Trouble-Free Tuesday – Markets “Soar and Ignore” but How Long Can it Last?

Image result for big brother trumpGood morning HomeSec!  

That's right, it seems our President has ordered our Big Brothers at Homeland Security to "Compile a comprehensive list of hundreds of thousands of “journalists, editors, correspondents, social media influencers, bloggers etc.”, and collect any “information that could be relevant” about them."  Not only that but they have put the contract out for bid to a private company – what could possibly go wrong?

As part of its “media monitoring,” the DHS seeks to track more than 290,000 global news sources as well as social media in over 100 languages, including Arabic, Chinese and Russian, for instant translation into English. The successful contracting company will have “24/7 access to a password protected, media influencer database, including journalists, editors, correspondents, social media influencers, bloggers etc.” in order to “identify any and all media coverage related to the Department of Homeland Security or a particular event.”

“Any and all media coverage,” as you might imagine, is quite broad and includes “online, print, broadcast, cable, radio, trade and industry publications, local sources, national/international outlets, traditional news sources, and social media.”

Related imageAnd we're already being Trumped for questioning this massive attack on freedom of the press as the DHS has already made the following statement:

If you find yourself skeptical of this proposal of mass state monitoring of the press, consider yourself a bonafide member of the “tinfoil hat wearing, black helicopter conspiracy theorists,” DHS representative Tyler Houlton 


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Monday Market Movement – Dollar Down, Markets Up – What Else is New?

The Dollar is down 0.5% this morning.

Dow Futures (/YM) are up 0.5% to match but the Russell (/RTY), Nasdaq (/NQ) and S&P (/ES) are up less than 0.25% as of 8am and that's not at all impressive.  /NQ is right on the 7,100 line, so an easy short below the mark but Apple (AAPL) is holding their developer's convference this afternoon and may say something bullish – so it's a very dangerous short.  Apple popped over $190 last week, now just $65Bn shy of a $1Tn valuation and 7% more ($13.30) will do the trick and we'll have the World's first Trillion Dollar Company.

If AAPL is doing well, the Nasdaq does well and so does the Dow, where every AAPL point is 8.5 Dow points and so does the S&P, where Apple makes up 4% of the 500 Indexe's total weighting.  

If it were not for Apple's great effect on the market, I'd be enthusiastically shorting the indexes but, as it is, we keep getting stopped out of our short positions as they keep making new highs.  This morning we're taking a whack at shorting the S&P Futures at 2,745 and the Dow Futures at 24,750 but tight stops over those lines as we near the pont of maximum crazy but the Dollar (/DX) should be councy at 93.70 and that will hopefully cause a pullback into the open – but only a small one as we expect it to have trouble getting back over 94.

Trade Wars are bad for the Dollar because the Dollar is an instrument of trade and China, Canada, Mexico and Europe have all threatened to retaliate if Trump doesn't reverse his position by this Thursday-Saturday G7 meeting so you bulls out there are betting on Trump being a great deal-maker, which is his repution but not at all his actual results.

Nonetheless, we've punched back over that 2,728 line on the S&P, which generally puts us back in bullish territory until it fails but I called for CASH!!! in early May, as we briefly popped over the line – as I didn't think it would last and I don't have enough faith in Trump's negotiating skills to think this rally will last either but, if we do manage to stay over the
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Non-Farm Friday – Is America Working?

How many jobs were created in May?

Expectations are about 190,000 but I'm not sure it matters much as we've been in a very tight, China-like range since 2011 – almost never too hot or too cold.  The Republicans often accused the Obama Administration of manipulating the data which means the current administration believes the data can be manipulated and MUST be manipulated to make it "fair" and give them the same advantage Obama had with his fake data.  See how easy that is to justify?

The US ads about 2M citizens per year so we'd better create 200,000 jobs per month or we're simply adding more unemployed people.  According to the Fed's recent Beige Book (see Wednesday's Webinar for discussion), we're actually running low on employees, with sub-4% Unemployment Rates, usually considered "full employment".  At this point and that's putting pressure on wages which will put pressure on Corporate Margins and it also raises demand for the Dollar (to pay the workers) and all that puts pressure on the Fed to raise rates.

Keep in mind, on this chart, earnings aren't going down, they are just accelerating at a slower pace but, in theory, 2.5% is ahead of inflation, which means it is, in fact, eating into Corporate Margins and the more jobs that are created, the more pressure it puts on employers to pay up if they want to get top talent.  We're only in the very early stages of worker empowerment but we're already seeing strikes and tougher labor negotiations as job mobility gets easier as we approach full employment.  

