Stocks gapped lower on Monday (down 0.61% in the SPY, down 0.39% in the DIA, and down 0.90% in the QQQ).  From there, all three major indices rode the roller-coaster sideways all day long.  This action gave us gap-down, indecisive Doji or Spinning Top type candles in the three major indices. The SPY held its T-line as support. Meanwhile, the DIA gapped down through and rallied up to retest its own T-line from below, not quite getting back above it while at the same time finding support off its own 50sma.  This all happening on a much lower-than-average volume.

On the day, nine of the 10 sectors are red as Technology (-1.53%) led the way lower and Utilities (+0.46%) held up better than other sectors. At the same time, the SPY was down 0.61%, the DIA was down 0.10%, and QQQ is down 0.86%.  Meanwhile, the VXX was up 2.39% to 11.59 and T2122 dropped back down into the midrange at 54.39.  10-year bond yields have spiked higher again to 3.655% and Oil (WTI) is up 1.38% to $74.40 per barrel.  So, on the day, we saw a gap lower, but then indecision, perhaps meaning the bears are uncertain whether they really want to push the bulls.  Basically, both sides need a little energy from some catalyst. 

In stock news, DELL announced it is laying off 6,650 employees (5% of staff).  At the same time, PSA made an $11 billion hostile takeover bid for LSI.  This amounts to a bid of $129.30/share, but not in cash, in PSA stock instead.  LSI was at $110.58/share at the time of offer, but it closed up 11.28% to $123.05 on the day.  Elsewhere, after it reported beats on both lines, ON announced a $3 billion stock buyback program, which was double the size of the previous program.  This is significant in the chip sector that had been weak with the exceptions of AMD.  In other tech news, GOOGL announced it is planning to launch an AI Chatbot service called Bard (powered by GOOGL’s LaMDA which is a competitor to ChatGPT, which MSFT recently announced will be built into their products).  The service has already been released to beta testers.  Meanwhile, in the gold sector, NEM has made a $17 billion takeover bid for NCMGF.  Bloomberg reports the offer is not likely to be challenged by NEM rival GOLD.  Meanwhile, AMC announced a new ticket pricing structure where the ticket price will be based on seat location in tiers.

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In airline industry news, on Monday, the FAA said it is proposing a $1.1 million fine on UAL for conducting Boeing 777 flights without conducting the required preflight fire system warning checks.  UAL has 30 days to respond to the charges.  Elsewhere, the IATA (largest airline trade organization) said that many airlines will fail to meet the FAA deadline to retrofit altimeters to avoid 5G wireless interference.  (Last summer, VZ and T voluntarily agreed to delay their use of some 5G spectrum to give airlines more time.  However, now the FAA, VZ and T are negotiating again for another extension.)  This is expected to have some small impact on the telecom companies’ expansion of 5G their networks.  Meanwhile, the EU version of the FAA ruled Monday that it will not permit single pilot flights by 2030 as airlines had been seeking (to help with labor shortages).

In commodity news, the US Dollar rose to a 4-week high against the Euro Monday as the reverberations from last week’s January Payroll numbers continued.  This caused a dampening effect on all commodity prices.  Meanwhile, Bloomberg reports that the US will impose a 200% tariff on Russian Aluminum as soon as this week.  (Reportedly, the final decision has not been made as the Biden administration talks to US Aerospace and Auto industry leaders, the main importers of Russian Aluminum, about the damage that might cause to their businesses.)  Elsewhere, Reuters reports that US farmers are planning to boost corn acreage in 2023.  This comes after a late-season drought crushed the 2022 harvest and has brought US corn supplies to near decade-low levels.  This modest 2.5% shift in acreage use is likely to cause dramatic swings in everything from seeds and fertilizer to herbicides, and eventually to food prices.

In miscellaneous news, on Monday Atlanta Fed President Bostic told Bloomberg that unless last week’s Payrolls report turns out to be an anomaly, it would mean the Fed still has more work to do.  Specifically, he said the FOMC would need to push the peak interest rate higher than he now projects (which is 5%-5.25% as a terminal rate).  At the same time, late in the day Monday, GS cuts its odds of a recession in the next 12 months to 25% (down from 35%).  GS cited a rapid reduction in inflation and wage growth as well as improving business sentiment as supporting a “soft landing” and the Fed stopping its tightening regime sooner.  In an unrelated story, after hours Monday, Bloomberg reported that hedge funds tracked by GS trimmed their long positions at the fasted rate in two years over the last several market days.  However, they are also not taking huge short positions either.  Bloomberg also reported the JPM data on the matter concurred.  They called this “de-grossing” move the largest move to cash and lower-risk trades since the day after the first Reddit-driven squeeze in January 2021.  Then this morning, Minneapolis Fed President Kashkari told CNBC that the Fed has not done enough yet based on January’s explosive job growth and he is raising his terminal rate expectation to 5.4% (which is higher than what most of his peers have publicly announced). He also went further in saying “we need to raise rates aggressively to put a ceiling on inflation” (which the market will not like to hear.

After the close, ACM, NOV, SPG, SAVE, FN, SKY, DIOD, KMT, SSD, and GNW all reported beats on both the revenue and earnings lines.  Meanwhile, CINF and SWKS both beat on revenue while missing on earnings.  On the other side, PINS missed on revenue while beating on earnings. Unfortunately, ATVI, TFII, AMRK, LEG, and TTWO all reported misses on both the top and bottom lines.  It is worth noting that SWKS, LEG, SPG, TTWO, and PINS all lowered their forward guidance.  However, FN raised its own forward guidance.

