Friday saw the Bears in control early and then a drift sideways all afternoon.  SPY opened 0.05% higher, DIA opened up 0.13%, and QQQ gapped down 0.20%.  At that point, QQQ led the way by selling off sharply until 11 a.m. and then more modestly for another 60 minutes.  SPY followed through to the upside for 5 minutes before following QQQ in a sharp selloff until 11 a.m. and then more modestly for an hour.  Meanwhile, after the open, DIA rallied for 20 minutes before it too followed QQQ by sharply selling until 11 a.m. and then more modestly until noon. At that point, all the air went out of the market, with all three trading sideways in a very tight range the rest of the day.  On the day, SPY and DIA retested their T-line (8ema) and failed that test.  SPY also tested and crossed below its 50sma.  This action gave us large black-body candles dropping well below the consolidations in SPY and QQQ.  This action took place on average volume in the SPY and QQQ as well as slightly below-average volume in DIA.

On the day, all 10 sectors were in the red with Technology (-2.56%) way out in front of the other sectors, leading the way lower.  On the other side, Consumer Defensive (-0.46%) and Communication Services (-0.48%) held up better than the other sectors. At the same time, SPY dropped 1.68%, DIA fell 0.98%, and QQQ dropped 2.68%. VXX popped 7.41% to close at 56.11% and T2122 dropped into the middle of its oversold territory at 10.65.  At the same time, 10-Year bond yields fell again to close at 3.716% while Oil (WTI) dropped 1.43% to close at $68.16 per barrel on demand concerns.  So, Friday a big drop, led by the TSLA (-8.45%), NVDA (-4.09%), GOOGL (-4.02%), AMZN (-3.65%), and AMD (-3.65%).  (AVGO also lost 10.35% on very heavy volume after its beat on both lines and modest forecast increase did not meet market expectations.) 

The major economic news scheduled for Friday included August Avg. Hourly Earnings, which were better than expected at +0.4% (compared to a forecast of +0.3% and July’s -0.1%).  On an annual basis, August Avg. Hourly Earnings were up 3.8% (versus a 3.7% forecast and up from July’s 3.6% reading).  At the same time, August Nonfarm Payrolls were up 142k (compared to a +164k forecast but much stronger than July’s +89k).  On the private side, August Private Nonfarm Payrolls were up 118k (versus a forecast of +139k but up strongly from July’s +74k value).  The August Participation Rate remained steady at 62.7% (with July’s reading also being 62.7%).  This led to a August Unemployment Rate of 4.2% (compared to a 4.2% forecast and down a tick from July’s 4.3% reading). 

In Fed news, on Friday, New York Fed President Williams indicated that the time has come for rate cuts.  Williams said, “With the economy now in equipoise and inflation on a path to 2%, it is now appropriate to dial down the degree of restrictiveness in the stance of policy by reducing the target range for the federal funds rate.”  However, he did hedge his bets, saying “The stance of monetary policy can be moved to a more neutral setting over time depending on the evolution of the data, the outlook, and the risks to achieving our objectives.”  He concluded, “It’s pretty clear we’re going to need over time to get interest rates back to a more normal level. The problem with that statement is I’m not sure what that more normal level is and I’m not sure at all about how long that should take.”  Later, Fed Governor Waller agreed with Williams, saying “The time has come (for the Fed to begin rate cuts).”  He continued, “If the data supports cuts at consecutive meetings, then I believe it will be appropriate to cut at consecutive meetings.”  Waller also opened the door to larger cuts, saying “If the data suggests the need for larger cuts, then I will support that as well. I was a big advocate of front-loading rate hikes when inflation accelerated in 2022, and I will be an advocate of front-loading rate cuts if that is appropriate.”

In stock news, on Friday, BAC analysts reported research showing that GOOGL’s share of the internet search market increased in August, helped by its integration of AI.  The report said, GGOL has 90.5% of the search market globally, but “only” 87.9% in the US.  At the same time, Reuters reported (and the French company confirmed) that French fir Elis had made an acquisition offer to VSTS.  Later, Reuters exclusively reported that QCOM has explored the possibility of acquiring portions of INTC’s chip design business.  At the same time, activist investor hedge fund Starboard Value filed a shareholder resolution to end NWSA’s “dual-class shares” in a bid to oust Rupert Murdoch from his control of the company.  After the close, S&P announced that DELL, PLTR, and ERIE will join the S&P500 before the open on September 23.  (These will replace AAL, ETSY, and BIO, which will be dropped from the index at the same time.)  Later, TSM announced they have achieved production yields on par with Taiwanese plants at their AZ plant. This likely means that 4nm plant is on track to achieving output goals after the initial startup in April.

Meanwhile, on Saturday, the Financial Times reported that AAPL’s new iPhone (to be announced on Monday) will use ARM chips for AI technologies.  Later, STLA recalled 1.46 million vehicles worldwide, including 1.23 million in the US, due to software malfunction in the anti-lock brake system that can increase the risk of crashes.  At the same time BA’s Starliner capsule was able to make it back to earth, parachuting into the NM desert.  (It will now be shipped to FL, where it will be examined to discover what parts failed.)  In other BA news, Sunday BA announced a it has a tentative deal with a union covering 32,000 of its workers in the US Pacific Northwest. (The deal calls for a 25% wage increase over four years, a commitment to build its next commercial aircraft in that area, 12 weeks paid parental leave, and improved retirement benefits among other things.)  At the same time, ANCTF (owner of the Circle-K convenience stores) plans to make a second offer to SVNDF (owner of the 7-eleven convenience stores) according to Bloomberg. (The first offer, of $38.6 billion, was rejected at the end of last week.) Later, CNBC reported that the CEO of NSC is being investigated by the company board over engaging in an inappropriate workplace relationship.

