Monday Market Maintenance – Dressing the Windows for One More Day

Image result for market contrarianRecord highs! 

That's what the Banksters want to print in their monthly reports to get their customers to pull their CASH!!! off the sidelines and put them into something that generates fees for the bank.  They don't give a crap whether you win or lose – as long as they get their fees.  

Morgan Stanley says "this time will be different" and that we shouldn't worry about Central Bank de-leveraging or China's Credit Collapse because (and these are their points, not me just making it sound absurd), although "global growth will moderate somewhat, and will remain above trend."  That would be great but the "trend" has been around 2% and global stocks are not priced for "above 2% growth" they are priced for 4% growth or 6% growth and we are miles away from that!

Goldman's Chief Equity Strategist, David Kostin says the company's HNW clients are "confused" by the lack of inflation (as that's what we expect in a great economy) and he ponts back to the disparity of measurement that we touched on last week.  

Like me, Kostin is recommending inflation hedges, urging his clients to ignore what the Fed is saying and pay attention to the evidence that's right in front of their eyes.  Zero Hedge does a very good job pointing out what's wrong with inflation measures as they note that: "A leading driver of disinflation has been the Video, Audio, and Computer category where prices dropped by 5% in 2015, by 10% in 2016, are declining at an average pace of 7% YTD."  This is one of the stupidest things the Government does when measuring inflation.  Basically, if you bought an IPhone last year for $1,000 and it had 64Gb or Ram and this year you spend $1,200 but it has 128Gb of ram, the Government says you are getting more for your money so that phone is counted as 40% CHEAPER than the one you bought last year.  

Of course it's a bit more complicated than that but processor speed per Dollar goes up too so yes, electronics are almost always a drag on inflation, as are appliances.  So take this chart with a Lot's wife-sized
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$2,000 Friday – Big Win on Nasdaq Shorts offset Oil Losses

It was a mixed bag.  

In yesterday's PSW Report, we called for shorting the Dow (/YM) below the the 21,650 line and we never really got there but the Russell Futures (/TF) crossed below our 1,445 target and plunged another 20 points to 1,425, yeilding a nice $1,000 per contract win on the day.  That was enough to offset our loss (so far) of $600 per contract on oil shorts at $48.50 (for those who did not use the tight stops suggested, of course).  

Oil is $49.10 this morning and we still think the short story will play out during August but it's likely to be a rough ride along the way.  The Nasdaq was good for a 100-point drop, yeilding gains of $2,000 per contract from our Wednesday morning call and the S&P (/ES) was rejected at our 2,480 line, dropping to 2,460 and that was also good for gains of $1,000 per contract in just two days.

In Wednesday morning's PSW Report, we also discussed our Wheaton Precious Metals (WPM) spread, which was net $3,825 at the time and is now net $4,180 so up $355 (9.2%) in two days – I told you it was good for a new trade.  Chipotle (CMG) was also a great spread, going from net $16,900 to $23,050 for a very quick $6,150 (36%) gain but sadly, for Seeking Alpha readers, the report we submitted on Wednesday was rejected by the editors because they didn't feel the trades were "new enough" – since they were both derived from older trade ideas.  Pinheads!  

If you want to read our Morning Report BEFORE the market opens every day – you can sign up HERE – I've lost my patience with Seeking Alpha and will no longer submit content there – other than the occasional blog post and, for now, my Options Opportunity obilgations.

Speaking of politics:  32 Million thank yous to Republican Senators Lisa Mukowski, Susan Collins and yes, even John McCain for saving health care for 32M Americans (for now).  They voted against the Obamacare repeal last night and there were gasps on the Senate floor when John McCain, who Trump just called a real hero for voting to allow debate…
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Thrilling Thursday – The View from the Top

Image result for stock market roller coasterHere we are again.

Once again the Fed failed to raise rates and the Dollar dropped, sending the indexes and commodities higher.  Boeing (BA) was the entire story for the Dow (DIA), as their $20 gain was good for 170 of the 97 points the Dow gained.  That's right, without BA, the rest of the Dow components lost 73 points and the S&P ended up red (slightly) despite Boeing's boost.  

