Markets opened flat on Wednesday with “gapping” up 0.04%, DIA gapping up 0.08%, and QQQ gapping up 0.04%.  At that point, the two large-cap index ETFs traded dead sideways while the QQQ made a small rally and then sold off in the first 30 minutes.  All three then sold off until 10:20 a.m., before rallying back up until 11 a.m.  After that, the SPY, DIA, and QQ all traded sideways in a very tight range until 2 p.m.  This led to a selloff that lasted until 3:15 p.m. before the day ended on a modest 45-minute rally.  This led to indecisive Spinning Top candles in all three major index ETFs, white-bodied in the SPY and QQQ as well as a black-bodied on in the DIA.  SPY and DIA both failed a retest and closed tight below their T-line (8ema) and 50sma while QQQ closed tight above its own T-line and 50sma.  This all happened on well-below-average volume in all three major index ETFs. 

On the day, seven of the 10 sectors were in the red with Utilities (+1.02%) way out in front leading the rest of the market higher, while Energy (-0.71%) was by far the biggest laggard sector.  At the same time, the SPY gained 0.12%, DIA lost just 0.19%, and QQQ gained 0.38%.  VXX fell just over two percent to close at 20.51 and T2122 dropped back down to just inside the oversold territory at 19.51.  10-year bond yields fell to close at 4.254% while Oil (WTI) ended the day flat at $88.85 per barrel.  So, on the whole, it was a very indecisive and volatile day (at least within a small range).  

The major economic news reported Wednesday included August Core CPI (month-on-month) which came in a bit hot at +0.3%, compared to a forecast of +0.2% which was also the July value.  However, the August Core CPI (year-on-year) was in line with what was expected at +4.3% (versus a +4.3% forecast and down from the July reading of +4.7%). Meanwhile, the August CPI month-on-month came in as predicted at +0.6% (compared to a +0.6% forecast but far above the July value of +0.2%).  At the same time, August CPI year-on-year was higher than anticipated at +3.7% (versus a forecast of +3.6% and the July reading of +3.2%).  Later the EIA Weekly Crude Oil Inventories showed a significant unexpected build of 3.954 million barrels (compared to a forecast calling for a drawdown of 1.912 million barrels and far above the prior week’s 6.307-million-barrel drawdown). Finally, at 2 p.m., the Federal Budget Balance was massively better than expected at +89.3 billion, yes it was a surplus, (versus a forecasted -$240 billion and the August deficit of $221 billion).  In light of the CPI data, it is worth noting that Wednesday night the CME Fedwatch Tool still shows that markets have priced in a 97% chance that the Fed will leave rates unchanged next week.

In stock news, German jet engine provider MTUAY said Wednesday that it will begin talks with RTX over the $751 million hit MTUAY will suffer due to problems with RTX’s Pratt & Whitney engines.  Elsewhere, DAL is facing a proposed class-action suit in Los Angeles over “Greenwashing” for allegedly false advertising in which DAL claimed to be “carbon-neutral” based on carbon offsets the company had purchased.  Later, XOM disclosed that it’s invested $30 billion into various projects in the Qatar LNG industry.  At the same time, USB was down hard after its three top officers made comments at an industry conference stating that slow loan growth would be a drag in its Q3 performance.  The CEO also said he expected “a little bit more of the effect in Q4.”  In other banking news, C announced a major reorganization Wednesday, cutting entire layers out of the management hierarchy and giving the CEO direct oversight of the five core business units.  Interestingly, while “job cuts” were part of the announcement, no numbers, timing, or specific senior manager exits were mentioned.  Later, EPOW shares jumped after it announced it had received interest from TSLA over its battery component products.  In less promising news, MMM warned that it foresees a “slow growth environment” in 2024, particularly mentioning projected weakness in electronics and consumer segments.  Later SGML announced it is “exploring strategic options” for the whole company after it has received multiple proposals for its Brazilian unit.  After the close, Reuters reported that GS has fired “several” executives in its transaction banking unit after they violated company communications policies (using banned apps like WhatsApp for secret interactions).  Also after the close, SBUX announced that founder and former three-time CEO Schultz will retire from the company board on September 30.  Wednesday evening, the head of US operations for TD said that the US Justice Dept. probe into the bank’s money laundering compliance is “manageable.”  However, he said he expects fines and non-monetary penalties.  Wednesday night, BRKB announced it sold 5.5 million shares of HPQ this week, unraveling a small portion of its $3.27 billion position in the stock.  Finally, The long-anticipated ARM IPO goes live today, after the Wall Street Journal reported Wednesday that it will be priced at $52 per share (top end of its earlier-announced range).

