Markets gapped down Tuesday and followed through to the downside in the morning, especially in the high-tech-heavy Nasdaq. From that point forward there was a very slow, gradual rally the rest of the day. This left us with gap-down Hammer-type candles in all 3 major indices. Both the large-cap indices remain in the recent range, but the QQQ gapped down below that range. On the day, SPY lost 0.59%, DIA gained 0.11%, and QQQ lost 1.80%. The VXX gained almost 3.8% to 40.21 and T2122 fell out of the overbought territory to 65.48. 10-year bond yields fell significantly to 1.582% and Oil (WTI) rose about 2% to $65.76/barrel.
During the day, Treasury Sec. Yellen told a conference that US interest rates may need to be raised modestly to keep economic growth from overheating after the trillions of dollars in stimulus. However, she followed up quickly by saying these were needed investments and will improve our competitiveness and economic growth in the longer run. Interestingly, while this news was widely publicized immediately, the market did not react strongly to the downside, despite the implied threat of inflation. Nonetheless, afterhours Yellen clarified her remarks saying she was not predicting or recommending a Fed rate hike. Instead, she said was just offering her opinion.
Crypto mania has hit again, this time in Doge as the currency rose 35% Tuesday and is up another 20% in premarket today. The surge in orders has crashed Robinhood crypto trading again this morning. Much of the enthusiasm comes from an Elon Musk tweet touting his appearance on Saturday Night Live on May 8, referring to himself as “The Dogefather.” So, speculators are hoping he will say something on the show that will bring in new buyers of Doge tokens.
Related to the virus, US infections are rising again after plateauing at a level above the fall level. The totals have risen to 33,274,659 confirmed cases and deaths are now at 592,409. The number of new cases has ticked lower again and are back down below the peak level from last summer to an average of 49,396 new cases per day. However, deaths have plateaued again, now at 718 per day. On Thursday, President Biden announced a new national goal that at least 70% of Americans have at least on vaccination shot by July 4 and also to have over half the population (160 million) fully vaccinated by then. This goal anticipates a drop-off in demand for vaccine. However, vaccine reluctance will still be a major hurdle with current vaccination rates down 50% from just 3 weeks ago.
Globally, the numbers rose to 155,061,321 confirmed cases and the confirmed deaths are now at 3,243,519 deaths. The trends have reversed and are now trending toward trouble again as we have seen significant upticks recently. The world’s average new cases continue to rise and is now at the all-time peak and with 805,993 new cases per day. Mortality, which lags, is also rising again at 13,192 new deaths per day. Although India remains the global epicenter, the entire Asian region is feeling the impact of the current surge from variants. In Osaka Japan, ICU beds are at 99% capacity as of Tuesday. Pakistan, Nepal, and Sri Lanka are all also implementing measures to get more oxygen as the wave spreads to their countries.
Overnight, Asian markets were mostly in the red. Thailand (-2.14%) was an outlier, but Japan (-0.83%), Shanghai (-0.81%), and Hong Kong (-0.49%) were typical of the region. However, in Europe, markets are strongly green across the board so far Wednesday. The FTSE (+1.17%), DAX (+1.33%), and CAC (+0.80%) are typical, but some of the smaller exchanges have rallied twice as hard as the majors. It appears the catalyst was business activity (Purchasing Manager’s Index) and good earnings. As of 7:30 am, US Futures are also pointing to the upside. The DIA is implying a +0.17% open, the SPY implying a +0.29% open, and the QQQ implying a +0.50% open.
The major economic news scheduled for Wednesday includes ADP Employment report (8:15 am), Services PMI (9:45 am), ISM Non-Mfg. PMI (10 am), Crude Oil Inventories (10:30 am), and 3 Fed speakers (Evans at 9:30 am, Rosengren at 11 am, and Mester at noon). Major earnings reports on the day include ABC, AAQQ, GOLD, BDC, BWA, BRKR, CDW, CERN, CLH, CNHI, DNB, EMR, EXC, FLEX, FTS, GM, HLT, HFC, JLL, NI, ODP, OMI, PSN, PFGC, PNW, PEG, REYN, SMG, SRE, SBGI, SITE, SPR, SGRY, TT, VRTV, WAT, and WRK before the open. Then, after the close, ADT, ALB, APA, ATO, EQH, BKNG, CENTA, CENT, CF, CLW, CTSH, CNDT, CXW, CW, DCP, EC, NVST, EQT, WTRG, ETSY, FLT, FMC, FOXA, GIL, GDDY, HUBG, LHCG, LBTYA, LNC, LUMN, MRO, VAC, MELI, MET, NUS, PTVE, PARR, PYPL, PRI, PRIM, QRVO, RCII, RSG, RKT, RYI, SJI, STN, TRMB, TPC, TWLO, UBER, UGI, UNM, YELL, and ZNGA report.
The bears made a push Tuesday morning but never managed to move the large caps outside of their recent range. Then the bulls mounted a slow, but consistent, rally the rest of the day. This left us well up from the lows and (with the exception of the QQQ) back in the middle of that sideways range. With the way Tuesday ended and the way pre-markets are looking now, it appears the bulls will make the first move today. However, day-to-day chop is still the main characteristic of this market. So, continue to be careful.
Remember, you don't have to trade every day or every week. Respect potential support and resistance levels. Stick with the trend (when you have one), but also avoid chasing trades you have missed and be nimble. Lock in your profits when you achieve your trade goals and maintain your discipline by following those trading rules. Don't let your emotions get the better of you. Consistency is the key to long-term trading success.
Swing Trade Ideas for your consideration and watchlist: RHI, SYF, RIG, WETF, WFC, UEC, XOM, LPX, DHI, DISH. 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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