Tuesday saw stocks open slightly higher and then diverge with large-caps chopping sideways and QQQ selling off before starting its own chop to the side.  SPY gapped up 0.19%, DIA opened 0.09% higher, and QQQ gapped up 0.27%.  At that point, SPY meandered sideways, recrossing its gap several times.  Meanwhile, DIA chopped to the side above its open and QQQ immediately recrossed the gap up and sold off until 12:30 p.m. before meandering along the lows.  Then, during the last 30 minutes of the day, all three major index ETFs rallied.  This action gave us a white-bodied Spinning Top in the SPY, a large-bodied, white-bodied Bullish Harami in the DIA (that bounced up off its T-line), and a black-bodied Spinning Top in the QQQ (which also bounced up off its 8ema). 

On the day, nine of the 10 sectors were in the green as Healthcare (+1.30%) and Consumer Cyclical (+1.20%) led the way higher.  Meanwhile, on the other end of the spectrum, Communications Services (-0.22%) was the only sector that stayed in the red.  At the same time, the SPY gained 0.29%, the DIA gained 0.39%, and QQQ lost 0.20%.  VXX fell another 2.43% to close at 14.05 and T2122 spiked back up into the center of its mid-range to 55.74.  10-year bond yields dropped back down to 4.09% and Oil (WTI) rose 0.92% and close at $73.45 per barrel. So, good premarket earnings led to a nice start to the day.  However, from that point forward we mostly saw drift and indecision as traders wait for a more broad-based read on earnings season (or more news and/or Fed opinions).

The major economic news released Tuesday was limited to Weekly API Crude Oil Stocks, which showed a smaller-than-expected increase of 0.674 million barrels (compared to a forecasted build of 2.133 million barrels but better than the prior week’s 2.500-million-barrel drawdown).  Elsewhere, the EIA released its short-term Energy Outlook.  The report says it expects US electricity use to rise to records in both 2024 and 2025.  (The US used 3,994 billion kWh in 2023 with 2024 demand projected at 4,112 billion kWh and 2025 at 4,123 billion kWh). 

In Fed news, Cleveland Fed President Mester said Tuesday that she is open to rate cuts if it is clear inflation is still slowing.  Mester said, “Monetary policy is in a good place from which to assess and respond” … “I don’t want to put a particular calendar date on it (rate cuts) – it really is dependent on the state of the economy.”  She added, “There’s no rush.”  Later, Philly Fed President Harker said that a soft landing was in sight for the US economy.  Harker said, “The data point to continued disinflation, to labor markets coming into better balance, and to resilient consumer spending — three elements necessary for us to stick to the soft landing we remain optimistic to achieve.”  He went on to say “real progress” is being made toward (getting back to) the Fed’s 2% target. 

After the close, AB, AFG, AMGN, AIZ, CSL, CMG, CINF, CRUS, CNO, EW, F, FTNT, IEX, JKHY, LUMN, OI, OMC, OXBC, SONO, SNEX, VLTO, VOYA, WFRD, WU, and YUMC all reported beats on both the revenue and earnings lines.  At the same time, ASTL, AMCR, EQH, CTSH, EXEL, and SNAP all missed on revenue while beating on the earnings lines.  On the other side, GILD, KD, PRU, QGEN, VSAT, and WERN all beat on revenue while missing on earnings.  Unfortunately, AMRK, DOX, ATO, PLUS, NBR, and VFC missed on both the top and bottom lines.  It is worth noting that PLUS and GILD lowered guidance.  However, JKHY, KD, and VLTO raised their forward guidance.

