On Monday, stocks gapped slightly higher at the open (less than a quarter of a percent in the large-cap indices and essentially none in the QQQ). From that point, the bulls stepped in to lead a very slow and steady rally that lasted right into the close. (The QQQ rally really kicked into high gear at 2:30 pm, while the other indices saw the rally speed up just before 3 pm.) This action gave us white-bodied candles that remained inside the range for the last few days. It also should be noted that the SPY, DIA, and QQQ all crossed back above their T-line (8ema) from below. All-in-all, it seems like Monday was a modest melt-up that finally kicked into gear late as traders wait on the CPI tomorrow and the FOMC announcements Wednesday.
On the day, all ten sectors ended in the green with Energy (+2.08%) leading us higher and the Basic Materials (+0.30%) and Consumer Cyclical (+0.46%) sectors being the laggards. Meanwhile, the SPY was up 1.43%, the DIA was up 1.57%, and the QQQ was up 1.26%. All of this action took place on less than average volume (although the DIA did manage to climb above average volume). The VXX fell by 0.59% to 15.21 and T2122 climbed back outside of the oversold territory at 53.75. 10-year bond yields were up to 3.615% and Oil (WTI) was up more than 3.5% to $73.52 per barrel.
In economic news, it was interesting to see that both 3-year notes and 10-year notes were auctioned off by the Treasury Dept. on Monday. Both of these came in more than half a percent lower than the previous auction. Later in the afternoon, the November Federal Budget Balance came in $1 billion worse than expected at -$249.0 billion (as compared to the forecast of -$248.0 billion). Elsewhere, the US Senate is aiming to pass another stop-gap spending bill to keep the government open. A vote is expected Friday and will keep the government open for another week while details of a longer-term $1.5 trillion omnibus spending bill are hammered out (although the 2 parties agreed to generalities last weekend).
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In stock news, the US Energy Dept. announced Monday that they have finalized a $2.5 billion low-cost loan for the lithium battery joint venture formed by GM and South Korean LG Energy Solutions. The loan will be used to finance manufacturing facilities in OH, TN, and MI. Elsewhere, in the afternoon, Bloomberg reported that GS is planning to cut at least 400 hundred more jobs as it restructures its retail consumer business. In other GS news, the company will stop making unsecured consumer loans according to a report from Reuters. In legal news, the US Supreme Court has ruled that the state of CA can ban flavored tobacco products in a case brought by BTI (which now owns RJ Reynolds).
In BA news, on Monday, Indian airline India Air announced a historically large new order for jet planes. Specifics were not shared other than it includes up to 500 jets delivered over the next decade from both BA and Airbus. Then early this morning, UAL and BA announced that the airline has placed orders to buy 100 of the BA 787 Dreamliner jets with deliveries scheduled between 2024 and 2032. (These planes will replace 100 existing BA 767s that United operates.)
In energy news, as of late Monday, TRP has yet to determine the cause of the 14,000+ barrel crude oil leak (from the Keystone pipeline) in KS. The pipeline normally delivers 622,000 barrels per day and has been down since Wednesday with no timetable for the resumption of operations. Oil trades indicate this was a driver behind Monday’s WTI rally and said if the outage lasts until the coming weekend, that could push the Cushing OK storage hub below the minimum required operating volume as well as crippling gulf region refineries.
After the close, ORCL beat on both the revenue and earnings lines. However, JOAN missed on both the top and bottom lines. ORCL also lowered its forward guidance.
Overnight, Asian markets were mixed on generally modest moves. Singapore (+0.98% was an outlier to the upside as Hong Kong (+0.68%) and India (+0.60%) led to the upside while Shenzhen (-0.66%) and Taiwan (-0.61%) led to the downside. In Europe, the exchanges are generally green at midday. The FTSE (+0.39%), DAX (+0.82%), and CAC (+0.67%) lead the region higher while only Russia (-0.64%) and Portugal (-0.07%) are in the read in early afternoon trade. Meanwhile, as of 7:30 am, US Futures are pointing toward a half percent gap higher to start the day. The DIA implies a +0.56% open, the SPY is implying a +0.48% open, and the QQQ implies a +0.46% open at this hour. 10-year bond yields are down again to 3.587% and Oil (WTI) is up a quarter of a percent to $73.37/barrel in early trading.
The major economic news events scheduled for Tuesday is limited to November CPI (8:30 am) and API Weekly Crude Oil Stocks (4:30 pm). The major earnings reports scheduled for before the open are limited to CNM. Then after the close, ABM reports.
In economic news later this week, on Wednesday, November Import/Export Price Index, EIA Crude Oil Inventories, Fed Q4 Interest Rate Projections, Fed Economic Projections, FOMC Statement, Fed Interest Rate Decision, and FOMC Press Conference are reported. On Thursday, we get November Retail Sales, Weekly Initial Jobless Claims, NY Fed Empire State Mfg. Index, Philly fed Mfg. Index, Nov. Industrial Production, Oct. Business Inventories, and Oct. Retail Inventories are reported. Finally, on Friday, Mfg. PMI and Services PMI are reported.
In earnings later this week, on Wednesday we get reports from REVG, LEN, NDSN, and TCOM. On Thursday we get reports from JBL and ADBE. Finally, on Friday, we hear from CAN, DRI, and WGO.
Equity markets are looking for good CPI news this morning and especially looking for a softer tone and only 0.50% rate increase by the Fed on Wednesday. We may see a melt-up in anticipation with a general “wait to see” attitude by the big money. Meanwhile, the crypto world continues to reel as early today the SEC said that the head of the FTX exchange (Sam Bankman-Fried) defrauded investors to the tune of $1.8 billion and in the aftermath of the FTX collapse the Binance exchange (the world’s largest crypto exchange) halted outflows of the USDC stablecoin this morning. Bianance said the halt was temporary while it carries out a “token swap” (which just means swapping one digital currency for another electronically)…which on its own could cause more fear in the crypto world.
With that background, the short-term bearish downtrend line has now been broken in all three major indices and it looks like the bulls are looking to move even higher(at least in premarket trade). However, the big Nov. CPI report will have a lot to say about the open as well. Over-extension is still not a problem at all either in terms of the T-line (8ema) or the T2122 indicator. So, the bulls have room to run if traders want to move the market. Just bear in mind that the market risk is to the downside where a disappointing CPI (in this case too high) could crush the bull’s hopes and turn the bears loose.
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.
Swing Trade Ideas for your consideration and watchlist: NVDA, GSK, FDX, QCOM, SWKS, LEVI, and T. 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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