Troubling Tuesday – Will Apple (AAPL) Earnings Be Enough to Save the Nasdaq?


That's a nice win on yesterday's Oil (/CL) Futures shorts this morning (so far, we're expecting $69.50 or lower) but it's NOTHING compared to the gains from Friday, where I said to our Members in our Live Chat Room (as well as our Morning Report, which you can subscribe to for less than $3/day):

Things seem to be holding up so far.  /YM back to 25,550 and also /RTY 1,700 along with 2,845 on /ES and 7,440 on /NQ so shorting the laggard but favoring the /YMshort still.  

/RB testing $2.17 makes a nice short into the weekend but might push higher first. 

/KC back to $109.50 so I like that long and that's $121.20 on /KCN9

/SI below $15.40 so long there if it goes back over (only) with very tight stops below.

The Dow fell back to 25,300 for a gain of $1,250 per contract, the Russell (/RTY) fell to 1,655 for a gain of $2,250 per contract, the S&P (/ES) fell to 2,800 for a gain of $900 per contract, the Nasdaq (/NQ) fell to 7,200, for a gain of $4,800 per contract, Gasoline (/RB) fell to $2.11 for a gain of $2,520 per contract, Coffee (/KC) rose to $112.50 for a gain of $1,125 per contract and Silver (/SI) flew up to $15.55 for a gain of $7,500 per contract.  

That day's report was certainly worth $3, wasn't it?  Of course, those trades are usually exclusive…
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Meaningless Monday to Kick Off a Wild Week in the Markets

It's a big week for the Central Banksters.  

The Bank of Japan kicks off the week with a 2-day meeting in which it is expected they will reduce their spending on ETFs that have been propping up the Nikkei for the past decade.  The BOJ has been criticized for favoring large-caps and, with the index at 22,580, the Central Bank has decided to give some love to the broader Topix Index to the tune of 6,000,000,000,000 Yen per year (only $54Bn in real money) but their previous monetary madness has made the BOJ the owner of 75% of the ENTIRE Japanese ETF market (about 4% of the entire market, 10% of the 225 Nikkei large caps). 

Image result for bank of japan owns stocks

In theory, the BOJ has made a lot of money buying Japanese stocks but, in practice – good luck selling them when they have been the primary buyer for the past 5 years.  Our own Federal Reserve doesn't dabble directly in stocks – they just print money and hand it out to Banksters, who then buy up stocks or, even better, lend Trillions of Dollars to Companies that buy up their own stocks.  In Q1 alone this year, S&P 500 companies bought back $190Bn of their own stock in a year that's on track for over $1Tn in buybacks – most of it on borrowed money.

Image result for fed treasury holdingOur Federal Reserve prefers to buy US Treasury notes, about $2.4Tn of those.  Isn't it great how easily we can throw TRILLION around?  As if it's not a big deal….

To put this into context, the Dow has a MONTHLY money flow that is up or down $10Bn for 30 large caps so imagine the effect of $100Bn worth of inflows through buybacks every single month!  The BOJ in Japan, the PBOC in China, the ECB in Europe and US Corporations using easy money from our own Federal Reserve represent ALL of the net buying of the Global stock markets.   What will happen when and if they ever do decide to withdraw their stimulus.

Of course, that doesn't mean we should be bearish.  Consider that Las Vegas is a city in the…
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GDP Friday – “Some Say 5.3%, Some Say 3.7%, If it has a 4 in Front of it, We’re Happy”

Image result for trump gdpThat's right, the President is at it again.

Less than a month after bragging about the jobs numbers before they were released, President Trump told a rally yesterday:  "Somebody actually predicted today, 5.3.   I don't think that's going to happen — 5.3. If it has a 4 in front of it, we're happy. If it has like a 3 but it's a 3.8, 3.9, 3.7, we're OK."  So of course the market rallied yesterday as earnings have been decent and we must be having spectacular growth if the President says so.  After all, when has Donald Trump ever lied to us?

We get the official GDP Report at 8:30 but, as you can see from the St Louis Fed's chart above, Real GDP, which takes into account that the Dollar is still down 7% from when Trump took office, has been a disaster under Trump with just 2.5% average growth and, as you can see, we've had 6 quarters of growth over 3.75%, 3 of which were over 4.5% since the Recession and none of those were under Trump (I won't say who it was because the President will say it's FAKE NEWS).  

The Atlanta Fed is sticking to their 4.5% forecast (see Wednesday's notes) and we might hit it with the inventory growth but piling up inventory at the docks because of a sudden tariff tiff is not a true positive on the GDP – the assumption is those goods will ultimately be sold but maybe not as Trump is already bailing out the Farmers who can't sell $12Bn worth of crops.

