Takeaway Tuesday – Trump Take $1.7Tn from the Poor to Give to the Rich

The new budget is here!  

As not at all promised by Trump when he was campaigning, Medicare will be slashed by $237Bn while $17Bn is being taken away from Food Stamps and yes, the Government will be getting in between you and your grocer as Trump is proposing no longer giving people food stamps, instead sending them boxes of food the Government selects for them (from campaign donors, of course).   

Trump's budget is an outright assault on small businesses and farmers with a 25% cut to the SBA  and a 15% cut to Agriculture with limited eligibility for crop insurance and caps on subsidies that will destroy those family farms, forcing them to sell out to big Corporations, who are still able to game the system to their advantage.  

Rural Economic Development Loans and Grants are being entirely eliminated – yet another way of making sure no one can compete with Trump's Corporate Donors, who will also benefit from the 25% budget cut to the EPA.  Overall, there's a 42.3% cut to all Non-Defense Discretionary spending.  In other words, Trump is cutting about half the stuff the Government does to actually help Americans while giving ALL of that money to the Top 10% – and mostly the Top 1%, of course.  

Despite coming off the most expensive disasters in history and with climate change getting worse, not better, 22% of the Army Corps of Engineers is being cut, which is a shame because, just this morning, new satellite data shows sea levels rising much faster than previously thought and the Army Corps of Engineers does things like building dams and levees to protect our cities from such things.

Image result for cost of disasters 2017But guess what happens when a city is flooded?  SALES!!!  Paint, hardware, carpets, furniture, Government clean-up contracts worth Billions of Dollars to Trump's donors.  Isn't that better than spending Millions to prevent the disaster from happening in the first place?  

And, just in case you thought Trump can't possibly be purposely trying to destroy the enviromnent to enrich his Donors – now they want to repeal Obama's restrictions on how much methane is released into the atmosphere by Corporate Donors who
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Monday Market Movement – Recovering or Just Bouncing?

We're up 300 more points! 

That would be exciting but it's only 1.25%, which is exactly what our 5% Rule™ predicted and, at this stage, is certainly no sign of market strength yet.  While we flipped bullish in Friday Morning's PSW Reprort, with a long at Dow (/YM) 24,000 that is now up $2,500 per contract (you're welcome).  Of course, first it was down $2,500 per contract (cue screams) but not if you followed our instructions, which were:

Well here's the test of 24,000 and we're failing that and 2,600 and 6,350 and 1,470 but those are now the lines we want to play long if we move back up but very ugly if we're failing that. 

Just before the market opened, in our Live Member Chat Room, I updated my prediction for our Members:

For now, we'll worry about the S&P lines – same as yesterday because, if we have to redraw them, then the Index is already failing (and forcing us to use lower levels).

And, of course, the lines don't change but the line we key off does.  Right now, we are looking at the 20% line on /ES and premising we consolidate there but, as I said yesterday, I think it's more likely we drift down to the 10% line (2.420) and that's where we should consolidate into Q2.  So, on the whole, I'm thinking 2,684 is going to fail today and we'll retest 2,640 next week and possibly blow it – hence the desire for more hedges!  


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Friday Free-Fall – Stop the Markets, We Want to Get Off!

Good golly, what a mess!  

The Dow gave up another 1,000 points yesterday and President Trump is now presiding over the worst week in stock market history.  Was it because he blew up the budget?  Was it because he got rid of Janet Yellen?  Was it because he's likely to be indicted and impeached?  Was it just because he was caught cheating on his wife with a porn star and then bribing her to cover it up using campaign donations?  Who can say – so many scandals, so little time.  

What is clear is that the US looks a little scary to investors, both foreign and domestic and it's not the kind of thing that can be fixed by having a huge military parade so money is coming out of funds and those funds are forced to sell their assets at whatever price and down we go.  

As noted during the week, we're in a bot-selling pullback and it's following the script of our 5% Rule to the letter but that's not good news as the S&P finished right at our 2,596 (weak retrace) line yesterday and is only just above it this morning.  We needed to go the other way, up to 2,728 and that's not likely to happen today but we are playing bullishly in our live Member Chat Room as follows:

Well here's the test of 24,000 and we're failing that and 2,600 and 6,350 and 1,470 but those are now the lines we want to play long if we move back up but very ugly if we're failing that. 

As long as 2,596 holds, we're willing to have a long on the S&P Futures (/ES) but it would be nice to have a confirmation from the others to let us know we're on track.  It's sad that I have to say this for the 4th time this week but yes, we still like Gasoline (/RB) long at $1.755, which is the 2.5% pullback line from $1.80, which we certainly expect to be back to into NEXT WEEK's holiday and that will…
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Flailing Thursday – Trouble at 2,700

Well, that about sums it up, right?

