Markets opened positive, if mixed, on Friday.  The DIA opened flat, while the SPY and QQQ both gapped about a half of a percent higher at the open. All 3 major indices then followed through in a rally until about 10:45 am.  At that point, all 3 sold off sharply for 45 minutes only to reverse again and start a long, strong, sustained rally for almost the entire rest of the day.  With that said, in the last 10 minutes of the day, all 3 indices sold off as that dark pool volume crossed the tape.  This left us with strong white candles with wicks on both ends across the major indices.  Volume was closer, but still below, average on that month-end rebalancing. 

Eight of the 10 sectors were in the green, with Energy up a whopping 3.08% and the worst of the losers was Healthcare (-0.59%).  Over 70% of stocks closed about their 40sma and 29% closed above the 200sma.  On the day, SPY gained 1.46%, DIA gained 1.01%, and QQQ gained 1.82%.  The VXX climbed slightly to 20.94 and T2122 remains deep in the overbought territory at 96.46.  10-year bonds yields were down sharply as somebody bought up bonds, giving us a 2.66% yield and Oil (WTI) was up more than 2% to $98.43/barrel.  This ended the best month since 2020 in all 3 major indices.

In economic news, June Personal Spending came in stronger than expected at +1.1% (versus +0.9% estimated and May’s +0.3%).  The Q2 Employment Cost Index came in a bit higher than expected too at +1.3% (versus +1.2% forecast), but better than Q1’s +1.4% number. The Chicago PMI came in lower than expected at 52.1 (55.0 estimate).  However, Michigan Consumer Sentiment came in better than expected at 51.5 (versus an estimate of 51.1 and last month’s 50.0). Taken together, this shows us the business is softening in anticipation of a downturn, but the consumer (driver of the economy) is holding up and has a little better outlook now that gas prices have been falling for 2 months.

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In stock news, on Friday BABA was added to the SEC’s delisting watchlist (of more than 270 Chinese companies identified as at risk for delisting. The dispute is over non-compliance with US auditing standards.  BABA was down more than 11% on the day.  Elsewhere, AVYA fell 57% after the company posted terrible preliminary Q3 results and fired the company’s CEO.  At the close Friday, AMD passed INTC in terms of market cap after INTC’s -8.56% day on poor earnings and outlook.  On Saturday, BA workers cancelled their planned strike and will instead vote on a new contract proposal on Wednesday.  Also on Saturday, USB was fined $37.5 million for the same practices that caused the uproar over WFC.  USB had pressured employees to meet quotas by illegally accessing customer credit and personal data (for targeting) and then opening sham accounts in customer names.

In China news, real estate developer Evergrande said one of its subsidiaries had been ordered to pay a little over $1 billion to a guarantor, who had guaranteed loans in July 2021.  Evergrande defaulted on the loans, the guarantor paid, and now Evergrande is obligated to pay the guarantor ahead of other creditors.  In the same sector, a Chinese mortgage payment revolt (well over 100 developers have been hit with a loan payment boycott as projects were not completed by developers) has caused prospective new buyers to rethink.  As a result, Chinese July home sales fell a staggering 40% (year on year) as new buyers no longer trust the developers will finish projects.  Elsewhere, Speaker of the House Pelosi has left Sunday for her Asian trip with the itinerary, and the Speaker herself being silent on whether there will be a stop in Taiwan.  This comes as China decried a potential visit from what would be the highest-ranking US official to visit Taiwan since 1997. 

So far this morning, BLDR, J, GPN, AMG, CHKP, ARLP, and L have all reported beats on both the top and bottom lines.  Meanwhile, HSBC missed on revenue while beating on earnings.  On the other side, CNA and JELD both beat on revenue while missing on earnings.  So far there have been no reports today that missed on both revenue and earnings.

Overnight, Asian markets leaned heavily to the green side on Monday.  Shenzhen (+1.20%), Thailand (+1.07%), and India (+1.06%) led the gainers.  Only Taiwan (-0.12%) showed any red on the day.  In Europe, stocks are leaning to the upside, but show more red than in Asia at mid-day.  The FTSE (+0.51%), DAX (+0.40%), and CAC (+0.46%) are leading the region higher while 5 exchanges head South, led by Russia (-0.67%) in early afternoon trading.  As of 7:30 am, US Futures are pointing toward an open just on the red side of flat.  The DIA implies a -0.02% open, the SPY is implying a -0.15% open, and the QQQ implies a -0.11% open at this hour.  10-year bond yields are falling, now at 2.649%, and Oil (WTI) is down more than 1.6% to $97.01/barrel in early trading.

The major economic news events scheduled for Monday are limited to Mfg. PMI (9:45 am) and ISM Mfg. PMI (10 am).  The major earnings reports scheduled for the day include AJRD, AMG, ARLP, BLDR, CHKP, CAN, GPN, HSBC, J, JELD, K, and ON before the open.  Then, after the close, ATVI, AFL, AMRC, ANET, CAR, CF, CVI, DVA, DVN, FANG, EHC, ENSG, NSP, KMPR, KMT, LEG, MATX, MOS, PINS, RRX, SANM, SBAC, SPG, STRL, TWI, RIG, TA, UNVR, WMB, and WWD report.

More than 20% of the S&P 500 report earnings this week.  However, in economic news later this week, on Tuesday we get June JOLTS, API Weekly Crude Oil Stocks, and Fed voter Bullard speaks.  Then on Wednesday the July Services PMI, June Factory Orders, July ISM Non-Mfg. PMI, and Crude Oil Inventories are announced.  On Thursday we get Import/Exports, Weekly Initial Jobless Claims, June Trade Balance, and Fed voter Mester speaks.  Finally, on Friday we get July Avg. Hourly Earnings, July Nonfarm Payrolls, July Participation Rate, and July Unemployment Rate.

As markets come off a very strong July, the dual fears of inflation and recession remain. However, for the most part, earnings reports continue to be strong…although many commpanies are issuing warnings and guiding lower. In short, we remain in a volatile market where major intraday reversals or many smaller whipsaws remain the norm. The trend remains bullish, but there is a lot of technical damage (resistance) to work through from the months of pullback. The one thing that continues to ring true is that volume shows that retail traders (and the big money) remain afraid to jump into this market yet. So, be cautious in believing that the recent trend truly shows market conviction.

Remember that trading is our job. So, do the work and follow the process. Stick with your trading rules, trade with the trend, and take those profits when you have them. Demonstrate patience and wait for confirmation. 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. 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!). 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: BA, NIO, AMD, TSLA, MU, SQM, WMT, NVDA, MRVL, CVX, KMI. 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.

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