Once again, on Friday, the large cap indices opened flat while the QQQ gapped down about 0.40%.  However, again, the bulls stepped in right away to rally all three major indices by close to 2% over the first hour, before the bears stepped in to sell off all 3 almost back to the open level over the course of the second hour.  Markets reversed again then at about 11:15 am, starting a long, steady rally that lasted the rest of the day.  This action is giving us Bullish Engulfing candles in the DIA, SPY and QQQ that all closed near their highs.  All 3 have also crossed back up above the T-line (8ema).  However, only the DIA broke through the resistance level from earlier in the week.

On the day, all ten sectors were in the green.  Communications (+0.40%) lagged the rest by almost 1.35%, while Basic Materials (+3.76%) was by far (again by 1.32%) the biggest gaining sector.  The SPY gained 2.42%, DIA gained 2.50%, and QQQ gained 2.35%.  The VXX fell 0.39% to 20.25 and T2122 spiked to just outside the overbought territory at 79.42.  10-year bond yields fell back from early gains to close at 4.221% and Oil (WTI) was up 0.78% to $85.17/barrel.  So, all-in-all, it was a strong bullish day to close out a very choppy and volatile week.

In economic news, the September Federal Budget Balance came in massively below the forecast.  For the month, the deficit fell 430 billion (which was the biggest drop in history), compared to the forecasted -173.5 billion (and a reduction of $220 billion in August).  This reduction cut the current deficit in half from the 2021 number of $2.776 trillion to $1.375 trillion (which is still a significant deficit).  Interestingly, the decline came mostly from an $850 billion increase in revenue (compared to about a $550 billion decline in spending).

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In Fed speak news, San Francisco Fed President Daly (a Dove) told a UC Berkeley Economic group that the FOMC should avoid putting the economy in an “unforced downturn.”  She went on to say that “people should not think it will be a 75-basis-point hike forever” and she thinks the Fed has to “do everything in their power to not overtighten,” concluding that “the time is now to start talking about stepping down (the increases).”  Later in the afternoon, Chicago Fed President Evans reiterated his previous statements, indicating the FOMC needs to get rates “a bit above 4.5% and then hold to reassess.”  (Rates are currently at 3.00% – 3.25% with two meetings left this year.)

On the regulatory/legal front, after the close Friday, toymaker MAT agreed to pay $3.5 million to settle SEC charges over financial misstatements in Q3 and Q4 of 2017.  Elsewhere, a US Judge has ruled that the victims of the BA 737 Max crashes were “crime victims” and rescinded BA’s immunity from criminal prosecution (which was part of the company’s $2.5 billion settlement in January 2021). Nasdaq has prohibited IPOs from Chinese companies (at least 4) for the time being.  The cancellations are due to Nasdaq’s concern over trading activity around such IPOs and problems identifying the pre-IPO shareholders as well as the circumstances of their ownership.

In international news, China (Xi Jinping) shuffled its Central Committee (leadership) on Saturday as Xi was elected to his third term as leader.  The shakeup threw out many market-oriented former members including the “walking out” of former members (and potential rivals of Xi) such as former President Hu Jintao in a staged event that was a bit reminiscent of Saddam Hussein’s infamous Bath Party Purge meeting. In related news, after his reelection, in his headline speech, Xi seemed to indicate an accelerated timeline for reunification with Taiwan in a somewhat vague manner.  This all caused a weakening of the Yuan (to 7.3 per Dollar) and plunging stock markets as traders deal with the idea of Xi’s new government not having the market-oriented supporters it has had up until now.  Finally, in the UK, former Finance Minister Rishi Sunak seems to be closing in on being elected the next Prime Minister.  (Votes should be counted by the afternoon US time.)

In other stock news, the CEO of VALE said Friday that his company is considering a spinoff its copper and nickel mining unit in the near term.  Meanwhile, COST had its contract with the Teamster Union (covering 18,000 employees) ratified. 

Overnight, Asian markets mixed with Chinese exchanges plunging (see above).  Hong Kong (-6.36%), Shenzhen (-2.06%), and Shanghai (-2.02%) led the region lower.  Still, Australia (+1.54%), South Korea (+1.04%), and Japan (+0.31%) as well as a few others managed to print some green candles.  Meanwhile, in Europe, exchanges are green across the board at midday.  The FTSE (+0.22%) lags as the UK government reshuffle continues. However, the DAX (+1.25%), and CAC (+1.50%) are leading the rest of the region higher in early afternoon trading.  As of 7:30 am, US Futures are pointing toward a modestly green start to the day.  The DIA implies a +0.35% open, the SPY is implying a +0.29% open, and the QQQ implies a +0.14% open at this hour.  10-year bond yields have plunged back to 4.158% and Oil (WTI) is down 1.2% to $84.05/barrel in early trading.

The major economic news events scheduled for Monday are limited to Mfg. PMI and Services PMI (both at 9:45 am).  The major earnings reports scheduled for the day include KEX, PHG, and SCHN before the open.  Then, after the close, AAN, ARE, BRO, CADE, CDNS, CLS, KOF, CR, CCK, DFS, LOGI, PKG, RRC, SSD, SUI, VLRS, WRB, and ZION report.