We had a live Webinar yesterday and we talked about the internal market weakeness and decided to stick with our index shorts from Tuesday morning's Report, notably the Dow below the 21,650 line and the Russell below 1,445 – with tight stops over the line.  

We're also still shorting Oil (/CL) Futures below the $48.50 line as that too, seems overdone after it's 15% run since Mid-June rom $42 to $48.50.  Considering how much effort has been made to talk oil up – $48.50 is pretty pathetic, a strong indicator of general weakness.  Also, we're getting into that time of year when there's already a tremendous overhang of fake, Fake, FAKE open contracts at the NYMEX from traders who have no intention of taking delivery.  December already holds open orders for 342M barrels – that's 20 times the amount that will actually be delivered!  

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Wishful Wednesday – Fed Edition

Image result for draghi whatever it takesHappy anniversary!  

It's been 5 years today since ECB President and Goldman Sachs (GS) stooge, Mario Draghi said: "The ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough."  At the time, the EuroStoxx index was at 2,000 and now we're at 3,500, a 75% gain in 5 years and Germany's DAX is up over 100%, from 6,000 to 12,281 as of yesterday's close.  That's an average gain of 20% a year for 5 consecutive years – happy anniversary indeed!

The Euro has fallen 20% over that time period, making the gains somewhat less impressive but not too much and "only" down 20% is very surprising as the Yen is down 30% over the same period and the ECB's money supply is up 30% as well.  Actually, the EU money supply is up closer to 100% since 2008, Draghi's "whatever" was just icing on that already well-iced cake.  

None of that comes close to the flood of Dollars that have been printed since 2009 with $3Tn new Dollars in circulation which QUADRUPLED the supply of US Dollars in the World.  Keep in mind those are hard Dollars which the banks then turn around and lend out 10 times each, which is $30Tn more Dollars or 1.5 times our entire GDP so, when you hear our GDP is growing at 2%, you should say "WTF?" as our money supply has been growing at an average of 30% per year for a decade…  

Image result for money supply dollars 2016

That money, in turn, gets pumped into the stock market, which also levers up the cash by about 10:1 on inflows and PRESTO! – it's a "recovery".  Steely Dan said "You Can't Buy a Thrill" but you can certainly buy an economy if you are a motivated Central Bank and no one was more motivated than the former Managing Director of Goldman Sachs, Mario Draghi, whose "former" firm is up 120% since he did "whatever it takes" for them.  

It's kind of cute the way people think there will be no consequences to 300% increases in the money supply.  The way gold, silver and uother commodities are trading – you…
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Tempting Tuesday – S&P 2,500 in Sight

Beat crazy!  

With the very notable exception of Google (GOOGL), who had higher than expected Traffic Acquisition Costs, most of today's reporting companies are nicely green and oil (USO) is back to our shorting line at $47.20 (/CL Futures) after yeasterdsay's failure to turn back down from $46.50, which is a loss of $700 per contract if you did not heed our warning, in yesterday morning's PSW Report, to use tight stops.

Nonethelss, you can be redeemed by doubling down at $47.20, which would raise your short average to $46.85 and then get out of at least half even there and back to tight stops above $47.25, which we shouldn't even see if oil remains weak.  That lines up with $49.50 on Brent Oil (/BZ) – which also should be a point of non-futile resistance.  

Seagate (STX) just missed and is down 20% and that does not bode well for Amazon (AMZN), who we've been shorting to no avail, as the only place they make any money is cloud storage.  That's right, turns out it's not profitable to pack and ship you a $3.99 case of Pepsi overnight – who'd have thought?  I was at the post office yesterday, contemplating what a stupid business Amazon really is.  Yes, it's nice that they can ship me all that stuff but, even at the post office, shipping costs are expensive and AMZN doesn't MAKE the stuff they ship, they only get a commission on it.  Even if they send you a book, where they take 30% of the sale price – by the time they pack, wrap and ship it to you – it's break-even at best.

