Services PMI and Fed Speakers Today

Markets diverged at the open Thursday.  The SPY gapped down 0.52%, QQQ gapped down 0.92%, but DIA gapped slightly to the upside by 0.16%.  After the open, all three of the major indices led a slow rally until 1:30 pm.  At that point, the bulls stepped in to really stoke the rally for half an hour.  Then from 2 pm, markets ground sideways in a very tight range until about 3:15 when another leg of the rally started taking us to the highs of the day at 3:40 pm.  However, we did see profit-taking in the last 20 minutes.  This action gave us large-body, white candles with small upper wicks in all three major indices.  The QQQ and SPY printed a Bullish Engulfing Signals (SPY engulfing a Doji), and the DIA gave us a Morning Star-type candle.  The SPY and DIA both retested their T-lines (8ema) and closed just below that level.

On the day, eight of the 10 sectors were in the green with Utilities (+1.32%) leading the way higher and the Financial Services (-0.61%) lagging behind the other sectors.  At the same time, the SPY was up 0.74%, the DIA was up 1.04%, and QQQ was up 0.83%.  The VXX fell 3.61% to 11.23 and T2122 climbed higher into the midrange to 42.73.  10-year bond yields spiked over the key 4% level to 4.062% and Oil (WTI) was up 0.33% to $77.95 per barrel.  So, overall, Thursday saw a gap down and, after that, it was a bullish market all day long.  This all happened on less-than-average volume across the board.

In economic news, the Weekly Initial Jobless Claims came in slightly below expectation at 190k (compared to a forecast of 195k and the previous week’s reading of 192k).  At the same time, Q4 Nonfarm Productivity printed far below projection at 1.7% (versus a forecast of 2.6% but at least better than the prior quarter value of 1.4%).  This was mainly a result of the Q4 Unit Labor Cost coming in twice as high as expected at 3.2% (compared to the forecast of 1.6% and the Q3 reading of +2.0%).  After the close, Atlanta Fed President Bostic (non-voter) ruled out supporting any return to aggressive FOMC rate hikes and also touted a pause in hikes by summer.  He told a roundtable that “right now, I am firmly in the quarter-point move camp.”  Meanwhile, Fed Governor Waller’s (voter) post-market videoconference presentation was canceled after that Zoom call was “Porn Bombed.”  However, some of his remarks were pre-released, and said he supports raising the projected terminal rate of the Fed Funds to 5.1%-5.4%.

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In stock news, WMT announced it had 32 Walmart Healthcare Centers at the end of 2022, is opening 17 new ones this year and plans to add 28 new healthcare centers in 2024.  Elsewhere, F recalled 98,500 Ranger trucks over the replacement of airbag inflators.  However, F also said it will restart production of the F-150 Lightning electric truck on March 13 (after F had halted that production in early February following a battery fire).  Meanwhile, BX defaulted on a $562.5 million bond Thursday that was backed by a portfolio of offices and stores in Europe.  In the crypto space, a number of major cryptocurrency companies (including COIN) dropped SI as their banking partner Thursday after SI’s most recent earnings report cast doubt on the company’s ability to stay afloat.  In other downbeat news, Bloomberg reported that C is cutting hundreds of jobs (just less than 1% of its total workforce).  After the close, the state of NV released news that it has approved a new $330 million tax abatement for TSLA after it had said it will invest $3.6 billion in the state to expand its Gigafactory complex in that state.  In executive news, the Wall Street Journal reported after the close that the CEO of WMT (McMillon) plans to stay in that role for at least three more years.  Finally, the Biden Administration is expected to announce another $400 million aid package to Ukraine today.  The package is expected to include HIMARS (made by LMT), GMLRS rockets (made by NOC), and ammunition for the Bradley fighting vehicle (made by BAESY).

