Final Friday of the First Half of 2017

Poof!

Just like that, half a year has gone by.  Who'd have thought, just 6 months ago, that the World would still be here with Donald Trump as President?  Given how bad we thought things were going to be, they are actually not so bad.  Yes, of course the President's Team is doing everything they can to bring about the Apocalypse but, so far, they've been generally ineffective at, well, everything: "Republicans frustrated as their to-do list grows."

So here we are, closing out the 2nd Quarter with the market near record-highs, despite yesterday's pullback, though we find it hard to trust anything that happens pre-market after yesterday's obviously fake prop-job.  It is the last day of the quarter and windows do need to be dressed but, as I predicted in Wednesday's Live Trading Webinar, the sellers took full advantage of the pumpers yesterday and sold into everything they had – giving us the biggest volume day of the month as declining shares and volume overwhelmed advancers 2:1.

The VIX briefly spiked up 50% as the market plunged and that sent SVXY (we're short on them) plunging back down but a long way to go to our $105 target in September so we're expecting to see a general up-trend in volatility over the summer – but let's not get ahead of ourselves and see how the quarter ends first. 

Though the Nasdaq is poised to finishe the month down about 1%, that's nothing compared to the amazing run it's had all year and, as evidenced by the chart below, literally nothing else seems to matter as EVERY OTHER INDICATOR has been falling while the Nasdaq has climbed 15% in the past 6 months.  We have been using the Nasdaq as one of our primary hedges (SQQQ) and they paid off in spades yesterday but that's nothing to get excited about as these dips don't tend to last long (so far).

More of a concern than macro indicators, however, is how much money it's been costing the G20 to prop up the markets for the past decade as Golbal Debt just hit $217 TRILLION
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Thrilling Thursday – Banks Pass Stress Tests (after being given $3.5Tn)

The banks all passed!  

After being handed $3.5Tn in various forms of relief by the Federal Reserve (and we already forgot another Trillion from TARP), our friendly Banksters were all given the go-ahead from the Fed (a cartel of Banksters that is NOT a Government Agency) to beign transferring that wealth (through dividends and stock buybacks) to the Top 1% while the losses from those bailed-out assets will be taken on by the Bottom 99% as additional Federal Debt.  

Image result for top 10% 75% of wealthSeems like business as usual in America to me where the Top 10% of the population (30M) hold 75% of the nation's wealth AND make 50% of the income – yet they need tax breaks to get by….  

As you can see from this distribution chart, no, this is not normal – the US has the worst wealth distribution in the developed world, you have to go to Oilgarchys like Russia or Dictatorships to find another country where the Top 10% takes more of the pie away from the Bottom 90% than they do in the US.  That's why our own Oligarchs rigged an election to install a more Russia-like system (where the top 10% have 85% of the wealth) – at some point they need to worry about the rubes realizing how much they are being screwed and rising up against them so the time to install an authoritarian regime is now – you have to nip dissent in the bud before it spreads.  

That's why the "Fake (non-Fox) News Media" is under attack, ideas cannot be spread to the masses unless they are the State's ideas – all other opinions must be squashed or invalidated.  Just the fact that I'm saying this here will cause this post to be censored at Seeking Alpha and several other places that usually syndicate our Morning Report.  

And it's not really about the Top 10%, they are generally poor compared to the Top 1% but they do go along (like any good party Member) because what's good for the Top 1% is usually good for the Top 10% as…
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Wednesday Window Dressers vs the Fed as Assets Continue to Bubble

Related imageThere's a battle going on at the top of the market.  

Four Fed speakers this week pulled out their pins and took a poke at the market bubble:  

  • Williams said "There seems to be a priced-to-perfection attitude out there.” and that the stock market rally "still seems to be running very much on fumes."  Speaking to Australian TV, Williams added that "We are seeing some reach for yield, and some, maybe, excess risk-taking in the financial system with very low rates. As we move interest rates back to more-normal, I think that that will, people will pull back on that."
  • Fischer said  "The increase in prices of risky assets in most asset markets over the past six months points to a notable uptick in risk appetites…. Measures of earnings strength, such as the return on assets, continue to approach pre-crisis levels at most banks, although with interest rates being so low, the return on assets might be expected to have declined relative to their pre-crisis levels--and that fact is also a cause for concern."  Fischer then also said that the corporate sector is "notably leveraged", that it would be foolish to think that all risks have been eliminated, and called for "close monitoring" of rising risk appetites.
  • Dudley said rates will keep rising as long as financial conditions remain loose: "When financial conditions tighten sharply, this may mean that monetary policy may need to be tightened by less or even loosened.  On the other hand, when financial conditions ease—as has been the case recently—this can provide additional impetus for the decision to continue to remove monetary policy accommodation."
  • And Chairwoman Janet Yellen said yesterday that some asset prices had become “somewhat rich" although like Fischer, she hedged that prices are fine… if one assumes record low rates in perpetuity… “Asset valuations are somewhat rich if you use some traditional metrics like price earnings ratios, but I wouldn’t try to comment on appropriate valuations, and those ratios ought to depend on long-term interest rates,” she said.  Yellen then said (already being taken out of context by bulls): "Will I say there will never, ever be another financial crisis? No, probably that would be going too far. But I do think we’re much safer and I hope that it will not be


