Tuesday saw a fair amount of whipsaw in the Market.  The SPY gapped down 0.72%, DIA gapped down 0.46%, and QQQ gapped down 0.99%.  However, the Bulls stepped in to rally all three major index ETFs until 12:30 p.m. when all three had recrossed the opening gap and reached the high of the day.  Then the Bears took over to sell off the market and recapture a good portion of what the Bulls had taken back during the morning rally by 2 p.m.  The rest of the day saw an hour and 45 minutes of sideways grind and then a rally into the close the last 15 minutes for all three major index ETFs.  This action gave us white-bodied candles in all three.  The QQQ printed a Spinning Top candle that retested and closed back up above its T-line (8ema) and 50sma.  The SPY and DIA both printed white candles with significant upper wicks that stayed up above their T-lines and the DIA stayed above its 200sma.  Again, this all happened on above-average volume in the DIA and below-average volume in both the SPY and QQQ.

On the day, eight of the 10 sectors were in the green with Basic Materials (+1.08%) and Consumer Cyclical (+1.00%) out front leading the way higher.  Meanwhile, Utilities (-0.15%) lagged behind the other sectors.  At the same time, the SPY was flat, the DIA gained 0.03%, and QQQ lost 0.33%.  VXX gained 2.79% to close at 23.55 and T2122 climbed back up to the bottom of the overbought territory at 81.61.  10-year bond yields spiked to 4.836% while Oil (WTI) popped back up to close at $87.73 per barrel.  So, it was a volatile day but at least it came on only a couple of moves.  We gapped down, rallied all morning, and reversed to give back much of the morning rebound.  At that point, Mr. Market was basically worn out.  So, we drifted sideways in the late afternoon only to rally the last 15 minutes.

The economic news reported Tuesday included September Retail Sales month-on-month, which came in stronger than expected at +0.7% (compared to a forecast of +0.3% but less than the August reading of +0.8%).  This included Sept. Core Retail Sales that were also stronger than expected at +0.6% (versus a forecast of +0.2% but with a declining rate of increase since August’s value was +0.9%).  Later, Sept. Industrial Production month-on-month was also stronger than anticipated at +0.3% (compared to a forecast of +0.1% and the August reading of +/-0.0%).  On a year-on-year basis, September Industrial Production came in unchanged at +0.08% versus the August value of +0.08%.  Still later, August Business Inventories month-on-month grew more than expected at +0.4% (compared to a forecast of +0.3% and the July value of +0.1%).  At the same time, August Retail Inventories were lower than predicted at +0.5% (versus a forecast of +0.6% but still higher than the July reading of +/- 0.0%).  Finally, API Weekly Cruce Oil Stocks reported a greater-than-expected drawdown of 4.383-million-barrel (compared to a forecasted 1.267-million-barrel drawdown and far different from the prior week’s 12.940-million-barrel inventory build).

In Fed speak news, Richmond Fed President Barkin indicated he is in the “wait and see” camp but is leaning dovish on Tuesday.  Barkin told a Real Estate Conference, “I see an economy that is much further along the path to demand normalization than much of the data would tell you.” even as “the path for inflation isn’t clear yet.”  He went on to say, “I am still looking to be convinced, both that demand is settling and that any weakness is feeding through to inflation.”  Later while being questioned by reporters, Barkin said “Longer-term rates have moved up, that’s certainly tightened financial conditions…”  After the close, Minneapolis Fed President Kashkari gave hawks some reason for hope when Reuters reported he told a University of Minnesota event that inflation has taken much longer than expected to come down and “it is still too high.”

In Autoworker contract talks and strike news, STLA canceled a scheduled presentation at technology show CES in January, blaming the cancellation on the UAW strike.  At the same time, GM announced that it is pushing back the scheduled start of production at its Orion EV truck plan by a year.  While speculated by analysts, the company did not mention the strike as a cause.

