Faltering Thursday – Market Struggles Around 50 DMAs, Again

Here come those tears again

Just when I was getting over you

Just when I was going to make it through

Thinking I might just be strong enough after all – Browne

Here we go again. 

If the markets were as strong as the Wall Street narrative suggests – they wouldn't keep failing the 50-day moving averages, would they?  Not only that but we STILL haven't gotten the broadest index, the NYSE, over their Must Hold level, which means we haven't even really confirmed a broad-market rally.  

Not only has the rally had a very narrow focus but, as it turns out, the main buyer of US Corporate stocks is — US Corporations!  Last week alone, US companies bought back $1.5Bn worth of stock through Bank America (BAC) alone – the biggest week they ever recorded.  In the past 3 months, $250Bn in additional buybacks have been announced, possibly pushing us to a $1Tn year in Corporate Buybacks or about 2.5% of the entire market.  

And, of course, they are not buying every stock, mostly their own so it's those big, Top 1% Corporations, 90 of the 9,000 listed companies – the ones who were given $1.5Tn worth of tax breaks by the Trump Administration – that are bringing back the cash they hid overseas to avoid paying taxes under Obama (at no penalty) – and are using it to buy back their own stock to mask the fact that earings are not actually improving by reducing the number of shares those earnings are divided by. 

All in all, it's just a huge Ponzi scheme where companies plow back declining profits into their own stock so the CEOs can justify their outrageous salaries and lure investors into their stock while insiders and Fund Managers (ie. "smart money") cashes out.  Then, when the whole thing ultimately collapses, they will say: "Who could have seen that coming?"  

 

IN PROGRESS

 

 

World War Wednesday – “One Does Not Give 24 Hours Notice to a Nuclear Power!”

"Climbing up on Salisbury Hill

I could see the city light

Wind was blowing, time stood still

Standing, stretching every nerve

Had to listen, had no choice

I did not believe the information


Just had to trust my imagination" – Peter Gabriel

While you were sleeping…

You know that funny story about the former Russian spy and his daughter who were poisoined in the UK (Salisbury) on March 4th and how the British investigated it and, Monday, Theresa May told Parliament that it was "highly likely" the Russians were responsible?  Well the British demanded an immediate response from the Kremlin or Britain would immediately place sanctions on them and now it gets REALLY amusing as the Kremlin called May's speech to Parliament "a circus" and, when they say "circus" they mean the boring Russian kind with no animals!  

Then (and here's where it gets REALLY funny), Russian Foreign Ministry Spokeswoman Maria Zakharova replied (or threatened – it's hard to tell the difference with Russians):

"One does not give 24 hours notice to a nuclear poweradding that the "Skripal poisoning was not an incident but a colossal international provocation."

THEN things got really crazy (not Trump crazy, but crazy for normal people) as a Twitter war erupted between the UK and the Russian Embassy:

  • “Moscow will not respond to London’s ultimatum until it receives samples of the chemical substance to which the UK investigators are referring.

    “Britain must comply with the Chemical Weapons Convention which stipulates joint investigation into the incident, for which Moscow is ready.

    “Without that, there can be no sense in any statements from London. The incident appears to be yet another crooked attempt by the UK authorities to discredit Russia.

    “Any threat to take ‘punitive’ measures against Russia will meet with a response. The British side should be aware of that.

Notice that Russia employs the "Fake News" meme to deflect any facts they don't like – something they train all their operatives to do these days.  According to Russia "Crooked UK" is up to their old tricks and we should ignore the poisoning and focus on the investigation – which can't possibly be unbiased if it finds Russia colluded with operatives to kill people on British soil.

Is anyone else having deja vu?

 

IN PROGRESS

 

 

 

 

Terrific Tuesday – Markets Blast Higher Just Because

No news is good news.

That's true for the markets as the lack of negatives puts us back into default mode (up), despite there being any real positives to point to either.  We're well over our bearish levels now and in full-on recovery mode and, usually, I would make a comment about yesterday's comically low volume but that never seems to matter either – so we're just going to go with the flow and enjoy the ride until it stops.

 

IN PROGRESS

 

 

 

 

Philstockworld Top Trade Review

Image result for top trade ideasYes, this is Monday morning's Report.