8:30 Update:  223,000 jobs were created in May and the Unemployment Rate has dropped to 3.8% which makes it practically and emergency for the Fed to raise rates at their June 13th meeting or they risk getting behind the 8-ball on inflation.  That means, once again, we'll look to short the Nasdaq (/NQ) at the 7,000 line (tight stops above) as well the S&P (/ES) now 2,720 as long as it's below 2,728 (a $400 loss, so be careful).

We had a lot of fun yesterday with our index shorts.  In yesterday's PSW Morning
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Final Thursday in May – Back to 2,728 on the S&P 500

Image result for helter skelter

"When I get to the bottom I go back to the top of the slide

Where I stop and I turn and I go for a ride

Till I get to the bottom and I see you again" 
Beatles 

We're closing out the month back at the top of the slide (so far) after a wild couple of days that took the S&P all the way down to 2,675 (down 2%) before blasting back yesterday to retest our 2,728 (strong bounce) line on the S&P 500 (/ES).  We'll have to take today's action with a grain of salt as it's the end of the month and yesterday's up volume on the S&P ETF (SPY) was half (67M) of Tuesday's down volume (115M) so the "rally", as they often are, is half-hearted at best.

We'll wade through a lot of data this morning with Personal Income and Outlays at 8:30, Chicago PMI and Consumer Comfort at 9:45, Pending Home Sales at 10:00, Natural Gas Inventories at 10:30, Oil Inventories at 11 (we're bearish) followed at 1pm by the Fed's Lael Brainard's NYC speech on "Economy and Monetary Outlook" – such fun!  

Brainard is a Fed Centrist so we'll see which way she tilts this afternoon but not much of this matters on a window-dressing day though, as I noted to our Members in yesterday's Live Chat Room, either the end of the month or the beginning of the next month has been cause for a sell-off every time this year.  Since we feel 2,728 on /ES is going to be the top, it makes sense to short the index here (2,725) with tight stops over 2,728, which would be a $150 per contract loss.  

Yesterday, in our Live Trading Webinar, we also discussed shorting the Russell (/RTY) below the 1,650 line, but we're above that now and, of course, we're still happy to short the Nasdaq (/NQ) below the 7,000 line, as we still expect an eventual…
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Which Way Wednesday – Crisis, What Crisis?

I love the market's attention span – or lack thereof…

No matter what happens, just a day later it's all forgotten and the dip buyers come in to buy things back to their highs.  We had this pattern back in 2006/7 and it was even a joke meme.  It's the kind of behavior that works – until it tragically does not.   

This morning, we've pretty much recovered half of yesterday's losses and we'll see where we end up but 2,712 was what we expected and we don't really care if it takes one day or two.  

Very much like in 1999 and 2006/7 investors have negative credit balances though, in 1999, it was just over -$100Bn and in 2007 it was -$75Bn and now it's -$300Bn so pretty much everything that was wrong with this strategy just prior to the other crashes is wrong with this strategy times 3!  

That's why, on the whole, this market is all about the Fed and even though we saw the trade war with China reignite yesterday, it's a good thing because it takes the Fed off the table as their minutes last week listed trade wars as a primary headwind that may cause them not to raise rates.  As long as rates remain ultra-low, those dip-buyers can keep on borrowing to buy those stocks and don't worry, this party will never ever stop and we'll never run out of money and the rates will never go up, right?

Well, maybe worry a little…  

Meanwhile, it only takes 10 companies to make up 20% of the S&P 500 with Apple (AAPL) coming in at 4.1% these days.  Apple has boosted the Tech Sector to the top of the S&P with 26% of the market cap, followed by Financials at 15%, Health Care at 14%, Consumer Discretionary 13% and Industrials at 10%.   The Energy Sector, which once led the index, has fallen to just 6% of the S&P's market capitalization.

 

 

 

IN PROGRESS

 

 

 

 

Tumblin’ Tuesday – Italy’s Looming Default Spooks the Markets

Wheeeeee!

We knew the markets were going down – we just weren't sure which of the many, MANY possible reasons would rise up and finally cause people to re-price risk.  Today it's Italy, which essentially has been unable to form a Government for the past 3 months as President Mattarella has refused to work woth a Euro-skeptic Finance Minister put forth by newly-elected Populist party leaders Salvini and Di Maio.  

