Turnaround Tuesday – Market Bounces on Stimulus Hopes, Xi’s Visit to Wuhan

China's President Xi went to Wuhan this morning.

The Communist Party leader arrived by plane in Hubei's capital for an "inspection of the epidemic prevention and control work" in the region, according to the official Xinhua news agency.  China's most powerful leader since Mao Zedong is usually a daily fixture in state media but has stayed out of the spotlight for much of the crisis and assigned Premier Li Keqiang to oversee the response to the epidemic – a move copied by Trump, who put VP Pence in charge of US efforts.

China reported only 19 new cases on Tuesday, the lowest figure since it started publishing data on January 21 but there are those calling that data into question amid allegations there is a cover-up aimed at getting Chinese workers, especially farmers, back to work at the beginning of the crucial planting season – regardless of how safe it actually is. 

Image result for trump golf virusPresident Trump stayed safe on the golf course yesterday but made it back in the evening to announce he will seek further tax cuts (duh!) and "very substantial relief" for his friends industries that have gained his favor been hit by the virus.  As usual with Trump, rather than actually having a plan to announce – he was only promoting his next show with a teaser: "I will be here tomorrow afternoon to let you know about some of the economic steps, which will be major.” said our cartoon President. 

Trump's press conference to announce a press conference tanked the Futures but then President Xi helped boost the markets later in the evening and, at the moment (8am) the Dow Futures are up 1,000 points, which is 4%, which is exactly what a weak bounce should be after a 20% drop according to our 5% Rule™ so let's not get too excited just yet…

We adjusted our hedges (as planned) but, otherwise, stayed pretty much on the sidelines in yesterday's carnage and will likely do the same today as 

 

 

IN PROGRESS

 

Monday Market Meltdown – Futures Open Limit Down as Virus Fears Mount, Oil Collapses

Good golly, what a mess!

The Futures get halted when they go "Limit Down" which is a 5% drop before the market opens.  That means there were so many people dumping positions that they pretty much ran out of buyers – something I have been warning could be the consequences of a thinly-traded rally for more than a year now.  

Not that being right helped too much, our current portfolios were adjusted more bullish into the weekend in expectations of a bounce (and expectations of more stimulus) and we're getting the very opposite of that.  Fortunately though, we did cash out of main portfolios back in September, when we had substantial amounts of cash tied up and, as I said at the time:

Hedging a $1.7M LTP would be very expensive and what if next time we didn't time the turn in the STP and instead blew the turn and lost money there as well as the LTP.  Then we'd be back to $2M and needing to make 30% to get back to $2.6M and what if it's hard to make money next year or what if we have another crash and the market is down 40% – it's just too much to risk vs. putting $2.6M safely on the sidelines and simply looking for new opportunities.

 

In November, we started putting some virtual money back to work but just $500,000 in our Long-Term Portfolio and $100,000 in our other Member Portfolios, keeping mainly in CASH!!! – just in case the market finally crashed but this move lower is surprising us and we'll have to wait PATIENTLY to see where things settle out but we can immediately add more hedges in our Short-Term Portfolio (STP), who's primary function is to protect the LTP in just these kinds of cases.  

 

IN PROGRESS

 

 

Friday Failure as S&P 3,000 – What Next?

Well, you can't say we didn't see this coming.

On Feb 27th, I said to our Members in our Live Chat Room:

I think we'll languish around 2,850 (100 points lower) on /ES for a couple of weeks and things will either get worse or better on the global front but that's mid-March and then we're about to get Q1 earnings, which will suck so, if the virus isn't significantly better in 2 weeks, we could be heading into a real catastrophe.

We're right on track and no, it's not me that's great at making these calls, it's or Fabulous 5% Rule™, which also told us to ignore the bounce off the -7.5% line (which was a 10% drop with an overshoot) and the quick recovery to the 5% line meant we ignored the additional 2.5% spike down and watched for 2% bounces off the 3,000 line which would take us to 3,060 (weak) and 3,120 (strong) and then the rule is that we don't believe in the strong bounce unless we close over it and then hold it for 2 full sessions without going under.  