In stock legal and regulatory news, GOOGL has won an appeal to the US 9th Circuit Court where users of “Chrome Incognito Mode” had sued for $5 billion in damages as a class action when it made public that this mode does not make browsing private and anonymous.  The trial will go on in November, but the class-action status was denied, which will severely limit the number of claims and greatly reduce any plaintiff award.  Elsewhere, a US Bankruptcy judge criticized the SEC for its “vague doubts” about a proposed purchase of defunct crypto lender Voyager Digital by Binance.  However, even if the judge approves the $1.3 billion purchase, the deal can’t proceed until the SEC approves it and the SEC has said Voyager Digital’s lending business involves the sale of unregistered securities.  Meanwhile, the US 2nd Circuit Court of Appeals ruled that the founder of APO cannot revive a conspiracy lawsuit accusing his co-founder (and others) of conspiring to destroy his reputation.  At the same time, across the pond, Reuters reported that sources tell it that MSFT will get EU approval for the long-delayed acquisition of ATVI.  Finally, the seven major US railroads (CP, CSX, KSU, UNP, NSC, BRKB’s subsidiary BNSF, and CNI) agreed to join a voluntary “Close Call Reporting System” after the notoriety brought by the NSC crash and chemical spill in East Palestine OH.  This move was aimed at avoiding mandatory reporting regulations from the NTSB or Transportation Dept.

After the close, DELL, AVGO, HPE, VMW, VSCO, COO, and VVX all reported beats on both the revenue and earnings lines.  Meanwhile, COST and JWN both missed on the revenue line while beating one earnings. On the other side, MRVL beat on revenue while missing on earnings.  There were no major misses on both the top and bottom lines.  It is worth noting that AVGO and COO both raised their forward guidance.  However, DELL, VVX, and MRVL lowered their forward guidance.

Overnight, Asian markets were mixed but leaned to the green side.  India (+1.57%), and Japan (+1.56%) were far and away the biggest winners on the day.  Meanwhile, Thailand (-0.36%), New Zealand (-0.27%), Malaysia (-0.13%), and Singapore (-0.09%) were the only red in the region.  In Europe, we see a heavily green lean at midday.  Only Greece (-0.55%), and Switzerland (-0.05%) show any red, while the FTSE (+0.15%) also lags a bit.  The DAX (+1.11%) and CAC (+0.83%) lead the region higher in early afternoon trade.  As of 7:30 am, US Futures are pointing toward a modest gap higher to start the day.  The DIA implies a +0.29% open, the SPY is implying a +0.41% open, and the QQQ implies a +0.46% open at this hour.  At the same time, 10-year bond yields have backed off slightly (but remain above the key 4% level) at 4.013%, and Oil (WTI) is off half a percent to $77.78/barrel in early trading.

The major economic news events scheduled for Friday are limited to Feb. Services PMI and S&P Global Composite PMI (both at 9:45 am), and ISM Non-Mfg. PMI (10 am), and we hear from 2 Fed speakers (Bostic at 11:45 am and Bowman at 3 pm). Major earnings reports scheduled for the day are limited to HIBB before the opening bell.  There are no major earnings reports after the close. 

So far this morning, HIBB missed on both the revenue and earnings lines.  It also lowered its forward guidance.

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In late-breaking news, while the Fed has recently pushed back against the idea of a rate hike pause anytime soon and raising expectations for the terminal rate slightly, Europe continues to look for more dovish central bank policy. However, overnight a member of the ECB Governing Council pushed back just a bit against the widespread belief that the ECB’s terminal rate will be under 4%. However, he only pushed a tiny bit, saying “market bets for euro-area interest rates peaking at 4% may prove accurate if inflation remains elevated.” In much less cheery news, XOM now faces a lawsuit filed by the US EEOC (Equal Employment Opportunity Commission) after a black employee found another noose, the fifth to be found at the same facility. The suit alleges that XOM has failed to investigate previous the nooses and has failed to do enough to prevent other such events.

With that background, it looks like the bulls are retesting the T-line in all three major indices this morning in the premarket. If we open right here, we would be breaking the downtrend line in all three, but that does not mean a bullish trend would be started until we put in a high and a higher low. So, be leery of FOMO and chasing new bullish trades too early. There is no problem of extension according to T2122, or, of course, the T-line. As I see it, the QQQ has support just at the bottom of the premarket candle with plenty of room above before hitting the next potential resistance, SPY has a little room to move before hitting resistance at about $400 and change, and DIA has room to run up to about $336 before resistance. Remember the intraday reversals (like yesterday’s “gap and rally”) and don’t forget that its Friday. So, take profits, pay yourself, and prepare your account for the weekend news cycle.

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.


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🎯 Dick Carp: the scanner paid for the year with HES-thank you

🎯 Arnoldo Bolanos: LTA scanner really works $$, thanks Ed.

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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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