Markets opened relatively flat on Monday.  However, at that point, stocks went on a slow, steady, all-day rally.  The SPY, DIA, and QQQ all closed very near their highs.  This gave us a definite Morning Star signal in the QQQ and 3-candle patterns you could at least say were “Morning Star-like” in the SPY and DIA.  With that said, the QQQ sits right at it 200sma and the DIA just below that major average.  On the day, SPY gained 0.88%, DIA (the weakest of the trio today) gained 0.35%, and QQQ gained a strong 2.06%.  It is worth noting that today’s action took place on volumes that were less than half the normal average across all 3 major indices.  The VXX fell 2.4% to 24.43 and T2122 climbed just inside the overbought territory at 83.24.  10-year bond yields rose to 2.41% and Oil (WTI) spiked yet again by 4.4% to $103.64/barrel.

TWTR (+27.12%) had its best day since the company’s IPO in November 2013.  This happened (mostly on a gap higher) as an SEC filing revealed that Elon Musk had taken a 9.2% passive position in the stock.  That position makes him the largest shareholder, but represents less than 1% of his wealth.  This, plus the fact that Musk has said he is considering creating his own social media platform has led analysts to believe he will increase his stake in TWTR and eventually take a more active role in the running of the company.  Interestingly, Musk seems to be picking another fight with the SEC. His disclosure came 20 days after Musk accumulated his position and that is a violation of SEC rules requiring large passive positions to be disclosed in 10 days or less.

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The 2-year versus 10-year bond yields inverted again Monday.  This means that the 2-year bond pays a higher rate than the 10-year, which is not normal and implies there is greater risk in the short term.  Every recession since 1950 has been preceded by such an inversion, although the lag time can be as long as 2 years.  There was also one “false positive” where there was an inversion, but no recession followed.

Regarding the Russian invasion, the EU will propose a ban on Russian coal imports as part of its “post war crime” round of sanctions. French President Macron also proposed sanctions against Russian oil.  However, these will both be very difficult proposals to get passed since Russia supplies 70% of the EU’s coal and 30% of the EU’s oil. Germany is particularly dependent on Russia for energy.  Meanwhile, the US is also preparing another round of sanctions, which is said to include prohibiting Russia from paying its debt payments in US Dollars through American banks.  This will just make it harder for Russia to avoid defaulting on loans.

XOM disclosed Monday that they expect to report record profits on April 29.  This comes as oil prices have soared and padded the company’s bottom line by at least $2.3 billion for the quarter.  However, the company said they also expect to write down its $4 billion investment for a Russian drilling project that the company is in the process of discontinuing as a result of the Russian invasion of Ukraine.  Executives from XOM, CVX, BP, DVN, SHEL, and PXD have all been called to testify before Congress about price gouging on Wednesday.

Overnight, the Asian markets were mixed but leaned more to the upside.  Hong Kong (+2.10%) was an outlier to the upside, but Shanghai (+0.94%), Shenzhen (+0.91%), and Singapore (+0.82%) led the region higher.  AT the same time, India (-0.53%) and Taiwan (-0.38%) paced the losers.  In Europe, stocks are mixed but lean to the downside at mid-day.  The FTSE (-0.10%) is an outlier, but the DAX (-0.56%), and CAC (-1.67%) are typical to the downside.  Russia (-4.68%) is, of course, also an outlier.  Gainers include Denmark (+1.60%) and Portugal (+1.27%).  As of 7:30 am, US Futures are pointing toward a modestly red start to the day.  The DIA implies a -0.28% open, the SPY is implying a -0.27% open, and the QQQ implies a -0.30% open at this hour.  10-year bond yields are up strongly again to 2.463% and oil (WTI) is up nearly another percent in early trading this morning.

Major economic news scheduled for release on Tuesday includes Imports/Exports and Feb. Trade Balance (both at 8:30 am), March Services PMI (9:45 am), March ISM Non-Mfg. PMI (10 am), and a trio of Fed speakers (Kashkari at 10 am, Brainard at 10:05 am, and Williams at 2 pm.   The only major earnings report scheduled for the day is AYI before the open. 

Premarket action seems to indicate a rest after Monday’s tech-led rally. Again we have minimal impactful news and basically no earnings which might drive markets. Eyes will continue to focus on interest rate inversions and the talking heads (fund managers) are likely to promote the idea that the Fed should not do half-percent raises with the dual pressures of inflation and the war in Ukraine hanging over the economy. Volatility still remains a concern, but the trend is definitely still bullish and yesterday’s action (Morning Star signals on small pullbacks in a strong trend) implies that we will see some follow-through, although not necessarily today. So, all traders can do is focus on the chart and be prepared for volatility-caused short-term pain.

The first rule of making big money in the market is to not lose big money in the market. Don’t be stubborn, and protect yourself from yourself. If you are wrong, just admit it and take your loss. Stick to those trading rules and manage the things that you can control while trying not to worry about the things you have no control over at all. Trade with the trend, don’t chase, keep consistently taking profits when you have them, and move your stops in your favor. Trading is a marathon, not a sprint. So, focus on the process and enjoy yourself.

Ed

Swing Trade Ideas for your consideration and watchlist: GSK, CVLT, PYPL, MRO, DG, FB, BE, TWLO, AAPL, MSFT, APA, DKNG, PINS, CLF, MTTR, CLOV 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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