Thousand Dollar Thursday – Our Webinar Trades Make Quick Profits

Do you want $1,000? 

How about $1,237.50?  That's what we made during our Live Trading Webinar yesterday in the S&P Futures alone.  And that was at 2,925 – this morning, our two remaining Futures contracts stopped out at 2,915 after testing 2,912 and that was good for an additional $500 per contract gain – another $1,000 to start your day!  

Futures trading is not hard and it is not scary or complicated – that's one of the things we try to teach our Members in our weekly live trading Webinars.  In fact, in yesterday morning's PSW Report, we made an entire case for shorting the S&P Futures (/ES) at 2,640 so all we did at the 1pm Webinar was follow our own advice.  A 15-point drop on the /ES Futures is good for $750 for each contract and each contract requires $6,600 in margin and changes $50 for each point the S&P moves.  

So, the way we like to enter a trade in the Futures is to find a good line of support or resistance – in this case S&P 2,640 – and then we use that for a stop, say at 2,645, so we're limiting our loss to $250 but, ideally, we prefer to catch a move on the way under the line – so momentum is on our side and then we keep very tight stops over the line. 

Usually we win or lose $250 but, once in a while, we win a lot more on a nice move in our favor.  If we can keep our small wins and losses about even then those big wins become our profits.  Our other calls from yesterday's morning Report were:

We're still shorting the S&P (/ES) at 2,940 with tight stops above the line and the Dow (/YM) at 26,900 – also with tight stops above and we're shorting Oil (/CL) Futures at $75.50 – but very dangerous into inventories at 10:30 and, other than that – it's another "watch and wait" sort of day while we wait to see if the S&P can break over 2,940 and make a serious run at 3,000


continue reading

Which Way Wednesday – S&P 2,940 or Bust (again)!

Will the 2nd time be a charm?

The S&P 500 will make another attempt at getting over the 2,940 line, which is 33.6% higher than our old "Must Hold" line at 2,200.  33.6% is not particularly significant, the real significant line is the 20% line at 2,640 and we haven't seen that since April and now we're over the 30% line (2,860) and it's probably time to move the goal posts as those lines were for the end of 2017 and the tax cuts have been a game-changer for the S&P 500 and anyone else who measures their earnings in Billions.  

Companies aren't making more money – they are just paying less taxes but same difference to investors – as long as more goes to the bottom line.  I'm not saying that 2,860 is likely to hold in the long run but, taking into account buybacks and repatriation of capital (ie tax avoidance) and lower tax rates – 2,640 is a reasonably good "Must Hold" level for the S&P going forward as the Must Hold Line represents a bearish break if it fails and 20% above (3,168) and 20% below (2,112) is the expected range the market should stay in.

Getting close to 3,000, it's hard to imagine 2,112 ever happening but I suppose we said that in 2000 and again in 2007, when the S&P was up at 1,550 and both times it fell 50% within the next two years.  This time is different though – we're 50% higher now so, even if we fall 50%, we still end up back at the previous highs – that's progress! 

Image result for s&p 500 pe ratio 2019

That's right, we're getting very close to that magical 3,000 level which, appropriately, would price the S&P 500 at 30 times it's trailing earnings but, if we assume forward earnings will go up and up forever and nothing will ever, ever, ever go wrong – then it's only 27 times earnings and that seems like a bargain these days, right?

Image result for stock market bubble chartAs you can see from the chart above, 30 on the CAPE index has popped every bubble since 1903 except
continue reading

Tuesday – Trouble at 1,700 for the Russell

What's wrong with small caps?

All the other indexes seemed pretty happy yesterday but the Russell 2000 fell 1.5% and are down even more this morning in a non-stop UGLY day of trading where almost every candle formed on the hourly chart was a down one (and the up ones were pathetic).  Volume was also almost all red and much stronger than Friday's up volume, which was completely reversed by noon.  