In stock news, on Tuesday, WH rejected a $7.8 billion ($49.50/share plus 0.324 shares of CHH) takeover offer from CHH.  This came after a six-month negotiation process.  Later, LCID shares plummeted after they reported Q3 productions and deliveries with minimal increases despite steep discounting.  At the same time, after announcing earnings, JNJ said it has embarked on a 2-year restructuring plan for its orthopedics (medical devices) business unit.  Elsewhere, HSBC announced it has taken further steps to tighten internal communications rules amidst strong scrutiny of the industry for prohibited “off books” communications between traders.  Later, GOOGL and QCOM announced a joint project to develop a RISC-V Snapdragon Chipset to increase the functionality of Wear OS watches.  (This comes after the recent announcement of GOOGL’s latest Pixel Watch 2 using the QCOM Snapdragon processor.)  At the same time, Reuters reported that TSN workers and activists continue their protests outside of the meat company’s headquarters in AR.  The protests are over the company using child labor (through contractors) to clean their slaughterhouses and packing plants.  After the close, Reuters reported that CHK had approached SWN about a potential acquisition in the $12 billion deal value range.  At the same time, Reuters also reported that MSFT is near to bringing on AMZN as a customer for its Office365 via cloud tools (1 million seat licenses) in what insiders said would be more than a $1 billion deal annually for MSFT.

In stock government, legal, and regulatory news, the AVGO merger with VMW was hurt by rumblings from Chinese regulators.  The rumor is that this $61 billion deal is a bargaining chip in the US-China technology sanctions fight.  Later, NKTX shares skyrocketed Tuesday after the FDA approved the company’s genetically engineered therapy for lupus nephritis.  (NKTX closed up more than 112%.)  Elsewhere, the NHTSA announced they have initiated an investigation into GM’s self-driving division (Cruise) related to pedestrian risks posed by their robotaxis.  At the same time, the Fed announced it will not enforce Dodd-Frank Category 2 requirements by the end of 2024.  The rules would have required additional capital requirements for banks of over $700 billion in assets.  BAC was the strongest big bank on the news after having acquired MUFG, which was not compliant with the rules.  Meanwhile, the NHTSA announced TSLA is recalling 55,000 2021-2023 Model X, which are failing to detect low brake fluid.  After the close, META and FTC lawyers argued against one another in a case over the FTC’s toughened privacy rules.  Also after the close, NVDA filed a notice that new technology export restrictions from the US will impact its results by preventing the sale of its high-profit AI products and top-end gaming video cards (which can be used for low-end AI) into China.  The restrictions will also impact AMD and to a lesser extent INTC but neither of them has filed SEC earnings impact statements yet.

After the close, HWC, IBKR, OMC, UAL, and WTFC all reported beats on both the revenue and earnings lines.  However, JBHT missed on both the top and bottom lines.  It is worth noting that UAL also lowered its forward guidance.  It is also worth noting that IBKR had 87% revenue growth (quarter on quarter), while PNFP and WTFC both had greater than 54% quarter-on-quarter revenue growth.

Overnight, Asian markets were mixed but leaned toward the red side.  Shenzhen (-1.24%), Taiwan (-1.21%), and Singapore (-1.11%) led the region lower.  Meanwhile, in Europe, we see a similar picture taking shape midday.  The CAC (-0.61%), DAX (-0.64%), and FTSE (-0.72%) are leading the region lower in early afternoon trade.  In the US, as of 7:30 a.m., Futures are pointing toward a down start to the day.  The DIA implies a -0.28% open, the SPY is implying a -0.44% open, and the QQQ implies a -0.56% open at this hour.  At the same time, 10-year bond yields are down a bit to 4.815% and Oil (WTI) has spiked 2.7% to $89.00 per barrel in early trading.

The major economic news scheduled for September Building Permits and Sept. Housing Starts (both at 8:30 a.m.), EIA Weekly Crude Oil Inventories (10:30 a.m.), and the Fed Beige Book (2 p.m.).  We also hear from Fed members Waller (noon), Williams (12:30 p.m.), Bowman (1 p.m.) and Harker (3:15 p.m.).  The major earnings reports scheduled for before the open ABT, ALLY, ASML, CFG, ELV, FHN, MTB, MS, NDAQ, NTRS, PG, STT, TRV, USB, and WGO.  Then, after the close, AA, COLB, CCI, DFS, EFX, KMI, LRCX, LVS, LBRT, NFLX, PPG, SAP, STLD, TSLA, and ZION report. 

