Questions? Call us! 1-877-882-5867
Which Way Wednesday – Russell 1,600 Edition
Is this rally real?
As you can see from our Big Chart – we're just above the 200-day moving averages, which was our goal for this rally – on all but the Russell 2000, which is at 1,574 in the /RTY Futures and we need them to confirm by getting over the line at 1,587 but we'll want to see 1,600 before we feel comfortable and we are expecting the Russelll to lead us – up or down, for the rest of the week as more and more small caps report their earnings.
We had an in-depth look at /RTY in yesterday's Live Member Chat Room where we concluded:
So, that being the case, we would expect the 5% Rule to be obeyed between 1,440 and 1,800 which is 360 points so 72-point bounce lines to 1,512 (weak), 1,584 (strong), 1,656, 1,728 (weak retrace – where we failed before) and 1,800. So expect good resistance at 1,584 and no more than a strong retrace of that run from 1,440 (if we're bullish) which is 144 so 29(ish) down to 1,555 (weak retrace) and 1,526 and we'll see how that goes:
In other words, our 5% Rule™ predicted a run to 1,584 and now the 200 dma is 1,587 so we're pretty confident taking a short up here with very tight stops over the line that risk a loss of $5 per point, per contract so let's say we call 1,580 the shorting line and 1,590 the stop (though I would add another short at 1,586 to average 1,583) so the risk would be losing 8 points over 1,590 ($40 per contract) and our pullback goal is 1,555, which is 25 points (from our initial entry) for a $125 per contract gain and possibly 1,526, for a total of $270 per contract at that level.
The reward potential, in this case, outweigh the risk so we make the play. Sometimes we are right and sometimes we are wrong but, since we can make 3-6 times more when we're right than we lose when we are wrong – we don't have to…
There is no trade deal.
That was easy!
8:30 Update: Oops, DISASTER! 
55 Miles, $1.4Bn.
Despite all the progress we're making in keeping out the tired, the poor and the huddled masses yearning to breathe free, Small Business Optimism contines to decline, especially in Future Expectations, which are down 10% since the last reading. That seems to be the general trend at the moment – people are content with the current conditions but they are worried that the country is going to Hell in a handbasket…
Steve Mnuchin to the rescue?
Now, there's nothing wrong with sending a tough negotiator to China but Lighthizer is more of an anti-China negotiator but even that may have a place if you have a highly skilled person keeping him in line but there's no indication that's the case with Mnuchin and, even if it were, it is complete folly for the markets to believe that this duo is going to be able to quickly resolve the many issues that the US and China are very far apart on in trade.
Low expectations.
Still, I would not go into today's end without hedges – just in case we have a repeat of last year and the great efforts to prop up the market end as soon as the President is done telling you how great things are. Trump also bitched about Government Regulations and said it was ridiculous that we were once able to build the Empire State Building in one year and now it takes 10 years to get a road built but 5 people died…
Well, we've made a bit of progress.
It costs real money to do these stiulus packages and it's money we're borrowing from the Future in order to what? in the present? Again, where's the beef in this economy that it can't stand even a little bit of price correction? 
America is barely working.
Asked by reporters to respond to Mr. Ross’s comments, Mr. Trump said that he had not heard….png)
Hold that line!
What an amazing first year!
If we were serious about Trade, we'd also be making concessions, not simply saying we'd stop doing something we only started doing so we could use it as a negotiating tool down the road – which is now. Even if China were that stupid (and they are not), Lighthizer didn't come all this way just to make a deal. His goal is the economic destruction of China and he…
As of this morning, the 50-day moving averages are:
Well, we're making no progress.
Don't even try to compare that to CSpan – it will make you cry. British Parliament is based on debate and consensus so any MP is a skilled orator – it's basically a job requirement. Most of our Congresspeople can't put two coherent sentences together without their entire staff working overtime to prep them and God forbid our Congresspeople get interrupted – that's game over for them but that's the entire game in the UK – a much better way to discuss the issues.
At the end of this week, we'll have gone a month without a Government.
We're right in the middle of Flu Season and 30 people are dead and 9,000 people are hospitalized but 
Well, we're right on track…
Well candy didn't work.
Pretty, pretty please?
Here we go again.
