On Friday, a much stronger-than-expected June Payrolls report (assuming this keeps the Fed on track to rate hikes in 2.5 weeks) resulted in a gap lower at the open (0.2% in the DIA, 0.5% in the SPY, and 1% in the QQQ).  From that point, we got seesaw action that oscillated around the opening gap the rest of the day.  As a result, we got indecisive candles in the DIA and SPY as well as a white candle with wicks on both ends for the QQQ.  This gave us a flat day in an otherwise strong week for the bulls.  33% of stocks are trading above their 40-day average, with Energy and Healthcare being the strongest while Basic Materials was by far the weakest sector on the day.  Movers of note include ENPH, MCK, TSLA, and SEDG to the upside and TWTR, CZR, and AOS to the downside.  On the day, SPY lost 0.12%, DIA lost 0.16%, and QQQ gained 0.13%.  The VXX fell 1.5% to 21.99 and T2122 dropped back into the mid-range at 63.38.  10-year bond yields climbed slightly to 3.084% and Oil (WTI) jumped 2% to $104.86/barrel (on reduced supply out of Kazakhstan).  There also remains a bond yield inversion between the 2s and 10s, which may be a recession indicator.

On the commodities front, Dr. Copper is ringing the recession warning bell.  The price of copper has been falling sharply and steadily since the first of June, down almost 23% over that period.  Cotton has fallen 35% over the same period.  The price of steel (rebar) has been falling since early May but is falling more slowly, down just 18% over twice the length of time.  And despite complaints about inflation, even the price of gas has fallen 19% in the last month (having fallen 26 straight days).  Taken cumulatively, it is clear major buyers are slowing and reducing their orders for raw materials in anticipation of a slowdown in demand soon.

However, it should be noted that some of the fall in prices is not just related to demand.  For example, the release of US Strategic Oil Reserves has had an impact on oil (and thus gasoline prices).  In addition, a global flight to safety has resulted in an increasingly strong dollar, which in turn makes commodities cheaper in dollar terms.  For example, the dollar is up over 11% versus the Euro since the Euro peak in early February.  The dollar is also up a little over 12% against the British Pound since mid-January.  Finally, the dollar is up almost 20% against the Japanese Yen since mid-January.

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In business news, during the day Friday, GOOGL offered concessions (up to selling off its ad placement business) in order to avoid a potential US antitrust lawsuit.  Then after the close, the NHTSA announced it will open a special investigation into a Wednesday Florida crash of a TSLA with a pedestrian while the “Drivers Assist” system was engaged.  Also after the close, Elon Musk notified TWTR that he is ending the deal to purchase their company, claiming TWTR hasn’t complied with contractual obligations and thus voiding the required $1 billion walk-away fee.  Finally, a German Union (Verdi) has called for a strike of the workers at 7 AMZN distribution centers in Germany for Prime Day (July 12).  

In China news, Macau has closed all its casinos for a week as of today due to rising Covid-19 case numbers.  This is the first closure in two years for the casinos, but the closure order does not impact restaurants, supermarkets, pharmacies, or other venues deemed “essential.” The South China Morning Post also reported on Sunday that Hong Kong (and its new mainland-backed government) are “considering” implementing a new health policy very similar to the mainland’s “Zero Covid” policy.  This comes as cases in Hong Kong are on the rise and several mainland cities are in the “circuit breaker” area, close to being forced to reenter city-wide lockdowns.  (That includes major cities like Shanghai and Xi’an.)  Finally, on Sunday the US Sec. of State Blinken told Bloomberg that President Biden and Chinese President Jinping are set to speak in the next couple of weeks.  The topics will include Chinese support of Russia and the potential lifting of US trade tariffs.

