Entries by Phil

Turnaround Tuesday – Markets Pop Back Just Because

Related imageNo, nothing happened.  

Still, we're up 0.6% pre-market across the board and we're just waiting to see if the Russell can get back over it's Strong Bounce Line at 1,532 to confirm the bullish action of the rest of the indexes.  As I mentioned in yesterday morning's PSW Report, we were playing for the bounces off "Dow (/YM) 25,300, S&P (/ES) 2,800, Nasdaq (/NQ) 7,300 and Russell (/RTY) 1,500" and in our Live Member Chat Room, at 9:51, I put up the following note to our Members:

Good morning!

Big Chart not bad, only the RUT failed the 200 dma (and the 50) so we need to see 1,523 come back and the rest is just normal bouncing which would be:

    Dow 26,000 to 25,400 is 600 points so 120-point bounces to 25,520 (weak) and 25,640 (strong)

    • S&P 2,860 to 2,790 is 70 points so 14-point bounces to 2,804 and 2,818

    • Nas 7,525 to 7,300 is 225 so 45-point bounces to 7,345 and 7,370 


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    Monday Market Movement – Back at S&P 2,800 Yet Again

    Image result for us drops global statusWell, Friday was a disaster, wasn't it?

    Turns out it wasn't about Trump, he is still at large after Mueller did not find enough evidence to convict (still plenty of evidence to suspect but Trump's AG Barr has squashed further investigation) so it looks like Trump's policies will be with us for another two years.  As you can see from the chart, that will give us two more years to work on really pissing off the rest of the World, whose approval of the US is already at or near the record lows set by Bush II.

    Isreal still likes us and you can see the GOP working double-overtime recently pandering to them and Nigeria likes us for some reason along with Poland and India.  Of course, Trump and his followers probably don't care if foriegners don't like us because these 320M people don't need the other 7,800M people on this planet and we don't need to trade with them or get along with them or even enter into defense agreements with them because – WE'RE NUMBER 1!  USA! USA! USA!!! 

    Image result for global economy cartoonSee, if you say it loud enough and often enough, you may actually start to believe that.  Who needs reasons when we have chants?  Well, I guess the answer is people with globes, people who understand that it's a global economy and not a local one any more but those people are called "Globalists" and they are vilified by the right as if reality is some anti-American agenda.  

    We have the same problem in the stock market as US traders think that things that affect the rest of the World don't matter to US markets, despite the FACT that the S&P 500 gets half it's revenues from overseas.  Fortunately, at PSW, we do watch the overseas markets and there was nothing surprising about last week's correction and this morning, we can play long off the support lines as we expect to bounce off Dow (/YM) 25,300, S&P (/ES) 2,800, Nasdaq (/NQ) 7,300 and Russell (/RTY) 1,500 and, of course, we go long the laggards with very tight stops if any of them fail to hold…
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    Flailing Friday – Crazy Market Action Continues

    And now we are down again.  

    The Dow started the week at 25,900 and we hit 26,130 on Tuesday but now back to 25,830 this morning so, on the whole, we'll be lucky to finish the week out flat.  It's a clearly manipulated, low-volume market and JP Morgan points out that, despite the S&P 500 surging 20% from its December low – almost every catagegory of investors tracked by JPM, from individuals to hedge funds and computer-driven trading, has shown little inclination to chase the rally. 

    Dwindling liquidity is often dragged into discussions of market meltdowns. In December, for instance, when the S&P 500 plunged toward the brink of a bear market, both President Donald Trump and strategists from Goldman Sachs flagged it as potentially escalating the sell-off.  While very dangerous if the market turns negative, JPM says these low-volume conditions could also keep the rally going:

    “Given liquidity, it is plausible that just short covering, buybacks, dealers’ gamma hedging, and some limited re-leveraging drove the entire recovery.  This, in turn, opens the possibility that the current rally can continue during the spring.”

    JPM cites the dramatic reversal in Central Bank policies as putting another floor under the market.  While I agree with their premise, I believe it, like most bullish premises, is ignoring the risks of the overall Global slowdown driven by the Trade Wars, Rising Oil Prices and Brexit as well as the dramatic slowdown in Corporate Profits we'll see now that they don't have additional tax breaks and, of course, rising wages will eat into profits as well.  

     

     

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    Throwback Thursday – Testing our Tops from Above

    "How long, how long will I slide?
    Separate my side, I don't
    I don't believe it's bad
    Slit my throat it's all I ever
    "Turn me on, take me for a hard ride
    Burn me out, leave me on the other side
    I yell and tell it that it's not my friend
    I tear it down, I tear it down

    And then it's born again" – RHCP

    Well, you can see why we remain skeptical with these low-volume rallies as we've now given up 50 S&P points since Tuesday's hign along with a whopping 500 Dow points and now we are testing 2,800 from above on /ES Futures and 25,600 from above on the /YM Futures.  During yesterday's Live Trading Webinar, we called for shorting the Russell (/RTY) at 1,560 and that's down 20 points, to 1,540 and that's good for gains of $1,000 per contract but we took a quick $750 and ran into yesterday's close.  