Yesterday's Durable Goods Report was a big miss, increasing just 1% vs 3.2% expected and, excluding Transportation (Boeing is a huge variable), it was only up 0.4%.  May was -0.3% and April was -1% and that's the quarter so the economic strength, assuming we are getting it, is not coming from things that will last and it's not coming from housing and it's not coming from commercial development – it will be interesting to see where the GDP number does come from.

Meanwhile, I already put out a note to our Members to short the Index Futures as we expected some earnings
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Face Plant Thursday – Facebook Drops 20% and Takes the Nasdaq With It

Wheeee, this is fun! 

We made a very quick $2,000 on our Live Trading Webinar idea to short the Nasdaq (/NQ) into the close as Facebook (FB) dropped 20% on earnings disappointment.  Poor Mark Zuckerberg lost $17Bn yesterday but at least we got our $2,000, right?  If only he would have listend to us and hedged his Billions into the earnings report, he could have protected his gains, right? 

That's what hedging is all about – it protects your assets from future uncertainty and that's why we prefer to have short-term short positions in the Futures – our portfolios are already filled with long-term longs – we don't need more of those!  BALANCE is the key to successful trading and this morning /NQ is down to 7,400 (where it can be played bullishly for the bounce) and that's another $1,200 per /NQ short.  We still have our /YM shorts and the Dow is still up around 25,450 and /YM pays $5 per point so even 1/2 of the Nasdaq's 1.75% pullback would be a 200-point drop, good for $1,000 per contract. 

Remember, I can only tell you what is likely to happen and how to profit from it – that is the extent of my powers….

Speaking of profits, in Tuesday's Morning Report we discussed using SQQQ as a hedge, picking up more Jan $10 calls at $2.50 and those should be about $3 this morning for a quick 20% gain against the Nasdaq's 1.7% loss so that's very good leverage on that hedge, giving you 12:1 protection on the way down but, of course, we're more worried about a major 10-20% correction in the Nasdaq than we are in a little dip like this.  I also said:

Oops, now there are rumors that China may be adding stimulus to their economy so no shorting yet – we'll have to wait and see how high we pop but hopefully 7,475 and certainly 7,500 will be a great shorting line on /NQ.

So all we did during yesterday's Live Trading Webinar was follow-through on our plan to short the Nasdaq around 7,500 from Tuesday Morning's Report, where we analyzed the top Nasdaq components and
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Which Way Wednesday – Trump and Earnings Drive the Market, both are Unpredictable


Our call to short the Nasdaq Futures (/NQ) at 7,460 in yesterday's Morning Report made a lovely $1,000 per contractyou're welcome!  Today we are shorting Oil Futures (/CL) below the $68.50 line (tight stops above) ahead of the 10:30 inventory report as API (a private report) showed a big draw in Oil (3.2Mb), Gasoline (4.9Mb) AND Distilates (1.3Mb) and yet, $68.50 is all they could manage – even with a weak Dollar.  That sends a pretty clear sign that oil is in trouble and anything but a huge draw in the official EIA report is likely to send it down hard and fast but, as I said, we'll be thrilled to take a quick $500 off the table ahead of the report on any sort of dip.

Meanwhile, earnings season is off to a good start with 17% (85) of the S&P 500 reporting as of last night and 87% of them (74) have beaten expectations vs 70% (60) in a typical year.  Those of you who know statistics may cringe at the small sampling and more so considering Banks and Big Tech have gone first but those are the kinds of numbers TV pundits throw out as if they are meaningful – I'm sure you'll hear plenty of examples of it this morning on any of the Financial Networks.  

All this FABULOUS news was already baked in however as companies are only beating expectation by an average of 4.5%, vs 5.6% last year and revenues are only 1.4% ahead of expectations.  Analysts are, in fact, LOWERING their Q3 expectations on companies that have reported, especially in the Non-Finanical, Non-Tech sectors (Energy, Industrials, Consumer Discretionary, Health Care, Utilities, Consumer Staples, and Real Estate).

Speaking of Real Estate, sales of new and existing homes in Southern California are down 11.8% from last year's first half while the median price of a home shot up to a record $536,250.  Newly built homes were the hardest hit, with sales off 47% compared to last June – partly due to low inventory and partly due to rising rates putting prospective buyers on the sidelines.  

As goes Real Estate, so goes the Nation – and the markets — eventually. 
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Trillion Dollar Tuesday – Amazon, Alphabet, Apple and Google Race to the Market Top

Who will get there first?

