Markets started the day flat Thursday, down 0.02% in the SPY, down 0.03% in the QQQ, and down 0.05% in the DIA.  However, the SPY and QQQ immediately sold off, reaching the low of the day shortly after 11 a.m.  Then both began a slower rally that took them back to their highs (high of the day in SPY) about 2:45 p.m.  From there, the pair of index ETFs traded sideways with a very modest bearish trend for the last 75 minutes.  Meanwhile, DIA traded sideways in a very tight range for an hour after the open.  Then it followed the other major index ETFs lower, finding its lows at about 11:50 a.m.  At that point, DIA traded sideways until 1:15 p.m. before following the SPY and QQQ higher until 2:45 p.m.  From there, DIA traded sideways in a tight range for the rest of the day.

On the day, six of the 10 sectors were in the red with Consumer Defensive (-1.67%) way out in front (by almost a full percent) leading the way lower.  Meanwhile, Financial Services (+0.76%) held up better than the other sectors.  At the same time, the SPY lost 0.04%, DIA gained 0.06%, and the tech-heavy QQQ lost 0.29%.  VXX fell 1.28% to close at 23.97 and T2122 climbed but still remained well into the oversold territory at 9.09.  10-year bond yields basically bobbed along sideways after Wednesday’s “fall” to close at 4.714% while Oil (WTI) dropped another 2.10% to end the day at $82.45 per barrel.  

This action gave us very indecisive candles in all three major index ETFs.  The DIA and SPY printed Dojis that remain below their T-line all day.  At the same time, QQQ printed more of a black-bodied Spinning Top which retested its T-line before closing just below it again.  This all happened on below-average volume in all three major index ETFs.  So, we saw a flat open followed by a selloff, a rebound, and finally a lack of conviction in the last hour.  That probably tells us Mr. Market is just waiting on the next shoe to drop this morning (September Payrolls and Unemployment data in the premarket).

The major economic news reported Thursday included August Exports, which came in higher than the previous month at $256 billion (compared with $251.9 billion in July).  At the same time, August Imports were down slightly to $314.3 billion (versus July’s $316.6 billion). Together this gave us an August Trade Balance (Deficit) of $58.3 billion which was better than expected (compared to a forecast of -$62.3 billion and July’s -$64.7 billion.  After the close, the Fed’s Balance Sheet came in below $8 trillion for the first time in over two years at $7.956 trillion (down $46 billion on the week).  Much of the drop was attributed to a big drop in the credit being given to deal with bank failures.

In Fed speak, Chicago Fed President Goolsbee told Bloomberg he doesn’t see treasury yields threatening a soft landing.  (To be fair, the interview was recorded before rates hit 7.5%.) Goolsbee said “On the real side I feel like nothing has happened so far that is convincing evidence that we are off the golden path.” (Goolsbee has been referring to the Fed path to a soft landing as “the golden path.”)  Later San Francisco Fed President Daly hinted at keeping rates steady at the next Fed meeting.  Daly said, “If we continue to see a cooling labor market and inflation heading back to our target, we can hold interest rates steady and let the effects of policy continue to work.”  Finally, Richmond Fed President Barkin said that surging Treasury yields reflect the strong economic data we’ve seen lately along with a heavy supply of bonds in the market.  (More bonds available drive down bond prices, which automatically drives up the bond yields.)

In Autoworker contract talks and strike news, GM revealed Thursday that it has made a counter-offer to the UAW.  (No details were released.)  Elsewhere, Reuters reported details of the tentative deal between the UAW and VLVLY (Volvo Mack Trucks).  The report showed a 19% hike over 5 years (10% immediately) plus a $3,500 “ratification bonus,” improved benefits (including a $1,000 annual addition to each 401K plan), additional vacation days, and a reduction in the tier-structure (the time it takes to get to top pay scale).    The deal must still be ratified by 4,000 hourly UAW workers.  Meanwhile, UAW President Fain announced he will hold another 2 p.m. Eastern streaming event to update workers on the progress of the talks.  In his post-scheduling the event, he hinted there might be an expansion of the strike but that all three of the automakers may not be hit.