    We also shorted Gasoline Futures (/RB) at $1.915 and, of course, we always go long on July Coffee Contracts (/KCN19) at $97 and Natural Gas (/NG) is getting to be playable again as a long at $2.80 (with tight stops below) but, since it's close to expiration on April Contracts (6 days), I'd go with /NGK19, which are the May contracts at $2.815 though even a stop at $2.80 would cost $1,500 per contract – so be very careful with those!  

    The Fed was very doveish, as expected but what spooked investors in the end was their overall downgrade of the economic picture as Trump's Tax Cuts simply are not boosting the economy and his Trade Wars are hurting it.  The Fed keeps dropping subtle hints that such things are our of their hands to fix and their $4Tn balance sheet makes it very difficult for them to add any new programs to boost the economy – the best we can hope…
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    Which Way Wednesday – Fed and FedEx Move the Markets

    FedEx (FDX) is tumbling and you should care.  

    Though smaller in volume than UPS, FedEx ships over 13M packages per day, which means they have their finger right on the pulse of business and, this morning, they missed earnings by 2.5% – but that was after they drastically lowered guidance last quarter (sending the stock 32% lower) and now they are lowering guidance yet again, sending the stock down 7% pre-market.

    Weakness in International Shipping is the major problem but FDX says the Government shut-down also contributed to giving them a very poor Q1 – though that's not the excuse for taking down Q2 as well.  Nonetheless, we think this news was already baked in in December and, in fact, on Dec 14th, we sold FDX 2021 Jan $180 puts for $22.22 to net in for $157.78 in our Long-Term Portfolio and it's likely you can do better than that this morning – if you are brave enough. 

    Why Did FedEx Cut Its Fiscal 2019 Earnings Outlook?Just because the economy is weak doesn't mean FDX is suddenly a bad company – so it's a great play for long-term investors on a $47Bn company ($45Bn this morning!) that dropped $4.5Bn to the bottom line last year but, even adjusting for one-time tax breaks – they should still be netting about $3Bn in profits in 2019 so $45Bn ($170) is very fair.

    FDX is also still working through their $4.8Bn acquisition of TNT Express in Europe – and it was pretty bad timing as the economy began turning down last year as the Brexit fears grew.  

    Still, it's not FDX we're worried about but what it says about the broader market, which has mostly ignored the troubles in Europe and the damage that was caused by the Government Shutdown, as well as all the nonsense in Europe and, let's not forget, the continuing trade battle between the US and China.  FDX is down $90 (33%) since Sept and about 40% as of this morning – it's the companies that haven't corrected yet that I'm worried about.  

    That brings us to the Fed, who are very likely not to raise rates today (2pm) and we'll be discussing it in today's Live Trading Webinar, which…
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    Terrific Tuesday (as usual) – Markets Up, Up and Up!

    Wow, what a rally!  

    Up 40 points in 3 days on the S&P (/ES) is 1.42% so Everything is Awesome - just like it was before the last crash because it's very dangerous to pin the Awesome Indicator and then something bad comes along and everyone is SHOCKED that things may not be as awesome as they were led to believe.

    Today we are waiting on the ever-wise Federal Reserve to come up with yet another excuse not to raise rates (the last Jobs Report comes to mind) or unwind their still $4,000,000,000,000 Balance Sheet.  Keep in mind that these Fed Fund Rates and this Balance Sheet are at emergency crisis levels and keeping the rates this low and the balance sheet this high means the Fed still thinks we are in an emergency of some sort – no matter what market traders may believe.  

    All the Fed has done so far is unwind $500Bn (11%) out of $4.5Tn that's on their books – and the market freaked out about that…  

    We're not "wrong" in our positioning, just a bit too cautious at the moment, considering the rally.   We reviewed our Money Talk Portfolio, which we trade live on BNN's Money Talk, two weeks ago (3/7) as it stood at $125,790 (up 151.6%) and we couldn't change it because we weren't on the show this month but, even left alone, that well-balanced portfolio is now $130,260 (up 160.5%) gaining almost 10% off our $50,000 basis in 12 days while the S&P went from 2,765 to 2,850, which is up 85 points (3%) so we're certainly keeping up with the gains – it's just that we COULD do much better if we were willing to be more aggressive.  

    The Money Talk Portfolio is hedged and our SQQQ hedge lost $800 and our TZA hedge lost $780 as the rest of the portfolio gained $6,050 but that's exactly how hedges are supposed to work – you give up a little of your upside in order to protect yourself if there's ever a downside – though that doesn't seem possible the way this market has been going

    The "big" news moving the markets this…
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    Monday Market Movement – Another Week at the Top

    Up and up we go – so far. 

