Stocks gapped just over a percent lower at the open Thursday and then followed through at least that much lower in the next 30 minutes.  However, then the reversal took hold and the bull ran us back up to flat on the day by about 12:30 pm.  The whip was no over though as we reversed the bears ran us back down to the open levels about 45 min. later and so on and so on all day long.  This volatile action left us with long-legged, Doji or Spinning Top type candles in all 3 major indices.  All but 2 sectors were in the red again as Energy was the weakest sector for the second day in a row.  On the day, SPY lost 0.77%, DIA lost 0.62%, and QQQ lost 1.24%.  VXX climbed 1% to 23.08 and T2122 rose, but remains deep in the oversold territory at 8.95.  10-year bonds rallied late but closed down at 3.018% and Oil (WTI) was down more than 3.5% to $105.87/barrel as the day/quarter/half ended.

Speaking of the end of the period, the S&P 500 just finished its worst half since 1970, losing 21% since the start of the year.  Not to be outdone, QQQ lost more than 32% over the same period, but this was just the worst performance since the 2002 dot-com bust for the tech-heavy index.  For the month, SPY lost 8.57%, DIA lost 6.68%, and QQQ lost 9.08%.  The quarter was also brutal with QQQ down 22.69%, DIA down 11.16%, and SPY off 16.40%.

During the day we continued the trend of bad economic data.  The May PCE Price Index came in slightly lower than expected, but still near 40-year highs.  This is the Fed’s preferred inflation measure.  However, even if better than expected the number is still bad enough that they are not likely to reduce the speed of rate hikes. Meanwhile, Jobless Claims came in 3,000 higher for the week than expected.  Finally, later in the day Chicago PMI came in a bit lower than forecast, but remained in expansion territory (56.0 vs. 58.0 est.).

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In energy news, despite all the constant talk about inflation, June saw some relief.  US natural gas prices fell 16.5% for the month of June.  This was the worst monthly loss for that commodity in the last 3 years.  Over the same time span, WTI Oil fell 7.65%.  However, it is important to note that WTI is up more than 28% YTD while natural gas is up 31.3% on the year.

In cryptocurrency news, Bitcoin closed the month below $19,000.  This capped a greater than 40% loss for the month of June and it is also down more than 58% on the year.  GTBC also sued the SEC for rejecting its application to offer a Bitcoin spot-price ETF.  Finally, Celsius Network (the largest cryptocurrency lender) said late Thursday that it was now exploring strategic options including M&A deals and restructuring.  This comes after it froze withdrawals earlier in June while citing “extreme market conditions.”

After the close, MU missed on revenue while beating on earnings.  During the earnings report, MU also offered a dim outlook for the rest of 2022, on worries that consumers are not spending as much on computers and phones.  Analysts were caught off guard by all this because MU held an analyst’s day with just 2 weeks left in the quarter and were very upbeat, presenting a rosy picture.  MU stock was down hard on the news, off as much as 9.6% in after-hours trading. 

In business news, KSS announced that it has ended talks with FRG and no longer intends to pursue selling the business. The reason stated is that the retail situation has gotten significantly worse since the start of the sale negotiations.  KSS also lowered its outlook.  KSS stock is down 17% while FRG remains unchanged on the news in premarket trading.  Elsewhere, in an interesting twist, despite lockdowns in various regions across the country and generally tough market conditions, Chinese EV maker NIO reported record sales for June, delivering just under 13,000 vehicles (up 60% from one year prior).  Even more interesting is that Chinese EV rivals XPEV and Li Auto both reported even better numbers for the month.  XPEV delivered 15,295 vehicles (up 133% from the same month in the prior year)  and Li Auto delivered 13,024 vehicles (up 69% from June 2021).  NIO stock is up 2.6% and XPEV is up 3% in premarket trading.

Overnight, Asian markets leaned heavily to the downside.  Only Malaysia (+0.38%) and Thailand (+0.28%) managed any green.  Meanwhile, Taiwan (-3.26%) was an outlier to the downside as Japan (-1.73%) and South Korea (-1.17%) led the region lower.  In Europe, stocks are mixed but lean slightly toward the red at mid-day.  The FTSE (-0.25%), DAX (-0.10%), and CAC (unch.) are typical of most exchanges with half a dozen exchanges in the green led by Russia (+1.13%) in early afternoon trading.  As of 7:30 am, US Futures are pointing toward a modestly red start to the day.  The DIA implies a -0.36% open, the SPY is implying a -0.38% open, and the QQQ implies a -0.45% open at this hour.  10-year bond yields are down sharply again to 2.939% and Oil (WTI) is up nearly 2% to $107.85/barrel in early trading.

The major economic news events scheduled for release Friday are limited to June Mfg. PMI (9:45 am) and June ISM Mfg. PMI (10 am).  There are no scheduled earnings reports either before the open or after the close.

As July starts, markets are expecting a 75-basis-point rate hike on July 28 and probably at least another half of a percent in September. As recession looks more likely, companies are falling all over one another in the mad scramble to lower forecasts (and more importantly market expectations) for the earnings season that gets into full swing in a couple of weeks. And on top of these issues, there is continued worry of very high inflation. Yet, there are also indications that (in places) inflation rates (if not prices) may have peaked. The market continues its bearish trend, but it must also be said that the trend is getting “long in the tooth” at least in the longer term.

In the short term, I would not be at all surprised if we see a low-volume day. (Thursday was the first time in two weeks we even reached the 50-day average volume in the SPY and QQQ…and even so, the DIA did not make that milestone). With a 3-day weekend ahead and news reports of travel problems (flight delays and cancellations), I expect a fair number of traders to call it a week and try to get ahead of the crowd. If you are trading, get yourself set for the long news cycle. Look at getting flat (or at least smaller), or hedged, especially if you have profits. They will sell the positions back to you Tuesday, I promise.

Don’t chase gaps. Demonstrate patience and wait for confirmation. Stick with your trading rules, trade with the trend, and consistently take profits when you have them. Remember that trading is our job. So, do the work and follow the process. And 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.

Ed

Swing Trade Ideas for your consideration and watchlist: No trade ideas today. 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.

🎯 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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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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