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Toppy Tuesday – Markets Bounce Back Ahead of the Fed
And we're back!
The Dow is up 75 points pre-market, back at 26,700 and the Nasdaq is testing the 7,600 line, which will certainly be bullish if they break over it but, until then, I like /NQ as a short with tight stops above. We also re-shorted Oil (/CL) Futures at $72.50 this morning – also with tight stops above as it sets a nice, positive risk/reward ratio to do so. We made $500 shorting /CL yesterday on an 0.50 drop and about the same on Gasoline (/RB) as it fell so no reason not to give them another chance to make us money, right?
Trade Wars are not good for oil demand and 74 out of 98 S&P Companies that have issued Q3 guidance so far have isssued negative guidance and that's already the worst rate since Q1 of 2016 when the S&P fell 15% from 2,100 to 1,800 as earnings rolled over. It's still early in the cycle but negatives outpacing positives 3:1 is certainly something we should be taking note of. Or, we can add it to the ever-growing list of negatives that investors are ignoring in this rally…
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)
Keep in mind that figure is WITH all the buybacks and WITH all the M&A activity and WITH the still-low interest rates and WITH what is still $60Bn/month in QE, though that may change on Wednesday if the Fed begins to pull back – as it has said it was planning to do.
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.
This is the greater market picture you need to be concerned with – it's the macro that will be driving the market…
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, 
$1,140,516!
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!
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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.
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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:
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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 "
WOW!!!!
I suppose if we're going to learn to accept valuations in the Trillions, we should start thinking about Corporations more like countries or maybe we should just start trading countries – it's a work in progress – anyone want to go long on North Korea at $17.4Bn? With 25M people, that's just $696 per person – seems like a bargain compared to South Korea, which is "valued" at $1.7Tn for just 50M people so $34,000 per person's share. Life is good below the 38th Parallel!
Good morning HomeSec!
And we're already being Trumped for questioning this massive attack on freedom of the press as the 
How many jobs were created in May?
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We had a lot of fun yesterday with our index shorts. In yesterday's PSW Morning…
Meanwhile, it only takes 10 companies to make up 20% of the S&P 500 with Apple (AAPL) coming in at 4.1% these days. Apple has boosted the Tech Sector to the top of the S&P with 26% of the market cap, followed by Financials at 15%, Health Care at 14%, Consumer Discretionary 13% and Industrials at 10%. The Energy Sector, which once led the index, has fallen to just 6% of the S&P's market capitalization.
At this point, it's very possible that the 5-Star Coalition that controls the biggest voting block in Government will seek to impeach Mattarella and, if that happens, we go from unstable right to the point where the hero is usually sweating over the nuclear bomb with a pair of pliers debating which wire to cut.
Yesterday the market blasted higher on the release of the Fed Minutes, which didn't really say much other than the addition of the word "symmetric" but it was used in regards to INFLATION, not rates. 
Don't say I didn't tell you so…
As earnings season begins to wind down, we're seeing analysts projecting that the 20% pop in earnings caused by the Trump Tax Cuts for Corporations will somehow happen again next year (it is certainly possible that, if the GOP keeps the House and Senate, they may pass another round of cuts for the Top 1% – crazy as that may seem). Edward Yardeni of Yardeni research asks "
Same old, same old…
WTF?
We're thrilled to have a nice little pullback and we even bought a couple of stocks yesterday but, on the whole, we're even more thrilled to be mainly in CASH!!! during this period of market uncertainty. 
The market is so predictable.
The Dow is also having fun around it's own 20% line but, in this case, it's been unable to get over the line (25,200). 26,250 is the 25% line and that's 1,050 away but we'll call it 1,000 so we can call the bounce lines 200 points and that makes our up and down range from 25,200: 24,800, 25,000, 25,400 and 25,600 so we can chart that like this:
Speaking of reversing: .jpg)
What a week it has been!
I don't want to get to excited but:
Having 15 drinks in front of…
Former President Barack Obama, who rarely comments on his successor, 
If most companies were doing that, I'd be very unhappy as it's often a waste to buy back your own stock but Apple just repatriated $250Bn in cash from overseas and, frankly, they have nothing better to do with their…
Other analysts blasted TSLA as well:
What is fake news?
