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PHIL IN THE MEDIA

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Phil: well, often you say, just for FUN, great comment, TXS, closed 2 SKF positions, one with 10 % , the other with 6 % gain.

RMM

Thanks to Phil (again) for the lessons on the art of the roll, selling premium and hanging tight under fire (particularly in the first hour of trading-MADNESS). Watching you manage the $25KP has really helped my trading in a big way.

Oknoman

Oknoman

I must add yet another paen to Phil’s “cash and short” call, as my TZA shorts are past paying for Similac and Pampers and have now covered all doctors and Mt. Sinai hospital bills for young Charlotte, as TZA took the portfolio up 10%.

Zeroxzero

That was a quick double on the DIA calls. trailing stop in place.

Kwan

Kwan

Hey Phil, Your HOV suggestion about 3 months ago basically paid for my Philstockworld subscription for years to come. My average cost is about $1.

Ether

Thanks again Phil and Successful Trading to all.

Verreaul

I love volatile days like this when you can make a bunch of money on these big swings. As long as you have Phil on your side calling the bottoms and the tops of course.

craigsa620

craigsa620

Phil, 26% on the week for the 20% I day.

trad

trad

Phil, 26% on the week for the 20% I day-trade, and since drinking the kool-aid last fall, the whole portfolio has doubled. Have a great weekend !!

JRW III

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Friday Market Follies – Flirting with 3,000 into the Weekend

October 18, 2019

Here we are again.

The S&P 500 is back to 3,000, the Dow 27,000, Nasdaq 7,950 and Russell 1,550 so all is well(ish) for the moment. Earnings have been, so far, on track for most of our early reporting companies but notable misses from big companies like AA, GS, UNP and ERIC have kept investors slightly concerned while the economic reports have generally been trending down.

We'll see the Leading Economic Indicators Report at 10am but it doesn't really matter as we have Kaplan at 9, George and Kaplan at 10, Kashkari at 10:30, Clarida at 11:30 and Kaplan again at 5pm so whatever message Kaplan is selling is one the Fed is looking to make sure is repeated over and over again.

I'm not sure what they are doing with Kaplan as his 9am is supposedly in Washington, DC while his 10am is scheduled for Denver but he's an economist, not a physicist – so he probably doesn't know that's not physically possible… On Wednesday, Kaplan said the Fed was "actively debating issuing a digital currency" so BitCoin fans may want to pay attention to his speeches as well.

Kaplan also "admitted" what I've maintained for years – that the Fed's ZIRP policy is a reaction to the US Government's $23 TRILLION in debt because each 1% of interest paid on bonds now translates to $230Bn out of the Government's budget. Kaplan also noted: “People around the world are working real hard to try to find alternatives to dollars and dollar infrastructure because the more they’re invested in that, the more susceptible they are to sanctions, tariffs and what’s going on right now.”

In other words, Trump's erratic behavior is now threatening the Dollar's role as the World's reserve currency – Putin couldn't have done more damage to our country if he had bombed us than Trump has done – and this mess can't be cleaned up easily. Losing our status as the World's reserve currency could put us just a step or two away from bankruptcy – just like companies with too much debt that get downgraded are thrown into chaos.

IN PROGRESS

Will We Hold It Wednesday – Dow 27,000, S&P 3,000 Edition

October 16, 2019

Doesn't this seem to happen a lot?

We get right up to these critical levels on happy talk over Trade and the Fed and Earnings but then, just as the Media is telling us how great things are and what a fool you are for not chasing the market – it all falls apart – again. To a large extent, it's because the indexes (and the individual components that make them up) are already priced for a perfect outcome.

When you pay 30 times earnings for a stock, you are getting an effective return of 3.3% and there is, of course, the risk that something bad might happen over the time you hold the stock, causing it to go down, not up.

A 30-year note yeilds 2.2% and has, theoretically no risk – though the real risk is you are locked into the low-rate note while inflation rises faster than your note or that newer notes start giving a better return than your note – causing the present value of your note to go lower. That would not effect your 2.2% reuturns but it would make it almost impossible to sell your note to someone else without steeply discounting it.

Still, the "risk-free" rate of return is 2.2% while a 30x stock is giving you 3.3% but should just 1 out of 3 of your stocks fail to go up this year, your rate of return drops to 2.2% anyway. That means you have to be right 66% of the time with your 30x picks just to keep up with TBills. We are able to do that using options since Being the House gives us an inherent advantage but people buying straight stocks at these prices barely stand a chance.

IN PROGRESS

Testy Tuesday – S&P Tests 3,000 (again) on Strong Bank Earnings

October 15, 2019

Why are we in cash?

Certainly it starts to feel like we're missing out as the indexes rally back near their highs but this is where we got off in mid-September and here we are, a month later, not quite back to where we were when we cashed out. Some of the uncertainty is out of the way now – it looks like we will have a trade deal with China, no one seems to care that Trump is being impeached (no on trading), Brexit is likely to have no deal but will happen anyway and Bank Earnings, at least so far, aren't so bad-looking.

Of course I'd like to see more than one day of earnings before jumping back in but what really bothers me is that ALL these positive things happened and we're still struggling to get back to 3,000 on the S&P 500. Even Apple (AAPL) has been leading us again. blasting back to $236 yesterday – up 20% since early August. With all this "great" stuff going on – why is the broad index only back at 3,000? Something is not right and, until we can see what that is – CASH!!! is still safer than equities.

Of course we are picking up some bargains: Just last Friday, we added Freeport McMorRan (FCX) to our Short-Term Portfolio in the Morning Report and that spread, with a target of $10, is already on track as FCX blasted 0.50 higher so far.

Earnings season should give us plenty of opportunities to pick up cheap stocks as traders panic out of positions but it's too early in the cycle to start guessing which way they will go – even the banks presented a mixed bag this morning

IN PROGRESS

Monday Market Movement – Still Not Really a Trade Deal?

October 14, 2019

Happy Indigenous People's Day!

China is already warning that there is no substantial trade deal and, in an opinion piece entitled “Let’s nail down ‘phase one’ before moving to the next,” the official Chinese state-owned English newspaper pointed fingers at the Trump administration’s unpredictability when it comes to foreign policy. According to China Daily:

“As based on its past practice, there is always the possibility that Washington may decide to cancel the deal if it thinks that doing so will better serve its interests, the US should avoid backpedaling, as it has in the past, and instead cherish what has been achieved as a manifestation of a healthy and steady China-US relationship that serves the interests of both countries and the world.”

China received scant relief from U.S. tariff pressure in the accord other than the waiving of a small increase in duties that had been scheduled for this week, a far cry from the complete removal of extra duties that had been their previous negotiating position. In return though, China hasn’t had to give much away other than vague commitments on its currency and intellectual property-practices, plus the purchase of agricultural commodities that it needs anyway.

Meanwhile, with a pause in the Trade War in the works, President Xi has turned his attention back to Hong Kong and warned over the weekend that "Any Attempt To Divide China Will End In "Shattered Bones" and the police have come down harder on protesters who have, in turn, stepped up the violence with a pipe bomb being used for the first time this weekend and, once again this morning, protesters have shut down the airport.

IN PROGRESS

Fabulous Friday Finish – Trump Saves the Day?

October 11, 2019

That's right, we're now expecting Trump to fix everything.

Well, at least fix trade and the markets are up another 1% this morning, now having recovered the vast majority of last week's drop in aniticipation of a Trade Deal with China (which is not going to happen) and Fed Rate Cuts (which certainly won't happen if we get a Trade Deal with China) and, of course, because the Global Economy is great and can only get better so why worry about paying all-time highs for stocks who are literally warning you that Q4 will have some "challenges"?

Of course, we're still in a situation where there's really nothing else to do with your money other than put it in US Equities. Bonds take your money, Banks take your money, Real Estate is still dicey, Bitcoin is hardly even a thing anymore, Oil has been decaying – not much left other than equities so we hold our noses and invest. Well, WE don't – we cashed out last month but that is what people seem to be doing. We're going to wait to see this round of earnings reports and guidance before we give our beautiful CASH!!! back to the markets.

Yesterday, President Trump said day one of the Trade Talks went very well and, since we know Donald's a man of his word, the Futures have kicked into over-drive. The meeting Trump has with China's Vice Premier, Liu He, are not until 2:45 this afternoon so it seems impossible that an actual deal could be accomplished by the market close at 4pm so we'll go into the weekend without knowing for sure and it all could reverse before trading resumes on Monday – not the best premise I've ever heard – that's for sure!

If there is a trade deal, and even if there's not, we like Freeport-McMoRan down at $9 as they should rebound nicely if there is a trade deal and, even if there isn't, it's still a nice "buy and hold" over the long run.

Since we actually do want to own it for the long-term, we can add it to our Short-Term Portfolio for now and move it to

…

Thrilling Thursday – Dow Loses and Recovers 300 Points Overnight

October 10, 2019

What is the point?

I'm trying to write a morning overview of the market but everything can change in an instant based on a random tweet or a statement from any random Chinese or Opec official. The market dropped a full point overnight, with the Dow testing 26,000 as the South China Morning Post (yes, we have to read that now), said Vice-Premier Liu and his team many leave the Trade Talks earlier than expected as the deputy-level trade talks made no progress this week.

Deputy-level negotiators, led on the Chinese side by vice-minister for finance Liao Min, spent the time focusing on only two areas: agricultural purchases and intellectual property protection. “They have made no progress,” said another source familiar with the talks, adding that the Chinese side had not made headway in persuading US negotiators to consider a freeze on tariff increases, a main priority for Beijing.

The markets quickly reversed as the White House deneyed this was happening but who are we to believe, a random Chinese newspaper article or the White House? Sadly, that's a real question these days…

Tariffs on $250 Bn of Chinese goods are set to increase from 25% to 30% on Tuesday, while fresh duties of 15% on $160 Bn of largely consumer products will go into effect on December 15th. Of course, China may have floated last night's rumor just to gain leverage – a harsh demonstration of what could happen to our markets should Trump fail to bend over and accept the terms they are offering. And, of course, China's retaliatory tariffs also kick in on Dec 15th.

IN PROGRESS

Whipsaw Wednesday – Trade Talks Back On!

October 9, 2019

Of course China wants to make a deal.

Trump is so weak right now they can shove almost any crap down his throat and he'll be happy to sign the papers just to get a "win". As we all know, it doesn't matter how awful the trade deal is for the US, Trump will still say it's "the best deal ever" over and over again until you can't even remember why he's lying anymore and isn't that good enough for US these days?

While Team Trump is ducking subpeonas like the Road Runner ducks anything you throw at him, the Dems keep blowing themselves up like Wile E. Coyote – the plans always look so good on paper but they tend to fall apart in the actual execution. Sure the impeachment inquiry is moving along but, as long as the GOP manages to delay things, Team Trump, Fox, et al manage to repeat their message another 1,000 times and, like a catchy commercial jingle – it doesn't matter whether or not the catch-phrase is true – you start to hum the tune and, eventually, you can't get it out of your head…

So it's "trade on" at the moment as China says they are still willing to make a trade deal though traders are ignoring the fact that China actually said they are prepared to accept a "PARTIAL" trade deal – as long as no more tariffs are imposed and they will only offer "non-core" concessions, like purchases of agricultural products – which they need to buy anyway. China said they will not budge on the other sticking points which would be a total humilation for Trump but, well – Trump.

I guess it's cool to have a President who always wins – even though it's only because he doesn't admit it when he's lost and that allows the whole country to pretend we've won – even when we've clearly lost, but at least we all feel good, right? The market is trading up on feelings as there's certainly no evidence that things are any better and the Dow may be up 200 points this morning but the…

Tumbling Tuesday – Trade War Heats Up Again as US Blacklists China

October 8, 2019

More Trade War!

Yesterday, the Trump Administration added 28 Chinese companies and organizations to a "Blacklist" that blocks them from buying American products – ostensibly over a sudden concern about human rights violations but this is just Trump's usual BS because he thinks it gives him leverage in the upcoming trade negotiations while what it actually does is piss China off.

Among the alleged "Human Right Violators" just so happens to be Hikvision and Dahua Technology, two of the world’s largest manufacturers of video surveillance products. It also hits China’s well-funded, newly emerging class of artificial-intelligence start-ups. Together, the companies’ products are central to China’s ambitions to be the top global exporter of surveillance technology.

The list also includes companies that specialize in artificial intelligence, voice recognition and data as well as provincial and local security bureaus that have helped construct what amounts to a police state in Xinjiang. These entities have been involved “in the implementation of China’s campaign of repression, mass arbitrary detention and high-technology surveillance,” the filing said.

While it may seem sort of reasonable to go after the "enablers", if Hitler used an IPhone we wouldn't ban Apple, would we? In fact, what we're banning is the ability of these companies to by the American parts that are enabling their technology in the first place. Will it stop them from getting the parts? Of course not – they'll just buy it from someone else.

“The U.S. government and Department of Commerce cannot and will not tolerate the brutal suppression of ethnic minorities within China,” Commerce Secretary Wilbur Ross said as he oversaw a Trump operation to get rid of the brown people. In fact, China has been calling for the UN to act on the US's human rights violations for 2 years now and the Chinese Government said they will immeditately retaliate against these new sanctions.

Of course the Blacklist is not…

Monday Market Movement – Waiting on China and then the Fed

October 7, 2019

Mostly, we're waiting.

This weekend, prospects for a China Trade Deal took a downturn (and I'm ignoring the fact that China has no incentive to make a deal with a President who may not last long enough to sign the deal because I'm just so sick of the whole thing already) as Chinese officials said a "broad pact" was off the table, completely contradicting all the happy talk that came out of the White House last week to boost the markets.

As you can see from the chart above (and this one), China imports $4.5 TRILLION worth of merchandise of which, $100Bn comes from the US while China exports $2.5Tn worth of merchandise, of which $275Bn is with the US. Of course the US would like China to buy more of our goods but they simply can't afford them and forcing them to buy stuff just because US Consumers like to buy inexpensive Chines merchandise is – well, you can see how that's working out so far.

Is it easier for China to forces their citizens to buy 175% more US merchandise, whether it's good or not or should China make more of an effort to make up the 10% of their merchandise sales to the US by making their easier-to-get-along-with trading partners happy? While it would be nice to "fix" the trade issues with the US – it certainly isn't the desperate situation for China that Trump paints it to be when talking to the very uncritical suckers who still support him.

Those people never check his facts, so he can make up anything he wants but the actual trade negotiations are held in a place called "reality" and that's why the average Fox viewer, Trump/GOP lackey or Conservative pundit are wrong, over and over and over again when they try to predict what China will do next. If your are basing your analysis on Trump's BS – what hope do you have of making accurate predictions?

Vice Premier Liu He, who will lead negotiations for China, told…

Fed Fun Friday – Powell Seeks to Save the Market (again)

October 4, 2019

More free money!

Whenever the market begins to dip, the Fed jumps into the fray to prop things up. That, of course, is not what the Fed is supposed to do – but they have morphed their mission into propping up the markets since the Banksters (which is who the Fed really works for) simply make more money in a bullish market – and these guys REALLY like money. They like money so much, they are even helping Donald Trump keep his Presidency.

Why? Because it it's not Trump in 2021 it's very likely to be Elizabeth Warren and she is one of the few people in Congress who actually understands the banking system – not as an abstract – but with a Harvard Law Professor's understanding of every little line they put into their 20-page contracts and she can clearly see how and where the money is flowing. You can't trick Elizabeth Warren and, for a profession that only exists to get people to part with their money – that's a bad, bad thing.

A Warren Presidency will cost banks BILLIONS in profits and it's likely to be no picnic for the Fossil Fuel Industry or Big Pharma either. That's why Donald Trump pulled in $125M in donations last quarter – the "Never Warren" wing of the Republican Party has vey deep pockets indeed. Those same donors are backing all the GOP Senators and Representatives too so don't get too deep in your liberal fantasies that 20 GOP Senators will walk away from their base AND their money in order to do the right thing and impeach Trump – it's very unlikely.

Either way though, the Democrats win as Trump staying on despite being obviously guilty is very likely to cause enough GOP Senators to lose their jobs to give the Democrats a majority in both houses and Trump is very unlikely to beat Warren in the General Election. So far, the only dirt Trump could dig up on Warren after 4 years of trying is that she claimed to be part Native American (and it is but a very small part), calling her "Pocahontas", which any …

Faltering Thursday – Back to S&P 2,850 as Trump Opens New EU Trade War Front

October 3, 2019

MADNESS!

As if there are not enough things going on, Trump announced just before yesterday's close that he would now be placing tariffs on European Union goods, including aircraft, clothing, whisky, cheese, yogurt and agricultural products. Who buys aircraft from Europe? US Airlines do, that's who. And who ends up paying for the additional cost of the planes they buy? I'll give you a hint – it isn't Mexico!

So, as if the Dow Transports didn't have enough troubles, this is going to really put them in technical trouble – along with all the indexes as they are close to failing their 200-day moving averages which, on the S&P 500, is 2,850 – also the mid-point we've been telling you would true up on the S&P chart since the beginning of summer thanks to our Fabulous 5% Rule™:

Back in our August 8th PSW Report, we noted the following bounce lines for our indexes (colors reflect current positions):

Dow 25,000 is the mid-point and bounce lines are 25,550 (weak) and 26,100 (strong)
S&P 2,850 is the mid-point and bounce lines are 2,880 (weak) and 2,910 (strong)
Nasdaq 7,200 is the mid-point and bounce lines are 7,360 (weak) and 7,520 (strong)
Russell 1,440 is the mid-point and bounce lines are 1,472 (weak) and 1,504 (strong)

I had to change S&P 2,880 and Russell 1,472 from green to black (we're right at the lines) but, otherwise, we're right where we are (2 boxes weaker) 2 months ago and that's right where we were two months before that and, in fact, 2 YEARS before that. This market has gone nowhere during the Trump Error – nowhere at all!

IN PROGRESS

Wednesday Worries – Traders Finally Notice Things are not Perfect

October 2, 2019

The ISM Report was, I would say, NOT good.

We knew that was going to happen on Monday, when I warned you not to be taken in by the window-dressing that was ending the quarter on a false high and we knew that two weeks ago when we cashed in our Member Portfolios at the top of the market so now we're pretty much sitting on the sidelines and laughing at all this BS – which is kind of fun, actually…

I also noted on Monday that we have two Fed speakers today: Harker at 9am and Williams at 10:50, right after the Oil Inventories. Tomorrow there are 2 more Fed speakers along with PMI and ISM Services but, if they are bad, I can't imagine what Evans and Quarles can do to cheer us up. Friday is Non-Farm Payroll so major disaster if that goes south and that's why we have 5 speakers after that report – including Jerry Powell at 2pm – so lots of way to prop things up – even if the data continues to suck.

We have Auto Sales today, coming in all day long but, so far, they have sucked in Europe and Asia, with double-digit declines for many companies – that hasn't been helping and the Futures are off another half a point this morning. Over in Japan Toyota, Honda and Nissan all reported double-digit declines for the US Market in September but the month began and ended on a Sunday and Labor Day was early so it's not really as bad as it seems – just tough comps to last year. Still, the money won't be there for the end of Q3 – that's what matters.

That's going to matter a lot to Tesla (TSLA) – so let's keep a close eye on their report too.

U.S. vehicle sales this year are projected to be around 17.1 million, according to Edmunds, slightly lower than the past few years. Rising car prices and higher interest rates dulled demand in the first six months of 2019. Detroit auto makers GM and Ford, as well as Fiat/Chrysler recently ended their long-term practice of reporting monthly U.S. sales numbers, although most major car companies still disclose the results each month. The companies now…

PhilStockWorld September Portfolio Review – Cashing out of this Crazy Market!

October 2, 2019

And we're out!

$2,606,756 is up $2,006,756 (434%) from our $600,000 start of our Long-Term/Short-Term paired portfolios back on Jan 2nd of 2018. The STP was the real star, turning $100,000 in to $881,976 due to some very good timing as we flipped our hedges almost perfectly several times over the past two years. That's very unusual – as was the huge $1,124,780 (245%) gain from the LTP's $500,000 start. We were very close to $2.5M in June but then had a rocky summer – to the point where I said I'd cash out if we fell back to $2M so getting back to $2.6M is a gift horse we dared not look in the mouth – so back to cash and we'll start fresh in November is the plan.

Hedging a $1.7M LTP would be very expensive and what if next time we didn't time the turn in the STP and instead blew the turn and lost money there as well as the LTP. Then we'd be back to $2M and needing to make 30% to get back to $2.6M and what if it's hard to make money next year or what if we have another crash and the market is down 40% – it's just too much to risk vs. putting $2.6M safely on the sidelines and simply looking for new opportunities.

As I noted in Member Chat last night, in anticipation of getting back to cash, I wrote up "5 Trade Ideas to Make $25,000 in 5 Months" on August 29th, to demonstrate that we didn't need to be massivly invested to make good money. Those trades are on track for a $33,603 gain in January from a $6,565 cash entry (and $26,659 in margin) and that's 33% for the quarter against $100,000 of sidelined cash – without risking it all to get there. That's as good as any of our portfolios have done – but with just 5 positions!

We officially cashed out the week of Sept 16-20th (and these reviews are from those dates – this is just a summary), into options expirations and we did so because we get much better prices

…

Testy Tuesday – Q4 Begins With a Lot of Concerns

October 1, 2019

Is Impeachment an Elitist move that shifts power away from the voters?

Of course not, that's idiotic as the voters elected the representatives (by actual majorities) that exercise their Constitutionally Mandated oversight of the President who was, in fact, put in power by an elitist Electoral College that did, in fact, ignore the popular vote. Still, that's the headline Fox "News" is going with this morning as part of an all-out GOP effort to discredit our Government, our laws and our processes – whatever it takes to keep their guy in power.

The "President" is, in fact, calling for a Civil War now and is back to his usual media bashing, making me wonder if it was all a dream when we were told in school that a free press is the backbone upon which a Democracy is built. Since Coporate Dollars have now crept into every click an article generates, there is really no such thing as a free press anymore as it's now all about pleasing the advertisers anyway.

"Liberty cannot be preserved without a general knowledge among the people, who have a right, from the frame of their nature, to knowledge, as their great Creator, who does nothing in vain, has given them understandings, and a desire to know; but besides this, they have a right, an indisputable, unalienable, indefeasible, divine right to that most dreaded and envied kind of knowledge, I mean, of the characters and conduct of their rulers. Rulers are no more than attorneys, agents, and trustees, of the people; and if the cause, the interest, and trust, is insidiously betrayed, or wantonly trifled away, the people have a right to revoke the authority that they themselves have deputed, and to constitute other and better agents, attorneys and trustees." - John Adams, A Dissertation on the Canon and Feudal Law (1765)

"The moment we no longer have a free press, anything can happen. What makes it possible for a totalitarian or any other dictatorship to rule is that people are not informed; how can you have an opinion if you are not informed? If everybody always lies to you, the

…

Marked-Up Monday – End of Quarter Window Dressing

September 30, 2019

It's the last quarter of the decade!

That's right, we've already gotten through the first two decades of the 21st Century without destroying the planet. Unfortunately, the odds are getting a lot higher against us for decades 3 and 4 and by 5 we're a long-shot to finish – so it's a good time to check off that bucket list…

As you can see from JP Morgan's S&P 500 Chart (click for a bigger version), the poor RSI line (bottom) liikes tired and we're pretty well set-up for a repeat of last October if things don't improve but certainly we can Unimpeach Trump, Make a Deal With China, Have a Happy Brexit, Bring Peace to the Middle East, Resolve the Hong Kong Protests and reverse Japan's Aging Problem by Christmas – heck, I bet Jared Kushner can get that all done by Hanukkah!

Speakiing of Jared Kushner, here he is burning evidence over the weekend… Just kidding, he's in Hong Kong, still protesting the Government and, at this point, we need to consider that nothing is going to make the Hong Kong protesters happy so what will happen next? China is celebrating their 70th Anniversary tomorro and they are trying not to have it stained with blood so they've been very restrained but the streets of Hong Kong are literally on fire and they will be forced to respond in the very near future.

This is week 17 and 1,753 protesters have been arrested and 4 have died (but all ruled suicides) and the police have used 2,731 cannisters of tear gas (I wonder who make that?) but demonstrations have gotten worse, not better and many protestors have sworn to die rather than surrender though, frankly, it's not very clear what it is they actually want.

It's become kind of a protest for protest's sake. Origninally, the protests were against having Hong Kong citizens extradited to China for trials – that's something I would have protested too but Hong Kong withdrew that bill and the protesters won but now they want "More Democracy" and, as Americans, we're not really qualified to say what that even is anymore.

To a large extent, the problem…

S&P 3,000 Friday – Windows Must be Dressed!

September 27, 2019

And we're back (again).

As we expected, the stops are being pulled out to give us a boost into the end of the quarter and we still have the Fed's Randy Quarles speaking at 8:30 followed by Patrick Harket at noon in order to buffer what's likely to be a poor Durable Goods Report at 8:30 and a poor Consumer Sentiment Report at 10. We also get the Farm Price Report at 3pm and the China situation doesn't bode well for that. We also still have Monday, that's the 30th.

Not that we care because we CASHED OUT last week – but it's still fun to watch from the (mostly) sidelines. President Trump considers the stock market to be some kind of scorecard for his Presidency the same way frat boys count how many girls they slept with and call it their "love life". Still, that means that, behind closed doors, Team Trump is doing whatever they can to boost the market so the boss can feel good about himself – despite all the things he should be feeling bad about.

Yes, despite all the spin, this isn't the Mueller Report and Trump is still getting impeached because this is a very simple, 9-page document that very clearly outlines a single, impeachable offense and so, despite Team Trump's protestations – there WILL be an impeachment though it's still doubtful the Senate will have 60 votes needed to actually remove Trump from office – but the elections will do that.

That's why the Health Care ETF (XLV) is taking a downturn – on fears of a Warren Presidency as it's not likely she will take a kind eye towards excessive profits in the Pharma space but this is a bit of a replay of late 2009, when we took advantage of the sell-off ahead of Obama's first term and the coming of Obamacare to pick some very successful health care plays (see my "2010 Outlook – A Tale of Two Economies") – so I recommend a re-read and we'll update some of the picks on our new Watch List.

It's not all bad…

Thrilling Thursday – Back to Test S&P 3,000 – Again

September 26, 2019

"Come easy, go easy
All right until the rising sun
I'm calling all the shots tonight
I'm like a loaded gun
I'm back in the saddle again" - Aerosmith

And we're back.

Right back to S&P 3,000 as the S&P gains 7 points in pre-market trading – more so on China Trade Progress than Trump's Impeachment, which is a truly quantum political event as he is at the same time guilty and not guilty – depending on who is observing his exact same actions. Here's some stuff we've been reading on the subject:

I threw that last one in there to remind us that the planet is dying and we're wasting time worrying about whether or not Trump might be lying about…

What Now Wednesday – Will 10 Fed Speakers Stop the Slide?

September 25, 2019

Wheeeee – it's so much fun to watch this from the sidelines!

Last Wednesday I listed Impeachment as one of the reasons we were cashing out our portfolios as the market went back to the top and BOY are we happy we did that! Impeachment is a pretty big uncertainty to throw at the market and the expectation of that (which came to pass yesterday) along with all the other issues we saw looming for Q4 gave us good reason to get to CASH!!! and see where things land during the final earnings season for the year.

We also didn't believe China was "fixed" and apparently it is not though now the pressure is on Trump to pull that rabbit out of his hat in order to distract people from all the other scandals he's drowing in – just like Nixon did when he opened relations with China in February, 1972 – ahead of his own re-election campaign. The Committee to RE-Elect the President (or CREEP) didn't break into the Watergate hotel until June of 1972 and it took all the way until July 27th of 1974 for there to finally be an impeachment hearing and Nixon resigned on August 9th, 1974, leading to two glorious years of Gerald Ford, which made Chevy Chase's career.

So it's going to be chaos for the next few weeks but don't worry, we have TEN (10) Fed speaches to guide us through the rest of the week, starting with Chicago's Charlie Evans, who already said this morning that not only is trade policy uncertainty slowing U.S. business investment decisions, limits on trade and immigration could mean slower potential economic growth overall. Evans supports more rate cuts and seems to be preparing us for a weak GDP Report tomorrow morning – possibly below 2%.

This is the 3rd revision of Q2, which started off closer to 3% (and the markets went higher on that BS) but was revised down dramatiallly as Residential Fixed Investment (includes Durable Goods) declined 2.9% and state and local Government Spending was revised down to 2.3% from 3.2% while net exports dropped 0.72%. Only Consumer Spending was a bright spot and we just got a TERRIBLE Consumer Confidence Report…

Toppy Tuesday (as usual) – Why Did China Go Home?

September 24, 2019

Trade on!

That's right, now Donald Trump claims he was "surprised" when Treasury Secretary Steve Mnuchin asked China's trade delegation to cancel a scheduled US Farm Tour. That was the cause of Friday's sell-off as the Chinese delegation packed up their toys and went home early and was taken as a sing that negotiations had broken down but now the Administration says that's not the case and that the Chinese were rushed home so they could buy our agricultural products rather than visiting the farms first.

Despite all the BS, we couldn't be more thrilled as we called Soybeans (/ZSU19) Sept Futures a long way back in our May 10th Morning Report at $825 (published at Seeking Alpha) and those contracts popped to 888.50 and October Soybean contracts are now $895.50. Soybean contracts pay $1,120 per $1 move so $63.50 for our September longs is a lovely $71,210 gain per contract – you're welcome!

For the Futures Impaired, we also had the following trade idea on the Soybean ETF (SOYB) that runs into November:

As to SOYB, it hasn't been this low since, well, ever – as the contract began in 2012 at $25 and never really went below $17.50 until the trade war began so $14.50 is quite a bargain and, as much as I hate to bet on Trump doing anything right, it's POSSIBLE we get a trade deal and that will hurt our hedges in the Short-Term Portfolio so, in order to hedge the hedges, a bullish bet on SOYB makes sense. For the STP, we can:

Buy 50 Nov $14 calls for $1.10 ($5,500)

Sell 50 Nov $15 puts for 0.95 ($4,750)

…

Just Another Manic Monday – More Signs of Global Slowing Amid China Troubles

September 23, 2019

Let's see what kind of trouble the World got into over the weekend:

So it's the same old, same old but, fortunately, we don't care because we CASHED OUT almost all of our positions last week and now we've got ringside seats for Q4, which starts in a week – it's going to be FUN!

It's not that we're particularly short on the markets – we aren't making many short bets – it's just that we've lost faith in the bullish premise and we do expect a correction but, the way the Fed and the Trump Adminstration rush in to prop up every dip in the markets – we're certainly not ready to make a bear case.

The same cannot be said for our friend David Rosenberg, who expects a PAINFUL pullback in the next 12 months EVEN if the Fed were to cut rates to ZERO. “The economy is already slowing down,” Rosenberg said. “Earnings are actually contracting.” Well Duh!, Dave – we've been talking about that for ages. The question is – will it MATTER? Back in 2007, I used to call it the "It Just Doesn't Matter" rally as the market just seemed to ignore any bad news and go higher and higher – no matter what was thrown at it until, suddenly, in the fall of 2008 – EVERYTHING started to matter and all the good news in…

TGIF – Quad Witching Madness

September 20, 2019

I love CASH!!!

We cashed in most of our Member Portfolios so I'm not at all worried about what will happen today. It's the end of the quarter for options and Futures (2 kinds of each) so "quad witching" and these days can have some violent swings – though we're not expecting anything dire. We still thought it was a good idea to take advantage of this triple market top – JUST in case Q 4 Earnings don't go well or the Trade Talks don't go well or Brexit doesn't go well, etc.

Just because we moved to CASH!!! doesn't mean we can't still find fun things to trade. We've been watching McDermott (MDR) collapse for the last few days and yesterday morning, I sent a Top Trade Alert out to our Members saying:

MDR – Fortunately, we got out of ours a long time ago as we never wanted them, we just liked CBI, who they merged with. Needless to say, the merger has not gone well (which is why we didn't want to ride it out) and now they are calling in restructuring experts. MDR says it "is taking positive and proactive measures, as we have done in the past, intended to improve its capital structure and the long-term health of its balance sheet." You can take them at their word (as no one is) or you can imagine this is a sort of cover-up for their emergency measures to stave off some sort of disaster that's looming.

I do watch them (because they took away my CBI) and last year they took a $2.7Bn hit on write-offs and such and this year they lost about $190M in the first two Qs and it's doubtful they turn that around by the end of the year but they have $455M in cash and I bet they end up down less than $100M for the year with a profit in Q4.

Assuming that's true – then

…

Federally Funded 3,000 Thursday

September 19, 2019

Here we are again!

As we expected, the Fed cut rates another 0.25% yesterday after changing just 15 words from their last statement, essentially indicating that Business Spending has slowed down to justify the completely unneccessary cut. “We took this step to help keep the U.S. economy strong in the face of some notable developments and to provide insurance against ongoing risks,” Powell told reporters. So, apparently, we've gone from a "data-dependent" Fed to one that now uses psychic powers to react to trouble before it even happens?

Powell said “Weakness in global growth and trade policy have weighed on the economy” but does that mean he will RAISE rates if Trump makes a deal with China? Powell can't win so he shouldn't try to please Trump, who immediately tweeted about the Fed Chairman: “No ‘guts,’ no sense, no vision!” for not giving the President the negative rates he demanded just last week.