Overnight, Asian markets were mixed on mostly modest moves.  South Korea (+0.55%), Hong Kong (+0.36%), and Shanghai (+0.29%) led the gainers.  Meanwhile, Malaysia (-0.95%), Australia (-0.46%), and India (-0.24%) paced the losses. In Europe, we see a similar picture taking shape at midday.  The FTSE (+0.49%), DAX (-0.17%), and CAC (unchanged) are typical of the spread in the region.  None of the European bourses have moved as much as one percent in either direction yet in early afternoon trade.  As of 7:30 am, US Futures are pointing toward a mixed and mostly flat start to the day.  The DIA implies a -0.09% open, the SPY is implying a +0.09% open, and the QQQ implies a +0.32% open at this hour.  At the same time, 10-year bond yields are down a bit to 3.63% and Oil (WTI) is up more than 1.5% to $75.24/barrel in early trading.

The major economic news events scheduled for Tuesday December Imports/Exports, and Dec. Trade Balance (both at 8:30 am), and API Crude Oil Stocks (4:30 pm) are reported and Fed Chair Powell speaks at 12:40 pm.  The major earnings reports scheduled for the day include ADNT, AGCO, ARMK, ARCC, BP, BV, CG, CARR, CTLT, CNC, CEIX, DD, FSV, IT, GPK, HAIN, HTZ, INCY, J, KKR, LIN, NTDOY, NVT, OMF, RCL, SCSC, SPR, TDG, and XYL before the opening bell.  Then, after the close, AMCR, AIZ, ATO, CSL, CMG, CNO, CCK, EHC, ENPH, PLUS, FMC, FTNT, PEAK, ILMN, ITUB, JKHY, KD, NBR, NCR, OMC, PRU, RXO, SSNC, SNEX, VRTX, VFC, VSAT, WERN, WU, and YUMC report.   

In economic news later in the week, on Wednesday EIA Crude Oil Inventories are reported and Fed member Williams speaks.  On Thursday we get Weekly Jobless Claims.  Finally, on Friday, Michigan Consumer Sentiment and Jan. Federal Budget Balance are reported and we hear from Fed members Waller and Harker.

In terms of earnings later this week, on Wednesday, FOX, BDC, BAM, BG, CPRI, CDW, CME, COTY, CVS, D, ETN, EMR, EEFT, FOXA, GPRE, INGR, NYT, PAG, PFGC, REYN, RITM, TEVA, TRMB, UBER, UA, UAA, VSH, WFRD, WEN, YUM, AB, UHAL, NLY, APP, ASGN, AVB, EQH, ENS, NVST, EFX, RE, FLT, FWRD, ULCC, GT, HI, IFF, LNC, MAT, MMS, MGM, MOH, ORLY, PPC, PAA, SON, SONO, STE, STC, SLF, TSE, TTMI, DIS, and XPO report.  On Thursday, we hear from ABBV, APO, MT, ARES, AZN, BN, BAX, BWA, BRKR, CIGI, DBD, DUK, FAF, GTES, HLT, HII, NSIT, NSP, IPG, ITT, K, LITE, MSGE, MAS, MDU, PATK, PTEN, PEP, PM, RL, SPGI, SEE, TPR, TU, TIXT, TPX, THC, TRI, TM, WMG, WEX, WTW, BHF, CBT, CC, BAP, DXCM, EQR, EXPE, FLO, G, LYFT, MTD, MHK, MSI, NGL, OSCR, PYPL. CNXN, TEX, MODG, USX, VTR, and YELL.  Finally, on Friday, ENB, FTS, GPN, HMC, IQV, MGA, NWL, SPB, and SLVM report.

In overnight news, BBBY announced last night that it will try a list-minute (last ditch) stock sale to raise the cash to avoid bankruptcy. They are hoping the new shares will raise just over $1 billion. Elsewhere, CS announced that it is canceling (at least for now) the company “Compensation Day” where employees were told their bonus amounts (and given the money) for 2022. The company had previously announced they were slashing the bonus pool in half this year due to the financial condition of the company.

So far this morning, CARR, DD, J, GPK, XYL, IT, OMF, INCY, NVT, BV, ARCC, FISV, and CEIX all reported beats on both the revenue and earnings lines.  Meanwhile, BP, CNC, ARMK, ADNT, CTLT, FISV, and VVV all reported beats on revenue while missing on earnings.  On the other side, LIN, CG, and HAIN reported a miss on revenue while beating on earnings.  Unfortunately, NTDOY (Nintendo) missed on both the top and bottom lines.  It is worth noting that FISV raised its forward guidance while BV lowered its own forward guidance.

With that background, it looks like the SPY and DIA are going to test their T-lines (8ema) again this morning. Meanwhile, QQQ looks to be trying to put a bottom into its two-day pullback (at least in premarket trade). The wedge pattern in the DIA and the bullish trends in the SPY and QQQ remain the main technical features of the market at this point. Do not be surprised if we wander around until Fed Chair Powell’s remarks this afternoon. I think that Bostic and Kashkari were presignalling his sentiments (preparing the market for his words today) and that Powell is likely to make sure the market realizes there will be no “March pause” (as several talking heads had predicted in the recent past). However, he is also likely to say the jobs numbers were a good sign that the Fed is walking a “Goldilocks path” where inflation is coming down and at the same time jobs are being created. In short, he’s likely to imply that we just need to “stay the course” with modest hikes for a while to definitely get inflation under control at the same time we stay on the soft-landing trajectory.

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.

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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