Friday was a volatile, bullish day to end the pre-holiday week and month.  SPY gapped 0.45%, DIA opened 0.17% higher, and QQQ gapped up 0.90%.   After the open, all three major index ETFs traded sideways until 10:50 a.m.  At that point, all three sold off, reaching the lows of the day at 12:40 p.m.  From there, all three rallied the rest of the day, spiking to new highs the last 10 minutes.  This action gave us white-bodied, Hammer-type candles in all three major index ETFs.  All three retested and passed the test of their t-line (8ema) as support and closed at the top end of their candles. This happened on slightly above-average volume in the SPY, slightly below-average volume in the QQQ, and below-average volume in the DIA. 

On the day, nine of the 10 sectors were in the green with Consumer Cyclical (+1.07%) and Technology (+1.03%) leading the way higher.  On the other side, Energy (-0.03%) lagged and was the only sector in the red. Meanwhile, SPY gained 0.95%, DIA gained 0.56%, and QQQ gained 1.19%. The VXX fell 3.01% to close at a very low 44.50% and T2122 rose slightly to remain in the top half of its overbought territory at 93.18. 10-Year bond yields rose to close at 3.909% while Oil (WTI) fell a bit to close at $75.55 per barrel.  So, Friday ended the week (and month) on another strong note. DIA printed yet another new all-time high and all-time high close.  For its part, QQQ also crossed back above its 50sma. 

For the week, SPY gained 0.28% and DIA gained 1.06% on their fourth consecutive week of gains.  Meanwhile, QQQ lost 0.78% on a Bearish Harami that retested and stayed above its T-line while printing the its first down week after three weeks of gains.   Looking at the month, SPY was up 2.34% on a white Hammer or Hanging Man that retested and passed the test of the monthly T-line.  DIA did the same on a 1.89% monthly gain and QQQ also followed suit on a 1.10% increase.

The major economic news scheduled for Friday included July Year-on-Year Core PCE Price Index, which stayed flat at +2.6% (compared to a forecast of +2.7% and June’s 2.6% value). On a Month-on-Month basis, July Core PCE Price Index, was flat at 0.2% (versus the forecast and June reading which were both +0.2%).  On the headline side, the July PCE Price Index (Year-on-Year) also came in flat at +2.5% (lower than the +2.6% forecast but in-line with the June reading of 2.5%).  On the monthly basis, the headline July PCE Price Index was just like the Core numbers, flat at 0.2% (versus the forecast and June reading which were both +0.2%).  Meanwhile, the July Personal Spending was up, as predicted at +0.5% (compared to a +0.5% forecast and June’s +0.3% reading).  Later, the August Chicago PMI was stronger than predicted at 46.1 (versus a 45.0 forecast and July’s 45.3 value).  Shortly afterward, Michigan Consumer Sentiment was reported as up and also a tick better than predicted at 67.9 (compared to a 67.8 forecast and July’s 66.4 reading).  At the same time, Michigan Consumer Expectations were up and in-line with forecasts at 72.1 (versus a July value of 68.8).  On the inflation front, Michigan 1-Year Inflation Expectations were down a tick to 2.8% (compared to a forecast and previous reading of 2.9%).  Looking further out, Michigan 5-Year Inflation Expectations stayed flat at 3.0% (compared to a forecast and prior value of 3.0%).

In stock news, on Friday, Bloomberg reported that a large-scale study started during the pandemic found that NVO’s weight loss and diabetes drug Wegovy also reduced both deaths and hospitalizations from Covid-19.  At the same time, NSC announced it had reached tentative 5-year labor contracts with five unions covering thousands of its employees.  The contracts, which provide a 3.5% average annual wage increase as well as more paid time off and better healthcare must still be ratified by members of the unions.  Later, GM and LAC “agreed to delay” an additional investment from GM into the lithium miner until the end of the year.  At the same time, Reuters reported that the Chinese state-backed Sinochem is planning to sell its 40% stake in a shale oil joint venture it is part of with XOM.  The sale would end an 11-year Sinochem involvement in the shale oil business in the TX Permian Basin. 

After the close, GS announced it will lay off “a few hundred” employees as part of its annual performance review process. (In 2023, this process resulted in between 1% and 5% of its staff being let go.)  GS said this is normal and it still expects to have more employees at the end of 2024 than it did at the end of 2023.  (GS had 44,300 employees as of June 30.)  At the same time, BRKB filed with the SEC, saying it had sold another 21.1 million shares of BAC for $845 million between August 28 and August 30.  (This makes more than $6 billion of BAC that Buffett’s BRKB has sold during August.)  On Sunday, 10k hotel workers went on strike against 24 locations run by MAR, H, and HLT hotels.  The union said the strike will be multi-day and will be rolling (on-again, off-again) to cause maximum disruption until a new contract has been reached.