Alphabet (GOOGL) knocked it out of the park with earnings last night and are jumping over $50 higher (5%) after last night's earnings report and that will take them to just under $900Bn but still behind AAPL at $941Bn but now firmly ahead of AMZN ($875Bn) and MSFT ($830Bn) in the race to become the World's first Trillion Dollar Company.

As you can see from this chart, throw in Facebook and the top 5 S&P companies have the market capitalization of the bottom 282 – the difference between mega-caps and what we used to call large-caps has never been greater but it mirrors the more uneven distribution of wealth in our society where the people in the Top 10% THINK they are doing well, only because they really can't comprehend the wealth of the Top 0.01%, which starts at 1,000 times more than they make and 3,000 more than they own. 

Image result for billionaires gone wildThese Monster Companies, just like our Monster Billionaires can throw their money around and buy almost anything and get away with almost anything like Monopolizing On-Line Retail, Using Your Personal Information to make a Profit or even becoming President of the United States.  It is truly terrifying to think of what kind of damage a bad Billionaire could do but thank goodness the US has a system of checks and balances that….  oops…

Oh well, if you can't beat them – invest in them, I guess.  To that end, Alphabet (GOOGL) just beat earnings by $2.21/share, coming in at $11.75 per $1,211 share, now $1,262 in pre-market.  If we assume they keep it up and make $46 for the year, then $1,262/46 is 27 times earnings, which is a lot, but maybe not for a company that made $32/share last year so about 40% bottom-line growth is not all tax cuts – this company is a MONSTER!

GOOGLE barely pulled back when the EU fined them $5Bn for engaging in anti-competitive behavior for giving Android away at a loss but GOOGL's solution will be to charge for Android and PRESTO!, they make much more than $5Bn installing an operating system on 1.3Bn phones – even if they just charge manufacturers $10 ($13Bn).  Giving Android away…
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Monday Market Movement – Trump Tweets War Threats Against Iran

Oh Trump, you crazy bastard!  

"Trump Threatens Iran in Tweet, Warning of Dire ‘Consequences’" is the headline in the Wall Street Journal this morning.  Apparently (and we don't know for sure what's in this guy's head, which is attached to the arm that's got a finger on the button), Trump was "responding" to a speech by Rouhani over the weekend that was the usual rhetoric in which Iran's President said:

"Peace with Iran would be the mother of all peace and war with Iran would be the mother of all wars" 

I guess we now know which path our President is going to choose!  Of course oil prices flew back up to $69 a barrel from lows of $65 last week after Trump announced he may open up the Strategic Petroluem Reserve to keep prices low.  People who have foreknowledge of Trump's announcements could make Billions of Dollars betting on the price swings very much the way Vladimir Putin and his Russian cronies did when they manipulated oil prices.  I wonder where Trump would have gotten that idea?

Mr. Trump’s warning to Iran came hours after a speech by Secretary of State Mike Pompeo that was harshly critical of Iran’s leadership. Mr. Pompeo accused Iran’s leadership of widespread corruption at the expense of its citizens’ welfare.  “Governments around the world worry that confronting the Islamic Republic harms the cause of moderates, but these so-called moderates within the regime are still violent Islamic revolutionaries with an anti-America, anti-West agenda.”

Well, if they didn't have one before, they sure have one now, especially after Trump unilaterally withdrew from the Iran Nuclear Treaty of 2015 that was negotiated over many years by Obama and Trump is not only imposing sacntions against Iran for no apparent reason but is also trying to force our allies to go along with the sancitions.  These are all moves that have driven the price of oil from $45 to 75 (66.6%) since Trump has been in office – maybe that's a sign?  

It's certainly a sign for the average American who has to fill up his gas tank as every $10 rise in oil…
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TGIF – Stop The Week, We Want to Get Off

$505 Billion!

Trump has now threatened to put a tariff on every single Dollar's worth of goods we import from China, ratcheting up the Trade War talk to unprecedented levels.  Of course, we're still at just $50Bn and Trump never followed through with his threat to add $200Bn before doubling down to $505Bn but he is still the President of the United States and you can't totally ignore the things he says – no matter how much you wish you could.  

As you can see from this WSJ chart, despite all the bluster, not much has actually happened so far but thank God for that as just the $50Bn that's already been enacted is causing disruptions in Corporate Earnings and Economic Outlook – there's no question in rational people's minds that actually enacting $250Bn worth of tariffs, let alone $505Bn, would be devastating for the Global Economy and yes, deplorables, the Global Economy INCLUDES America!  

