Friday Market Failure – Trump Temper Tantrum Lashes Out at Mexico

Related imageThe whim of a madman! 

That's a line from Speed used to describe Dennis Hopper's insane actions and demands (he was a mad bomber) and I used it to describe Trump's trade actions back on May 7th and yesterday Robert Meuller clarified the fact that President Trump is indeed a criminal and simply can't be convicted only because he is currently the President.  Hundreds of former federal prosecutors signed a letter stating that Trump’s conduct would be chargeable as a crime if he was not the president. Mueller’s view is that it’s up to Congress, not him, to make that decision.  

This has now led to Trump, who needs another distraction, lashing out at Mexico and threatening to sanction them with tariffs (ie. – more taxes on the American people) if they don't stop people from legally crossing through Mexico on their way to the United States where they attempt to LEGALLY seek asylum.  The US, of course, looks completely ridiculous, trying to force a foreign Government to solve what is really a domestic problem and it puts the entire USMCA (NAFTA) in jeopardy but also makes us look completely irrational to anyone else we're negotiating with:

WASHINGTON—President Trump said Thursday the U.S. would impose escalating tariffs on all Mexican imports beginning June 10, in an effort to push the country to deter the flow of asylum-seeking Central American families to the southern border.

Reacting to what he described as “Mexico’s passive cooperation in allowing this mass incursion,” the president said the tariff on America’s third-largest trading partner would begin at 5% and grow steadily, hitting 25% on Oct. 1 unless Mexico takes satisfactory action to halt the migrants.

“If the illegal migration crisis is alleviated through effective actions taken by Mexico, to be determined in our sole discretion and judgment, the Tariffs will be removed,” Mr. Trump said in a statement released by the White House.

The president also lashed out at Democrats, who he said “refuse to help in any way, shape, or form.”

Image result for us mexico tradeWe import $346Bn  worth of goods from Mexico and a 25% tariff tax, paid by the…
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Thrilling Thursday – Failure at 2,800 Spells DOOM for the S&P 500!

This is not good! 

The only reason the S&P 500 is holding the 200-day moving average at 2,776 is because the 200 dma keeps sinking.  That, of course, is also pulling the 50 dma lower and once it comes down we're only a month or two away from a "Death Cross" and then we would be looking at a very long, very hard climb back for the senior index

That's why it is very, VERY important that we finish the week back above the 2,800 line on the S&P and the 1,500 line on the Russell and the 12,500 line on the NYSE and the 25,500 line on the Dow and the 7,250 line on the Nasdaq 100.  Anything less than that is DOOM!!!!  

While we are pretty well-hedged for DOOM!!!! we did add to our hedges yesterday, in our Live Trading Webinar, and we'll be adding more hedges on Friday if the indexes don't perk up and get back to their levels which, though nowhere near a recovery, would at least indicate that there is SOME buying interest still out there – something we're beginning to doubt.  By all indications, it does look a lot more like we're consolidating for a move down – rather than a move back up:

Of course, that's why we have our bounce lines – they let us know whether a recovery is real of if it's just a dead cat bounce on the way to the next lower band.  The lines we've been using all month are:

  • Dow 25,200 is the 5% line and the bounce lines are 25,450 (weak) and 25,700 (strong)  
  • S&P 


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Whipsaw Wednesday – They are Selling in May and Going Away!

"Sell in May and Go Away."

It's one of those market truisms that works often enough for people to think it's a thing and it's certainly been a thing this year as the month of may has sucked for US Equities.  Fortunately, we were properly skeptical of the rally and I said to our Members in our April Portfolio Review on the 30th:

"I hate to be in this position as we're clearly benefitting from RIDICULOUS market conditions and I know from experience that, no matter how many times I say it, people won't believe how quickly we can give back a big chunk of these profits.  Just this morning, GOOGL went down 8%, INTC is down 13% in the past week…  If that can happen to big blue chip stocks – what can happen to the other crap?"  

Image result for trump china trade cartoonWell, now we're seeing what can happen to the other crap as Q1 earnings were certainly not enough to get the S&P to 3,000 and now we're back BELOW 2,800 this morning and that's going to be a critical failure if they can't take it back. 