I don't have much to say about the markets, they are back near the highs and we'll see if they hold tomorrow, not today, as it's Monday and Monday's don't matter.  What we do need to do is bargain-hunt in case it is a real rally and the best way to do that is to look back on past trade ideas and see if we can find some that haven't gone up yet.  

We haven't done a Top Trade Review since the end of Sept so it's a good time to do one of those and, as our Members well know, the vast majority of those trades turn positive so, when they're not, it's usually just a matter of time.  As of the September review, we had looked at Top Trades that were initiated in the first half of the year and, out of 27 trade ideas in 26 weeks, we had 21 winners and 6 losers but 2 of the winners turned around by Sept and that left is with 28 wins and 3 losses for a wonderful 90.3% winning percentatge.

Let's start by taking a look at our two losers and see how they are doing:

Tesla (TSLA) had jumped to $390 in Sept and though it was back to $340 by the 30th, we were worried about the 3 short Oct $300 calls we had sold for $30 were $43.50 so we rolled them ($13,050) to 4 short Jan $340 calls at $31.20 ($12,480) for net $570 less than the $9,000 we collected and THOSE short calls expired at $10.02 ($4,080) so we ended up with a net profit of $4,350 on that "loser" trade.  

Chesapeake Energy (CHK) is still a big loser and we still have the adjusted position (30 2020 $4 puts at $1.25 (now $1.56) and 20 short 2020 $2.50/5.50 bull call spreads at $1.25, now 0.85) so we are still down on them and I would now double down on the 2020 $250 calls at $1.35 and wait for a bounce to sell 20 more $5.50s for $1 (now 0.40)

IMax (IMAX) is running out of time to…
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Thank Trump It’s Friday – Market Madness Continues Despite Massive Uncertainty

And we're short again!  

Nasdaq (/NQ) 7,000 seems like a lovely shorting line and we grabbed a couple this morning in our Live Member Chat Room along with Russell (/RTY) shorts at 1,580 – these are now the June contracts, so they are a little higher than our shorting lines earlier in the week but essentially the same.  Not only that but we bought back half the covers on our primary SQQQ short yesterday afternoon – essentially flipping us much more bearish into the weekend.  

We're expecting a pullback on the Nasdaq next week to at least 6,850 and 150 /NQ points is good for $3,000 per contract gains and we weigh that against stopping out over 7,005 with a $100 per contract loss – so it's a very nice reward vs a fairly small risk – the kind of trades we love to take in the Futures.  The same with the Russell but 1,580.50 only costs us $25 per contract vs 1,550 would be a gain of $1,500 each.  

We have Non-Farm Payrolls out at 8:30 and economists expect 200,000 jobs to be created, which is the same amount of jobs we always create – there has been no improvement at all under Trump and, in fact, we've been drifting lower but hourly earnings are on the rise (due to Obama-era Minimum Wage increases that are kicking in now) and that's good for the economy – though not so great for Corporate Margins.

With unemployment hovering around 4% – everyone is working so the labor market is tight and we're expecting to see some serious wage inflation over the next few years that, in turn, sparks a broader inflationary cycle in the economy.  In fact, China was ahead of us in increasing wages (still much lower than ours) and now they have 2.9% inflation – double what it was a month ago but possibly a blip from the New Year celebrations last month.  

Meahwhile, the GDP estimates are in free-fall and no one seems to notice, no one seems to care as the Atlanta Fed has taken their ridiculously optimistic GDP Now forecast down from 5%, which rallied the markets
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Full-Throttle Thursday – Nasdaq Blasts Back to All-Time Highs

We’re back baby!

Not our posts – we’re still having WordPress issues and I can’t format but the market is roaring back on news the Trump may go easy on Canada and Mexico with his tariffs but I think he’ll sign a bill with no exemptions this afternoon and tank the markets again so we’ll look for shorting opportunities – especially as the Nasdaq (/NQ) closes in on that 7,000 line (now 6,962 on the 100).

As long as the S&P (/ES) holds it’s strong bounce line at 2,728 – it’s silly to short but below that, we will look for 1,575 on the Russell (/RTY) and 6,950 on /NQ and 24,850 on the Dow (/YM) to confirm weakness and short the laggards on the way down (with tight stops if any of them pop back over, of course).