    As I said two weeks ago: "Notice how well the 5% Rule is being obeyed.  That also tells us that 2,835 is the 1.25% line but we haven't made that and we are finding resistance at the 0.625% line, which is 2,817.50.  We don't usually bother at that level but it is ineresting that that's exactly where we topped out yesteday, which indicates there is a LOT of technical resistance over 2,800 and it's going to take a lot more than promises of trade progress to get us over that hump."    

    So here we are, two weeks later, finally up to the goal line we set way back on March 5th after exactly nailing our downside goal of 2,730, or, as I said at the time:

    As you can see, almost all the rejections sent us down 100-200 points so let's not get too bullish as all we got yesterday was a bounce off the fall from 2,820 on Monday to 2,770 yesterday so that's 50 points and that means, per the Fabulous 5% Rule™, that we can expect 10-point bounces to 2,780 (weak) and 2,790 (strong) so now we're watching 2,790 as the fail line and, if we can't hold that, we'll be back to 2,770 and likely on the way to a full 1.25% pullback from 2,800 to 2,765 and, failing that, the next stop is the 2.5% line at 2,730, which we last tested on 2/15.  

    Image result for stock market crystal ballRemember, I can only tell you what is likely to happen and how to make money playing it – the rest is up to you!  

    So it's taken one month to cycle from 2,730 (2/15) to 2,920 (3/4) back to 2,730 (3/8) and now 2,835 and there's very little data this week and little earnings and the Fed is meeting on Weds but they can't possibly be more doveish so what's the catalyst going to be?  On the other hand – there's not likely to be a downside catalyst either so maybe we'll drift along at the top – which might be bullish – but any move below 2,800 on /ES would be a
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    TGIF – Terrific Week Ends with a Bang

    Up and up we go! 

    It's been an all bull week after Monday's weak start and we're up 600 points (2.4%) on the Dow (despite BA falling apart), to 25,900 though that's nothing compared to the S&P 500's 5.5% rise from 2,730 on Friday to 2,825 at yesterday's close.  

    Are things 5.5% better than they were last Friday?  What can you think of that's changed for the better?  If you can't think of 3 things – or at least one really good one – you have to question WTF the market is doing…

    The Nasdaq was at 6,975 last Friday and this morning we're looking at 7,310, which is up 335 points and that's 4.8% while the Russell bottomed out at 1,520 and is now 1,560 – that's just 2.6% and we can't blame Boeing for that one, can we?  And, let's not forget that a 2.5% gain in the Dow still doesn't get us back to where we were at February Expiration Day (15th):

    Still, without BA dragging the Dow, we'd be up 5% on the majors and that's a pretty good week though today is Options Expiration Day so it's not over yet.  We do have strong-looking Futures at the moment (8:30) and I don't see any news likely to derail things though there was a terrorist attack against 2 New Zealand Mosques where 49 people were killed and dozens more injured by explosions.  

    Not that the market cares about such things – especially when they happen far away to people we don't know but it should remind us that the World is still a bit unstable and we shouldn't be pricing stocks as if we don't have a care in the World about the future…

     

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    Thrilling Thursday – The View From the Top

    Here we are again.

    For the past year we've been topping out around 2,800 on the S&P 500 (/ES) and yesterday we closed over at 2,820 and, if we can hold it through the weekend, we may be looking at a real move above the line and the top of the range may become the new bottom BUT, I don't see the economic data to support that yet – so I remain a bit skeptical.

    Fortunately, not too skeptical and our Long-Term Portfolio added $42,172 (8%)  since our 2/15 Review while our Short-Term Portfolio (where we keep our hedges) has remained fairly flat and that's exactly what we like to see in our paired portfolios.  

     

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    Why Worry Wednesday – Market Continues to “Soar and Ignore”

    No Brexit deal again.

    Not that the markets seem to care but, at the moment, Britain is scheduled to leave the EU on March 29th and, as you can see from yesterday's vote, they are nowhere close to agreeing on a divorce settlement with the EU.  

    Without a deal, the UK must depend on the EU to simply give them an extention and restart negotiations but, if the EU plays hardball – the UK could be cut adrift, with no trade agreements with ANY country.  Since all the EU nations have negotiated as a block for the last 30 years, the UK doesn't have any individual trade deals with any nation so, effectively, they can't trade.  

    EU President, Donald Tusk, said that the 27 EU governments would consider a “reasoned request” from the U.K. for an extension, noting they would need to agree unanimously. The leaders, he said, “will expect a credible justification for a possible extension and its duration.”  Meanwhile, Jeremy Corbyn, leader of the main opposition Labour Party, said: “The government has been defeated again, they must accept that their deal…is clearly dead,” adding the U.K. should stay in a customs union with the EU.

     

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