In stock news, BHP told Reuters Thursday that it intends to focus on cost-cutting rather than M&A to improve results over the next year.  Without setting a goal or forecast, the CEO said “If we can cut our cost base by 10%, that’s $20 billion in value…the last time someone created $20 billion with an M&A – I’d like them to tell me when it was.”  At the same time, XOM raised its Q3 profit forecast by $1 billion, citing escalated oil prices.  Elsewhere, a study published in the JAMA Medical Journal showed a link to increased stomach paralysis and other rare gastrointestinal issues for NVO’s wildly popular diabetes drugs Ozempic, Wegovy, and Saxenda which are all widely used for significant weight loss.  Bloomberg said the study found patients on one of those drugs are nine times more likely to develop swelling of the pancreas than a competing diabetes drug.  At the same time, C outlined its layoff process for eliminating layers of management in a brief internal meeting on Thursday.  No specifics were given, but Reuters reports the next layoffs will hit in November. A bit later, CLX announced that its sales took a hard hit from a cyber-attack but also acknowledged a “challenging consumer environment.” In the early afternoon, GSK announced it had raised $1.1 billion by selling 270 million shares of Haleon Plc in the UK. The funds will reportedly be rolled back into its Pharma business unit (Haleon is just an investment).  Meanwhile, STLA announced a $90 million investment in Argentina Lithium & Energy.  STLA will hold 19.9% ownership as a result of the deal.  Late in the day, MRTX shares jumped after Bloomberg reported rumors that French Pharma giant SNY is exploring an acquisition of MRTX.  After the close, MGM announced it expects operational disruptions from its September cyber-attack to negatively impact Q3 results.

In stock government, legal, and regulatory news, the UK announced Thursday morning that it will investigate the AMZN and MSFT dominance of the cloud computing market.  (The two combined have 80% market share with GOOGL being the closest competitor with 5%-10% of the market.)  Later, the Commerce Dept. said it is examining TSM, whose $40 billion AZ plant is a crucial planned recipient of US CHIPS Act funds.  Recent information indicates that nearly half of the project’s workforce comes from Taiwan.  This is, of course, contrary to the act’s goal of increasing US employment and chip manufacturing capability.  (TSM has had a very hard time filling jobs with qualified, i.e., experienced, US workers and has found it most expedient to bring in staff from the Taiwanese facility, of which the AZ fab is designed to be a mirror image.)  Elsewhere, GIFI announced a settlement of a lawsuit with Hornbeck Offshore Services.  After the settlement, the court dismissed the suit.  (No terms were released.)  At the same time, principally INTC, NVDA, and QCOM (but including others) launched a large-scale lobbying campaign in Washington in a bid to defeat semiconductor sales to China.  (NVDA was particularly vocal with the trio above claiming the restrictions could cost their firms $50 billion in lost sales per year from China.)  The three companies also testified before a House committee hearing Thursday.  Later, TSLA asked the Mexican government to build new infrastructure in the Northern Mexican state where the company intends to construct a new car plant.  (These improvements included upgrades to the region’s electric grid and railway system.)  In the afternoon, the NHTSA held a public hearing and recommended the government mandate a recall of 52 million air bag inflators (11 million of those produced under license by ALV).  These inflators were used between 200 and 2018 by 12 different car makers.  At the close, the SEC sued TSLA CEO Musk related to his X (Twitter) purchase. The SEC is attempting to force Musk to testify in the agency’s probe of his purchase of the company.  (Musk defied a subpoena to appear on Sept. 15 from the agency.)

After the close, LEVI missed on revenue while beating on earnings.  The company also cut its full-year guidance again.  (It cut forward guidance just 3 months ago as well.)