Powell left the door open to “a more extensive sequences of cuts” if needed, but stressed this was not what officials expect. Instead, he described the situation as one “which can be addressed and should be addressed with moderate adjustments to the federal funds rate.” Updated quarterly forecasts showed officials split over the need for rate cuts this year. Five didn’t want to move. Five saw a quarter-point reduction warranted, while seven saw 50 basis points of easing needed by year-end — half of which was delivered on Wednesday.

As you can see from the Fed's projections, we're wrapping up Trump's Presidency (hopefully!) with barely 2% GDP growth and an uptick in unemployment while the fiction of low inflation is being maintained and keep in mind that if inflation is 2% and the economy is growing 2% – then the economy isn't growing at all – things are just getting more expensive while we produce the same amount of stuff. To some extent, that's to be expected in a mature economy but we do have 1% population growth so really 3% growth with 2% inflation should be the minimum we shoot for.

I discussed the Fed and the overall economy with Kim Parlee on Money Talk last night, so here's that segment:

Given all those concerns, as we noted in…

Which Way Wednesday – Fed Edition

September 18, 2019

CASH!!!

That is our response to market uncertainty and we are officially cashing out our Money Talk Portfolio after a very successful 2-year run where we've taken it from a $50,000 start to $124,043, which is up a whopping 148%. I'll be on BNN's Money Talk Show later this evening to discuss the matter but, in short – it's simply too hard to protect those gains against all the market uncertainty regarding the Fed, Trade, Brexit, the Middle East, Election Interference, Impeachment, Overpriced Stocks & Indexes and, of course, a slowing Global Economy. While the market is, so far, content to "soar and ignore" – I don't think we have more than 10% left in the best of circumstances while the risk is a 20% drop – so I'd rather sit this quarter out.

Of course "sitting out" doesn't mean we won't still find things to trade – I just want to get a clean start in 2020 and I don't want to risk what we've made in the last quarter of 2019. We also reviewed our Hemp Boca Portfolio yesterday morning in our Live Member Chat Room and, though it's only 4 months old and only up 8.2% so far, we reduced our risk on that one as well. One difference is I'm on the Hemp Boca show at least once a month to make adjustments but only on Money Talk once a quarter and, between now and January – I really can't condone the risk of holding positions without the ability to make changes!

Our Butterfly Portfolio is market neutral and self-hedging so we simply removed some of the riskier plays but the Options Opportunity Portfolio, which is now up almost 300% in less than two years is going to be completely closed down, as will the Long-Term Portfolio and the Short-Term Portfolio that protects it. As with our Hemp Boca Portfolio, I will be highlighting those trades I think are worthy of keeping but, for the purposes of our educational porfolios – I think there's more to be gained next year starting with a clean slate so we can emphasize portfolio building strategies and stock picking.

Here's our Hemp Boca Review from yesterday's Live Member Chat Room: …

The PhilStockWorld.com Money Talk Portfolio Review – Sept 18, 2019

September 18, 2019

I'll be on BNN's (Bloomberg Canada) Money Talk tonight at 7pm.

The last time I was on the show was back in on April 24th and we only make changes to the Money Talk Portfolio live on the show so we decided to lock into a neutral position over the summer and that's just where we ended up, dropping to $124,043 from April's $127,663 so down $3,620 for the summer is about as neutral as we can get it and we're still up $74,043 (148%) from our $50,000 start just about 2 years ago on the button.

Since there's a lot of uncertainty going into Q4 and it has been just about 2 years – I think this is a good time to cash out this portfolio and we will begin a new portfolio with a new $50,000 around Thanksgiving – beginning with our still-undecided Stock of the Year.

Our 2019 Stock of the Year is IBM (IBM) and our IBM position is already 100% in the money at net $2,707 out of a potential $7,500 so, if I were going to keep one trade active – that would be the one as all IBM has to do between now and January of 2021 is hold $135 and that spread will make another $4,793 (177%) so we could, for example, put $27,070 of our $124,043 in cash back to work on just the IBM trade and, if all goes well, it will turn into $75,000 – making almost 100% of our original total in just over a year – so why be more complicated than that?

There's still a lot of potential in all these positions, as noted in the April review, the portfolio has the potential to hit over $200,000 by Jan 2020 but, as I noted, if we cash out now at $124,043 and make another $50,000 on the IBM trade – that's $174,000(ish) anyway but we'd have $100,000 in our pockets NOT at risk through the holidays – that is certainly a much wiser way to go – especially in a portfolio we are unable to adjust between shows.

So the decision is final, we're cashing out and endorsing our Stock of…

Testy Tuesday – Trouble at S&P 3,000 – Again

September 17, 2019

Here we are again.

We re-tested our highs to close last week but they didn't last and we've already failed the 3,000 line – gapping below it with no support. That is, as they say in the chart schools – not good. Still, anyhing over the strong bounce line at 2,920 is still long-term bullish and that's still 77 points away or EXACTLY a 2.5% correction from here. That's at least what we'll see if the Fed disappoints tomorrow.

Meanwhile, what is the Fed supposed to do since they have no idea what's going on with China Trade, which goes from getting worse to "all fixed" overnight? Brexit is still up in the air and now we have this additional trouble in the Middle East – these are not things the Fed has control of but they are all things that have serious impacts on the economy.

Wages are rising in the US, Prices are going up – these are reasons the Fed should be raising rates, not lowering them. The Fed Fund Rate stands at 2-2.25% and dropping it to 1.75-2% isn't going to change people's spending habits or economic decisions. It won't even do much for Trump, who wants to save money on the interest he pays on $22.5 TRILLION in debt he's run us up to but, even at 2% that's $450 BILLION a year in debt payments and the 1/4-point rate cut saves him $50Bn in interest but it's not savings if Trump turns right around and spends it on something else.

Trunp has added over 10% to the entire National Debt of the United States in just 2 years (the 2016.5-2017.5 budget was still Obama's). You can see the way the budget explodes higher as Trump's tax cuts take effect and he's boosted Government spending, almost all of it military, at the same time – pretty much everything the Republican's used to run against…

You can like or not like his reasons but the math says that if Trump continues at this pace, we'll be $24.8Tn in debt by the time his 2020.5-2021.5 budget runs it's course and 4 more years of Trump's policies would take us to $30.2Tn – 150% of our GDP in debt. Trying to force…

Monday Market Madness – Drone Attacks Threaten Global Oil Supplies

September 16, 2019

Phil – September 14th, 2019 at 3:17 pm

"Oil/Emike, Bert – Yeah but it's the same thing. FUNDAMENTALLY we knew the Saudis would do something to support $60 on /BZ due to the Aramco deal. Last summer they pulled the deal but now they are too far along so their only option is to do SOMETHING to boost the price.

Oil (/CL) right at $55, Gasoline (/RB) coming off $1.55. Brent (/BZ) $60.33 should hold $60 so /CL is not a bad long at this line over the weekend – maybe something will blow up? "

And THAT is how you make $5,000 PER CONTRACT trading oil into the weekend!

In our Live Memeber Chat Room, we are not conspiracy theorists – it's simly that we have observed many, many times that, when the Saudis need to boost the price of oil (and they desperatately needed the price highers as the Aramco (state-owned oil company) IPO is looming), things tend to blow up. Whether it's Nigerians attacking a pipeline or Iran or Houthis (who are taking credit for the current attack), we call them "Rent-A-Rebel" as they are perpetually on-call to jack up oil prices off key supports.

Creating a sense of unease in the supply chain is a great way to jack up the Futures and jacking up the futures by 10% is a $100-200Bn payoff for the valuation of Saudi Aramco – that's enough money to make even Dr. Evil stand up and take notice. Do you think the Saudis are above sacrificing a few men for that kind of money? Jamal Khashoggi would certainly tell you otherwise.

IN PROGRESS

Lucky Friday the 13th – Markets Retest their All-Time Highs

September 13, 2019

"Let me tell ya, your love (your love keeps lifting me)

Keep on lifting (love keeps lifting me)

Higher (lifting me)

Higher and higher (higher)

I said your love (your love keeps lifting me)

Keep on (love keeps lifting me)

Lifting me (lifting me)

Higher and higher (higher)" – Jackie Wilson

Here we go again!

3,028 was our July high on the S&P 500 and we're so close this morning we might actually get there into the weekend – isn't that great! This is the highest the S&P has been since it dropped 200 points (6.66%) in the last week of July/first week of August but we held that top for a good two weeks so it's not that likely we'll fall right back off the cliff on Monday – especially as the driving catalyst is "progress" on the China deal and we're not actually meeting until October – so we can have a whole month of enthusiasm before the next breakdown.

That's good news because we'll be adjusting our portfolios into next Friday's Options Expiration Day and it's Quad Witching as the quarter is ending as well so Futures contracts expire along with stock options and I'm going to be very hard-pressed for a reason not to take the money and run on a good deal of our positions, rather than risk an uncertain Q4 – keeping in mind that last year we rolled into September making a new all-time high at 2,950 (that's right, the S&P is only up 75 points (2.5%) since last year) but plunged 600 points (20%), below 2,350, into Christmas.

I think a proper China Trade Deal could take us up to 3,300…

Thrilling Thursday – Back Over S&P 3,000 as the ECB Eases

September 12, 2019

NEGATIVE 0.5%!

That is now the European Central Bank's Deposit Rate. That's 2.6% lower than our Fed's current 2.1% rate and 0.75% lower than our all-time low of 0.25% (and you thought we couldn't go to zero!) back in the throes of the Recession. As you can see from the bottom of the Fed's historical rate chart – this has never happened before in the history of the World so don't listen to people who tell you that they know what is going to happen in a negative-rate World – no one has any friggin' idea what is actually going to happen when we go below the zero line…

We've had Recessions, Depressions, Hyper-Inflation and even Deflation in Human Economic History but we have not had a situation in which rich people (Banksters) CHARGE YOU money for holding your money. And they are not HOLDING it, you are lending it to them and they are using it to make more money (as Jimmy Stewart explains) – they don't even HAVE your money – IT's GONE!!!

Negative rates sent the Euro plunging lower (if you have 100 Euros, and you put it them the bank for 10 years, you get back 95 Euros), which will not make Trump happy, as he wants a weak Dollar to inflate the value of his real estate assets so he will pressure the Fed to lower our rates further, so Trump can then borrow money at lower rates to buy more buildings and, of course, the US Taxpayers pay the bill for all these artificially low rates through gigantic deficits and Putin wins again – but there's no collusion – things just work out for him… all the time.

In fact Russia has been hoarding gold and dumping US assets – almost as if they knew what Trump was going to do. Russia has been the World's largest buyer of gold recently with the value of their reserves climbing 42% in the past year alone. “Russia prefers to cushion its macroeconomic stability through politically neutral tools,” said Vladimir Miklashevsky, a strategist at Danske Bank A/S in Helsinki. “There is a massive substitution of U.S. dollar assets by gold — a strategy which…

Which Way Wednesday – Why Not Both Ways?

September 11, 2019

What a crazy week already.

Yesterday the Dow topped out Monday at 26,900 and fell back to 26,700 yesterday, closed at 26,909 and is now up another 40 points in the Futures as President Trump is back on Twitter this morning saying:

The Federal Reserve should get our interest rates down to ZERO, or less, and we should then start to refinance our debt. INTEREST COST COULD BE BROUGHT WAY DOWN, while at the same time substantially lengthening the term. We have the great currency, power, and balance sheet…..

….The USA should always be paying the the lowest rate. No Inflation! It is only the naïveté of Jay Powell and the Federal Reserve that doesn’t allow us to do what other countries are already doing. A once in a lifetime opportunity that we are missing because of “Boneheads.”

By the way, that's not my emphasis, that's his – I have no idea how he gets twitter to make giant text like that. In this case, Trump is not wrong(ish) as his "plan" is to have the Fed lower rates to zero and then WE can borrow $22,000,000,000,000 to "refinance" our existing debt (by confiscating existing bonds?) and then sell even longer-term bonds at 0% or maybe even BELOW 0% so PEOPLE WILL PAY US to lend us money in which case the more in debt we go – the more money we'll make forever and ever and ever – what could possibly go wrong with that plan?

IN PROGRESS

Technical Tuesday – 3,000 or Bust on the S&P 500

September 10, 2019

Here we are again!

2,978 on the S&P 500 is within spitting distance of 3,000 and today it will be all about Apple (AAPL) and the market's reaction to their event at 1pm today, where they are expected to announce yet another new IPhone and probably more watches and stuff about their TV Service and who knows what else…

Apple is 3.5% of the S&P – its largest component and it's 14% of the Nasdaq – by far the largest component and it's a Dow component where each $1 move in AAPL stock moves the Dow by 8.5 points. So, to say there's a lot riding on AAPL today is a huge understatement.

The Nasdaq, for it's part, is having a rough week – so they could use some good news from Apple, who are the only FAANG stock besides NFLX who are not involved in anti-trust investigations and NetFlix WISHES they were more of a monopoly because AAPL, DIS and a dozen other streaming companies are putting pressure on their bottom line and limiting their growth (our hedge fund is short NFLX).

My early summer comments to our Members on NFLX were:

Submitted on 2019/06/01 at 7:43 am

CMG/Sun – NFLX would be my top short, I just don't think they can keep their growth up, there's no moat to their business and costs are skyrocketing because they are a movie studio selling subscriptions (HMNY) when push comes to shove, not a tech company.

Submitted on 2019/07/17 at 4:17 pm

As I said in the Webinar, it's not really possible for them to sustain that ridiculous valuation. They are no different than TWX or CBS and those companies trade at 15-20x earnings. The same people who were convinced to subscribe to HBO over the past 40 years

…

Monday Market Movement – Back to the Top

September 9, 2019

It's quiet time.

With a Fed Meeting a week from Wednesday, the Fed has entered a "quiet period" where there won't be any policy statements. At the moment, based on last week's comments, odds are strongly favoring a 0.25% rate cut – even though the market is at record highs, unemployment is at record lows and inflation is at or over the Fed's 2% target so a rate cut, if we get one, will undercut faith in the Federal Reserve as being independent of the Government and will render them far less effective for years to come – but at least Trump will get his bonus rally.

As you can see from the S&P chart, as we expected, breaking out over the Strong Bounce line is taking us back towards the highs and last time we did this (June) on hopes of a China deal and a rate cut, we ran up another 2.5% over 2,950 to 3,020 so 3,100 would be the ideal goal of this run on the S&P (/ES) – at which point we'd probably start shorting again – deal or no deal with China.

Still, there's probably a month of this nonsense to deal with – 30 days in which the bulls will once again become insufferable with their ever-rising predictions for higher and higher market prices. It's a very annoying time to be a Fundamentalist and, come to think of it – we don't enjoy the crashes either – maybe I should stop thinking and become a TA guy…

Not a very exciting week on the Economic Calendar and earnings are barely trickling in at this point but still a few big guns reporting – even at this leat stage:

GameStop (GME) is very interesting as yes, they are going through a rough patch but not as rough as is not indicated by their $4.30 price as they made $7.5M last quarter and $4.30 is just $413M for the whole company so, even if they only made $30M for the year – that's still pretty reasonable but Q4 is their big one and they had an operating income of $196,300 from 11/2-2/2 which was wiped out…

Non-Farm Friday – Is America Working and Do the Markets Care?

September 6, 2019

We'll see how the trend is going today.

On the whole, job growth has been weaker than expected, especially since the US population grows by 2M people each year so we need 166,000 new jobs per month just to stay even. That's just about been Trump's average since he was elected, a far cry from the 10.2M jobs (212,500 per month) Obama added in his second term.

In fact, we generally average 200,000 jobs per month under Democrats: Clinton added 23.5M new jobs in two terms and even Carter added 10.3M jobs in a single term and Kennedy/Johnson put up 15.6M jobs in 8 years. Even Ronald Reagan managed to add 15M jobs in his 8 years so Trump will be a real outlier if he continues at this anemic pace but, fortunately, he can always point to the Bushes, who added a total of 3.3M jobs in 12 combined years at the helm, leaving 32M new Americans with very little opportunity to work.

It would seem amazing that Americans would want to return to those days yet they voted for a guy who espoused the same policies the Bushes used to run this country into the ground (S&L Crisis from Poppa, Great Recession from Junior) but that's where we are at the moment and now the question is whether we WANT a strong job number or not because a strong jobs number (over 200,000) could take the Fed off the table at the next meeting (18th) as this is the last major data-point before they make their decision.

With China "fixed" and strong jobs and record-high market levels – what possible justification would the Fed have in two weeks to lower rates? Inflation is clearly climbing and wages are rising – these are generally reasons the Fed would RAISE rates, not lower them so, if you are a big fan of FREE MONEY – you'd better hope this job report is another disaster – like last month was!

8:30 Update: Disaster it is! Only 130,000 jobs were added in August and July, which was already a weak 148,000, has been revised down to 131,000 so, even with that – we're worse than last month! Hourly earnings, on the…

Trade Talk Thursday – China Negotiations Back On!

September 5, 2019

Wheeeeeeeee – this is fun!

We're up another 1% this morning as Trade Talks between the US and China are now officially scheduled to resume – in "early October" and if that isn't worth another 300 Dow points – I just don't know what is? According to the WSJ:

Expectations for a breakthrough in trade talks are low, as tensions have risen between the two countries. Neither Beijing nor Washington specified a start date for the talks, which would be the 13th round in a series of on-and-off negotiations that began in January, after the U.S. initially agreed to hold off on further tariffs to try to reach a trade deal.

“The path to even a modest deal is strewn with many obstacles, as neither side is likely to pull back any of the existing trade sanctions without substantial concessions from the other side,” said Eswar Prasad, a China expert and economist at Cornell University.

Hell, that's got to be worth 1,000 points – doesn't it? We're up 600 points on they Dow since Friday and up 1,200 points off our August 23rd low at 25,400. Correct me if I'm wrong but isn't the trade war the ONLY reason the Fed was considering raising rates and isn't a good part of this last 1,200 point rally based on expectations the Fed will lower rates? So are we now expecting the Fed to lower rates AND to get a China Trade Deal? It's like Santa Clause AND the Tooth Fairy will come on our birthday! I'm sure it has happened to some kid, somewhere – but it's got to be pretty rare – not the sort of thing you should bet your portfolio on…

Not only that, but didn't we have a rally in June when trade talks were scheduled for September? That never happened and then we crashed from S&P (/ES) 3,020 back to 2,800 in August and then we began the "Fed will save us" narrative that took us back to 2,950 and now we're going…

Whipsaw Wednesday – Hong Kong Capitulates and Johnson has a Coup

September 4, 2019

What a night it's been!

The MSCI Hong Kong Index popped 5.4% – the biggest gain since a massive stimulus bill in October, 2011 led by Real Estate firms that almost hit the limit up 10% as the Government finally gave in to protesters and witdrew the extradition legislation that had started the protests over a month ago. Hong Kong also declined to set up a comission to investigate the protesters – another point of contention.

The index had fallen 8.6% in August as the protests raged and properties were down 20% as the real estate market ground to a halt and values began dropping. It's not clear, however, that the protests will end as there are several more issues on the table but any sign of flexibility on the part of the Government is a huge step forward and, for now, the markets are thrilled.

Yesterday we also noted that, while Boris Johnson was talking on the floor of Parliament, one of his House Conservatives, Phillip Lee literally got up and walked across the aisle to join the opposition party, taking Johnson's one-vote lead with him.

“I have reached the conclusion that it is not possible to serve my constituents’ and country’s best interests as a Conservative Member of Parliament,” Lee said in a statement. “This Conservative government is aggressively pursuing a damaging Brexit in unprincipled ways. It is putting lives and livelihoods at risk unnecessarily and it is wantonly endangering the integrity of the United Kingdom.”

If only the Republicans in this country had the same level of integrity! Lee's defection stops Johnson from forcing a "NO DEAL" Brexit next month and, of course, that's a massive relief to European markets. Lee inspired 21 other Conservative politicians to defy the Prime Minister and vote to delay Brexit until 2020. Johnson was, of course, outraged and called for a general election in an attempt to get the public to give him more Ministers but he's clearly lost control of his party…

Tuesday Already? Short Week Opens at 2,900 on the S&P 500

September 3, 2019

We're not off to a good start.

Of course we knew last week's "rally" was nothing but BS window-dressing to end the month on a high note, though the indexes were still down overall, giving us a losing month that caused a lot of technical damage on the charts.

The S&P was at 2,900 last September and we held on all the way until early October, and then we crashed into the end of the year, hitting 2,400 at Chrismas, down 17.25% and it took us all the way until April to get back to 2,900 – and here we still are!

"Well we know where we're going

But we don't know where we've been

And we know what we're knowing

But we can't say what we've seen

And the future is certain

Give us time to work it out" – Talking Heads

What is certain is that Trump did carry out his evil scheme to put more tariffs on Chinese products that US Consumers have to pay for and, as we feared (though was denied last week), China IMMEDIATELY retaliated by placing a levy on US crude imports, encouraging buyers to stop buying US OIl, which is exactly what Trump's donors didn't want though, of course, Putin wins again as Russia is China's largest supplier. China also placed tariffs on additional US Goods and the Chinese Government has filed a complaint with the World Trade Organization, who are very likely to rule against Trump so our next crisis may be pulling out of the WTO.

Hong Kong protests are getting worse, not better and we're now 60 days away from a "NO DEAL" Brexit that will throw the EU into chaos and UK Prime Minister, Boris Johnson has said he will call for new elections (they can do that) if Parliament tries to block…

Fabulous Friday – Finishing the Month with a Bang!

August 30, 2019

To trade or not to trade?

Trump said yesterday that the US and China are scheduled to have a "conversation about trade" without giving any actual details after China said what the media are interpreting as signals they won't retaliate against the latest US increase but I interpreted as the usually vague niceties China tends to utter when they are about to crush you (see yesterday's report). Trump is like a cartoon character – with his economy going off a cliff and an election looming but, standing at the edge of the cliff with China about to push him off he says – NOW I have them right where I want them!

Sadly, this is not how it works in real life yet you can't tell that to investors who are being herded back into stocks by MSM pundits who are screaming BUYBUYBUY – as if this is the opportunity of a lifetime with stocks 2.5% below their all-time highs. I for one am disappointed, traders are supposed to be smarter than the average American yet they fall for this BS? Of course, the very, very low volumes on the S&P indicate not many people are really falling for it. The pattern continues that we have low-volume rallies and high-volume sell-offs so there are actually more sellers than buyers – they are just reeling in the buyers like fish on a hook.

S&P ETF (SPY) volume:

Date	Open	High	Low	Close*	Adj Close**	Volume

…

Thrilling Thursday – 5 Trade Ideas to Make $25,000 in 5 Months

August 29, 2019

There's a huge move up in the Futures this morning simply because China said they wished to resolve the trade dispute with a "calm" attitude. I've never seen a market move up and down 1% on words before.

“We firmly reject an escalation of the trade war, and are willing to negotiate and collaborate in order to solve this problem with calm attitude,” Gao Feng, spokesman for China’s Ministry of Commerce, says Thursday, according to a CNBC translation of his Mandarin-language remarks.

Gao noted the Chinese and U.S. trade delegations have maintained “effective” communication.

But he did not confirm U.S. President Donald Trump’s claim on Monday that the Chinese team called the U.S. over the weekend with the desire of reaching a deal soon.

So that's hitting the headlines but, as I'm sure you read in the People's Daily (Government Publication) this morning:

US risks losing big for fighting trade war with China

The trade war has already affected both sides. However, all you need to do is look at the videos of Chinese shoppers crowding the aisles of the Costco store in Shanghai to know that the United States has a lot to gain from greater cooperation with China and a lot to lose if it erects a wall between the world’s two largest economies.

China saying they firmly reject an escalation of the trade war ahead of Trump's plans to escalate the trade war…

Window-Dressing Wednesday – Can the Indexes End August on a Positive Note?

August 28, 2019

We're down a lot for the month.

We're down a lot for the summer, in fact as the S&P 500 (/ES) was at 2,971 on July 1st, 2,980 on August 1st and on May 1st, we were at 2,952 and today at 2,860 so we could have, in fact, sold in May, gone away and had a great, long vacation – instead of feeling very much like we need one after treading water all summer.

In our Mid-Year Portfolio Review our main Long-Term and Short-Term paired portfolios were at $2,093,568 (from a $500,000/$100,000 start in Jan, 2018) and our strategy was to stay neutral in what we thought would be a choppy market and now, two months later, the LTP/STP stand at $2,075,462 but we've moved $100,000 more towards cash in the LTP and $75,000 more to cash in the STP so we've lowered our exposure while also taking advantage of dips to roll our long positions as planned when I said in early July:

That's our very simple long-term investing strategy in a nutshell. Stocks cycle up and down and we almost automatically take advantage of the dips buy buying bigger positions and because we usually sell calls to cover our positions, we tend to set realistic targets for our exits though that doesn't prevent us from setting up new positions using SOME of the cash we made on the first round. The bottom line is we don't just let our risk expand – the system keeps the cash moving down to the bottom line…

So staying even(ish) and moving $175,000 (8.3%) back to CASH!!!, where it's safe, was a reasonable way to spend our summer but, on the whole, I would have been happier hiking in Norway or something else far away from all the nonsense going on in this country. Then I could have come back to work on Tuesday (Monday's a holiday!) and said "Oh, is Trump still President?"

We did a little bit better with our Options Opportunity Portfolio, which was featured over at Seeking Alpha and was initiated on Jan 2nd, 2018 with $100,000 and, as of June 17th, we had run it up to $276,735 and, though we were also cautious with the OOP over the summer, we didn't take as many…

Turnaround Tuesday – Trade Talk Turns Positive

August 27, 2019

And up we go again!

As you can see from our S&P (/ES) chart, we made a perfect weak bounce yesterday so today we see if we can get follow-through to the strong bounce line at 2,910 but keep in mind that it's easy to manipulate the indexes within their bounce lines – the hard part is breaking over them. Also, the end of the month is coming so we have the usual window-dressing to prop up the markets along with the Government and Fed meddling – everyone wants the market to go higher – so why isn't it?

Clearly SOMEONE is selling and they seem to be selling hard as these low-volume rallies exhaust themselves and it doesn't have to be one person but someone or some group clearly is cashing out of the market and then the suckers come in and buy the dips until it's time for the sellers to dump their shares again. Wash, rinse, repeat after that.

Yesterday, at the G7 conference, Trump was a bit more flexible-sounding on the China Trade deal and China said they would love to negotiate a deal but this is what they all say all the time – and we're now into year 2 of these "negotiations". The US and China both wanted peace in Vietnam and then Korea – remember how that worked out? These are two stubborn super-powers and, after two years, China has no reason to give into Trump as it's 50/50 that he'll be gone in a year – why would they give him concessions? No one in China is up for re-election next year.

IN PROGRESS

PhilStockWorld August Portfolio Review (Members Only)

August 27, 2019

$2,075,462!

That's down $209,538 since our July 28th review and back to where we were at the beginning of July so, as we expected, a bit of a wasted summer as we've had a hard time gaining advantage in the market chop. The challenge has been protecting the positions we have while trying to position ourselves to take advantage of a China Trade Deal that never actually comes.

As you know, I'm very skeptical of a deal getting done and I wanted to cash out as even $1.4M (233%) is a silly amount of money to gain in less than 2 years in our paired LTP/STP portfolios. Our aim is to make 60-80% in two years and we usually cash in and reset our portfolios when they are up 100% so we're miles ahead of our normal pace, thanks to the huge rally and also to our timing which turned the STP, which usually treads water when the LTP does well, into a bigger winner than the LTP.

Since we are "going for it" and not cashing out (and see last week's webinar where I made an impassioned case for cashing out), we made a lot of aggressive moves this month to take advantage of the recent sell-off and, though we did add another hedge, I think our risk to the downside is substantially higher now so I'm setting a stop at $1.2M in the LTP (now $1,283,604) as it would be idiotic to let these gains slip away – I'd much rather cash in the whole thing and start from scratch. And yes, if we're cashing in the LTP, we'll cash out the rest as well.

CASH!!! is a valid position. In fact, since early July, the US Dollar has gained 2.5% so, had we cashed out early in the summer, we'd be better off than we are now. I know that, as traders, you feel like you're not doing your job if you are not trading but WAITING is part of trading – or at least it should be. We wait, patiently, for better prices on stocks we love – there's always something going on sale.

As much as I love our LTP positions,…

Manic Monday Market Movement

August 26, 2019

How crazy is this?

After trading over the top of the Strong Bounce line at 26,100 for 3 straight days, the Dow (/YM) and all the other indexes dover right back below their weak bounce lines and almost made it back to our baselines – with the Russell (/RTY) bouncing exactly off it last night and the S&P (/ES) failing theirs. But it was all pre-market nonsense, as is this morning's "rally" so we ignore it all and just focus on the same old levels we've been watching for a month thanks to our fabulous 5% Rule™:

Dow 25,000 is the mid-point and bounce lines are 25,550 (weak) and 26,100 (strong)

S&P 2,850 is the mid-point and bounce lines are 2,880 (weak) and 2,910 (strong)

Nasdaq 7,200 is the mid-point and bounce lines are 7,360 (weak) and 7,520 (strong)

Russell 1,440 is the mid-point and bounce lines are 1,472 (weak) and 1,504 (strong)

All except the Russell were green on Friday morning so a lot of damage has been done Friday's sell-off and that's AFTER the pre-market bounce is taken into effect. Trump (it's always Trump) at the G7 this morning, has been palling around with UK's Boris Johnson and promising a "very big tade deal" with the UIK and "lots of fantastic mini-deals" so of course, since Donald Trump would never lie to us, the market jumps up (again) on the President's word. …

Friday Follies – The Empire Strikes Back with New Tariffs

August 23, 2019

Wheee, what a fun ride this is!

Things were going along nicely for a while but, this morning, China announced they will be retaliating against Trump's tariffs (as opposed to some fantasy World people live in where China takes Trump's crap lying down?) with tariffs on $75Bn worth of US Goods (which the US will pay for, of course) AND a 25% tariff on US autos beginning Dec 15th.

Don't worry though, Powell is making a speech at 10am from Jackso Hole and it's widely expected he will wave the money wand and "fix" things so we'lll take this pre-market dip about as seriously as we took the pre-market rallies this week – just more nonsens to make the Futures trades money. Like this morning, we can go long on the S&P (/ES) at 2,900 as it should at least be bouncy and tight stops below the line, of course. S&P Futures pay $50 per point, so it could easily be good for a quick $500 per contract.

The same goes for the Russell (/RTY) if it gets back over the 1,500 line – that makes for a good long bet too but only with tight stops below and only looking for a quick gain as it's too risky to hold into Powell's speech as there's little he can do but disappoint as the expectations are widely held now that the Fed will drop rates 0.5% when they next meet on Sept 18th and I don't think that's realistic.

The theme of this year's Fed Conference in Jackson Hole is "Challenges for Monetary Policy" and that seems like a bit of an understatement at the moment and Powelll's speech has the same title so there's not much to do but get ready for 10am and see how things shake out after his speech.

Have a great weekend,

- Phil

Thrilling Thursday – Markets are Half-Recovered Ahead of the Fed

August 22, 2019

"Woah, we're half way there

Woah, livin' on a prayer

Take my hand, we'll make it I swear

Woah, livin' on a prayer" – Bon Jovi

It's too early to tell if we'll have to be playing "Stuck in the Middle With You" into the weekend but we're certainly right in the center of the 50 and 200-day moving averages and exactly halfway back from our recent dip from 3,025 to 2,825 at 2,925 so all we can do is sit back and see what happens tomorrow as Jerry Powell speaks to us from Jackson Hole at 10 am.

The volume has been anemic this week so there are simply no tea leaves to read but, as you can see from the S&P 500 chart, we've fallen comfortably below the 200-day moving average and it is going to take more than lip service to jack the indexes back over the line though it is encouraging to see the 50-day moving average curving up slightly – indicating we could have a sustainable rally if we can keep things together for the rest of the month.

It's all about Jackson Hole on Friday though all we're really going to get there is more Fed spin and, as I noted in yesterday's Live Trading Webinar, I'm getting more and more inclined to cash out our portfolios while we can as we're finding less and less things to buy and, as value investors – that's a pretty good sign the market is putting in a top – something John Hussman agrees with us on in his August letter.

As you can see from Hussman's P/E chart, we've now passed the madness of 1999 and miles above where we crashed in 2008 and he has a dozen other charts and graphs to illustrate the point but my point, which I emphatically made yesterday, is that it simply isn't worth…

Whipsaw Wednesday – Low Volume Futures Rallies Mask Market Losses

August 21, 2019

Wheeee, what a ride!

The indexes fell off a cliff in afternoon trading but, not to worry because, as soon as the markets closes, the little manipulator gnomes went right to work and prettied things up for the Asian (9pm) and European (3am) opens – so no one even knew that the US sold off into the close and the total flat-line since 5am isn't the least bit suspicious – just normal human beings trading normally… Move along – nothing to see here folks…

The stock market is becoming a farce and that makes for dangerous trading conditions so caution is strongly advised. We are right back where we started the day yesterday so I won't bore you with a repeat of yesterday morning's PSW Report but I will point out that it doesn't count to get over the Strong Bounce lines if you can't hold them for 48 consecutive hours so, according to the 5% Rule™ – we're still not our of the woods on the recent correction.

