Powell Testifies, API Hints at Crude Build

On Wednesday, stocks gapped down about 1% – 1.25% at the open.  However, this was a bear trap as the bulls immediately went on a face-ripping rally in the first hour that took stocks back up through the gap and even another percent higher.  This was yet another trap as the bears then sold the market off back down into the gap.  This seesaw action continued all day with prices closing below the prior day’s close.  This left us with gap-down white candles with large upper wicks in all 3 major indices.  On the day, SPY lost 0.18%, DIA lost 0.22%, and QQQ lost 0.19%.  The VXX lost 3.35% to 23.68 and T2122 fell back into the oversold territory at 8.42.  10-year bonds plunged lower to 3.164% and Oil (WTI) also took a beating, falling 4.7% to $104.37/barrel.

During the day, Fed Chair Powell told the Senate he was “strongly committed” to bringing down inflation.  (Like he was going to say “You know, high inflation doesn’t really both me, so I’m going to let it slide.”)  He clarified that the Fed’s commitment means that they will continue to raise rates until there is “compelling evidence” that inflation is coming down.  During the session, Republicans pressured Powell to clamp down on inflation while Democrats (especially Senator Warren) warned him about causing a recession while he is fighting inflation.  Later in the Day, Chicago Fed Pres. Evans said he thought a 75-basis-point “big move” was reasonable for July.  In other economic news, President Biden called on Congress to suspend the Federal Gasoline Tax (18 cents/gallon for gas and 24 cents/gallon for diesel) for the next 3 months.  However, the number 2 Republican in the Senate (Thune) said the tax holiday is dead on arrival.

In business news, JPM laid off hundreds of employees and reassigned hundreds of others from their mortgage processing departments.  The company believes rising rates will kill mortgage demand in months to come.  Elsewhere, the American Petroleum Inst. Reported that their survey found that US Crude Oil inventories unexpectedly rose 5.6 million barrels (compared to an expected 1.4 million barrel draw-down).  They also reported that gasoline stocks rose 1.2 million barrels.

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In long-term economic concern news, the Western drought is no longer a joke.  The US Bureau of Reclamation has told Western states (Colorado, New Mexico, Wyoming, Arizona, Nevada, and California) that they have 60 days to deliver plans to cut water usage from the Colorado River by 2-4 million acre-feet by next year.  (If the states do not deliver those plans, the Federal government will unilaterally decide the plan.)  This amount of water is the equivalent of enough water for 20-40 million people for an entire year.  Obviously, not all water drawn from the Colorado River is used for residential use.  However, another way to look at this is that 2-4 million acre-feet is more water than the entire state of Arizona uses from the Colorado River over the course of a year.  In addition, the projects are that by 2024 Lake Powell will no longer be able to produce hydroelectric power.

In technical analysis news, after Wednesday’s volatile session, among QQQ members, only META and ILMN remain at 52-week lows among the 98 QQQ members.  (None of the 98 QQQ members are at 52-week highs.)  41 of the 98 are currently above their own T-line (8 ema), including TSLA, AMZN, MSFT, GOOG, COST, and NFLX.  Among the 57 or 98 that are below their T-line are AAPL, NVDA, AMD, META, INTC, QCOM, AVGO, PYPL, MU, ADBE, CSCO, and CMCSA.  In terms of the 50sma, only 11 of the 98 are currently above their 50-day simple moving average, including JD, TMUS, PDD, VRTX, ZM, BIDU, SNPS, MNST, EA, BIIB, and SGEN.

After the close, FUL, KBH, and WOR all reported beats on both the revenue and earnings lines.  So far this morning, DRI, FDS, GMS, and RAD all reported beating on the top and bottom lines.  Meanwhile, ACN beat on the revenue line while missing on the earnings line.

Overnight, Asian markets were mixed but leaned to the green side.  Shenzhen (+2.19%), Shanghai (+1.62%), and Hong Kong (+1.26%) led the gainers.  Meanwhile, South Korea (-1.22%) and Taiwan (-1.12%) paced the losses.  In Europe, stocks are mixed on modest moves as of mid-day.  The FTSE (+0.21%), DAX (-0.40%), and CAC (+0.51%) are typical of the even red and green spread across the region in early afternoon trading.  As of 7:30 am, US Futures are pointing toward a green start to the day.  The DIA implies a +0.43% open, the SPY is implying a +0.70% open, and the QQQ implies a +1.00% open at this hour.  10-year bond yields (3.13%) are down and Oil (WTI) ($105.94/barrel) is trading up in early action.

The major economic news events scheduled for release Thursday include Q1 Current Accounts and Weekly Jobless Claims (both at 8:30 am), Mfg. PMI and Services PMI (both at 9:45 am), Crude Oil Inventories (11 am), and Fed Bank Stress Test Results (4:30 pm).  Fed Chair Powell also testifies before the House at 10 am. On the earnings front, we get reports from ACN, DRI, FDS, GMS, and RAD before the open.  Then after the close, FDX reports.

In economic news coming later this week, on Friday, we get Michigan Consumer Expectations and May New Home Sales.

On the earnings front, on Friday, we hear from KMX and CCL.

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Beware of chasing gaps. Volatility and intraday whipsaw action still reigns in this market. Today we look to be gapping higher at the open, but so far none of the major indices have even taken out their T-line. And always remember that brutal gap and reverse from just yesterday. So, caution and taking your time are the smart plays. As the saying goes, slow is smooth and smooth is fast. The trend remains strongly bearish, but we are back in oversold territory. So, there is not much in the way of an edge at the open today.

As always, remember that trading is our job. So, do the work and follow the process. Demonstrate patience and wait for confirmation. Stick with your trading rules, trade with the trend, and consistently take profits when you have them. Always, always, always move your stops in your favor. Remember the “Legend of the man in the green bathrobe“…it’s not house money, it’s all our money (so don’t give very damn much of it back). Also, the first rule of making big money in the market 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. As they say, the best time to have taken a $500 loss is when you are now staring at a $1,500 loss. 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.


Swing Trade Ideas for your consideration and watchlist: FUTU, VEEV, TUP, TSLA, CHWY, TTWO, ZM, USO, DT, PLTR, BMY, VIPS. 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.

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🎯 Dick Carp: the scanner paid for the year with HES-thank you

🎯 Arnoldo Bolanos: LTA scanner really works $$, thanks Ed.

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🎯 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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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.

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