On Friday, markets gapped lower at the open (down 0.54% on the SPY, down 0.49% on the DIA, and down 0.75% in the QQQ), following through on Thursday afternoon’s selloff.  From there, all three major indices bobbed sideways below the open until about 2:15 pm.  At that point, a late-day rally saw the DIA cross the gap and turn green while the SPY and QQQ rallied back up above the open (into the gap) with all three going out near their highs.  This action gave us a gap-down Doji in the QQQ, a gap-down, white-bodied Hammer in the SPY, and a gap-down, white-bodied candle with a small lower wick in the DIA.  All three indices closed below their T-lines and the DIA retested and closed above its 50sma.

On the day, five of the 10 sectors were in the red as Energy (-2.97%) led the way lower and Communications Services (+1.12%) held up better than the other sectors.  At the same time, the SPY was down 0.24%, the DIA was up 0.25%, and QQQ was down 0.71%.  The VXX was flat at 11.67 and T2122 fell a bit more in the midrange to 44.71.  10-year bond yields fell significantly to 3.817% and Oil (WTI) is down 2.76% to $76.32 per barrel.  So, on the day, we’ve seen a gap lower met with volatile indecision.  This resolved into a bearish push to end the day.  Again, this all happened on slightly less-than-average volume.

In economic news Friday, the January Export Price Index came in far higher than expected at +0.8% (compared to a forecast of -0.2% and the December reading of -3.2%).  Meanwhile, the January Import Price Index came in just as expected at -0.2% (versus a forecast of -0.2% and a December value of -0.1%).   Together, these indicate that the US was passing inflated prices on the rest of the world, while the price of our imported goods fell slightly.  Elsewhere, two Fed speakers made headlines Friday.  Fed Governor Bowman said “I think there’s a long way to go before we reach our 2% inflation objective and I think we’ll have to continue to raise the federal funds rate until we see a lot more progress on that,” while addressing bankers in Nashville.  She also said, “We were seeing some progress in lowering inflation at the end of last year, but some of the data that we’re seeing early this year is not tracking with consistently lowering inflation in a way that I would like to see.”  In a separate event, Richmond Fed President Barkin said the Fed still needs to raise interest rates higher but noted that he prefers to stick with slower, quarter-percent hikes.  Barkin said, “I am not taking as much signal from the data that we’ve gotten recently on the demand side as you might if you start to see it for multiple months”.

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In stock news, Reuters reported Friday that MSFT is already in talks with ad agencies on how it plans to incorporate paid links (ads) in the AI responses generated by the new ChatGPT-enabled Bing (which is already in beta release).  Unnamed sources said that in addition, the AI-generated results will be more prominent (above) traditional search ads.  Then after the close, the US Navy awarded LMT a $2 billion contract for hypersonic missile systems.  Meanwhile, after hours a report circulated saying that TSLA is now considering buying metals (lithium) miner SGML. (SGML spiked in after-hours trade.)  Over the weekend, META took a page out of the Twitter playbook and launched new subscription services for Instagram and FaceBook where a user buys a blue badge to mark them as “verified.”  META is charging more than Twitter has (so far) for their badge at $12 on web and $15 on mobile (compared to Twitter’s $8 and $11 respectively).  In addition to the supposed prestige of having the badge, META is promising greater “visibility and reach” for verified user’s posts, suggesting that their algorithm will treat verified users similar to ad buyers (promoting their posts over those from second-class users).  Elsewhere, over the weekend Fortune reported that an online retailer named Temu (owned by US-listed Chinese online retailer PDD) has become the most downloaded shopping app in the US.  During Q4, the Temu app was installed more than AMZN, WMT, TGT, or any other shopping app.  Finally, UNP said on Monday that it has reached an agreement with two unions and will begin providing 2,100 of its workers with up to four paid sick days per year.

In stock legal and regulatory news, BDX convinced a US appeals court to reinstate three patents related to its medical injection device (Powerport).  Elsewhere, the FDA granted accelerated approval to TVTX for their kidney disease drug IgAN.  At the same time, the FDA also approved the APLS drug Syfovre (and macular degeneration drug).  Meanwhile, a group of US Senators and Congressmen asked that the Surface Transportation Board delay a decision on a proposed merger of CP with KSU until after a Chicago-region impact assessment has been completed.  On Saturday, Reuters reported that US Treasury Dept. sanctions authority has begun an investigation of US-listed, Austrian bank RAIFF over its business related to Russia and whether it is being used to skirt sanctions.  Later on Saturday, the FDA announced that PEP is recalling 300,000 bottles of SBUX chilled Frappuccino drinks after glass chips were found in some bottles.  On Sunday, the NHTSA added another deadly crash to its TSLA probe after a vehicle slammed into a fire truck on a California interstate Saturday, killing the driver, apparently while using the TSLA “Full Self-Driving” feature.  Finally, the US Supreme Court will hear oral arguments today in a case that challenges social media and the Internet as we know it.  The case will determine whether websites and social media companies are liable for everything posted (by the public) on their sites.  META and GOOGL are the most obviously impacted. However, every website will be affected by the ruling on this difficult subject.

In energy news, Friday was another down day (and week) for Natural Gas.  The March front-month Natty contract closed down 4.8% to $2.2750/mmBtu after hitting a 2.5-year low earlier in the session.  With the sole exception of the prior week, the Natty has closed lower every week since the beginning of December.  It has lost more than 65% in the process.  Meanwhile, Oil (WTI) also ended Friday down 4.2% on the week.  Oil analysts say that “rate hike jitters” have returned with vengeance. In addition, the oil traders are now also fearing the legally-mandated sale of 26 million more barrels of oil from the US Strategic Reserve hitting the market in the coming weeks/months.  Finally, Bloomberg reported Friday that a record 311 mid-range tanker ships have recently been seen sailing without cargo or listed destination near Russia.  (This is compared to an average of 14 such ships at any given time in the prior year.)  The shift implies a new “shadow fleet” has been formed to help Russia avoid sanctions and keep shipping hundreds of thousands of barrels of diesel and gasoline per day.  In addition, the removal of those ships from the global market has caused the cost of fuel tankers to skyrocket for regular routes such as those feeding Europe and the US East Coast.