This afternoon we get the FOMC Minutes from their July 31st meeting (2pm), when they gave Trump a 0.25% cut with Rosengren and Quarles objecting but the Minutes will give us color as to how supportive the rest of the Fed was as it's now widely believed that they will cut AT LEAST 0.25% at the Sept 18th meeting and Trump is asking for a 1% rate cut – which would be uprecedented and unhinged!

Of course, as usual, the markets are reading it wrong and, as usual, traders have absolutely no grasp of history as, historically, the Fed raises rates in a GOOD market and LOWERS rates in a bad market – ESPECIALLY at the top of a bad market as they attempt to forestall a looming disaster so the cut of July 31st was a warning – not a bullish signal!

And notice the key is the Fed generally cuts rates about 5% during a market correction and now we are starting at 2.25% so are we going to go for -3% when the market begins to tumble? -3% means you get paid to borrow money, which sounds good but no one is actually going to lend…

Technical Tuesday – Markets Pause at Our Strong Bounce Lines

August 20, 2019

Well, here we are.

As expected, we got to our strong bounce lines on yesterday's pre-market rally but then we went nowhere and now we'll have to wait and see if we go somewhere for the rest of the week. After getting properly spanked by Wall Street for his latest China tweets, the President has been more conciliatory – other than his continued attacks on the Fed, where he is now demanding a 1% rate cut. That too may backfire as it will be impossible for Powell to please the market with even a 0.5% rate cut and expectations are now over 85% that the Fed will cut at the next meeting.

As you can see from our S&P 500 chart (SPY), we're at the Strong Bounce Line – which is the same line we've been using all month, predicting both the bottom and the top of the correction. As you can see, the 50-day moving average is just above at 2,945 and the S&P is at 2,920 this morning and MUST HOLD that bounce line at 2,910, which I think it should do into the Fed. Our other indexes are also right around their strong bounce lines:

Dow 25,000 is the mid-point and bounce lines are 25,550 (weak) and 26,100 (strong)
S&P 2,850 is the mid-point and bounce lines are 2,880 (weak) and 2,910 (strong)
Nasdaq 7,200 is the mid-point and bounce lines are 7,360 (weak) and 7,520 (strong)
Russell 1,440 is

…

Monday Market Movement – Up We Go Again

August 19, 2019

Trump says we're "talking with China" and that's all it takes.

The Dow is up 300 points (1%), pre-market, as are the other indexes but I think it's the Fed's Jackson Hole Conference everyone is looking forward to as the rumor is the Fed is going to give us MORE FREE MONEY!!! – and we do love MORE FREE MONEY!!! – don't we? Not only are hopes high for Jackson Hole (Friday and over the weekend) but Asian Central Banks are expected to be easing as well and there are rumors that even fiscally conservative Germany is now talking about Government stimulus to boost the economy.

It's a very big deal if even Germany is going to start stimulating the economy – that should be enough to boost things though it's all rumor at the moment and why these Governments are in such a panic to support markets at or near their all-time highs is a bit of a mystery – because they already have negative interest rates and low unemployment, which means they have very little room to move if we do get into a real recession and, if you don't act during a Recession – things can get Depressing!

Weak economic data from Germany and China last week triggered a stock-market selloff and a bond-market rally, with yields on 30-year Treasury bonds falling to their lowest levels ever. The reaction illustrated the growing sensitivity of investors to worries about trade tensions and global growth. Unfortunately, Trump only used the last Fed Cut to launch additional tariffs on China, which are the real problem and, if the Fed gives Trump more cuts at the Sept 18th meeting – that might be the signal for Trump to attack China again – and that's the real catalyst that's spooking the markets.

Still, for now, like last week, the Fed is generally quiet and the markets can run back up on rumors. Only Randy Quarles speaks at 6pm tomorrow ahead of Powell's big speack from Jackson Hole Friday morning and it's a fairly light data week so not much to stand in the way of a good economic rumor as we bounce back towards recovery.

…

TGIF – The ECB Takes a Turn at the Stimulus Wheel

August 16, 2019

More free money!

That's what's got the markets rebounding this morning as the European Central Bank says they are preparing a "very strong package" of stimulus measures for its next policy meeting in September. Speaking in his offices in Finland’s capital on Thursday, Olli Rehn said the slowing global economy would see the ECB rolling out fresh stimulus measures that should include “substantial and sufficient” bond purchases as well as cuts to the bank’s key interest rate.

“It’s important that we come up with a significant and impactful policy package in September. When you’re working with financial markets, it’s often better to overshoot than undershoot, and better to have a very strong package of policy measures than to tinker.”

ECB President Mario Draghi last month raised the prospect of fresh ECB action in September, but the new comments from Mr. Rehn indicate that the level of stimulus is likely to be at the upper end of analysts’ expectations. By raising market expectations for the ECB’s September meeting, Mr Rehn’s comments could put pressure on any ECB policy makers critical of a large stimulus package to fall into line.

IN PROGRESS

Thrilling Thursday – Markets Yanked Around by Every Rumor

August 15, 2019

Wheeee! What fun!

At the moment, the Dow (/YM) Futures are up 200 points after being down over 100 points. The downturn was caused by China threatening to escalate the trade war (yet again), with the Minister of Finance saying that China "would take necessary countermeasures" against any new US tariffs and said the new tariffs "seriously violated the consensus" that Trump and Xi has come to at the G20 meeting. China meanwhile injected $2.4Bn of stimulus into Hong Kong and then said that Trump and Xi were engaging in phone meetings – flipping the Futures back up.

WalMart (WMT) had good earnings and positive guidance this morning and they are adding 50 points to the Dow by themselves with a 6% gain pre-market but I seem to remember WMT doing well in the last recession as more and more middle-class shoppers looked to cut costs so I'm not sure if what they see as a positive trend is really a positive for the US economy.

Meanwhile, remember that big blue line we drew on the S&P chart two weeks ago with bounce lines predicting the future action of the index? Well we're still there:

We discussed the 5% Rule in yesterday's Live Trading Webinar as well as our hedges and, at the time, we decided not to get more aggressively bearish, despite the TERRIBLE DAY the market had yesterday, as we are pretty well-balanced and the situation is extremely difficult to predict – so why bet bearish when we are comfortably neutral? 2,880 is the weak bounce line on the S&P Futures (/ES) and we failed that so my note to our Members after the Webinar reflected what I said at its close:

So ugly. Failed the weak bounces, looks like we're on the way to 2,700 (10% total corrections).

25,500, 2,850, 7,500 and 1,465 are the lines to watch, shorting the laggard if 2 go below and out if any get back above after that

…

Which Way Wednesday – Recession Worries

August 14, 2019

Now, where was I?

Before we were so rudely interrupted by yesterday's "rally," I was pointing out how there are simply too many macro fears to shrug off and get bullish. Despite the 70-point S&P stick on China "news" that we'd be having a phone call with them in September, I remained skeptical and we took advantage of the rally to begin closing out some long positions in our Options Opportunity Portfolio, turning it a lot more bearish. I had, in fact, said to our Members right at 9:56 am, in our Live Member Chat Room:

LOL, what a rocket on China Trade news! How silly…

So hard to take this market seriously when it goes up and down 5% based on whether or not we're going to speak to China on the phone in 2 weeks. It's like High School!

The market has, indeed, turned into more of a popularity contest than a true measure of economic activity. The Administration has learned how they can talk the market up or down at will but, as we just saw yesterday – it's a short-lived thing when there's no meat on the bone to back up their statements. Tartiffs are only delayed until Dec 15th after massive blowback on Trump's announcement last week and the "phone call" to China was nothing more than a face-saving attempt by the Administration so Trump could avoid saying he screwed up and misjudged how badly the market would take new tariff announcements.

The delayed tariff date will also boost orders into the holidays and give us a better Q4 than we probably would have had as people rush to beat the tariffs with their orders. That's something that will blow back on us next year, but Trump won't have to run on next year's GDP as it won't be over by the election so this year is his "report card" and, like his school career – the President is willing to cheat to get a C.

IN PROGRESS

Tumblin’ Tuesday – Back to 2,880 Again

August 13, 2019

A bit of a roller-coaster, right?

Since we posted this chart last week, we've been right in the range predicted by our 5% Rule™ and, unfortunately, that means we're likely to test 2,850 again and likely to fail it on the way down to 2,700 at the moment, we can blame escalating trade tensions between the US and China or, as noted yesterday, the Hong Kong protests which Cramer now says are serious (since reading my report) and, of course, yesterday, the Argentine Stock Market fell 48% in a single day – something that's got to make investors in the Developed World Markets reconsider the lofty valuations they are paying for stocks in countries run by tyrants-in-training.

I have been warning people to stay away from Argentina since 2013, when the index first spiked up to ridiculous levels and we had a correction but then spiked to even more ridiculous levels but now Argentina has given up all those gains and more and it's still a stay-away country with a President who lost an election and refuses to leave office (shades of futures past for the US?) and a bond market that's showing a 72% chance of default within 5 years – 50% higher than the chances were on Friday.

And this is why we told you to stay far away from 100-year bonds:

Meanwhile, Argentina is only one of many things on the Global Radar we should be paying attention to and, quite simply, when there are a lot of macro issues to be worried about – we should be a lot less willing to pay higher forward multiples for stocks – in case one of those issues becomes a bigger problem than it is now.

As you know, the bond market is already pricing in a Recession with the inverted Yield Curve, Germany and South Korea are both very close to recessions already, with almost no growth in the first half and Global Industrial Production and Manufacturing is also very near the contraction line below 50. Trade Growth is, of course, negative and not looking like it's going…

Monday Market Mayhem – Hong Kong Protests Shut Airport, Spooks Investors

August 12, 2019

China is boiling over.

The Hong Kong Airport was shut down today, culminating 10 weeks of unrest as the protests grow stronger and stronger over China's attempts to exert more authority over the former British territory. Oddly enough, this is something we thought would happen over 20 years ago, when Hong Kong was first handed over but the Chinese Government is very good at being patient before applying pressure – a lesson Trump is only just now beginning to learn.

Beijing cranked up the warning rhetoric on Friday aiming to put a halt to protests ahead of the weekend but it only intensified the situation and protests turned violent on Sunday with dozens of arrests in numerous clashes with the police. Late Sunday afternoon, thousands of protesters descended on tourist destinations and residential neighborhoods alike, building metal barricades and some throwing bricks and what police identified as smoke bombs.

Hong Kong Airport is one of the World's busiest, with hundreds of flights each day, it's closure disrupts a lot of business in Asia and, long-term, if people begin to feel they can't rely on it, there could be major economic repercussions.

“We are outraged by the violent protesters’ behaviors, which showed a total disregard of the law, posing a serious threat to the safety of police officers and other members of the public. We severely condemn the acts,” the government said early Monday. In recent public appearances, Hong Kong’s leader, Carrie Lam, has said the government can’t accede to the protesters’ demands.

Meanwhile, over the weekend, Trump indicated he is "not ready" to talk to China in September, likely pushing off any possible progress in the trade dispute into next year. As I keep saying, Trump loves his tariff slush fund and is very unlikely to give it up and he feels the Hong Kong situation is weakening China, so Trump is more likely to increase the tariffs than call them off next month.

IN PROGRESS

50% Friday – Indexes are Halfway to What?

August 9, 2019

So far, so good.

In the past 3 days, we've taken back 50% of the drop that we had in the prior 3 days but, if you think about it, that's not as strong going up as it was coming down and certainly the volume is fading with just 85M shares traded on the S&P ETF (SPY) yesterday vs 142M shares last Thursday (1st) on the way down. Total down volume for the 2nd, 3rd and 4th was 438M shares while total up volume for the 5th, 6th and 7th was 346M shares so 1/4 less shares traded with 50% less results.

What that means, in a nutshell, is there was a net exit of cash from SPY and, so we infer, from the entire market and that's like letting the air out of a ballon (or, in this case, a bubble) – it's simply not able to get back to the way it was before. That's why the 5% Rule demands symmetry, you need to rise as fast as you fell or we're still in danger and, since we're going into the weekend – we'll be adding back some hedges in the Short-Term Portfolio as we lightened up when we crossed over our Strong Bounce lines (which are all green at the moment).

IN PROGRESS

Thrilling Thursday – Strong Bounce Lines Tested

August 8, 2019

We're making some progress.

As we noted yesterday, we were looking to take back 2,880 on the S&P 500 and we finished at 2,884 and our next goal is the strong bounce line at 2,910 – after which we can put this weakness behind us and get back to our rally – because nothing that happened last week to cause the sell-off matters this week, I guess…

Our bounce lines remain:

Dow 25,000 is the mid-point and bounce lines are 25,550 (weak) and 26,100 (strong)
S&P 2,850 is the mid-point and bounce lines are 2,880 (weak) and 2,910 (strong)
Nasdaq 7,200 is the mid-point and bounce lines are 7,360 (weak) and 7,520 (strong)
Russell 1,440 is the mid-point and bounce lines are 1,472 (weak) and 1,504 (strong)

We made good progress yesterday, flipping the Weak Bounce Line on the S&P green along with the Strong Bounce Line on the Nasdaq and the Russell is right on the Strong Bounce Line at 1,503 this morning, so we turn that black. That's all we need to do to see if we are moving in a healthy or unhealthy direction.

Yesterday's move up came courtesy of Chicago Fed Governor Charlie Evans who said: "As long as inflation continues to behave the way it has, I think we have capacity to pursue these accommodative stances in support of the economy and sustaining the expansion and maximum employment. There is a role for risk management, and you could take the view, as I have, that inflation…

Wednesday Weakovery – Indexes Fail to Bounce, Held Back by Weak Earnings

August 7, 2019

2,880.

That's the weak bounce line on the S&P 500 and, as we predicted in yesterday morning's report, that's right where we ended up, though it was only due to a "stick save" into the close, which popped the S&P up to 2,881, but this morning, when we're back to 2,861 because that 20-point afternoon surge was nonsense – meant to entice retail traders into buying the dips (while the big boys sell into the bounces).

That's what our 5% Rule™ is for – to prevent us from chasing false rallies or panicking over normal corrections. The 5% Rule™ works best when bots are doing most of the trading and that's a trend that's worked well all decade and should continue to do so as we begin to look forward to the next decade as well.

Yesterday morning, in our Live Member Chat Room, we calculated the bounce lines for the other indexes as well so, to summarize here (green or red determined by Futures at 8:30 am):

Dow 25,000 is the mid-point and bounce lines are 25,550 (weak) and 26,100 (strong)
S&P 2,850 is the mid-point and bounce lines are 2,880 (weak) and 2,910 (strong)
Nasdaq 7,200 is the mid-point and bounce lines are 7,360 (weak) and 7,520 (strong)
Russell 1,440 is the mid-point and bounce lines are 1,472 (weak) and 1,504 (strong)

Before we had our Big Chart (thanks StJ), we just had the little spreadsheet in the corner of the Big Chart and that's really all you need to gauge the health and we simply count the red and green boxes and, if things are getting redder, the market is getting weaker and if things are getting greener, the market is getting stronger and anything that happens in-between those lines is meaningless.

Of course, the above bounce lines are just measuring the short-term action but we also apply them to weekly and monthly charts so we are able to plot our trading ranges over years of time. Another big factor in why the 5% Rule™ is so accurate is because, at the heart, it's based first and foremost of the FUNDAMENTAL…

Tricky Tuesday – Weak Bounces Look Like Rallies After Such Big Drops

August 6, 2019

Don't be fooled.

Yesterday, at 3:25 pm, in our Live Member Chat Room, I said we are very likely on the way to 2,700 on the S&P but, before that happens, we were very likely to get at least a weak bounce:

I think we'll have to wait for 2,700 on /ES. If 2,850 is halfway down from 3,000 (5%) then we're looking for 30-point weak bounce to 2,880 and strong would be 2,910 but that's not likely if we we're heading lower so look for a failure at 2,880 and then follow-through below 2,850 over the next few days.

As you can see on the chart, we ended up just under 2,850 at 2,844 and this morning the S&P has bounced to 2,856 after falling to 2,775 overnight. That movement doesn't matter, what matters is how we trade once the volume picks up and our 5% Rule™ tells us that we should expect a 20% retrace of the 150-point drop from 3,000, so that's 30 points (green weak bounce at 2,780) and, if that fails, then it's very likely we are on the way to 2,700, which becomes a 300-point drop and then the bounces we expect double to 60-points (red weak bounce at 2,760).

This morning, the talking heads on the MSM are saying we are bouncing because China didn't devalue the Yuan as much as feared but that's not the real reason we were dropping, that was the White House spin on why we were dropping to deflect the blame away from the President and his idiotic tariffs and yesterday, the US branded China a Currency Manipulator – further escalating trade tensions and making it less likely we'll be coming to an agreement – there's nothing bullish about that.

In addition to the currency move, Beijing said that Chinese companies had suspended purchases of U.S. agricultural products, and that the government has not ruled out putting tariffs on U.S. farm goods purchased after Aug. 3rd. China’s Central Bank said Monday’s depreciation was “due to the effects of unilateralist and trade-protectionist measures and the expectations for tariffs against China.” People’s Bank of China Governor, Yi Gang, said that China…

Monday Market Mayhem – Mass Shootings and Trade Wars Make Investors Nervous

August 5, 2019

Can America seem more our of control?

Over the weekend, there were two major shootings (Dayton, Ohio and El Paso Texas) where 30 people were killed and another 53 injured but that was Saturday. On Friday in Virginia and Maryland, 5 people were killed and 4 injured, which hardly rated a mention in the US press as it's a daily thing now but Sunday, while Dayton was happening, another 20 people were injured and 2 people killed in 2 incidents in Chicago, 1 in NYC and one in Memphis.

Before you think that Dayton and El Paso just distracted us from 22 people hurt by guns (and this only counts multiple death/injury incidents), keep in mind that, in the previous week (from 7/23 to 7/30), there were 16 mass shootings where 28 people were killed and 62 were injured including a dozen people in Brooklyn you probably didn't hear a thing about. Are we really that numb to this sort of thing that 50 people killed in July and 202 wounded didn't even get our attention? Maybe it's because it was less than the 217 wounded in June (only 34 killed though)?

And again, this is ONLY shootings with AT LEAST 3 people being shot in a single incident. So far, in 2019, we average 1.2 of those every day, 22 of them in schools. It's only Aug 5th but we've had over 450 total shootings in the US this year so it's a very good thing "only" about 1/3 of them are mass shootings or we'd still be picking up the bodies. Maybe that's what it will take – maybe we have to start tripping over all the bodies while we shop before we decide this madness has to end?

How can you look at these maps and not think something is very wrong with the way we're doing things in this country? How can you let your elected representatives get away with telling you there's nothing wrong with the way we do things? Do they tell you it's violent everywhere? Because it's not!

The US…

TGIF – Stop the Week, We Want to Get Off!

August 2, 2019

What a mess!

All of our summer gains are completely wiped out – thanks to the Tweeter in Chief, who sent the markets flying lower by proclaiming additional tariffs on China after this week's meeting yeilded no progress. Of course the meeting was just an excuse to place more tariffs as the US could hardly be serious taking a 14-hour flight to Beijing to have a 4-hour meeting and then not schedule the next one until September.

This is just political theater aimed at dragging out the negotiations while Trump places more taxes on the American people to add to his re-election slush fund that lets him hand out "relief money" to his biggest donors. Fortunately for Trump, as I pointed out Wednesday morning, his base is too dumb to know they are being robbed by the President, who confidently repeats the lie that China is paying these tariffs so often that it really is hard to keep a grip on reality.

Even by the President's own warped logic that China somehow magically pays for the tariff tax that is solely levied against US Citizens and Corporations, what about the retaliatory tariffs China has placed on US Goods? Wouldn't that mean that we are paying for those? Of course China makes no such claim because their people aren't idiots and, so far, China has "only" placed $113Bn worth of Tariffs on US goods but China last night said they will retaliate against Trump's new round of Tariffs.

As I've been saying since this began – this has nothing to do with China. Trump wants to tax the American people $125Bn to pay for the tax breaks he gave to his family and his Top 0.1% buddies and that's also why Trump was so gung-ho to ram a budget bill through that would raise the debt ceiling (and our debt) by $2.5Tn – BEFORE his tax breaks became an issue and were possibly repealed. Now he's got his tax cut extended for 2 more year and the first thing he does is go out and place more tariffs because that's "found money" in his budget that he can then turn around and hand out…

Thursday – Fed Fails to Support S&P 3,000 – Now What?

August 1, 2019

Whaaaaaaah!

The markets threw a little temper tantrum yesterday when they "only" got a 0.25% rate cut from the Fed and then, adding insult to injury, Chairman Powell did not promise more cuts for sure but said he might if wages stay low – so there's more incentive for our Corporate Masters to not pay us a fair share of the profits.

As you can see from the chart on the right (which has gotten worse, not better, since), Corporate Profits do keep rising but wages have been on a completely different track – especially since the Financial Crisis as Corporations were bailed out and people were not. The $15 minimum wage is hopefully going to balance that just a bit – but we're miles away from anything resembling a fair distribution.

Corporate Profits used to be 5% of GDP ($1Tn today) and Wages were 52% of GDP ($10.4Tn) in the 60s but now Corporate Profits are $2.4Tn and Wages are $8.8Tn but the difference is Corporate Profits are shared by the Top 1% while Wages are split by 100% of the workers, including the Top 1% who double dip by taking wages that are now up AVERAGING 300 TIMES what their workers make.

If you really want to Make America Great Again – maybe we should go back to the days when CEOs made 1/10th of what they do today and workers made 16% more than they do now. That's the problem, in order for one rich guy to go from 20x the average wage to 312x the average wage – you have to take 16% away from the other 99 guys. Why do they put up with that?

They might not for long as Democratic Candidate and Mayor of New York City said in yesterday's debate that "We will tax the Hell out of the Wealthy" saying:

“For 40 years the working people have taken it on the chin in this country. For 40 years the rich got richer and they paid less and less in taxes. It cannot go on this

…

Which Way Wednesday – Expected Fed Cut Keeps us Above S&P 3,000 – for Now

July 31, 2019

Apple (AAPL) is up 3.5%, pre-market.

That's boosting the Nasdaq 0.7% but the Nasdaq (/NQ) is only up 0.4% pre-market and AAPL is up 8 points and that's 70 Dow points and the Dow (/YM) is only up 71 points so there's actually broad-market weakness in this morning's "rally" and the Fed is expected to cut rates by AT LEAST 0.25% this afternoon and, if they don't, there aren't enough Apples in the World to hold this market up.

But let's assume they do. Then the question is: Will it be enough to lift the markets higher or has all this Fed generosity already been priced in to the 2,500-point (10%) Dow rallly since June 1st? AAPL is up (as of this morning's $215) $45 (26.5%) since June 1st so the market has not kept pace with its largest component by any measure. That is, in large part, because earnings growth has slowed down tremendously since 2018 and would probably be negative if not for the continuation of the Trump Tax Cuts (and now they want to cut more Corporate Taxes!):

While there has been some improvement in Q2 earnings so far with 40% of the S&P 500 reporting – it's not the S&P 500 we're worried about but small-cap stocks that are facing cost pressures and companies that do more business overseas, where economies are definitely slowing. In fact, the Eurozone's economy grew by just 0.2% in Q2 – just a tick above Recession and, adjusted for inflation – clearly in a recession. Japan has made similar downward adjustments to their growth as well – and Singapore, and Hong Kong and – well, you get the picture…

The ECB left their rates unchanged at last week's meeting but our beloved Commander in Chief has made it very clear that he will not tolerate any more responsible monetary decisions by our own Fed and he will get his rate cut or heads are gonna' roll…

Meanwhile, while we wait for the Fed decision at 2pm and Powell's press conference at 2:30, we should reflect on the fact that the China Trade…

Tumblin’ Tuesday – Monday’s Gains Quickly Reversed

July 30, 2019

So much for that "rally".

We call them "Meaningless" Mondays for a reason as nothing that happens on a Monday is any true indication of market direction – it's usually a low-volume affair that can be quickly reversed. Yesterday's volume on the S&P ETF (SPY) was 37.8M, less than what we usually have on a half-day of holiday trading. Volumes have been low for a long time as we topped out in the market and that's very scary as it indicates very weak support below the current prices.

Things are especially meaningless ahead of the Fed, which is geared up to disappoint the markets unless they give us a 0.5% rate cut, more than reversing December's 0.25% hike that sent the S&P down to 2,346, which is now 22% below our current level. If your stock is not earning 22% more than it was in November – then why would it not be able to fall back to that level just as quickly?

Beyond Meat (BYND) has been a market darling since its IPO in May at $25 and yesterday, at $222, they annouced earnings that were fairly ordinary and certainly not indicative of a 1,000% run but it wasn't the earnings that took them down 13% to $193 – it was the announcement that they would be selling 250,000 additional shares to raise $56.5M and that the CEO would be able to sell 1% of his 3,177,922 shares for $8M with lock-ups waived for some of the other big pre-IPO Investors (yes, it's optional, not mandatory – a lockup provision is there to protect the underwriters, not the ordinary shareholders, so it can be waived at the underwriter's discretion).

Keep in mind, despite their current valuation (not value!) of $13Bn, BYND's IPO only raised $240M by selling 9.6M (16.5%) of the 58.3M shares outstanding because they didn't know it was going to go to $240 in 3 months, did they? So it's very rational, with the stock above $200, to raise some more cash and it's very rational for the people who originally invested in the company to want to take a little off the table. It's not usual to change a lock-up period post-IPO, the lockup is sort of a promise made to new shareholders by original shareholders that…

Monday Market Momentum Continues Ahead of the Fed

July 29, 2019

How will July end?

It ends on Wednesday and Wednesday is Fed day and the FOMC announces their rate decision at 2pm, where a 0.25-0.5 cut is widely expected, followed by a speech by Jerome Powell at 2:30, where he pretends to explain why cuts were necessary for some other reason than to please the President. Ahead of that circus, we have the Dallas Fed Manufacturing Survey this morning (10:30), Personal Income and Outlays tomorrow (8:30) along with the Redbook Sales (8:55), Case-Shiller (9:00), Consumer Confidence and Pending Home Sales (10:00).

On Wednesday morning we have MBA Mortgage Applications at 7am, ADP at 8:15, Employment Cost Index (8:30), Chicago PMI (9:45), State Street Investor Confidence (10:00) and Petroleum Status at 10:30. Those are the last data-points that are going to influence the Fed ahead of their "decision" and, of course, there will be hundreds of earnings reports highlighted by the following:

So that's the set-up but the outcome seems to be a given as we no longer have a data-driven Fed but a politically-driven one and no one seems concerned that the independence of the Federal Reserve has been a cornerstone of our economic stability since the Great Depression. While we certainly have our issues with what is essentially a banking cartel operating under the guise of a Government entity – at least they were independent of the White House and ANY kind of check against Presidential over-reach would be welcome these days – as we have very few left – and now the Fed has given up and is about to lower rates when a hike would be more appropriate. That's just crazy!

With interest rates near their lower band, a key transmission channel of unconventional monetary policies – quantitative easing, yield curve control and forward guidance – has been to entice investors to take greater risk and hunt for yield outside of the traditional investment-grade bond market. This has inflated stock valuations, made junk bond yield look like investment-grade, and increased housing prices in major cities where real estate is a prized possession. All of…

Philstockworld July Portfolio Review (Members Only)

July 28, 2019

$2,285,000!

That's up a very healthy $191,432 from our Mid-Year Review just 3 weeks ago so I guess we're positioned a bit more bullish than we thought though we have added to our hedges since then. There was also a bit of a bounce back as that review had us down $40,487 from the June Review but we knew that was simply a poor time to take a snapshot and was likely to come back on its own. Actually, to check in (since these reviews were as of around July 19th) as of Friday our main, paired portfolios were at $1,598,911 on the LTP and $703,510 on the STP for a grand total of $2,302,421 so up another $17,421 with the S&P up very slightly means we're still a little bit net bullish, which means, next week, we'll lean towards finding some downside plays as we want to be very neutral into the Fed Meeting on Wednesday.

In perspective, $191,432 is only up 9.1% for the month and that's about what our audited Hedge Fund did so, on the whole, we simply did a good job of caputring a 3% up move in the S&P getting our usual leverage from our option positions. Once again, I want to emphasize our very important strategy of LEAVING YOUR POSITIONS ALONE (for the most part) as we only adjusted 8 of 80 positions in the Long-Term Portfolio in our last reveiw and mostly that was just housekeeping as July puts and calls expired and had to be swapped out for longer-term ones (Sept or Jan).

As we began 18 months ago with $500,000 in the Long-Term Portfolio and $100,000 in the Short-Term Portfolio, we're up combined $1,685,000 (280%) while our more conservative Options Opportunity Portfolio has gone from $100,000 to $336,374 (up 236%) and even the restricted Money Talk Portfolio has gone from $50,000 to $136,583, which is up 173% while the Butterfly Portfolio, which is not meant to make too much money (or lose it) is up from $100,000 to $187,736, which is up 85% over the same period.

We just began our Hemp Boca Portfolio with $50,000 (see our Virtual Portfolio tab for all of them) and that's at $52,923 (up 6%) after two months…

Fantastic Friday – Google Gains $75Bn Overnight

July 26, 2019

$75Bn!

That's how much the market cap of Google (GOOG) gained overnight in a 10% run that brings their market cap to $860Bn and back in contention for the Trillion Dolllar Club. There are only 30 S&P 500 companies valued at more than $75Bn: GE (GE) is only $92Bn, Caterpillar (CAT) is $75.8Bn and CVS (CVS) is $72Bn so, essentially, GOOG added an entire blue chip to their valuation in overnight trading.

Did $75Bn pour into the company? No, not at all, the overnight trading is very thin with less than 500,000 shares trading and, even at $1,200 per share and even if every transaction were a buy and not a sell, that's only $600M of inflows yet the stock shows that investors gained over 100 times that amount. That's one of the great illusions of the stock market, the APPARENT valuation of these companies has very little to do with actual money flows – it's more like an auction where whatever crazy price the last person bids on the last share sold becomes the price of hundreds of millions of other shares – regardless of whether there is actually demand for them or not.

We take advantage of this foolishness all the time in our options plays, where mispricings occur daily and I'm certainly not saying that Google, with their $60 per share in annualized earnings, don't deserve a $1,200 (20x) valuation – it's just that is certainly didn't really generate that kind of interest yet and it's a good example of how many, many stocks in this market are severely overpriced – having risen to all-time highs on very thin trading which povides very little support should sentiment ever turn negative.

This morning we're going to get our first look at Q2's GDP, which is expected to come in at 1.8% and that's down 42% from Q1s 3.1% growth rate – a very significant slow-down. The Atlanta Fed's GDPNow forecast, in fact, has lowered their projections for Q2 down to 1.3% – quite a bit lower than leading economorons and the market will not likely take…

Thrilling Thursday – Mueller Fails and Draghi Disappoints

July 25, 2019

Are we there yet?

The Futures were signaling peak euphoria as the Democrats failed to nail Donald Trump (as usual) despite 37 indictments of the people around him. Mueller's testimony was a huge disappointment as he stuck to the letter of the report (as directed to by Barr) so there were no big reveals to move the needle forward on Trump's corruption. Though there are still 5 open investigations, no one is in the mood to even talk about them after 2 years of Mueller came to nothing other than a certaintly that Russia massively intervened in the US elections to make Donald Trump President and 10 instances in which the President then obstructed the investigation into the Russian interference. You know, no big deal and we should all drop it because there wasn't a smoking gun.

As the President said: "I could shoot someone right on 5th Avenue and they couldn't convict me." Turns out he wasn't just bragging.

Obviously, the markets were pleased to not have the turmoil of an impeachment as it seems unlikely now that the Democrats have enough ammunition – or the will – to go down that road when the election is only 16 months away. There's certainly enough evidence out there to show what Trump did and the election will come down to a question of whether or not Americans care if they have a Russian-backed leader who flaunts the laws of the land. As long as the economy stays strong – why change horses, right?

The ECB is about to change horses as Draghi holds his last press conference but they surprisingly held rates steady, despite all rhetoric to the contrarcy and that's spooking the markets, which were up sharply ahead of the decision. If the ECB isn't lowering rates, maybe our Fed won't lower rates next week either and without lower rates – how will the economy survive? I mean really, is this what we've come to?

Despite leaving rates unchanged, Draghi did say that they expect rates to remain at the current level AT LEAST through the first half of 2020. 10-year notes in Europe currently yield 0% and, taking into account transaction fees AND…

Which Way Wednesday – It’s Mueller Time!

July 24, 2019

Politics!

Do they really matter? Like Willaim Barr, John Mitchell was Richard Nixon's Attorney General and, like Barr, Mitchell did whatever it took to keep his boss out of jail – making the cover-up worse than the crime and leading to the eventual impeachment of President Nixon, who resigned to avoid the disgrace of having what he did revealed to the American people.

Not only did that process take a long time but Nixon was re-elected during it. The Watergate Break-In happened on Sept 3rd, 1971 and Nixon was re-elected in a landslide a year later and then there were years of cover-up and posturing before 7 of Nixon's co-conspirators, including his loyal Attoney General Mitchell, were indicted on March 4th, 1974 and it was still not until August when Nixon finally resigned, a full month after the House voted to impeach him.

