Thursday was a divergent day with the Bears in control in the SPY and QQQ and the Bulls hanging on in DIA.  This started with a 0.21% gap down in the SPY, a 0.74% gap down in the QQQ, and a 0.23% gap up in the DIA.  Then the Bulls led a 20-minute modest rally.  However, from there SPY and QQQ sold off the rest of the day ending the day just up off the lows.  Meanwhile, the DIA continued to rally until 12:20 pm only to sell off modestly the rest of the day, ending up about 0.27% above the open.  This action gave us an Evening Star in the SPY and QQQ (with the QQQ even closing back below its T-line) as well as a white-bodied, high-wick candle in the DIA.  It is also notable that QQQ saw significantly higher-than-average volume, with above-average volume in the DIA, but well less-than-average volume in the SPY. 

On the day, seven of the 10 sectors were in the green with Utilities (+1.34%) way out front leading the way higher and Technology (-02.48%) and Consumer Cyclical (-1.79%) dragging the rest of the market lower.  At the same time, the SPY lost 0.66%, DIA gained 0.50, and QQQ lost 2.31%.  The VXX climbed 0.38% to 23.99 and T2122 fell but remains well into the overbought territory to 88.11.  10-year bond yields spiked up to 3.856% while Oil (WTI) was up 0.37% to close at $75.63 per barrel. So, Thursday looked like a reversal day in the QQQ (which has led markets all year) and to a lesser extent in the SPY.  However, neither of them has broken its uptrend yet.  On the other hand, the DIA (which has lagged all year) held up relatively well, gaining on the day. 

The major economic news on Thursday included Weekly Initial Jobless Claims coming in lower than expected at 228k (compared to a forecast of 242k and the prior week’s 237k).  At the same time, Philly Fed Manufacturing Index also came in lower than predicted at -13.5 (versus a forecast of -10.0 but slightly better than the June reading of -13.7).  The Philly Fed Mfg. Employment Index came in better than anticipated at -1.0 (compared to a forecast of -4.5 but still worse than June’s -0.4).  Later the June Existing home sales were reported as less than expected at 4.16 million (versus a forecast of 4.20 million and the May value of 4.30 million).  This was a month-on-month 3.3% decline as compared to the May value of +0.2%.  Elsewhere, US mortgage rates fell significantly in the week ending July 20.  30-year, fixed-rate mortgages averaged 6.78% (the lowest level in four weeks) for the week down from 6.96% the week prior.  Then, after the close, the Fed said that Bank borrowing from the two emergency lending programs increased in the week ending July 19 going from $105 billion to $105.56 billion. 

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In stock news, GOOGL announced that, for the first time ever, YouTube has hiked prices for premium subscribers of multiple YouTube services.  Elsewhere, the CEO of UAL confirmed previous reports that the airline is having trouble getting pilots to take promotions to the captain role.  (50% of UAL’s 978 captain job openings have gone unfilled in the past year.)  The reason has been reported to be that Captain pilots have a much less predictable schedule in addition to a bigger paycheck.  Meanwhile, in its earnings call, TSLA confirmed that it is in preliminary discussions about licensing its “Full Self Driving” software to a major automaker.  Speculation is that the automaker involved would be STLA since F and GM already have their own self-driving programs well underway.  At the same time, AMC announced it has dropped its previous plan to charge tiered ticket prices based on the seat location within the theatre. 

In stock legal and regulatory news, the bill which increases the mandatory retirement age of pilots from 65 to 67 passed the US House in a large-majority bipartisan vote.  Elsewhere, the NHTSA said that TSLA has recalled 15,000 Model S and Model X cars due to a potential front seatbelt issue.  At the same time, an executive from STLA has pleaded guilty to Dept. of Justice charges of conspiracy to breach the Clean Air Act (by cheating on emissions testing).  Later, a US Appeals Court ruled that PZZA cannot force its delivery drivers to arbitrate claims that the company violated federal law by not reimbursing for vehicle expenses (mileage) after it was revealed the lead driver in the class-action suit had never even seen the arbitration agreement the company was trying to invoke to get the case dismissed.  Meanwhile, Bloomberg reported that the FTC is poised to pause its internal trial against MSFT over the ATVI acquisition.  At the same time, the US Dept. of Transportation has opened an investigation into DAL after a loaded plane sat on the tarmac without air conditioning for four hours Monday in 111-degree heat in Las Vegas.  (Multiple passengers had to be treated by medics.)