Europe is closed, Asia is closed.
$134 BILLION!
I didn't make this up – :format(jpeg):mode_rgb():quality(40)/discogs-images/R-9199284-1484689008-8476.png.jpg)
Wow, what a day!
Here come those tears again
Central bankers sounded the alert that a trade war would leave them worrying more about the economic fallout than any boost tariffs would give to inflation. Colombia’s central bank president said a trade war would be "catastrophic," his Paraguayan peer said it would be "bad for everyone," while Japan’s chief described protectionism as "very undesirable." Across the board, 2019 growth forecasts are moving lower while debt is getting quickly out of control.
I am now a Donald Trump fan!
Here we are again!
Wheeee!
As you can see, $67.45 turned out to be the dead to – perhaps BECAUSE we called it but we'll take the win either way and we'll certainly take the $1,560 profit! This morning we stopped out back over $66.50 but we're happy to go back short on 
He's at it again
“The most important thing about a U.S. strike is the potential for Russian casualties as a result of any military activity there,” said Ayham Kamel, head of Middle East and North Africa research at Eurasia Group. “That is where there’s a risk of an escalatory cycle that would be much more meaningful than attacking Assad’s forces.” In March, Valery Gerasimov, chief of Russia’s General Staff, already warned the US that “in the event a threat arises to the lives of our servicemen, the Armed Forces of Russia will take retaliatory measures…
If Trump is smart (debateable), he'll thank Xi and move on – WITHOUT declaring victory. Only by stressing cooperation can we back off the cliff of this Trade War but, of course, the cooperation Xi envisions is essentially Globalization – the very thing the Trump Administration and their…
Don't get fooled by a bounce.
Holy cow!
That was our only official play of the day but it was good for profits of $3,000 per contract so, no need for more, right? We knew 6,650 was going to be resistance (between our weak and strong bounces) and, of course, we also knew Trump was going to continue to attack Amazon (AMZN) and that casts a shadow on the whole tech sector because – if the President of the US can harrass one tech company – what's to stop him from going after others and, with that precident set – what's to stop every World Leader from going after their political business enemies like Trump does?
Tariffs!
“Only polite to reciprocate” is unusually dark and direct. Unlike the U.S. president, who salts his speech with off-the-cuff remarks about foreign policy, Chinese officials don’t usually digress with clever comments. Trump has undone years of hard-fought civility in discourse that was meant to avoid exactly the kind of economic catastrophe he is now causing.
Wheee – what fun!
Well, we survived the Space Debris at least.
Down 1,000 points isn't so bad.
Wheeeeeee, this is fun!
We'll see what sticks into the weekend but patience is the key on that trade as the Saudis are pulling out all the stops to keep the price of oil high as they continue to…
Down 6.9% for the month!
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Until then, we have plenty of longs and plenty of hedges so we just sit back and watch and wait. The US and European markets are closed next Friday (my Birthday, actually Thurs but it's celbrated on Friday this year) and Easter is Sunday and that Monday will be slow and that whole week will be slow, as will the weak before (next week) so not the best time to determine what levels are holding up but a great time to take a break!
What an exciting day.
Meanwhile, as we expected, the market was not too thrilled about the Fed hiking rates and we made some big money in yesterday's Live Trading Webinar (
Yawn, are we there yet?
Oops, he did it again.
Not just a weak week but a weak 45 days since February.
And, of course, they are not buying every stock, mostly their own so it's those big, Top 1% Corporations, 90 of the 9,000 listed companies – the ones who were given $1.5Tn worth of tax breaks by the Trump Administration – that are bringing back the cash they hid overseas to avoid paying taxes under Obama (at no penalty) – and are using it to buy back their own stock to mask the fact that earings are not actually improving by reducing the number of shares those earnings are divided by.
THEN things got really crazy (not Trump crazy, but crazy for normal people) as 
Notice that Russia employs the "Fake News" meme to deflect any facts they don't like – something they train all their operatives to do these days. According to Russia "Crooked UK" is up to their old tricks and we should ignore the poisoning and focus on the investigation – which can't possibly be unbiased if it finds Russia colluded with operatives to kill people on British soil.