That's about 3 years, the same 3 years Trump has had only the GOP has controlled the House and Senate until just this January so there hasn't been a proper investigation and the results of the Mueller Investigation have been buried (and redacted) so today is a very important day for the President and the AG. One thing the President learned from Nixon is not to tape anything – Trump doesn't even let WH staff take mandated official records when he reports to Putin – that's smart.

So how are we going to nail this guy? We probably won't but, unlike Nixon, the Democrats hope to at least make the case to the American people that Trump should not be given another 4 years and, if that works, they can set about undoing the damage Trump has already done in less than 3 years (so far). This is likely to be an important and frustrating day in American History as nothing will really be accomplished today – but at least it will help draw the battle lines for 2020.

Market-wise, we're sitting right on that 3,000 line on the S&P this morning as the Futures have dropped overnight, giving up about half of yesterday's gains. Mueller is testifying at 8:30 and…

Tuesday: Testing S&P 3,000 (again)

July 23, 2019

5%.

That's all we're up from when the S&P 500 hit 2,850 back in Jan of 2018. That was 548 days ago and we're struggling to go up a full 150 points so it's very important to keep this "rally" in perspective and not use it as an excuse to overpay for stocks, just because we're in "record high" territory.

Just this morning we got great earnings reports from Whirlpool (WHR), who we have in our Long-Term Portfolio along with Lockheed-Martin (LMT) and United Technologies (UTX), both of which are still excellent value plays. There are plenty of good values out there – especially in the Retail and REIT spaces so, if this rally is real and if we're going to leave 3,000 in the dust – I'd rather play the value stocks to catch up than the momentum stocks to keep going.

We reviewed our portfolios last week and we pretty much decided to let everything run but we do have a ton of hedges – just in case they don't. We could make more money being more aggressively long but I'd rather be able to sleep at night, thank you very much. It's a big week with 144 of the S&P 500 companies reporting and 10 of 30 Dow components report with KO, BA, CAT, MCD and V still on deck. Also, tomorrow is Mueller time though Trump's New Attorney General, Barr, has already put a muzzle on Mueller, directing him not to discuss anything that hasn't already been revealed in the report – not even the redacted items.

The Justice Department is “taking the position that anything outside the written pages of the report are things about which presidential privilege hasn’t been waived,” the former U.S. official said. That, in and of itself, is obstruction of justice but only the Attorney General can bring those charges – and he's the one doing the obstructing! Trump invoked the broad privilege claim just minutes before the committee voted to hold Barr in contempt of Congress

We can certainly expect chaos in Congress into the weekend but they do seem to have agreed to a spending bill that will allow the Government to go $25Tn into debt to avoid a shutdown so Yay!, I guess…

IN PROGRESS

Just Another Manic Monday

July 22, 2019

We're waiting on the Fed.

The problem is the Fed is having their policy meeting a week from Wednesday and the Fed is entering their quiet period, where they refreain from talking about the markets so we will lose the Fed's talking support for the next week as well – what's going to keep us over 3,000 without endless promises of more Fed easing? Well, we don't really have to worry about that as we're not over 3,000 anymore anyway – so the pressure is somewhat off though it will now be very easy for us to slip into a bit of a downtrend – in the absence of "good" news.

We do, of course, have plenty of earnings reports this week, including WHR tonight, CMG tomorrow, BA, T, FB and TSLA on Wednesday, AMZN and GOOGL on Thursday and TWTR and MCD on Thursday – that and about 300 other reports to chew over for the week and not too much data to distract us until Durable Goods on Thursday and GDP on Friday:

All in all, this is a bad lack of news for the President, as we will be finally hearing delayed testimony from Robert Mueller on Wednesday, in what will be telivised testimony to two House Committees, who look for clarity regarding statements made by the Special Investigator in his April Report (yes, it was 4 months ago!). Democratic House Judiciary Committee Chairman Jerry Nadler on Sunday argued that there was "very substantial evidence" the President was guilty of "high crimes and misdemeanors" — the Constitutional standard for impeachment.

A CNN poll last month found that 76% of Democrats back the idea of impeaching Trump. But 54% of Americans overall oppose the idea. Trump, who has claimed he will not watch the testimony, tweeted simply on Sunday: "Presidential Harassment!" "If we had confidence that the President clearly did not commit a crime, we would have said that," Mueller said. That statement may provide the starting point for many of the questions from Democrats.

On the whole, expect to see the usual…

Federally Funded Friday – Rally Continues on Rate Cut Expectations

July 19, 2019

I hope I get it!

That's the chorus line the market pundits are taking this week and the Fed speakers have given them plenty of ammunition with Vice Chairman Clarida and New York's Williams making more doveish comments yesterday, which sent the indexes flying higher into the close and pushing the S&P 500 back over that critical 3,000 mark so it will look pretty for the weekend.

Since the data certainly isn't supporting a rate cut the Fed has now turned to fortune-telling to justify doing Trump's bidding:

“You don’t need to wait until things get so bad to have a dramatic series of rate cuts,” Clarida told Fox Business Network, citing economic research. “We need to make a decision based on where we think the economy may be heading and, importantly, where the risks to the economy are lined up.”

Clarida’s remarks line up with testimony last week by Fed Chairman Jerome Powell, and comments a bit earlier in the day from Williams, that have cemented expectations for a rate cut. Investors, weighing their words, increased betsThursday that the Fed will move by a half point at the July 31st meeting. While the U.S. economy is “in a good place,” Clarida said recent global economic data have been softer than expected. “We’ve had mixed data, but I do think the global data has been disappointing on the downside,” he said. “Disinflationary pressures, if anything, are more intense than I thought six weeks ago.”

Lowering rates 0.5% with the market at record highs and the unemployment rate below 3% is unprecidented and very probably insane but that is what the market is now expecting a week from Wednesday.

IN PROGRESS

Faltering Thursday – Failure at S&P 3,000

July 18, 2019

We did not hold it.

The S&P finished "Will We Hold It Wednesday" at 2,984, dropping 19.62 points from Tuesday's close and, since our run was from 2,800 to 3,000, that wasn't even a weak retracement, which would have been 40 points so we're still on a very bullish path unless 2,960 fails today but, so far, the Futures are improving.

The Philly Fed came in quite strong this morning at 21.8 vs just 5 expected and 0.3 in the prior reading and we can add that to strong Empire State Manufacturing (4.3 vs 2 expected and -8.6 prior), strong Retail Sales (0.4% vs 0.2% expected and 0.4% prior), lower than expected Business Inventories (0.3% vs 0.4% expected and 0.5% prior) although we did have declining Import (-0.9%) and Export (-0.7%) Prices and Industrial Production (0% vs 0.2% expected and 0% prior) was awful and Housing Starts (1.25M) were a bit disappointing.

We will get Leading Economic Indicators at 10 am and they are expected to be flat and tomorrow we get the Michigan Consumer Sentiment reading, which was last seen at 98.2 and that's it for our data so mixed – no matter what happens with the last two.

IN PROGRESS

Will We Hold It Wednesday – S&P 3,000 Edition

July 17, 2019

So far, so good.

Just a few days into earnings season but no major blow-ups yet and the S&P 500 is holding up over the 3,000 line but the volume finally increased yesterday and it was down volume, not up. We have to hold 3,000 for the whole weak to make a meaningful breakout and this evening we get earnings from a lot of heavy-weights like EBAY, NFLX and IBM and MSFT reports tomorrow evening so we'll have some clues as to how Big Tech is doing.

Bank earnings have been good so far and Dow components JPM, GS and even JNJ beat their estimates yesterday though the overall index still finished lower as sellers showed up and found not enough buyers to keep the prices level. That's the great danger in a low-volume rally: When it comes time to sell, there's no one to buy it from you and prices can drop very quickly.

IN PROGRESS

320% Tuesday – Global Debt to GDP Makes New Records

July 16, 2019

$246,000,000,000,000.

That's what we just hit in Global Debt as of Q1 and, as you can easily see by adding up all the numbers in the chart on the right, our Global GDP is just under $80Tn so we're now hitting the 320% mark on the debt to GDP scale for the first time in human history. And the US "only" has $22.5Tn of that debt so perhaps you are willing to ignore the complete inability of the US to ever pay that bill, but that still leaves $223,500,000,000,000 of debt divided by the remaining $60Tn, which means the rest of the world is getting very close to being 400% of their GDP in debt.

And what is the rest of the World doing about it? The same thing we are – they are easing their policies and they are spending money on stimulus programs because NO ONE can afford a recession – even a mild one can quickly lead to a total collapse that will ignite this global debt bomb – and no one wants to see that happen so we are Globally "extending and pretending" and waiting for the debt fairy to come and forgive us our economic sins.

While the Chinese Government is "only" about 100% of their GDP in debt, Chinese Companies make up for it with their own $21Tn pile of debt, 155% of their current GDP. In fact, Chinese firms accounted for 42% of all Corporate Bonds issued in Emerging Markets this year and the IIF says there are now serious risks of default next year and in 2021. Sonja Gibbs the IIF’s Managing Director for Global Policy Initiatives, said:

"It’s almost Pavlovian. Rates go down and borrowing goes up. Once they are built up, debts are hard to pay down without diverting funds from other goals, whether that’s productive investment by companies or government spending.”

“This is not a group of borrowers with long experience of managing debt over economic cycles. Once you get into a downturn, a lot of firms have a lot of debts that they will have difficulty in paying.”

There's been a shift to shorter-term borrowing in Emerging Markets as the yield curve widens and that leaves…

Monday Market Momentum Continues

July 15, 2019

And we keep going higher!

The S&P is now up 15% for the year and 25% off the December lows and 10% off the June lows, so it's been quite a year for the senior index. Citigroup (C) kicked off earnings season this morning with a decent report but tomorrow things begin to get serious and it will be a jam-packed couple of weeks as July 4th cost us a week so we're a bit behind in our reporting already.

Income at C is up 7% from last year at $4.5Bn for the quarter, which is $1.95/share vs $1.85 expected but revenues were only in-line at $18.5Bn so we're not likely to get a very enthusiastic reaction with the stock already at $72 (we are long C with a 2021 target of $75 in our LTP). There aren't many bank stocks we like but C is one of them so no surprise here. Wells Fargo (WFC) tomorrow will be much more interesing and Johnson & Johnson (JNJ) also reports in the morning and we'll see what they set aside for their talcum powder scandal.

These are probably the most fun earnings to play but it's early in the season and we have little to go on though we are already long on Skechers (SKX) and Cliffs (CLF) though SKX passed our $27 target long agao and we're just waiting to get paid as the spread is netting just $11,025 out of a potential $16,000 so it still has $4,975 (45%) left to gain between now and Jan 17th, 2020 even though it's +20% in the money – aren't options fun?

SKX Short Put

2020 17-JAN 30.00 PUT [SKX @ $34.11 $0.00]

-10

…

S&P 3,000 Thursday – Markets Up 350% from March 2009 Lows!

July 11, 2019

350%!

That's 3.5 times more than the S&P 500 was valued at just 10 years ago. That would imply economic growth of 35% a year for the past 10 years so kudos to all the believers although, to be fair, we thought the market was toppy at 2,850 last year and we're really only up 150 (5%) since then so let's not get too excited that we're finally hitting 3,000 after trying for 18 months.

All the heavy lifting, from 666 to 2,500 (275%) was done under Obama's watch and the economy was doing so well that the Fed was tightening and reducting their balance sheet. 30 months into Trump's turn in office and the Fed is hitting the panic button again, reversing course and actually going back to cutting rates to help stabilize an economy ravaged by rampaging deficits, political instability and pointless trade wars.

And that's considered the "GOOD" news that traders are embracing from Powell's comments as he stretches to justify bowing to pressure from the President to lower rates despite all the prosperity the President claims we are enjoying. Of course it makes no sense – but is that a reason not to pay all-time high prices for stocks? $1Tn for Apple, $1Tn for Microsoft, $1Tn for Amazon… sure, why not? After all, what's a Trillion anyway – we run up more than that in debt every 12 months now.

We're on a path towards making money meaningless so why not spend it on over-priced equities. As you can see from the chart above, it's been a pretty much straight up 10-year run with only 6 noticeable corrections so once every 18 months we average a pullback on our 350% run. No wonder so many people are trained to buy any dip – it's been a winning formula since Generation Y got out of college – they don't know any better.

Ignorance can truly be bliss in a bull market as traders are content to ride stocks like Amazon to the moon while more cautious investors might have taken some off the table half a Trillion Dollars ago. Just yesterday, AMZN gained 1.5% or $15Bn in market cap despite the fact that only $10Bn worth of shares…

The Hemp Boca Portfolio

July 11, 2019

A new portfolio!

One of our PSW Investment Companies, Hemp Boca, has a weekly radio show that I'm often a guest on and I've been giving trade ideas to their listeners and we have now begun to track them in a new virtual portfolio that we started with $50,000 and we're playing this one small and conservative – so it is a great way for people to get started learning to manage a small options portfolio.

We initiated the portfolio on May 21st so just over a month and we're only up 1.1% so far – so these are still good for new trades and we will add to the portfolio over the course of the year with a goal of making 25-30% annual returns. Initially, there's always a bit of a loss when you add new positions as you are penalized by the bid/ask spreads of the options since your broker always shows you the worst-case balance.

So far, we've deployed just $6,895 of our cash and about 1/3 of our ordinary margin. As this is our first summary of the positions, I will make some comments on each one as to the logic of the position and we will use these reviews for reference (as you always should with portfolios) to remind ourselves if our premises are holding up and whether or not our investments are on track to our goals at time progresses.

For those of you unfamiliar with options – it's really not very complicated.

A call is a contract you buy (or sell) that gives the the right to purchase a stock at a certain price between now and the expiration date for that contract. In the case below, we paid $4.20 for the right to buy IMAX stock for $17 between now and Jan 17th, 2020 – the expiration day for that contract. Our bet then, is that IMAX will be higher than $21.20 (our net cost) on that date. HOWEVER, we mitigated that cost by selling an equal number (10) of call contracts where someone paid us $1.78 for the right to buy IMAX stock for $21 between now and Jan 17th, 2020. That lowers our net basis on the spread to $2.42 and now we're netting

…

Which Way Wednesday – Waiting on the Fed (Again)

July 10, 2019

TODAY is the day!

I blame Econoday, which had Powell speaking yesterday on Monday's Economic Calendar but it turned out he is speaking today and tomorrow to Congress so the market just drifted along for the most part – continuing the boring trend for the month as we attempt to get over the 3,000 line on the S&P 500 (/ES).

We did the math for the 5% Rule™ in yesterday's Live Member Chat Room and decided that 2,976 would be the inflection point and we closed a bit over the line yesterday but we're right back on the line this morning.

Powell's testimony begins at 10am and goes on for a couple of hours but his official statement being released at 8:30 so we'll see a quick reaction (not necessarily the right one) ahead of the bell. Oil and Gasoline are up 2% off a strong API Report and the EIA Report confirms or denies those numbers at 10:30 – so that's another market-mover to watch this morning AND we have the Atlanta Fed's Business Expectations Report, also at 10 am and, just in case Powell doesn't get us over 3,000, Bullard has a speech lined up at 1:30 – just ahead of the Fed minutes.

8:30 update: So much for waiting for Powell as his statement has popped the Dow 100 points already and here are the key points from his statement:

Since June, uncertainty continues to weigh on the outlook

Inflation pressures remain muted

Uncertainty over trade, global growth

Business investment slowed ‘notably’

Brexit, debt ceiling are unresolved

‘Crosscurrents have reemerged’

Fed will ‘act as appropriate’ to sustain expansion

Baseline is still solid economic growth

Economy performing ‘reasonably well’

Inflation to move back over time to 2% objective

Traders are keying off "Fed will act as appropriate to sustain expansion" which indicates they are 100% behind this rally but it's a bit of cherry-picking as Powell is also saying we are on track to hit the inflation target (so easing makes no sense) and the "worries" he has for the economy are still Trade and Brexit (and their effect on…

Tuesday Testification – Powell Speaks to Congress

July 9, 2019

To ease or not to ease…

That is the question investors will be looking for Fed Chairman Powell to address when he testifies before the Senate Banking Committee this morning at 10:00 am. Friday's strong jobs report has led to a sell-off as investors now believe the Fed is less likely to cut rates at their end-of-month meeting and of course they shouldn't be cutting with record-low unemployment, rising inflation and a record-high stock market – that would be MADNESS!!!

Of course madness is Trump's sweet spot and he's been hammering on the Fed lately to lower rates because Trump needs to stretch this rally out another year or there's no way he'll get re-elected and he's going to need the Fed's cooperation because this rally has already overstayed it's welcome and is quite overdue for a correction. The Fed, for it's part, wants to RAISE rates so they are then able to LOWER them WHEN it is necessary. If they lower rates when it's not necessary, what are they going to do when it is?

That's the difference between thinking like a child and thinking like an adult, of course and, as our friends in the UK like to point out – Trump is essentially a giant baby with low attention span who likes to repeat catchy phrases with little understanding of the underlying issues and has an absolute melt-down if he doesn't immediately get what he wants.

Powell, like any Fed Chairman, is supposed to be the adult in the room and tries to intervene only when necessary – generally staying out of politics. The need for an independent Federal Reserve has been recognized by every President in US History – until this one… Even now, Trump is packing the Fed with his own people and is pressuring Powell to step down so he can put another sycophant in charge of our monetary policy – very scary stuff.

Fortunately, the Fed doesn't answer to the President and they don't answer to Congress either but, twice a year, they are required to appear before Congress and explain themselves – though Alan Greenspan was great at making a mockery of that proceeding. Bernie Sanders…

Monday Market Movement – Morgan’s Misgivings

July 8, 2019

Morgan Stanley says we're in a Recession already.

As you can see from this chart, the Treasury Yields are flashing signs we usually don't see until we are already deeply in a Recession only this time we're ignoring those signs, as well as dozens of other Economic Indicators that are screaming recession – to those who are willing to listen. According to MS, "decelerations and disasppointments are mounting":

Cass Freight Index

Retailer earnings

Durable goods orders

Capital spending

PMIs

May payrolls

Semiconductor inventories

…

Fallback Friday – Trump’s Parade Gets Rained On, S&P Teases 3,000

July 5, 2019

Wow are "THEY" trying hard to sell you this rally.

The official close on the S&P 500 on Wednesday was 2,995.82 but they pushed and pushed once the volume went down at the close and hit 3,000 after hours but it all began to unwind at 3pm – as soon as the European Markets opened and the volume picked up. That's a pretty strong indication that a lot of this "rally" is "fake, Fake, FAKE" but we can reserve judgment until 8:30, when we see the Non-Farm Payroll Report and the market's reaction to that.

As I noted on Tuesday, we're at the top (probably) of a 400-point run from 2,600 and, according to our fabulous 5% Rule™, we can expect a 20% pullback of this 15% move higher (2,990 actually) soi 400 points x 20% is 80 points back and since it's really 2,900 and since we like to round, we can say we expect to see 2,900 for a weak retrace of the run and somewhere between 2,800 and 2,840 (the real strong retrace from 3,000) should be a healthy pullback from here so that's the tendency we expect and now we'll see wha the data says.

8:30 Update: Up 226,000 jobs! That just blows away expectations of 160,000 and May was revised even lower, to 72,000 but this makes that look like an aberration and not a trend. Unfortunately, Average Hourly Earnings are only up 0.2% so people have jobs but they aren't making any money. You would think the markets would pop on that many jobs but no, too many jobs means the Fed is less likely to hike and their next meeting is July 31st, before the next jobs report – so this is what they'll be looking at and it would seem foolish for them to cut with these kinds of jobs numbers – where a HIKE is usually mandated.

"Fortunately" the jobs gains are mitigated by low wages so the Fed doesn't have pressure to raise rates but they would really have to twist themselves into knots in order to give Trump the cuts he wants and, of course, strong payrolls mean a strong demand for the Dollar and that's sending the Dollar up 0.5% which…

Philstockworld Mid-Year Portfolio Review (Members Only)

July 4, 2019

$2.1 MILLION Dollars!

$2,093,568 to be exact in our primary portfolios, the paired Long-Term Portrfolio (LTP) and the Short-Term Portfolio (STP) whose job is to protect it. It's really nothing to crow about as we're actually DOWN $40,487 since our June Review (through mid-May) though these numbers are only through mid June and the month finished with quite a bang. We close our months on option expiration day, of course, so we won't really know how the first half went until after July 19th and, by the time I consolidate that into a review it will be August and it would sound silly to call that a mid-year review – so that's why I'm calling this one a mid-year review.

While semantics are fun, let's get back to talking about trading strategies: Our intention over the summer was to lock down our portfolios in neutral as $2.1M is up from our Jan, 2018 start with $500,000 in our LTP and $100,000 in the STP so, overall, we're up $1.5M (250%) in 18 months and, with China Trade still up in the air, I'd rather protect my $1.5M in gains than risk them trying to make another $150,000 (10%). That's one of the problems you have as you make more and more money – you spend a lot more time protecting your wealth, rather than concentrating on making more wealth.

That's why we like to have multiple virtual portfolios at PSW. The LTP/STP is where we keep the bulk of our investing capital and they follow a strategy that is constantly hedging to protect what we started with. Nonetheless, they can still make spectacular gains but this cycle we have a very odd situation in which we have usually guessed correctly when we have added and removed hedges in the STP, causing an unusual $600,000 gain in a portfolio that usually loses money while the LTP gains.

It's been a very unusual market with lots of dips and recoveries and that kind of suits our trading style perfectly as we tend to scale into positions, buying small, conservative spreads to begin and adding more and widening the spread on dips. Another strategy we use is rolling our profits and the leads to a lot of our big gains. For…

Why Bother Wednesday? Low Volumes Ahead of the Holiday

July 3, 2019

There's not much going on this week.

It's only a holiday for the US tomorrow but so may people take vacations this week and the people not on vacation are planning parties and such and no one is in the mood to work – so very little goes on. Even as I go through the news I find a lot fewer articles being published – writers take time off as well. So no one is making news and no one is reporting news and Trump is distracted by his parade – let's just sit back and enjoy the quiet...

I didn't find a chart for a Thursday July 4th but that's probably just a flatline into the weekend – this is usually the week I take my family on vacation but my girls are getting older and have plans with friends and we'll do a family thing next month (when it's less convenient for me). Anyone who's been a boss knows this week is second only to Christmas in not getting anything accomplished but there is a Non-Farm Payroll Report on Friday, for some reason, so we can't completely ignore the markets.

The Futures are up a bit this morning as Europe has nominated the IMF's Christine Lagarde to replace Draghi at the ECB. I don't think Lagarde is going to be quite the dove they think she will be as she's been quick to lend money to struggling nations but does not sit on the lap of Goldman Sachs, as Draghi did (his previous employer). A truly independend ECB would be a great thing – but not so much for the markets.

Meanwhile, my theme of the week is gathering steam as now 82% of the companies pre-announcing earnings revisions are guiding down and Analysts have now downgraded the most stocks since June of 2017, though that's not really something to worry about since 2017 was a great year where we barely dipped. It's the fact that we're getting worse and worse that should be a concern, not the comparison.

In June, 116 more companies had their earnings forecasts cut by analysts than raises – that's 20% of the S&P 500. “There is some sagging in…

Testy Tuesday – Can We Hold onto the New Highs?

July 2, 2019

2,982.

That's where the S&P 500 crested yesterday and now we're back to 2,965 this morning after falling to 2,855 yesterday afternoon. We're so close to 3,000 that is makes no sense at all to be bullish into the holiday weekend as S&P 3,000 is going to be a tough line to cross as it's up 2,334 points (350%) from the March 2nd, 2009 low of 666.

Clearly companies are not making 350% more money than they did in 2009 but that's a false benchmark because the stocks were clearly UNDERvalued at the time and 666 was stupidly cheap for the S&P 500 but S&P 3,000 is still going to cause people to question valuations and, as I noted in yesterday's Report, Corporate Profits are very unlikely to justify these record highs and we begin to see those results on July 15th, as Q2 earnings begin coming in volume.

The run to 3,000 has come off our most recent consolidation at 2,400 and before that 2,000 and there's nothing wrong with moving up 20% (400 points) between 2015 and mid-2017 – that's pretty normal for 2.5 years but, just 2 years after that, we're up 600 more points and that's probably a bit much. We WERE having healthy consolidation around the 2,800 mark in 2018, when S&P 500 companies combined for $134.95 per share, giving the S&P 500 a Price/Earnings Ratio of 17.78 at 2,400. For Q1 of this year, we are pacing at $135.73, just a 0.5% improvement but, as we close in on 3,000 on the S&P, that's up 25% – and the P/E Multiple at 3,000 is 22.10 and that's up 24.3% – see the pattern?

I know it may not seem like it when you have a runaway market and it's easy to say that Fundamentals don't matter but they do to the people who aren't trading every day. The silent majority of traders are the buy and hold fund managers who hold

IN PROGRESS

Monday Market Movement – Trade Talks Back on with China!

July 1, 2019

The Dow is up 250 points pre-market.

That's after bursting over 100 points higher in the last 30 minutes of Friday's session. Overall, it's a very low-volume rally, mostly short covering (we will be covering some shorts ourselves) as Trump met with Xi at the G20 and he decided Huawei isn't spying on us after all (despite slandering them all over the world) and that Trump will not put tariffs on another $300Bn worth of Chinese goods but he is keeping the tariffs already in place. Keep in mind this is all to arrive at an eventual deal that is not likely to be substantially different than the deal he broke last year – so why all the celebration?

As you can see from the chart above, earnings haven't grown at all this year and it's been Valuation Expansion or Multiple Expansion that's accouted for 90% of the move in the S&P 500 for the first 6 months. Very simply, we are paying much more for the same earnings as last year. Granted a lot of companies did us "China" to excuse their shortfalls and we can imagine, with the Trade War hopefully winding down, that we'll get some real growth but that doesn't mean we're not paying too much for the growth we do get.

Notice that 87 S&P 500 companies have already pre-announced negative guidance for Q2 and, when we get back from the Holiday weekend next Monday, we'll begin to see those Q2 earnings reports. So, while we hedged heavily into the weekend – just in case the G20 went badly – we will be using those hedges into Q2 earnings season, albeit less aggressively as we sell some covers as well.

We know the Fed is certainly in no hurry to raise rates, so that's a big plus for the market but I'm not so sure the Fed is looking to lower rates as we are no in the 121st month of a market expansion – the longest in history (and 104 (86%) months of it came before Trump was President – in case you are wondering).

Nonetheless, Economists surveyed by Bloomberg see a 30% chance of recession over the next 12 months and growth…

EOQ Friday – Quarter Closes with G20 Meeting in Play

June 28, 2019

We've got high hopes!

Whatever problems the World has, we like to think our leaders are going to solve them and there is often a lot of faith put into these G20 meetings and, while it is great that our leaders get together and talk once in a while – it's really no different than any executive retreat – not a whole lot actually gets done – it's mostly an all-expense paid week off for 20 of the most powerful people in the World.

They do get together and issue a "communique" but already at this meeting France is insisting that the G20 make a firm statement on Climate Change and re-commit to the Paris Accords, which is something they have all done except Trump so it's really aimed at just him. Japan wants the communique to promote free trade and again, this is all about Donald Trump and trying to get him to agree with the other 19 World Leaders.

We always have high hopes into these meetings but I'll remind you that the last G20 Meeting was in Buenos Aires on December 1st of last year and that was a Saturday and on December 3rd the Dow topped out at 26,000 and by Christmas Eve (24th) we were below 22,000 – a 4,000 point correction after the G20 Meeting – so forgive me if I'm just a little sceptical as we head into another one pressing new market highs (26,650).

At the December Summit, the agenda was to discuss the Future of Work (as more and more people are being replaced by robots), Infrastructure and Sustainable Food along with the need for Crypto-Currency Regulation and resolving the Trade Wars. In fact, the US, Canada and Mexico sight NAFTA – oh, excuse me, the United States-Mexico-Canada Agreement, which is not just NAFTA again – and even that still hasn't been ratified 6 months later.

While the other 19 nations at the last Summit recommitted tot he Paris Climate Accord, saying it was "irreversible and committing to its full implementaion" they also aknowledged that the United States withdrew from the Agreement, so I imagine when France says they wants a statement on Climate – I assume they mean from the 19 rational countries because good luck changing Trump's mind on that one!

IN PROGRESS

G20 Thursday – World Leaders Gather as Storm Clouds Form Over Global Economy

June 27, 2019

Trump is on the other side of the World.

Unfortunately, that doesn't stop him from tweeting and the President was active last night, sending this very scary video out to his followers while calling the Democratic Debates "BORING!" (they were, but it's not polite) and calling NBC and MSNBC "FAKE NEWS Orgainzations", which undermines the basic principles on which our democracy was founded. All in a day's work for the President...

On his way to meet with the other World leaders, Trump insulted all of our allies saying that, if the United States were attacked, Japan would only “watch it on a Sony television.” He called Germany a security freeloader and chastised India for raising tariffs on American goods.

Trump has meetings scheduled with each of those leaders tomorrow so we're off to a great start already. The President has already spoken favorably about Vladimir Putin and told reporters that what they discussed in their meeting would be "none of your business" and Saturday Morning, Trump is scheduled to meet with Mohammed Bin Salman, who had Jamal Khashoggi murdered and dismembered – Trump had nothing bad to say about him either.

As noted in the New York Times, Trump also continues to repeat his lies about NATO – our primary military alliance:

After assailing the treaty with Japan, Mr. Trump went on to repeat what has become a perennial attack on Ms. Merkel’s Germany. “We pay for close to 100 percent of NATO,” he said. “People don’t know that. We pay for close to that because Germany doesn’t pay what they’re supposed to pay, and out of the 28 countries, seven are paid up.”

As he has consistently done since taking office, Mr. Trump mischaracterized how NATO works and

…

What Now Wednesday? Powell Disappoints, Mnuchin Makes Promises…

June 26, 2019

Wheeee, what a ride!

As we expected, Powell's speech yesterday was a disappointment and the Dow fell 200 points during Tuesday's session and you can see why we're using the DXD ETF as one of our primary hedges. We stayed down overnight but, early this morning (about 5am) Steve Mnuchin jumped on CNBC at midnight in Bharain to tell Hadley Gamble that the US and China were "90% of the way there" on the path to a trade deal.

This is, of course, meaningless nonsense as we're the same 90% of the way there as we were when trade negotiations broke down a few months ago so Mnuchin is simply tearing a page out of Chamberlian's book to declare "Peace in our Time" to score points at home, no matter how untrue the facts of the matter are. Still the market responds like Pavlov's dogs EVERY time someone in the administration says we are making progress on trade, and this morning was no different with the Dow Futures (/YM) popping over 100 points (0.4%) on the "news", we get a rally.

We had the same "good news" at the last G20 meeting in December, when the headlines were: "Donald Trump and Xi Jinping declare trade truce at G20" yet here we are, 7 months later with even more tariffs and even less progress. We were 100% then, we're 90% now – what exactly is the market celebrating?

Certainly it wasn't the Data as we had TERRIBLE numbers from the Richmond Fed, New Home Sales missed by 10% and Consumer Confidence dove 10% in Expectations and 8.3% overall. Consumer Confidence is now at a 2-year low while Economorons predicted it would be higher – which shows you how clueless the people making pronouncements on this economy truly are!

As you can see from the chart, forward expectations (red) re now lower than they were when Trump took office in January of 2017. If we see the other segments move lower to join them, then we really have to question:

700 (31%) S&P

…

Toppy Tuesday – Trouble at 2,950 – Again

June 25, 2019

At least it's not 2,800.

The S&P is back up 150 points from our DOOM!!! line, which didn't turn out to be very doomy when we failed it 27 days ago. In fact, we bottomed out at 2,740 and now we're up 210 points (7.66%) and we tested 2,860 and failed that but never came close to the +15% line at 2,990. 2,925 is the +12.5% line so we'll keep an eye on that but if the Russell (/RTY) can't get back over 1,550 – there's really nothing to be bullish about.

7,750 on the Nasdaq (/NQ) and 26,800 on the Dow (/YM) are the other lines to watch and we've made good money – over and over again – shorting the Dow Futures at that spot. We got some good market news this morning as AbbVie (ABBV) is buying Allergan (AGN) for $63Bn, which is 50% over yesterday's closing price. When investors see one deal like that, they assume the whole sector is undervalued. ABBV may be overpaying as AGN only has $15Bn in revenues and has lost money consistently and is a bit of a one-trick pony with Botox, which is more than half their total sales but they were supposed to turn things around this year and they did make $2.5Bn last quarter ($5Bn profit projected for 2019) – so I guess they saw something others did not in their due diligence.

Meanwhile, tensions with Iran continue to heat up as Iran's President Hassan Rouhani called the White House “mentally retarded,” dismissing the Trump administration’s latest round of economic sanctions as pointless and declaring that Iran would not be intimidated. Rouhani’s personal attacks on Trump are especially significant. In the context of the Iranian political system, Rouhani is regarded as a moderate who is relatively open to negotiations with Washington, and the insults from Rouhani further diminish the already-remote prospects of talks between the two sides.

Oil (/CL) is hovering around $57.50, which is up 15% for the month so you can thank President Trump when you fill up your gas tank next week. Gasoline (/RB) is at $1.86 and that's up 12% – so far and we may see $2…

Monday Market Movement – Post Fed, Pre G20

June 24, 2019

There's a whole lot of nothing going on this week.