Related imageThat's why Amazon doesn't have any real competition – there's no money in their business, why would anyone compete?  Don't get me wrong, you can sell the crap out of a service that doesn't make any money because the people will love it but how long before they wise up?  For instance, I was at the super market and I saw Starbucks (SBUX) Cold Brew Cofee with cream, cocoa and honey – 3 things I like in coffee so, even though it was $4, I had to buy one and it was…
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Manic Monday – Saudis Cut 600,000 More Barrels and it’s Still Not Enough!

As we predicted on Friday, the Saudis have unilaterally cut production.

It was less than we recommended, however – 600,000 barrels vs. 1Mb needed to make enough impact to get Brent Crude back to $50 so we'll be back to shorting oil once the bulls get done reacting to the headline.  At the moment (8am), US Oil (/CL) is trading at $46.06 and hopefully we can short it at $46.50 but we'll take a short under $46 with tight stops above as they may not get there on this half-assed effort.

The Saudis have to act in loco parentis at these meetings but it was hoped by oil bulls that holding the OPEC meeting in St. Petersburgh meant Russia would be joining in with more cuts.  Not only didn't that happen but both Nigeria and Lybia have room to INCREASE their production under today's agreement, which offsets most of the Saudis' new cuts.  The success of this deal rests on the rest of OPEC complying with November's production cut – something they are notoriously bad at.  

Long-Term, the OPEC nations face a disaster of biblical proportions as their oil-dependent economies are running headlong into the end of the oil era.  According to a new book. Burn Out: The Endgame for Fossil Fuels takes the view that oil prices will not just be “lower for longer”, as BP chief Bob Dudley predicted, but lower forever.  The evidence for author Dieter Helm’s case rests on plentiful supply unlocked largely by the US shale revolution, “unstoppable” global action on climate change, and technological advances.  

My view is that oil prices will probably carry on falling forever, and $50 is a high price for oil, not low,the University of Oxford professor told an audience in London.    

Helm described his book as “very bleak” about the fate of the Middle East’s oil producers, who he warns face challenges “at best uncomfortable and at worst close to existential”.  Of Opec, he writes: “The popular narrative … assumes that these countries still have the power to move the price, and hence assumes that, eventually, Opec will restore order and return to the good days of ever-higher prices. This narrative is profoundly wrong.”…
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Faltering Friday – Will Oil Drag the Markets Down in August?

Will the last short seller please turn out the lights?

According to S3 Analytics, Bets against the SPDR S&P 500 (SPY), the largest ETF tracking the broad index, fell to $38.9Bn last week, the lowest level of short interest since May, 2013.  The same thing is going on in hedge funds as we're well below 2013 levels in short funds – people have simply given up on the idea that this market is going to go down – and that's probably the best time to short it!  

In our Portfolio Reviews this week, we have been pressing our hedges by using about 1/4 of the money we have made on our longs, simply trying to lock in our gains as we certainly don't expect the market to make 4-7% every month – that would be silly, right?  These days, you have to wonder as the S&P is up 25% from the mid-point (not the lows) of 2015 and early 2016 (2,000) yet, as I noted in yesterday's Live Trading Webinar (Members Only) the earnings of the components of the S&P are not matching those gains at all:

Apple (AAPL) is the top component of the S&P.  With an almost $800Bn market cap, it makes up 3.7% of the index.  In 2015 they had $233Bn in sales and made $53Bn, last year they had $215Bn in sales and made $45Bn and this year they are looking for $220Bn in sales and $46Bn in profit yet AAPL is trading 60 points higher (66.6%) than it was at the beginning of last year (after 2015 earnings were reported).  What has AAPL actually done to justify a 66% gain?  Mostly, it was drastically undervalued but, other than that – it has added no profits to the overall S&P.  In fact, it has subtracted them!  

AAPL is also the largest Dow component and $1 in share price is 8.5 Dow points (yes, it's an idiotic system).  So AAPL alone is responsible for 510 points (12.5%) out of the Dow's 4,100 point run from 17,500 (23%).  Now I love AAPL, it was our Stock of the Year in 2013, 2014 and 2015 (this year it is WPM), so I'm fine with their value now, it was simply too cheap before.  By the way, we make…
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500,000 Thursday – Trump Orders GOP to Kill Over 4,000 People Per Month

Every 12 minutes.