Meahwhile, the GDP estimates are in free-fall and no one seems to notice, no one seems to care as the Atlanta Fed has taken their ridiculously optimistic GDP Now forecast down from 5%, which rallied the markets…
Overnight, we lost the “adult in the room”, Gary “Moe” Cohn, as he quit the White House rather than pretend he was in favor of the trade tariffs. I’m sure Cohns everywhere are breathing a sigh of relief that their names won’t go down in history next to Smoots and Hawleys in the annals of poor economic decisions. Speaking of anals – Stormy Daniels is suing Trump – just had to mention that! Meanwhile, in referring to the 1930 Tariff Act, I noticed the full name of the Act was:
Trump wins!
President Trump for life!
Angela Merkel is not a dictator but she just spent the last 6 months since the election forging an alliance that lets her extend here 12-year reign for another term at the head of Germany and de-facto head of Europe. Putin has been in office 5 years longer than her and Xi came to power in 2012 – so he has a long way to go if he wants to match his other Democratically elected peers as the…
Wheeeee!
Wheeee!
As we expected, our Short-Term Portfolio, which was $116,777.50 yesterday morning, jumped to $123,397.50 for a gain of $6,620 as our DIA June $255 puts moved back into the money and SQQQ climbed back over $15 but those trades "only" provide $100,000 and $40,000 worth of protection, respecitively, so it's time to consider the next layer of hedges – just in case this drop doesn't stop at the previous lows.
Wheeee, that was fun!
Best of all, our Long-Term Portfolio finished the day at $551,871 (up 10.4%) which is up $1,008 (0.2%) on a bad day – so we know we're doing something right there while our Short-Term Portfolio, which hedges the LTP, did it's job and gained $6,600 (6.6%) on the market drop so, as we intended, we're very well-hedged for the coming market chop into the month's end. It is ALL about balance in an uncertain market!
Powell speaks!
What we're expecting to hear from Powell is whether the Fed is more worried about overshooting (too loose) or undershooting (too tight) their 2% inflation target (just right) and the nuance will be whether Powell indicates concern about the recent bump in inflation – especially ahead of Thursday's PCE numbers, which are expected to come in hot, around 0.4%, which would pop the Fed's chart from 113.9 to 114.3 and that would be up 2.1% for the year – magic time!
What a fun market this is!
Last time I was on Benzinga, we talked about 
Wheeee, this is fun!
This morning, in an effort to spin the reaction to the Minutes (
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As you can see, we already had 
Is overbought the right price now?
You're welcome
Happy Valentine's Day!
The new budget is here!
But guess what happens when a city is flooded? SALES!!! Paint, hardware, carpets, furniture, Government clean-up contracts worth Billions of Dollars to Trump's donors. Isn't that better than spending Millions to prevent the disaster from happening in the first place?
We're up 300 more points!
Good golly, what a mess!
As long as 2,596 holds, we're willing to have a long on the S&P Futures (
Now this is what I call trading!
Wheeeee, what a ride!
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I love to say "I told you so" – it means I got something right.
Better late than never.
FYI, Wednesday's post was rejected by Seeking Alpha because: "
Wheeee, what a ride!
Finally!
While we can't count on Corporations to spend the cash they bring back in, we can expect the massive stock buyback trend to continue. As you can see from Credit Suisse's chart, the only real buyer of US equities for the past 10 years has been the Corporations themselves – who have engaged in MASSIVE buy-back programs that have lowered the share count of US equites by 20% which has therefore inflated the earnings per share by 20% by simply reducing the number of shares those earnings are divided by.
Can we really go higher?
How low can we go?
Solar-industry leaders said tariffs will slow growth in solar-panel installations and the jobs they create, which are more plentiful than in solar-cell manufacturing, a relatively small industry in the U.S.
Government shudown!
Meanwhile, the last time the markets were this bullish was 1987 and we begain that year with a rally from S&P 250 to S&P 335 in August and then back to 200 (-40%) in October – so a hell of a fun ride that time! More recently though, we were also very enthusiastic in 2015 and there we topped out, also in August, at 2,200 on the S&P and we only fell to 1,850 (-16%) into 2016 so maybe this rally can last into the summer but, if it does, it will be the most overbought, overconfident market ever measured – much healthier to have a small correction now.
Wow, what a week!