Thursday Flatline – Markets Drift Weakly into the Weekend

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"Well we know where we're going

But we don't know where we've been

We're on a road to nowhere

Come on inside

Taking that ride to nowhere

We'll take that ride" – T Heads

As you can see frojm they  S&P ETF (SPY) chart, we haven't done much of anything since Monday's open but it has been an exciting week as the S&P has had a 100-point trading range (4%) but each of these exaggerated moves in the Futures, whether up or down, seems to get dragged back to the middle once the real trading sessions (with volume) begins.

Date Open High Low Close* Adj Close** Volume
Dec 12, 2018 267.47 269.00 265.37 265.46 265.46 97,760,100


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Meaningless Monday Market Movement – Waiting for the Next Shoe to Drop

Are the dip buyers still out there?

That's not entirely clear anymore as we're testing a triple bottom on the S&P since late October and 2,950 to 2,650 is 300 points down and 2,800 is right in the middle and that's where we kept failing – not a very bullish sign and this dip has been faster than the first two so, if the bounce is weaker than the first two – that's a bearish pattern we'll be able to hang our hats on.

Trade talks with China did not improve over the weekend with Lighthizer saying March 1st would be a "hard deadline" while Navarro says "China's predatory days are over" – and those are our chief negotiators!  China is demanding that Canada release the daughter of Huawei's Founder and is treatening "further actions" against the US if the issue is not resolved and this is what happnes when people pretend to negotiate a trade deal but are actually only interested in sabotaging it so Trump can keep taxing (oh, sorry, tariffing) Americans on things they used to buy under free trade agreements.

Speaking of Trump – things have not been going well in Trump Land and that adds to the market uncertainty so I would take any move up this morning with a huge grain of salt.  Very simply, for the S&P, the 300-point drop leads to a 60-point weak bounce so that's the goal for today and failing that (we will fail that) then it's more likely we'll have to keep an eye on the floor tomorrow to see if that holds.

Meanwhile, both China and Japan had poor economic data over the weekend and riots continue in France for the 4th week with 136,000 people marching on Satuday leading to 2,000 arrests while Retail Sales are down $1Bn for the month and restaurant sales are down as much as 50% as people choose to stay home rather than navigate Paris' burning streets. 

If you wonder why you don't hear much about the Paris protests in the US – it's because the Yellow Vest Protests are about economic inequality and the Capitalists that own the media like to pretend there is no
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Friday Market Follies – Will Non-Farm Payrolls Give us a Flip or a Flop?

Image result for monks roller coasterWheeeee – what a ride!  

Down 800, up 700, what a fun day in the market.  Now we're only down 750 from Monday's open so we can make that up by 11, right?  I certainly hope you have your hedges as we literally could go 750 points either way off the Non-Farm Payroll Report at 8:30 this morning – especially if it shows more than 250,000 jobs created as that would mean the Fed really needs to raise rates before wages start eating into Corporate Profits and spur inflation.  Even though wage inflation is "the good kind" that makes the economy stronger – the Fed doesn't give a crap about that – the Fed is a banking cartel, not some Government entity there to help you and they are only interested in protecting Corporate Profits, specifically Banking profits, they could care less whether or not you have a job – what they care about is that, if you do have a job, you are paid as little as possible so you have to take out lots of loans and pay interest to the Banksters.  That is literally their primary function.

Why does the Fed not want inflation?  Because you take a fixed loan on your home of, for example, $250,000 and put down a $50,000 deposit and, at 4.5%, you pay $1,266.71/month (not including taxes, insurance, etc) for 360 months which works out to $458,933 (plus your $50,000 deposit) paid out on your $300,000 home.  The problem the Banksters have, however, is that the last $1,266.71 you pay them isn't worth as much as the first $1,266.71 you paid them due to inflation so they want inflation to be as low as possible to maximize your effective payments.  THAT is what the Fed is concerned about.  