Keep in mind that our last "recovery" was driven by rumors, often started by the President, that trade talks with China were going great and a deal was on the table.  That, not really suprisingly, turned out to be total BS (as we warned every morning for weeks) and now the negotiations have clearly fallen apart and, just yesterday, China ramped up their threat to cut off their exports of Rare Earth Materials – a move that would ground the US economy to a halt at a flick of a Chinese switch.  

Unfortunately, Trump has chosen to bluff when he had no idea what cards China held and now it turns out they have a very strong hand and are not afraid to play it.  It is simply not possible for the US to fill their demand for rare earth materials without China and Trump has pushed China into a corner where they may have to retaliate to our sanctions with this, er, trump card they've been holding the whole time.

 

IN PROGRESS

 

 

Tuesday Already – Short Week Begins with a Bounce

May has not been kind to the markets

As you can see from the S&P chart, we're down from 2,950 back to just over 2,800 and it's about a 5% drop (2,802 is exact) and that means, according to the Fabulous 5% Rule™, that we can expect AT LEAST a 30-point bounce to 2,830 but the exact number is 2,832, which is EXACTLY where we are at about 8:30 this morning.

The reason the 5% Rule is so amazing at predicting these levels weeks in advance is that it's not TA, we're merely exploiting the mathematical convergences inherent in bot-trading programs – which dominate trading these days – ESPECIALLY in low-volume markets, like we're having now.  In fact, here's the S&P chart we drew on 5/15 – still stuck in the range we expected:

Remember, the 5% Rule can only tell you the range the indexes are likely to track in and we are Philstockworld can only tell you how to profit frtom trading those moves – the rest is up to you.

Speaking of things that were up to you – congratulations to all who stuck it our with us on our Gasoline (/RBN19) trade as we got a nice pop Friday that followed-through into this morning and now we're up over $2,500 on two contracts and we're very happy to lock that in with a tight stop at $1.94 since both Silver (/SI) at $14.30 and Natural Gas (/NGv19) at $2.60 are both back to our buy points as the Dollar pops back to 97.70 so we're happy to switch horses at this spot.

Fututres have been all over the place as Trump said yesterday that the US is "not ready" to make a Trade Deal with ChinaChina's Industrial Profits fell  in April but that was before the new round of tariffs so it's hard to say if Trump is "winning" or just kicking China while it's down – something the Middle Kingdom will not soon forget.  In reality (something the President is not very familiar with), the drop in profits was mainly due to the comparison to high profits a
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Friday Flip Flop – Market takes back SOME of the Losses – Still Down 5% for the Month

Up and down we go – but mostly down

We're still stuck in that range but at least we haven't failed the 200 dma – yet.  The Russell has already failed and the NYSE was on the line yesterday but recovered to hold 12,500 and this morning the Futures are up a little so it doesn't look like it will be a total catastrophe into the weekend – so we still have that to look forward to.

As you can see from our S&P 500 chart, we're stuck in a range between the 5% and 10% lines on our Big Chart as well as between the 50-day moving average and the 200 dma and whichever way this resolves itself should set the tone for the 2nd half of the year but first, it may be a summer where we drift in-between.  That's why we're so easily swayed by any news item – when you are trading between major support and resistance – it takes very little to change your course. 

We're still playing for Gasoline (/RBN19) to change it's course and we're very surprised to be losing $1,250 per contract at the moment on our long position from Wednesday's Live Trading Webinar and we now have 4 long contracts at an average entry of $1.935 with /RBN19 at $1.905 and the good news is it will be cheap to fill up our tanks ahead of the holiday weekend and the better news is we are still expecting a run up – maybe not until next week though…

Our theory is that the rollover of /RBM19 (June contract), which expires on Tuesday, is putting downward pressure on /RBN19 (July contract) and that the timing of the last EIA Report (through 5/17) failed to capture the orders for gas stations who are topping their tanks off this week – ahead of the holiday driving.  AAA expects this to be the busiest holiday driving weekens since 2005, when we were still a care-free nation who thought housing was a great investment.

The markets were high in 2005 also and they kept going higher for 3 more years before finally collapsing.  This morning, Durable Goods are down 2.1% for April but a lot of that is from BA and core Durable
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Faltering Thursday (Again) – Trump Tantrum Spooks Markets

The President is losing it.

