Markets gapped down in all three major index ETFs (down 0.44% in the SPY, down 0.49% in the DIA, and down 0.43% in the QQQ).  However, at that point, the QQQ immediately recrossed the gap on its way to the highs of the day at about 10:40 am.  It then spent the rest of the day wandering around just above the Monday close.  SPY also recrossed the gap, but more slowly, reaching the prior close at 10:40 am and then spending the whole day in the top half of the gap (not far below the Monday close).  For its part, DIA also spent the whole day inside its gap never quite closing it or retouching the open level.  This action gave us gap-down, white-bodied candles with upper wicks in all three major index ETFs. 

On the day, nine of the 10 sectors were in the red with Utilities (+0.61%) leading the way higher while Basic Materials (-2.01%) by far (1.2% worse than any other) the biggest losing sector.  At the same time, SPY lost 0.15%, DIA lost 0.37%, and QQQ was dead flat -0.00%.  The VXX gained 1.33% to close at 25.07 and T2122 dropped back out of the overbought territory into the top end of the mid-range at 73.60.  10-year bond yields spiked up to 3.936% while Oil (WTI) jumped up 3.04% to $71.91 per barrel.  So, Wednesday was another day of consolidation where the bears could not follow through on the opening gap lower but the bulls could not break out to new highs either.  This all happened on well-below-average volume in the SPY and QQQ while DIA volume was not far below-average.

In major economic news Wednesday, May Factory Orders came in well below forecast at +0.3% (compared to a forecast of +0.8% but exactly in line with the April reading of +0.3%).  This was the cause of the big gap lower and I do not know why forecasts had called for the value to increase so dramatically…but it certainly did not.  Nonetheless, Factory Orders did increase, albeit at a slow pace.  However, the big economic news on the day was the FOMC June Meeting Minutes.  Those minutes caused momentary volatility, but in the end, were a nothing burger.  The notes revealed that almost all Fed members were in favor of a pause and also that in their economic projections that they believe (two) additional hikes in the federal funds rate will be needed during 2023. After the close, the API Weekly Crude Oil Stocks report showed a drawdown of 4.382-million-barrels (versus a prior week’s 2.408-million-barrel drawdown).  At the same time, New York Fed President Williams told a moderated panel discussion that the Fed was correct to pause in June, there was still more work to do, and the markets have heard the message that hikes will resume (and there will likely be two quarter-point hikes in the second half of 2023).  He also said that it was a small minority of Fed members who diverge from the more common public FOMC stance. 

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In stock news, shares of KNX (one of the largest US trucking companies) fell 3.29% on Wednesday after a volatile session.  The company warned that Q2 results will be lower than previously expected due to “persistently soft demand.”  However, in Auto news, TM announced their June car sales were up 14.9% from the same month a year ago.  At the same time, STLA unveiled a new “medium” vehicle size platform which will include 26 models across all its brands (Jeep, Chrysler, Ram, Peugeot, Alfa Romeo, Citroen, and Opel).  A bit later, GM announced that their Q2 auto sales had risen 19% from Q2 2022.  Elsewhere, UPS and the Teamster Union both accused the other of walking away from negotiations.  Time remains with the current contract set to expire July 31 but the Teamsters have already voted to authorize a strike if no deal is reached before that date.  (UPS says it is still confident a deal will be reached in time.)  Up in Canada, some Canadian advertisers have begun to pull their advertisements from META in response to the company’s removal of Canadian news from the platform (which itself was in response to a Canadian law passed saying companies must pay Canadian publishers for their content).  There was no word on ads being pulled from GOOGL (which followed META’s lead in solidarity) yet.  After the close, BAC followed suit with its big bank competitors raising its dividend by 9% after passing the Fed stress test last week.

In stock legal and regulatory news, on Wednesday afternoon the FTC ruled that six companies who make cannabis-ingredient products must cease packaging and marketing their foods that are too similar to well-known brands.  Specifically, the FTC ruled “Stoneoes” and “Double Stuff Stoneos” are too similar to Oreos.  Other familiar snacks that had been targeted by pot copycats were Doritos, Cheetos, Jolly Rancher, and Nerds candies.  Elsewhere, the US Interior Dept. approved the construction of DOGEF’s 30-gigawatt wind farm offshore near Atlantic City, NJ.  Then, late in the day, GM announced it could face compliance challenges under the US EPA’s proposed vehicle emissions rules (as well as other state and federal regulations).  It is worth noting that the EPA proposals would not even start to take effect until 2030 and won’t be fully in place until 2032.  At the same time, AMZN, AAPL, GOOGL, META, MSFT, and BKNG said Wednesday that they will fall into the EU’s new criteria making them a “Gatekeeper” and as a result will be forced to comply with tougher rules.  These rules include making messaging platforms interoperable and letting users decide what apps are pre-installed on devices.  Meanwhile, JBLU announced after the close that it will not appeal the US judge’s decision that requires an end to its alliance (defacto merger) with AAL.