After a coup in 1973, the new Government in Chile declared a State of Emergency that lasted for 15 years and Myanmar declared one as recently as 2012, imposing emergency powers to segregate the Muslims leading to many "disappearances". Make no mistake, there is no "National Emergency" here, Trump is declaring an emergency to punish another branch of the Government for…
Well, we're still closed.
The much bigger deal this week is 
Could this be the last straw?
Though Trump is repeating those same economic mistakes, at least he hasn't done anything to stop the 
Only $84Bn?
That kind of madness internally means the markets can be moved on any sort of insane rumor because ANYTHING is possible. "Trump Declares War on Apple" is not a headline you would ignore because it MIGHT be true and, unfortunately, modern trading algorithms are trained to respond to headline news – on the assumption that thing that make the headlines of mainstream media are likely to be true. This is no longer the case as the MSM also doesn't know if something is too insane for Donald Trump or not.
Despite the surge in the Futures, we haven't gained a single green box since 
Nice bounce.
Wheeeee – what fun!
Merry F'ing Christmas!
Meadows still gets paid, 6,200 Federal Employees who work in his district will not. Even his fellow Republican Rep, Ryan Costello blasted Meadows for being a total ass. Unfortunately, Costello is a good man and has chosen not to seek re-election as he's an actual person trying to do what's best for the country and not some partisan hack who sucks up to the richest monster he can latch onto.
Wheeeee – such fun!
18 out of 22 people at dinner had IPhones and that's in a wealthy part of Florida but my ordinary town in NJ (middle to upper-middle class) is probably 80% IPhones as well. Now, I'm sure it's different somewhere in America because, nationally, IOS (Apple's operating system) is only on 50% of the phones in the country but, as of April, 
Will the Fed save us or doom us?
I'm not happy about it, this means the damage is worse than expected already and the Fed really shouldn't be tightening this afternoon but they kind of have to tighten as rates are still…
A World without Trump!
What's it going to take to stop the bleeding?
Are the dip buyers still out there?
Meanwhile, both 
Wheeeee – what a ride!
Why does the Fed not want inflation? Because you take a fixed loan on your home of, for example, $250,000 and put down a $50,000 deposit and, at 4.5%, you pay $1,266.71/month (not including taxes, insurance, etc) for 360 months which works out to $458,933 (plus your $50,000 deposit) paid out on your $300,000 home. The problem the Banksters have, however, is that the last $1,266.71 you pay them isn't worth as much as the first $1,266.71 you paid them due to inflation so they want inflation to be as low as possible to maximize your effective payments. THAT is what the Fed is concerned about.
DOOM!!!
We're still in technical trouble.
Trump has named China hard-liner, Robert Lighthizer, to head up the negotiations
Donald Trump will save us.
Opponents—including generic drugmakers, insurers and the influential AARP advocacy group for older Americans—say the deal would make it harder to ease those rules in the U.S. and restrict competition regionally. The Association for Affordable Medicines coalition wrote to U.S. Trade…
Wow, what a comeback!
Rather than focusing on "still low by historical standards" the media chose to focus on the much vaguer "just below the broad range of estimates" which shows a complete lack of understanding of what a range is – whether intentional or otherwise. Fortunately, we know exactly what range Powell is talking about as it's the Fed's famous "Dot Plot" that shows exactly what the range for rate expections is among the 12 Fed Governors.
Well, we flipped the NYSE's weak bounce line green at 12,150.
And it's not just the NYSE, the Russell has already crossed and the Nasdaq will cross early next week and the S&P will cross within two weeks and the Dow MIGHT avoid a death cross, but only if it gets back over 25,000 and stays there. This morning, the 
Does he do it on purpose?
Trump has done NOTHING for jobs and, in fact, Trump's first 22 months in office created just 4.1M jobs while Obama's last 22 months in office created 4.8M jobs – Trump inherited a triple and turned it into a double and, at this pace, it will dribble out into a weak single.
The good news this morning is progress on Brexit, hopes that the US and China can make trade progress at the G20 and oil has finally stopped falling at $50 – so the energy sector is having a bit of a relief rally. Also, border patrol agents seem to have saved us from that deadly migrant caravan by 
I had predicted way back on Jan 25th that 2018 was going to be a stock picker's market
Down and down we go.
