Stocks gapped higher on the AI coming from NVDA’s blowout earnings report and forecast.  SPY gapped up 0.59%, DIA opened just 0.07% higher, and QQQ gapped up 1.07%.  However, this was a Bull trap as all three major index ETFs sold off sharply until 10 a.m.  From there, all three chopped sideways until 12:30 p.m. when the next leg of sharp selloff began.  That selloff lasted until 3 p.m. when DIA began a sideways grind for the last hour while SPY and DIA bounced modestly the last hour.  This action gave up large black-body candles with lower wicks in the case of SPY and QQQ (less so in the DIA).  DIA recrossed and fell significantly below its T-line (8ema). At the same time, SPY crossed just below its T-line.  However, QQQ retested and bounced up off its T-line.  Once again, this all happened on less-than-average volume in all three major index ETFs.  (Although, it should be noted that DIA was closer to average than the other two.)

On the day, all 10 sectors were in the red with Utilities (-2.11%) far out in front leading the rest of the market lower.  At the same time, Technology (-0.55%), buoyed by NVDA’s huge +9.32% showing, held up better than all other sectors.  Meanwhile, SPY lost 0.73%, DIA lost a huge 1.50%, and QQQ lost 0.44%.  VXX gained 1.40% to close at still very low 11.59 and T2122 dropped out of the midrange and into its oversold territory at 14.40.  Elsewhere, 10-year bond yields climbed to 4.477% and Oil (WTI) fell 0.90% to close at $76.87 per barrel.  So, overall, Thursday was a Bull Trap Day where the Bears were in charge all day after a gap higher.  It might be worth noting that all 30 of the DIA were negative, 449 of the SPY’s 503 stocks were in the red, and 83 of the 101 stocks in the QQQ were down. With that said, DIA was clearly the weakest, giving up potential support levels and printing by far the largest black candle.

The major economic news scheduled for Thursday included Building Permits, which came in down but exactly as expected at 1.440 million (compared to a 1.440 million forecast and the previous 1.467 million reading).  At the same time, Weekly Initial Jobless Claims came in lower than predicted at 215k (versus a 220k forecast and a 223k prior week value).  On the ongoing front, Weekly Continuing Jobless Claims were up but exactly as anticipated at 1,794k (compared to the 1,794k forecast and up from the previous week’s 1,786k).  Later, S&P Global Mfg. PMI was a bit stronger than expected at 50.9 (versus a 50.0 forecast and previous reading). At the same time, S&P Global Services PMI were reported as stronger than predicted at 54.8 (compared to a forecast of 51.2 and the April 51.3 value).  Together, these last two gave us an S&P Global Composite PMI that was better than anticipated at 54.4 (versus the 51.1 forecast and the 51.3 April reading).  Later, April New Home Sales were weaker than expected at 634k (compared to the 677k forecast and 665k March number).  Then, after the close, the Fed Balance Sheet showed another decrease, now at $7.300 trillion (versus the prior week’s $7.304 trillion).

In Fed news, Atlanta Fed President Bostic told a Stanford University audience that the Us is not out of the woods on inflation yet.  Bostic said, “We’re not past the worry point in terms of inflation getting back to our target.”  However, he did suggest that inflation is still on a slow pace toward the FOMC goal, saying, “The couple of inflation numbers suggest it’s going back to 2%, but going slow.”  He continued, “Job growth has been robust … which tells me there’s still a lot of energy in the economy.  We’re not at risk today, I don’t think, of falling into a contractionary environment.”  Bostic concluded, “It might be that we have to be a little more patient and be more certain that inflation is on its way (to the Fed’s 2% goal).”

