Tuesday was a Bullish day for markets as the SPY gapped up 0.21%, QQQ gapped up 0.43%, and DIA opened dead flat.  From there, all three major index ETFs gave a slow, steady rally until 2:30 pm.  The last 90 minutes of the day saw the SPY, DIA, and QQQ grind sideways in a tight range and then take profits in the last 10 minutes.  This action gave us large white candles with tiny wicks that crossed back above the T-line (8ema) in all three.  (DIA barely crossed above.)  In the process, you could see the price as having broken a (tight) downtrend line in the SPY, DIA, and QQQ.  This happened on less-than-average volume in the SPY and QQQ and significantly less-than-average volume in the DIA.

On the day, eight of the 10 sectors were in the green with Consumer Cyclical (+2.17%) and Technology (+1.98%) leading the way higher while Healthcare (-0.18%) was the laggard on the day. Meanwhile, SPY gained 1.10%, DIA gained 0.60%, and QQQ gained 1.72%.  The VXX lost 2.50% to close at 25.77 and T2122 jumped back up into the overbought territory at 87.88.  10-year bond yields climbed to 3.766% while Oil (WTI) dropped 2.28% to close at $67.80 per barrel.  So, the bulls were in charge all day on Tuesday with only some very late profit-taking keeping us from closing on the highs.  As has been the case all year, once again, DIA was the laggard. 

The only major economic news on Tuesday, Building Permits came in a bit above the expected value at 1.496 million (compared to 1.491 million forecast and well above the previous value of 1.417 million).  That was a month-on-month increase of 5.6% (versus the anticipated +5.2% but far above the prior value of -1.4%).  Later, May Durable Goods Orders were better than anticipated at +1.7% (compared to a forecast of -1.0% and even increased from the April reading of +1.2%).  Then the Conference Board Consumer Confidence indicator came in well above expectation at 109.7 (versus a forecast of 104.0 and well above the May value of 102.5).  At the same time, May New Home Sales were reported well above what was predicted at 763k (compared to a forecasted 675k and the April reading of 680k).  That was a 12.2% increase versus April’s +3.5% month-on-month growth.  Finally, after the close, the API Weekly Crude Oil Stocks report showed a larger-than-expected drawdown of 2.408-million-barrels (compared to an expected draw of 1.467-million-barrels and well more than the prior week’s 1.246-million-barrel drawdown). 

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In stock news, BAC opened new branches in nine markets (across four states) on Tuesday, bringing its coverage to 3,800 branches spread over 39 states.  (Among the major banks, this is second only to JPM which has branches in 49 states.)  Elsewhere, STLA announced they are launching their own electric vehicle charging business unit to provide customers access to “partner’s charging networks.”  At the same time, CIR announced it has accepted a $1.7 billion offer ($51/share plus debt) from KKR to take the company private.  Meanwhile, TRI announced it has agreed to a $650 million all-cash deal to acquire legal startup Casetext (which has an AI assistant for use by legal professionals).  Then, by mid-afternoon, Bloomberg was reporting that UBS plans to cut more than half of the CS workforce bringing the overall reduction of the combined company to 30% (10,000 jobs reduced).  Later, SMNEY, ABBV, and SBGSY (Schneider Electric) were added to the global list of companies hit by the MOVEit hack (perpetrated by Russian state-sponsored hacking group CIOp).  After the close, SPR and its machinist union reached a tentative deal to end a strike at the company’s Wichita, KS plant.  Union members will vote on the deal Thursday.  (SPR is the main supplier of fuselage assemblies for BA.)  At the same time, the Wall Street Journal reported that Adalytics research has found that GOOGL video ads on other websites violated their promised standards (giving the company’s own internally-placed ads preference) 80% of the time.  (This is a key complaint and could well be important to EU efforts to force GOOGL to divest of their ad network while selling ads of their own.)  GOOGL disputed the findings.

In stock legal and regulatory news, the state of Washington announced they will be following other states in mandating that charging stations that participate in state programs must include a TSLA plug.  Later, the Consumer Financial Protection Bureau fined ACIW $25 million for improperly electronically processing $2 billion in payment transactions without customer authorization.  Elsewhere, hearings started Tuesday for JNJ’s second attempt to eliminate liability for talc cancer claims through the bankruptcy of the subsidiary onto which JNJ has transferred all liability.  Cancer victims are fighting the filing as an obvious abuse of bankruptcy law.  However, JNJ claims its recent $8.9 billion settlement offer (spread over decades) has the support of many of the 38,000 lawsuit-filing attorneys.  Meanwhile, a US district judge in CA rejected AAPL’s bid to have a class action lawsuit thrown out.  The suit alleges that AAPL of defrauded its shareholders by concealing the falling demand for iPhones in China (via comments made by CEO Cook shortly before an earnings report showed the demand had, in fact, dropped sharply).  REGN stock plummeted Tuesday after the company received a “Complete Response Letter” from the FDA related to the company’s aflibercept drug.  However, the letter was solely because the FDA is currently reviewing inspections of a third-party filler of prescriptions for the treatment…not due to any investigation into either REGN or the drug itself.  However, late in the day, the FDA did decline to approve a new higher-dose version of REGN’s Eylea blindness treatment.