That's how often an American citizen dies due to lack of health care.  Trump gave a fiery speech yesterday ordering his Republican goons to repeal Obamacare at any costs – and the costs are turning out to be staggering.  According to the Congressional Budget Office, Trump's plan will throw 32 MILLION Americans off health care and that will cost over 500,000 of them their lives over the next 10 years.  

That will make Trump, the GOP and the people who voted for them, the greatest mass murderers in the history of this country – right up there with the worst in World history (would rank #12, actually).  And why are they doing this, why do 4,000+ Americans have to die every month?  Well, according to the Congressional Budget Office, taking health care away from 1 out of 10 people you see today will save us $473Bn – over 10 years.  That's $47.3Bn a year and that does sound like a lot but there are 165M taxpayers so we each save $286.66 per year.  

$286.66 a year!  How many people would you kill for that kind of money?  Next time you are at a football stadium (50,000 people) pick 8 people to kill because that's how many out of 50,000 (1/6,400) are being killed to give you $286.66.  In fact, the amount of people in the stadium (all of them) is just about how many people your vote will be killing each year.  Isn't that GREAT!?!?  America is truly great again when we can value $286.66 over 50,000 human lives.  

And, if you think your own health care bill won't rise quite a lot more than $286.66 without Obamacare protections, then you are way too far down the rabbit hole to be saved.  The repeal-only act will increase premiums for those who hold plans, according to the CBO.  The office estimates that "average premiums in the nongroup market (for individual policies purchased through the marketplaces or directly from insurers) would increase by roughly 25%" in one year.  That average premium increase would hit 50% by 2020 compared to projections of rates under the current law, and double by 2026, the CBO said. …
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Will We Hold It Wednesday – New Highs Again?

Up and up she goes.  

Now we're watching that 6,000 line on the Nasdaq (/NQ) Futures which is up 33% in 18 months and up 40% from the lows of Jan, 2017.  We barely paused at 5,000 and didn't pull back at 5,500 but our first attempt at 6,000 was rejected and, if we call it a 1,500-point run from 4,500, then the "weak" reatracement, according to our 5% Rule™, would be back to 5,700 – and it was.

Holding the weak retracement is a sign of strength – indicicating that it's more likely we're consolidating for a move up than making a sustained move down and now we're testing 6,000 again but now we have to raise the bar and cannot accept more than a 150-point correction (5,850) to stay bullish on the Nasdaq and failing 5,700 would signal the start of a broader correction, down to 5,400 or possibly all the way to 5,000 before stabilizing.  That's why we pressed the hedges in our Short-Term Portfolio (which protects our Long-Term Portfolio) as well as our Options Opportunity Portfolio, though we still didn't find many long plays we wanted to take off the table.

That leaves us, so far, net bullish and more bullish than we thought as we "only" have about $300,000 of downside protection in our Short-Term Portfolio against a Long-Term Portfolio that gained $200,000 (17%) in the past 30 days – very aggressively bullish.  The Nasdaq is up 300 points (5%) since our last LTP review and that in itself calls for at least a 1% correction (60 points), back to 5,840 but that would then be below 5,850 – so you can see why this is such a tricky spot.  

Not much to do but see how the week plays out.  In yesterday's Live Member Chat Room, we took the money and ran on our Tesla (TSLA) short position and we added a long on Chipotle (CMG) towards the close as their sell-off has just gotten silly.  I'm not supposed to be giving away trades but this is such a juicy one I'll tell you what I said to our Members at 2:37:

"CMG Aug $370 calls are $14.30 and were $47 two weeks ago.


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Temper Tantrum Tuesday – GOP Wants to Scrap Obamacare Without Replacement

Image result for you'll get nothing and you'll like itYou'll get nothing and like it!  

That is the new GOP plan for your health care as their 3rd attempt at crafting a replacement for Obamacare goes down in flames.  "Republicans should just REPEAL failing ObamaCare now & work on a new Healthcare Plan that will start from a clean slate. Dems will join in!" wrote the Whiner in Chief on Twitter last night.  He was right, I am tired of whining

 

IN PROGRESS