In stock news, on Thursday, WMT countered TGT’s announcement of price cuts on 5,000 items (from earlier this week) by saying that WMT has already cut prices on 7,000 products.  The “Bentonville behemoth” noted deflationary trends in general merchandise in doing so.  At the same time, Reuters reported that talks related to a potential GOOGL acquisition of HUBS are continuing.  (The potential for such a deal was reported in April, with the aim of allowing GOOGL to be better positioned against MSFT’s cloud-based applications offerings.)  Later, the Chairman of MS announced he will step down at the end of the year.  At the same time, Bloomberg reported that CVS is seeking a private equity partner to fund the growth if its Oak Street Health (a primary care provider CVS bough in 2023).  After the close, PARA and CHTR announced a multi-year content distribution deal.  Also after the close, TSLA omitted its previous goal of delivering 20 million vehicles a year by the end of the decade.  The omission came in its latest impact report, published late Thursday.  (Analysts suggested this reflects on the company’s failure to deliver a more affordable $25k electric vehicle, but may also hint at the company’s shift toward a focus on robotaxis.)

In stock legal and governmental news, MDLZ was fined $365.72 million by EU antitrust regulators for impeding cross-border trade.  (MDLZ was found to have prevented retailers from freely sourcing products and forbidding its distributors from competing in areas beyond their assigned portion of the EU.)   At the same time, it was reported that MRNA, PFE, and BNTX are in talks with the multiple governments related to vaccines after more human cases of H5N1 Bird Flu have been found in the US and Australia.  Later, as predicted, the US Dept. of Justice filed suit (along with 30 states, including polar opposites CA and TX, and the District of Columbia) seeking to force a breakup of LYV from Ticketmaster, which LYV bought in 2010.  The suit alleges LYV monopolizes the ticket market, driving up prices and also hurting artists.  At the same time, a jury in Chicago ruled in favor of GSK and said that the plaintiffs had failed to prove the company’s Zantac drug was the cause of her cancer.  Later, NSC agreed to pay a $15 million civil penalty for future cleanup costs and $57.1 million in past cleanup costs related to the railroad’s 2023 train derailment and chemical spill in East Palestine, OH.

Elsewhere, the FAA said Thursday that BA faces a “long road” to address safety and quality issues.  The company must deliver its plan to address “systemic quality-control issues” on May 30.  Those problems caused the FAA to prohibit expansion of 737 MAX production and implemented additional on-site inspectors and audits of BA production after a myriad of problems.  At the same time, the Chairman of the House Foreign Affairs Committee (McCaul) warned that the MSFT deal with UAE-backed AI firm G42 could involved the transfer of sophisticated ships and tools abroad.  The TX GOP Rep. said the deal may pose a national security risk given Chinese interests in UAE. McCaul said he will demand a comprehensive briefing from the Dept. of Commerce, which must approve licenses for the deal.  Later, the FDA advisory committee recommended the approval of GH’s blood test for colon or rectal cancer.  After the close, the SEC approved applications from Nasdaq, CBOE and NYSE to list ETFs tied to the spot price of cryptocurrency Ether.  Later, JPM confirmed reported from earlier in the week that it will pay a $100 million fine to the CFTC related to trade reporting lapses.

After the close, DECK, INTU, ROST, and WDAY reported beats on both the revenue and earnings lines.  However, CVCO missed on both the top and bottom line.  It is worth noting that WDAY lowered its forward guidance.

Overnight, Asian markets were red across the board.  Hong Kong (-1.38%), South Korea (-1.26%), Shenzhen (-1.23%), and Japan (-1.17%) led the region lower.  In Europe, we see the same picture taking shape at midday, but on much more modest moves so far.  The CAC (-0.17%), DAX (-0.37%), and FTSE (-0.41%) lead the region lower in early afternoon trade.  Meanwhile, in the US, as of 7:30 a.m., Futures are pointing toward a green start to the morning.  The DIA implies a modest +0.10% open, the SPY is implying a +0.27% open, and the QQQ implies a +0.29% open at this hour.  At the same time, 10-year bond yields are up a bit to 4.479% and Oil (WTI) is off by half a percent to $76.55 per barrel in early trading.

The major economic news scheduled for Friday, April Core Durable Goods and April Durable Goods (both at 8:30 a.m.), Michigan Consumer Sentiment, Michigan Consumer Expectations, Michigan 1-Year Inflation Expectations, and Michigan 5-Year Inflation Expectations (all at 10 a.m.).  We also hear from Fed Governor Waller at 9:35 a.m.  The major earnings reports scheduled for before the open are limited to BAH.  There are no reported scheduled for after the close. 