THAT is what keeps us out of trouble.  So we haven't added many new posiitons in this downturn but, yesterday, we did add to some of the positions we already have, taking advantage of cheap rolls and cheap double-downs on value plays we believe have gotten too cheap.  Not that they can't get cheaper – of course – but if we already doubled down we'll be happy to roll lower and if we only rolled lower, we'll be happy to doubled down – but not until we're a good 10% lower – which we don't think is very likely unless the virus gets much worse.  

Fortunately, our portfolios are full of fantastic value positions and, for example, our Money Talk Portfolio, is only down 4% after being up as much as 10% for the year but the positions are very solid.  We can't touch them unless we're on the show (next is April), so they are positions that are meant to be bullet-proof and this is a good test but also a great time for new Members to follow along so let's do a quick review.

  • Sunpower (SPWR)


continue reading

$5,000 Thursday – Down We Go Again!

Wheeee, this is fun! 

We talked about how manipulated the market is yesterday morning and, in our Live Trading Webinar in the afternoon (1-3pm Wednesdays) we decided on the following Futures positions:

Shorting /ES at 3,100 and long /CL at $46.90.

3,100 is, of course, the strong bounce line on the S&P 500 (/ES) Futures that we drew for you in our Morning Report and we did go a bit over but we decided to stick with it because yesterday's rapid move higher was just silly as nothing has really changed.  On the other hand, we went long on Oil (/CL) Futures because something was about to change as we expected OPEC to announce production cuts.  And why did we think that?  BECAUSE WE KNOW HOW TO READ THE NEWS!  Trading is not that hard folks – we just read, think and trade…

As you can see from our /ES position, we're already up $5,720 on 2 contracts and we'll put a stop at $5,000 to lock in those gains or, once we fall below 3,050 on /ES – that becomes the stop with a goal of 3,020.  That's over $30,000 in Futures gains since the market began turning down, making a lovely bonus hedge to our portfolios.  That's why we keep shorting the market – it's not so much we are uber-bearish – it's just that we have plenty of long positions so, to BALANCE the portfolio, we prefer to look for things that profit when the market turns down.  OIl (/CL) is an exception as it's a news-driven trade. 

 Oil is surprisingly still at $46.90, I suppose because virus fears are back this morning (yes, it's getting worse but I'm bored talking about it now that everyone else is) DESPITE the FACT that OPEC just annnounced a MASSIVE 1.5Mb/d production cut, so there's still time to join us in the most obvious bet of the week!

"We now convene at a time when the outbreak of COVID-19 has had a **pronounced** adverse impact on economic and oil demand forecasts in 2020, particularly in the first and second quarters" – OPEC President Manuel Fernandez


continue reading

Whipsaw Wednesday – Wild Market Swings Continue

Notice we're not playing the Futures this week.

Last week, we were racking up $5,000 gains almost daily with our Futures calls but this week the market is just as wild but nowhere near as predictable due to Fed interference against the still MASSIVE UNCERTAINTY surrounding the virus.  As I often say to our Members: 

"We only like to play when we feel there's an 80% chance we will win – that way, we're only wrong about half the time and good money-management techniques can take care of the rest."  

So far, the S&P and the other indexes are simply consolidating under the Strong Bounce Lines (see yesterday morning's PSW Report for official levels) and, if they make a move over, it will be good proof of a bottom but, if they make a move back below last week's lows then, in retrospect, it will be very obvious that they were only consolidating for another 10% move down.  

Is the Fed's 0.5% rate cut enough to save us?  Well it wasn't when they had emergency rate cuts in August of 2007 (Dow 13,000 to 14,000) or in January of 2008 (Dow 12,000 to 13,000) or in October of 2008 + $800Bn TARP (Dow 8,000 to 9,000) – after which we fell from 9,000 back to 6,666 so forgive me if I don't get too excited about a 1,000-point, stimulus-driven bounce this week…

Another thing I discussed with our Members yesterday was how the Dow Jones has been manipulated since 2008 when Rupert Murdoch took over the company and made a series of changes that drastically boosted the index.  Bearing in mind that each Dow Component is price-weighted, not market-cap weighted, and adds 8.5 Dow points per $1 in share price – these are the substitutions that have been made under Murdoch:

  • AAPL (now $295) replaced T (now $37) 
  • CSCO ($41) replaced C ($66) 
  • TRV ($127) replaced GM ($31) 
  • UNH ($268) replaced KHC ($26
  • GS ($206) replaced AA ($13) 
  • NKE ($93) replaced BAC ($28)
  • V $190 replaced HPQ ($20)
  • WBA ($47) replaced GE ($11)

That's net +$1,035 in substitutions and,
continue reading

Super Tuesday – G7 Fails to Guarantee Free Money

What the Hell were people expecting?