In stock legal and governmental news, on Friday, a federal judge rejected a COIN motion to dismiss a shareholder class action suit alleging the company had played down the risk of being sued by the SEC (for buying/selling crypto being securities).  So, the shareholder suit will continue.  At the same time, the SEC fined Esmark and its Chairman for making a “false tender offer” to acquire X at $35 per share.  (The suit alleges the tender offer was made even though Esmark had no financing in place to execute on the offer, which would have required $7.8 billion in cash.)  Later, MA state security regulators fined MS $2 million for failing to monitor insider trading by FRCB prior to the bank failing.  (MS managed the stock sales of FRCB and the small bank’s Chair was allowed to execute stock sales prior to material nonpublic information being released to the market.)  At the same time, the US State Dept. approved the sale of $691 million of RTX Sidewinder missiles to the Netherlands. 

Elsewhere, a bi-partisan group of Congressman and Senators launched an inquiry into six US retailers (including AZO and AAP) over whether they bought Chinese auto parts and evaded tariffs by trans-shipping the cargoes through Thailand.  After the close Friday, Bloomberg reported that BIG is preparing to file for bankruptcy under chapter 11.  (This comes after the company postponed earnings from Sept. 6 to Sept. 12.) Friday evening, the US Federal Energy Regulatory Commission (FERC) approved BLK’s $12.5 billion (cash and stock) deal to acquire Global Infrastructure Partners (which owns many assets in the utility space).  Then, on Saturday, as part of a money laundering case, WYNN agreed to pay $130 million to the SEC and admit that it let unlicensed money transfers from around the world funnel gambler money to its flagship Las Vegas casino. This was part of a Dept. of Justice “Non-prosecution settlement.”  Finally, on Sunday, DirecTV filed an FCC complaint against DIS for anti-competitive practices and failing to negotiate in good faith.  DIS was requiring DirecTV to take an pay for less popular channels in order to distribute ESPN, while DIS offers “skinnier” bundles direct to the public.

Overnight, Asian markets were mixed but leaned toward the red side.  Singapore (+1.22%) was the outlier of four gaining exchanges.  Meanwhile, Hong Kong (-1.42%), Taiwan (-1.36%), and Shanghai (-1.06%) paced the losses.  In Europe, we see nearly green across the board at midday with only Greece (-0.26%) in the red among the 14 bourses.  The CAC (+0.84%), DAX (+0.75%), and FTSE (+0.75%) lead the region higher in early afternoon trade.  In the US, as of 7:45 a.m., Futures are pointing toward a gap higher to start the day.  The DIA implies a +0.68% open, the SPY is implying a +0.70% open, and the QQQ implies a +0.81% open at this hour.  At the same time, 10-Year bond yields are back up to 3.746% and Oil (WTI) is up 0.78% to $68.20 per barrel in early trading.

The major economic news scheduled for Monday are limited to August NY Fed 1-Year Consumer Inflation Expectations (11 a.m.) and July Consumer Credit (3 p.m.).  There are no major earnings reports scheduled for before the open. However, after the close, ORCL reports.

In economic news later this week, on Tuesday the Weekly API Crude Oil Stocks are reported.  Then Wednesday, we get August Core CPI, August CPI, and EIA Crude Oil Inventories.  On Thursday, Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, August Core PPI, August PPI, WASDE Ag report, August Federal Budget Balance, and the Fed Balance Sheet are reported.  Finally, on Friday, we get August Export Price Index, August Import Price Index, Michigan Consumer Sentiment, Michigan Consumer Expectations, Michigan 1-Year Inflation Expectations, and Michigan 5-Year Inflation Expectations.

In terms of earnings reports later this week, on Tuesday, we hear from ASO, CMA, PLAY, GME, and WOOF. Then Wednesday, DBI, HEPS, and TEN report. On Thursday, we hear from BIG, CAL, KR, SIG, ABDE, and RH.  Finally, on Friday, there are no reports scheduled.

So far this morning, there are no significant earnings reports.

With that background, it looks as if the Bulls are indecisively in control this morning. All three major index ETFs gapped higher to start the premarket. Since then, all three have given us indecisive, small-body and plenty of wick candles. Despite the gap higher, all three remain below their 8ema. So, the short-term trend is bearish. At the same time, the mid-term trend is mixed with the QQQ now bearish and in the long-term we still have a Bull trend with DIA and SPY. In terms of extension, QQQ remains a bit stretched below its T-line and SPY pushed toward joining it Friday. However DIA remains close enough to the 8ema. On the other hand, the T2122 indicator is back in the middle of its oversold range. So, the market is not “crazy extended” but at least the QQQ will need a pause, bounce, or reversal soon to avoid becoming out of whack in its decline. Just remember the mantra “follow, don’t lead, but also don’t chase” in mind. With regard to those 10 big dog tickers, all 10 are in the green this morning, led by TSLA (+1.94%). However, five of the 10 are up more than a percent and the laggard is AAPL (+0.29%). So the Bulls are in control in the Tech sector this morning.

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 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 gains are 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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