So far, this is just a natural rejection of the Russell's 10% run for the year, which began at the 1,550 line on Jan 2nd so 10% from there is 1,705 and that's why we have been shorting the Russell below the 1,700 line, looking for that rejection.  According to our 5% Rule and rounding off to the more significant 1,700 mark, a 150-point run expects a 30-point (20% of the run) rejection so 1,670 should be a weak retrace and that's all this is so far.  Another 30 points would be a strong retract (1,640) and still not really bearish unless we fail it.  As noted in Friday morning's PSW Report:

Notice on our Big Chart that the Russell has failed its 50-day moving average at 1,700.  There's nothing bullish about the market until it takes that back and watch out below if any of the others fail to confirm a new downtrend but, as I said, not today – today we have to make the quarter look pretty so we can bring some fresh retail suckers in to hold the bags next quarter

Remember, I can only tell you what is likely to happen and how to make money trading it.  A 30-point drop in the Russell is good for gains of $1,500 per contract and, since we expect a bounce off the weak retrace at 1,670 – we already know where we're likely to stop out.  Now that we have that range, we look at the 40-point drop from 1,710 (because we can't round off in the short-term picture) to 1,670 (but we do use the goal line – even if it doesn't actually hit) and now we look for a weak bounce – which is 20% of the 40-point drop – to 1,678 and a strong bounce to 1,686, which we have to clear before looking bullish…
continue reading

Faltering Friday – Tesla Tumbles, Takes Nasdaq With It

Image result for emperor musk has no clothesWell, that's a big "I told you so!"

Way back in our August 8th PSW Report (and in our Live Member Chat Room the day before) our reaction to the Elon Musk tweet that Tesla (TLSA) was considering going private at $420 with "funding secured" was to call BS and short the stock.  The title of that particular report was:  "Wednesday’s Whopper – Musk Claims Some Idiot Offered Him $420/share for Tesla!" in which I said:

$420 per share?!?

That's $72Bn for a car company that had to run production lines in tents to push out 5,000 cars in the last week of July and, aside from the high level of defects reported in the cars that have been delivered, word is that it's taking weeks to get even basic repairs done and MONTHS for replacement body parts to arrive.  Not only that but the Model 3s that are being delivered are averaging $64,000, not $35,000 as promised and TSLA is going to run out of $7,500 EV credits this year – as well as cash

The company lost $1.9Bn in 2017 on $11.7Bn in sales and, in Q1 and Q2 of 2018, they have lost $1.4Bn on $7.4Bn in sales so 58% more sales 47% more losses – I guess that COULD be called improvement, right?  Liabilities have "improved" from $21.9Bn to $22.6Bn but what's another $700M between friends, right?  TSLA also "needs" to build a $2Bn factory in China and maybe put a roof on their new production lines in Freemont so that's what, about $100Bn to take over TSLA for the joy of losing another $1.5Bn for the rest of 2018?


continue reading

GDPhursday – 4.2% Now, Below 3% From Now On

This is not pretty:

While this morning's GDP Report may show that we grew at a 4.2% pace in Q2, the Federal Reserve thinks that's so unusual that our annual GDP gain will still only be 3.1% for 2018 and then they see that DROPPING to 2.5% in 2019, 2% in 2020 and 1.8% in 2021, giving Trump and his policies the worst 4 years of GDP growth since Bush's 2nd term or Hoover's only term.

Image result for trickle down trumpWhat's even worse is that Trump's budget projections expect 4% GDP Growth and if we fall 2% shy that's $400Bn less growth than anticipated and Trillions of additional Dollars will compile into our debt if the Government fails to hit their collection targets – which we all knew was based on a ridiculous trickle-down fantasy in the first place – we just didn't expect it to all fall apart so soon.  

The Fed is calling this the bottom in Unemployment as well and does not project more than the usual amount of jobs to be created, despite the massive stimulus that's been given to the Top 1% and their Corporations.  Again, any idiot could have predicted that but 63M people believed the BS enough to vote for Donald Trump or, more accurately, 62,400,000 believed the BS and the other 600,000 were happly to screw them over in order to get their tax cuts. 