The markets rallied insanely yesterday on expectations of a 50-point rate cut along with coordinated cuts around the World and tax cuts and Santa Clause, etc., etc. – total idiocy.  This morning the futures are turning down already as the G7 "Emergency Meeting" has not actually come up with any actual emergency measures – it's more like one of those "hopes and prayers" messages after a school shooting – good luck guys!  

 Of course the G7 doesn't have the power to do much – only to suggest and, as Trump pointed out, the Australian Central Bank lowered their rates by another 0.5% but keep in mind that Australia was on fire a few weeks ago and NOW they have the virus AND their primary trading partners are China and Japan - that's a little worse off than we are.

Image result for mnuchin g7 cartoonKeep in mind the lunacy that is going on here – we are having emergency G7 meetings led by Steve Mnuchin (a Goldman Sachs Bankster) who is telling the Global Finance Leaders that they must lower rates to prop up the markets BECAUSE THEY ARE 8% below their all-time record highs.  Propping up the markets is very expensive and it adds to government debt and it only helps the Top 1%, who own 90% of the stocks – what is the real agenda here?

Remember that Steve Mnuchin's primary experience after leaving Goldman Sachs in 2002 was overseeing the complete collapse of Sears as a Board Member from 2005 until 2016 when Trump decided he was the perfect guy to supervise the collapse of the United States of America as well…

Going more into debt can't be the answer for every problem – especially when it's "Let's go more into debt by giving more money to rich people."  The money doesn't trickle down – it's been 40 years of this BS and it has NEVER trickled down – it's a ridiculous strategy that used to be called "Voodoo Economics" until the Republicans realized they could win elections and, more importantly, win campaign contributions by making it the cornerstone of their economic platform.


continue reading

Mitigation Monday – Coming to Grips with a Global Pandemic

The Futures are all over the place.  

On Friday, we mitigated much of the damage as rumors spread that the Fed was going to save us but the Federal Reserve can't stop the economy from grinding to a halt as people avoid movies, restaurants, crowded workplaces and even supermarkets that don't have face masks – which is now the hottest selling item in the World (even though they don't really help).

The global death toll jumped from 2,871 Friday afternoon to 3,048 with 89,197 now infected (up 5,000) with 4,335 in South Korea (up 85%), 1,694 in Italy (up 90%), 978 in Iran (up 152%) and now 130 in France, 130 in Germany and 86 in the US.  And we are still NOT testing people.  There simply aren't any kits so we have NO IDEA how many cases there are in the US.

All in all, there are now 9,000 cases outside of China, where the virus is somewhat contained though it is possible the Chinese Government is lying in order to get the people back to work and, frankly, it's a very tough choice the Government has to make since it's planting season and, if they fail to plant crops, then people will starve in the Fall in much greater numbers than they would be likely to die of the virus – so it is better for the people to go back to work and risk getting sick – China just doesn't trust them enough to tell the people the truth of the situation.  

Dale Fisher, a professor at National University of Singapore who specializes in infectious diseases, said the outbreak will continue globally unless more countries take a stricter approach to finding all the individuals who had contact with infected people. In places with a large number of cases, they may have to take extreme measures and quarantine large areas, he added.

“If you do nothing you’ll get another Wuhan,” said Dr. Fisher, who also heads the World Health Organization’s global outbreak alert and response network.

You're not hearning about this because your own leaders don't trust you with the truth either.  The message from the Trump Administration is that this is "no big deal" and you should get back into the market because the Fed will
continue reading

Friday Flip Flop – Warsh Calls for Rate Cuts – Market Continues to Panic

This is too funny.

They can't get anyone on the actual Fed to call for a rate cut so they bring back Ex-Fed Governor Kevin Warsh to call for an "IMMEDIATE GLOBAL RATE CUT" and, if that isn't enough, CNBC interviews him and Joe says "You know there are rumors you are going to be the next Fed Chairman."  We've been through this dance before – no matter how much Donald Trump wants to put "his guy" on the Fed to throw money (borrowed) at every problem (like he did with his casinos before they went bankrupt) – he doesn't have the right to force Powell to resign.  It's one of the very few checks that remain on Trumps power – now that the GOP Senate has become his Yes Man.

