Monday Market Movement – NAFTA “Fixed”? Of Course, that calls for a RECORD HIGH!

Image result for trump nafta cartoonAnother record high!

We're finishing August off with a bang as ANY news is good news these days, even making progress on keeping NAFTA, which Trump promised to throw out and was enacted almost 25 years ago (Jan, 1994) so the only reason there's an "accomplishment" to fixing it is because Trump broke it in the first place.  Of course the Administration will say they won big concessions but so will the Mexican Administration and, so far, Canada isn't even playing with Trump – so it's not really "fixed" at all.

It doesn't matter though as the Dow (/YM) is up 140 points (25,927) and the Nasdaq (/NQ) is up 35 points (7,530) in the Futures along with 2,887 on the S&P 500 (/ES) and 1,730 on the Russell (/TF), which also well above the June high of 1,708, depsite the weakening Dollar and rising oil prices ($69), which are considered bad for small-cap stocks.  

Word of progress on NAFTA lifted Asia's stocks as it's seen as more likely the US will begin to negotiate with Japan and China and China's Central Bank took steps over the weekend to strengthen the Yuan, sending their market up 2% overnight – another reason our Futures look so good at the moment.  That's despite the fact that China's Industrial Profits continued to cool off, down to $75Bn in May from $93Bn in June.  There's also some alarming internals as Producers and Refiners of raw materials like oil companies and steel mills have accounted for roughly 2/3 of the gains this year. Smaller firms are facing much tougher business conditions that are squeezing profit margins.  

Despite this morning's 2.5% rally, China's Shanghai Composite still has a long way to go before recovering, after falling 25% from 492 to 379 since topping out in January.  It will take 5% just to make a weak bounce off that so 390 will be the line to watch and then 410 would be a real recovery at the strong bounce line.  

For the purposes of our 5% Rule™, it's a 100-point rejection (20%) from 500 to 400 and a 20% overshoot to 380 which…
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Trade War Friday – US China Talks Collapse With No Resolution

The WSJ says: "U.S.-China Trade Talks End With No Sign of Progress"

As we predicted, trade talks between the U.S. and China failed to produce any visible sign of progress, reducing the prospects of a deal soon, people closely tracking the talks said.  The statement was significant for what it didn’t say as well, people said after the talks. There was no discussion of follow-up talks or any accomplishments.

For now, the U.S. continues to turn to tariffs to pressure China. As negotiations wrapped up on Thursday, the U.S. put in place $16 billion in tariffs on Chinese goods, raising the total to $50 billion. The Chinese have matched them dollar for dollar.  Public hearings continued on U.S. plans to hit another $200 billion in Chinese imports with tariffs as high as 25%, which would place levies on about half of Chinese imports. If the U.S. continues on the same schedule as in the past, those tariffs could start to take effect in September.

As I explained in yesterday morning's report, Trump has no interest in ending the Trade War with China as these "tariffs" are nothing more than a 25% tax on consumer goods purchased by the average American which fund tax cuts for the above-average American, who are better than you because they have more money – so don't complain!  

President Trump is complaining that Twitter, Facebook and others are cracking down on Russian Hackers, White Nationalists, Hate Mongers and Bots which spread Fake News in Social Media (often from Russian Troll Farms).  It may be difficult for Republican Congresspeople to get elected without all the fake news and fake supporters and, of course, it's a fantastic distraction as the real news flow is turning towards articles of impeachment as more and more of Trump's inner circle is convicted or "flips" on him – something else he's been complaining about.

Obviously, people who are not guilty do not complain of their associates "flipping" on them and they don't decry plea-bargain agreements and they don't screem for the Attorney General to halt investigations – especially when they are effectively uncovering many, many, MANY crimes.  No, this is what guilty people do – especially when they are the heads
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Trade War Thursday – US and China Sitting Down Gives Markets Hope

Image result for trump china trade war"U.S. Seizes on Chinese Economic Vulnerability in Trade Talks."

That's the headline in the Wall Street Journal this morning and, frankly, that's NOT the way to enter into a negotiation.  Of course the WSJ has drunken all of Trump's Kool-Aid and they think he's a master negotiator who gets the upper hand by bullying and insulting the people he is dealing with so that, when he makes even the smallest concession, they are thrilled to accept it.  That may work in real estate, where you can burn bridges and move on but this is Geopolitics and those are the same countries you need to do business with tomorrow – you can't just screw everyone over without repercussions.  