In stock news, USB announced it will resume share buybacks and plans to find $3 billion more in cost savings related to integrating its acquisition of CS.  (UBS says it now expects to save $13 billion total by the end of 2026 from the CS purchase.)  Later, the UAW announced that more than 50% of the workers at VLKAF (Volkswagen) TN plant have signed requests to join the union.  (UAW previously announced it will seek recognition once that number reaches 70%.)  At the same time, DD announced a new $1 billion stock buyback program and hiked its dividend by 6%.  Later, KSS stock jumped as hedge funds (major shareholders) urged the company to sell itself.  (KSS rejected a $64/share offer in 2022, holding out for a $70/share offer that never arrived.  KSS closed at $26.80 on Tuesday.)  At the same time, AMZN announced it will cut 115 jobs from its healthcare services unit (which has 400 employees).  Elsewhere, DIS (ESPN and ABC), FOX, and WBD announced a revolutionary sports-centric subscription streaming service to be launched in the fall of 2024.  This will target non-cable, sports fan subscribers.

In stock legal, governmental, and regulatory news, the NHTSA announced Tuesday that HMC will recall 750k 2020-2021 vehicles related to airbags that could deploy unintentionally during a minor collision. (This is not related to the widely-known Takata airbag recalls across many car makers.  Instead, this is related to a natural disaster at an HMC subcontractor causing it to change the materials used.)   Later, the NHTSA announced that GM is recalling more than 323k trucks for issues that may cause the tailgate to open while driving.  At the same time, the FAA said it would post inspectors at BA, saying BA’s current quality system “is not working.”  Elsewhere, the NTSB released its preliminary report into the mid-air loss of the BA 737 MAX 9 body panel.  The report says bolts were removed to repair a damaged door plug and the bolts were not reinstalled.  Similar missing bolts were found on numerous other 737 MAX 9s.  It also cited that the system allowing BA to certify the safety of their own planes when the company’s primary goal was increasing production rates was untenable.  At the same time, the US, UK, and France along with MSFT, GOOGL, and META signed a joint statement calling for more efforts to tackle cyber spying tools.  Elsewhere, the FDA said after the close Tuesday that it has found quality control lapses at CTLT, including “pest control” issues. (NVO announced Monday it is buying CTLT for $16.5 billion in order to expand production capacity for obesity drugs.)  Later, GOOGL agreed to pay $350 million to settle a shareholder lawsuit related to a security bug in the company’s now-defunct Google+ social media platform.  (The bug exposed users personal data.)  At the same time, a CA judge grilled GM Cruise unit officials over the coverup and then disclosure of the company’s pedestrian-dragging crash in October.  (Afterward, GM raised its offer to end the investigation by CA regulators, raising it to just $112,500.) Later, AAPL won a dismissal of a lawsuit by a Silicon Valley startup accusing AAPL of monopolizing the US heart-rate monitoring apps market via its app store.

Overnight, Asian markets were mostly green, again led by China.  Shenzhen (+2.93%), Shanghai (+1.44%), and South Korea (+1.30%) led the gainers with only two of the 12 exchanges in the red.  Meanwhile, in Europe, the bourses lean toward the red side with only four of 15 bourses in the green at midday.  The CAC (-0.25%), DAX (-0.32%), and FTSE (-0.41%) lead the region lower in early afternoon trade.  In the US, as of 7:30 a.m., Futures point toward a mixed and flat start to the day.  The DIA implies a -0.15% open, the SPY is implying a -0.04% open, and the QQQ implies a +0.07% open at this hour.  At the same time, 10-year bond yields are back up to 4.1333% and Oil (WTI) is up another 0.71% to $73.85 per barrel in early trading.

The major economic news scheduled for Wednesday includes Dec. Exports, Dec. Imports, and Dec. Trade Balance (all at 8:30 a.m.), Weekly EIA Crude Oil Inventories (10:30 a.m.), Dec. Consumer Credit (3 p.m.), and Fed member Bowman speaks (2 p.m.).  The major earnings reports scheduled for before the open include ADNT, BABA, ATS, ARCC, BERY, BAM, BG, CDW, CVS, EPC, EMR, EQNR, EEFT, FOXA, GPRE, GFF, HAIN, HLT, KMT, NBIX, NYT, OMF, PAG, PFGC, REYN, RBLX, SEE, TTMI, UBER, VSTS, VSH, XPO, and YUM.  Then, after the close, ALL, ARM, ASGN, BKH, CENTA, CENT, CPA, CXW, COTY, EHC, ENS, NVST, EFX, EG, FAF, FLT, GL, MAT, MMS, MCK, MAA, MKSI, MOH, MUSA, NWSA, ORLY, OSCR, PYPL, RRX, STE, SLF, SU, UHAL, DIS, and WYNN report. 