As I said in yesterday morning's Report: "On the whole, I'd rather if we consolidate here before even popping above 2,700 again as 2,850 was too high.  Hopefuly we can hang around 2,650 for a week or two and form a proper base before trying to move higher again – but traders are so impatient.…" 

Well, it's been a day and people are already freaking out because we haven't flown back to 2,850 and it's going to be a while before they realize 2,850 shouldn't have happened in the first place and it's more likely that this (2,700) is the top of the range, not the bottom – at least through Q2.  On our Big Chart, 2,640 is the 20% line on the S&P and, even being generous, THAT should be the middle of a range we move 5% up (2,772) and 5% down (2,508) in, so call it 2,500 to 2,800 with 2,650 the middle line.  That's where I think we'll settle once all the dust clears.

This morning, however, in our Live Member Chat Room, we are playing for a bounce using the following levels:

I also like /TF over 1,500 and /NQ over 6,600 and /NQ is lagging and likely to pop big if we get moving.  /YM 24,800 and /ES 2,675 will confirm and tight stops if 2 of the 3 fail to hold those lines!

Remember, 25 points (back to 2,700) on the S&P (/ES) is good for $1,250 per contract – nothing to sneeze at.  The Russell (/TF) hit 1,520 yesterday and that's up $1,000 per contract and the Nasdaq hit 6,700 and getting back there pays $2,000 per contract, so it's well worth playing for the bounce and the BOE gave a more hawkish statement this morning and that should keep the Dollar in check and allow our indexes a bit of breathing room today.  

In the Futures, we tested 2,550 on Tuesday and our 30% line is 2,860 and 2,640 is 20% so, ignoring the spike below, we have a 220-point drop and our 5% Rule™ tells us to expect a 20% weak bounce off that fall (44 points) back to 2,684 and then the strong bounce line
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What Now Wednesday – Volatility Returns in Spades!

Now this is what I call trading!  

As you can see from the FactSet chart, we're about 5% below where I called for cashing out our Member Portfolios on December 5th (see "Tempting Tuesday – Stop Buying that Dip and GET OUT!!!").  At that time, I said the market was perhaps 20% overbought and, now that we've had a 5% rally and a 10% drop, I still think we're 5-10% overbought but I will concede 5% to better earnings and good global conditions (so far).  

At the time, our portfolios, after 4 years, were up 200-250% and we didn't want to risk our gains gambling on the holidays – as I expected what happened this week to happen in early January, not early February.  My timing was off but the call was right and we restarted our portfolios on Jan 2nd with 1/3 of what we took off the table and then we deployed less than half of that on new positions.  After getting off to a great start (up about 5%) they are all in the red but yesterday we took advantage of this 10% sell-off to press our longs and take some of our hedging profits off the table. 

We don't play our hedges to negate ALL downside damage – when you do that, you spend so much money on the hedges you can't make any money.  What we use hedges for is to MITIGATE the damage, so we don't lose too much on a dip.  All we need is some quick cash to put back into our long positions while they are low, like this adjustment to IMAX we made in our Options Opportunity Portfolio yesterday:

5 IMAX (IMAX) June $23 puts, now $4 ($2,000) can be rolled to 10 Sept $19 puts at $2.20 ($2,200) and, if we can pick up $4 in strike every 3 months, we'll be at $0 by 2020!  We have 15 Sept $19 ($3.20)/25 ($1.10) bull call spreads at $2.10 ($3,150) and we can roll that down to 20 of the Sept $15 ($5.80)/20 ($2.70) bull call spreads at $3.10 ($6,200).  Our initial outlay was $2,415


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10% Tuesday – Market Correction Hits Our Primary Goal

Wheeeee, what a ride!

That $6,205 profit is just what we made playing the bounce overnight on the Russell as I said to our Members at 10:54pm (yes, we work all night!):

I take it back, picked up 2 long /TF for fun (1,429).

/YM also tempting above the 23,400 line with tight stops below.  Getting back the 1,000-point drop would be $5,000 per contract!

The Dow (/YM) Futures also did well, topping out all the way back at 24,100 with a stop-out at 24,000 for a gain of $3,500 per contract.  Again, this is why we love trading the Futures – this is just our overnight money but it also serves to lock in the gains we made on our hedges and now (6:30 am) we're looking to play for a bounce off 2,600 on /ES, 6,400 on /NQ, 1,450 on /TF and 23,750 on /YM but, if they break down, we'll use the 2,600 line on the S&P for shorting so, either way – we are able to make fine adjustments to our portfolios on the fly.  

Now that we're down 10%, we'll see how 2,550 holds up on the S&P (/ES) but we should get a nice 2% move higher as simply a weak bounce from here so we're targeting 2,600 as a weak bounce and 2,650 as a strong bounce and anything less than that is going to be a sign of further weakness.  We already tested 2,650 at 4am and failed and, as I noted above, we're ready to short at the weak bounce line if it fails or go long if it holds.  Though it was ugly, the sell-off was not unexpected – as I said to our Members:


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Monday Market Momentum – Our Futures Calls Makes $3,000+ Per Contract!

I love to say "I told you so" – it means I got something right.

We did the math for you last Tuesday and predicted the S&P would drop to 2,730, which was a 2.5% pullback from 2,800 and 70 points down on the S&P Futures (/ES) pays $3,500 per contract but, even if you missed that call, we gave you another chance to cover on Friday with our call that the Dow would drop 600 points (at $5 per point, per contract) to 25,400 and we pretty much hit that one on the button for the day for gains of over $3,000 per contract so you are very welcome and what a great way to end our month of free trading tips!  