Back in October, we looked at the "30 Risks to Markets in 2018" and that is why we expected the correction and those risks are still out there for the most part but now many of them are REALIZED by investors – so they are less likely to cause panic selling when they bubble up in the news cycle and that means we MIGHT stablize here – down 10%, but I'd still feel a lot better about buying if we weak bounce here and continue on to a full 20% correction.
40%!
In other words, I don't think many of Facebook's 3.6Bn users are going to delete their accounts over privacy issues, election hacking or whatever until there's a better place to share pictures of their puppies and children. Likewise, my kids couldn't even contemplate life without Instagram and they have no idea its owned by Facebook and people in Europe aren't going to drop WhatsApp and start paying for their phone calls (much as the telcos who fund the political and media attacks would like them to).
When at first you don't succeed…
As you can see from the chart above, a massive effort was made just a month ago to rescue the market and, since then, we've drifted along but still haven't filled the gap that occured in October that took the market down 15% and even that is just 1/2 of the overall 30% decline since January.
Well, you can't say we didn't see this coming.
We're still 
It's not even possible for the BOJ to…
Oh what a beautiful morning!
Usually something like that in an attorney's past would immediately derail any chance they had of becomming the Attorney General of the United States of America but this is the Trump Administration…
Is this guy delusional or what?
It's election day.
Oct 19th was options expiration day and we opened at 2,775.66, ran up to 2,797.77 and closed at 2,767.78 so we could have another interesting day ahead of us – especially with the Non-Farm Payroll Report coming out at 8:30 to povide us with real data that might move the market. Our last Non-Farm Payroll Report was on October 5th, when the S&P opened at 2,902.54, up a little from the previous days close despite a big miss in payrolls but we finished that day down 7 at 2,885.57 and we WISH we were less than 120 points (5%) away from that this morning.
This is the worst part of my job because I have to be like the parents telling the kids not too eat too much…
Wheeeee!
/2014%2F10%2F09%2Fa6%2FIBMWatsonTh.b999f.jpg)
It's also a brave and confident move by IBM CEO Ginny Rometty and it's the kind of thing woman CEOs do that men almost certainly would not, which is make a move that carries a lot of personal risk for them, has no immediate payback but paves the way for the company to be much healthier in the distant future. It's a nurturing move and the question now is whether she will be tarred and feathered for making it but predominantly male investors and analysts.
Wheeeeeee!!!
Wheeeeeee!
We're back!
Wheeeee!!!!
Not much going on.
When Congress does come back, they'll actually be working to avoid a Government shut-down as Trump's prolific spending has already broken the very generous debt ceiling and another cut would surely shatter it beyond repair. Rule #1 of government is that you don't run up deficits in a strong economy – 
Well, we made some progress.
Yesterday morning I warned you not to be fooled by a "dead cat bounce" and we promptly fell off a cliff and lost a lot of our gains. Fortunately, 
Schrodinger's Market.
That's why we have the 2-day rule, you have to let the various cross-currents play out before you can say you are really recovering. Take the Shanghai Composite, for example. China's market looked like it was bouncing in 2015 but went lower and then made another protracted bounce that collapsed early this year and now it turns out we've been consolidating for a move lower for 3 years.
Crazy!
The turmoil continues.
Don't be fooled by weak bounces.
EU authorities are expected to declare Italy in violation of the bloc’s rules on fiscal discipline unless Rome changes course. Leaders of the League and 5 Star have defiantly denounced EU officials, raising the specter of a monthslong confrontation. Last Friday, the EU’s executive arm criticized Italy’s budget plans, saying they represent a “significant deviation” from recommended fiscal policies. Skeptical investors have dumped Italian bonds and stocks, especially banking-sector shares. The yield on Italy’s benchmark 10-year bonds touched a four-year high of 3.7% on Tuesday.
Wheeeee!
Global Groth is still 3.7%, which is not bad but it's worse than the 3.9% forecast they had just 3 months ago and, since trade tensions are getting worse and since Trump is still threatening to ratched tarriffs up from the current $110Bn to $500Bn – we can expect the IMF to downgrade the growth forecasts another couple of times down the road. Will this also shock and surprise traders?