After the close, COF, BANF, ISRG, PPG, and SCHL all reported beats on both the revenue and earnings lines.  Meanwhile, ASB and OZK beat on revenue while missing on earnings.  On the other side, CSX and WRB both missed on revenue while beating on earnings.  Unfortunately, KNX missed on both the top and bottom lines.

Overnight, Asian markets were mixed with Hong Kong (+0.78%), Thailand (+0.53%), and Malaysia (+0.49%) leading the gainers while India (-1.17%), Taiwan (-0.78%), and Japan (-0.57%) pacing the losses.  In Europe, we see a similar picture taking shape with a lean slightly more to the green side at midday.  The CAC (+0.29%), DAX (-0.41%), and FTSE (+0.11%) lead on volume and are fairly typical of the region in early afternoon trade.  In the US, as of 7:30 am, Futures are pointing toward a green start to the day.  The DIA implies a +0.04% open, the SPY is implying a +0.26% open, and the QQQ implies a +0.53% open at this hour.  At the same time, 10-year bond yields are down 3.837% and Oil (WTI) is rallying now up 1.10% to $76.46 per barrel in early trading.

On Friday, there are no major economics news scheduled.  The major earnings reports scheduled for before the opening bell include AXP, ALV, AN, CMA, HBAN, IPG, RF, ROP, and SLB.  However, after the close, there are no reports scheduled.    

So far this morning, ALV, AN, DNKEY, HBAN, IPG, NHYDY, and ROP all reported beats on both the revenue and earnings lines.  Meanwhile, AXP and SLB missed on the revenue line while beating on earnings.  On the other side, RF beat on revenue while missing on earnings.  Unfortunately, SEOAY missed on both the top and bottom lines.  It is worth noting that ROP raised its forward guidance. 

In miscellaneous news, the Director of the Consumer Financial Protection Bureau Chopra told Reuters that the days of easy approvals for bank mergers are over. He went on to say, “There is no question past adjudications of mergers did not meet the level of analytical rigor that they ought to have.” He also said, “Banks can expect a more rigorous review of applications. The ink on the rubber stamp has dried up and … my hope is to see a shift from the regulators of moving from cheerleader to umpire.”  For what it’s worth, Chopra does also sit on the Board of the FDIC.  Elsewhere, the Fed launched its long-awaited “FedNow” instant settlement service covering 41 banks and 15 service providers.  While touted as a boon for everyday consumers, the move just means fund settlement for electronic payments should happen within seconds rather than hours to days later.

In other news, overnight the White House announced that it has secured “voluntary pledges” from OpenAI, MSFT, and GOOGL related to artificial intelligence.  The group will meet with President Biden at the White House today.  The commitment is that the group will create ways the consumers will be able to identify AI-generated information (like watermarks) as well as standards for how the companies and third parties test AI tools for security before they are released. The overall goal is to ensure AI safeguards without hindering innovation. With that said, like everything else in the world, intentions and platitudes are fine, but the devil is in the details when it comes to controlling a new technology that offers significant advantages to any individual, group, company, or country. Notably absent from the list of attendees are META, AAPL, and any Chinese or European representatives.

With that background, it looks like markets are working on inside candles in the premarket. The QQQ is now retesting its T-line (8ema) from below while the DIA has reversed and is giving us a black candle before the opening bell. With no major news planned for the day and earnings out of the way before the open, today may be more of a drift. The bears have the chart pattern in the market-leading QQQ and SPY. However, the Bulls have been in control all year and are not going to roll over on the back of a single candle. So, at this point, it is still looking like a pullback in an uptrend, with no strong indication a reversal has or is happening. As far as extension goes, none of the major index ETFs are far away from their T-line, but the T2122 indicator remains well into the overbought region. So, there is room to run in either direction. Just remember that markets can stay extended longer than we can stay solvent predicting the reversion to the mean, especially using an indicator like T2122. Finally, remember that it’s Friday. Pay yourself, hedge, move stops, and do whatever you need to do to get your account ready for the weekend news cycle. (Also, bear in mind there will be a slight weighting rebalance in the QQQ as of Monday. This is likely not a big deal, but it is happening.)

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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