So yes, we know what the market will do today only we're not going to tell you – that was reserved for our Members this morning in our Live Member Chat Room.  What I can tell you is we're not worried and this is simply the pullback we expected – albeit a bit later than we expected it in January, since it's actually February at this point.  

Keep in mind that we're not Futures traders, we just use the Futures to make quick adjustments to changing market conditions and, of course, for fun during boring trading days.  Friday was aqnything but boring and this morning we'll have some follow-through to the downside but, as long as we hold 25,000 on the Dow – we're probably going to survive and turn around by mid-week.

Meanwhile, we look for bounces and, according to our 5% Rule™ (the same one that told us exactly what to play for last week), 2,640 on the S&P (/ES) should be the worst-case before getting a nice bounce off the fall from 2,860 and that's 220 points so we'd look for a 44-point weak bounce to 2,684 and another 44 points takes us to the strong bounce line at, Ta Da!, 2,728 – close enough to 2,730 that we can call it a strong confirmation of our theory.

If the S&P is going to stay away from 2,600, then we expect there to be good resistance at the strong bounce line (2,730) and, if we don't cross below it, we…
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TGIF – Markets End Wild Week on a Sour Note

Better late than never.

As noted in yesterday's Report, I was on Money Talk Wednesday night (adding a big hedge to that portfolio) and I said my biggest concerns were Japanese Debt and China's Bad Loans and that the market was due for another 2.5% to the downside and yesterday I titled the morning Report: "Thursday Failure – Fed and Trump Fail to Boost the Markets" and I looked a little silly at yesterday's open as we popped back to 2,840 but not so much by the day's end, when we were back to 2,820 and not at all silly now as we're bouncing off the 2,800 line.

As I said yesterday in a post that Seeking Alpha refused to publish because "…there are just too many references to your non-SA subscription service here. (This includes links that go to sign-up pages, which we don't allow authors to use.)", which is ridiculous as the fact that they don't consistently publish my posts FORCES me to provide links back to Philstockworld so people can read what I wrote and, if readers don't sign up, they have no way to access the full post! 

Anyway, where was I?  Oh yes, so yesterday in the (REDACTED FOR SA), I said:

We have plenty of longs and the thing that is most likely to wreck the market this week is disappointing FANG results so that Nasdaq (SQQQ) hedge (see: "Top Trades for Sun, 28 Jan 2018 19:53 – Money Talk Portfolio") or the Dow (DIA) hedge we dicussed in yesterday's report (see "Which Way Wednesday – Fed Edition") are good ways to protect yourself into earnings this evening and NFP tomorrow.   

Image result for censorshipFYI, Wednesday's post was rejected by Seeking Alpha because: "There's just too many references to trade ideas that were not available to our Seeking Alpha readers yesterday, Phil." which means obviously I have to refer back to the article on PSW because SA never published it.  REALLY CAN THEY BE THAT STUPID???  I'm sorry, not stupid, I'm sure they were only following orders and SA readers…
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Thursday Failure – Fed and Trump Fail to Boost the Markets

Wheeeeee, what fun!  

I was on TV last night and I predicted we had another 2.5% drop in us as yesterday's gains (such as they were) were entirely due to Boeings 16-point gain for the day, which accounted for 144 points to the Dow's 72-point gain so, on the whole, the Dow should have been down 72, not up 72 if BA hadn't had earnings yesterday.  

Of course we played for bounces into the close with a Russell (/TF) long at 1,575 and and S&P long (/ES) at 2,820 in our Live Member Chat Room at 3:33 and those paid a quick $250 per contract on /TF and $200 per contract on /ES on top of the $200 we made in our Live Trading Webinar at 1pm but by the time I was on TV, at 7pm, the markets had gotten silly again and I called for shorts at Dow (/YM) 26,200, S&P 2,540, Nasdaq (/NQ) 6,985 and Russell 1,582.50 as well as a play on the Dollar (/DX) long at 88.75 – though my actual call there was that 88 would hold.  

We also discussed our Money Talk Portfolio, which gained 74% for the year from picks I made live on the show in a $50,000 portfolio and we added trades on General Electric (GE), Barrick Gold (ABX) as well as a hedge using the Nasdaq Ultra-Short (SQQQ) just in case the FANG stocks mess up earnings tonight.  The Futures shorts are way up this morning (8am) with the Dow down 86 points to 26,050 so up 150 at $5 per point is a gain of $750 per contract on that one and /ES is 2,822 (up $360 per contract), /NQ 6,942 (up $860 per contract) and /TF 1,575 (up $375 per contract) so, of course we're keeping tight stops on those gains in this crazy, crazy market as the Egg McMuffins are paid for and that's all we need from our breakfast trades.  

Today is a heavy data day with Productivity at 8:30, Consumer Comfort and PMI at 9:45 along with ISM and Construction Spending at 10 and Auto Sales throughout the day but none of that really matters as Non-Farm Payroll is tomorrow morning (8:30) and we'd better…
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