In economic news later this week, on Thursday, Weekly Initial Jobless Claims, Weekly Continuing Jobless Claims, WASDE Ag report, and Fed Balance Sheet are reported.  Then Friday there is no major news planned.

In terms of earnings reports later this week, on Thursday, we hear from WMS, APO, MT, ARES, ARW, ABG, AXTA, BAX, BCE, BDC, BWA, CCJ, CX, CIGI, COP, DTE, DUK, GTES, HOG, HSY, HMC, NSP, ICE, IPG, ITT, K, KVUE, LNC, MAS, MDU, NFG, PATK, BTU, PM, RL, RXO, SPGI, SNA, SPB, SAVE, TROW, TPR, TPX, THC, TRI, TDG, UA, UAA, WMG, WEX, ZBH, AFRM, ATR, BYD, CPRI, BAP, DXCM, EXPE, FE, FLO, G, PEAK, ILMN, LEG, MTD, MHK, MSI, NGL, PINS, TTWO, TEX, and TFII.  Finally, on Friday, AMCX, CTLT, ENB, FTS, MGA, NWL, PEP, PAA, PAGP, and TIXT report.

So far this morning, ARCC, BAM, CG, CMRE, CVS, EPC, EMR, EEFT, HLT, OMF, RITM, UBER, VSH, and XPO all reported beats on both the revenue and earnings lines.  At the same time, ATS, ASAZY, BERY, EQNR, PAG, and PFGC all beat on the revenue line while missing on earnings.  On the other side, BG, CDW, HAIN, KMT, NBIX, NYT, and REYN missed on revenue while beating on earnings.  Unfortunately, ADNT, BABA, GPRE, and YUM missed on both the top and bottom lines.  It is worth noting that BG, CVS, HAIN, HLT, KMT, and VSH lowered forward guidance.  However, EMR raised its guidance. Finally, it is also well worth noting that even though BABA missed on both lines, the company increased its share buyback program by $25 billion.

In miscellaneous news, Reuters reported US stock buyback programs are speeding up, now well above the average of the past 12 earnings seasons.  Companies have announced an average of $6.9 billion of stock buybacks PER DAY in the first three weeks of the Q4 earnings season.  This is the highest level at this point since the record $8.2 billion per day at this point of the Q1 2023 reporting period.  Elsewhere, surprisingly strong demand resulted in $54 billion in 3-year treasury bonds sold, just ahead of the record-setting $42 billion 10-year bond sale.  At the same time, in a big move in foreign markets, both GS and MS endorsed having their clients move their higher-risk emerging markets money from China into India, designating it as a prime investment destination for the next decade.

With that background, it looks like all three major index ETFs are looking to open little changed from Tuesday’s close. DIA is giving us the largest (black) body in the premarket but remains above its T-line (8ema). QQQ is giving us the largest (white) body candle in the early session. And, for its part, SPY is giving us a white-bodied, indecisive candle so far this morning. All three remain above their T-line (8ema). So, the Bulls remain in control of the trend in both the long and short term. However, you would be hard-pressed to call the action of the last several days anything other than consolidation in the rally. In terms of extension, none of the three is far from their 8ema and the T2122 indicator is now back down in the center of its midrange. This means the market has plenty of slack to work with if either side of the market gains traction. As I have been saying for a long time, keep an eye on those 10 huge tech stocks. Whatever direction they decide to go is very likely to call the tune for the rest of the market.

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 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 gains are 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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