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Toppy Tuesday – S&P 2,440 Keeps Failing into Earnings

Here we are again, again.

We've been watching that 2,440 line on the S&P all month long for signs of an upside breakout and, while the Nasdaq is still making record highs, the much more reliable S&P 500 seems reluctant to go higher.  Earnings season is just around the corner but a week delayed because of the Holiday, with Big Banks (C, JPM, WFC) reporting on the 14th and then comes the flood.

It's hard to imagine how the S&P can go higher without solid evidence it deserves to have a p/e greater than 25 (now 24.6) to cross that 2,500 mark so all eyes will be on the 500 and how much they are actually dropping to the bottom line this quarter.

Unfortuately, that may be a bit of a snag as the Atlanta Fed has once again lowered their GDPNow Forecast to 2.9%, down 30% from the original 4.2% estimate that kicked off the 2nd quarter.  Yesterday's Durable Goods Report for May was a horrific -1.1% and April's (the first month of Q2) report was revised down from terrible (-0.7%) to horrific (-0.9%) as well.  

GDPNowThat caused the forecasts for contributions of real Nonresidential Equipment and Inventory Investment to second-quarter real GDP growth to decline from 0.15% and 0.76% to 0.12% and 0.69%, respectively, which knocked the overall forecast futher down the line.

Keep in mind Trump's budget is based on 4% GDP Growth and failing to achieve that adds Trillions of Dollars to our deficit yet they will ignore this FACT and cut the taxes anyway and your children and your grandchildren will suffer for it for the rest of their lives – enjoy.

Of course, those lives are much more likely to be brief – especially if they are in the bottom 90% as the newest version of the TrumpDon'tCare lack of Health Bill cuts 22M people off from insurance and will skyrocket costs for people who remain covered – including seniors as the famous "donut hole" in coverage is back with a vengance under the new plan.  4,000 people PER MONTH will DIE due to lack of coverage - that's what your Senators are voting for – a 9/11 per month for America's…
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Monday Market Movement – Hedging for the Holidays

Image result for be carefulBe careful out there!  

That's how I often close my posts but I want to double-plus emphasize it this morning as we have the 4th of July next Tuesday and there will be very few Americans working on Monday (US markets close at 1pm) - as it's the perfect chance to take a long weekend.  In fact, next week is likely to be the slowest trading week of the year but that makes it very dangerous because any kind of panic into low volumes can cause a sharp sell-off so BE CAREFUL OUT THERE!  

We already took our winning commodity trades off the table (you're welcome) in an Alert I sent to our Members at 5:36 becasue we had nice pre-market moves up in oil, gasoline, natural gas – even coffee – all of our weekend longs, in fact.  These are the same trades we discussed in Wednesday's Live Trading Webinar and, of course, in Thursday morning's PSW Report, where I said:

Gasoline (/RB) is a bit more encouraging, already racing back to $1.435 (up $630 per contract) after hitting $1.395 on yesterday's lows.  $1.42 is our long spot on /RB with tight stops below so it's game on again this morning, as it is with Oil (/CL) at $42.50 – if you are brave.  We still like Coffee (/KC) at $122 but it doesn't like us and Natural Gas (/NGV7) went from $2.95 to $3 (up $500 per contract) yesterday and now it's back at $2.95 so why not take it again?

Why not indeed as we cashed in 2 longs for another $1,760 profit on the rejection at $3.05 and that's certainly good enough for 2 day's work, right?  We teach people how to trade Futures contracts every Wednesday in our Live Trading Webinars as well as every day inside Philstockworld – you can join us HERE.  

Once you pick up a good trading channel, you can make these same trades over and over again for quick profits like this and that's the best way to get started trading Futures – quick in and out trades with tight stops to limit your losses.  I also…
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Friday Already? Russell Rebalancing Should Make Things Interesting

$8.5 Trillion.  