In mortgage news, the demand for mortgages dropped last week as interest rates rose.  The average cost of a 30-year, fixed-rate, conforming mortgage rose dramatically from 6.75% to 6.85% (and closing points rose to 0.65 from 0.64) on the week.  This included a brief stay over 7%.  As a result, overall mortgage applications fell by 4.4%.  This was made up of a 5% drop in new-purchase loan requests and a 4% decrease in refinance loan applications.  Interestingly, the average loan size requested fell to the lowest level since January at $423,500.  (The latter fact may say something about home prices and the housing market in general if it becomes a trend.)

Overnight, the nearly unanimous Fed feeling that rates will indeed need to rise twice more in 2023 apparently caught global markets off guard.  Asian markets were all well into the red with the lone exception of India (+0.51%).  Hong Kong (-3.02%), Taiwan (-1.73%), and Japan (-1.70%) led the region lower as Treasury Sec. Yellen arrived in Beijing to work on bilateral policy and trade issues between the two largest economies.  Meanwhile, in Europe, we see the same picture taking shape at midday.  Only Russia (+0.70%) is in the green while the CAC (-1.83%), DAX (-1.16%), and FTSE (-1.38%) lead the region lower.  In the US, as of 7:30 am, Futures are pointing toward a gap down to start the day.  The DIA implies a -0.39% open, the SPY is implying a -0.37% open, and the QQQ implies a -0.38% open at this hour.  At the same time, 10-year bond yields are rising again to 3.975% and Oil (WTI) is positive by four-tenths of a percent at $72.10 per barrel in early trading.

The major economic news events scheduled for Thursday include ADP Nonfarm Employment Change (8:15 am), May Imports/Exports, May Trade Balance, and Weekly Initial Jobless Claims (all at 8:30 am), June Services PMI and June S&P Global Composite PMI (both at 9:45 am), June ISM Non-Mfg. PMI and May JOLTs Job Openings (both at 10 am), and EIA Crude Oil Inventories (11 am).  There are no major earnings reports scheduled for before the open. However, after the close, LEVI reports.        

In economic news later this week, on Friday, June Nonfarm Payrolls, June Avg. Hourly Earnings, June Participation Rate, and June Unemployment Rate are reported.

In terms of earnings reports, there are no major earnings reports scheduled for Friday.

In miscellaneous news, Reuters reported Wednesday that Cyber Insurance premiums dropped 10% in June compared to June 2022.  This dramatically reverses the sharp increase in prior months and comes despite the major global MOVEit hack and ransom attacks.  Elsewhere, the China Daily newspaper quoted a former Vice Commerce Minister (who now heads a state-owned thinktank) as saying that the Chinese rare earth export restrictions were a warning shot and are “just the start” ahead of Treasury Sec. Yellen’s visit, which starts today.  Meanwhile, META launched its competitor for Twitter, called Instagram Threads on Wednesday night.  In a geopolitical tidbit, the President of Belarus Lukashenko told the press that Wagner Group leader Prigozhin had left his country and, interestingly, returned to his home base of St. Petersburg Russia. Finally, after the Fed Minutes, the CME FedWatch Tools shows there is an 88.7% probability of a quarter-point rate hike on July 26.

With that background, it looks like all three major index ETFs are looking to open lower again today. However, only the DIA is back to a retest of its T-line (8ema) so far this morning and all three of the major index ETFs are giving us very small candles. So, either the market is sleeping in today, waiting on the morning data dump, or just unsure of direction at this point. So, the pullback in an uptrend continues, at least as of this point. Again, on a holiday-shortened week at the start of a new quarter, do not expect heavy volume as many traders have taken the week off. We could see reallocation or new money coming into the market. However, I would be surprised if the action was heavy. As far as extension goes, none of the three major index ETFs is too far from their T-line and the T2122 indicator has dropped back outside of its overbought territory. So, there is room to run in either direction if either the bulls or bears can gain momentum. Beware of volatility around the ADP and Weekly Jobless Claims (as well as maybe the JOLTs) reports as traders try to read through to tomorrow’s June Payrolls data.

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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