The Fed, for its part, still sees the need to "normalize" interest rates and project a 3.25% rate by the end of next year, which would be 4 more 0.25% hikes over the next 8 meetings but that's going to be miles behind the bond market, which is already hitting 3.05% on the 10-year notes.  Even more alarming, the 10-year note began this month at 2.85% so up 0.2% in a month is a 7% increase in less than 30 days.  While the Fed may be content to keep lending at unrealistically low rates, real-world lenders are not and borrowing costs are increasing – no matter where the Fed sets their "benchmark."  

Rising interest rates traditionally have a negative impact on Business Profits, Home Sales and Consumer Spending so, as long as the stocks you are holding
continue reading

Which Way Wednesday – Fed Edition

It's rate hike time!

We have a Federal Reserve Rate Decision at 2pm and a hike is very widely expected but whatever Powell says in the subsequent conference afterwards is likely to affect the market going forward.  Even more importantly, the Fed will release their first economic estimates for 2021 and we'll get to see if they think the economy is going to grow fast enough to justify these runaway market prices.  Here's a preview from Market Watch.

Keep in mind that Trump's economic projection hinge on having better than 3% increases in GDP while 2% barely keeps up with inflation and, according to even the Fed's conservative inflation projections – loses ground to it.  As noted in yesterday's PSW Report, the Government had to borrow $156Bn in September just to keep the lights on and every 1% increase in interest rates costs us $200Bn in additional interest payments alone.  If the economy is stagnant and rates are rising – what are investors so excited about?

IN PROGRESS

 

 

Toppy Tuesday – Markets Bounce Back Ahead of the Fed

And we're back!

The Dow is up 75 points pre-market, back at 26,700 and the Nasdaq is testing the 7,600 line, which will certainly be bullish if they break over it but, until then, I like /NQ as a short with tight stops above.  We also re-shorted Oil (/CL) Futures at $72.50 this morning – also with tight stops above as it sets a nice, positive risk/reward ratio to do so.  We made $500 shorting /CL yesterday on an 0.50 drop and about the same on Gasoline (/RB) as it fell so no reason not to give them another chance to make us money, right?

Trade Wars are not good for oil demand and 74 out of 98 S&P Companies that have issued Q3 guidance so far have isssued negative guidance and that's already the worst rate since Q1 of 2016 when the S&P fell 15% from 2,100 to 1,800 as earnings rolled over.  It's still early in the cycle but negatives outpacing positives 3:1 is certainly something we should be taking note of.  Or, we can add it to the ever-growing list of negatives that investors are ignoring in this rally… 

Percentage of Companies Issuing Negative EPS Guidance

Keep in mind that figure is WITH all the buybacks and WITH all the M&A activity and WITH the still-low interest rates and WITH what is still $60Bn/month in QE, though that may change on Wednesday if the Fed begins to pull back – as it has said it was planning to do.  

Related imageThough our Fed has begun to somewhat unwind their QE program, the rest of the World's QE is only just now hitting its peak, so of course the markets are at record highs when there are record amounts of money chasing equities but this (2018) should mark the end of the Global Liquidity Boom and now comes the reduction – a slow and painful process that will be with us for years as the Central Banksters race to drain the monetary swamp before all those Dollars lying around begin to turn inflationary.

This is the greater market picture you need to be concerned with – it's the macro that will be driving the market
continue reading

Monday Market Movement – OPEC Blasts Oil Higher, China Walks from Trade Talks

Move along folks, nothing to see here.

Despite a run of bad news over the weekend, so far, the market indexes seem unphased by negative news reports.  Of course it is the last week of the quarter and windows need to be dressed so we'll see what happens when October rolls in, along with Q3 earnings, when we may begin to see some companies begin to choke on higher wages and trade concerns.  As noted in the Wall Street Journal, Industrial and Material stocks are in their own private bear market yet no one is taking it seriously at all.