We''re in between earnings seasons and in between market-moving events and, though we do have a GDP Report on Friday, it's the third revision to Q1, not a new report and should be steady at 3.1% so – yawn. It's the 2nd Quarter's GDP that's in trouble as estimates have that down around 2% and possibly below. Durable Goods come out on Wednesday and, unless they are a strong positive upside (doubtful), we're closing Q2 with a whimper, not a bang.

Other data that matters this week is Consumer Confidence tomorrow along wiht Home Sales and Personal Income and Spending on Friday along with Michigan Sentiment. Earnings season restarts in the middle of July with bank earnings but, until then, it's pretty much all speculation as to whether things are getting better or worse on the eearnings front.

One major data-pont that has us worried is Factory Activity, whichhas gone into contraction in the US, Europe and Japan and is sitting at decade lows as of the June surveys. And it's not just the PMI that's in the dumps, the latest IHS Survey found strong correlation to the downside in all aspects of Manufacturing AND Services:

Flash U.S. Composite Output Index at 50.6 (50.9 in May). 40-month low.
Flash U.S. Services Business Activity Index at 50.7 (50.9 in May). 40-month low.
Flash U.S. Manufacturing PMI at 50.1 (50.5 in May). 117-month low.
Flash U.S. Manufacturing Output Index at 50.2 (50.7 in May). 37-month low.

IN PROGRESS

TGIF – Four Witches Test the Market Highs

June 21, 2019

It's quad witching day!

The quarterly expiration of options and Futures contracts can cause a great deal of market volatility and, when your indexes are pushing all-time highs – down is a lot easier than up so we're still shorting the Dow (/YM) Futures below the 26,800 line which was good for 200 points yesterday and gains of $1,000 per contract and our Nasdaq (/NQ) Futures short call at 7,800 from yesterday's PSW Morning Report (subscribe here if you want to stop missing these calls) is good for more than 50 points so far – also gaining $1,000 per contract. What a great way to finish the week!

Futures are a very valuabale tool to have in your trading belt but can be dangerous. Usually we play options, like Wednesday morning's call to go long on Gasoline (and you don't even want to know how much the Futures have made if you didn't play it), which is now at $1.85 due to a massive refinery fire in Philadelphia, where we had the following trade idea:

Speaking of justifications, OPEC is acquiescing to Russia's demands to move their meeting to July 1-2 in Vienna and OPEC will do ANYTHING to get the Russians to join them in cutting production – just in time to screw American drivers over the July 4th Holiday. If you believe in OPEC+, you can play the September Gasoline Futures (/RBU19) long off the $1.65 line ($1.62 has been the lows so I'd plan to DD there for a $1.635 avg and stop below $1.60) or you can play the Gasoling ETF (UGA) and I'd go with:

Sell 10 UGA July $28 puts for $1.40 ($1,400)

Buy 20 UGA July $27 calls for $1.70 ($3,400)

Sell 20 UGA

…

Thursday Thrust – Powell’s Comments are Spun to Blast Market Higher

June 20, 2019

“The case for somewhat more accommodative policy has strengthened.”

That is the phrase investors are taking to the bank from Powell's press conference yesterday. While the Fed Chairman didn't bow to Trump's pressure to deliver an immediate cut – he did leave the door open to interpretation that he was willing to cut rates the moment the economy begins to falter – giving investors a "Powell Put" to the market.

It wasn't the US markets that took Powell's statement as bullish but overnight the spin was in and now the Dow Futures are up 250 points as the spin doctors chimed in overnight to take any stray word Powell said and treat is like it was policy:

“The market now knows the Fed is going to ease unless the data dramatically reverse,” said Steven Blitz, chief U.S. economist at TS Lombard.

For the Fed to not cut rates at its July meeting, “it would take all of the data coming in to be consistently strong,” together with an end to trade-related uncertainty, said Seth Carpenter, chief U.S. economist at UBS.

The central bank’s rate-setting committee on Wednesday dropped language from its policy statement describing its stance as “patient”—which implied rates were on hold. Instead, it said uncertainties about the economic outlook have increased, a phrase it has used during past periods of rate cuts. “The committee will closely monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion,” the statement said.

Of course that means that IF Trump makes a Trade Deal with China or tensions with Iran calm down or earnings or economic data improve – then the Fed will have no reason to cut so will good economic news be bad news for the markets going forward? We'll have to see but, for now, the madness continues.

IN PROGRESS

Record High Wednesday – Will the Fed Pop Us or Drop Us?

June 19, 2019

We are so close – again.

Back on May 3rd, I explained how the market was confusing efficiency for a strong economy, noting that Corporations can make more money while the people starve. At the time, I noted that materials sector performance looked too weak for a proper bull market and, for the quarter, we're still in very bad shape with Petrolum down 9%, Natural Gas down 19% and Copper down 7.5% – those are not signs of a strong recovery.

Speaking of Copper (/HGZ19), yesterdsay morning's long trade idea from our PSW Report (subscribe here if you don't want to miss our trade ideas) with contracts jumping from $2.64 to $2.70 for gains of $3,000 per contract before lunch! Our options trade idea for Freeport-McMoRan (FCX) is slower-moving but that stock gained 1% yesterday and will really take off if there's progress with China.

Meanwhile, the indexes blasted higher as Trump tweeted out that he will be meeting with China's Xi at the G20 this weekend and, although that's kind of the point of the G20 – people are very excited about it. Also, as noted in yesterday's Morning Report, Draghi fever spread across the markets and anticipation couldn't be higher that our Fed will also signal that it's ready to cut rates, buy bonds, buy assets – whatever it takes to keep the rally going becuase what on this Earth is more important than making rich people richer?

Nonetheless, we are urging caution into the Fed Report and yesterday, in our Live Member Chat Room, we discussed a good 3-month hedge to take us, not just through today but through the summer:

Hedge/QC – Two factors in selecting a hedge is which index is ahead of the others (that's what the Big Chart is for) and which index is most likely to fail. From the Big Chart, the Dow is now back to the May high S&P close and Nas lagging a bit and RUT lagging a lot so Dow or S&P and BA may come down more and drag the Dow and others if the trade talks blow up so

…

Terrific Tuesday – Draghi Fever Hits the Markets, Blasting Higher

June 18, 2019

More free money!

This is why Goldman Sachs put Mario Draghi in charge of the European Central Bank (ECB) – exactly for a moment like this when they need to boost the US markets and this statement couldn't have been timed better – just ahead of the start of the Federal Reserve's 2-day meeting that will lead to a policy announcement tomorrow at 2pm. Draghi said the ECB is "ready to launch another round of stimulus" as inflation remains below targets.

That target is, of course, 2% and if we were over 2%, they would be raising rates to fight it so the entire process is ridiculous but the most ridiculous thing is basing your entire monetary policy on a singly, unreliable data-point. Of course, the inflation target is just an excuse because, over or under, we've seen Central Banksters call it "transitory" – meaning they will totally ingnore it when it suits them. In this case – the Masters want to see all-time highs in the markets – so low inflation is our #1 excuse to jack up the markets.

Low rates aren't free – taxpayers subsidize the wealthy by artificially reducting rates through Government Debt (where the wealthy lend the Government money to subsidize their rate cuts) and we are being forced to do this (year 10) in order to force the prices that we pay to go unnaturally higher (in order to increase Corporate Profits so the wealthy can have more money). Are you beginning to see a pattern here? It didn't take long for the Oligarch-In-Chief to weigh in on the subject:

Donald J. Trump‏Verified account @realDonaldTrump 1h1 hour ago

…

Monetary Monday – Market on Pause Ahead of the Fed

June 17, 2019

We're wating on the Fed.

We have "the greatest stock market in history" and "the greatest economy in history" with "record employment" but, if the Federal Reserve doesn't lower rates below the current 2.5% they have set – it will be "a disaster". Clearly, to any rational person, something must wrong with those statements existing at the same time but they all come from our President's lips and far be it for me to call Donald Trump a liar – so I guess we just have to accept that it's all true.

30-Year Fixed Mortgages are still 3.5-4.0% yet Home Sales are still trending lower and that's impacting a lot of high-paying construction jobs which, in turn, impacts the materials industry and even banking, as less people look for loans to buy homes and then the Durable Goods crowd can't sell washing machines, refrigerators, couches and TVs and there's less hardware and paint sales, etc., etc.

Housing, as always, is a major driver of the economy and it's kind of hard to ignore it when it begins to falter – but that's exactly what the market is doing at the moment. This is where the panic is coming from as even a 1% rise in rates last year has caused a 10% decline in housing activity and we NEVER came close to getting back to our pre-2008 levels in the first place.

What Trump doesn't understand is that, for the average American, low rates aren't enough to get them to invest in real estate. You can't "take advantage" of low rates on homes you can't afford and very few Americans have $50,000 to plunk down on a $250,000 home – not that there are many $250,000 homes left anymore anyway. Not only that but Property Taxes have risen out of control and Trump has limited their deductability – making the rises much harsher and not many people in the bottom 90% have tax lawyers to get them out of paying their share.

IN PROGRESS

Faltering Friday – Triple Trouble at 2,900 on the S&P 500

June 14, 2019

"Falling, yes I am falling

And she keeps calling

Me back again" – McCartney

Here we go again.

It's always something that stops us from making new highs as we hover around our 10% line which is the TOP of our expected range into the end of the year. What we actually expect to happen is we settle back down around 2,700 on the S&P (/ES) but the market doesn't seem to want to correct properly so we keep getting these low-volume rallies that keep us near the top.

That's fine with us as our Long-Term Portfolio has held up nicely so far while our Short-Term Portfolio, where we have our hedges, made some nice gains on the last dip and we were wise enough to lock them in near the bottom. We just did an STP Review where we cashed in our Russell Ultra-Short (TZA) hedges and I think, into the weekend, we should add back a new hedge to replace them. I don't know if rising tensions with Iran and China (who just pledged to stand behind Iran) will bring us back to our DOOM!!! line at 2,800 on the S&P but we can look at hedges similar to the ones we used on May 30th to catch the last dip:

Sell 10 Macy's (M) 2021 $20 puts for $3.75 ($3,750)
Buy 40 SDS July $31 calls for $1.50 ($6,000)
Sell 40 SDS July $34 calls for 0.55 ($2,200)

The net cash outlay on the spread is just $50 and it pays $12,000 if the S&P Ultra-Short (SDS) climbs back to $34 and, of course, stays there into July 19th expirations. SDS is a 2x ETF and currently $31.85 so we need a $2.15 move which is 6.7% so about a 3.5% drop in the S&P should do it – to just under 2,800.

There's also the long-term obligation to buy 1,000 shares of Macy's (M) for $20 ($20,000) so make sure you REALLY want to own them and, if not, we had a few…

$2,000 Thursday – Our Webinar Trade on Oil Pays off Big Already!

June 13, 2019

We didn't start the fire

It was always burning

Since the world's been turning

We didn't start the fire

No we didn't light it

But we tried to fight it – Billy Joel

No, we didn't start the fire…

However, we did go long on oil in yesterday's Live Trading Webinar as it tested the $51 line and now Iran has apparently attacket two tankers in the Strait of Hormuz with torpedoes, critically damaging one of them and US ships are heading in to assist and Oil (/CL) is already at $53 (up $2,000 per contract) and Gasoline (/RB) has blasted from our long position at $1.68 to $1.725 and that's up $1,890 per contract but both could squeeze higher as the shorts wake up to a nightmare scenario.

This is a tragedy, we may end up in war and it's certainly not the way we wanted to be right (fortunately no one was hurt) - we simply bet that Oil and Gasoline had gotten way too low based on Fundamentals and the fact that they exploded higher on an incident simply proves our point. We will keep $400, trailing stops (10% of the profit) at this point as we may end up with another $2,000 gain from here – hard to say how high the squeeze will take us at the moment.

Another odd reaction is the stock of Frontline (FRO), whose tanker was hit. Rather than going lower, FRO is up 8% this morning as it's an old tanker and they'll be happy to get the insurance and it's one of 61 tankers they own and, with oil higher, they'll be making more money – especially if trips get longer as tankers try to avoid Iranian waters.

In other commodity news, Soybeans have really taken off, and the September contracts (/ZSU19) which we had featured over at Seeking…

What Now Wednesday? Trump Talks Tough on Trade – Tanks Markets

June 12, 2019

Oops, he did it again.

For some reason, last night, Trump decided to place more tariffs on China – again – and said he was "personally holding up a trade deal with China and that he won’t complete the agreement unless Beijing returns to terms negotiated earlier in the year."

“It’s me right now that’s holding up the deal,” Trump said at the White House before he left on a trip to Iowa. “And we’re going to either do a great deal with China or we’re not going to do a deal at all.”

I keep saying that Trump doesn't actually want a trade deal and simply wants an excuse to tax the American People (who pay for the tariffs – not China) to offset the taxes he and his rich friends are no longer paying as well as to give him Billions of Dollars to hand out to voters in the form of "tariff relief" – which is simply a way to alleviate the damage HE is causing.

Trump has already threatened to raise tariffs on China if President Xi doesn't meet with him at the G20 at the end of the month and even Trump's most loyal supporters must understand that this is not the way World leaders usually schedule appointments but the good news is Xi will be at the G20 and Trump will be at the G20, so Trump will be able to claim he "met" with Xi – regardless of what actually happens – an easy win for Trump to claim.

Meanwhile, Xi allowing Trump to be an ass and make ridiculous demands and accusations is hurting him at home and emboldening opponents, many of which would take a much harsher stance on the US than Xi, as well as protesters like in Hong Kong, where over 1M people (15% of the entire population) hit the streets. This morning the protesters managed to delay the voting on the extradition bill, which would allow Hong Kong residents to be transported to mainland China for trials, which is like Trump passing a bill that forces you to appear before his court in Washington if he doesn't like something you…

Terrific Tuesday – Up and Up We Go

June 11, 2019

Day 6 of the rally.

I'm not upset because I wanted to crash, I'm upset because we didn't get a proper correction and now, this low-volume move back up doesn't give me enough confidence to enjoy the rally or assume we'll get to higher highs than the ones that have been rejected before.

How many times can we rally because we made progress on fixing things that weren't broken in the first place? What's next:

Mars is invading
Trump is talking to Mars
Mars is not invading – market soars to new highs

Have we really gotten this stupid? What happened to trading on earnings and performance? I'm a Fundamental Investor so of course I don't like it when the Fundamentals are ignored – it's very annoying. It doesn't stop us from making money, however as yesterday, right in the PSW Morning Report, I said: "The Russell (/RTY) is lagging in the recovery and can be played long over the 1,520 line but with tight stops below because NOTHING actually happened since the Russell was at 1,620." As you can see, we got a lovely pop off that line at the open:

Oh yes, I should clarify, that was early in the Morning Report (it's sent out to our Members while in progress) but, at the end of the morning report, I said:

We're well over all our bounce lines now so we can't make any bearish bets but what the Nasdaq 100 (/NQ) for a possible rejection at 7,500 and, of course, 2,900 on the S&P (/ES) and 26,200 on the Dow (/YM) also seems to get rejected a lot but we should still squeeze out a quick 15 points on the Russell (/RTY) at 1,535 before that happens and +$750 per contract is a great way to start the week off.

So 1,535 was our target and it was a pretty good one – as you can see from the chart. At 12:24, in our Live Member Chat Room, we flipped bearish and played the Nasdaq Futures to go lower:

With the

…

Made Up Monday – Trump’s Fake Mexican Melt-Down Ends

June 10, 2019

All is well, again.

How many times are we going to fall for this BS? Turns out Trump had already gotten concessions out of Mexico months ago and his "demands" for border security has already been agreed to so there were never going to be any tariffs on Mexico – it was just Trump stomping his feet and beating his chest in order to look like he actually accopmplished something – as well as to distract us from all the crimes he's about to be indicted for.

The Futures are up another 100+ points this morning and we're just 500 points away from a full recover – back to our record highs after a 1,000-point drop in May – and it's only June 10th.

The Russell (/RTY) is lagging in the recovery and can be played long over the 1,520 line but with tight stops below because NOTHING actually happened since the Russell was at 1,620 ($5,000 per contract higher than 1,520) – except the fact that the President has once again shows how completely unstable he is and THAT remains a bit of a concern to me – and it should to anyone who has money at risk in the markets.

We completely ignored last week's TERRIBLE Non-Farm Payroll Report and the downward adjustments to the last two reports and the ecitement over possible Fed Rate Cuts was over statements the Fed made that assumed we were placing tariffs against Mexico that would crash the economy – that's now off the table because the Fed, like us, made the mistake of believing something Trump said he would do (10,796 lies in 869 days so far).

UK Manufacturing Output fell 3.9% in April and that is a REAL thing that actually happened. GDP fell 0.4% in April and puts the entire quarter on track for a 0.3% recessionary drop – adjusted from +0.5% expected just two months ago. These numbers may be skewed by the original Brexit deadline of March 29th, which may have pushed a lot of production and orders into Q1 – ahead of that deadline.

Unfortuantaly, we won't know the truth until…

Non-Farm Friday – Markets Bounce Back Despite Trade Deadline

June 7, 2019

Hope reigns eternal.

Today we'll see how well the Non-Farm Payroll Report goes at 8:30 but we're up another quarter-point at the moment (7:30) in anticipation of a strong report, led by Government hiring for the 2020 census. Even with the extra workers, only 180,000 jobs are expected so it's going to be an easy upside surprise and wages are expected to be up at a 3.2% annualized pace with, of course, no sign of inflation – that the Fed can see, anyway…

On the right is the ShadowStats chart of REAL Inflation, which is pegging near 10% using a consistent methodology since 1980 – before the Government began tweaking the measurments to make sure the Data was no longer able to show inflation. In essence, what the Government has done is like measuring the temperature in Celcius instead of Farenheit in order to show you how they have cooled off the planet because they didn't bother changing the units on the chart – it's a huge scam and it's getting more and more out of control as the lies get bigger and bigger to cover it up. As noted by ShadowStats:

Consumer Price Index Has Been Reconfigured Since Early-1980s
So As to Understate Inflation versus Common Experience

CPI no longer measures the cost of maintaining a constant standard of living.

CPI no longer measures full inflation for out-of-pocket expenditures.

With the misused cover of academic theory, politicians forced significant underreporting of official inflation, so as to cut annual cost-of-living adjustments to Social Security, etc.

Politicians look to expand further the concept of artificially-suppressed cost-of-living adjustments in current budget-deficit negotiations, through the use of the Chained-CPI.

Use of the CPI to adjust retirement benefits, private income or to set investment goals impairs the ability of retirees, income earners and investors to stay ahead of inflation.

Understated inflation used in estimating inflation-adjusted growth has created

…

Trilling Thursday – Bouncy Markets Face a Test into the Weekend

June 6, 2019

We are hitting our goals.

The Dow is over the strong bounce line at 25,500 by 160 points (at 200 points it's a 50% recovery), the S&P 500 is right at the strong bounce line of 2,830 and Futures indicated 5 points higher, the Nasdaq 100 is right at it's weak bounce line at 7,250 and the Russell is right at the strong bounce line at 1,510. With 3 indexes over the bounce line we like to go long on the laggard so this morning's Futures Trade Idea is to go long the Nasdaq over the 7,250 line – with tight stops below OR short the Dow (as it's the over-achiever) if the others fail their lines and the Dow fails 25,600 – with tight stops above.

That way, we can make nice money in either direction while we watch and wait to see which way our bounce lines resolve themselves (which then informs us whether to get more bullish or bearish into the weekend):

Dow 26,700 to 24,700 is 2,000 so huge 400-point bounces to 25,100 (weak) and 25,500 (strong)

S&P 2,950 to 2,750 is 200 so 40-point bounces (or what I said above) to 2,790 and 2,830

Nasdaq 7,850 to 7,100 is 750 so 150-point bounces to 7,250 and 7,400

…

Wednesday Weakovery – Low Volume Rally Gives Us Hope

June 5, 2019

Quite the bounce.

All it took was a few words from China, Mexico and, of course, the Fed and the market was off to the races again led by the small-cap Russell Index, which is already testing the strong bounce line at 1,510 in the overnights. We're still waiting for the Nasdaq to make it's weak bounce line at 7,250 but, on the whole, we're glad we kept our longs in play (covered with hedges, of course). As it stands now, we've got a lot more green on the chart than we had yesterday morning:

Dow 26,700 to 24,700 is 2,000 so huge 400-point bounces to 25,100 (weak) and 25,500 (strong)

S&P 2,950 to 2,750 is 200 so 40-point bounces (or what I said above) to 2,790 and 2,830

Nasdaq 7,850 to 7,100 is 750 so 150-point bounces to 7,250 and 7,400

Russell 1,600 to 1,450 is 150 so 30-point bounces to 1,480 and 1,510

That's really about as much progress as you can expect for one day but the underperformance of the Nasdaq is a concern and, as you can see from the daily chart – even the 100-point rally off the bottom isn't enough to put much of a dent in the 850-point drop – so we'll be watching the Nasdaq very closely today to let us…

25,000 Tuesday – Dow Tests a Critical Line from Below

June 4, 2019

25,000 or bust!

That's what we'll be watching today as the Dow Futures (/YM) rally 116 points (8am) to come back to the 25,000 mark and yesterday, in our live Member Chat Room, we drew out the following bounce lines:

Dow 26,700 to 24,700 is 2,000 so huge 400-point bounces to 25,100 (weak) and 25,500 (strong)

S&P 2,950 to 2,750 is 200 so 40-point bounces (or what I said above) to 2,790 and 2,830

Nasdaq 7,850 to 7,100 is 750 so 150-point bounces to 7,250 and 7,400

Russell 1,600 to 1,450 is 150 so 30-point bounces to 1,480 and 1,510

As you can see from the sea of red, we didn't make much progress yesterday but the Russell is back at their weak bounce line this morning so there is some hope that the dip buyers are still out there. Yesterday's volume was good for a Monday but we ended up flat for the day so non-committal too.

The better news is the S&P 500 tested and held the 2,730 mark we predicted in the morning right on the button and that's our 5% line so a good sign if that continues to hold as it means we're still consolidating in the higher part of our expected trading range (see yesterday's notes).

Keep in mind the index gains are far less impressive since the Dollar is down over 1% since Friday's open while 40 out of 2,730 S&P points clocks in at 1.46% so we're barely keeping up with Dollar deflation on this "rally" so far. That also makes Oil's (/CL) drop from $66.50 to $52.50 seem even worse, as that's a 21% correction and we should be getting $2.50 bounces to $55 (weak) and $57.50 (strong) but we were firmly rejected at $55 and smacked right back to $52.50 – a very bad sign if we fail again and it's not likely the markets will recover if oil is slumping this badly.

If oil has a 21% correction and heads lower, it's very likely we'll see the S&P, Dow and NYSE follow as they have plenty…

Monday Market Mayhem – Stocks Continue Lower

June 3, 2019

Greetings from Havana!

I'm over in Cuba checking out this Communism thing as, clearly, Capitalism just isn't cutting it anymore and we'll need a better alternative for 2020.

Before 1959, Cuba was run by a US-backed regime which was ousted by Fidel Castro, who allied himself with the Soviet Union and, ever since then, Cuba has been BAD, like Iran is BAD but for different reasons that we had to make up since they overthrew a totally different US puppet Government. That makes it a bit confusuing as to why we're supposed to hate everyone but it seems hate is becomming a huge US export lately – there seems to be plenty for everybody.

Predient Obama and Raul Castro attempted to begin normalizing relations in 2008 and between 2009 and 2013 the number of self-employed workers in Cuba tripled thanks to reforms including decentralizing the agricultural sector, relaxing restrictions on small businesses, liberalizing real estate markets, easing Cubans’ ability to obtain permission to travel abroad, and expanding access to consumer goods. While the state still controlls 70% of the island's $92Bn economy, they were making good progress until Trump rolled it all back – now it's unclear how Cuba is doing – so I think it's worth a look.

Cuba's economy is 20 times bigger than Puerto Rico and they mostly trade with countries in South and Central America – not Russia – not at all. Canada is 10% of Cuba's trade but it's dominated by Venezuela, more than 1/3 of the total and Venezuela's a mess and that hurts Cuba.

IN PROGRESS

Friday Market Failure – Trump Temper Tantrum Lashes Out at Mexico

May 31, 2019

The whim of a madman!

That's a line from Speed used to describe Dennis Hopper's insane actions and demands (he was a mad bomber) and I used it to describe Trump's trade actions back on May 7th and yesterday Robert Meuller clarified the fact that President Trump is indeed a criminal and simply can't be convicted only because he is currently the President. Hundreds of former federal prosecutors signed a letter stating that Trump’s conduct would be chargeable as a crime if he was not the president. Mueller’s view is that it’s up to Congress, not him, to make that decision.

This has now led to Trump, who needs another distraction, lashing out at Mexico and threatening to sanction them with tariffs (ie. – more taxes on the American people) if they don't stop people from legally crossing through Mexico on their way to the United States where they attempt to LEGALLY seek asylum. The US, of course, looks completely ridiculous, trying to force a foreign Government to solve what is really a domestic problem and it puts the entire USMCA (NAFTA) in jeopardy but also makes us look completely irrational to anyone else we're negotiating with:

WASHINGTON—President Trump said Thursday the U.S. would impose escalating tariffs on all Mexican imports beginning June 10, in an effort to push the country to deter the flow of asylum-seeking Central American families to the southern border.

Reacting to what he described as “Mexico’s passive cooperation in allowing this mass incursion,” the president said the tariff on America’s third-largest trading partner would begin at 5% and grow steadily, hitting 25% on Oct. 1 unless Mexico takes satisfactory action to halt the migrants.

“If the illegal migration crisis is alleviated through effective actions taken by Mexico, to be determined in our sole discretion and judgment, the Tariffs will be removed,” Mr. Trump said in a statement released by the White House.

The president also lashed out at Democrats, who he said “refuse to help in any way, shape, or form.”

We import $346Bn worth of goods from Mexico and a 25% tariff tax, paid by the…

Thrilling Thursday – Failure at 2,800 Spells DOOM for the S&P 500!

May 30, 2019

This is not good!

The only reason the S&P 500 is holding the 200-day moving average at 2,776 is because the 200 dma keeps sinking. That, of course, is also pulling the 50 dma lower and once it comes down we're only a month or two away from a "Death Cross" and then we would be looking at a very long, very hard climb back for the senior index.

That's why it is very, VERY important that we finish the week back above the 2,800 line on the S&P and the 1,500 line on the Russell and the 12,500 line on the NYSE and the 25,500 line on the Dow and the 7,250 line on the Nasdaq 100. Anything less than that is DOOM!!!!

While we are pretty well-hedged for DOOM!!!! we did add to our hedges yesterday, in our Live Trading Webinar, and we'll be adding more hedges on Friday if the indexes don't perk up and get back to their levels which, though nowhere near a recovery, would at least indicate that there is SOME buying interest still out there – something we're beginning to doubt. By all indications, it does look a lot more like we're consolidating for a move down – rather than a move back up:

Of course, that's why we have our bounce lines – they let us know whether a recovery is real of if it's just a dead cat bounce on the way to the next lower band. The lines we've been using all month are:

Dow 25,200 is the 5% line and the bounce lines are 25,450 (weak) and 25,700 (strong)
S&P

…

Whipsaw Wednesday – They are Selling in May and Going Away!

May 29, 2019

"Sell in May and Go Away."

It's one of those market truisms that works often enough for people to think it's a thing and it's certainly been a thing this year as the month of may has sucked for US Equities. Fortunately, we were properly skeptical of the rally and I said to our Members in our April Portfolio Review on the 30th:

"I hate to be in this position as we're clearly benefitting from RIDICULOUS market conditions and I know from experience that, no matter how many times I say it, people won't believe how quickly we can give back a big chunk of these profits. Just this morning, GOOGL went down 8%, INTC is down 13% in the past week… If that can happen to big blue chip stocks – what can happen to the other crap?"

Well, now we're seeing what can happen to the other crap as Q1 earnings were certainly not enough to get the S&P to 3,000 and now we're back BELOW 2,800 this morning and that's going to be a critical failure if they can't take it back.

Keep in mind that our last "recovery" was driven by rumors, often started by the President, that trade talks with China were going great and a deal was on the table. That, not really suprisingly, turned out to be total BS (as we warned every morning for weeks) and now the negotiations have clearly fallen apart and, just yesterday, China ramped up their threat to cut off their exports of Rare Earth Materials – a move that would ground the US economy to a halt at a flick of a Chinese switch.

Unfortunately, Trump has chosen to bluff when he had no idea what cards China held and now it turns out they have a very strong hand and are not afraid to play it. It is simply not possible for the US to fill their demand for rare earth materials without China and Trump has pushed China into a corner where they may have to retaliate to our sanctions with this, er, trump card they've been holding the whole time.

IN PROGRESS

Tuesday Already – Short Week Begins with a Bounce

May 28, 2019

May has not been kind to the markets.

As you can see from the S&P chart, we're down from 2,950 back to just over 2,800 and it's about a 5% drop (2,802 is exact) and that means, according to the Fabulous 5% Rule™, that we can expect AT LEAST a 30-point bounce to 2,830 but the exact number is 2,832, which is EXACTLY where we are at about 8:30 this morning.

The reason the 5% Rule is so amazing at predicting these levels weeks in advance is that it's not TA, we're merely exploiting the mathematical convergences inherent in bot-trading programs – which dominate trading these days – ESPECIALLY in low-volume markets, like we're having now. In fact, here's the S&P chart we drew on 5/15 – still stuck in the range we expected:

Remember, the 5% Rule can only tell you the range the indexes are likely to track in and we are Philstockworld can only tell you how to profit frtom trading those moves – the rest is up to you.

Speaking of things that were up to you – congratulations to all who stuck it our with us on our Gasoline (/RBN19) trade as we got a nice pop Friday that followed-through into this morning and now we're up over $2,500 on two contracts and we're very happy to lock that in with a tight stop at $1.94 since both Silver (/SI) at $14.30 and Natural Gas (/NGv19) at $2.60 are both back to our buy points as the Dollar pops back to 97.70 so we're happy to switch horses at this spot.

Fututres have been all over the place as Trump said yesterday that the US is "not ready" to make a Trade Deal with China. China's Industrial Profits fell in April but that was before the new round of tariffs so it's hard to say if Trump is "winning" or just kicking China while it's down – something the Middle Kingdom will not soon forget. In reality (something the President is not very familiar with), the drop in profits was mainly due to the comparison to high profits a…

Friday Flip Flop – Market takes back SOME of the Losses – Still Down 5% for the Month

May 24, 2019

Up and down we go – but mostly down.

We're still stuck in that range but at least we haven't failed the 200 dma – yet. The Russell has already failed and the NYSE was on the line yesterday but recovered to hold 12,500 and this morning the Futures are up a little so it doesn't look like it will be a total catastrophe into the weekend – so we still have that to look forward to.

As you can see from our S&P 500 chart, we're stuck in a range between the 5% and 10% lines on our Big Chart as well as between the 50-day moving average and the 200 dma and whichever way this resolves itself should set the tone for the 2nd half of the year but first, it may be a summer where we drift in-between. That's why we're so easily swayed by any news item – when you are trading between major support and resistance – it takes very little to change your course.

We're still playing for Gasoline (/RBN19) to change it's course and we're very surprised to be losing $1,250 per contract at the moment on our long position from Wednesday's Live Trading Webinar and we now have 4 long contracts at an average entry of $1.935 with /RBN19 at $1.905 and the good news is it will be cheap to fill up our tanks ahead of the holiday weekend and the better news is we are still expecting a run up – maybe not until next week though…

Our theory is that the rollover of /RBM19 (June contract), which expires on Tuesday, is putting downward pressure on /RBN19 (July contract) and that the timing of the last EIA Report (through 5/17) failed to capture the orders for gas stations who are topping their tanks off this week – ahead of the holiday driving. AAA expects this to be the busiest holiday driving weekens since 2005, when we were still a care-free nation who thought housing was a great investment.

The markets were high in 2005 also and they kept going higher for 3 more years before finally collapsing. This morning, Durable Goods are down 2.1% for April but a lot of that is from BA and core Durable…

Faltering Thursday (Again) – Trump Tantrum Spooks Markets

May 23, 2019

The President is losing it.

Yesterday, he invited the House and Senate Democrats to meet with him to discuss Infrastructure and they had been discussing $2Tn worth of it but, when they showed up, Trump demanded they drop their investigations or he would not spend any money on Infrastructure – even though it's something America desperately needs action on.

Trump is not above holding America hostage to get what he wants – he shut the Goverment down for 35 days last year just to get funding for his wall and, so far, $1.57Bn has bought America 1.7 Miles of fence. President Donald Trump also commented on the progress of the wall construction on Twitter Wednesday, saying “tremendous work is being done.”

The Democrats did not agree to stop investingating Russian Interference into the US Elections which happens to also include potential charges of collusion and obstruction of justice on behalf of the President and his inner circle. One could say Trump's actions yesterday were obviously yet another attempt to obstruct justice by threatening people involved in an ongoing investigation but, regarless of that – this man is clearly not acting rationally and, unfortunately, he's our President.

It's interesting that Trump is complaining about the Mueller Investigation costing $35M (his estimate, not a fact) when Trump has spent $102M of the taxpayers' money playing golf in the past two years – and that is a FACT. In fact, Mueller has already collected $47M in fines so there's a $12M+ PROFIT from the investigation, not to mention that there have already been 37 people indicted for criminal activity including 26 Russians who interferred with our Demcracy and, so far, 7 people have already pled guilty, including several who were serving directly under the President.

