This indicates that the “inflation story” has given the company cover to increase prices by significantly more than costs rose and that the consumer is willing to accept these higher prices.

In mortgage news, home loan applications fell 2% for the week as the interest rate on a 30-year, fixed-rate, conforming loan went from 6.75% to 6.81%.  However, as rates have risen, there has been renewed interest in adjustable-rate mortgages (which has been a dead niche for years).  (ARMs used to make up less than 3% of loans and now are up to 12% of all new home loans.)  This shift comes as home buyers have become accustomed to very low rates and either expect rates to come back down or are betting that they will have moved again before the rate adjusts up.  The rate for a 5/1 ARM (rate is set for 5 years) is just 5.56%.

Overnight, Asian markets were mixed again but more evenly split today.  Shenzhen (+2.46%) and Shanghai (+1.53%) were by far the strongest markets.  Meanwhile, it was Hong Kong (-0.78%), New Zealand (-0.76%), and Singapore (-0.70%) that paced the region’s losses.  In Europe, the bourses are mixed on mostly modest moves at midday.  The FTSE (-0.10%), DAX (+0.20%), and CAC (+0.11%) show indecision at this point.  At the same time, smaller exchanges are showing greater moves (in both directions) in early afternoon trading.  As of 7:30 am, US Futures are pointing toward a green start to the day.  The DIA implies a +0.49% open, the SPY is implying a +0.67% open, and the QQQ implies a +0.89% open at this hour.  At the same time, 10-year bond yields are up strongly again to 3.958% and Oil (WTI) is up one-half of a percent at $89.79/barrel in early trading.

The major economic news events scheduled for Wednesday include September PPI (8:30 am), WASDE Ag Report and EIA Short-Term Energy Outlook (both at noon), September Fed Meeting Minutes (2 pm), and the API Weekly Crude Oil Stocks report (4:30 pm).  We also have a Fed speaker scheduled (Bowman at 6:30 pm).  The major earnings reports scheduled for the day are limited to PEP and WIT before the open.  There are no major reports after the close.

In economic news later this week, on Thursday, September CPI, Weekly Initial Jobless Claims, EIA Weekly Crude Oil Inventories, and the Federal Budget Balance are reported.  Finally, on Friday, we get September Retail Sales, September Import/Exports, August Bus. Inventories, Mich. Consumer Sentiment, and August Retail Inventories.

In earnings reports later this week, Thursday, we hear from BLK, CMC, DAL, DPZ, FAST, INFY, PGR, TSM, and WBA.  Finally, on Friday, C, FRC, JPM, MS, PNC, USB, UNH, and WFC all report.

This morning all eyes will be on the PPI numbers during the pre-market. After that, some may look ahead to the Fed Minutes in the afternoon. However, we already know what FOMC Chair Powell said that day and have had an absolute chorus of Fed speakers reiterating the same story since. So, the meeting minutes may be a non-story. So, I think the inflation data (and read-through to out-guessing when the Fed will lighten up) will be the main market driver today. Don’t be surprised if we see some market “dead time” as some traders decide to wait on CPI and the real start of the Earnings Season before placing many bets. Overall then, look for morning volatility and a potentially dead market once we get past that knee-jerk and “second thought.”

With this backdrop, the premarket action seems to show some optimism ahead of the PPI data. The market is a bit extended in terms of T2122, but not extremely so. Watch the T-line levels for resistance if the bounce gets that far. Once again, the one thing we know for sure is that the strong bear trend is still in place and that has to be the main directional indicator we heed. So, don’t predict a bottom. If you are going long the market, be sure you are either quick or in it for the long term because a resumption of the down move is the most likely scenario for now.

Don’t be stubborn. If you have a loss, just admit you were wrong, respect your stop, and take the loss before it grows. When price does move in your direction, always move your stops in your favor (remember the “Legend of the man in the green bathrobe“…it is NOT HOUSE MONEY, it’s all OUR MONEY!). Also, keep in mind that trading is a job. It’s not a hobby. 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. Demonstrate patience and wait for confirmation. 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.

See you in the trading room.

Ed

Swing Trade Ideas for your consideration and watchlist: EOG, COP, DVN, SLB, OXY, MRO, VLO, PSX. 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

🎯 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.

Hit and Run Candlesticks / Road To Wealth Youtube videos

Disclosure: We do not act on all trades we mention, and not all mentions acted on the day of the mention. All trades we mention are for your consideration only.

Free YouTube Education  •  Subscription Plans • Private 2-Hour Coaching

DISCLAIMER: Investing / Trading involves significant financial risk and is not suitable for everyone. No communication from Hit and Run Candlesticks Inc, its affiliates or representatives is not financial or trading advice. All information provided by Hit and Run Candlesticks Inc, its affiliates and representatives are intended for educational purposes only. You are advised to test any new trading approach before implementing it.  Past performance does not guarantee future results.  Terms of Service