Yesterday, in our Live Trading Webinar, we made $445 trading the Russell and Nasdaq Futures – not bad for 2 hours’ “work”. Our longs from the Morning Report yesterday on the Dow (/YM) paid of very well at 24,800, good for gains of $1,500 per contract on the day.

We reviewed our Member Portfolios during the Webinar and all are in great shape but the paired Long-Term/Short-Term Portfolios (LTP/STP) are simply performing fantastically as we have, so far, played the channel very well. This will be the Nasdaq’s 3rd attempt at the 7,000 line and the first time (Jan) we fell back over 10%, to 6,300 and the 2nd time, late last month, we fell only 300 points (5%) to 6,750 so, even if we’re getting stronger – I still think we see a 150-point dip back to 6,850 and 150 point on the Nasdaq Futures pays $3,000 per contract vs the risk of getting stopped out with a $100 loss if we pop over – that’s the kind of reward/risk set-ups we love to play in the Futures!

But we’re not there yet – let’s look for 24,850 on /YM and 1,577.50 on /RTY to fail this morning with very tight stops over each while we wait to for the Nas to make a move.

Hopefully the posts will be fixed tomorrow but I’ll continue my commentary in chat today.

Whipsaw Wednesday – Mo Quits, Larry and Curly Running the Country!

Wow, what a night!

We’re having technical difficulties this morning and are unable to post our PSW Report but it is available to our Members in our Live Chat Room HERE as well as below (poorly formatted):

https://www.philstockworld.com/2018/03/06/tariffic-tuesday-market-shakes-off-trade-wars-as-kim-disarms/#comment-7090041

Hopefully we’ll have this spot fixed shortly.

Thanks,

- Phil

Overnight, we lost the “adult in the room”, Gary “Moe” Cohn, as he quit the White House rather than pretend he was in favor of the trade tariffs. I’m sure Cohns everywhere are breathing a sigh of relief that their names won’t go down in history next to Smoots and Hawleys in the annals of poor economic decisions. Speaking of anals – Stormy Daniels is suing Trump – just had to mention that! Meanwhile, in referring to the 1930 Tariff Act, I noticed the full name of the Act was:

“An Act To provide revenue, to regulate commerce with foreign countries, to encourage the industries of the United States, to protect American labor, and for other purposes.”

I guess the long name for the new Tariff Act should be the “We never f’ing learn Act of 2018, where the American people fall for the same dog-whistle BS over and over again for the purposes of distracting them from a massive criminal investigation of pretty much the entire White House.”

As I said to our Members this morning: “As to Cohn, I think the panic is over losing the adult in the room. Now it’s like the 3 Stooges came over to do your plumbing but Moe quit. The whole job was going to be a mess but at least, with Moe, there was a chance that it would get done. Now there is no chance and things are likely to get much worse. ” That’s why the market are freaking out this morning, with the Dow down over 300 points.

Overall, this is the kind of panic we see when a company loses its CEO – people sell into the uncertainty. Trump could fix this by appointing someone like Warren Buffett or Janet Yellen to be his Senior Economic Advisor but he’ll more likely choose a spineless toady like Larry Kudlow or the current head of the Council of Advisers, Kevin Hassett, whose primary claim to fame is publishing “Dow 36,000: The New Strategy for Profiting From the Coming Rise in the Stock Market” in 1999.

Speaking of…
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Tariffic Tuesday – Market Shakes off Trade Wars as Kim Disarms

Trump wins!

North Korea said they are willing to hold talks with the US about giving up nuclear weapons and "normalizing" relations with Washington (whatever normal is these days).  The two Koreas also agreed to hold a summit meeting between Mr. Kim and President Moon Jae-in of South Korea on the countries’ border in late April, Mr. Moon’s office said in a statement.  

“The North Korean side clearly stated its willingness to denuclearize,” the statement said. “It made it clear that it would have no reason to keep nuclear weapons if the military threat to the North was eliminated and its security guaranteed.”

“The North expressed its willingness to hold a heartfelt dialogue with the United States on the issues of denuclearization and normalizing relations with the United States,” the statement said. “It made it clear that while dialogue is continuing, it will not attempt any strategic provocations, such as nuclear and ballistic missile tests.”