Overnight, Asian markets were mostly green.  Thailand (-0.97%) was the only major outlier to the downside while Hong Kong (+1.58%) was an outlier to the upside.  Singapore (+0.61%) and India (+0.55%) were the more typical leaders to the upside.  In Europe, we see the same picture taking shape at midday with only two of the 15 bourses showing red.  The CAC (+0.69%), DAX (+0.83%), and FTSE (+0.40%) lead the region higher in early afternoon trade.  In the US, as of 7:30 a.m., markets are now looking to start the day on the upside.  (Of course, this is pre-Payrolls data.)  The DIA implies a +0.20% open, the SPY is implying a +0.21% open, and the QQQ implies a +0.27% open at this hour.  At the same time, 10-year bond yields are higher at 4.744% and Oil (WTI) is just on the green side of flat at $82.43 per barrel in early trading.

The major economic news scheduled for Friday includes Sept. Avg. Hourly Earnings, Sept. Nonfarm Payrolls, Sept. Private Nonfarm Payrolls, Sept. Participation Rate, Sept. Unemployment Rate (all at 8:30 a.m.).  We also hear from a Fed speaker (Waller at noon).  The major earnings reports scheduled for before the open are limited to. There are no major earnings reports scheduled for Friday (either before the bell or after the close).

In miscellaneous news, Nat Gas hit a price not seen since January as the commodity broke $3 to close at $3.184.  After hours, AMC announced that cultural phenom Taylor Swift is helping it rake in money.  A film of Swift’s recent Eras tour will open on Oct. 13 and has already surpassed $100 million in advance ticket sales.  Meanwhile, Politico reports that in the wake of the GOP mess in Congress, the Biden Administration is now looking at using State Dept. grants as a way to send more weapons to Ukraine.  The idea seems to be grating the money to Ukraine who would use the funds to buy arms from US weapons manufacturers such as GD, NOC, and RTX.  (The same mechanism has been used to transfer weapons to Taiwan in the past.)  At the same time, the National Assn. of Realtors said the average US mortgage rate has now hit a 22-year peak of 7.49% for a 30-year, fixed-rate loan.

In late-breaking news, TSLA announced it will cut its US prices again on its Model 3 and Model Y cars.  (A 3%-4% cut in Model 3 prices and a 3.7% cut in Model Y.)  The move comes after TSLA vehicle deliveries for Q3 missed the market expectations.  At the same time, PHG (Philips) took a hit overnight as the FDA said it does not believe the data shared by the medical device maker is sufficient to evaluate the risks posed by the company’s recalled sleep apnea ventilators.  (More than 10 million of those devices were recalled after a number of deaths were attributed to breathing toxic materials produced by the breakdown of some silicone components of the device.)  Elsewhere, Bloomberg reports this morning that XOM is in “advanced talks” on buying PXD in a $60 billion deal.  It would be the oil giant’s biggest acquisition since Mobil back in 1999.  (The CEO of PXD had previously announced his retirement at year end.)  Finally, a meeting between President Biden and Chinese President Xi next month is looking more likely.  The meeting would take place on the sidelines of an APEC (Asia-Pacific Economic Cooperation) summit in San Francisco in Mid-November.

With that background, it looks like the Bulls are tentatively and indecisively in charge prior to today’s data drop. All three major index ETFs are easing closer to their T-line (8ema) from below. All three are also printing very small, white-body, Spinning Top type candles very early. In terms of extension, none of the three major index ETFs are far below their T-line (8ema) but the T2122 indicator is now in the middle of its oversold range. So, we are not extremely oversold and have some slack to run with if either the Bulls or Bears can find energy. Expect some volatility at 8:30 a.m. and again at the open (and possibly when the UAW streams its news mid-afternoon). Also remember that this is Friday, payday, and time to get your account ready for the weekend news cycle. Just remember, the first rule of making big money in the market is to not lose big money in the 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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