Tuesday was another day in the Bulls’ column right from the start after a cooler-than-expected CPI number.  The SPY gapped 0.34% higher, DIA gapped 0.17% higher, and QQQ gapped 0.78% higher at the open.  At that point, both of the large-cap index ETFs followed through for the first 15 minutes before selling off back down to the Opening level by 10:15 am.  At that point, both the SPY and DIA rallied back to the highs of the day shortly before 2 pm.  Then we saw an hour of selloff back near the open and an hour of mild rally to end the day in both of those large-cap index ETFs.  Meanwhile, at the open, QQQ almost immediately sold off completely recrossing the opening gap by 10:15 am.  It then rallied back to the open level by 11:30 am and chopped along that level until 1:50 pm.  At that point, the QQQ sold off for 45 minutes and then rallied the last hour of the day to close very near where it opened.  This action gave us gap-up, indecisive candles across all the major indices.  QQQ printed a Doji, SPY printed a white-bodied Spinning Top, and the DIA printed a white-bodied candle with a large upper wick. 

On the day, eight of the 10 sectors were in the green as Basic Materials (+1.79%) led the market higher, while Utilities (-0.11%) and Communication Services (-0.10%) were the lagging sectors.  At the same time, SPY gained 0.66%, DIA gained 0.43%, and QQQ gained 0.77%.  The VXX fell slightly to 28.42 and T2122 climbed even further into the overbought territory to 96.27.  10-year bond yields climbed briskly to end at 3.821% while Oil (WTI) gained 3.02% to end the day at $69.16 per barrel.  Overall, all three index ETFs remain well above their T-lines (8ema) with the QQQ and SPY now extended from it.  This all happened on average volume in all three (slightly below average in the SPY and slightly above average in the QQQ).  So, Tuesday was the Bulls’ Day again but there was indecision.  Perhaps this was a nod to the FOMC announcements ahead or maybe to a lack of drama at the Miami courthouse.  Either way, we go into Wednesday up against potential resistance in the DIA, a bit below it in the SPY, and with room to run in the QQQ.

In major economic news Tuesday, May CPI came in below expectations on a month-over-month basis at +0.1% (compared to a forecast of +0.2% and significantly better than April’s +0.4% reading).  On a year-on-year basis, May CPI also came in better than was anticipated at +4.0% (versus the forecast of +4.1% and much better than the April +4.9% value).  If you look deeper, May Core CPI came in just as expected at +0.4% (month-on-month) and +5.3% (year-on-year).  It is worth noting that the year-on-year value was down two-tenths of a percent from the April reading.  So, overall, this tells us inflation is cooling but remains well above a 2% target.  If you are a hawk, you would say there is a long way to go and the Fed should hike rates more and faster.  On the other side, if you are a dove, you’d say inflation has fallen dramatically (more than 5%) in the last year and the Fed probably should pause to give what they’ve done already a little more time to work (in order to reduce the risk of a hard landing).  Later, after the close, API Weekly Crude Oil Stocks reported an unexpected inventory build of 1.024-million-barrels (versus the expected 1.291-million-barrel drawdown and last week’s 1.710-million-barrel drawdown).

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In stock news, AMD announced a new AI chip that will compete with NVDA’s chips in the same market, starting in Q4.  The AMD chip will have more memory and be more power efficient than NVDA’s current offerings.  However, NVDA will still have the absolute single-chip computing power lead.  At the same time, BA announced that it has delivered 50 737 MAX jets in May (13 less than Airbus but still a 43% improvement over May 2022) as production recovered from the discovery of a defective part.  Elsewhere, Reuters reported that AMZN is now excluding the Chinese rival site Temu (which is owned by PDD) from its “competitive price checks” algorithm.  This could mean that suppliers could sell the same product on Temu at a lower price than AMZN without incurring the online giant’s wrath.  (AMZN is betting it doesn’t have to match/beat Temu prices because buyers won’t check other sites to compare thus raising margins.)  Later, UAL announced that it expects the new contract it is offering pilots to add more than $8 billion in costs over four years (if the deal is approved by the union).  For reference, the deal DAL reached with its pilots in March is expected to add $7 billion to that airline’s costs over the same period.  At the same time, IN Gov. Holcomb announced that GM and Korean manufacturer Samsung will build a $3 billion EV battery plant in the state (planned to begin production in 2026). Later in the day, FSLY disclosed new pricing and product packages.  FSLY shares jumped 8.42% on the news.  Meanwhile, TSN announced that it will terminate 228 corporate employees in Chicago who have refused to relocate to the company’s AR headquarters.  (This is identical to the action taken for employees at the TSN location in SD.) 