I know people don't like to talk about politics on investing sites but this is serious stuff, folks! When this happened yesterday I told our Members to "GET OUT!!!" of the markets as this was clearly going to lead to some serious selling as, if nothing else, we have a completely dysfunctional government which will be doing nothing to address many, many critical things AND we're on a…

What Now Wednesday – More Trade BS Halts the Rally

May 22, 2019

Not again!

Now Trump is "considering" Huawei-like sanctions on Hikvision (a $37Bn company) and Zhejiang Dahua Technologies, sending both companies limit-down 10% this morning, even though the US is only 5% of Hikvision's sales. Other companies are supposedly on Trump's "list" but they have not been disclosed.

Meanwhile, yesterday, China's President Xi toured a rare-earths manufacturer, likely to point out that China actually has us by the balls as they supply 90% of the rare materials that make electronic manufacturing possible.

On his tour, President Xi was shown on state television on Monday accompanied by his emissary to the trade talks with the U.S., Liu He. Stock prices of companies associated with the industry soared in China in anticipation of a potential increase in prices of the materials. Beijing exerts critical influence on the supply of rare-earth materials. The 17 elements have high-tech uses: neodymium for permanent magnets in mobile phones, terbium in LED lights and dysprosium used to cool nuclear rods, for example. Though the minerals are found in abundance in many parts of the world, processing them into materials is often highly polluting, sometimes releasing radioactivity. China holds that production chain.

This whole thing could be part of a brilliant plan by Trump to manipulate the situation to allow him to lift the environmental restrictions on rare-earth mining in the US. and Texas Mineral Resources Corp. (TMRC) is one company that would greatly benefit from such a decision. I don't usually play penny stocks, but this one could be fun at 0.27, as they would certainly be in the right place at the right time if Trump can play the "national security" card (again) to allow TMRC and others to begin strip-mining America. That's certainly worth a few board seats for the Trump family down the road, right?

We already began the day shorting the Dow in our Live Member Chat Room, my note to our Members at 7:06 am was:

/YM is a nice short below 2,850 if /ES is

…

Tariffic Tuesday – Markets Bounce Back – Again

May 21, 2019

What a month this has been!

It's all over now because Monday is a holiday and EVERYONE (who matters) is out the door early on Friday or Thursday or Wednesday for that matter and they don't come back until next Tuesday or Wednesday or, if they do – they sure aren't working much. While Americans complain that they don't get many holidays – they certainly seem to stretch the ones they do have out quite a bit.

I said we shouldn't expect much volume and yesterday's SPY volume was 60% of Friday's and I think we'll see even lower transaction numbers as the week goes on. In other words, the whole thing is a joke – you may as well take the week off. Our picks from yesterday morning were no joke as the Nasdaq (/NQ) Futures popped back to 7,450 this morning for a lovely $1,000 per contract gain from the long play we discussed in Monday Monring's PSW Report. Likewise the S&P Futures (/ES) gained 10 points at 2,860 (again) and that was good for $500 per contract – not a bad way to start our trading week.

This morning we're playing JULY Gasoline (/RBN19) Futures at $1.99 and I'll be very surprised if we're not at $2.05 by Thursday and, at $420 per penny, per contract, that could be good for $2,520 per contract – good enough to barbeque some steaks instead of hot dogs this weekend. A stop below the $198 line limits the risk to $420.

This weekend is the start of "Summer Driving Season" and the EIA forecasts a slight increase in consumption vs. last year, despite a 1% increase in overall fuel efficiency for the motor vehicle fleet:

For summer 2019, EIA forecasts U.S. motor gasoline consumption will average 9.54 million barrels per day (b/d), up 29,000 b/d (0.3%) compared with last summer’s level and nearly the same as the record summer average set in 2017. Highway travel is forecast to be 1.3% higher than last summer. The forecast increase in highway travel is largely because of growth in employment and population. The effect of the increase in highway travel is forecast to be partially offset by a 1.0%

…

Monday Market Madness – Trade Worries Continue to Weigh Down Markets

May 20, 2019

And down we go again!

Don't worry, it's not only Monday but it's a pre-holiday week so the volume is likely to be low and it's hard to break out of a range on low volume – even to the downside. That means we kind of like playing 7,400 on the Nasdaq (/NQ) Futures for a bounce – with tight stops below tha line. The S&P (/ES) Futures are also playable if they get back over 2,850 (now 2,845) with very tight stops below that line as /ES is $50 per point, per contract – so we don't want to mess around.

The Nasdaq bottomed out at 7,300 on the 13th and the S&P was 2,800 with the Dow (/YM) 25,200 and the Russell (/RTY) 1,520 so, if we fail to hold our lines this morning – that's the next place we'll take a stand but the Russell is already down at 1,527 and looking a bit shakey – so be very careful this morning.

We did get a nice pop this morning on Natural Gas, which was our long idea from Wednesday's Live Trading Webinar and we're already up over $500 so that's now our stop line but hopefully $2.75(ish) will hold and we'll leg up further but congrats to all who played along with that one on the quick winner.

We also, of course, blew through our hoped-for 25-point drop on the Nasdaq (/NQ) as we're now down over 100 points from our Webinar short and that one is good for $20 per point, per contract so $2,000+ on that short and that's why we love the Futures – it's a great, quick way to hedge your portfolio that quickly returns the cash you need to adjust your bullish positions – like we did last week in our Portfolio Reviews.

Speaking of the Portfolio Reviews, I want everyone to keep in mind that I have been saying for the past month that we are only staying in our portfolio positions to demonstrate how to trade through a downturn in the market and we ABSOLUTELY would have cashed out any portfolio that mattered to our long-term financial future.

We are very

…

Faltering Friday – Markets Give Up Half the “Rally” on No News

May 17, 2019

The markets are very moody.

Just when we got the S&P back to our 10% line, we're down 20 points this morning and back below the 50-day moving average (2,866), back at the 2,860 line that marks the bottom of our 5% correction zone on the bounce charts we've been using all week. It's a very disappointing setback and, if this is how we're going to go into the weekend – we are going to need more hedges!

At the moment (7:30), however, the 5% Rule's™ Bounce Chart™ looks like this:

Dow 25,200 is the 5% line and the bounce lines are 25,450 (weak) and 25,700 (strong)
S&P 2,860 is the 5% line and the bounce lines are 2,875 (weak) and 2,890 (strong)
Nasdaq 7,475 is the 5% line and the bounce lines are 7,540 (weak) and 7,605 (strong)
Russell 1,550 is the 5% line and the bounce lines are 1,565 (weak) and 1,580 (strong)

We were all red except the Dow (which was at the weak bounce line) on Tuesday morning so this is still progress, but just yesterday afternoon we only had 3 red boxes left to capture and we would have been back to bullish. That's what's useful about the Bounce Chart – it keeps you from making bad decisions by making sure the rally is real before…

The PhilStockWorld.com May Money Talk Portfolio Review

May 16, 2019

Are we weathering the storm?

So far, not so bad as we're down $14,755 from our April Review, when the overall market was 5% higher. Options tend to be very volatile, of course and the Volatility Index (VIX) is higher now, which inflates the asking price of the options we sold. This doesn't matter as long as we're not buying them back at the moment, but it can make our balances look ugly.

Not that being up 125.8% is "ugly", of course, but we were up 155.3% and it sucks to backslide. Another problem we have at the moment is our hedges certainly don't kick in on a 5% market drop – so they are not helping but, since I can only adjust this portfolio when I'm live on BNN's Money Talk (here's the April show), I needed hedges that would keep us safe all the way into July, which will be the next time I'm on the show (once a quarter it becomes the Phil Show).

Since our longs were on track to make $83,104 in a flat to slightly down market – we don't mind losing a bit of money on our hedges to take us through a rough quarter – like this one. As I said on the show, we expected at least a minor correction but there's a fear of missing out (FOMO) as this portfolio was only at $88,922 on Feb 15th, so of course we were going to give back some of those ridiculous gains – but that doesn't invalidate our long-term positions, so we choose to ride out the rough spots.

As FUNDAMENTAL VALUE INVESTORS we believe that stocks – even the ones we like – can be too expensive, as well as too cheap. When they are too cheap, we buy them – when they are too expensive, we sell them. It sounds logical but how many traders actually do it when the time comes? Unfortunately, we can't make adjustments until July but we can certainly check in our our positions – so let's do that.

Nasdaq Ultra-Short ETF (SQQQ) - A hedge we

…

Will We Hold It Wednesday – Weak Bounce Edition

May 15, 2019

This is not pretty.

We're down in the Futures and pretty much back where we were at Monday's close – a bit higher but, more importantly, failing our weak bounce lines 2 days after the drop and that's generally a sign that we're consolidating for a move lower – not recovering.

I mentioned last week that there's nothing the Russell could do to avoid a "death cross", where the 50-day moving average crosses below the 200-day moving average and that's a bearish sign and, as of this morning, the 50 dma is 1,562 and that's now below the 200 dma at 1,561 and that's 1 point away from a Death Cross!

Since the 50 dma moves 4x faster than the 200 dma, all it will take is a single down day on the Russell to trigger this extremely bearish technical indicator and that will then trigger selling programs that will affect all the indexes so hedging with the Russell (which we do) is a pretty good idea at the moment – especially as it was down at 1,266 in December and that's 272 points (17.6%) down from here and that would pay $13,600 per contract on the /RTY Futures OR, you could play the Ultra-Short Russell ETF (TZA) like we are in our Short-Term Portfolio with the following spread:

TZA Short Put

2020 17-JAN 10.00 PUT [TZA @ $9.66 $0.00]

-40

8/29/2018

(247)

$-13,000

$3.25

…

What Trade War Tuesday – Markets Fuggedaboutit Already

May 14, 2019

What, us worry?

1, 2, 3, 4 Trump declared a trade war and then announced he's going to have fun in the sun at the G20 with his pal Putin but also plans to see China's President Xi in late June and force him to accept US terms of face SEVERE CONSEQUENCES. This is the mindset of a 75 year-old racist schmuck who has a 1950s view of China and thinks we just won WWII and get to dictate terms to all the inferior races – not the rational strategy of a United States President!

Nonetheless, the markets love it when Trump lies to them and we're up almost 200 points pre-market after being down 600 points yesterday so YAY!!!, I guess…

If you remember, way back on Friday morning, in our PSW Report, I told you "it's more likely we're consolidating for a move down" and we put up our anticipated levels, which all failed yesterday but we don't count Mondays (and the volume wasn't very strong either) so TODAY is the day that matters and I'm going to highlight the pre-market (7:30) positions so we can see where we are:

Dow 25,200 is the 5% line and the bounce lines are 25,450 (weak) and 25,700 (strong)

S&P 2,860 is the 5% line and the bounce lines are 2,875 (weak) and 2,890 (strong)

…

Monday Market Mayhem – Trade Lies Unravel and Take the Market with Them

May 13, 2019

Telling lies is all you know

You had me believing they were so

Nothing new, yeah, the same old thing

You got me singing the blues again – Fats Domino

Well it turns out everything the White House said on Friday was BS.

That's not too suprising but the market is acting like it's surprised now that China has stated that no progress was made last week and there are no further meetings scheduled and now the White House is trying to spin the G20 Meeting in June as a summit between Trump and Xi because Xi WILL be there and Trump WILL be there but, at the moment, it doesn't seem like Xi is very eager to speak to Trump, especially after Trump was blatantly insulting in his weekend tweet-storm:

Donald J. Trump‏Verified account @realDonaldTrump May 11

…

Tariffic Friday – Trump Taxes Americans, Claims Victory

May 10, 2019

No deal!!!

That's right, as we expected Team Trump has not been able to make a deal with China and, as of midnight, tariffs increased on $200Bn (not $250Bn) worth of Chinese goods from 10% to 25%, which isn't really that terrible ($30Bn) but President Crazy Train is also looking to add taxes to another $350Bn worth of goods but, to do that one (legally), the U.S. trade representative’s office would need to identify the goods, seek comments on its choices and hold hearings – so it's very possibly just an empty threat from the President and China knows it because they study US law a lot more closely than Trump and his advisers seem to.

So, in the grand scheme of things, $30Bn more tariffs isn't going to break anyone and the total revenues would be $50Bn (25% of $200Bn), not "over $100Bn" that Trump is fantasizing about and how pissed off do you think Puerto Rico is to have Trump BS'ing about sending humanitarian assistance to "poor and starving countries" when they've been waiting almost two years for something besides paper towels to clean up after their disastrous hurricane?

The Futures are down again today and we may revisit yesterday's lows but we went long on Dow (/YM) Futures at 25,600 in yesterday's Live Member Chat Rooom caught a ride back to 25,850 into the close, which gave us gains of $1,250 per contract while our bullish play on the S&P (/ES) Futures also gained $1,250 per contract on a 25-point move back to 2,875.

Of course, those same levels will be in play again today but keep in mind we made the call at 11:58 for our Members – as the indexes were crossing back OVER the lines and momentum was on our side – don't try to be a hero and catch the index while it's moving against you – that can lead to big losses if your line doesn't hold.

In fact, later in the afternoon we analyzed the index moves and determined they were only making bounces off the 5% drop lines according to our fabulous 5% Rule™, which is not TA – just math. Failing the bounce lines means it's more…

Faltering Thursday (as usual) – Investors Hold Out Hope on Trade Talks

May 9, 2019

The art of the deal?

The best deal Team Trump can hope for this week is to keep the Trade Talks with China from completely collapsing and sending the markets into a tailspin. While you hear idiots on TV saying China is coming to negotiate, Trump has set a midnight TONIGHT deadline on more tariffs and the Chinese response has been to reschedule their arrival from Tuesday to today and I want you to contemplate what unrealistic idiots the TV pundits are when they tell you a guy who just got off a flight all the way from China is going to hit the ground running in order to bend over for Trump and concede on all his points in order to get a deal done by 11:59 tonight.

China's Vice Premier Lui He is landing in DC this morning and is scheduled to have dinner with China-hating Robert Lighthizer this evening but don't be surprised if Lui doesn't even spend the night in Washington because, as Tom Hagen sort of said, "Chairman Xi is a man who insists on hearning bad news immediately."

The die is already cast as Mr. Lui, unlike in previous visits, has not been given the title of "special envoy", which suggests he is no longer empowered to make any trade concessions on behalf of the Chairman. In other words, Xi has already told Trump to shove his tactics and has left no room for negotiation on the contract they sent over to Washington last week so now it's up to Trump to either bend over and accept China's terms or throw a tantrum and penalize Americans with more tariffs.

IN PROGRESS

Wednesday Weakness – Selling Pressure Continues

May 8, 2019

Down and down we go.

I said last week that we'd more likely to see 2,800 on the S&P before we see 3,000 but I didn't think things would fall apart so hard and fast. Still, a correction is a correction and this one is long overdue and it's still very mild as 2,850 is only down 5% from the 3,000 line and that means we expect 30-point bounces to 2,880 (weak) and 2,910 (strong) from there so we know exactly what range to watch and, conveniently, 2,855 is now the 200-day moving average – so it's a perfect level to test to see how real this rally is.

As you can see from this S&P chart, we're moving right within the 5% Rule™ around 2,850 as we predict 30-point incriments to drive the index in either direction. If we can stay in the top of the range and hold the 2,850 line and get back over the strong bounce line – then we're be consolidating for a move over 3,000 but anything below 2,850 and we'll have to consider another 5% drop (2,700) before this correction is over.

We're happy either way as we've considerably lightened up our portfolios as of last month, taking 1/3 of our gains off the table in the Long-Term Portfolio and bulking up our hedges – just in case. Having more cash on the sidelines allows us to take advantage of new trade opportunities, like yesterday's UGA spread and, in our Live Member Chat Room, we decided to buy the long July $29 calls for $2.75 as they weren't getting lower while the $32 puts were an easy sale at $2+ and we're waiting for a bounce to sell the July $32 calls for $1.70 now (to make up for the extra quarter we spent on the calls).

The July $32 calls are now $1.15 after bottoming at $1.10 and, since we expect $1.70, that's a 0.55 (48%) gain from here so actually it's good for a long play at this point too! We're nothing if not flexible in our outlook because we're Fundamental Investors which means we know the value of an option and, since we fell the July $32s are worth $1.70, but not more – just…

Tuesday Trade Turmoil – Rumors Drive the Market

May 7, 2019

Is this fun or what?

After being down 500 points in the morning, the Dow almost fully recovered into the close, getting all the way back to 26,400, which was a lovely $2,000 per contract gain on our Futures play from yesterday's Morning Report. Playing a pre-market move like that for a bounce off support – especially when the "news" was a tweet from the President that had no official standing ("the whim of a madman").

This morning we have Team Trump accusing China of reneging in it's trade commitments, which is an odd thing to say as they are in the middle of negotiating so nothing is actually commited yet. Also, unfortunately, the Trump Administration says many, many things that are not true – so it's kind of hard to take their word over China's – even though they are "on our side". In fact, this past weekend, Trump celebrated his 10,000th false statement since he took office less than 1,000 days ago. Trump has single-handedly created an entire division of fact-checkers, now employed at almost every media outlet and he does keep them busy at over 10 lies per day.

Yesterday's briefing from Lighthizer (the anti-China fanatic) and Mnuchin (withholder of Trump's tax returns), which took place after U.S. markets closed on Monday, made it clear there are deep concerns about the direction of the talks and the Futures tanked again and are still down more than half a point this morning but not so low that we want to go long again.

“The level of brinkmanship on both sides and their obvious mutual distrust has made the path to even a temporary cease-fire a lot murkier than just a few days ago,” said Eswar Prasad, professor of trade policy at Cornell University. “It is likely a cooling-off period will be needed to get the talks back on track, but the imposition of additional tariffs by the U.S. later this week could keep the talks derailed for a while to come.”

I love the fact that we have actual Ivy League Professors of Trade Policy but they comment from the sidelines while people with no experience whatsoever are

…

Monday Mayhem – Trump Trade Tantrum Tanks Markets

May 6, 2019

Wheeeeee – down we go!

Who says the market never sells off, we dropped 100 S&P points this morning and 500 Dow points after President Trump THREATENED (didn't actually do anything) to put more tariffs on China if they didn't give him a trade deal this week. Negotiating like a toddler is the President's sweet spot, so I don't know what the market is so surprised about though this is downright rude behavior as China has/had a delegation on the way to attempt to hammer out a deal.

Changing the rules and moving the goal posts in the middle of a negotiation shows a total lack of respect for your trade partner and we can only conclude that Trump doesn't actually want a deal (something I've been concerned about the whole time) and is only interested in collecting more taxes (ie tariffs) to pay for his tax cuts. And, of course, China doesn't pay a penny of these tariffs – the Amerian people do as it's a tax on the goods we purchase.

According to the WSJ: Negotiations were initially scheduled to resume Wednesday. Some working-level Chinese officials who were supposed to leave for Washington on Monday were staying put instead, waiting for further instructions. The threat of renewed trade tensions sent mainland China markets downward, undoing some of the gains made this year. The Shanghai Composite Index fell 5.6% while its counterpart in Shenzhen tumbled 7.4% -their biggest single-day declines since 2016.

“Turning the heat on China would only lead to rising nationalist sentiment,” a Chinese regulator said Monday. “It’s really not conducive to reaching a deal.”

So it's hard to say what Trump is up to but it's clearly messing with the markets but it's nice to have a test to see if our hedges are doing thier jobs so thanks, Mr. President – we've been waiting for a nice dip. The Dow (/YM) Futures can be played for a bounce off the 26,000 line with tight stops below. Down from 26,500 on Friday means we're looking for at least a 100-point (weak) bounce and, if that fails – then we may be looking ahead to a 5% correction – back to 25,175, in which case we…

Non-Farm Friday – Is America Working?

May 3, 2019

Though it may seem like we're treading water, we're actually rotating our sectors.

3 weeks into Q1 earnings that have generally been strong the "safety" sectors have fallen back out of favor and the usual suspects (Tech, Finance) are back in favor, joined by Contstruction, Media and Industrials, which have come back in favor. With the cyclicals moving up, it's odd that materials are not and, if the rally is real – that's a sector we'll expect to see improvement in.

To some extent, I'm worried that we are confusing increased efficiency for a good economy. Automation and AI are driving earnings gains while sectors that actually serve the consumers like Travel, Retail, Personal Goods, Real Estate, Utilities, Telcos – even Healthcare – are falling off because, as I noted earlier in the week, consumers have less and less disposable income.

You can have an earnings recovery without actually selling more stuff and that's what's going on now but, ultimately, you can't grow if you don't sell more stuff and Trump's Tax Cuts have done nothing to improve the buying power of the consumers that ultimately drive this economy. Sadly, as we may see today, you can have a nice economic recovery without having to hire people these days.

Woops – there goes another couple of million jobs!

Honeywell says their robot will unload 1,500 cases per hour, enough to replace 6 workers with just one worker overseeing 3 or 4 robots so let's say 15 $35,000 workers ($525,000) replaced by 3 $200,000 robots ($600,000) and one $60,000 superviser (though I guess the workers had a superviser too) but the robots are a once in 5 years cost and work 3 shifts a day so really you're replacing 45 workers ($1,575,000) per year with $150,000/yr in robot expenses. See how great corporations can do while humans are being discarded?

That's how we're seeing all these companies, without the benefit of having more sales, dropping more and more money to the bottom line and we're only in the very early stage of this automation cycle – like the beginning of the Industrial Revolution – which led to World Wars 1…

Faltering Thursday (Again)

May 2, 2019

The market can't seem to get the hang of Thursdays.

Fortunately though, at Philstockworld, we had a pretty good handle on things yesterday as I noted my concerns in the Morning Report (and all week) and yesterday morning, in our Live Member Chat Room, I called for shorting the Dow (/YM) Futures at 26,650 as well as the S&P (/ES) Futures at 2,950 and, as you can see, we had a nice gain of $1,500 per contract on the Dow and I even called the perfect exit at 4:35 (Futures trade until 6pm), saying to our Members:

300 points is plenty on /YM – don't be greedy!

The S&P (/ES) bottomed out at 2,915 but the S&P pays $50 per point so 35 points was good for $1,750 per contract – even beter than the Dow gains. It's been a while since we've played the Index Futures but this is a nice way to get back into the swing as we get back to the kind of toppy inflection points we like to play.

Speaking of toppy, my crystal ball was on fire yesterday morning as in the same morning note to our Members where we shorted the Futures, I also said:

API showed a 6Mb build in oil and down 1M in Gasoline and up 2M in Distillates so we'll see what EIA says but a build like that can send us back to $62.50 but now it won't take much to "beat" terrible expectations so I'd have to say it's too tricky to play at the moment.

How cool is that? Oil contracts pay $10 per penny so a $1 drop is worth $1,000 per contract – nice work if you can get it! More importantly, when our crystal ball is working we're able to make MONEY in the Futures and that's always fun so we're going to be looking for more opportunities but probably more next week, though you can play Oil (/CL) to bounce off $62.50 and, since it's down $2 from $64.50 a weak bounce is…

Wednesday: An AAPL a Day Keeps the Bears at Bay

May 1, 2019

$11.5 Billion Dollars.

Or, what's known as a slow quarter for Apple (AAPL), who beat lowered expectations (they guided down $9Bn for the year back in January) on $58Bn in sales, which were down $3Bn from last year. So we have $3Bn less Sales and $2.3Bn less Net Income and the stock is up 33% from last April.

Apple is a bit different from most stocks as it was stupidly cheap last April and we have a substantial long on them in our Long-Term Portfolio and our Options Opportunity Portfolio and we even have short AAPL puts in the Short-Term Portfolio, where we sold the 2021 $170 puts for $22 back on November 20th, which was like getting $22,000 NOT to buy AAPL for $170 at this point, with Apple expected to open over $210 this morning.

We just reviewed the Options Opportunity Portfolio in the April 18th Morning Report and our AAPL trade at the time was net $38,525, up from a $12,500 entry back on Jan 3rd but we wanted to be a bit more conservative so we called for the following adjustment:

AAPL – There's no sense having $120 calls that are so deep in the money so we're going to cash those in for $85 ($85,000) and add 20 of the June 2021 $180 ($42)/220 ($23) bull call spreads at $19 ($38,000) and we'll roll our 10 short 2021 $185 calls at $36.50 ($36,500) to 10 short July $200 calls at $11 ($11,000) so we're taking net $21,500 off the table and we still have an $80,000 potential spread 1/2 covered by short calls.

Now, had we left it alone, as of yesterday, the options spread looked like this:

AAPL Short Put

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Philstockworld April Portfolio Review (Members Only)

May 1, 2019

Your love (your love keeps lifting me)

Keep on lifting (love keeps lifting me)

Higher (lifting me)

Higher and higher (higher) – Jackie Wilson

Up and up the markets go, where they stop — well, they don't seem to be stopping, do they?

Last month we couldn't believe we were already close to $2M in our primary paired portfolios. The Long-Term and Short-Term Portfolios stood at $1,990,381 as of about the 15th of March and, although we played cautiously and added more hedges, the LTP has marched on to $1,429,270 by itself (as of the 4/18 review) while the STP took a $36,413 hit but that still left it at $704,785 for a combined total of $2,134,055 – up $1,534,055 (255%) from our original $600,000 start on Jan 2nd, 2018 and up $143,674 for the month, which is 24% of $600,000 but "just" 7.2% higher than where we were in March.

I hate to be in this position as we're clearly benefitting from RIDICULOUS market conditions and I know from experience that, no matter how many times I say it, people won't believe how quickly we can give back a big chunk of these profits. Just this morning, GOOGL went down 8%, INTC is down 13% in the past week… If that can happen to big blue chip stocks – what can happen to the other crap?

We've been purging things we think are overvalued and we keep hedging but, when you make 255% in less than 18 months you have to KNOW that there's something wrong with the markets and, eventually, things may normalize on you. I've discussed FOMO (fear of missing out) a lot lately and sure, we'd hate to have missed another $143,674 in gains and now those gains are a buffer against future losses but $2M is A LOT of money to risk and we're getting to the point where I'd rather cash it and start again with a fresh $600,000 – locking $1.4M away in a safer place.

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Tumultuous Tuesday – Venezuela Crisis Boosts Oil Prices

April 30, 2019

A coup!

When's the last time we had a good, old-fashioned coup? There's one going on right now in Venezuela, where Trump-backed opposition leader Juan Guaido has a small, or large (depending who you ask) group of army guys taking on the elected Socialist (Boo! Hiss!!) leader, Nicolas Maduro, who was elected to a 2nd 6-year term a year ago.

“The imperialist U.S. government is directing an operation to impose through a coup a puppet government for its interests,” Mr. Maduro said in a speech from a balcony of the presidential palace. “No one here is surrendering. We’re going to combat until victory.”

Guaido and his troops have apparently taken over part of a highway adjacent to an air base near Caracas, possibly in preparation for landing US or other troops though, of course, it would be completely outrageous for Trump to openly support the overthrow of a democratically elected leader – even if he is a Socialist but, of course – who are we kidding? Do you really think he wouldn't?

There's a lot at stake here as the US imports 10% of its oil from Venezeula yet it is thought that the country could produce 1-2 Million more barrels per day if the right investments are made but to make the right investments, we need a Capitalist-friendly Government that will allow US-based oil companies (ie. Trump donors) to take over Venezuela's valuable oil assets so – Viva la Revolution!

Of course, Maduro is no prize and, though he won with 67.8% of the vote, it was only 6.2M out of 32M people voting so very low turnout and very possibly it was a sham election but none of that was proven and it was Henri Falcon who got the 2nd most votes (2M), Guaido wasn't even a candidate!

In a REALLY crazy move – even for Republicans, Senator Marco Rubio tweeted out, not just support, but a call to action to overthrow a foreign Government, urging the Venezeulan Military to "fulfill their constitutional oath and defend the legitimate interim President Guaido." I mean – WOW –…

Monday Market Movement – Big Earnings Week Ahead

April 29, 2019

Now we'll see.

30% of the S&P 500 report this week and we'll have more than 2/3 reporting by the end of the week so, hopefully, we'll have a good handle on what's going on by then. We also have a Fed Meeting on Wednesday and Non-Farm Payrolls on Friday AND the month ends on Tuesday yet I'm VERY concerned because there are SIX (6) Fed speeches scheduled for Friday – that's a lot and it seems like they must be thinking they'll have something to spin with that schedule.

Apple (AAPL) announces their earnings tomorrow, after the bell and this evening we hear from Google (GOOGL) followed by several heavy-hitters lined up tomorrow morning. It will be nice to get a fuller picture of how the S&P stocks are performing but, generally, it's so far, so good on earnings reports – with not too many areas of serious concern.

Unfortunately, our first data point of the week is not that good. Personal Income only went up 0.1%, indicating wage growth is not keeping pace with even the low inflation we supposedly have while Personal Spending blasted up 9% and that means consumers are plunging deeper and deeper into debt, trying to keep up with the inflation the Fed pretends not to see while the economy continues to run on borrowed money.

The December bump in personal income reflects all the bonus money paid out on Wall Street, not raises on Main Street and, since the turn of the year, Income Growth has died and automation will continue to kill it as companies spend more and more on machines and less and less on people. Notice in the above chart that Real Disposable Income has gone negative as rising gas prices along with inflation in other essentials is leaving consumers with less and less to spend (except on Avengers Endgame tickets, of course).

To me, this is not a recipe for a record-high stock market. If the US consumer breaks (and they are certainly stretched to the breaking point), then there's no one left in…

Faltering Friday – Earnings Season Hits a Rough Patch

April 26, 2019

I love earnings season!

So far, it's loving us as well as we have generally been on the right side over each report but the seas are turning ugly as we get into the meat of earnings season, with about 40% of the S&P 500 scheduled to report next week AND there will be a Fed Rate Decision AND there will be Non-Farm Payrolls next Friday which have flipped between 312,000 in Jan to 33,000 in Feb to 196,000 in March – so be ready for anything there as well...

This morning, we're going to see the advanced estimate of Q1 GDP and it's still a low bar of 2.1% expected and we should be able to clear that hurdle, despite the Government Shutdown that caused so much damage to Q4 and Q1.

While we are waiting, we had big misses from Exxon (XOM) and Archer-Daniels (ADM) but XOM's miss was due to more CapEx spending, which we expected and we're wating on Chevron (CVX) who are in a bidding war with OXY now for APC, so I wouldn't touch them for fear they end up drastically overpaying in order to "win".

Sony (SNE) had very good numbers this morning but then ruined it by lowering guidance as the PS4 has run its course and they have nothing new planned for Christmas. The company was a real bargain though at $46.50 ($58.5Bn) yesterday and, even this morning, you can sell the 2021 $45 puts for $5.50 to net in for $39.50 – I'm happy to add 10 of those to the Long-Term Portfolio to collect $5,500 while we watch them.

8:30 Update: GDP was an even bigger beat than we thought, coming in at 3.2% so about 50% higher than the expectations of leading economorons but they'll ask the same idiots what they think next Q will be as well and no one is ever held accountable for these TERRIBLE predictions on CRITICAL data – amazing!

Government spending was up 2.4% and the export of LNG as well as 3Mb/d of oil we now export did a lot to support our balance of trade and accounted for much of the upside What I don't like about the GDP number is a huge…

Thursday Failure – MMM Drops The Dow

April 25, 2019

Well our site was down this morning.

It seemed to have gone down last night, perhaps on all that Canadian traffic as I appeared on BNN (Canadian Bloomberg)'s Money Talk with Kim Parlee and we went over our Money Talk Portfolio (see yesterday's Report for details), which is now up 155% since it's inception in Sept of 2017 – so it's not surprising that a lot of people want to check it out…

As I noted on the show, we can justify the current market levels given the strong earnings we're seeing (not you MMM!) while taking into account what I'm calling an Automation Super-Cycle that, while being disruptive and destructive at times, is going to be an overall long-term positive for corporate profits as we lurch ever-forward into the 21st Century.

We added trade ideas for Bank of Nova Scotia (BNS) as well as the Natural Gas ETF (UNG) on yesterday's show but it was L Brands (LB), which we noted was a laggard yesterday morning, that popped over 3% on the day but is still very, very playable for very nice profits ahead.

This morning, 3M (MMM) is dinging the Dow but, on the whole, the Futures are holding up well and the Dow Futures (/YM) are bouncing off the 26,400 line as we wait for the Durable Good Report at 8:30 and the Kansas City Fed Report at 11 along with a $32Bn, 7-year note auction at 1pm – so it's a good day for the Dow to turn down to chase some money into bonds anyway.

8:30 Update: Durable Goods came in at a very nice 2.7% headline, up from -1.6% last month and ex-transports it was in-line at 0.4% so the economy is still chugging along and tomorrow GDP should beat 2.1% expected and then we'll see how Michigan Sentiment looks (97.1 expected) and then it's time for the weekend again.

Once again, sorry the site was down this morning – some issue with Amazon Web Services that I do not understand at all!

Earlier comments were over at Seeking Alpha and, whenever PSW is down (hopefully not often!), just check our Twitter feed to see where we're chatting.

Money Talk Portfolio Update

April 24, 2019

I'll be on BNN's (Bloomberg Canada) Money Talk tonight at 7pm.