Problems, 
Look, I know you don't want to hear this stuff on a Monday morning but we are talking about a major global crisis and WE ARE MAKING IT WORSE, not better, not even the same, because we have "leaders" who are not only ignoring the problem but ACTIVELY working…
Do you want $1,000?
Will the 2nd time be a charm?
As you can see from the chart above, 30 on the CAPE index has popped every bubble since 1903 except…
Well, that's a big "I told you so!"
What's even worse is that Trump's budget projections expect 4% GDP Growth and if we fall 2% shy that's $400Bn less growth than anticipated and Trillions of additional Dollars will compile into our debt if the Government fails to hit their collection targets – which we all knew was based on a ridiculous trickle-down fantasy in the first place – we just didn't expect it to all fall apart so soon.
It's rate hike time!
And we're back!
Insight/2018/09.2018/09.21.2018_EI/Percentage%20of%20Companies%20Issuing%20Negative%20EPS%20Guidance.png?t=1537864669380&width=910&name=Percentage%20of%20Companies%20Issuing%20Negative%20EPS%20Guidance.png)
Though our Fed has begun to somewhat unwind their QE program, the rest of the World's QE is only just now hitting its peak, so of course the markets are at record highs when there are record amounts of money chasing equities but this (2018) should mark the end of the Global Liquidity Boom and now comes the reduction – a slow and painful process that will be with us for years as the Central Banksters race to drain the monetary swamp before all those Dollars lying around begin to turn inflationary.
Move along folks, nothing to see here.
Analysts caution that while investors have been pricing the risk of a trade war into shares of manufacturers, mining firms, home builders and others, they mostly have ignored the glaring risks associated with major tech companies, 
China turned around this morning.
Harmless trade war?
Dimon is not going to say what happens in China has no effect but he's mimizing the impact and misleading traders by using the 10% figure that costs $20Bn but that 10% tariff escalates to 25% at the end of the year ($50Bn) and then Trump plans to double the number of goods that are taxed ($100Bn) so a smart reporter would ask Dimon – does $100Bn matter then?
As was the case in the late 1920s, the markets are shaking off all the signs of a pending Global catastrophe and continuing to move higher, albeit on the lowest volumes we've seen this century. You can see the "smart money" moving out of the market – even as it continues to make new highs but there are plenty of suckers still out….jpg)
In 
Gee, who could have seen this coming?
Unfortunately, Trump has not learned or doesn't want to learn from Nixon's great mistake which is: Don't get into trade wars with people you depend on and with Nixon it was OPEC and oil while Trump doesn't…
The Dow is up 116 points as of 8am.
Obviously, that's not happening but let's say that $666Bn of deficit was unavoidable and Trump spent just $333Bn extra Dollars to create jobs (wasn't that the point?). Well, at $333Bn/2.4M it turns out Trump is spending $138,750 per job created and, as noted above, they are not really being created – we're just keeping pace with the population growth of 0.8%.
Wheee – this is fun!
September, of course, closes out the 3rd quarter and we have a Fed meeting on the 26th where the Fed is very, very likely to hike rates. As you can see on this chart, the Fed is still a hike below the average prediction of 2.25% by the end of the year and next year, the target is more like 3.25% so there's a lot of hiking ahead of us – usually not great for the market.
$200Bn more in tariffs.
We've gotta hold those highs, right?
Up and up she goes!
.jpg)
THOSE are the kind…
Wow, just wow!
Without getting into the whole "fair value of the S&P" which we do when we are setting our major Must Hold Levels, what has really changed since 2015? Well mostly we have higher wages, a stronger GDP, lower unemployment and much lower taxes – mostly good things for the bottom line of S&P 500 companies. Good but not so good they should be trading at 35x Cash Flow…
Another record high!
Despite this morning's 2.5% rally, China's Shanghai Composite still has a long way to go before recovering, after falling 25% from 492 to 379 since topping out in January. It will take 5% just to make a weak bounce off that so 390 will be the line to watch and then 410 would be a real recovery at the strong bounce line.