That's the value of the Russell "small cap" Index (IWM), which is up $3.7Tn (77%) from $4.8Tn in 4 years.  While that's impressive, of course, it's lagging the Nasdaq, which is up 130% in the same time-frame, so the Russell (and the other indexes) have a long way to go if they are going to catch the Nadaq (QQQ) – or maybe the Nasdaq is ridiculously overvalued?

The Russell rebalancing or "Reconstitution", as they like to call it, takes place today and thank goodness they have made their own infographic to explain it because I couldn't figure out how to do it in less than 10 pages – so click here if you want the details.  There will not likely be a huge effect, they are simply rearranging the deck chairs – it's not like when the Dow or S&P add or drop companies but strange things do happen as companies shift from the Russell 3000 to the 2000 or the 1000 because it takes them out of one ETF and puts them in another in some cases.  

Last year you can see that red spike down in June though – that was the last rebalancing and the index dropped from 1,175 to 1,075 (-8.5%) in 2 days – but then recovered the next week.  We went long on the Russell Futures (/TF) yesterday in our Morning Report and caught a $500 per contract gain up to 1,410 but today we are watching and waiting to see what happens.  

Getting back to the Nasdaq, although it seems outrageously high, the tech companies have come on strong with earnings – or at least Apple (AAPL) has, since that one company added $11Bn in profits or 50% of the Nasdaq's gains but that's enough to keep the p/e ratio of the entire index at a not-too-crazy 25.97 vs 24.09 for the S&P while the Russell 2,000 has a p/e ratio of 82.36 – THAT is why it's lagging so far behind!  

Now, to be fair, the Russell 2,000 tends to include some start-ups that are still in the money-losing phase of their existence and they have to get much bigger before they graduate to the…
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Thrilling Thursday – Nasdaq Makes New Highs, Ethereum Flash Crashes

Wow, what a ride!  

The #2 Crypto-currency, Ethereum had a bit of a flash crash yesterday, trading as low as 0.10 from the high of the day at $317 as a single seller tried to sell $30M worth in what is really an illiquid market.  Even after the first wave reversed, a second wave took the currency down to $130 on even heavier volume than the first, forcing the main exchange, Coinbase, to go offline.    

Even though the "Status ICO" (selling program called an "Initial Coin Offering") is over, there are still a huge number of transactions clogging up the network and the only way to get transactions in is to pay huge fees (which most of the exchanges probably don't want to do). Until it clears out, people are going to be missing ENS auctions, unable to withdraw from many wallets and exchanges, etc.  As noted by Emansipater, one of Reddit's crypto experts:

"Badly designed ICOs, plus selfish and foolish miners = major delays and maybe even substantial losses for everyone else." Judging by the ensuing flash crash, this was an accurate assessment.

Inexperienced traders on amateur exchanges – what could possibly go wrong?  

That's what I like about the Dollar – it hardly ever goes off-line, freezing my assets while it's value goes up and down 99% in a day.  Have I mentioned how much I like CASH!!! lately?  We certainly have tons of CASH!!! in our 4 Member Portfolios and, as noted in this weekend's Portfolio Review, we're very well-balanced but still tilted a little bit bearish as we simply can't endorse the insane valuations that are driving indexes, especially the Nasdaq, to record highs.  

I was on Money Talk last night and we discussed the trade ideas from yesterday's morning Report and I called a bottom on Oil (/CL), which was trading at about $42.50 last night after testing $42 during yesterday's carnage.  That's well below our $44.50 entry but we're sticking
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Will We Hold It Wednesday – Nasdaq 5,700 Edition

We're still using the same chart.

Our predicted range for the Nasdaq 100 Futures has been holding since last Monday (6/12) and, as you can see, it's been following our 5% Rule™ perfectly, which is why we were able to call the shorts for our Members in our Live Chat Room at the open, saying:

"2,450 still a good short on /ES, of course and 5,780 on /NQ and we even hit 1,420 on /TF again.  Dow is unprecedented at 21,450+ but below that line will confirm a move lower for the day."

This stuff isn't that hard folks, it's been the same range for 2 weeks and we play it until it breaks.  Notice how if we go long with tight stops at the red line and go short with tight stops at the green lines, we don't get burned too badly but we have several occasions where we make a nice sum of money.  This morning the Nasdaq (/NQ) hit the 5,720 line and that was good for one-day gains of $1,200 per contract along with S&P (/ES) 2,430, which gained $1,000 per contract, Russell 1,396 was good for gains of $120 per contract and Dow 21,400, which was up $250 per contract.  