In terms of technical analysis, 142 of the SPY 501 are currently trading above their 50sma.  In order of liquidity, these include TSLA, AAPL, AMZN, MSFT, GOOGL, GOOG, UNH, QCOM, V, JNJ, KO, MRK, BA, ABBV, NFLX, COST, PFE, and VZ.  In addition, 316 of the 501 are trading above their T-line (8ema), including TSLA, AAPL, NVDA, AMZN, AMD, MSFT, META, GOOGL, GOOG, OXY, INTC, UNH, BAC, JPM, QCOM, V, JNJ, MU, AVGO, KO, MRK, BA, WMT, PG, ADBE, C, ABBV, NFLX, COST, PFE, TXN, MA, and HD.  Only 3 of the 501 SPY components are very near their 52-week high, including CI, VRTX, and HUM.  Meanwhile, only CE is trading very near its 52-week low.  However, more broadly, 33% of stocks are above their 40sma while only 16.92% are trading above their 200sma.

Overnight, Asian markets were mixed but leaned heavily to the red side.  Japan (+1.11%) and Malaysia (+0.50%) were the only appreciable green among exchanges in the region.  Meanwhile, Hong Kong (-2.77%), Shenzhen (-1,87%), and Shanghai (-1.27%) led the region lower.  In Europe, we see a similar pattern taking shape at mid-day.  The FTSE (-0.24%), DAX (-0.72%), and CAC (-0.56%) are representative of the region with the glaring exception of Norway (+1.46%) in early afternoon trading.  As of 7:30 am, US Futures are pointing toward a down start to the day.  The DIA implies a -0.33% open, the SPY is implying a -0.44% open, and the QQQ implies a -0.61% open at this hour.  10-year bond yields are down to 3.052% and Oil (WTI) is off more than 2% to $102.54/barrel in early trading.

The major economic news events scheduled for release Monday are limited to a Fed speaker (Williams at 2 pm).  The only major earnings report scheduled for the day is GBX before the open. And GBX reported a beat on the revenue line while missing on the earnings line.

In economic news coming later this week, on Tuesday we get the WASDE Report and 10-year bond auction.  Then Wednesday, the June CPI, Crude Oil Inventories, the Fed Beige Book, and the June Federal Budget Balance are announced.  On Thursday, we see the June PPI and Weekly Jobless Claims.  Finally, on Friday we get June Retail Sales, June Import/Export Price Index, NY Empire State Mfg. Index, June Industrial Production, May Business Inventories, and Michigan Consumer Sentiment.

In earnings reports later this week, on Tuesday we hear from PEP and AMX.  Then Wednesday we get reports from DAL and FAST.  On Thursday, earnings season kicks off again with reports from CTAS, CAG, ERIC, FRC, JPM, MS, and TSM.  Finally, on Friday we hear from BK, BLK, C, PNC, PGR, STT, USB, UNH, and WFC.  

Earnings season is back upon us later this week. That, combined with recession fears have center stage in most traders’ minds. As a result, it would not be surprising to see choppy “wait and see” action until we get more clues later in the week. At this point, it looks like we will follow the rest of the world lower on recession, supply chain, and Chinee market (Covid) fears. Remember, regardless of how we start the day, intraday reversals and general market chop tends to be the norm lately. However, the longer-term trend remains bearish and we have resistance from recent highs and the mid-term downtrend not far overhead.

Demonstrate patience and wait for confirmation. Stick with your trading rules, trade with the trend, and take those profits when you have them. Remember that trading is our job. So, do the work and follow the process. Always move your stops in your favor and remember the “Legend of the man in the green bathrobe“…it is NOT house money, it’s all our money! One way to put this is Buffett’s first rule of making big money in the market, which 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. 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. Lastly, remember it is Friday. So, be prepared for the weekend news cycle.

See you in the trading room.

Ed

Swing Trade Ideas for your consideration and watchlist: VEEV, ZM, LLY, SBUX, VSCO, INTU, RIVN, LCID, PENN, AI, PLTR, TDOC, TROW, RBLX, PGEN, ACCD, NIO, WYNN, GM. 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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🎯 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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