Stocks gapped lower between a third and a half of a percent on Monday.  However, all 3 major indices had filled the gap by 10 am.   From there we saw a grind sideways most of the morning, followed by a mid-day rally and then a sideways grind most of the afternoon.  Only a slight selloff the last 30 minutes of the day kept all3 major indices from closing near their highs of the day.  This action has left us with gap-down strong white candles with a small upper wick.

Eight of the ten sectors are green, with Energy (-1.99%) by far the biggest loser and a virtual dead heat for the biggest gainer between Consumer Defensive and Utilities.  The VXX has fallen over 2.5% to 21.49 and markets remain overbought with T2122 being very high in its range at 97.37.  10-year bond yields are back down a bit to 2.799% as traders buy bonds and Oil (WTI) is off more than 3.42% to $88.95, which is actually a recovery from early losses of more than 5%.

In economic news, on Monday the NY Empire State Mfg. Index came in far below expectations Monday.  The reading was -31.30 while +5.5 was forecast and July’s reading was +11.10.  That 42-point fall was the second largest on record.  Elsewhere, US Egg commodity prices have fallen 37% since the end of July (after a 47% increase in July).  This will be seen by consumers over the next 30 days.  Overseas, Chinese July Industrial Output grew 3.8%, well below the +4.6% analysts expected and even slightly slower than June’s +3.9%.  Meanwhile, Chinese July Retail Sales rose 2.7% year-on-year, far below the +5.0% forecast and June’s +3.1% number.  For that reason, China’s Central Bank cut both the 7-year and 10-year lending rates by 10 basis points

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After the close, TME, GSM, NU, and FN reported beating on both the top and bottom lines.  However, COMP missed on both the revenue and earnings lines.  FN was up as much as 16% in post-market trading after their beat and an increase in guidance.  Meanwhile, NU was up 11% and GSM was up 9% in post-market trade.

In stock news, after the close, BRKB reported that it has tripled its stake in ALLY while also shedding its VZ holdings.  Elsewhere, AAL announced that it is cutting 16% of its November flight schedule (31,000 flights) well above the 2% of flights they are canceling for September and October.  Meanwhile, TWTR was ordered by the judge to give Elon Musk access to a former TWTR executive’s documents related to the court case over closing Musk’s acquisition of TWTR.  However, the same judge ruled that TWTR only needs to give Musk the data from one “bot checker.”  Lastly, Bloomberg reports that WFC plans to retreat from the home mortgage business.  WFC has dominated that business (issuing one-third of all US mortgages) since other banks backed off of that business during the 2008 financial crisis.  WFC issued $205 billion in new home loans in 2021.

In Energy news, on Monday, crude oil settled at a 6.5-month low on weak demand out of China, Saudi Aramco saying it was ready to ramp up production, and fear that Iran will comply with the 3 remaining stumbling blocks (which would allow Iran to start exporting oil again) Monday night.  Elsewhere, after the close, Reuters reported that energy companies are gearing up to capture some of the $430 billion in US Tax Credits from the Inflation Reduction Act by implementing carbon capture projects (pumping carbon captured from operations into wells).  CVX, XOM, SLB, ET, and TALO are all listed by Reuters as companies planning such projects.  Finally, Bloomberg reports that BP will sell off all of its Mexican oil assets as it refocuses on renewable energy.

President Biden will sign into law today a bill that eliminates the tax credit for electric and hybrid vehicles.  An automotive trade group told Bloomberg that this will eliminate customer tax credits for the purchase of 70% of electric and hybrid vehicles.  However, the same law will give tens of billions of dollars in grants, loans, and tax credits to automakers who build cleaner vehicles.  Obviously, major auto companies like GM, F, TM, HMC, and STLA are in the best position to gain from the incentives, even as the industry customers lose a reason to buy cleaner vehicles.

Overnight, Asian markets were mostly green on modest moves.  The only significant loss was in Hong Kong (-1.05%).  On the other side, Malaysia (+0.98%), India (+0.72%), and Australia (+0.58%) led the gains.  In Europe, stocks are leaning heavily to the upside at mid-day.  The FTSE (+0.64%), DAX (+0.67%), and CAC (+0.40%) are leading the region higher in early afternoon trade.  As of 7:30 am, US Futures are pointing toward an open just on the red side of flat.  The DIA implies a -0.06% open, the SPY is implying a -0.13% open, and the QQQ implies a -0.12% open at this hour.  10-year bond yields are up slightly to 2.81% and Oil (WTI) is flat in early afternoon trading.

The major economic news events scheduled for Tuesday include July Building Permits and July Housing Starts (both at 8:30 am), July Industrial Production (9:15 am), and API Weekly Crude Oil Stock (4:30 pm).  The major earnings reports scheduled for the day include ESLT, HD, SE, and WMT before the open.  Then, after the close, A and JKHY report.

So far this morning, WMT and HD have both reported beats on both lines.  Meanwhile, SE beat on revenue while missing on earnings.  However, ESLT missed on both the top and bottom lines. Both WMT and HD stood by their previous forward guidance during their reports.

In economic news later this week, on Wednesday we get July Retail Sales, June Business Inventories, June Retail Inventories, EIA Crude Oil Inventories, a 20-year Bond Auction, and Fed Member Bowman speaks twice.  Then Thursday Weekly Initial Jobless Claims, Philly Fed Mfg. Index, and July Existing Home Sales are announced and Fed Member George speaks.  Finally, on Friday there is no major economic news.

In earnings later this week, on Wednesday, ADI, LOW, PFGC, TGT, TJX, ZIM, AMCR, BBWI, SQM, CSCO, KEYS, SNPS, and ZTO report.  Then Thursday, we hear from BJ, CSIQ, EL, KSS, NICE, SPTN, TPR, AMAT, and ROST.  Finally, on Friday we get reports from DE, FL, and VIPS.

Coming off Monday’s nice showing, markets seem to be pausing this morning. Or, perhaps, traders are just waiting for more clues as to future Fed rate hike sizes. Regardless, we get housing data later today and that industry’s trade group is already making the morning show rounds fretting about a “housing recession” caused by increasing loan rates and consumer fears over the future. (They conveniently forget about the long run of boon years when rates were historically low.) At any rate, the bulls could certainly use a little pause to rest following the strong moves made in the last week. With that backdrop, we can expect another low-volume day. Overall the trend remains bullish, but remember those stocks are extended/overbought…do not chase.

Remember that trading is our job. So, do the work and follow the process. Stick with your trading rules, trade with the trend, and take those profits when you have them. Demonstrate patience and wait for confirmation. Don’t be stubborn. If you have a loss, just admit you were wrong, respect your stop, and take the loss before it grows. When price does move in your direction, always move your stops in your favor (remember the “Legend of the man in the green bathrobe“…it is NOT HOUSE MONEY, it’s all OUR MONEY!). Lastly, remember that you get rich slowly and steadily in Trading…not by striking it rich on one or two trades. So, give up that lottery ticket mentality.

See you in the trading room.

Ed

Swing Trade Ideas for your consideration and watchlist: No Trade Ideas today. 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.

🎯 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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