Between that news and the growing consensus that Trump's tariffs won't really affect much of the Global Trade (the EU retailiated with just $3.5Bn in sanctions against US goods) the markets are sharply higher yet again and, once again we'll check in on the S&P's bounce lines to answer the eternal question: "Are we there yet?"  Here's the line we were looking for a month ago:

And here's where we are today:

I would be more excited but last Monday we had a fake 80-point gain on low volume and yesterday we had an 80-point move on low volume – so it remains to be seen if it actually holds up for more than a day.  Also, last Monday was far more impressive than where we are now and we fell 140 (5%) points by Thursday – so let's not get carried away by getting halfway back to where we were, OK?  

There's not too much market-moving news, we had Powell's testimony last week and then the Tariff thing and now we have possible peaceful moves in North Korea but were we really…
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Just Another Maniac Monday – Trump for Life!

XiPresident Trump for life!  

That's the word this weekend as Trump said to a group of Republican supporters regarding China's President Xi abolishing term limits:

"He's now president for life.  President for life (boos).  No, he's great.  And look, he was able to do that. I think it's great. Maybe we'll have to give that a shot some day.

Well there's nothing more exciting to stock markets than Fascist Dictators on the march, just ask 1929!  More dictators means more guns and more bombs and, in fact, China raised their military budget by 8% for next year to 1 Trillion Yuan and that is now being circulated by the Conservative Media to demonstrate why we need to raise our $1Tn Military Budget and it works because they can count on the fact that their viewers are too stupid to remember that we started this by raising our own Military Budget by 8% and, of course, they know their audience hasn't got a clue that there are 6.34 Yuan to a Dollar so 1Tn Yuan is actually only $157Bn which means China's TOTAL military budget is less than Trump has raised ours in the past two years! 

Russia's military budget is $70Bn, in case you are wondering about that "threat" and notice how Putin demonstrate his new missile just in time for Trump to press to raise our Military Budget this year by the entirety of Russia's Military Budget – what a lucky coincidence for Trump's agenda!  And having an "enemy" like Trump to point to solidifies Putin's position as the unquestionalbe leader of Russia – doing anything he wants "for the sake of security" – much like the Government in Orwell's 1984 or the current Trump Administration.  

Related imageAngela Merkel is not a dictator but she just spent the last 6 months since the election forging an alliance that lets her extend here 12-year reign for another term at the head of Germany and de-facto head of Europe.  Putin has been in office 5 years longer than her and Xi came to power in 2012 – so he has a long way to go if he wants to match his other Democratically elected peers as the
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Friday Freak-Out: 1, 2, 3, 4, Trump Declares a Trade War!

Wheeeee! 

This market is non-stop fun, isn't it?  It sure is for our Short-Term Portfolio, the same one we discussed adding more shorts to yesterday morning because the market was once again in a downward spiral gained a lovely $13,873 for the day and is now up $37,270.50 (37.2%) for the year.  Unfortunately, our bullish, Long-Term Portfolio Positions fell back to $515,411, up just $15,411 for the year (3.1%) but that's the whole point of our paired portfolio strategy – we use the STP to hedge the LTP and lock in profits on the way up.  

Even better, when there is a sharp sell-off, we still have tons of cash and we're already well-hedged so we're ready to go shopping.  In fact, the reason the LTP took a 7% hit on this sell-off is because we added a lot of bullish positions last time the maket fell (only 30 days ago), so we're actually less hedged than we were last time, when we had fewer longs and just as many hedges (in anticipation of buying on the dip).

Hedges are insurance and YOU WILL LOSE MONEY when the market goes up – it's like life insurance – you don't WANT to die but, if you do, at least you get paid.  We don't WANT our hedges to pay off but, when they do, they save our portfolios – which is the whole point.  Yesterday we showed you one of the primary hedges in our STP, which was the following bullish spread on the Ultra-Short Nasdaq ETF (SQQQ):

We're still waiting to sell the Sept $3 calls for $3 or better (maybe this morning) but already we had a nice move yesterday, with the net $18,800 trade (as of yesterday, we paid $21,000) has popped to net $23,100 so the spread we showed you yesterday morning and told you was our primary hedge jumped $4,300 (23%) as the Nasdaq dropped 1.6% – THAT is how you use leverage effectively! 

Keep in mind this spead pays $100,000 if SQQQ is over $30 when the calls expire and we paid $21,000 for that protection against our $500,000 long portfolio so we can afford to take a…
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