As usual, we will be reviewing our Money Talk Portfolio, which we initiated back on Sept 6th, 2017 to track the trade ideas we would introduce, live on the show, about once each quarter. The idea of the portfolio was to select highly leveraged, high-probability trades that did not have to be adjusted very often (or at all) and, so far, it's been a tremendous success with our initial $50,000 turning into a lovely $127,663 (up 155.3%) at yesterday's close, about 18 months after we got started.

We recently reviewed the MTP back on Feb 15th and, at the time, the portfolio was at $88,922 with, of course, the exact same positions – as I hadn't been on the show since Jan. We did send out an alert (our first ever) to dump GE shortly after that – those alerts go out free of charge on Twitter, Facebook, Seeking Alpha, etc to make sure they were available to all so make sure you follow those feeds. Note that, for each position, we clearly define our expectations and, overall, we expected our positions to make another $76,638 at the time but we've already made another $38,741 (43%) – which is way too fast – so we have to be careful that some of our positions are overbought already.

That's right as FUNDAMENTAL VALUE INVESTORS we believe that stocks – even the ones we like – can be too expensive, as well as too cheap. When they are too cheap, we buy them – when they are too expensive, we sell them. It sounds logical but how many traders actually do it when the time comes?

Now, let's take a fresh look at what we have:

Alaska Airlines (ALK) – Just a short put that nets us in for $51.80. We're not worried about it. Expect to gain the full $4,100 so $2,650 left to gain.

Nasdaq Ultra-Short ETF (SQQQ) - A hedge we expect to lose on and so far, so good as we're down about $4,000 with just $450 in value left. Still, we do need hedges so

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Tempting Tuesday – The Beats Keep Coming (so far)

April 23, 2019

Earnings are going very well.

While there are plenty of misses in companies you probably don't care about (ABCB, ASTE, BANC, EDU, FCF, FBC, IRDM, MLI, PII, SHW and WAT missed just this morning), there are plenty of beats from large-cap companies you probably do care about like DGX, HOG, HAS (by a mile), JBLU, KO, LMT, NTRS, PG, PHM, STT, TRU, TWTR (by a mile) UTX and VZ – all from this morning.

Of course large caps are benefitting from tax breaks and buybacks but, as a shareholder, money (per share) is still money so up and up we go. This is why we still have our longs – FOMO continues to be a thing and it doesn't matter that a stock is already high in anticipation of earnings – good earnings take them up anyway. We're still adding hedges on the way up but it's silly to close down too many positions if the market is determined to break out to new all-time highs.

One thing that is too high is Oil (/CL) Futures at $66 – that's a good spot to put our foot down and play for the short but be very careful around inventories tomorrow (10:30, EST) – as they can move us pretty violently but $66 is a good stopping out line, so a good place to short with tight stops above.

Generally, with our /CL trades, as soon as we make $500 we try to lock in $350 and then $500 at $700, etc – a $1,000 gain ($1 in price) on a single move is not something you often catch though, as you can see – it happened TWICE on Friday night with an over $2 move from $64 to $66.

For bigger companies and commodities, weak Dollars are a benefit and the Dollar was generally weaker in Q1 than it was in Q4 and that's giving everything a boost but we may be heading back to the top of that range (98) as the UK is back in turmoil mode – with Theresa May very, very close to being forced to step down – perhaps as soon as next week. That would be Pound/Euro negative and Dollar-positive.

IN PROGRESS

$300,000 Thursday – Our Options Opportunity Portfolio Goes up 200%

April 18, 2019

There's not much news and it's a silly pre-holiday trading day so I'm going to reveiw the OOP instead.

The Options Opportunity Portfolio was initiated last year in Seeking Alpha's Marketplace and, since the Summer, it's been on quite a tear and we just crossed $300,000 – up 200.7% from our $100,000 initial set-up back on Jan 3rd of 2018. You can follow our progress and changes under the Virtual Porfolio Tab on Philstockworld's main page and, unlike our Long-Term/Short-Term paird portfolios, the Options Opportunity Portfolio is self-hedged – so it's just the one, balanced portfolio.

Our goal in the OOP is to take advantage of OPPORTUNITIES in the maket – usually we jump on stocks that have been unfairly sold off on news we don't consider as bad as the traders who are running out of the stock. That's why you see a lot of stocks in here with erratic charts – usually they've had some kind of mishap which drew our attention to them.

In our March Review, on the 7th, we were at $283,465 and now $300,689 is up $17,224 for the month and that's 17.2% of our original $100,000 – so pretty good for a month – too good really and we're going to look carefully for places we can take some money off the table, as we don't REALLY trust this rally.

FTR – This has been a bad trade for us this year and we're just waiting to see what happens on 4/30 earnings.

HMNY – I think we own most of the company at this point – not that it's worth anything…

HOV – This one we're expecting to recover nicely over time.

TZA – One of our hedges, no adjustments. TZA is a 3x Ultra-Short so a 20% drop in the Russell should give us a 60% bounce to about $14.50, which would make the 50 calls worth $6.50 so $32,500 less the current value of $10,275 means we have $22,225 worth of protection here.

LB – An aggressive put but we like LB.

PLAY – Not worried about these.

SIG – Retail

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Will We Hold It Wednesday – Nasdaq 8,000 Edition

April 17, 2019

8,000 on the Nasdaq Composite!

5,150 was the top in 2,000 before the great crash took it back to 1,200, a 76% drop which took many years to recover from. In fact, we only got back to 5,000 in 2016 but here we are, less than 3 years later, up another 3,000 (60%) and no, I don't think this time is like 1999 when people were throwing money at terrible stocks but there are still plenty of stocks people are throwing unrealistic amounts of money at and there WILL be a reckoning – one day.

We did consolidate for about a year at the 5,000 line, which means roughly half the people trading thought stocks should be higher and half thought they should be lower but then Trump got elected and promises were made (not kept, just made) and we've been off to the races ever since.

If we want to determine whether 8,000 is too much for the Composite, we should look at the top 10 holdings, which make up a whopping 40% of the indexes weight while the other 2,629 components fight for the other 60%. The simple question we can ask here is are these companies worth 60% more than they were in 2016 and, to do that, we can simply look at earnings and revenues because we should expect some real changes, right?

While Apple (AAPL) gets a lot of attention as it nears $1Tn in valuation, Microsoft (MSFT) has quietely gotten there without the drama and is "worth" $927Bn at $120. Revenues have gone from $92Bn to $118Bn (up 28%) while profits in 2016 were $20.5Bn and, last year, they were $16.5Bn but that was due to write-offs and they should do better than $34Bn in 2019 and that's up 70% so yes, MSFT is worth much more than in 2016 but I'm not sure I want to pay $1,000Bn for "just" $34Bn in earnings (p/e 29.5) so I would give this one a B- grade.
AAPL, of course, is my favorite company on the planet and $200/share is $943Bn in market cap but AAPL earned $59.5Bn last year (tax advantaged) and should make $53Bn this year for a p/e of 17.8 –

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Terrific Tuesday – Futures Blast Higher Just Because

April 16, 2019

Wheee, up 180!

Why? Literally, there is no reason that the Dow is up 0.666% this morning in the Futures. The other indexes are up 0.4% and mostly we popped higher at the EU open (3am). There are no reasons for this and we don't need any reasons – there were no reasons in 1999 or 2007 as the market plowed higher – even as some were warning of dire macro events that were clearly visible just around the corner. The markets tend to march on until the changes are long past undeniable, kind of like our President…

All eyes were on France yesterday as Notre Dame had a tragic fire, destroying a large part of one of the World's greatest architectural wonders. Victor Hugo said Notre Dame is a work of art authored by humanity itself, with no individual artist. It surpasses anything an individual can do and therefore becomes the best of what all of us can do – it's loss is a great tragedy and already hundreds of Millions of Dollars have been pledged to rebuild it.

When Hugo Wrote "The Hunchback of Notre Dame" the church had already been destroyed during the French revolution and his novel called enough attention to it that it underwent a great rebuilding program in the mid-1800s so, almost 200 years later – we're just repeating the cycle – hopefully with less wood this time! In truth, there's not all that much left of the original, built in 1163.

So, while we may see it rebuilt and think "it's not the same" – our great, great, great grandchildren will probably see it as an achitechtural classic once again – providing we do something about Global Warming, which came within 3 feet of breaking over the embankments during the 2016 Paris Flood.

As there is not much news today, it's a good time to kick off our Portfolio Reviews with a look at our public portfolio called the Money Talk Portfolio, which we only trade live on BNN's (Bloomberg Canada) Money Talk Show once per quarter. I'll be on the show again next Wednesday at 7pm…

Monday Market Movement – Earnings Season Finally Begins!

April 15, 2019

It's earnings season!

Finally we get to see whether or not these record highs come with record earnings! We got off to a bang on Friday with beats from FRC ($1.26 vs $1.22 expected), INFY ($9.36 vs $8.95), JPM ($2.65 vs $2.35), PNC ($2.61 vs $2.60) and WFC ($1.20 vs $1.10) so so far, so good it seems and, this morning, Citigroup (C) came in at $1.87 vs $1.79 expected and Goldman Sachs (GS) is $5.71 vs $5.02, M&T Bank (MTB) $3.35 vs $3.29 and we're waiting for Schwab (SCHW) and Washington Federal (WAFD) but things are looking good in banking.

Goldman Sachs, of course, gained 2.5% on Friday so today's earnings is giving them no additional lift and that's another sign of a toppy market as the whole banking sector went up on just a few earnings reports so woe unto any of them who fail to deliver going forward. We still have plenty of Banks to hear from but, more interesting, will be the companies who may have been affected by the Government Shut-Down in Q1 – that's where we're expecting to get some resistance.

Earnings Whispers has the above cool charts for earnings and I love the "implied move" into earnings as it can alert you to seriously mis-matches that we can potentially take advantage of like Micro-Vision, where options imply a 50% move but the average move is only 11.3%. MVIS is essentially a penny stock, trading at $1.03 but it does have options abd a fun way to play them is to sell the August $1 calls for 0.40 and sell the August $1 puts for 0.30 so you are collecting 0.70 and anything less than an 0.70 move between now and Aug 16th (expiration day) is your profit.

Sketchers (SKX) on the other hand, usually makes violent moves on earnings yet it's priced for a relatively calm 7.6% move so we can play them to be more violent than that but we can also use our heads and, though we love to be bullish on SKX when they are low (and we are aggressively long in our…

Fantastic Friday – Pre-Market Boost Turns the Week Positive

April 12, 2019

At 4am the week turned positive in the Futures.

A bit later, it was announced that Chevron (CVX) was buying Anadarko (APC) for $33Bn AND CVX will spend another $5Bn buying back 2% of their own stock. That's pumping up the energy sector into earnings season as APC is getting a 44% premium to yesterday's close, which is an indicator that the energy sector stocks may be underpriced by quite a bit or it's simply a play to capture Natural Gas assets (/NG), which we are long on.

In our Long-Term Portfolio, we have an aggressive position on Chesapeake (CHK), which we thought was very undervalued at $2.50 and our net $0 position is already up $3,425 but still has plenty of room to grow as it pays $15,000 at $5 so a potential triple from here if all goes well:

CHK Short Put

2020 17-JAN 4.00 PUT [CHK @ $3.33 $-0.07]

-50

1/8/2018

(280)

$-6,000

$1.20

$-0.18

$-0.95

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$2,000 Thursday – Our Webinar Short Pays off Nicely

April 11, 2019

Wheeee – that was fun!

Yesterday, in our Live Trading Webinar, we picked up two shorts on Gasoline Futures (/RB) after reading the Full Petroleum Status Report (released at 1pm) and deciding the run-up to $2.06 was miguided. We rode out a bit of pain to $2.07 but decided to stick with it into the close and, this morning, we were rewarded with a lovely drop to $2.04, where we are taking the very nice $2,196.60 profit and running. Congratulations to all who played along at home.

Once again, this is the key to Fundamental Investing, we read the news and reports, check out the data and then make our trades based on how that information is likely to affect the stocks and commodities we are trading. It's much more fun, and satisfying, than starting at squiggly lines on a chart all day.

This morning there's pressure on commodities and indexes as well, with Silver (/SI) plunging all the way back to $15 and Gold (/YG) to $1,300 as the Dollar pops back up – something else we were expecting and today's excuse is a Brexit extension that has weakened the Euro and the Pound but also the relatively hawkishness of our Fed compared to other Central Banksters is a factor that continues to keep the Dollar strong.

We love playing /SI long at the $15 line, it's great for a bounce and an easy line to place tight stops below – especially when the only reason Silver is down is because the Dollar is up – that's a dumb reason for people to bail out of their positions but /SI is a painful contract, at $50 per penny, per contract so gains, and losses, come very quickly. $14.90 has been the low for the year and the $15 line has held up well so we take these opportunities whenever they come along.

Also in yesterday's webinar, we reviewed our Member Portfolios, which are up nicely for the month and we discussed the importance of using some of those unrealized profits (25-33%) to shore up our hedges and lock in those gains – because they can reverse in…

Which Way Wednesday – Russell 2000 Fails at the 200 DMA

April 10, 2019

Are we recovering from yesterday's dip?

While the Futures are up 0.2%, the Dollar is down 0.2% so that's just a re-pricing against the weak Dollar, rather than a pre-market rally and, even with the currency boost, the Russell (RUT) has once again failed to hold the 200-day moving average at 1,573 and that's what signaled our March sell-off but it won't be a catastrophe until we fail the 50-day moving average at 1,545 – so that's the line we want to watch very closely.

Yesterday we shorted the S&P Futures (/ES) with a target of 1,580 and we hit that on the nose for a $1,000 per contract gain and then we flipped to the Nasdaq (/NQ) shorts at 7,600 and those paid us another $400 per contract into the close but this morning we're just watching and waiting – mostly hoping oil pops to $65 on inventories (10:30), so we can short that.

Oil is up from the $59-60 range in late March so call it $59.50 and 10% up from there is actually $65.45 but let's say $65.50 and it's a $10 run so $2 pullbacks to $63.50 (weak) and $61.50 (strong) but I'm betting weak holds as we have a holiday coming up. In either case, we can prettty confidently take a poke at shorting oil at $65 with a tight stop over (0.10) and then again at $65.50 and $66 if we have to and we'll carry our 0.20-0.30 loss knowing it's very likely that, when we get it right, we have a $2 ($2,000 per contract) gain to look forward to.

Remember, I can only tell you what is likely to happen and how to make money trading it – the rest is up to you!

Today we have a $20Bn auction of 10-year treasury notes at 1pm and it's long been a pattern that the market goes down ahead of a 10-year auction as it scares investors into buying bonds, which keeps the rates low and countries that owe $21Tn NEED to have rates a low as possible. This morning the ECB announced they will keep interest rates unchanged for the rest of the…

Trade War Tuesday – Trump Pivots to Europe with More Sanctions

April 9, 2019

Now what?

Apparently, since the EU MIGHT have given Boeing rival Airbus $11Bn worth of subsidies since 2004, the Trump Administration will retaliate by placing tariffs on cheese, bicycles, kitchen knives, artist's brushes, etc. While this may seem crazy and illogical, it's really just another day in Trumpland, so no one is really batting an eye and, although the German and European stocks have turned down on the news, the US stocks are, as usual, ignoring the inevitable retaliation this is likely to cause.

Technically, Trump isn't allowed to DECLARE tariffs whenever he wants and it's kind of hard to see how cheese is a national security risk but that ship has already sailed with the Chinese tariffs (which are also not going away) but what's the point of even pretending we follow the rules anymore?

We're testing another major level at S&P (/ES) 2,900 this morning but, as noted in yesterday's PSW Report, we shorted it into yesterday's close anitipating that SOMETHING would cause us to pull back after testing that level. So far, we're up $250 per contract so we can set a stop at $200 and lock in the gain and raise the stop $50 for each $75 we gain going forward.

Since the S&P is up 50 points on this run, a weak retrace should be 10 points, back to 2,890 so our expectation, at $50 per point, per contract, is to make $500 per contract just following the 5% Rule™ – isn't that nice and simple? If we're lucky, we get a strong pullback of 20 points to 2,880 and we'll know if we're getting a strong pullback because the weak bounce (2 points) will fail at 2,992 so our stop will the $400 gain at that line by the time we get there. See, Futures are easy!

Once we go below 2,892, that becomes our stop and it's almost certain we'll bounce back to there and test that line so we can do our calculations on the other indexes to see how they are bouncing too. Once we get below 2,890, our next stop should be the weak bounce line off 2,880, which would then be 4…

Monday Market Movement – Boeing (BA) Once Again Takes Down the Dow

April 8, 2019

Here we go again.

Boeing is still having trouble fixing the 737 Max planes and announced over the weekend they would be cutting production of the planes for now, which is sending their stock down $16, pre-market, which is good for about 130 Dow points and BA is also a big player on the S&P 500 so it's responsible for all of the pre-market losses (as of 7:30 am) so far.

"As we continue to work through these steps, we're adjusting the 737 production system temporarily to accommodate the pause in MAX deliveries, allowing us to prioritize additional resources to focus on software certification and returning the MAX to flight," CEO Dennis Muilenburg said in a statement. "We have decided to temporarily move from a production rate of 52 airplanes per month to 42 airplanes per month starting in mid-April."

Other than BA, the rest of the indexes are continuing to show strength and there's no sense fighting the tape, especially with all of our indexes now above their 200-day moving averages with 3 of the 5 majors making what are called "Golden Crosses", where the 50 dma crosses over the 200 dma – a fairly reliable bullish chart patten.

That doesn't mean this isn't a good time to grab some hedges. In fact, it's the best time to hedge as the indexes are high and the Volatility Index (VIX) is low, which means your cost of insurance is low as well – since the general sentiment is that the rally will continue.

In Friday Morning's PSW Report, we liked shorting the S&P 500 Futures (/ES) at 2,900 and we topped out at 2,899.50 and now we're back town to 2,895, which is still a good shorting spot as long as you keep very tight stops above. Nasdaq (/NQ) 7,600 is also going to be hard for the bulls to cross, so that's another excellent shorting line with tight stops above in the Futures.

Last Tuesday we asked: "Are We Moving Up to a New Range?" and we have gained 50 S&P points since then and the Nasdaq Ultra-Short (SQQQ) Jan $10 calls we liked at $1.80…

Non-Farm Friday – Is America Working?

April 5, 2019

Our last Non-Farm Payroll Report really sucked.

Jobs created dropped down to an anemic 20,000 in February, possibly as a result of the Government shut-down, which ended at the beginning of the month. We'll see what happens at 8:30 as 160,000 jobs are expected to be gained for March but they expected 200,000 jobs last month and Leading Economorons missed that one by 90%. Most likely we get a big rebound as 20,000 was unusually low.

NFP is made up of a lot of factors so it's best not to guess. Interestingly, wages rose 0.4%, which is an almost 5% annual pace and that is running red-hot and, if we see that kind of number again – we can expect a downturn in the Futures as it's a sign the economy may be running too hot and that puts the Fed back on the table because the inflation the Fed hates the most is Wage Inflation.

Wage inflation scares the Banksters who run the Fed as it squeezes Corporate Profit margins, causing them to borrow less money and, of course, banks employ many, many low-wage workers and giving money to workers can lead to inflation becuase, unlike the current plan of giving money to people who already have lots of it, when you give money to the bottom 80%, they tend to spend it and then it circulates in the economy and has a multiplier effect and then we get inflation due to an increased demand for goods and services.

Why do Banksters hate inflation? Because they lend you $300,000 at 4.5% for your home and you pay them back $1,721 a month for 30 years but, if inflation is 5%, over time the bank gets less and less money back relative to inflation. For over a decade, this has gone the other way, the banks were lending at rates that were locked in higher than they rate they could borrow at (currently 1.75%) and they've been making tons of money and inflation has been non-existent - they don't want that to stop.

8:30 Update: We got a very nice 196,000 jobs added in March and wages only rose 0.1%, calming considerably so, of course, we're getting a quick…

Why Worry Wednesday?

April 3, 2019

And we're up again in the Futures.

Why? I don't know why, do we need a reason? We closed down yesterday and felt pretty smart about adding more hedges in the Morning Report (and subsequently in our Live Member Chat Room) but when the markets closed and the volume died down last night, "THEY" popped the indexes right back to new highs making it look to Asia and Europe as if we had a great day yesterday.

Seeing how great the US markets looked, China's Hang Seng Index jumped higher at their open and closed up 1.22%, back at the 3,000 line (still down from highs over 5,000) and, of course, Europe, seeing how well the US and Asia were doing when they woke up, began buying as well and now their stocks are up 1% and, of course, our Futures are up because Asia and Europe seem so happy.

This is the "Fear of Missing Out" we were discussing on Monday and it's a terrible reason to buy into the market. Not that we're not buying anything – there are still plenty of bargains around and earnings season is likely to give us many more. Yesterday we noted WBA seemed to be over-selling off an earnings miss and lowered guidance and the stock dropped 13% to $55 – where we promptly jumped in and bought it because it's FUNDAMENTALLY too cheap – no matter how bad the chart looks.

The headline in the Wall Street Journal this morning is: "Investors Brace for Profits Hit as Costs Rise, Economy Slows" but I stuggle to see how S&P 2,885 is "braced for a profit hit". The lead line in the article is "Increasing wage and energy costs threaten to hurt companies’ margins just as the U.S. economy slows" and that's certainly true, wages grew at the fastest pace in a decade in our last Non-Farm Payroll Report and tomorrow we get the March Report and again we're likely to miss the job growth target of 160,000, even after growing an anemic 20,000 jobs in February.

I feel like I'm at a very loud party smelling smoke and…

Technical Tuesday – Are We Moving Up to a New Range?

April 2, 2019

Over 2,850 on the S&P 500 (/ES).

2,873, in fact, as of yesterday's close and I really liked this chart by Andrew Lais at Stockcharts on the SPY showing the huge turnaround in buying activity that has fueled what is now a 12.9% rally off the January lows. Clearly, sentiment could not be better and that may be the problem as we head into an earnings season that is almost certain to disappoint the bulls. On the other hand, if they are willing to consider Q1 a bump in the road, we may truly be off to the races if 2,850 firms up as a new bottom for the senior index.

We have a light round of earnings this week but, just this morning, Walgreens (WBA) gave a disappointing report and promptly dropped 8% pre-market after reporting earnings of $1.64 vs $1.72 that was expected and also cutting guidance for 2019 to flat to last year's $6/share in earnings, which makes $60 quite a bargain to me (we're long) and our 2021 target was only $62.50 anyway – so we don't mind a little pullback.

In a trend that will challenge the sector, declining reimbursements for prescription drugs cut into the company's profit margins. While Walgreens is filling more prescriptions at the pharmacy counter, it’s making less money on them – a worrisome sign for a key part of the business. Prescription sales in its U.S. stores rose 9.8 percent in the second quarter, but gross profit at the pharmacies fell 3.2%. “The market challenges and macro trends we have been discussing for some time accelerated, resulting in the most difficult quarter we have had since the formation of Walgreens Boots Alliance,” Chief Executive Officer Stefano Pessina said in a statement about the quarter.

While those problems may be unique to WAG, poor Q1 earnings will not be unique at all and, if investors are going to chop 8% off the price of a company for matching last year's earnings – then don't expect 2,850 to hold up on the S&P 500 as more and more earnings reports are revealed.

It's not just earnings that are a problem, we just got…

Manufactured Monday – Chinese Data Turns Back Up, Markets Rise With It

April 1, 2019

Good news everyone!

China's Manufacturing PMI rose from 49.2 in February to 50.05 in March, which is back to expansion and that's boosted Asian markets which in turn boosted the EU open which is now boosting the US Futures, so it looks like we're going to have a good open. Of course, Chinese PMI always rises in March as Feb is their Lunar New Year, when things are closed for a week but, shhhhhhhh… let people celebrate if they want to….

Even if we pretend to trust Chinese data, if their economy is rebounding while under Trump's sanctions, they may consider that they don't have to make as many trade concessions – and that can drag out or completely derail the process that has been the basis for these record-setting Q1 gains in the indexes. David Lipton, the International Monetary Fund’s first deputy managing director, said last week that trade tensions between the two biggest economies “pose the largest risk to global stability.”

To boost the Chinese economy in March, policy makers urged banks to lend more, especially to small and private companies, boosted spending on infrastructure and promised 2 Trillion yuan ($298Bn) in cuts to taxes and fees on businesses and households. First-quarter reports of company borrowing matched the highest level since mid-2013

According to the WSJ, FOMO (Fear of Missing Out) is back as a driving force in the market as investors are worried about missing the rally and falling behind and I have to agree with that assessment as it's the only reason we haven't cashed out – and it bothers me every day as it's a pretty dumb reason to be bullish but, on the other hand, we'd hate to miss more gains...

And, of course, if you don't want to buy stock in a company, they are happy to buy it themselves. Some analysts say greater investor demand for stocks could join robust corporate buybacks in supporting major indexes. S&P 500 share repurchases in the fourth quarter rose to a record $223 billion, a 63% increase from a year earlier, according to S&P Dow Jones Indices.

Meanwhile, these record-high market levels are MADNESS considering we're heading into a significiant slump in Corporate profits – the first one after two straight years of gains:

IN PROGRESS

Philstockworld March Portfolio Review (Members Only)

March 31, 2019

And the madness continues.

We just finished the best Q1 in 10 years and, keep in mind, we're at the top of a 300% rally from the 2009 bottom so we're accelerating, not decelerating. The Fed is keeping their foot on the gas and the economy isn't showing the usual signs of overheating (inflation, rising wages, rapid housing increases, commodity shortages) so they don't have a compelling reason not to boost the economy further – despite the stock market inflation that's causing the largest wealth gap this country has ever seen since the start of the Great Depression.

It's very simple really, the Fed and the Government have boosted the market 300%, which has greatly increased the wealth of the investing class but none of that wealth has trickled down so demand for goods, services, housing and even labor remains restrained. In other words, the rich get much, much richer and the poor barely hold their ground.

While my liberal heart bleeds for them, we are running portfolios for the Top 1% and our two paired portfolios (LTP and STP) are now just under the $2M mark at $1,990,381 – or they were back on the 15th, when we did these reviews. That's up $1.4M (233%) since our 1/2/18 inception at $600,000 so it's been a very good year for long-term investing, although the STP has actually outperformed the LTP by a wide margin in this crazy market. It's an odd kind of rally indeed when your hedges outperform your longs – but that's the way it's been for the past year or so.

With the market topping out again, we haven't found too many bargains recently but that doesn't stop our portfolios from making money as we make quite a lot of money by the very reliable method of time (theta) decay from the options we sell – the system we call "Being the House – NOT the Gambler".

Options Opportunity Portfolio Review (OOP): $283,465 is actually DOWN $3,622 from our 2/14 Review but was closer to $300,000 a couple of days ago – so luck of the draw as to when I do a review. ALK took a big hit, BHC was better, CHK went our way, GNC got hit,…

TGIF – Best Q1 in 10 Years – Is This as Good as it Gets?

March 29, 2019

I am 56 today.

Hard to get that off my mind as 56 seems like a lot and, of course, Birthday's mark the end of a year, not the beginning, so this is year 57 on the planet for me and thinking about how different it is now from when I was born makes me wonder what kind of World, if any, we are building for our chilren – mine are 17 and 19.

March 29th, 1963 was a Friday as well and a Boeing 707 with Warren Beatty on it was struck by lightning over London and had to dump it's fuel before landing and the Castro Regime apologized that day for firiing on one of our jets with their Russian MIGs. The first trans-Atlantic phone call was made the next day between NY and London (probably Beatty) and the New York City newspaper strike ended after 114 days on Sunday, with the price of papers doubling to 10 cents to meet union demands for raises. Guatemala had a military coup that day with the US-backed army taking over the Government, which was close to electing Communist leaders (we couldn't have that!).

IN PROGRESS

Fool Us Thursday – China Deal Once Again Used to Boost the Markets

March 28, 2019

Really?

How many times can we possibly fall for the same thing? Every time the market takes a dip we suddenly make trade progress with China – according to US Officials, anyway. Of course we need something good to happen with China to offset today's depressing GDP Report, which will highlight the damage Trump's Government Shutdown has done to the US (and Global) Economy.

Still, it looks like you can certainly fool some of the people all of the time and the Futures are, as usual, coming off their lows on "news" that China is making concessions in the trade talks. Reuters reported previously that the two sides were working on written agreements in six areas: forced technology transfer and cyber theft, intellectual property rights, services, currency, agriculture and non-tariff barriers to trade. Still, progress is not a deal and we are still miles away from a deal which means Trump's Tariff Tax on the American People will continue while China runs out the clock on his Presidency.

It's been almost a month since the last meeting and the next meeting will be in May and then it's summertime and who knows if anything gets done over the summer yet, today, the Dow came 100 points off the low on rumors that progress is being made – it doesn't take much to get that index excited, does it?

Aside from GDP at 8:30, we get Jobless Claims and Corporate Profits followed by Pending Home Sales at 10 and the KC Fed Manufacturing Report at 11 followed by four (4) Fed speakers – Bostick at 11:30, Williams at 1:15 (on both sides of a 1pm 7-year note auction), Willimas again at 2:30 and Bullard this evening at 6:30 followed by Williams again at 9:25 tomorrow morning. Williams is the Fed's Uber-Dove, so you can see which way the Fed is looking to steer things into the quarter's end.

It may not feel like it but this has been a great quarter for stocks, with the Dow up about 2,500 points (11%) and the S&P up 300 points (12%) since the year began. It's just that we've been here since mid-February,…

Which Way Wednesday – Weak Bounce Edition

March 27, 2019

So close but yet so far.

The Futures are down yet again as we revisit yesterday's lows ahead of the open (7:30). The bond market is still causing trouble around the World as investors are getting jittery and Draghi came out with some comments this morning about the danger of negative rates – even as German 10-year notes fell further into negative territiory. Draghi also said he's ready to get even more doveish but he's not too worried about the economy, saying:

"During the four euro area business cycle expansions since 1970, there have been 50 soft patches – defined as a two-quarter growth slowdown – and only four recessions. In fact, the euro area faced an analogous situation in 2016, when the economy also went through a soft patch triggered by a contraction in world trade. At that time, the strength of the domestic economy was able to shield the recovery from external uncertainties."

Somehow, this makes me worry more because 2019-1970 = 49 years and Draghi is saying we've had FIFTY (50) 2-quarter slowdowns in less than 50 years – and he thinks that's OK? Sounds like a good case to get out of the EU to me! Speaking of which – the first rat to attempt to leave the sinking EU ship is, of course, the UK and the chart on the left gives us an idea of where they stand.

The original deadline for the decision was Friday but now it's the end of June but Parliament is voting today and notice that most paths lead towards a General Election, tossing out Theresa May and throwing the UK into turmoil yet again but all is not lost as Conservatives seem to be coming over to May's side in favor of the deal they just rejected – mostly because they just want to get this thing over with so they can go back to worrying about the names of new tugboats ("Boaty McBoatFace" won last time) without all that nasty interference from the EU (who submitted the name "Tugboat 12").

Still, it's all the same nonsense that…

Turnaround Tuesday – Markets Pop Back Just Because

March 26, 2019

No, nothing happened.

Still, we're up 0.6% pre-market across the board and we're just waiting to see if the Russell can get back over it's Strong Bounce Line at 1,532 to confirm the bullish action of the rest of the indexes. As I mentioned in yesterday morning's PSW Report, we were playing for the bounces off "Dow (/YM) 25,300, S&P (/ES) 2,800, Nasdaq (/NQ) 7,300 and Russell (/RTY) 1,500" and in our Live Member Chat Room, at 9:51, I put up the following note to our Members:

Good morning!

Big Chart not bad, only the RUT failed the 200 dma (and the 50) so we need to see 1,523 come back and the rest is just normal bouncing which would be:

Dow 26,000 to 25,400 is 600 points so 120-point bounces to 25,520 (weak) and 25,640 (strong)

S&P 2,860 to 2,790 is 70 points so 14-point bounces to 2,804 and 2,818

Nas 7,525 to 7,300 is 225 so 45-point bounces to 7,345 and 7,370

…

Monday Market Movement – Back at S&P 2,800 Yet Again

March 25, 2019

Well, Friday was a disaster, wasn't it?

Turns out it wasn't about Trump, he is still at large after Mueller did not find enough evidence to convict (still plenty of evidence to suspect but Trump's AG Barr has squashed further investigation) so it looks like Trump's policies will be with us for another two years. As you can see from the chart, that will give us two more years to work on really pissing off the rest of the World, whose approval of the US is already at or near the record lows set by Bush II.

Isreal still likes us and you can see the GOP working double-overtime recently pandering to them and Nigeria likes us for some reason along with Poland and India. Of course, Trump and his followers probably don't care if foriegners don't like us because these 320M people don't need the other 7,800M people on this planet and we don't need to trade with them or get along with them or even enter into defense agreements with them because – WE'RE NUMBER 1! USA! USA! USA!!!

See, if you say it loud enough and often enough, you may actually start to believe that. Who needs reasons when we have chants? Well, I guess the answer is people with globes, people who understand that it's a global economy and not a local one any more but those people are called "Globalists" and they are vilified by the right as if reality is some anti-American agenda.

We have the same problem in the stock market as US traders think that things that affect the rest of the World don't matter to US markets, despite the FACT that the S&P 500 gets half it's revenues from overseas. Fortunately, at PSW, we do watch the overseas markets and there was nothing surprising about last week's correction and this morning, we can play long off the support lines as we expect to bounce off Dow (/YM) 25,300, S&P (/ES) 2,800, Nasdaq (/NQ) 7,300 and Russell (/RTY) 1,500 and, of course, we go long the laggards with very tight stops if any of them fail to hold…

Flailing Friday – Crazy Market Action Continues

March 22, 2019

And now we are down again.