In stock legal and governmental news, on Friday, India approved the $8.5 billion merger between DIS’s Indian unit and Reliance Industries.  Later, China announced that TSLA is recalling 870 imported TSLA vehicles.  At the same time, RTX agreed to pay a $200 million fine to settle allegations that the company violated US export laws by shipping product and data to prohibited countries (China).  (Among other violations, RTX gave China details about an aluminum instrument display component of the F-22 fighter aircraft.)  Later, the FDA authorized the use of NVAX’s COVID vaccine, which had been updated to fight the new JN.1 variant of the disease.  At the same time, CAH, MCK, and COR (the three largest US drug distributors) agreed to pay $300 million to resolve claims by health insurers that the companies had helped fuel the opioid crisis.   (The same companies had agreed to pay $21 billion to states and local governments to settle the same charges.)  

Elsewhere, after the close, CTLT reported that it is unable to file its annual report (which was expected on August 29) while it is waiting on the closing of the $16.5 billion takeover by NVO that was announced in February.  On Saturday, the NHTSA announced F will recall almost 91k vehicles over engine valve intakes that may break during operation.  (F will perform tests on each vehicle and replace engines as required as part of the remedy.)  On Monday, HPQ said it would continue its $4 billion lawsuit against now-deceased British billionaire Mike Lynch related to what it alleges was fraudulently-inflated value of a company HPQ acquired from Lynch in 2011.

In miscellaneous news, on Friday Bloomberg reported that the level of conviction in the economy is soaring.  It reported that August was the fourth straight month of gains in ETFs tracking for government debt, corporate debt, and equities.  That was the longest consecutive stretch of correlated gains across those assets since 2007.  At the same time, the S&P 500 is up 25% in the past 12 months…that most it has climbed in the run up to a first rate cut in history.  So, the Fed got it right and we got the soft landing we had all hoped would happen.  Elsewhere, in a deeper-dive into PCE data, Bloomberg reported that the metric economists say is a more accurate gauge of inflation, the 3-month annualized average, showed a 1.7% increase…the slowest since 2023. 

Overnight, Asian markets were mostly red with only four of the 12 regional exchanges in the green.  With that said, the big movers were green as Shenzhen (+1.17%) and Thailand (+0.81%) led the gains and Taiwan (-0.64%) and South Korea (-0.61%) paced the losses.  In Europe, we nearly see red across the board with just two of the 14 bourses in the green at midday.  The CAC (-0.23%), DAX (-0.38%), and FTSE (-0.48%) lead the region lower in early afternoon trade.  Meanwhile, in the US, as of 7:30 a.m., Futures are pointing toward a gap down to start the day.  The DIA implies a -0.48% open, the SPY is implying a -0.53% open, and the QQQ implies a -0.76% open at this hour.  At the same time, 10-Year bonds are up to 3.911% and Oil (WTI) is down 1.9% to $72.17 per barrel in early trading.

The major economic news scheduled for Tuesday includes August S&P Global US Mfg. PMI (9:45 a.m.), July Construction Spending, August ISM Mfg. Employment, August ISM Mfg. PMI, and August ISM Mfg. PMI Prices (all at 10 a.m.).  There are no major earnings reports scheduled for before the open.  Then, after the close, the only significant report scheduled is ZS.

In economic news later this week, on Wednesday we get July Exports, July Imports, July Trade Balance, July Factory Orders, July JOLTs Job Openings, Fed Beige Books, and API Weekly Crude Stocks. The Thursday, August ADM Nonfarm Employment Change, Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, Q2 Nonfarm Productivity, Q2 Unit Labor Costs, August S&P Global Composite PMI, August Global Services PMI, August ISM Non-Mfg. Employment, August ISM Non-Mfg. PMI, August ISM Non-Mfg. Prices, Weekly EIA Crude Oil Inventories, and Fed Balance Sheet are reported.  Finally, on Friday, we get August Avg. Hourly Earnings, August Nonfarm Payrolls, August Private Nonfarm Payrolls, August Participation Rate, and the August Unemployment Rate.  We also hear from Fed members Williams and Waller (twice).

In terms of earnings reports later this week, on Wednesday we hear from CIEN, CNM, DKS, DLTR, HRL, REVG, CASY, CPRT, and HPE.  Then Thursday, GIII, KFY, NIO, SAIC, TTC, AVGO, and DOCU report.  Finally, on Friday, we hear from ABM, BIG, DOOO, and GCO.

With that background, QQQ gapped lower to start the premarket session and has printed an indecisive, black-body candle since then that did more price back below its T-line (8ema) as that retest begins again. Meanwhile, SPY and DIA opened the early session more or less flat before trading decidedly bearish in larger black-body candles. (To be fair, both are still not down to a retest of their T-line. So the damage is not heavy.) So, the short-term trend is still bullish. At the same time, the mid-term trend is bullish and in the long-term, we are now clearly back in a Bull trend with DIA sitting just below all-time highs on the pre-market pullback and SPY less than a percent from its own high-water mark. In terms of extension, none of the major index ETFs are too far extended from their T-line. However, the T2122 indicator is in the top half of its overbought territory. So, the market could use a pause or pullback. However, remember the mantra “follow, don’t lead, but also don’t chase” in mind. With regard to those 10 big dog tickers, nine of the 10 are in the red this morning with the the biggest dog NVDA (-2.03%) out front leading the way lower the second biggest TSLA (+0.76%) holding up by far the best.

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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