On Friday, markets opened more or less flat.  Then, after waffling for the first hour, all 3 major indices sold off to the lows about 1:20 pm.  Then the options expiration buying took all 3 on a rally into 3 pm.  However, the last hour saw another, smaller, down wave.  This left us with black candles with fairly large wicks including Spinning Tops in the two large-caps indices.  On the day, SPY lost 0.65%, DIA lost 0.79%, and QQQ lost 1.14%.  Meanwhile, the VXX gained over 2% to 23.45 and T2122 dropped closer to the oversold territory at 22.49.  10-year bond yields fell back to 1.927% and Oil (WTI) was flat at $91.80/barrel.

On Monday, Russia recognized Ukrainian Separatist Regions as independent nations and ordered his armed forces into those regions under the pretense of protecting them against Ukrainian aggression.  This and the Western reactions to it are likely to be the main market drivers Tuesday.  Among these reactions are the likely halt of Natural Gas imports to Western Europe from Russia and the cancellation of a Biden-Putin meeting this week.  Nonetheless, as of 7 am, US futures have recovered most of the overnight losses (that occurred when the soft invasion started).

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The market is down 10%-20% from the all-time highs.  However, many have recently asked, ”given heavy inflation, huge government debt, unprecedented supply chain snarls, etc., why hasn’t the market fallen off a cliff.”   The short answer is that the market is not the economy.  A more nuanced answer is that most companies simply have more pricing power and consumers are more resilient to inflation than expected.  So, companies are able to charge prices even higher than their cost increases and this has/is resulting in strong profits.  In other words, we hear a lot of tales of woe about inflation, but we do not hear a lot of stories about companies shutting down operations because they are unable to pass on increased costs.  

Another factor is that many of the biggest corporations are putting a floor in markets in a sense.  For example, Bloomberg reported Saturday that the 10 largest stock buyback programs this year are 30% larger than they were a year ago.  So, companies like AAPL, FB, GOOG, MSFT, CSCO, PG, CHTR, V, SBUX, and WMT are spending tens of billions of dollars to essentially prevent their stock prices from falling.  In addition to those big boys, a large number of “smaller” companies had suspended their buybacks during 2020 and the first half of 2021, but they are also now using that saved money to protect their share prices again.  As a result, well over $265 billion (a record, which broke the record set just the previous quarter) was spent on buyback programs in Q4-21.  And those numbers are expected to rise again in Q1-22.  The estimate is that 2021 saw a record near $900 billion in stock buybacks in the S&P500 members and more expected this year.  So, simply put, it’s hard for prices to fall too far with massive buy orders sitting out there to absorb sell orders.

Overnight, the Asian markets were down across the board, but in varying degrees on the Russian soft invasion.  Hong Kong (-2.69%), Japan (-1.71%), Taiwan (-1.38%), and South Korea (-1.35%) paced the losses.  Thailand (-0.19%), New Zealand (-0.34%), and Malaysia (-0.36%) were the closest thing to gainers in the region.  Quite interestingly, European markets are mixed on fairly modest moves at mid-day.  The FTSE (+0.25%), DAX (-0.25%), and CAC (-0.02%) lead the region, but there are 5 green exchanges, and only Russia (-4.52%) is down hard on the Monday news.  As of 7:30 am, US Futures are pointing toward a down open (but significantly recovered from overnight lows).  The DIA implies a -0.19% open, the SPY is implying a -0.03% open, and the QQQ implies a -0.38% open at this hour. 10-year bond yields are up to 1.942% and Oil (WTI) is the big winner on the geopolitical news, up 3.69% in early trading.

The major economic news scheduled for Tuesday is limited to Mfg. PMI and Services PMI (both at 9:45 am), and Conf. Board Consumer Confidence (10 am).  The major earnings reports scheduled for before the open include CNP, CFX, CBRL, CVI, EXPD, FLR, HD, HSBC, JELD, KBR, LPX, M, MDT, MIDD, NHYDY, TPX, BLD, TRU, VNTR, and WLK.  Then after the close, A, ARGO, AGR, BTG, BWXT, CDNS, CZR, CWH, CSGP, FANG, ESI, JBT, MELI, MOS, NDSN, PANW, PSA, RXT, RRC, O, TDOC, TXRH, TOL, RIG, TA, and VRSK report.

So far this morning, HD, M, FLR, CNP, WLK, NXST, LPX, CFX, BLD, and CEQP have all reported beats on both lines.  Meanwhile, MDT and KBR reported beats on earnings while missing on revenue.  On the other side, JELD and TRU missed on earnings, but beat on revenue.  However, HSBC, TPX, and VNTR all missed on both lines.

News of talks between the US Sec. of State and Russian Foreign Minister Russian, tentatively scheduled for next week have given European and US stocks a little help this morning. However, we have to remember there will be a long 3-day news cycle before US markets open again. So, while some may run with the potentially good news, be very careful joining that crowd. The truth is we don’t know what will happen or when. And frankly, with 150k Russian troops plus tens of thousands of “Ukrainian Separatist Militia” on the Ukrainian border or inside Eastern Ukraine, it would not take much for a mistake to turn into war. (Fighting is already in progress between Ukraine and Separatists.) So, the prudent course is to go into the weekend flat or hedged. Just keep fighting the urge to put on rose-colored glasses and trade like you’re making up time.

Stick to your trading rules and manage the things that you can control. Trade with the trend, don’t chase, keep consistently taking profits when you have them, and move your stops in your favor. The first rule of making money in the market is to not lose big money in the market. So, don’t be stubborn, and protect yourself from yourself. If you are wrong, just admit it and take your loss. (That’s why we set stops in the first place.) Remember that you don’t have to trade every day and you definitely don’t need to chase the premarket moves by trading early. Trading is a marathon, not a sprint.

Ed

Swing Trade Ideas for your consideration and watchlist: Rick is back, but no trade ideas today til the turmoil settles a bit. 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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