The Dow started the week at 25,900 and we hit 26,130 on Tuesday but now back to 25,830 this morning so, on the whole, we'll be lucky to finish the week out flat. It's a clearly manipulated, low-volume market and JP Morgan points out that, despite the S&P 500 surging 20% from its December low – almost every catagegory of investors tracked by JPM, from individuals to hedge funds and computer-driven trading, has shown little inclination to chase the rally.

Dwindling liquidity is often dragged into discussions of market meltdowns. In December, for instance, when the S&P 500 plunged toward the brink of a bear market, both President Donald Trump and strategists from Goldman Sachs flagged it as potentially escalating the sell-off. While very dangerous if the market turns negative, JPM says these low-volume conditions could also keep the rally going:

“Given liquidity, it is plausible that just short covering, buybacks, dealers’ gamma hedging, and some limited re-leveraging drove the entire recovery. This, in turn, opens the possibility that the current rally can continue during the spring.”

JPM cites the dramatic reversal in Central Bank policies as putting another floor under the market. While I agree with their premise, I believe it, like most bullish premises, is ignoring the risks of the overall Global slowdown driven by the Trade Wars, Rising Oil Prices and Brexit as well as the dramatic slowdown in Corporate Profits we'll see now that they don't have additional tax breaks and, of course, rising wages will eat into profits as well.

IN PROGRESS

Throwback Thursday – Testing our Tops from Above

March 21, 2019

"How long, how long will I slide?
Separate my side, I don't
I don't believe it's bad
Slit my throat it's all I ever

"Turn me on, take me for a hard ride
Burn me out, leave me on the other side
I yell and tell it that it's not my friend
I tear it down, I tear it down
And then it's born again" – RHCP

Well, you can see why we remain skeptical with these low-volume rallies as we've now given up 50 S&P points since Tuesday's hign along with a whopping 500 Dow points and now we are testing 2,800 from above on /ES Futures and 25,600 from above on the /YM Futures. During yesterday's Live Trading Webinar, we called for shorting the Russell (/RTY) at 1,560 and that's down 20 points, to 1,540 and that's good for gains of $1,000 per contract but we took a quick $750 and ran into yesterday's close.

We also shorted Gasoline Futures (/RB) at $1.915 and, of course, we always go long on July Coffee Contracts (/KCN19) at $97 and Natural Gas (/NG) is getting to be playable again as a long at $2.80 (with tight stops below) but, since it's close to expiration on April Contracts (6 days), I'd go with /NGK19, which are the May contracts at $2.815 though even a stop at $2.80 would cost $1,500 per contract – so be very careful with those!

The Fed was very doveish, as expected but what spooked investors in the end was their overall downgrade of the economic picture as Trump's Tax Cuts simply are not boosting the economy and his Trade Wars are hurting it. The Fed keeps dropping subtle hints that such things are our of their hands to fix and their $4Tn balance sheet makes it very difficult for them to add any new programs to boost the economy – the best we can hope…

Which Way Wednesday – Fed and FedEx Move the Markets

March 20, 2019

FedEx (FDX) is tumbling and you should care.

Though smaller in volume than UPS, FedEx ships over 13M packages per day, which means they have their finger right on the pulse of business and, this morning, they missed earnings by 2.5% – but that was after they drastically lowered guidance last quarter (sending the stock 32% lower) and now they are lowering guidance yet again, sending the stock down 7% pre-market.

Weakness in International Shipping is the major problem but FDX says the Government shut-down also contributed to giving them a very poor Q1 – though that's not the excuse for taking down Q2 as well. Nonetheless, we think this news was already baked in in December and, in fact, on Dec 14th, we sold FDX 2021 Jan $180 puts for $22.22 to net in for $157.78 in our Long-Term Portfolio and it's likely you can do better than that this morning – if you are brave enough.

Just because the economy is weak doesn't mean FDX is suddenly a bad company – so it's a great play for long-term investors on a $47Bn company ($45Bn this morning!) that dropped $4.5Bn to the bottom line last year but, even adjusting for one-time tax breaks – they should still be netting about $3Bn in profits in 2019 so $45Bn ($170) is very fair.

FDX is also still working through their $4.8Bn acquisition of TNT Express in Europe – and it was pretty bad timing as the economy began turning down last year as the Brexit fears grew.

Still, it's not FDX we're worried about but what it says about the broader market, which has mostly ignored the troubles in Europe and the damage that was caused by the Government Shutdown, as well as all the nonsense in Europe and, let's not forget, the continuing trade battle between the US and China. FDX is down $90 (33%) since Sept and about 40% as of this morning – it's the companies that haven't corrected yet that I'm worried about.

That brings us to the Fed, who are very likely not to raise rates today (2pm) and we'll be discussing it in today's Live Trading Webinar, which…

Terrific Tuesday (as usual) – Markets Up, Up and Up!

March 19, 2019

Wow, what a rally!

Up 40 points in 3 days on the S&P (/ES) is 1.42% so Everything is Awesome - just like it was before the last crash because it's very dangerous to pin the Awesome Indicator and then something bad comes along and everyone is SHOCKED that things may not be as awesome as they were led to believe.

Today we are waiting on the ever-wise Federal Reserve to come up with yet another excuse not to raise rates (the last Jobs Report comes to mind) or unwind their still $4,000,000,000,000 Balance Sheet. Keep in mind that these Fed Fund Rates and this Balance Sheet are at emergency crisis levels and keeping the rates this low and the balance sheet this high means the Fed still thinks we are in an emergency of some sort – no matter what market traders may believe.

All the Fed has done so far is unwind $500Bn (11%) out of $4.5Tn that's on their books – and the market freaked out about that…

We're not "wrong" in our positioning, just a bit too cautious at the moment, considering the rally. We reviewed our Money Talk Portfolio, which we trade live on BNN's Money Talk, two weeks ago (3/7) as it stood at $125,790 (up 151.6%) and we couldn't change it because we weren't on the show this month but, even left alone, that well-balanced portfolio is now $130,260 (up 160.5%) gaining almost 10% off our $50,000 basis in 12 days while the S&P went from 2,765 to 2,850, which is up 85 points (3%) so we're certainly keeping up with the gains – it's just that we COULD do much better if we were willing to be more aggressive.

The Money Talk Portfolio is hedged and our SQQQ hedge lost $800 and our TZA hedge lost $780 as the rest of the portfolio gained $6,050 but that's exactly how hedges are supposed to work – you give up a little of your upside in order to protect yourself if there's ever a downside – though that doesn't seem possible the way this market has been going.

The "big" news moving the markets this…

Monday Market Movement – Another Week at the Top

March 18, 2019

Up and up we go – so far.

As I said two weeks ago: "Notice how well the 5% Rule is being obeyed. That also tells us that 2,835 is the 1.25% line but we haven't made that and we are finding resistance at the 0.625% line, which is 2,817.50. We don't usually bother at that level but it is ineresting that that's exactly where we topped out yesteday, which indicates there is a LOT of technical resistance over 2,800 and it's going to take a lot more than promises of trade progress to get us over that hump."

So here we are, two weeks later, finally up to the goal line we set way back on March 5th after exactly nailing our downside goal of 2,730, or, as I said at the time:

As you can see, almost all the rejections sent us down 100-200 points so let's not get too bullish as all we got yesterday was a bounce off the fall from 2,820 on Monday to 2,770 yesterday so that's 50 points and that means, per the Fabulous 5% Rule™, that we can expect 10-point bounces to 2,780 (weak) and 2,790 (strong) so now we're watching 2,790 as the fail line and, if we can't hold that, we'll be back to 2,770 and likely on the way to a full 1.25% pullback from 2,800 to 2,765 and, failing that, the next stop is the 2.5% line at 2,730, which we last tested on 2/15.

Remember, I can only tell you what is likely to happen and how to make money playing it – the rest is up to you!

So it's taken one month to cycle from 2,730 (2/15) to 2,920 (3/4) back to 2,730 (3/8) and now 2,835 and there's very little data this week and little earnings and the Fed is meeting on Weds but they can't possibly be more doveish so what's the catalyst going to be? On the other hand – there's not likely to be a downside catalyst either so maybe we'll drift along at the top – which might be bullish – but any move below 2,800 on /ES would be a…

TGIF – Terrific Week Ends with a Bang

March 15, 2019

Up and up we go!

It's been an all bull week after Monday's weak start and we're up 600 points (2.4%) on the Dow (despite BA falling apart), to 25,900 though that's nothing compared to the S&P 500's 5.5% rise from 2,730 on Friday to 2,825 at yesterday's close.

Are things 5.5% better than they were last Friday? What can you think of that's changed for the better? If you can't think of 3 things – or at least one really good one – you have to question WTF the market is doing…

The Nasdaq was at 6,975 last Friday and this morning we're looking at 7,310, which is up 335 points and that's 4.8% while the Russell bottomed out at 1,520 and is now 1,560 – that's just 2.6% and we can't blame Boeing for that one, can we? And, let's not forget that a 2.5% gain in the Dow still doesn't get us back to where we were at February Expiration Day (15th):

Still, without BA dragging the Dow, we'd be up 5% on the majors and that's a pretty good week though today is Options Expiration Day so it's not over yet. We do have strong-looking Futures at the moment (8:30) and I don't see any news likely to derail things though there was a terrorist attack against 2 New Zealand Mosques where 49 people were killed and dozens more injured by explosions.

Not that the market cares about such things – especially when they happen far away to people we don't know but it should remind us that the World is still a bit unstable and we shouldn't be pricing stocks as if we don't have a care in the World about the future…

IN PROGRESS

Thrilling Thursday – The View From the Top

March 14, 2019

Here we are again.

For the past year we've been topping out around 2,800 on the S&P 500 (/ES) and yesterday we closed over at 2,820 and, if we can hold it through the weekend, we may be looking at a real move above the line and the top of the range may become the new bottom BUT, I don't see the economic data to support that yet – so I remain a bit skeptical.

Fortunately, not too skeptical and our Long-Term Portfolio added $42,172 (8%) since our 2/15 Review while our Short-Term Portfolio (where we keep our hedges) has remained fairly flat and that's exactly what we like to see in our paired portfolios.

IN PROGRESS

Why Worry Wednesday – Market Continues to “Soar and Ignore”

March 13, 2019

No Brexit deal again.

Not that the markets seem to care but, at the moment, Britain is scheduled to leave the EU on March 29th and, as you can see from yesterday's vote, they are nowhere close to agreeing on a divorce settlement with the EU.

Without a deal, the UK must depend on the EU to simply give them an extention and restart negotiations but, if the EU plays hardball – the UK could be cut adrift, with no trade agreements with ANY country. Since all the EU nations have negotiated as a block for the last 30 years, the UK doesn't have any individual trade deals with any nation so, effectively, they can't trade.

EU President, Donald Tusk, said that the 27 EU governments would consider a “reasoned request” from the U.K. for an extension, noting they would need to agree unanimously. The leaders, he said, “will expect a credible justification for a possible extension and its duration.” Meanwhile, Jeremy Corbyn, leader of the main opposition Labour Party, said: “The government has been defeated again, they must accept that their deal…is clearly dead,” adding the U.K. should stay in a customs union with the EU.

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Testy Tuesday – Trouble at 2,800 – As Usual

March 12, 2019

Here we go again.

We made it back to our favorite shorting line yesterday as the S&P 500 (/ES) once again tested the 2,800 mark, failing to cross it into the very fake, Fake, FAKE close and already down 14 points this morning but still up 35 from the 2,750 open so we'll have to see how things go on the first real day's trading of the week.

Boeing (BA) came all the way back to $400 at the day's end, down "just" 5% after being down 12.5% at the open but we're not bottom-fishing BA as there remains an open question as to whether their primary plane is safe enough to fly and it probably is, but BA is no bargain at $400, which is $225Bn for a company making $10Bn a year so p/e about 22.5 and I'm certainly more than 10% less sure BA will be able to justify that multiple than I was last week. Other investors seem to feel differently but there's no way I'd take that risk right now.

As noted, this is a political issue as much as a corporate one and we can't really trust the FAA under Trump to make an impartial decision so we can expect a lot of countries (who don't trust Trump either – see why we watch those polls?) to ground 737 Max planes until their own agencies can re-certify the aircraft.

To some extent, the behavior of BA stock is very similar to the behavior of the S&P 500 and the other major indexes. We made it to all-time highs and, despite numerous new risk factors popping up – the indexes keep recovering back towards the highs – as if that's where they belong – despite all the problems we are now seeing in the Global Economy. Apparently we've learned nothing at all since 2008.

Certainly investors haven't learned NOT to buy stocks on margin as Margin Debt is 25% higher than it was in 2007 – despite being drastically reduced over the past quarter. First Margin Debt contracts and then the Indexes contract is pretty much the market norm – as people have to buy stocks with real money and begin demanding real performance and we'd better keep our eye on this chart because it seems to indicate we're pretty close to a significant correction.

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Monday Market Madness – Boeing’s 2nd Crash Since October Takes The Dow Down With It

March 11, 2019

Is China over-reacting or are we under-reacting?

Aviation safety is one of those things you would hope don't get politicized but that's what we're getting this morning as an Ethiopian Airlines 737 Max crashed on take-off, killing all 157 on board less than 6 months after Indonesia's Lion Air 737 Max crashed on take-off, killing all 189 on board that plane. The FAA was supposed to be looking into the matter in January but, you know – the Government shut-down and the investigation was delayed.

It's POSSIBLE (nothing is proven) that the 737 Max has problems with it's software automation and that means China and Ethiopia are right to ground the fleet immediately but it's also possible that China and their trading partner are sticking it to Trump and BA, using America's largest exporter as a negotiating chip – exactly the same way Trump has been using Huawei to put pressure on China.

That's how dysfunctional and unstable the World has become – we have no way of knowing if Governments are acting in the people's best interest or if they are simply playing Cold War-style Economic Brinksmanship.

In the Lion Air crash, investigators have indicated the pilots fought the MCAS system as it strongly and repeatedly pushed down the plane’s nose, but didn’t follow an existing procedure to deactivate it. On MAX 8 models, under certain conditions, pilots may be unable to pull the plane out of a dive unless they react quickly and proceed to the most relevant portion of their emergency checklist. Outside safety experts have questioned how the FAA gave the green light for such a design lacking redundant software or hardware safeguards.

One malfunctioning sensor or a single stream of faulty signals—called a “single point failure” in engineering lingo—can lead to a catastrophic dive, if pilots react improperly, so China may have a very good point and maybe it's the US who is politicizing the issue by NOT grounding the 737 Max's pending a full investigation – who the F knows anymore???

There's a lot at stake here as Boeing is a large part of US Exports and, while only…

TGIF – Stocks Slide into the Weekend – What’s Next?

March 8, 2019

Wheeeee!

I love a good sell-off – especially when we called it and we're well-prepared. We were skeptical of the market rally on Monday and, in our PSW Morning Report (which can be delivered to you pre-market for a small fee), I said:

"We'll see if the market is ablfe to get excited about more Trade Talks and we still haven't cracked 1,600 on the Russell (/RTY) but as long as the S&P (/ES) is over 2,800 – all is technically well in the markets… 7,200 on the Nasdaq (/NQ is a good shorting line for today as is 1,590 on /RTY, since that's the 200 dma – tight stops above!"

30 points is a 1% pullback on the S&P Futures (/ES) and, at $50 per point per contract, it pays $1,500 – making it an excellent portfolio hedge (using $6,600 of margin per contract). What makes Futures Trading such a valuable tool is that you don't have to wait for the market to open to make an adjustment. Also, there's very little friction cost (the cost of entering or exiting the trade, including fees) so you can use it to very quickly adjust your portfolio at a moment's notice.

Generally, at PSW, we don't like to enter a Futures trade unless there is a significant support or resistance line we can use as a stop because Futures contracts tend to move quickly and erratically EXCEPT when they run into significant support or resistance, where they slow down enough for you to catch your breath and see what's real. Since we are not technical traders but Fundamental ones – having the time to check the news flow is critical in deciding when to get in and out of a Futures trade. In fact, we took the quick $1,500 gain on Monday and we concentrated on the Russell (/RTY) shorts on Tuesday as I said in that Morning Report:

/RTY 1,568 should be support but, if not, could see 1,550. Tight stops in any case but I'm happy with these gains!

As you can see, almost all the rejections sent us down 100-200 points so let's

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Flailing Thursday – Markets Look More Toppy With Each Passing Day

March 7, 2019

This is sad:

We've been going nowhere for a month and there's nothing wrong with healthy consolidation but, if you listen to the Financial Media, you would think you are missing out on some huge rally. FOMO, or "Fear of Missing Out" is the new driver for market behavior though I can't imagine what it is people fear, when you consider the S&P 500 is up 1,000 points 55% in the last 3 years though we're actually lower now than we were a year ago.

That's why we've been "Cashy and Cautious" since we cashed our our 5 Member Portfolios in December of 2017, when I decided the risk of holding through the holidays wasn't worth it after a year of such spectacular gains. I was a little early with that call but we got a great sell-off last January and we jumped in with our new Portfolios and now they have made ridiculous gains – especially our skeptical Short-Term Portfolio, which we use to hedge our Long-Term Portfolio.

I went over the STP and gave my thoughts on it in yesterday's Live Trading Webinar (replay available here) and we feel our current hedges adequately protect us from what we think will be a minor (2.5-5%) correction that shouldn't take us lower than 2,640 on the S&P (/ES), which is the 20% line on our Big Chart, which is still using the 5% Rule™ calculations we applied way back in 2015 so we're right on track but we also need to adjust those brackets 10% higher (Dow, Nas and S&P only) to account for the new, lower, Corporate Taxes and their effect on large-cap earnings.

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Which Way Wednesday – Beige Book Edition

March 6, 2019

More Fed data.

That's what we're waiting for today as the Fed will release their Beige Book, which covers the end of the shutdown period and should give us a read on how damaging the shutdown has been to Q1 earnings. As you can see from the chart, the Atlanta Fed's estimate of growth in Q1 is pretty close to zero while the "consensus" estimate of leading economorons is just under 2% – that's a pretty wide gap and it's going to matter A LOT which way that line begins to bend.

For the moment, the markets are hanging onto hope that the US and China have finally worked out their differences and that the Governement won't shut down again this year and Brexit won't be a total disaster and, of course, that all those warning signs that have been flashing in the economy are temporary (from our self-inflicted wounds) and we will get back to growth very quickly. Despite my skepticism, that is how we've been playing the market as our Member Portfolios are generally bullish – with a few hedges – "just in case".

I would still be happier if the market made a nice 10-20% correction and stayed down long enough to consolidate for a proper move up but it doesn't look like the powers that be are willing to let that happen – and that includes China – who went to great lengths to prop up their own markets this week as well.

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Testy Tuesday – Trouble at 2,800 – Again!

March 5, 2019

You're welcome!

In yesterday's PSW Morning Report (subscribe here) I said:

7,200 on the Nasdaq (/NQ is a good shorting line for today as is 1,590 on /RTY, since that's the 200 dma – tight stops above!

As you can see, the Nasdaq (/NQ) shorts were good for gains $2,000 for each Futures contract shorted while the Russell (/RTY) fell to 1,565 and that was good for gains of $1,500 per contract – not a bad way to start the week. In case you are wondering – in our Live Member Chat Room, at 12:16, I also called the bottom, saying:

Hopefully that will be it, 2,780 though is a terrible fail of 2,800 and down 100 points on the Nas is a quick $2,000 and /RTY 1,568 should be support but, if not, could see 1,550. Tight stops in any case but I'm happy with these gains!

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Despacito – How to Make Money the Old-Fashioned Way – SLOWLY!

March 4, 2019

Are you ready to retire?

For most people, the purpose of investing is to build up enough wealth to allow you to retire. In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic – to say the least – with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives. A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) and 20 years (6.7%) than any other investing vehicle and, if that keeps up, a stock market portfolio may give you the best chance of obtaining a functional retirement. At 7% a year, if you want to generate a $70,000 annual income, you need to have $1M invested but it would be a tragedy if the market dropped 30% and then you had $700,000 and 7% of that is only $49,000 so you have less money coming in AND not enough to live on – keep that in mind when coming up with your "Comfort Number" and, by all means – speak to a Financial Professional who can help you plan by taking into account your own circumstances!

While some investors shy away from stock options because of their reputation for being akin to gambling, we disagree. Stock options are an important tool for supplementing your stock investing. Options, when used correctly and strategically, allow you to “Be the House, NOT the Gambler”. While no one in the casino always wins, the odds favor the dealer. We’ll show you how to structure your investments to keep the odds in your favor, like the dealer in a casino.

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Monday Market Moves Up (again) on Trade Progress (again)

March 4, 2019

Yay, I guess.

The crisis we created may be over! The US and China may lift tariffs by March 27th – after President Xi finishes a trip to Italy and France, where China may buy both countries under the EU's new BOGO Program. Meanwhile, to appease Presdent Trump, President Xi has agreed to buy $18Bn worth of Natural Gas (/NG) from, specifically, Cheniere Energy (LNG), the US's largest exporter of Liquefied Natural Gas.

Of course, this kind of concession is completely meaningless as Natural Gas and Oil (/CL) is what they call a "fungible" commodity, meaning that it's essentially irrelevant WHERE China buys it's Oil and Nat Gas because they will simply replace another buyer here and the guy who used to buy it from us will buy it from someone else or, perhaps, forced Chinese buying of our Natural Gas will create a shortage and artificially raise prices for all Americans.

Of course LNG has been spending big to boost exports ($15Bn, in fact) as if they KNEW this deal was coming or maybe it's because the deal already came and Trump is just acting like he did something (not surprising) as LNG already signed a deal with China National Petroleum in November, to buy 1.2M tonnes of LNG a year and a tonne of LNG is 48.7Bcf so 58.44Bcf of Natural Gas is 3.6% of the entire US supply of Natural Gas, which is already in the low end of the 5-year range.

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TGIF – Trade Talk (Again) Pops Us into the Weekend

March 1, 2019

Back to 2,800!

As you can see from the chart, S&P earnings are down about 1% since September but the S&P itself it up 1%, back to the critical 2,800 line (again) and we'll see if it sticks but the /ES Futures are a fantastic short below that line with very tight stops above. What I find most interesting on this chart, however, is the "value" of the S&P 500 stocks now bushing $67Tn and I'll tell you why that is important.

You can look and look and look but you can't find a good number on the total Profit of US Corporations because they, and the Government, work very hard to obscure that information from the public. Why? Because if the public understood just how much money Corporate America was makin and how little they are paying in taxes – there would be lynchings – and NOT the kind the GOP like!

$67 TRILLION is a good clue about corportate profits because you know that the S&P is trading at roughly 22x forward earnings so, if the valuation is $67Tn, we divide that by 22 and find that profits must be $3.05Tn. That makes sense becuase Apple alone makes $60Bn and they are about 2% of the S&P so 50 x $60Bn is $3Tn also. Well that's settled then, JUST the 500 companies in the S&P 500 make $3Tn and figure $3Tn for the other 5,500 public companies is $6Tn and than whatever all the private companies (Cargill, Koch, Deloitte, Pricewaterhouse, Mars, Publix, Bechtel…) make has got to be at least another $2Tn so that's about $8Tn in PROFITS for our Corporate Masters and let's see what they paid in taxes last year:

$297Bn??? WTF??? That's just 1.5% of our GDP and Corporate Profits are 40% of our total GDP – they are barely paying 10% of their profits in taxes! 165M wage-earners making $50,000 a year get paid $8.25Tn – about the same as the corporations make in profits, yet they paid $1.6Tn in Income Taxes (20%) and another $1.2Tn (15%) in Payroll Taxes.

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GDPhursday – Trump Finally Goes to Vietnam – And Loses

February 28, 2019

No deal!

Trump called an early end to his long-awaited summit with Kim Jong Un last night, 2 hours before the two were scheduled to have a "joint signing event" to conclude the negotiations. Our deal-maker in chief said they reached an impasse and "We actually had papers ready to be signed, but it just wasn't appropriate." Now I guess that sounds fine to a farmer in Iowa but anyone who's been top management at a company knows that when you schedule a closing for deal and people fly around the World to get it done and then it blows up at the last minute – that there was some seriously incompetent crap happening beforehand.

What really bothers me about North Korea is the implications it has for the China Trade Deal as that may end up not happening just as easily as Team Trump was assuring us up to the last second that North Korea was in the bag and Japan's Shinzo Abe has already nominated Trump for a Nobel Peace Prize for "Bringing Peace to the Korean Peninsula" – which hasn't actually been at war for 50 years – but who's counting. Despite that very low bar of making it through year 51 – Trump has failed – capping off a very bad day where Trump's lawyer provided Congress with a list of Felonies committed by the President, including: Bank Fraud, Tax Fraud and Campaign Finance Violations.

My working theory remains that Trump does not want a trade deal with China because he's taxing AMERICANS hundreds of Billions of Dollars a year in order to balance the tax cuts in his budget. In other words, the tariffs are nothing more than Trump's way of robbing the poor to give to the rich and, even though Farm Loan Delinquencies have skyrocketed to 19.4% of all loans – despite the $7.7Bn Socialist Government hand-out – yet Trump's base is still too dumb to connect the dots!

This morning, we see how the overall economy has been affected by the Trade War and it looks like Q4 GDP is…

What Now Wednesday? Suddenly India and Pakistan are Shooting at Each Other!

February 27, 2019

It's always something!

Early this morning, India and Pakistan shot down each other's planes and now what used to be the World's most likely place for nuclear war to break out is once again the World's most likely place for nuclear war to break out – which says a lot since Trump's finger is still on the button but he's been bumped to #2 by this new tussle.

This is still backlash from the terror attack on India, which killed 40 people we didn't care about on Valentine's Day and India retaliated and bombed what they claim was a Militant Base inside of Pakistan. We still sell arms to both countries, so this war is great for us! Actually, Pakistan already pissed off Trump and the GOP by switching to China as their main weapon supplier (much cheaper).

The Futures are already recovering from a sharp drop this morning as Nuclear War is way down on this Planet's list of things to worry about what with the planet boiling us alive and all the insects dying. If that doesn't bother us – what's a little background radiation going to do?

What's really concerning is the S&P's repeated failure to hold 2,800, which still has us wondering if this whole rally is topping out 5% below the September highs (2,940) and, of course, the Russell is still unable to crack the 1,600 mark – which we said last week was a big problem. In fact, I also said in last Wednesday's Morning Report:

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

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Turn Down Tuesday – Trump Crimes and Fed Testimony Reverse the Rally

February 26, 2019

Criminal conduct!

Trump's former lawyer, Michael Cohen will for the first time publicly accuse the President of criminal conduct while in office related to a hush-money payment to a porn star. According to the Wall Street Journal: "The President’s ex-lawyer will tell House Committee he witnessed Trump’s ‘lies, racism and cheating,’ role in hush payments." This is contrary to Trump and the GOPs position that his payments to the porn star he was cheating on his wife with were perfectly legal and just a normal part of any campaign process and, of course, he's already been given a pass by the Evangelicals who support Trump 100% in all of his exrtra-marital affairs.

Criminal charges are new and that opens up a whole new avenue of investigations for Trump – even if there isn't enough evidence to prove that he's a Russian Agent, placed in power through a coordinated effort that clearly came from Russia and Putin, with money that clearly came from Russia and Putin following through on an agenda that is clearly benefitting Russia and Putin BUT – we can't PROVE that he's purposely doing all this to pay back Putin or if it's just a cooincidence that his staff has already been found guilty of conspiring with Russia and none of that has anything to do with Trump himself.

Sure, that's the ticket, right? Well, the market has been willing to move along, even as Russian State TV on Sunday listed potential US cities that they could strike first with their new Hyppersonic Missiles. The report came days after Russian President Vladimir Putin warned the U.S. against deploying intermediate-range missiles in Europe. You would think the President (any other President) would be outraged but there was not a single tweet as Trump was busy calling for "retaliation" against Saturday Night Live for making fun of him and touting his trade progress with China, which boosted the markets yesterday.

While I know most of you reading this think this is all some sort of Liberal attack against the President (and yes, I am a Liberal), I don't really see how that disqualifies me from being concerned when the Russian Propaganda Network has a whole…

Monday Market Melt-Up – Trade Talk Progress Pushes Us Higher

February 25, 2019

"Substantial progress."

President Trump said Sunday he would delay an increase in tariffs on Chinese goods set to take effect at the end of this week, citing “substantial progress” on issues including intellectual property and technology transfer after a weekend of talks. In a tweet, Mr. Trump wrote that should progress continue, the U.S. would plan a summit with President Xi Jinping of China to “conclude an agreement” that would settle a yearlong trade fight between the two nations.

While Trump’s tweets didn’t specify how long the extension of a trade truce would last or any date for a potential summit, we are halting the tariff increase on $200Bn worth of Chinese goods that were scheduled to go from 10% to 25% as of March 1st, so that's $30Bn already not being collected and I'm pleased with just that as my primary fear was that trump wouldn't be willing to give up the $360Bn budget offset those tariffs represented (but even his thick fans were starting to notice that they were the ones paying the tariffs, not the Chinese).

The key concession Trump seems to have gained from China is a promise to buy $300-400Bn more goods per year from the US to "balance" the trade and mostly that will come in the form of farm and energy products (you didn't think the Chinese would actually want our manufactured goods, did you?) and that's already giving our Natural Gas (/NGV19) trade a nice bump (we talked about that in last Wednesday's Morning Report) and, of you missed that one, try going long on July Coffee Futures (/KCN19), which are still down at $102.45 as that's been very depressed all winter.

Oil prices are off a cliff today as the Trump, feeling all-powerful this morning, decided it was time to declare "Oil prices getting too high. OPEC, please relax and take it easy. World cannot take a price hike – fragile!". Keep in mind that Trump had room for another 200 characters, so he didn't need to sound like a cave man but it's possible he's working on some new type of Haiku.

Oil is actually 10% lower than it was last year but now it's lower than that, dropping 2.5% this morning back below $56 but we knew it was too high on Friday and I had made a call for…

Friday Flip Flop – Five Fed Speakers and Trade Progress Finish the Week Strong

February 22, 2019

Williams (twice!), Clarida, Harker and Bullard.

We knew on Tuesday that the Fed expected the market would need saving on Friday and despite the Dow being up 100 points pre-market this morning, at 25,926 we're still below Tuedsay's highs though well off yesterday's lows – which was 25,762. On Wednesday we talked about the importance of the Russell 2000 and the 1,600 line and, at 1,581.50 – we're no closer today than we were on Tuesday, but off our lows at 1,570, which was a $700 per contract gain from our shorting line (you're welcome!).

Fortunately, Kraft Foods (now KHC) was dropped from the Dow back in 2012 or we'd be red this morning anyway as that company is down 25% pre-market as the merged company (with Heinz) catches 5 downgrades this morning after their accounting methods are being questioned by the SEC (which is actually not a big deal) and the company is writing down $15Bn in "Goodwill", which is a big deal as it indicates they dramatically overstated the value of their balance sheet BUT – it's only 10% of their total assets so a 25% drop is still a bit of an over-reaction.

If you want to capitalize on this event, you can, of course, go long KHC (who also cut their dividend) or you can short Berkshire Hathaway (BRK-B), who are taking a $3Bn hit on their KHC holdings – the day before Buffett's annual letter to his shareholders comes out. Berkshire is not a company you would usually short but they own a lot of the kind of companys that have "Goodwill" as a major asset and KHC's situation will calll all Goodwill Assets into question – all $3Tn of them that are declared in the S&P 500 – $80Bn of which is Berkshire!

BRK-B was at $205 this morning but is already indicating a $5 drop but a $3Bn hit is 20% of their quarterly income and Buffett doesn't sugar-coat things so they could drop further and the March $195 puts are $2 and could be a fun play there. As to KHC – We'll be taking a hit on the spread we have in our Long-Term Portfolio and I won't be quick to add, as…

Faltering Thursday – Market Shrugs off “Framework” for China Trade Deal

February 21, 2019

Uh-oh!

Early this morning the US and China announced they had made "significant progress" and have outlined "commitments in principle" with Negotiators are drawing up six memorandums of understanding on structural issues: forced technology transfer and cyber theft, intellectual property rights, services, currency, agriculture and non-tariff barriers to trade. The Chinese are even coming to Washington TODAY to continue their "fruitful" discussions of last week – actually attempting to hit the March 1st deadline for a deal.

You would think the Dow would be up at least 200 points on this news – but noooooooooooooo – it's down slightly and if a trade deal isn't going to be a good catalyst – then I am worried that we don't have a catalyst to take us any higher than we are now.

As you can see – there was a pop around midnight, when the announcement hit the wires but it has since faded out while the Russell made it right to our stopping line at 1,590 but failed there, so it's game on for the Russell Fututures (/RTX) shorts we discussed yesterday (we already had some small winners) – despite the "great" trade news.

We got a very doveish Fed Report yesterday and that didn't help much – especially considering the Dollar was down 1% – so the markets should have been much higher in yesterday's action. These are all signs of rally exhaustion and we still have our hedges in place from last week and I would strongly suggest you take some time to make sure your own portfolio is well-protected.

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