Markets gapped modestly lower on Wednesday and then road the roller coaster sideways the rest of the day. A bullish lean the last 90 minutes took stocks out toward the high end of the range. This left us with white candles with small lower wicks and larger upper wicks. However, the SPY and DIA both managed to close above their T-lines. On the day, SPY gained 0.90%, DIA gained 0.58%, and QQQ gained 1.40%. The VXX fell 1.6% to 23.65 and T2122 spiked into the overbought territory at 90.79. 10-year bond yields were flat on the day at 2.756% and Oil (WTI) gained almost 1% to $110.84/barrel.
In economic news, April Durable Goods Orders came in at half what was expected (+0.3% vs. +0.6% est.). Crude Oil Inventories came in lower than expected (down 1.019mil barrels vs. down 737,000 barrels expected). The non-partisan Congressional Budget Office raised its 2022 economic output (GDP) forecast to +3.1% and also said that it believes inflation has topped out and will have fallen to 2% by 2024. This good news was unexpected. However, it was the Fed Meeting Minutes that made the biggest splash.
The Fed minutes released in the afternoon indicated the Fed is ready to move ahead with multiple half-percent rate hikes in the coming meetings. In fact, they said it was likely that we will see 50-basis-point moves at each of the next few meetings. The thing that was perhaps unexpected was the minutes showed they are ready to keep raising into “neutral” or even “restrictive rate” territory in order to get inflation under control. Ominously, several of the members said they were concerned about financial stability risks (in both the bond and commodities markets) of them getting to restrictive rates, but generally agreed they would do whatever was needed.
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After the close, NVDA, WSM, ENS, MOD, SPLK, and PLUS all reported beats on both the revenue and earnings lines. Meanwhile, UHAL, GES, and CHNG beat on revenue while missing on earnings. However, DXC missed on both revenue and earnings lines. It is worth noting the NVDA fell, despite beating, on light forward guidance.
In other stock news, an SEC filing on Wednesday showed that Musk has increased his personal financial commitment to the TWTR buyout deal to $33.5 billion, with the remaining $10 billion coming from outside investors. TWTR was up on that news. However, in perhaps unrelated news, after-hours TWTR shareholders voted to oust longtime Elon Musk associate and backer Egon Durban from his TWTR board seat. Finally, Reuters reported that there are multiple bidders competing the acquire KSS, and the stock spiked on the news (up as much as 17% and closing up almost 12%).
In AAPL news, yesterday the company released a statement saying that it was raising compensation by 10% or more. It also released an internal video urging workers at its retail stores not to join a union. This morning Bloomberg reports that the company has asked suppliers to build 221 million iPhones, which is in line with 2021 but far below analyst expectations of 240 million units for this year.
Overnight, Asian markets were mixed on modest moves. Singapore (+0.93%), India (+0.90%), and Shenzhen (+0.57%) led the gainers. Meanwhile, Taiwan (-0.84%), Australia (-0.69%), and New Zealand (-0.63%) paced the losses. In Europe, stocks are nearly green across the board (with the sole exception of Sweden (-0.96%) at mid-day. The FTSE (+0.04%) lags while the DAX (+0.77%) and CAC (+0.74%) are more typical of the region in early afternoon trading. As of 7:30 am, US Futures are pointing toward a modest gap higher at the start of the day. The DIA implies a +0.76% open, the SPY is implying a +0.77% open, and the QQQ implies a +0.57% open at this hour. 10-year bond yields are slightly higher at 2.761% and Oil (WTI) is three-quarters of a percent higher at $111.15/barrel in early trading.
The major economic news scheduled for release Thursday is limited to Q1 GDP and Weekly Initial Jobless Claims (both at 8:30 am), and April Pending Home Sales (10 am). The major earnings reports scheduled for release include BABA, AMWD, BIDU, BURL, CM, DG, DLTR, GCO, IQ, M, and MDT before the open. Then after the close, AEO, ADSK, COST, DELL, FTCH, GPS, MRVL, ULTA, VMW, and WDAY report.
So far this morning BABA, TD, BIDU, IQ, DG, DLTR, TITN, and M have reported beats on both lines. At the same time, BKE and GCO missed on revenue while beating on earnings. However, MDT and BURL reported misses on both the revenue and earnings lines.
The major economic news coming Friday includes a Fed speaker (Bullard, twice), April Trade Goods Balance, April PCE Price Index, April Retail Inventories, April Personal Spending, and Michigan Consumer Sentiment.
Back and forth we go as the chop looks to be heading toward a modest gap higher today. Regardless, the bears still have the trend and the bulls have not capitulated in a crescendo of volume yet. So, uncertainty and stubbornness remain. That means volatility and intraday whipsaw are also likely to continue. If we do break lower, keep an eye on that bear market line (about 384 in the SPY) for the S&P. The bulls have defended that line before, so a bounce there is possible. Be very careful about chasing and remain nimble or hedged. There is no need to predict reversals or fear of missing out. The market will still be here after it has given confirmation.
Trading is a job, not a lottery ticket. So, work the process. Stick with your trading rules and manage the things that you can control while trying not to worry about the things you have no control over at all. Trade with the trend, don’t chase, keep consistently taking profits when you have them, and move your stops in your favor. Also, remember that the first rule of making big money in the market is to not lose big money in the market. So, don’t be stubborn, and protect yourself from yourself. Keep in mind that nobody is right all the time. When you’re wrong, just admit it and take your loss. As they say, the best time to have taken a $500 loss is when you are now staring at a $1,500 loss.
Swing Trade Ideas for your consideration and watchlist: BMBL, MNKD, DKNG, KRE, WFC, FITB, ZION, XLE, ZIM, FIS, BTU. 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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