As the "failing" NY Times (BOO, fake news, BOO!!!) noted yesterday, Chinese state media has been putting out videos depicting Trump as a bumbling bufoon of little consequence, releasing one video thanking President Trump for helping make China stronger. It shows him in unflattering poses, his brow furrowed and his mouth agape. Its sarcastic title: “Thanks Mr. Trump, you are GREAT!”  “They sense his (TRUMP's) increasing domestic weakness and see a chance to pile pressure on,” said Kerry Brown, a professor of Chinese politics at King’s College London.

Sadly, I had to insert "(TRUMP's)" in that quote because SOME people in this country are so brainwashed that they don't even know Trump is weak or that he's already expended all of his political capital and may be taken out of the oval office in handcuffs in the near future and they actually believe it's possible that Trump is the one negotiating from strength.  It's amazing, but it's true!  

Keep in mind, this is China's state-run TV that's mocking Trump – that is not something they are likely to do if they are about to bend over for him in trade talks this afternoon more tariffs have already been put into effect as of 12:01 this morning!  More likely, today's negotiations will go something like this SNL classic from the Obama years.

Xi Jinping has been the President of China since 2012 and before that was the Governor of Fujan Province (1999) and Zhejang Province (2002) before
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Which Way Wednesday – The View From the Top of the Market

We did it! 

For a minute anyway – that's how long the S&P 500 held its new record high (2,873.23) for before falling steeply back down to the 2,850 mark and, this morning, we're bouncing back to around 2,860 as more Members of Team Trump are convicted of crimes that the President knew nothing about and didn't discuss and doesn't believe and WITCH HUNT!!!  

I think, usually, in a "witch hunt" the prosecutors don't find so many actual witches, do they?  Webster's actually defines "Witch Hunt" as: "The searching out and deliberate harassment of those (such as political opponents) with unpopular views."  That's not quite the same thing as the actual uncovering of a culture of graft and corruption as well as uncovering evidence of collusion indicating possibly treasonous actions against the United States of America carried out by a political candidate and his family in an effort (successful) to steal the Presidency.

This is serious stuff folks!  No one "did the nose" here – these are real crimes that have been committed and, as Michael Cohen testified yesterday "at the direction of Donald Trump."  Yes, Cohen was the assassin but Trump is the mafia don who ordered the hit – and those guys go to prison too!  And it's not just Manafort and Cohen.  Michael Flynn, Rick Gates and George Papadopoulos have all pled guilty and are currently cooperating with prosecutors.  The case is, of course, still building (you have to be beyond 100% certain if you are going to charge the President of the United States with Fraud or Treason) but here's what we know so far:

Image result for trump with russians table

The President claims these 71 connections between himself, his people, Putin and Putin's people are all just fabrications by the Liberal Media and they must have photoshopped all the pictures and fabricated all the evidence and, of course, made up their own facts.  The funny thing is, it's working.  Trump's relentless campaign against The Truth has caused "facts" to be confused with opinions and, like many dicators who destroy the free press or make them the enemy, it allows his followers to ignore all the evidence against…
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2,860 Tuesday – Donald Dumps on the Dollar, Demands Fed Help Boost Markets

3,500 days.

That's how long the bull market has lasted as of today since the BIG CRASH on March 9th, 2009.  If you've forgotten how much fun that was, take a moment to read our 2010 reviews, written while the whole thing was a fresh wound:

?As of tomorrow, this will officially be the longest bull market in US history but it is VITALLY important to Trump and the Republicans that it continue until November, when the GOP can ill-afford to have you pulling levers while seeing red in your portfolios.  There's only so many votes a Russian hacker can change in one day, you know!  

To that end, Trump has now called for a weaker Dollar, publicly complaining about the Fed's tighter monetary policy and saying the Fed should help him do more to boost the economy – never mind that that's not at all what the Fed is supposed to be doing.  So far, Trump has the Atlanta Fed's Bostic in his court and Bostic has now said he will dissent against further rate hikes to prevent the yield curve from inverting.