So far this morning, BAH has reported beats on both the revenue and earnings lines.

In miscellaneous news, mortgage rates fell for the third consecutive week.  The US national average 30-year fixed-rate conforming mortgage fell below 7% to 6.94% (down from last week’s 7.02%).  Meanwhile, NVDA added more than $200 billion in market cap Thursday on its huge post-earnings stock price gains.  At the same time, Elon Musk announced that he no longer supports US tariffs on Chinese EVs.  Musk’s about face is speculated to be related to China’s treatment of TSLA.  Elsewhere, two US Senate Committees (Democrat majority) launched investigations into ex-President Trumps “quid pro quo” offer to rollback a series of environmental protections…in return for $1 billion in campaign donations from the oil industry.  (Leaders of OXY, CTLR, and ET held a Trump fundraiser in Houston after the offer.)  Finally, Fidelity said Thursday that the number of 401(k) accounts with a balance of more than $1 million that they house jumped 15% in Q1, reaching a record level.  Better yet, they say that number has increased another 43% since March.

In late-breaking news, the CEO of BA told investors to be prepared for plane deliveries not to improve in Q2 versus the dismal Q1 numbers.  He also said the company has already burned through $4 billion in cash in Q1 and expects the number for Q2 to be “a little worse.”  In fact, the new CEO (West) says BA will burn cash throughout 2024 as it tries to recover from massive safety and quality problems.  Elsewhere, CNBC reports the Commerce Dept. has $6 billion left of the $52 billion allocated by the CHIPS Act (meant to spur growth of US semiconductor design and manufacture (to reduce the US current dependence on foreign chip makers).  CNBC reports the remaining money will be allocated in smaller award directed toward smaller companies.  600 have submitted grant requests with only nine awarded so far. Commerce Sec. Raimondo said that 85% of the remaining money will be awarded by year end.  (Contrast the US’s $52 billion program with a new program approved this week in South Korea and aiming at doing the same for that country.  South Korea’s program is $19 billion in size. For reference, South Korea’s GDP is under $1.7 trillion while the US GDP is nearly $29 trillion.)

As a reminder, remember that Monday is a holiday and markets will be closed.  Also keep in mind that this is Friday…payday…and time to prepare your account for the long weekend news cycle. Finally, also make note the US securities market will begin its 1-day trade settlement (called “T+1”) down from the current 3-day settlement next week.  This change begins Tuesday, May 28.  (Also note that some analysts are nervous over the stress on the system of clearinghouses and brokerages.)

With that background, it looks like the Bulls are trying to claw back some ground after Thursday’s post-open bearish run. All three major index ETFs are printing white body, inside day type candles in the premarket with QQQ the strongest (no wick) and DIA the weakest (a Doji). Yesterday’s candles were definitely ugly. However, we need to bear in mind that SPY is only three-quarters of a percent from its all-time high close, QQQ is less than 0.20% below its all-time high close, but DIA is a bit more than 2.26% from its all-time high close. The point is that one or even a few bad candles hardly change the character of this market. The bulls remain in control beyond the very, very short term. In fact, the early session action has SPY joining QQQ back above their T-lines (8ema) with DIA still well below its own. So, the short-term trend remains bullish (except on the DIA). At the same time, the mid-term is also very bullish and the longer-term market remains very Bullish. In terms of extension, after Thursday, SPY and QQQ are not extended at all from the T-line. However, DIA is over-extended to the downside and needs a pause or bounce. The T2122 indicator returned to the upper half of its oversold area. So, the bottom line is that the market has more room to run for the Bulls than Bears but both camps could still move at least some if they find momentum. With regard to those 10 big dog tickers, again all 10 are well into the green at this point this morning with that biggest dog NVDA (+1.06%) and AI competitor AMD (+0.91%) out front dragging the QQQ higher again today.

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 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 gains are 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.

Ed

🎯 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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