In economic news later this week, on Tuesday we get Conf. Board Consumer Confidence, API Weekly Crude Oil Stock, and Treasury Sec. Yellen Speaks.  Then on Wednesday, Sept. Goods Trade Balance, Sept. Retail Inventories, Sept. New Home Sales, and EIA Weekly Crude Oil Inventories are reported.  On Thursday, we get Sept. Durable Goods Orders, Q3 GDP, and Weekly Initial Jobless Claims.  Finally, on Friday, Sept. PCE Price Index, Q3 Employment Cost Index, Sept. Personal Spending, Michigan Consumer Sentiment, and September Pending Home Sales.

This is a huge earnings week as on Tuesday we hear from MMM, ALFVY, ADM, ARCC, BIIB, CNC, CLF, KO, GLW, FELE, GE, GM, GPK, HAL, HSBC, HUBB, ITW, IVZ, JBLU, KMB, MCO, MSCI, NVS, ONB, ORAN, PCAR, PNR, PII, POR, PHM, RTX, SAP, ST, SHW, SYF, TRU, TRN, UBS, UPS, VLO, XRX, GOOGL, AMP, AGR, AXTA, BXP, BYD, CNI, CHX, CC, CMG, CB, CSGP, WIRE, ENPH, EQR, FFIV, FE, GOOG, HA, JNPR, MTDR, MAT, MSFT, NBR, NCR, NEX, RUSHA, SKX, SPOT, TER, TXN, UHS, and V.  Then Wednesday, APH, ADP, AVY, BSBR, BA, BSX, BCO, BMY, BG, CHEF, CME, SID, CSTM, CPG, DRVN, EXP, EVR, FSV, FTV, GRMN, GTX, GD, GPI, HOG, HES, HLT, IEX, IQV, KBR, KHC, MHO, MAS, EDU, NSC, OTIS, OC, PAG, BPOP, PRG, ROL, ROP, R, STX, SLGN, TMHC, TDY, TMO, TKR, UMC, VRT, WNC, WM, WFRD, AEM, ALGN, ALSN, AMED, NLY, AR, ACGL, ASGN, AVT, AXS, BMRN, CACI, CP, CCS, FIX, CYH, DLR, ESI, EHC, EQT, RE, FLEX, F, FBHS, FWRD, ULCC, GGG, INVH, JBT, KLAC, MTH, META, MEOH, MAA, MOH, MUSA, MYRG, ORLY, OII, OLN, OMF, PTEN, PPC, PLXS, RJF, SEIC, NOW, SNBR, STC, FTI, TDOC, TROX, UCTT, URI, VMI, VFC, and WFG  report.  On Thursday, we hear from AOS, ALLE, MO, AEP, AMT, BUD, HOUS, AIT, ARCH, AMBP, ARES, ABG, AN, BAX, BWA, BFH, BC, CRS, CARR, CAT, CBRE, CX, CHKP, CMS, CNX, CMCSA, CS, DAN, DQ, CTE, EME, FAF, FCNCA, FCFS, FISV, FCN, GEO, GOL, GVA, GBX, HTZ, HON, IP, JHG, KDP, LH, LAZ, LII, LECO, LIN, LKQ, MDC, MMP, HZO, MA, MCD, MRK, NOC, OPCH, OSK, OSTK, PATK, PBF, PCG, RS, SPGI, SNDR, SHEL, SHOP, SAH, SO, LUV, SWK, STM, TROW, TECK, TFX, TXT, TNL, TPH, VC, WST, WDC, WEX, WTW, XEL, AMZN, AAPL, ATR, AJG, BSMX, BIO, COF, CSL, COLM, DECK, DXCM, EMN, EW, ERIE, FSLR, GILD, HIG, HUBG, INTC, LHX, LPLA, MTX, MHK, MPWR, NEXA, NOV, ORI, PINS, PXD, PFG, RSG, RMD, SKYW, SWN, SSNC, TMUS, TEX, TXRH, TFII, X, VRTX, VICI, WY,  and INT.  Finally, on Friday, ABBV, AB, AVTR, BBVA, BSAC, BLMN, BAH, CHTR, CVX, CHD, CL, DVA, EQNR, XOM, FMX, FTS, GNTX, IMO, JKS, LYB, NWL, NMRK, NEE, NVT, SNY, and GWW report.

As we start a week of heavy earnings, the bulls seem to be continuing their Friday move. Financial media are now saying they are seeing “some signs of a reversal.” However, the big banks tell us more downside lays ahead as the bad news of the recession is still out in the future. With that backdrop, markets are looking to challenge their bearish trends. As I’ve been saying, all 3 major indices are working on obvious “inverted head and shoulders” (bottoming) patterns. Market extension is not yet a factor. However, we do sit just outside of the overbought territory in terms of the T2122 indicator. However, intraday reversals and indecision remain the norm (and biggest threat). So, continue to be cautious and show patience (wait for confirmation). With high volatility and less certainty at the moment, this may be the time to pursue more cautious trading strategies (options spreads for example), including remaining hedged, quick, and/or small.

Don’t be stubborn. If you have a loss, just admit you were wrong and take it before it grows. And 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!). Also, keep in mind that trading is not a hobby. It’s a job. 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. 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: BAC, JNJ, WMT, WFC, NFLX, DE, NUE, DVN, FCX. 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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Disclosure: We do not act on all trades we mention, and not all mentions acted on the day of the mention. All trades we mention are for your consideration only.

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