Trump has also accused China and the EU of manipulating their currency to make it weaker – giving them unfair trade advantages (it makes their exports to the US cheaper – as if the US is the only person they trade with) and all that has combined to take the Dollar down over 1% in the past week, which then reprices the market up 1% (since we buy stocks in Dollars) giving Trump the same "unfair" advantage he accuses Europe of when measuring HIS rally (the one he's been here for the last 585 out of 2,200 points of).  

That's right, Trump got on this S&P 500 ride at 2,275 and the index has gained  26% in two years for an average of 13% a year,
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Monday Market Movement – The Climb Continues

Up and up we go.

No big news over the weekend other than more scandals in Trump Land – but what else is new over there?  As we noted on Friday, the Dow is still miles away from retaking it's February highs so our attention is currently focused on the S&P 500 at the 2,850 line, which is 30% over the Must Hold Line at 2,200 and our February high on the S&P was 2,872.87 on Jan 26th but, sadly, two weeks later (Feb 9th) we were back at 2,532.69, a drop of 340.18 (11.8%) in 10 trading sessions.  

The volume on SPY on the way down was considerably heavier than what we have been getting recently and it's a good idea to do a quick comparison:

Date Open High Low Close* Adj Close** Volume
Aug 17, 2018 283.83 285.56 283.37 285.06 285.06 65,567,700
Aug 16, 2018 283.40

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Friday Fade Out – A Wild Week Comes to a Close

What a week it has been.

For the 3rd time in a month we have tested the highs of the Dow only this time we also tested lows that go back to early July, when we ran up from a test of 24,000.  To some extent, we would call this a bullish test of the 50-day moving average at 25,000 (this is an hourly chart, so those are the hourly moving averages) but we also bounced off that in May and went back to 25,400 before falling back to 24,000.

Needless to say, we're still well-hedged in all 5 of our Member Portfolios with strong cash balances for additional protection.  We did use some of that cash to add positions we thought were a bit too low – but they only replaced some too high positions we cashed out during July's expiration week.

Keep in mind, the market has actually gone NOWHERE since the February high of 26,600 and we're still a good 1,000 points below that so perhaps people who say I'm too bearish during this "amazing" bull market need to get a bit of perspective.  I'm not bearish – we have 50 long positions in our Long-Term Portfolios – I'm just CAUTIOUS because cautious traders live to trade another day, and I like trading! 

Even if it's a rising channel, the market is still in a channel and we've been beating the Dow and the S&P and even the Nasdaw all year long by not going crazy at the top of the channel and not panicking at the bottom of the channel.  Just yesterday, at 3:02 pm, I said to our Members:

/YM 25,600 is a very tempting short after this madness.  If I weren't on a ship, I think I'd play it with tight stops above.  

That trade idea isn't rocket science, we're just thinking that a 600-point run from 25,000 (which is just under the 2.5% line at 25,625) should give us a small retrace.  In fact, using the 25,625 line predicted by our 5% Rule™, we expect a retrace of 125, back to 25,500 (weak) or another 125, down to 25,375.  So all we're doing is
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Thrilling Thursday – Markets Make a Remarkable Comeback While You Sleep

Nice reversal!  

The Dow is actually 100 points higher this morning than it was yesterday after falling 300 points at yesterday's lows.  Kudos to Doug, our Hedge Fund trader at Capital Ideas, who actually said to me yesterday morning that "this whole thing can end the day with the Dow higher" – he was only off by 12 hours…

Our first attempt at going long, from the Morning Report, was a failure as we blasted through all those levels but what fantastic entries we got during the day, as noted in our Live Member Chat Room:

August 15th, 2018 at 10:37 am | (Unlocked) | Permalink

Indexes getting worse, not even going to attempt to go long again.  Gold and silver way off too.  /SI at $14.50, WPM getting killed so good time to sell the 2020 $20 puts for $3+. 

/SI $14.40?  Wow!  /NQ just hit 7,340, that's down 120 for the day, about 1.5% so look for 25-point bounces to 7,365 (weak) and 7,405 (strong) but OUCH!