Yesterday, he invited the House and Senate Democrats to meet with him to discuss Infrastructure and they had been discussing $2Tn worth of it but, when they showed up, Trump demanded they drop their investigations or he would not spend any money on Infrastructure – even though it's something America desperately needs action on.

Trump is not above holding America hostage to get what he wants – he shut the Goverment down for 35 days last year just to get funding for his wall and, so far, $1.57Bn has bought America 1.7 Miles of fence.  President Donald Trump also commented on the progress of the wall construction on Twitter Wednesday, saying “tremendous work is being done.”  

The Democrats did not agree to stop investingating Russian Interference into the US Elections which happens to also include potential charges of collusion and obstruction of justice on behalf of the President and his inner circle.  One could say Trump's actions yesterday were obviously yet another attempt to obstruct justice by threatening people involved in an ongoing investigation but, regarless of that – this man is clearly not acting rationally and, unfortunately, he's our President.  

It's interesting that Trump is complaining about the Mueller Investigation costing $35M (his estimate, not a fact) when Trump has spent $102M of the taxpayers' money playing golf in the past two years – and that is a FACT.  In fact, Mueller has already collected $47M in fines so there's a $12M+ PROFIT from the investigation, not to mention that there have already been 37 people indicted for criminal activity including 26 Russians who interferred with our Demcracy and, so far, 7 people have already pled guilty, including several who were serving directly under the President.   

I know people don't like to talk about politics on investing sites but this is serious stuff, folks!  When this happened yesterday I told our Members to "GET OUT!!!" of the markets as this was clearly going to lead to some serious selling as, if nothing else, we have a completely dysfunctional government which will be doing nothing to address many, many critical things AND we're on a…
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What Now Wednesday – More Trade BS Halts the Rally

Image result for not again coyote animated gifNot again!  

Now Trump is "considering" Huawei-like sanctions on Hikvision (a $37Bn company) and Zhejiang Dahua Technologies, sending both companies limit-down 10% this morning, even though the US is only 5% of Hikvision's sales.  Other companies are supposedly on Trump's "list" but they have not been disclosed.  

Meanwhile, yesterday, China's President Xi toured a rare-earths manufacturer, likely to point out that China actually has us by the balls as they supply 90% of the rare materials that make electronic manufacturing possible.  

On his tour, President Xi was shown on state television on Monday accompanied by his emissary to the trade talks with the U.S., Liu He. Stock prices of companies associated with the industry soared in China in anticipation of a potential increase in prices of the materials.  Beijing exerts critical influence on the supply of rare-earth materials. The 17 elements have high-tech uses: neodymium for permanent magnets in mobile phones, terbium in LED lights and dysprosium used to cool nuclear rods, for example. Though the minerals are found in abundance in many parts of the world, processing them into materials is often highly polluting, sometimes releasing radioactivity. China holds that production chain.

This whole thing could be part of a brilliant plan by Trump to manipulate the situation to allow him to lift the environmental restrictions on rare-earth mining in the US. and Texas Mineral Resources Corp. (TMRC) is one company that would greatly benefit from such a decision.  I don't usually play penny stocks, but this one could be fun at 0.27, as they would certainly be in the right place at the right time if Trump can play the "national security" card (again) to allow TMRC and others to begin strip-mining America.  That's certainly worth a few board seats for the Trump family down the road, right?

We already began the day shorting the Dow in our Live Member Chat Room, my note to our Members at 7:06 am was:

/YM is a nice short below 2,850 if /ES is


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Tariffic Tuesday – Markets Bounce Back – Again

What a month this has been! 

It's all over now because Monday is a holiday and EVERYONE (who matters) is out the door early on Friday or Thursday or Wednesday for that matter and they don't come back until next Tuesday or Wednesday or, if they do – they sure aren't working much.  While Americans complain that they don't get many holidays – they certainly seem to stretch the ones they do have out quite a bit

I said we shouldn't expect much volume and yesterday's SPY volume was 60% of Friday's and I think we'll see even lower transaction numbers as the week goes on.  In other words, the whole thing is a joke – you may as well take the week off.  Our picks from yesterday morning were no joke as the Nasdaq (/NQ) Futures popped back to 7,450 this morning for a lovely $1,000 per contract gain from the long play we discussed in Monday Monring's PSW Report.  Likewise the S&P Futures (/ES) gained 10 points at 2,860 (again) and that was good for $500 per contract – not a bad way to start our trading week.  