Tariffs are a TAX on the American people and the real reason your President wants to put a 25% tax on $505Bn worth of Chinese Imports is that it will generate another $126.25Bn that he can use to give more tax breaks to his family and friends and it will allow his budget committee to project collecting $1.26 TRILLION in revenues over the next decade, which he can then use to either claim he has brought down the deficit or use to offset more military spending, etc.  

And who pays this tax?  Attention Wal Mart shoppers – it's YOU!  Who do you think is the consumer of Chinese goods.  $505Bn happens to be the exact annual sales of Wal Mart and, if I had a TV show, I would challenge people coming out of Wal Mart to find something they've bought that didn't come from China.  Of course there are plenty of things but you'd be very surprised how much is Chinese as well as, of course, the Dollar Stores, phones, etc.   

So a tariff is just a fancy word for a tax on American consumers, especilly the poor ones who can least afford it and no, they will not switch to "lower-priced" American goods because we don't even have factories that make 90% of the stuff China ships to us and all a tariff…
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$2,000 Thursday – Our Live Trading Webinar Makes a Quick Two Grand!

I love it when a plan comes together.  

In yesterday's Live Trading Webinar (replay available here) we worked our way into 6 short Dow (/YM) Futures shorts at an average of about 25,167 and we rode them down this morning to the 25,100 line for a quick $2,000 gain on the set and then, in our Live Member Chat Room, we called for a follow-on short below the 25,100 line, with a target of 25,000 for another $500 per contract gain.

It's been a busy week as we have options expirations so we're reviewing our 5 Member Portfolios, one of which we share with the viewers of Business News Network's (Canada's Bloomberg) Money Talk in a portfolio where we only initiate and change trades on the show so every single trade is available to the viewers live.  The disadvange to that restriction is that we can't make adjustments between shows (I'm on quarterly) so we try to stick to low-touch value trades but, as we teach our Members, trading does not have to be exciting to be profitable and our Money Talk Portfolio is already up 68.6% since we intiated it last September (10 months).  Not bad for free samples!  

You can see the review of the adjustments we made yesterday at and here are the clips from the show talking about the market, the portfolio and adding a new trade idea on General Foods (GIS):

Money Talk segments #1 and #2:  

As noted, we are moving to a lot more CASH!!! and were shorting the market as we're taking the trade war more seriously than other investors seem to be and, just this morning, to prove my point, there was more saber-rattling from the President about Auto Tariffs, which would be a horrifically bad idea for the entire Global Economy.  That's what sent the market lower, despite pretty good earnings reports so far.

Just because we're generally bearish doesn't mean we can't find values in the market – they are just few and far between.  On BNN I noted that Barrick Gold (ABX) at
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Weakening Wednesday – Powell’s Testimony Doesn’t Really Help

The Fog of Truth.

That's what Robert Reich calls the confusion and bewilderment Americans feel when listening to the President but the same can be said for our New Federal Reserve Chariman, Jerome Powell, who testified before the Senate yesterday and will testify again tomorrow without actually saying anything at all but, like the parable of the blind men feeling an elephant – everyone will be able to draw a conclusion about what he said – even if those conclusions are diametrically opposed to each other

CNBC says "Powell backs more rate hikes as economy growing "considerably stronger"" while Market Watch says Treasury yeilds are heading lower on doveish testimony and CBS says "Jay Powell shrugs off trade worries, expects rates to keep rising" and Bloomberg says "Powell's 'For Now' Caveat a Sign Fed Rate Hikes Not on Autopilot."  So Jerome Powell, like the President, is all things to all people – whatever you want to think he said – he kind of said it.

Is that really what we want in a Fed Chairman?  Why is our monetary policy a closely guarded secret?  There was, briefly, a movement to make the Fed more transparent and have them set firm tartgets for actions well ahead of time but investment banks can't make money if EVERYONE know what the Fed is going to do – who would they be able to bet against with their inside information?

It doesn't get more inside than Goldman Sachs, of course, who have alumni like Neel Kashkari, Stephen Friedman, Bill Dudly, Patrick Harker and Robert Kaplan.  In fact, there are 12 GS Alumni currently on the Fed Board (not to mention Carney heading the Bank of England, and, of course Draghi at the ECB)  and Goldman was even fined $50M after one of it's emploees was caught obtaining regulatory documents from former collegues at the NY Fed but don't worry, no one has been caught since!  Treasury Secretary Steve Mnuchin is also a former GS partner.   

And, of course, a few Trillion Dollars worth of our National Debt (which you and your children owe) was accrued by the Fed (who still have $4.5Tn worth of debt on their balance sheet) bailing out Goldman and other…
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