In stock government, and regulatory news, the NASDAQ has formally submitted an application to the SEC, seeking approval to list an ETF the combines the spot and futures contract prices of Ethereum cryptocurrency. The fund, Hashex Nasdaq Ethereum ETF, would be offered by a Brazilian asset management company managed by Toroso Investments.  Elsewhere, the NHTSA announced that TM has issued recalls for nearly 22k 2023 Tundra and Tundra Hybrid vehicles (due to load carrying labeling that can encourage usage at unsafe load capacities).  Overseas, China said that it “has not banned the purchase or use of foreign phones (AAPL).  However, at the same time, the spokesman said they had noticed a lot of recent media exposure over security incidents related to AAPL phones and the Chinese government placed great importance on information security…and will monitor things closely.  (Great house you have there.  It would be a shame is it burned down.  AAPL gets 20% of its revenue from China.)  At the same time, the FBI announced it was investigating the cyber attack at MGM that has kept the hotel and casino operator’s systems paralyzed for three days now.  Meanwhile, AAPL defended its iPhone 12 model after a French watchdog agency halted the sale of that model, claiming the phone breaches EU radiation exposure limits.  AAPL claims the 12 model (2020) phone meets international standards for radiation, but French tests have now found otherwise.  This raises the possibility of European-wide bans on the sale of model 12 iPhones.  After the close, the EEOC filed suit in AR against WMT over allegations it fired hourly workers with disabilities who could not pass a computer-based test which had no relation to their jobs.  (WMT has since discontinued the tests but did not offer to rehire those workers it fired.)  Also after the close, Elon Musk told reporters that while he can’t read lawmaker’s minds, the majority did raise their hand when asked if they felt there was a need from more AI regulation.  (The day-long closed-door session was meant to be a primer for lawmakers on AI technology and issues with speakers including the CEOs from GOOGL, META, NVDA, MSFT, IBM, and TSLA as well as former MSFT CEO Bill Gates.)

In stock legal news, a federal judge in Washington DC ruled that DAL and UAL must face a consumer antitrust class action case that accuses the airlines of conspiring to drive up domestic airfares by reducing the number of seats available.  (AAL and LUV have already settled for $45 million and $15 million respectively over this same claim.)  Elsewhere, in the GOOG antitrust case, Wednesday, a former GOOG executive testified that the company aggressively sought “exclusive” deals with mobile carriers for use of its search engine.  Later, a US Appeals Court questioned why a shareholder lawsuit against PCG officers and directors had been halted since September 2022.  A lower court judge halted the case at company request as PCG pursued bankruptcy.  The three-judge panel called the delay puzzling and questioned what efficiency was being gained by the delay. 

Overnight, Asian markets were mostly in the green.  South Korea (+1.51%), Japan (+1.41%), and Taiwan (+1.36%) paced the gainers while the only three red exchanges were Shenzhen (-0.57%), New Zealand (-0.38%), and Malaysia (-0.27%).  In Europe, the only red at midday comes from Russia (-1.24%).  Meanwhile, The FTSE (+1.24%), CAC (+0.41%), and DAX (+0.24%) lead the region higher.  In the US, as of 7:30 a.m., Futures are pointing toward a higher open.  The DIA implies a +0.30% open, the SPY is implying a +0.44% open, and the QQQ implies a +0.45% open at this hour.  At the same time, 10-year bond yields are up a bit once again to 4.262% and Oil (WTI) is up 1.32% to $89.69 per barrel in early trading.

The major economic news scheduled for Thursday includes August Month-on-Month PPI, Weekly Initial Jobless Claims, and August Retail Sales (all at 8:30 a.m.), July Business Inventories and July Retail Inventories (both at 10 a.m.), and the Fed Balance Sheet (4:30 p.m.).  There are no major earnings reports before the open.  However, after the close, ADBE, CPRT, and LEN report. 