Warsh is yet another Republican talking head from the (and you can't make this up) Hoover Institution, where most of the Fellows seem Hell-bent on repeating the mistakes that led to the Great Depression – as if Hoover is some kind of Economic hero to be revered, rather than reviled.  This is the last bastion of Trickle-Down Economics in Americ or, as Bush the First liked to call it "Voo-Doo Economics" or, as Trump likes to call it "Loans from Dad".  

Since 2016, Warsh has been one of Trump's economic advisers – and look where it's gotten us! 

Where it's gotten Warsh, however, is married to Jane Lauder, granddaughter of Estee Lauder, who is worth $2Bn – so they do know a lot about trickling on poor people, at least…

“This thing’s moving pretty darn quickly,” Warsh said. “At the very least, a statement on Sunday night before Asian markets open would buy them a little time and let us all learn a little bit more about where things are.”

Image result for federal reserve ammunition cartoonWarsh agrees with my take that the Fed doesn’t have a lot of ammunition to help markets and the economy, but he thinks that means it needs to act quickly in a coordinated fashion with other Central Banksters like the European Central Bank, the Bank of England, the People’s Bank of China and the Bank of Japan
continue reading

Faltering Thursday – Trump Fails to Reassure the Markets

Down we go again.

Yesterday's press conference with Trump and the CDC did NOT calm the markets down as we gained 600 more global cases yesterday and 400 more cases in China, where things are "under control".  “We’re testing everybody that we need to test,” Trump said yesterday, “and we’re finding very little problem, very little problem.”  Nonetheless, right after he put Pence in line to take the blame when this thing goes bad, the CDC announced the first case in Califonia not linked to foreign travel – the guy just caught the virus in the wild in California!

As you can see from the chart above, the Nasdaq (/NQ) Futures shorts we added during yesterday's Live Member Chat are doing well as that index drops another 150 points, giving us gains of over $2,500 per contract (you're welcome) and we are having a FANTASTIC week shorting the indexes but tight stops here (8,750) to lock in those gains.  

We're benchmarking a bottom this morning at 26,500 on the Dow (/YM), 3,065 on the S&P (/ES), 8,700 on the Nasdaq (/NQ) and 1,525 on the Russell (/RTY

 

IN PROGRESS 

 

 

Will We Hold It Wednesday – Must Hold Line Edition

Wheeeee, this is fun!

Suddenly we're making a lot more money on the way down than we did on the way up on our Futures trades and that's not a good sign for the market.  We played the Dow (/YM) Futures and the Naturar Gas Futures (/NG) for a bounce in the morning and only bounced from 28,000 to 28,100 (up $500 per contract) before we stopped out at the opening bell and we quickly got our bearish crosses which allowed us to play the Dow (/YM) down from 28,000 to 27,000 for gains of $5,000 per contract at 27,000 – now that's a nice hedge!

Sadly, we're still in the index shorts as we haven't had a reason to  stop out as the weak bounce line on the Dow, for example, after a 2,000-point drop in two days, is 27,400 and we haven't gotten over that yet.  More importantly, as noted on our Big Chart, the Dow has failed it's 200-day moving average at 27,223 and, below that, we may be on the way to the -10% line at 24,750, which would be nice for our /YM shorts (another $20,000 per contract) but terrible for the markets and the US Economy – so we're not exactly hoping to make that much money.  

 

That's what the Must Hold lines are on our big chart, they signal the beginning of a bear market and we really need to stay on top of them or things are likely to get much worse indeed as we only capitulated and raised our Must Hold lines earlier this year.  Before that, we had been predicting a fall back to 2,850 on the S&P anyway so, on the whole, "everything is proceeding as I have foreseen".  

As in yesterday morning's PSW Report (except lower), we'll stop out of our shorts at 27,250 and, like yesterday, we can reshort if the indexes cross back under their low supports at 27,000 on the Dow (/YM), 3,100 on the S&P 500 (/ES), 8,800 on the Nasdaq (/NQ) and 1,565 on the Russell (/RTY).  We certainly need to see the Dow back over it's 200 dma and the Nasdaq has to clear 9,000 before I'd…
continue reading