The WSJ says: "
President Trump is complaining that Twitter, Facebook and others are cracking down on Russian Hackers, White Nationalists, Hate Mongers and Bots which spread Fake News in Social Media (often from Russian Troll Farms). It may be difficult for Republican Congresspeople to get elected without all the fake news and fake supporters and, of course, it's a fantastic distraction as the real news flow is turning towards articles of impeachment as more and more of Trump's inner circle is convicted or "flips" on him – 
"
Sadly, I had to insert "(TRUMP's)" in that quote because SOME people in this country are so brainwashed that they don't even know Trump is weak or that he's already expended all of his political capital and may be taken out of the oval office in handcuffs in the near future and they actually believe it's possible that Trump is the one negotiating from strength. It's amazing, but it's true!
3,500 days.
What a week it has been.
I know, so complicated, right? How will you ever learn the jargon? Well, I would think our results would motivated you as those Gasoline contracts made a quick $1,000 each at $2.02 (and back to $2.05 this morning for another $1,260 per contract since) while Oil Futures (
Trade War – so what?
Yet traders seem perfectly happy to ignore the multiple elephants in the room as we party like it's 1999 and now we'll see if last week's dip was the start of a correction or yet another pullback we bounce right back from. Bounce lines to watch are:
The Ruble crashed yesterday and Medvedev said this morning that Moscow would consider it a "declaration of economic war" and would retaliate "economically, politically, or, if needed, by other means" if the United States imposes bans on Russian banks or their use of a particular currency. While he did not go into detail, Medvedev's reference to "other means" appeared to have been aimed to raise the prospect that Russia could respond with military force or some other form of warfare, such as a cyberattack or even more nerve gas.
We're not there yet but if the Chinese Government declares it "unpatriotic" to buy American goods – our exports to China can ground to a very quick halt. China can also hit us where it hurts on Rare Earth Materials, which China makes 90% of for the Planet Earth, not because they are actually rare but because 
Up and up we go.
The real question is, why is nobody trading? I know I'm on vacation and a lot of our Members are on vacation but surely, we can't be the only ones trading the market, can we? Well, considering this volume, maybe we are! Also interesting yesterday was a strong uptick in VIX volume, as well as VIX options, where call volume outpaced puts by 6.5 to 1.
It's vacation time!
Wages.
More tariffs?
That means, for example, the 250-point drop on the Dow (
At the time, the chart on the Russell looked like this. I know it's confusing because we only TELL you what is going to happen and how to make money on it but, when you look back at the trade ideas, you can't believe we didn't have today's chart yesterday, since the market does EXACTLY what we tell you it's going to do. Pretty cool, right?
$2,300!
The Dow fell back to 25,300 for 
Our Federal Reserve prefers to buy US Treasury notes, about $2.4Tn of those. Isn't it great how easily we can throw TRILLION around? As if it's not a big deal….
That's right, 
Yesterday's Durable Goods Report was a big miss, increasing just 1% vs 3.2% expected and, excluding Transportation (Boeing is a huge variable), it was only up 0.4%. May was -0.3% and April was -1% and that's the quarter so the economic strength, assuming we are getting it, is not coming from things that will last and it's not coming from housing and it's not coming from commercial development – it will be interesting to see where the GDP number does come from.
Wheeee, this is fun!
So all we did during yesterday's Live Trading Webinar was follow-through on our plan to short the Nasdaq around 7,500 from Tuesday Morning's Report, where we analyzed the top Nasdaq components and…
MADNESS!
All this FABULOUS news was already baked in however as companies are only beating expectation by an average of 4.5%, vs 5.6% last year and revenues are only 1.4% ahead of expectations. Analysts are, in fact, LOWERING their Q3 expectations on companies that have reported, especially in the Non-Finanical, Non-Tech sectors (Energy, Industrials, Consumer Discretionary, Health Care, Utilities, Consumer Staples, and Real Estate).
These Monster Companies, just like .jpg)
Oh Trump, you crazy bastard!
$505 Billion!
As you can see from this WSJ chart, despite all the bluster, not much has actually happened so far but thank God for that as just the $50Bn that's already been enacted is causing disruptions in Corporate Earnings and Economic Outlook – there's no question in rational people's minds that actually enacting $250Bn worth of tariffs, let alone $505Bn, would be devastating for the Global Economy and yes, deplorables, the Global Economy INCLUDES America!
