Yellen On Deck and Premarket Rebounds

Markets gapped down 0.8%-1.2% at the open Tuesday. However, the intraday reversal theme held as the bulls stepped in to fill that gap by 10:30 am.  From there we saw a rollercoaster ride with a bullish trend that drove into the close not far from the high. The action left us with gap-down, large, white candles that have climbed back above the T-line and back into the upper end of the recent choppy trading range.  The SPY and DIA both printed Bullish Engulfing candles while the QQQ printed a Bullish Piercing Candle.  The energy and Healthcare sectors led the market throughout the session.  On the day, SPY gained 0.90%, DIA gained 0.83%, and QQQ gained 0.86%.  The VXX fell 1.63% to 21.67 and T2122 climbed even deeper into the overbought territory at 94.  10-year bond yields fell to 2.985% and Oil (WTI) gained 1.4% to $120.14/barrel.

During the day Tuesday, AAPL outlined its new Apple Pay features that include “Buy Now, Pay Later” which will now directly compete with AFRM and PYPL.  The idea behind this offering is to capture users and keep them inside the iOS ecosystem instead of looking elsewhere for “Buy Now, Pay Later” services.  AAPL was up 1.75% while PYPL gained 1.96% and AFRM gained 2.74% on the day.  On the other side of the pond, AAPL agreed to a deal with the EU to remove their proprietary charging cables and go-to industry-standard USB-C cables for charging iPhones by 2024.  The deal will allow the company to avoid further fines and sanctions on the issue.

After the close, CASY reported beats on both lines. So far this morning CPB, THO, and BLCO all reported beating on the top and bottom lines as well. 

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In business news, after the close 5 automakers backed President Biden’s push to restore California having the ability to set its own, stricter than Federal, emissions standards.  Former President Trump had stripped states of that authority and the Biden administration is backing an EPW decision to restore it.  The companies supporting the measure include F, HMC, VWAGY, BMWYY, and VOLAF.  Surprisingly not on that list is TSLA, NIO, RIVN, NKLA, LCID, or even TM who might all benefit from the tighter rules on emissions.  Elsewhere, PYPL announced that it will now allow users to send and receive cryptocurrencies between PYPL wallets and other exchanges.  (PYPL users had previously been able to buy and sell crypto only to PYPL itself.)

SEC Chair Gary Gensler is scheduled to speak today. He is expected to address plans to change rules forcing exchanges to openly bid on brokerage order flows (rather than have unknown back-room deals) and for brokerages to be required to disclose how this will impact both order execution and the price received.  Industry forces (such as order wholesalers) are lobbying against Gensler’s plan even before they are announced.  We should note that the “Payment for Order Flow” is the mechanism that let many brokers go to a zero commissions business model. So, depending on what Gensler says and how the SEC eventually implements his vision, brokerage commission structures may be changing again. Another topic Gensler is expected to address is “Dark Pools” which now account for 40% of all market volume and are hidden from most market participants until the end of the day.

In Economic news, Bloomberg reported a few rays of light in the dark cloud of inflation we have been facing.  As I mentioned in the past, the price of semiconductors has been coming down for months now.  However, Bloomberg reported last night that the price of shipping containers has fallen 28% since the September 2021 highs.  In addition (and too late for the current US crop) nitrogen fertilizer prices have dropped like a rock from the $1400/ton March price to $675/ton as Brazil reported a glut in Brazilian ports with no place left to store it.  These will take some time to ripple through the economy and by no means does this mean inflation is falling yet, but these are signs of hope. On the opposite side of the spectrum, citing the Russian invasion of Ukraine, the World Bank lowered its global GDP forecast to +2.9% for 2022. This is down dramatically from the 2021 +5.7% number or even the World Bank’s own January forecast of 4.1%. Finally, mortgage demand has fallen again this week, reaching the lowest level of this century as 30-year, fixed-rate, conforming rates rose to 5.40%.

Overnight, Asian markets mixed, but leaned to the green side.  Hong Kong (+2.24%) was an outlier with Japan (+1.04%), Taiwan (+0.95%), and Shenzhen (+0.82%) being the more typical leaders of the region.  In Europe, stocks are mostly in the red at mid-day.  The FTSE (-0.33%), DAX (-0.42%), and CAC (-0.68%) are typical of the region with outliers like Russia (+1.71%) and Denmark (-1.23%) in early afternoon trading.  As of 7:30 am, US Futures are pointing toward a modestly lower start to the day.  The DIA implies a -0.34% open, the SPY is implying a -0.26% open, and the QQQ implies a -0.11% open at this hour.  10-year bond yields have climbed back to 3.012% and Oil (WTI) is up another percent to $120.66/barrel in early trading.

The major economic news events scheduled for release Wednesday we see Crude Oil Inventories (10:30 am) and the 10-year bond auction (1 pm).  Treasury Sec. Yellen will also testify before Congress at 10 am. The major earnings reports scheduled for release include BF.B, BLCO, CPB, and OLLI before the open.  Then after the close, ABM, FIVE, and GEF report.

In economic news later this week, Thursday brings Weekly Initial Jobless Claims.  Finally, on Friday we get May CPI, Univ. of Michigan Consumer Sentiment, the WASDE Report, and the May Federal Budget Balance.

On the earnings front for later this week, on Thursday we hear from BILI, SIG, DOCU, SFIX, and MTN. Finally, on Friday there are no major reports scheduled.

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The bears are offering only a slight pushback on the strong candles the market printed yesterday. Even at that, the premarket action has been positive (white candle) since the start of the early session. So, we should keep our eyes on the top of the recent chop range to see if the bulls can get going. However, remember that until that level is broken with some strength, we have to assume the back-and-forth chop of the last week and a half will continue.

Technically speaking, we remain way over-bought in a choppy consolidation zone that started after a one-week rally inside a longer-term downtrend. None of the major indices are in an uptrend yet (at least on a daily chart), but we do have a higher-low in all 3 of them. So, we remain in limbo with the mid-term downtrend broken, but a potential new uptrend that has not been confirmed. This is a dangerous area for Swing Traders. So continue to be careful, nimble, and/or hedged. (Or sit on your hands.)

Remember to be very careful chasing gaps/moves early. The whipsaw is very real during times when we are thinking about changing trends and as we’ve seen lately, gap-chasers can get hurt. Trading is our job. So, do the work and work the process. Stick with your trading rules, trade with the trend, and consistently take profits when you have them. Always move your stops in your favor. Remember that the first rule of making big money in the market is to not lose big money in the market. So, don’t be stubborn. If you have a loss, just admit you were wrong and take it before it grows. As they say, the best time to have taken a $500 loss is when you are now staring at a $1,500 loss. Finally, remember that you get rich steadily over the long run in Trading…not by striking it rich on one or two trades. So, give up that lottery ticket mentality.

Ed

Swing Trade Ideas for your consideration and watchlist: NEWR, PLUG, DHR, OXY, LKQ, DVN, VERU, WMB, F, T, VALE. 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.

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🎯 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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