Keeping inflation down means keeping wages down, which has the side-benefit of keeping you perpetually in debt and, hopefully, they can one day sock you with a 8 or 10% mortgage and then they really start raking in the profits!  At 8%, that same $300,000 house with a $250,000 mortgage goes up to $1,834.41/month and that's $665,596.45 paid over 30 years on that $250,000 you borrowed.  Sucker!!!  

By the way, funny
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Follow-Through Thursday – 5% Correction or Just the First Step?

Related imageDOOM!!!

That's what I said would happen on Tuesday morning so this is certainly not surprising.  Even from my vacation on Monday I could smell the BS of the move up, as Team Trump's Trade Triumph was not at all confimed by their Chinese trading partners and, as I said in the Morning Report:

When you think about it, of course, not only has NOTHING changed since last week but now we know for sure there will be no trade deal until March at best.  Trump showed real weakness backing down on more tariffs since that was the only leverage he had in this negotiations and China's tariffs have always been retaliatory – so Xi has given up nothing at all and Trump has stopped fighting – how is that worth $500Bn of stock advances?

All pretenses of improving US-China relations were dashed yesterday evening as news spread that the CFO of Huawei was arrested in Canada on Dec 1st, at the behest of US Authorities over "Iran Sanction Violations" – something the company claims to have had no notice of and no one was more shocked (or insulted) than China's President Xi, who was pretty much sitting down to dinner with Donald Trump at the time and was embarassingly clueless that this was happening.  Making a Chinese leader look clueless has historically been a big mistake….

The United States is “resorting to despicable hooliganism,” China's Global Times wrote in an editorial published Thursday. “Anybody can see that the United States is maliciously picking holes in Huawei, trying to give it a hard time using the American legal system,” said the paper, which often reflects the foreign policy views of the ruling Communist Party.

The “persecution” of Huawei is “clearly contrary to the spirit of the consensus” forged between Trump and Xi, it said.


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Testy Tuesday – Is China Enthusiasm Enough to Flip the Death Cross?

We're still in technical trouble.

The rally, while impressive, has not been enough to avoid the dreaded "death crosses" in the stock indexes, where the 50-day moving average falls below the 200-day moving average (indicating acceleration to the downside) and, keep in mind that's 50 business days so more like 2.5 actual months of downward movement is being tracked – that's not the kind of thing you reverse in a single session or even a very bullish week – is it?

You can see from the "W" pattern on the NYSE that has formed below the 200-day moving average since early October and now it's December and we are making our second attempt at a rally after the early November rally failed so spectacularly into the Holiday.  But now it's Santa Rally time and Team Trump is promising us a trade deal for Christmas and when have they ever lied to us, right?

Trump has named China hard-liner, Robert Lighthizer, to head up the negotiations and that's not a good sign as Lighthizer fought hard in 2001 to stop China from joining the World Trade Organization in the first place so it would be really, Really, REALLY ironic if he were to suddenly put together the largest trade deal in history, with China…

Treasury Secretary Mnuchin would have been a more China-friendly and negotiating-friendly choice or even pro-trade Economic Adviser, Larry Kudlow, who said China committed to rolling back tarriffs on autos and agriculture to which China has already replied "He said we said what???"

Pushing things back 90 days let's Team Trump make all sorts of BS claims that can't be verified for 3 months and, even then, they can push it back another 3 months.  The two sides even disagree whether there is a deadline for talks.  While the U.S. said it would “endeavor” to wrap up talks in 90 days. In Buenos Aires, Chinese officials made no mention of any deadline, and were angered when told about the U.S. claims.

After popping 450 points near the open yesterday, the Dow gave back 150 of those points and, this morning, the Futures are giving back 100 more but that still leaves us with…
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Monday Market Madness – China Goes on Hold, Markets Go Crazy!

All fixed! 