That's a nice way to start the week and we needed the money to double down on our, so far, wrong-way bet on Oil ($44.50, now $43.50) and Gasoline ($1.42, flat), which we discussed in Monday's Morning Report.    As we expected, the contract rollover caused a sell-off though, if you listen to the TV analysts, you'd think oil was going to $20.  We see the holiday just around the corner AND, much more importantly, Saudi Arabia is taking the state oil company, Saudi Aramco, public and they are trying to get a $2 TRILLION valuation and the logic I laid out for our Members was:

Analysts are chasing all the sheeple out at the lows, methinks – then the Banksters can run in and BUYBUYBUY and take oil up $5 and make their quarter off of one trade.  Don't forget Aramco IPO is coming and every $5


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Terrific Tuesday – What Could Possibly Go Wrong?

I love market bubbles – people just lose their minds!  

On the right is a picture of Jeff Bezos' desk, according to the MSM, as they speculate about which company Amazon (AMZN) will buy next now that they have devoured Whole Foods (WFM).  This, in turn, drives the price of these stocks (and their sectors) higher on an endless wave of speculation which then forces companies that are looking to make acquisitions to overpay for their targets – before things get too expensive and pretty soon everyone is buying everyone else.

Exxon bought Mobile, Volkswagen bought Rolls Royce, Equitable Bank bought PCI bank, Bank of America bought Countrywide, Sears bought KMart, HP bought Autonomy, Mattel bought Kevin O'leary's Learning Company for $3.6Bn – and we're still suffering with the consequences of that guy being a Billionaire!    

Not all M&A is smart, Sprint spent $36Bn for Nextel and Sprint (S) is now valued at $31Bn total, Time Warner (TWX) bought AOL for $111Bn and TWX is now worth $77Bn total – the list goes on and on with massive M&A failures and they usually come in toppy markets where companies have no way to expand their natural business so they seek to mask that fact by buying other companies – the way Tesla (TSLA) just bought Solar City (SCTY) to help justify their 300x p/e ratio and the way Amazon is buying Whole Foods who's $500M in profits on $15Bn in sales with a $14Bn valuation gives them a p/e of 28, which is an incredible bargain compared to AMZN's $475Bn market cap on $136Bn in sales and just $2.4Bn in profits for a p/e of 198.  

Image result for amazon p/e ratioI'm not saying AMZN buying WFM is a mistake – it's a good move for AMZN as it drops their p/e from 198 to 163 so now it only takes 163 years for AMZN to make the $995 you pay for their stock – what a deal!  I'm just saying maybe the whole thing is silly and AMZN should be trading at, at most, 50 times earnings which, even if you assume that WFM is a brilliant acquisition and they double profits over the next 24 months to $6Bn, would…
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Money Market Movement – Up, of Course

Up and up the markets go, when the madness stops, no one knows

There's simply no reality to these market moves any more.  We just finished our May Portfolio Review and our net gain was only 2.7% while the S&P gained 3.1% because we're a bit too bearish for this rally and our hedges are killing us and today we're up yet again in the Futures, back to 2,440 on /ES, where we had success shorting them last week.  

The Nasdaq (/NQ) is up 50 points from Friday's close at 5,733 and there's no reason for this excitement – it's just a normal pumped-up Monday and, so far, not even a weak bounce from the Nasdaq's fall from 5,900 to 5,700 (ignoring the spike below).  These moves are not just mechanical and fake but obviously so but I'll bet you already forgot that we had this conversation last Monday, when I said:

It's really all about the Nasdaq (/NQ) which, so far, has fallen from 5,900 to below 5,700 but we'll be looking for a weak bounce over the 5,700 line (40 points) to 5,740 so going long on /NQ is a no-brainer this morning with tight stops below the line.  If we make a strong bounce (5,780) today, then all of Friday's sell-off can be quickly forgotten but failing the weak bounce would be a bearish sign and we'd be looking for other indexes to short as well.

Mondays are, of course, meaningless days in the market, especially in the summer and we'll have to wait until tomorrow to see what's really going on but a huge correction like we had on Friday COULD lead people to contemplate that some of the overbought crap they have in their portfolios may not actually be worth 100 times earnings. 

That was June 12th and here's what the Nasdaq has done since:

You can see why we remain skeptical, right?  The Nasdaq did exactly what our 5% Rule™ predicted, exactly when it predicted and we made nice…
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