I love it when a plan comes together.
.jpg)
Wheeeee!
President Trump is meeting his handler this morning.
21%.
As I was saying, as an investor, you are getting your $25 worth from an earnings perspective as it's still 20x earnings but, consider that last year, this company had $4Bn in cash on the $20Bn valuation (or cash and no debt) and now it does not. Wasn't the OPPORTUNITY to use that $4Bn to grow the business part of what made the company worth 20x earnings in the first place. Now that opportunity is lost and the company is what it is at $25/share with MUCH LESS possibility of growth down the road as it WASTED 25% of it's market cap buying back it's own stock!
88 to 11.
The NATO talks have been well summed up in this one image of Trump looking in the opposite direction of everyone else in the photo 
None of the above as it turns out it was simply the President, already bored with meeting with his former allies, was looking forward to heading off to…
66.6 Thousand.
It's Monday so we must be up in the Futures, right?
Well, Trump has started World War III.
2,728 once again!
The Chinese markets, of course, are falling off a cliff, like they did in 2015, when our markets also ignored them, until 3 months later, when the S&P dropped 12% from 2,100 to 1,850. Maybe this time will be different – maybe China doesn't matter, maybe Trade Wars can be won, maybe Trump is a genius and his policies will all work – even though they seem more like they are going to bankrupt us at the momnet. Hope can spring eternal but that doesn't make me want to bet on it!
In fact, speaking of manipulation, you can see from the EIA Report last week that these bastards EXPORTED 3,088,000 barrels of Refined Products (gasoline) PER DAY last week – effectively stealing 21.6 MILLION barrels from Americans and creating an artificial shortage in this country to drive up prices – WHERE IS TRUMP ON THAT???
Trade Wars are heating up!
Imagine how embarassing it is when your elected leader goes off on factless tirades launching baseless accusations at supposed allies and engaging in policies that are nothing but detrimental to the Global Economy… We are used to having Presidents who stayed awake in school or at least learned something about the World along the way to the Presidency – being governed by effectively a selfish, clueless 5 year-old is a new experience for all of us. Too bad it has real-life repercussions.
Wheeee! That was exciting!
According to the Financial Times
First of all – 
Now what has President Trump done?
Did you manage to make it through that without laughing? Well, that's the situation we have now, unchecked power in the hands of Donald Trump and today he's using it to suspend due process. Of course, it's only being used against immigrants at the moment but that's kind of the point of that famous poem by Pastor Niemoller about the Holocost:
.jpg)
The Dow is down 1% for the year so up 1% (250 points to 24,750) is also very important to make. Meanwhile, as you can see from the chart above, the Nasdaq is still up 12% for the year – though we made a lovely $5,535 on Wednesday's short position (
Coming back or just bouncing?
Seriously people, let's step back for a second to consider that CHINA has just accused the US of BLACKMAIL and of violating International Laws and undermining diplomacy – all in one paragraph! President Trump is undoing 70 years of hard-faught diplomatic steps that have given us 70 years of relative peace and prosperity. Who actually benefits from Trump single-handedly upending the World Order?
As you know, 
It's Fed day!
I remember working in the late 70s and early 80s when it was downright insulting if you didn't get a 5% annual raise just for doing your job 10% was fairly normal for doing a good job and when you took a job that started at $25,000, you fully expected to be making $50,000 in less than 5 years. That seems like a fantasy these days as it's been decades since the workers have been given a fair share of the profits.
This is good news.
Meanwhile, the Amazon (AMZN) and Apple (AAPL) driven Nasdaq is up 30 points (0.42%) since last Wedneday and we're back at our shorting line at 7,200 on the 
Thank goodness!
Crypto currencies are also having a doomsday as BitCoin falls below $7,000 as a South Korean Coin Excahange was hacked over the weekend. See, this is why we have BANKS and Government-backed currencies – there's a massive system in place that insures against loss and theft of your US Dollars. We put that in place after years of the exact kind of random losses, robberies and devaluations associated with old monetary systems. Crypto currencies are sure making things great again – for bank robbers!
The consequences of the U.S. driving away allies, even if it wins short-term trade concessions, could do lasting damage to the strength of America’s coalition (see "