August 15th, 2018 at 11:18 am | (Unlocked) | Permalink

Huge 10MB build is very, very bad but note /RB had a draw so best bet to play at $1.99 but VERY DANGEROUS TRADE as the market is crazy at the moment and it's still more than two weeks to the holiday and we have a rollover in between

We really want to play /RBV8, long which is Oct at $1.884 at the moment! 

August 15th, 2018 at 11:32 am | (Unlocked) | Permalink 

/KC/Palotay – Ugh, I forgot I have 3 long /KCN9 that are getting clobbered.  Same as /SI though – great chance to get in at a cheap price ($114), if you can stand the pain.

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Turnaround Tuesday – US Markets Run Up in the Futures Just Because

Yet another meaningless Monday erased from history.

After all of yesterday's excitement, the Futures have taken us right back to where we finished on Friday, 2,832 on the S&P 500 and 25,300 on the Dow – as if yesterday never happened.  I'm not sure it will last as Europe is flat, not up and China was down yet again this morning so there's nothing really to get too excited about and 25,300 is a good shorting line on the Dow Futures (/YM) with tight stops above – if you feel like playing.

We felt like playing yesterday as Gasoline (/RB) dipped down to the $2 line and Oil (/CL) fell to $66 and I said to our Members at 1:48 in our Live Chat Room:

Wow, Oil etc went down hard and fast, good chance to get back in for the bounce off $66 on /CL and $1.99 on /RB (tight stops below).  

I know, so complicated, right?  How will you ever learn the jargon?  Well, I would think our results would motivated you as those Gasoline contracts made a quick $1,000 each at $2.02 (and back to $2.05 this morning for another $1,260 per contract since) while Oil Futures (/CL) blasted back over $68 for a $2,000 per contract gain ($67.50 in yesterday's close was $1,500 per contract – also very nice!  

Futures trading is the only kind of day trading I like to do as it's a nice quick way to take advantage of market stupidity without incurring a lot of trading fees and, more importantly, without consuming your attention.  As Fundamental Investors, we KNEW $2 was too low for /RB (that did not stop it from hitting $1.98, of course) and we KNEW $66 was too low for oil with 2 weeks until a holiday weekend so it made good sense to take a chance at those levels and notice we waited until AFTER it bottomed – you don't get rich trying to call exact bottoms or tops in the Futures!

 As I was saying in last week's webinar,…
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Monday Market Movement – Bouncing Back to Highs?

Image result for trade war market highsTrade War – so what?

Despite Friday's sell-off, which was more a result of Turkey's currency issues than the escalating Trade Wars, the markets are still generally shrugging off any and all bad news as they continue to march into uncharted territories.  Nothing has changed today – the Turkish Lira is still collapsing only now it's taking other currencies with it and the Trade War talk is heating up between the US and China, the US and Japan, the US and Russia, the US and Europe, the US and Canada and the US and Mexico and I THINK that's all the countries we're fighting with at the momen- all I know is I'm on a cruise with people from all over the World and they all ask me "What the f*ck is wrong with your President?"

So far, we're only scratching the surface of Trump's actions compared to Trump's threats.  About $700Bn worth of tariffs have been threatened which would tax the American consumers $175Bn at 25% but, so far, "only" $63Bn worth of tariffs have been enacted so 1/10th of the way there and look at all the chaos it's already causing.  Want to stay for rounds 2-10?

Image result for trade war market highsYet traders seem perfectly happy to ignore the multiple elephants in the room as we party like it's 1999 and now we'll see if last week's dip was the start of a correction or yet another pullback we bounce right back from.  Bounce lines to watch are:

  • Dow (/YM) 25,650 to 25,175 is a 475 drop so we'll call it 100-point bounces to 25,275 (weak) and 25,375 (strong)
  • S&P (/ES) 2,860 to 2,820 is a 40-point drop so call them 10-point bounces to 2,830 (weak) and 2,840 (strong)
  • Nasdaq (/NQ) 7,500 to 7,375 is 125 so we get 25-point bounces to 7,400 (weak) and 7,425 (strong)
  • Russell (/RTY) 1,700 to 1,675 is 25 points so 5-point bounces to 1,680 (weak) and 1,685 (strong)

We're certainly going to get our weak bounces and probably strong bounces into the open but what matters is what holds for the day
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