In partially explanatory news, there were rumors Tuesday and more reports overnight that the Biden Admin is considering adding more restrictions on the sale of chips to China. This led NVDA (which has developed lower-powered chips to circumvent current restrictions) to drop almost 3.5% yesterday. (It is worth noting that NVDA gets 20% of its revenue from sales to China.) AMD, which is the other super-power in creating AI chips was also down more than 3% on the day. The object of the potential restrictions is the artificial intelligence race and protecting the US (and MSFT as well as GOOGL) lead in that new technology. However, we should note that the same computational results can be obtained from a vast array of lower-end processors as opposed to a smaller array of higher-end ones…just in a much less efficient and more electric-intensive way.

In mortgage news, we saw a reversal of recent relationships last week.  For a long time, it had been the norm that rates drove activity, particularly in home sales.  This week, strong home sales drove rates.  (Tuesday’s new home sales report showed May with a 12% increase in sales versus April and a 20% increase compared to May 2022.)  Weekly mortgage applications for the purchase of homes were up 3% for the week as were applications for a refinance loan.  This came despite the rate for a 30-year, fixed-rate, conforming loan increasing from 6.73% to 6.75%.  (Closing points remained at 0.64%.) 

In earnings news, after the close, JEF missed on both the revenue and earnings lines. 

Overnight, Asian markets were mostly in the green, with Japan (+2.02%), Australia (+1.10%), and India (+0.82%) pacing the gains.  Meanwhile, Thailand ( -0.76%), South Korea (-0.67%), and Shenzhen (-0.47%) were the only red in the region.  In Europe, we see an even stronger picture taking shape at midday.  Only Portugal (-0.05%) shows any red while the CAC (+0.86%), DAX (+0.82%), and FTSE (+0.66%) lead the continent higher in early afternoon trade.  In the US, as of 7:30 am, Futures point to a modestly lower start to the day.  The DIA implies a +0.02% open, the SPY is implying a -0.15% open, and the QQQ implies a -0.34% open at this hour.  At the same time, 10-year bond yields have fallen again to 3.737% while Oil (WTI) is flat at $67.71 per barrel in early trading.

The major economic news events scheduled for Wednesday include Preliminary May Goods Trade Balance and May Preliminary Retail Inventories (both at 8:30 am), EIA Crude Oil Inventories (10:30 am), and Fed Bank Stress Test Results (4:30 pm).  We also hear from Fed Chair Powell (9:30 am) and President Biden (on the economy) at 1 pm.  The major earnings reports scheduled for Wednesday are limited to GIS and UNF before the open.  Then, after the close, CNXC, FUL, MU, and WOR report.         

In economic news later this week, on Thursday, we get Q1 GDP, Q1 GDP Price Index, Weekly Initial Jobless Claims, and May Pending Home Sales along with Fed speaker Bostic.  Finally, on Friday, May PCE Price Index, May Personal Spending, Chicago PMI, and Michigan Consumer Sentiment are reported.

In terms of earnings reports, on Thursday, we hear from AYI, GBX, MKC, MSM, PAYX, RAD, and NKE.  Finally, on Friday, STZ reports.

In miscellaneous news, a survey published Tuesday by NatWest found that US fund managers are factoring in greenhouse gas emissions and other climate risks into their debt investment decisions just as much as peers in Europe.  This comes despite Republican efforts in many states and in the US House to make such considerations illegal in the US.  In a related story, BLK CEO Fink told a conference he has simply stopped using the politically weaponized term “ESG” (which many on the far right have labeled “woke”). Instead, he talks to businesses his funds may invest in about decarbonization, corporate ethics, and responsibility without the term. In other news, ERCOT reported that electric use in TX reached an all-time high on Tuesday as the heatwave continued.  ERCOT maintained its request for customers to limit usage but said it has enough resources to meet current demand at the moment.  Elsewhere, the US Dept. of Transportation decided that the New York City plan to charge a “vehicle congestion toll” would not have a significant impact on the environment and therefore does not require an environmental study.  Interestingly, it is Democratic lawmakers (from NJ, of course) who are fighting the toll as nothing but a money grab by NYC.  (If/when implemented this would be the first of its kind toll in the US, similar to what is in place in London and Singapore.)

So far this morning, GIS reported a miss on revenue while beating on the earnings line.  (UNF reports later at 8:10 am.)

With that background, it looks like all three major index ETFs are holding onto their T-line (8ema) during retests from above in the premarket. However, it’s still very early and none of the premarket candles are decisive with all of those ETFs printing Spinning Top type candles so far. From a higher-level view, all three seem to be trying to reverse the recent Bull Flag pullback pattern. In terms of extension, obviously (given the premarket retest), none of the three major index ETFs is too far from their T-line. However, the T2122 indicator is back up in the overbought territory with more than half of that range left above. So, both sides have room to run.

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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