In stock legal and regulatory news, STLA recalled 354,000 Jeeps from 2021 to 2023 model years according to the NHTSA.  The recall was over rear coil springs that might fall off while driving after faulty installation.  Elsewhere, Sky News in the UK reports that CNNWQ (Cineworld), who is the primary rival of AMC, is preparing to file for the British version of bankruptcy (administration).  For their part, AMC tells Reuters it is still on track to emerge from US bankruptcy in July.  Later, the state of NY fined BRKa’s Geico insurance unit for violating the state’s law about timely reporting of the vehicle insurance status of vehicles registered in the state.  Late in the day, the NHTSA released a report saying that TSLA Autopilot software has been involved in 736 crashes resulting in 17 fatalities since 2019.  (This was a dramatic increase from the same report in June 2022 when the software had only been linked to three deaths.)  Meanwhile, MMM appealed the dismissal of its subsidiary bankruptcy case in an effort to avoid liability from 260,000 pending lawsuits claiming hearing loss from defective military earplugs.  At roughly the same time, a US appeals court partially revived a shareholder lawsuit (alleging the company concealed a life insurance policy reserves shortfall) against PRU.  That shortfall caused a 10% drop in share price when it was announced in November 2019.  At the close, the NHTSA sided with automakers by issuing a letter to those automakers telling them not to comply with a MA “Right to Repair” law requiring that they release auto telemetry data to independent repair facilities.  The excuse used was that the MA law would pose a safety concern.  Also after the close, it was announced that GOOGL must postpone the planned release of its Bard AI in the EU (formerly planned for this week) due to privacy concerns raised by the Irish Data Protection Commission.  Finally, a US Patent Office tribunal sided with INTC in its bid to invalidate a patent held by VLSI Technology.  The invalidation will cancel out a $1.5 billion patent infringement verdict delivered against INTC in 2021.

In mortgage news, last week the 30-year, fixed-rate, conforming loan rates fell to an average of 6.77% (down from 6.81% the prior week).  As a result, home refinance loan applications rose 6% (but were still 41% lower than the same week in 2022).  New home purchase loan applications climbed 8% for the week. However, they remain 27% below the same week during the previous year.  Overall, this led to a 7.2 increase in mortgage application volume for the week.

Overnight, Asian markets were mostly in the green.  Japan (+1.47%) was by far the biggest winner with Singapore (+0.90%), and Malaysia (+0.35%) rounding out the top gainers.  Meanwhile, South Korea (-0.72%) and Hong Kong (-0.58%) gave us the only significant losses in the region.  In Europe, the bourses lean heavily to the upside at midday with only two spots of red among 13 green exchanges.  The CAC (+0.84%), DAX (+0.57%), and FTSE (+0.55%) are leading Europe higher in early afternoon trade.  In the US, as of 7:30 am, Futures are pointing toward a mixed and modest start to the day ahead of data.  The DIA implies a -0.11% open, the SPY is implying a +0.19% open, and the QQQ implies a +0.14% open at this hour.  At the same time, 10-year bond yields are up slightly to 3.827% and Oil (WTI) is climbing up 1.3% to $70.33 per barrel in early trading.

The major economic news events scheduled for Wednesday include May PPI (8:30 am), EIA Crude Oil Inventories (10:30 am), Q2 Fed Interest Rate Projections Current year, 1^st year, and 2^nd year, FOMC Economic Projections, FOMC statement, and Fed Interest Rate Decision (all at 2 pm), and the Fed Chair Press Conference (2:30 pm). The major earnings reports scheduled for Wednesday are limited to LEN after the close.

In economic news later this week, on Thursday, May Retail Sales, May Imports, May Exports, Weekly Initial Jobless Claims, NY Empire State Mfg. Index, Philly Fed Mfg. Index, May Industrial Production, April Business Inventories, and April Retail Inventories are reported.  Then, on Friday, we Michigan consumer Sentiment, and a Fed Speaker (Waller at 7:45 am).

In terms of earnings reports later this week, on Thursday, KR, JBL, WLY, and ADBE report.  Finally, there are no reports on Friday.

In late-breaking news, the MSFT $69 billion acquisition of ATVI hit another snag on Tuesday evening as a CA federal judge placed a restraining order on the deal to give the FTC challenge time to be heard in the courts.  Elsewhere, Bloomberg reports this morning that the ECB is calling in $540 billion in loans to European banks (pandemic emergency loans) at one time.  This will be a real stress test, especially for smaller banks and especially the ones in Italy and Greece.  Finally, as reported here earlier, the EU has now charged GOOGL with anticompetitive practices in their ad business.  In a preliminary conclusion the European Commission that GOOGL advertising tech is dominant in the European ad buying/publishing market and is abusing that position to harm competitors.  The commission suggested GOOGL may be forced to break up, removing its ad marketplace platform from its ad-selling unit.

With that background, it looks like the Bulls in the QQQ and SPY are tentatively looking to make another push at the open today but also that the DIA remains unsure of this move and is leaning downward. All of this is subject to change based on the PPI numbers. However, those are usually less influential than the CPI data we got yesterday. The pivotal data of the day will obviously come from the Fed at 2 pm and 2:30 pm. Expect there to be at least two jolts at that point. (Usually, we get a knee-jerk reaction…and then a counter-reaction. Sometimes even followed by a re-reaction.) QQQ (and to a lesser extent SPY) is extended away from its T-line at this point. Meanwhile, the T2122 indicator is also deep in the overbought territory. So, rest or a pullback is in order regardless of outside data. So, just be prepared for the volatility in what is otherwise a bullish market.

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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