That's how the markets are acting now that Trump and Xi have agreed not to employ more tariffs while they negotiate trade.  I'm not quite sure how they plan to fix, in the next 90 days, what they haven't been able to in the past 360 but it is fun to be hopeful, isn't it?  As you can see from the Chart, the S&P is flying back to 2,800, where we were in early November but still way below 2,950, where we were in early Ocober but it's only early December and now Trump and Xi only have to keep quiet for 30 days and we can all pretend everything is high and go back to paying record-high prices on stocks – Merry Christmas!

Of course a Santa Clause Rally is a time-honored tradition as it's how all the Wall Street Banksters lock in their bonuses so it was never likely we were going to end the year on a sour note – that's why we put a lot of money into our bullish positions in the last round of portfolio adjustments.  Even GE is up 2.5% this morning as all the switches have been thrown on all the Buy Programs and every stock – good or bad – is on the move this morning.

 

IN PROGRESS

 

 

Friday Market Follies – China Trade Deal or BUST!!!

Donald Trump will save us.

That's what we're hoping as the market optimistically heads into this weekend's G20 Meeting, expecting some sort of Major breakthrough as Trump and Xi sit down for dinner on Friday.  In fact, the first image out of Buenos Aires is that of Trump, Trudeau and Nieto signing the USMCA (ie. NAFTA) after 18 months of negotiations in which our Negotiator-in-Chief got NOTHING better – to the point where Congress may not even ratify the thing as there are so many angy constituents.  

Keep in mind that we already had NAFTA – all Trump did was change the name and claim he invented it (after saying how horrible it was for years) and even THAT took 18 months.  We do not have a current trade deal with China and the chance of going from something to nothing over this weekend is about the same as the chance of Trump letting Xi pick the menu for Saturday's dinner.  

It's not actually clear that Mexico will ratify the deal either as this is effectively Nieto's last act as President of Mexico as he turns over the office to Nationalist successor Andres Obrador on Saturday and you might think "Oh good, another Nationalist, he and Trump should get along great" but that's not how Nationalism works.  We used to have lots of Nationalists and they all said "XXX First!" and they all ended up going to war and killing each other, which led us to an elightened age when GLOBALISTS took control and cut down on conflicts by realizing that nations had to compromise to achieve lasting peace.  That's all out the window now…

One of the key "accomplishments" of the USMCA is already a disaster that threatens to skyrocket health care costs as it protects drug makers from generic competition for 10 years (up from 5 in Mexico and 8 in Canada) which means companies can charge outrageous prices for medicine for much longer periods of time.

Image result for prescription drug prices chartOpponents—including generic drugmakers, insurers and the influential AARP advocacy group for older Americans—say the deal would make it harder to ease those rules in the U.S. and restrict competition regionally. The Association for Affordable Medicines coalition wrote to U.S. Trade
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Thursday Follow Trough – Well-Dressed Windows Ahead of the Fed Minutes

Wow, what a comeback!  

Fed Chair Jay Powell said some words and the market jumped up over 2%, adding $2Tn to the global market cap in a matter of minutes.  He should say those words every day, right?  Actually, he didn't have to say anything as the Dow (/YM) began rising from 24,900 (already up from 24,800 at 5am) at 11am to 24,950 at noon – before the text of Powell's speech had even been released and, by 12:05, we were already up around 25,200 and we continued on to a high of 25,370 at the close, up 600 points for the day (2.4%).

The market's exuberance hinged essentially on a single sentence from Powell's speech:

"Interest rates are still low by historical standards, and they remain just below the broad range of estimates of the level that would be neutral for the economy--that is, neither speeding up nor slowing down growth. "

Rather than focusing on "still low by historical standards" the media chose to focus on the much vaguer "just below the broad range of estimates" which shows a complete lack of understanding of what a range is – whether intentional or otherwise.  Fortunately, we know exactly what range Powell is talking about as it's the Fed's famous "Dot Plot" that shows exactly what the range for rate expections is among the 12 Fed Governors.  

As you can see from the chart of Sept 26th, the RANGE of the expectations is from 2.25%-2.5% at the end of 2018 (we're at 2.125% now) but the RANGE next year is between 2.25% and 3.75% and, by 2020 – there is only one outlying dot that shows 2.25% while the middle of the range is about 3.25% – that's 4 quarter-point hikes from now.

