Markets mostly recovered in the premarket Monday, to give a tiny gap down in the large-cap indices and a four-tenths of a percent gap down in the QQQ. However, the whipsaw was in effect and we got an immediate strong rally into the highs of the day during the first hour. At that point, markets ground sideways for a couple of hours before beginning a strong and protracted selloff that took us out on the lows. This left us with ugly black candles with large upper wicks in all 3 major indices. The SPY and QQQ both gave up the 8ema, while the DIA closed while testing that level. On the day, SPY lost 0.72%, DIA lost 0.73%, and QQQ lost 0.77%. The VXX rose to 25.12 and T2122 fell back to 43.40 (mid-range). 10-year bond yields were just below flat at 1.612% and Oil (WTI) rose 1.5% to $80.51.
During the day, MRK submitted its request to have FDA approve its new anti-viral treatment (not vaccine) pill for emergency use. The company says the data shows it improves survival and hospitalization rates by 50% for mild to moderate cases of Covid. This comes as the 7-day average of new cases in the US falls below 85,000 and a few days before the FDA is scheduled to debate and vote on approval of the MRNA and JNJ vaccines for booster use. The independent panel is expected to approve the booster shots of those two vaccines, since it previously said the panel was frustrated that only the PFE vaccine was available for boosters.
Bitcoin surged back above $57,000 on the day. The primary drivers appear to be that the head of the SEC and Fed Chair Powell said they have no intention of banning Bitcoin. In addition, several Bitcoin or other cryptocurrency EFTs are the works that are expected to be approved and launched soon, thereby allowing many new buyers into that market.
For the first time in perhaps decades, coal is center stage on the economic front. The shortage of coal is causing major problems for several countries, including China and India. Global logistics issues and massively increasing demand seem to be the main causes. However, in China the country is also trying to achieve global climate emissions standards. One might think this could help the shortage, but in order not to shut down one region’s businesses entirely they have instituted rolling brownouts and scheduled power cuts nationwide to help achieve their goals. This means that coal needs to be everywhere in the country at the point the local power plant is allowed to go back online, which prohibits the centralization of coal inventories. As of now, India’s power plants are down to an 8-day supply of coal on average, with some as few as 2 days of supply. Coal accounts for 70% of India’s electricity. In China, coal prices have hit a record as both supply shortages coming into the country and massive logistics challenges are hampering the situation. This includes mass flooding in China’s main coal production region, which has 60 coal mines offline due to floods. Coal accounts for 60% of China’s power production.
Overnight, Asian markets leaned heavily to the red side. Some of the smaller exchanges, like Malaysia (+0.83%) and Thailand (+0.62%) managed gains. However, most followed Shenzhen (-1.62%) Hong Kong (-1.43%), and South Korea (-1.35%). In Europe, stocks are also mostly in the red on smaller moves as of mid-day. Denmark (+1.36%) is the clear exception to the rule, but the FTSE (-0.35%), DAX (-0.30%), and CAC (-0.46%) are more typical of the region in early afternoon trading. As of 7:30 am, US Futures are pointing to a start to the day just on the green side of flat. The DIA is implying a +0.05% open, the SPY implying a +0.10% open, and the QQQ implying a +0.28% open at this hour. 10-year bond yields are down to 1.596% and Oil (WTI) is up another half of a percent as the Dollar is dead flat in early trading.
The only major economic news scheduled for release on Tuesday is the August JOLTs (10 am), and the WASDE world Ag report (noon). However, there are a couple of Fed speakers (Clarida at 11:15 am and Bostic at 12:30 pm). There are also no earnings reports scheduled for the day as the market prepares for earnings season to begin on Wednesday.
Premarket prices are recovering from the overnight lows at this point and seem headed toward a slightly green open. However, a downtrend remains intact and the bears have the momentum both from overseas and Monday's US price action. That said, don't be surprised if Tuesday is a quiet day as markets get ready for earnings season, which kicks off again before the open tomorrow. Trade carefully and don't get caught up in the need for action or FOMO.
Watch your current positions before looking to add trades. Remember that it's discipline and good trading rules that protect us from our own worst mistakes. So, focus on your trading process and on managing the things you can control. Consistently take profits when you have them. Don't let greed get the better of you. Finally, remember that we have monthly options expiring at the end of the week. So, it's time to think about closing, rolling, or riding into expiration with very little time value left.
Swing Trade Ideas for your consideration and watchlist: FCEL, MGM, APRE, NKE, AMD, BX, GOTU, CRM, MSFT, FCX, OPEN. 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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🎯 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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