Speakers, PCE, and Oil Inventories On Tap

On Tuesday, markets gapped and then ran higher for a 1% gain across all 3 major indices during the first 10 minutes of the day.  However, this was just a bull trap.  From that point, we saw a steady and protracted selloff right into the close.  This gives us Bearish Evening Star type signals in all 3 major indices and all 3 also gave up their T-lines (8ema).  On the day, SPY lost 2.00%, DIA lost 1.57% and QQQ lost 3.05%.  The VXX rose slightly to 22.78 and T2122 dropped back into the oversold territory at 17.11. 10-year bond yields fell slightly to 3.183% and Oil (WTI) gained 2% to $111.75/barrel.

Bloomberg reported new problems in the US supply chain.  Due to the buildup in retailer inventories (ahead of the holiday season), and slowdowns by rail and trucking carriers, the largest ports in the US are dealing with over-flowing warehouses. This is due to a glut of containers awaiting shipment to the rest of the US.  The volume of inbound containers has tripled since February.  However, truck and rail carriers are unable to catch up.  As a result, 28,000 containers sit in the Port of Los Angeles, with two-thirds of them have been waiting to be loaded on rail cars for more than 9 days. This comes just weeks before 115,000 rail workers may begin a strike on July 18 (after months of failed contract negotiations and, in addition, dock workers’ contracts also expires on this Friday.  In the other (main) mode of transport, half of the truck loading gates remain unfilled daily, even as storage at both the ports of Los Angeles and Long Beach (which together handle over 42% of Asian import containers) sits at 99.7%.  (Normally there is a vacancy rate of about 5%.)   Put all together, these conditions can mean new (or worse) delays and shortages among manufacturers and retailers starting immediately.

In oil news, WTI surged another 2% Tuesday after it was reported that Saudi Arabia and the UAE have told the west they cannot increase production because they are near max production capacity.  In addition, Reuters reported Monday that the Strategic Petroleum Reserve fell by 6.9 million barrels in the last week.  This brings the SPR to less than 498 million barrels, which is the lowest level since 1986 (and down about one-third from the all-time high SPR level reached in 2010). With that all said, US oil production is still at the same level it was in 2019. So, the problem does not seem to be domestic production.

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In business news, the board of DIS has extended the contract of CEO Bob Chapek for another 3 years.  TSLA laid off 200 workers from its CA Autopilot team.  PINS CEO Ben Silbermann stepped down after the close.  Former GOOGL Commerce Unit President Bill Ready will take the vacated role.  After the close it was announced that XOM and IMO will sell Canadian assets to SPGYF (Whitecap Resources) for $1.48 billion.

So far this morning, GIS and PDCO have both reported beats on the revenue and earnings lines.  Meanwhile, MSM missed on revenue while beating on earnings.  However, BBBY and MKC both missed on the top and bottom lines. (SCHN and UNF report at 8 am). In addition, BBBY reports that its CEO is leaving the company after they missed estimates by a large margin.

In technical analysis news, the S&P 500 closed back in the bearish market territory on Tuesday with only 65 of the 502 members managing to close in the green on the day.  However, exactly half (251) of them remain above their T-line (8ema). This list includes XOM, OXY, UNH, QCOM, KO, PFE, PG, MRK, BA, BMY, and ABBV.  At the same time, 70 of the 502 are above their 50sma, including XOM, UNH, PFE, MRK, BMY, and ABBV.

On the mortgage front, after an odd increase in mortgage applications, the demand for loans was basically flat last week.  Even as the average interest rate fell to 5.84% from the prior week’s 5.98%, loan applications did not change much.  New home purchase loan applications rose 0.1% (but were still 24% lower than one year ago) while new home loan applications rose 2% (but were still down 80% from one year ago).

Overnight, Asian markets were red across the board.  Shenzhen (-2.20%), Hong Kong (-1.88%), and South Korea (-1.82%) led the way lower.  However, losses were widespread with only a couple of the smaller exchanges managing to lose less than a quarter of one percent.  In Europe, stocks are not universally in the red, but only two minor exchanges are managing to hold on to the green side of flat at mid-day (and only by their fingernails).  The FTSE (-0.59%) lags but the DAX (-2.00%) and CAC (-1.27%) are typical of the region in early afternoon trading.  As of 7:30 am, US Futures are pointing toward a slightly lower start to the day.  The DIA implies a -0.08% open, the SPY is implying a -0.23% open, and the QQQ implies a -0.35% open at this hour.  10-year bond yields are down to 3.162% and Oil (WTI) is up 1% to $112.89/barrel in early trading.

The major economic news events scheduled for release Wednesday, we get Q1 GDP (final rev at 8:30), Crude Oil Inventories (10:30), and 3 Fed speakers (Mester at 6:30 am, Chair Powell at 9 am, and Bullard at 1:05 pm).  On the earnings front, we get reports from BBBY, GIS, MKC, MSM, PDCO, PAYX, SCHN, and UNF before the open.  Then, after the close, we hear from MLKN and SGH.

In economic news coming later this week, on Thursday, we get May PCE Price Index, Initial Jobless Claims, May Personal Spending, and Chicago PMI.  Finally, on Friday we get June Mfg. PMI and June ISM Mfg. PMI.  There will also be the ECB Central Banking forum (6/27-6/29) where both Fed Chair Powell and ECB President Lagarde speak.

On the earnings front, on Thursday, we get reports from AYI, STZ, WBA, and MU.  There are no reports on Friday, July 1.

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Yesterday’s much lower than expected Consumer Confidence number caused a tech rout as traders fled from growth stocks. Not only did this hit stocks, but Bitcoin is back below $20,000 again this morning. Central Bankers are not helping matters as markets watch the ECB Central Bank Forum for clues and, so far, the speeches have all pointed toward bigger and faster hikes as Euro ara inflation data gave mixed signals. (German inflation came in lower than expected while some others came in higher. Spain unexpectedly printed a double-digit inflation number.) Today the speakers will also be key with Fed Chair Powell speaking as well as BoE Governor Bailey, and ECB President Lagarde. With this all said, this may not be the day for any major new moves by traders. Month/Quarter/Half end is fast approaching, we have a long weekend ahead, and uncertainty is the rule in markets now.

Demonstrate patience and wait for confirmation. Stick with your trading rules, trade with the trend, and consistently take profits when you have them. Remember that trading is our job. So, do the work and follow the process. And always, always, always move your stops in your favor. Remember the “Legend of the man in the green bathrobe“…it’s NOT house money, it’s all our money (so don’t give very damn much of it back). Also, the first rule of making big money in the market is to not lose big money in the market. So, don’t be stubborn. If you have a loss, just admit you were wrong, respect your stop, and take the loss before it grows. As they say, the best time to have taken a $500 loss is when you are now staring at a $1,500 loss. Lastly, remember that you get rich slowly and steadily in Trading…not by striking it rich on one or two trades. So, give up that lottery ticket mentality.

See you in the trading room.

Ed

Swing Trade Ideas for your consideration and watchlist: SQQQ, TZA, SDS, CVX, SU, LYFT, AMD, M, AMAT, TNA, BITO. 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.

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🎯 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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