In economic news later this week, on Friday, the August Export Price Index, August Import Price Index, NY Empire State Mfg. Index, August Year-on-Year Industrial Production, August Month-on-Month Industrial Production, Michigan Consumer Sentiment, Michigan Consumer Expectations, Michigan Consumer 12-month Inflation Expectation, and Michigan Consumer 5-Year Inflation Expectations are reported.

In terms of earnings reports later this week, on Friday, there are no major earnings reports scheduled again.

In miscellaneous news, Bloomberg reported Wednesday that global central banks are not as down on US Treasuries as the media might have you believe.  In fact, demand is consistent and bond buying is on pace to top last year’s $183 billion as central banks are trying to scoop up beaten-down US bonds.  The article pointed out that currency exchange rate differences accounted for all of the changes in the value of bond sales (not the quantity).  Elsewhere, the EPA issued a surprising report that claimed the US is on track to reduce carbon emissions between 35% and 43% by 2030 (compared to 2005 levels). The agency attributed this to Inflation Reduction Act programs. However, Republicans want to kill those programs in support of industry and would likely dispute those findings as “just made up to take credit.” Meanwhile, on the other side, Environmentalists would likely dispute the findings as pollyannish and overly optimistic, especially given continuing industry pushback and the 6.25 years left between now and 2030.   In other Congressional news, GOP House Majority Whip Emmer introduced a bill aimed at preventing the Fed from creating a Central Bank Digital Currency.  While he claimed this was needed because President Biden “is willing to compromise American’s right to privacy,” he did not mention the idea was first proposed (and studies of the idea began during) the Trump Administration and that the Fed is not actually part of any branch of government.  Meanwhile, on a similar topic, the fifth-largest Australian bank (Macquarie) announced it will begin phasing out cash, check, and phone operations in favor of digital-only transactions.  Finally, the London Metal Exchange reported that Copper stockpiles have reached the highest level in two years, citing a decline in the expected demand from China.

In Autoworker contract talks or strike news, President Biden said Wednesday that he expects the UAW and major automakers to work around-the-clock to avoid a strike.  He also said the White House was engaged with both sides encouraging progress in the negotiations.  For its part, the UAW outlined plans for a series of strikes targeting specific individual auto plants of all three top carmakers.  However, the currently planned strikes would not be company-wide for any of the three.  (This would be the first ever simultaneous strike against the Big 3.)  The current contract expires tonight at midnight and the strikes have already been authorized by workers.  The union said the best offer from the companies was a 20% wage hike spread over 4.5 years offered by F with the other two offering two to 2.5% less than F.  Meanwhile, the UAW lowered its demand from 40% to 36% over the same 4.5-year period.  On Wednesday night, F CEO Farley “rebuffed” comments made by UAW President Fain (who had said F was not taking bargaining seriously).  Instead, Farley blamed Fain for giving “no genuine counteroffer” to the most recent F proposal.  Farley went on to blame Fain for being absent from a Tuesday meeting that he and F Chair Bill Ford expected him.  (Fain later replied he was elsewhere meeting with STLA negotiators.)  As a side note, it does seem odd and unwieldy to hold all three negotiations at the same time, but separately.  Yet the companies do claim to have different issues and situations.  The bottom line of all this is that we seem to be 16 hours from strikes at individual auto plants, which will last varying lengths and rotate between plants for each automaker (a tactic designed to force the companies to either lock all autoworkers out or cause maximum chaos).

With that background, it looks like the Bulls are making at least a modest push this morning. All three major index ETFs are back above their T-line (8ema). The SPY and QQQ are also back above their 50sma while the DIA is just below that average. All three gave us “gap ups” in the early session but the candles are still small and are not showing premarket follow-through (at least yet). The short, mid, and long-term trends remain bullish, but action has been choppy within those trends recently. In terms of extension, none of the major index ETFs are very far from their T-line and the T2122 indicator is now just inside the oversold range. So, there is plenty of slack for either the Bulls or the Bears to make a move. Again, it’s a matter of finding the buyers or sellers to get the move started…one way or the other.

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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