This morning we're playing JULY Gasoline (/RBN19) Futures at $1.99 and I'll be very surprised if we're not at $2.05 by Thursday and, at $420 per penny, per contract, that could be good for $2,520 per contract – good enough to barbeque some steaks instead of hot dogs this weekend.  A stop below the $198 line limits the risk to $420.  

This weekend is the start of "Summer Driving Season" and the EIA forecasts a slight increase in consumption vs. last year, despite a 1% increase in overall fuel efficiency for the motor vehicle fleet:

For summer 2019, EIA forecasts U.S. motor gasoline consumption will average 9.54 million barrels per day (b/d), up 29,000 b/d (0.3%) compared with last summer’s level and nearly the same as the record summer average set in 2017. Highway travel is forecast to be 1.3% higher than last summer. The forecast increase in highway travel is largely because of growth in employment and population. The effect of the increase in highway travel is forecast to be partially offset by a 1.0%


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Monday Market Madness – Trade Worries Continue to Weigh Down Markets

And down we go again!

Don't worry, it's not only Monday but it's a pre-holiday week so the volume is likely to be low and it's hard to break out of a range on low volume – even to the downside.  That means we kind of like playing 7,400 on the Nasdaq (/NQ) Futures for a bounce – with tight stops below tha line.  The S&P (/ES) Futures are also playable if they get back over 2,850 (now 2,845) with very tight stops below that line as /ES is $50 per point, per contract – so we don't want to mess around.  

The Nasdaq bottomed out at 7,300 on the 13th and the S&P was 2,800 with the Dow (/YM) 25,200 and the Russell (/RTY) 1,520 so, if we fail to hold our lines this morning – that's the next place we'll take a stand but the Russell is already down at 1,527 and looking a bit shakey – so be very careful this morning. 

We did get a nice pop this morning on Natural Gas, which was our long idea from Wednesday's Live Trading Webinar and we're already up over $500 so that's now our stop line but hopefully $2.75(ish) will hold and we'll leg up further but congrats to all who played along with that one on the quick winner.

We also, of course, blew through our hoped-for 25-point drop on the Nasdaq (/NQ) as we're now down over 100 points from our Webinar short and that one is good for $20 per point, per contract so $2,000+ on that short and that's why we love the Futures – it's a great, quick way to hedge your portfolio that quickly returns the cash you need to adjust your bullish positions – like we did last week in our Portfolio Reviews.  

Speaking of the Portfolio Reviews, I want everyone to keep in mind that I have been saying for the past month that we are only staying in our portfolio positions to demonstrate how to trade through a downturn in the market and we ABSOLUTELY would have cashed out any portfolio that mattered to our long-term financial future. 

We are very


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Faltering Friday – Markets Give Up Half the “Rally” on No News

The markets are very moody

Just when we got the S&P back to our 10% line, we're down 20 points this morning and back below the 50-day moving average (2,866), back at the 2,860 line that marks the bottom of our 5% correction zone on the bounce charts we've been using all week.  It's a very disappointing setback and, if this is how we're going to go into the weekend – we are going to need more hedges!  

At the moment (7:30), however, the 5% Rule's™ Bounce Chart™ looks like this:

  • Dow 25,200 is the 5% line and the bounce lines are 25,450 (weak) and 25,700 (strong)  
  • S&P 2,860 is the 5% line and the bounce lines are 2,875 (weak) and 2,890 (strong)
  • Nasdaq 7,475 is the 5% line and the bounce lines are 7,540 (weak) and 7,605 (strong) 
  • Russell 1,550 is the 5% line and the bounce lines are 1,565 (weak) and 1,580 (strong)

We were all red except the Dow (which was at the weak bounce line) on Tuesday morning so this is still progress, but just yesterday afternoon  we only had 3 red boxes left to capture and we would have been back to bullish.  That's what's useful about the Bounce Chart – it keeps you from making bad decisions by making sure the rally is real before…
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