Overnight, Asian markets were mixed on mostly modest moves.  Hong Kong (-1.71%), Thailand (+0.66%), and Shanghai (+0.49%) were the exception to that rule with all other exchanges in the region moving only fractionally in either direction.  In Europe, we see the bourses leaning to the red side at midday.  The FTSE (-0.20%), DAX (-0.43%), and CAC (-0.35%) lead the region lower in early afternoon trade.  However, Russia (+1.51%) is an outlier as they responded to President Biden’s surprise visit to Ukraine by dropping out of a nuclear arms treaty and vowing to keep pushing in their war of conquest against Ukraine.  As of 7:30 am, US Futures are pointing to a gap lower to start the day.  The DIA implies a -0.89% open, the SPY is implying a -0.84% open, and the QQQ implies a -1.08% open at this hour.  At the same time, 10-year bond yields are spiking again to 3.882% and Oil (WTI) is up just under 1% to $77.06/barrel.

The major economic news events scheduled for Tuesday are limited to Mfg. PMI, S&P Global PMI, and Services PMI (all three at 9:45 am), and January Existing Home Sales (10 am).  The major earnings reports scheduled for the day include ARNC, CEQP, DAN, ELAN, EXPD, FLR, HD, HUN, IR, JBT, JELD, LGIH, LECO, LPX, MDT, MIDD, TAP, NMM, PEG, TECK, TPH, TRN, WMT, WLK, and WLKP before the opening bell.  Then after the close, ALIT, AGR, BXC, BCC, CZR, CWH, CHK, COIN, CSGP, CW, CVI, FANG, ESI, EQX, EXAS, FLS, GFL, IAA, IOSP, KEYS, LZB, MTDR, PANW, PSA, O, SBAC, TOL, RIG, UNVR, and WSC report.

In economic news later this week, on Wednesday the FOMC Minutes are released, the API Weekly Crude Oil Stock Report and Fed member Williams speaks.  On Thursday, we get Q4 GSP, Q4 GDP Price Index, Weekly Initial Jobless Claims, and EIA Crude Oil Inventories.  Finally, on Friday, the January PCE Price Index, January Personal Spending, Michigan Consumer Sentiment, and January New Home Sales are reported.

In terms of earnings later in the week, on Wednesday, we hear from ALLE, BIDU, BLCO, BCO, CRL, CSTM, CRVN, GRMN, GIL, IBP, IQ, NI, OSTK, PRG, SBGI, TRGP, TJX, TNL, UTHR, VRT, WWW, ATUS, ANSS, APA, BTG, CPE, CAKE, CHRD, CDE, FIX, CTRA, CCRN, DVA, EBAY, ETSY, EXR, GSM, FNF, ICLR, LBTYA, VAC, DOOR, MATV, MOS, MYRG, NTAP, NVDA, OPAD, OGS, OUT, PAGS, PARR, PK, PDCE, PXD, PR, RXT, RIO, RYI, SNBR, SM, STN, SUI, RUN, TDOC, VMI, and WES.  Then Thursday, BABA, AMR, AEP, AMT, HOUS, AMBP, AAWW, BBWI, BHC, CBRE, CQP, LNG, COMM, DPZ, DTE, EME, AG, FCN, GPC, GFI, IRM, KDP, LKQ, MRNA, MODV, NTES, NEM, NICE, NOMD, OPCH, PZZA, PCG, PRMW, PWR, RCII, SPTN, SRCL, FTI, TFX, BLD, TAC, VIPS, W, YETI, ACCO, ATSG, ACA, ADSK, BALY, BECN, SQ, BKNG, BWXT, CVNA, CE, CGAU, CENX, CHE, CWK, EIX, ERIE, FTCH, FND, INTU, LYV, MTZ, MELI, OII, ZEUS, OPEN, PBA, PRI, RHP, SEM, SWN, VICI, WBD, and INT report.  Finally, on Friday, we hear from CM, GTLS, CNK, EOG, EVRG, FMX, FYBR, GTN, DINO, IEP, LAMR, and CRC.

So far this morning, WMT, MDT, TAP, DDS, IR, JELD, TPH, ELAN, and MIDD have all reported beats on both the revenue and earnings lines.  Meanwhile, HD, ARNC, CEQP, LPX, and JBT have all reported misses on the revenue line while beating on the earnings line.  On the other side, HUN and DAN both beat on revenue while missing on the earnings line.  Unfortunately, WLK, FLR, and LGIH missed on both the top and bottom lines.  It is worth noting that MDT raised forward guidance,  However, WMT, HD, TAP, DAN, TPH, ELAN, and TRN all lowered their own forward guidance.

With that background, it looks like the bears are following through to the downside again this morning. Perhaps this is a reaction to HD’s mixed report and both WMT and HD lowering guidance (HD also raised the wages of its hourly workers to the tune of $1 billion). I’m sure that a renewed lack of certainty about the Fed’s March rate action is not helping. (As of this morning, 79% of the Fed Futures bets are on a quarter-percent hike while 21% are looking for a half-percent hike in March.) The DIA is retesting its 50sma at the moment and it looks like the SPY may be headed toward the same retest soon. All three major indices are below their T-lines and the short-term trends are bearish. However, all three also have potential support levels not far below. Continue to be cautious about intraday reversals as we have seen recently.

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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