Also, not at all covered by the media – Powell also had slides (as well as 14 other pages of text) and he was also concerned about the massive increase in Corporate Debt, now well above the economic collapse levels of 2009 and matching the post-crash levels of 2002.  The difference was, in 2002 and 2009 the Fed was able to LOWER rates significantly to reduce the stress of outstanding Corporate Debt but, without
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Which Way Wednesday – Waiting on the G20

Well, we flipped the NYSE's weak bounce line green at 12,150.

We also hit the weak bounce line (24,800) on the Dow (/YM) futures so all is well(ish) at the moment as the Trump administration made nice noises on trade yesterday – essentially negating Trump's morning tirade and that gave us the pop that we needed to get back over the hump so now we are waiting to see if either the S&P (/ES) can take back their weak bounce at 2,710, Nasdaq (/NQ) 7,080 or the Russell (/RTY) 1,530 and, if any of them do – then we can go long on the laggard with tight stops if those weak bounce lines fail again.  

Unfortunately, as you can see from the NYSE chart, recent weakness has already caused a "death cross" to occur as the 50-day moving average fell below the 200-day moving average and we really won't be out of the woods again until that reverses and that will take a couple of months above the 200 dma so, until we cross back over those lines – this market will still have a tendency to trend lower well into Q1 of 2019.

And it's not just the NYSE, the Russell has already crossed and the Nasdaq will cross early next week and the S&P will cross within two weeks and the Dow MIGHT avoid a death cross, but only if it gets back over 25,000 and stays there.  This morning, the /YM Futures are at 24,900 with a 160-point gain on the Dow overnight so it could possibly happen and the best bullish Futures bet at the moment is going to be going long on the Russell (/RTY) above the 1,500 line which will be confirmed by Nasdaq (/NQ) 6,750 and S&P (/ES) 2,700 so as long as all 4 of the indexes are over those lines, you can stay bullish on /RTY.

The big, positive spin for the World markets this morning is that Trump and Xi are scheduled to meet over the weekend at the G20 conference so, hopefully, there will be a resolution of some sort.  Also to be resolved is Brexit, which seems to be staggering forward without actually collapsing…
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Tariffic Tuesday, Part 12 – Trump Ramps Up Tariff Talk Ahead of G20 Meeting

Image result for trump robin hoodDoes he do it on purpose?  

As much as the President likes to complain about the market not performing well, more often than not he's the primary cause of poor performance.  Yesterday, for example, we were having a lovely bounce (albeit on very low volume) but then Trump suddenly decides to say he's moving ahead and boosting tariffs on $200Bn worth of Chinese goods from the current 10% to 25% – which is up 150% from where they are and will sock American Consumers with an additional $30Bn in tax, crippling disposable income and boosting inflation.  But it's $30Bn more in tax breaks he can give to his friends so – winning!  

In an interview with The Wall Street Journal, Mr. Trump suggested that if negotiations don’t produce a favorable outcome for the U.S., he would also put tariffs on the rest of Chinese imports that are currently not subject to duties.

"The rest" is another $267Bn with of goods and 25% of that would be yet another $66Bn picked from the pockets of American Shoppers.  So we're talking about $96Bn worth of additional taxes aimed at the people who can afford it the least and the chances of Trump not doing that but instead making a deal with Xi this weekend that widens his already out-of-control budget deficit by $96Bn are slim to none – just as I've warned about from the start.  These tariffs have nothing to do with China and everything to do with making middle Americans (the suckers who voted for him) pay for his tax cuts while wrapping it in a flag of patriotic protectionism that hasn't bought a single job back to our shores in two years.

Trump has done NOTHING for jobs and, in fact, Trump's first 22 months in office created just 4.1M jobs while Obama's last 22 months in office created 4.8M jobs – Trump inherited a triple and turned it into a double and, at this pace, it will dribble out into a weak single. 


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