In economic news later this week, on Thursday, we get Weekly Initial Jobless Claims, Philly Fed Mfg. Index, Sept. Existing Home Sales, and the Fed Balance Sheet.  We also hear from Fed Chair Powell (noon), Bostic (4 p.m.), and member Harker 5:30 p.m.).  Finally, on Friday, there is no scheduled news.  However, again we hear from Fed member Harker (9 a.m.) and Mester (12:15 p.m.).

In terms of earnings reports later this week, on Thursday, ALK, AAL, T, BX, EWBC, FITB, FCX, GPC, KEY, MAN, MMC, NOK, PM, POOL, SNA, SNV, TSM, TFC, UNP, WSO, WBS, CSX, ISRG, KNX, and WAL.  Finally, on Friday, AXP, ALV, CMA, EEFT, HBAN, IPG, RF, and SLB report.

So far this morning, ABT, ALLY, ASML, CBSH, ELV, FHN, MTB, MS, NDAQ, PG, and USB all reported beat on both the revenue and earnings lines.  Meanwhile, CFG, NTRS, and TRV reported beats on revenue while missing on earnings.  On the other side, WGO missed on revenue while beating on earnings.  However, SCL and WIT missed on both the top and bottom lines. It is worth noting that ABT and ELV raised their forward guidance while CFG and USB lowered guidance.

In US Congressional news, right-wing Re. Jordan failed to get anywhere near enough votes to become Speaker Tuesday, coming in a distant second even though his party has the majority.  20 GOP members voted against him and one abstained, giving him 200 votes after bullying other moderates to fall in line.  After that vote, a second vote was canceled until today when it became clear he would not gain the votes on Tuesday.  Multiple media reports say one “no” vote has said they will vote for Jordan on the next ballot, but others that were “yes” votes said they are leaning toward voting “no” now. Elsewhere, Reuters reported that Israel is asking for $10 billion in cash aid immediately to pay for its retaliation against Hamas and also payments to its citizens impacted by the terror attacks.  However, Bloomberg reports the Administration is now considering a funding request of $100 billion covering Israel, Ukraine, and Taiwan. (This comes just days after the request was expected to be North of $2 billion and to be fair, I guess 100 is greater than 2.)  Given the race to proclaim and demonstrate support for Israel, these packages are likely to get broad bipartisan support.  GOP Senate Majority Leader McConnell said he expects an assistance bill for Israel, Ukraine, and Taiwan as well as doing “something serious” about the US-Mexican border.  However, he did not commit to any amount when pressed by Reuters.  Of course, no package can even be voted on until the GOP finds their next Speaker of the House.

In miscellaneous news, President Biden is in Israel today and his trip to Jordan to meet with Palestinian and Arab leaders was canceled after a Gaza hospital was blown up Tuesday, reportedly killing at least 500.  (It’s a bit difficult to de-escalate or talk about the future of Palestinians without talking to any Palestinians or their supporters.) Upon landing, Biden echoed the Israeli line that the hospital bombing “appears” to be the fault of a failed missile launch by Hamas. Elsewhere, in China, one of the country’s largest developers faces bankruptcy as Country Garden failed to make a payment on its debt and the grace period expired today.

With that background, it looks like the Bears are firmly in control in the premarket despite more strong earnings reports. All three major index ETFs opened the early session down and have printed black-bodied candles (with DIA being the only one of the three looking indecisive). However, only the QQQ has crossed back below their T-line (8ema). QQQ is also crossing down its 50sma in the early session while the DIA remains just above its 200sma. The economic news today is not likely to more markets much, but news out of the House, Fed speakers, or President Biden’s trip to Israel could cause some volatility. In terms of extension, none of the three major index ETFs are too far from their T-line (8ema). The T2122 indicator is now back just inside the low end of the overbought territory. So, again we have slack to run in either direction, but the probabilities are slightly in the Bears favor.

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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