There’s a number of money managers who’ve been hesitant to be involved with the [companies] that are going to be potentially affected by the tariffs, whether they’ll be able to export fewer goods or be buying less from China,” said Mark Grant, managing director and chief global strategist at B. Riley FBR Inc.

As I noted last week, China's Shanghai Composite is down 20% for the year and would likely have been down more today as China withdrew from trade negotiations over the weekend but that market is closed today for a holiday.  THESE ARE THE SAME KIND OF THINGS PEOPLE IGNORED IN 2007/8!

Image result for trump china trade warAnalysts caution that while investors have been pricing the risk of a trade war into shares of manufacturers, mining firms, home builders and others, they mostly have ignored the glaring risks associated with major tech companies, such as potential punitive measures that could affect Apple’s manufacturing in China or cost increases that could hurt Amazon’s e-commerce sales. That puts the S&P 500’s narrow leadership at risk of a sharp pullback if trade tensions reach a boiling point, similar to the swift correction that stocks suffered in February on worries about a potential pickup in inflation.  

Last night, China cancelled this week's trade negotiations with the Trump Administration and no further talks are scheduled as the US insisted on moving forward with $200Bn in additional tariffs that take effect today.  That makes it very doubtful there will be any resolution before the election as China has no reason not to wait and see if they will have more a more reasonable…
continue reading

PhilStockWorld September Portfolio Review (Members Only)

Image result for one million dollars animated gif$1,140,516!  

It's been two months since we did our July Portfolio Review as I was on a cruise in August and skipped that review and, in fact, we made very few changes to our portfolios over the summer but that didn't stop them from chugging along to fantastic gains.  Most of the changes we made were to get more bullish as, back in June, we cashed out a lot of our winning positions in an attempt to get more defensive into the summer.  

As we started the year with $500,000 in the Long-Term Portfolio and $100,000 in the Short-Term Portfolio to protect it with, we're getting very close to an overall double as we're already up $540,516 (90%) but our moves this month have once again led towards taking money off the table and adding more hedges and you may think that's being too defensive in this runaway bull market but it's the same thing we did in July, when we pressed our hedges and cashed in winners as well.

The thing about cashing in winners is, when you do it right, you also improve your losing positions and then, when they turn around, you can really turbo-charge your returns.  We benefitted this summer from a rising tide that lifted most ships over the summer – even the ones we had left on the bottom.  The S&P, for its part, is up just under 10% since the June dip as we keep waiting for the correction that never comes.  Still, that doesn't stop us from adding hedges in the Short-Term Portfolio to lock in these ill-gotten gains in the LTP:

Short-Term Portfolio Review (STP):  We added the AMZN shorts, but that's the only change since our 8/27 review, when we were at $225,802 and now we're at $232,125 which is up 132.1% for the year and up $6,323 for the month (6.3%) as our TSLA and AMZN shorts more than offset the losses from our hedges (and we cashed out AAPL too).     

Now we have $173,350 in CASH!!! and, as calculated last month, about $200,000 in protection for our LTP – which we only pray is going to…
continue reading

TGIF – Quad Witching Today, Window Dressing Next Week

China turned around this morning.  

It's funny because everyone thinks they are "winning" the trade war.  The Chinese Government is planning to cut tariffs on imports to their favored trading partners, which we assume will no longer include the US.  This will disadvantage US exporters to China and encourage Chinese firms and consumers to buy goods and services from other trading partners but it's also a nice tax break so it's boosting the Shanghai this morning, up 2.5% for the day at the close.  

Other than that, the news has been very quiet and we're expecting to drift along into the close today as it's a Quad Witching Day in which quarterly options and futures contracts expire (there are 4 kinds), which is often punchuated by high-volume (what is that?) moves and yesterday was already a busy day on SPY as we punched in a new high at 2,945 and we would have liked to short 2,950 but we'll take a cross below 2,940 on /ES to short that with tight stops:

Date Open High Low Close* Adj Close** Volume
Sep 20, 2018 292.64 293.94 291.24 293.58 293.58 100,288,900


continue reading