At issue is Italy's potential to default on $250Bn worth of bonds and a possible exit from the Euro-Zone, following the UK's Brexit lead and possibly unraveling the whole Union at this point.  If this is a surprise to you – then you don't read our PSW Reports every day as my first bullet-point on July 6th of 2016 was "Italy is spinning out of control and taking the EU down with it." – so we saw this coming from a couple of miles away – aside from our many recent posts on the topic

Image result for defusing nuclear bomb animated gifAt this point, it's very possible that the 5-Star Coalition that controls the biggest voting block in Government will seek to impeach Mattarella and, if that happens, we go from unstable right to the point where the hero is usually sweating over the nuclear bomb with a pair of pliers debating which wire to cut.  

Italy really isn't the important thing, anything could have sent investors flying out of equities and back into bonds (up 1% this morning) and CASH!!! rather than paying 100x earnings for the next "hot" stock.  The market is overpriced and it needs to cool off – any catalyst is a good excuse to do so.  

 On Thursday we called for a short of the Nasdaq (/NQ) Futures at 6,950 and we hit 6,900 this morning for a gain of $1,000 per contract and the S&P (/ES) Futures at 2,728 blew through our 2,712 target to test the 2,700 line for a $1,400 per contract gain so "wheeeeeee!" indeed and a great way to start our week.  Also, Wednesday's webinar play to short oil using the SCO June $14/17 bull call spread at $1.45 is on track for the full $3 as…
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TGIF – A Nothing Week in the Markets Dribbles to a Close

What a waste!

It's a low-volume pre-holiday week but it looks like we could have taken the whole thing off as we're drifting back to 2,712 on the S&P, which is right where we closed last Friday and not too far off the Friday before that either.  

IN PROGRESS  

 

 

 

 

Thursday Market Fakery – Pump it Up!

"Down in the pleasure centre,
hell bent or heaven sent,
listen to the propaganda,
listen to the latest slander.

Pump it up until you can feel it.
Pump it up when you don't really need it." – Elvis

S&P 2,728 again – they can't keep us over it but they won't let us go under it either. 

Today marks two weeks at the strong bounce line and an optimist would say we're consolidating for a move up but a pragmatist would say this is all being done on low-volume BS pump jobs that are faking market highs by holding up the headline stocks while the broad market sells off – leaving the retail suckers holding the bag when the bottom ultimately falls out.  

Notice how, nearly every day, we hit a high early in the day and then sell off?  That's how you catch big game fish, you give them a little line and then you reel them in and then give them a little line and reel them in again – over and over until they are exhaused and you can haul them onto the boat and gut them and have them for dinner.  That's what's happening to Retail Investors at the moment and the Top 1% are baiting the hooks.  

Yesterday the market blasted higher on the release of the Fed Minutes, which didn't really say much other than the addition of the word "symmetric" but it was used in regards to INFLATION, not rates.  Here's the context of the statement that got the market "so excited" yesterday afternoon:

"Participants generally expected that further gradual increases in the target range for the federal funds rate would be consistent with solid expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2 percent objective over the medium term. Participants generally viewed the risks to the economic outlook to be roughly balanced."

Now, keep in mind this a 5-minute chart so it took less than 5 minutes of reading the minutes for traders (bots) to decide that the minutes were doveish and blast…
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Weakening Wednesday – We Are Loving Our CASH!!!

Don't say I didn't tell you so…

If you don't cash out when the markets are making silly highs then you end up having to scramble like an idiot to cash out when everyone is panicking and you get MUCH WORSE PRICES for your stocks and options.  The same thing goes with hedging – as it's MUCH CHEAPER to hedge when the market is going up and no one thinks it's going to fall.  You have to have a bit of contrarian in you if you want to learn to be a good investor, following the herd all the time just makes you one of the sheeple.  

The wolves who read yesterday's PSW Morning Report not only picked up the $2,000 per contract-winning Nasdaq (/NQ) short but also $500 per contract gains on the Oil (/CL) and $500 per contract on the S&P (/ES) (and, if you'd like to get these trade ideas pre-market, you can SUBSCRIBE HERE) based on these very simple instructions:

Since the Dollar has been holding things up, today is a good day to short Oil Futures (/CL) at $72.50 for a quick dip but get out before the API report this evening.  We're just looking for a quick win with VERY TIGHT STOPS above the $72.50 line.  The whole key to trading the Futures is having a good backstop so you can limit your losses.  6,950 on the Nasdaq (/NQ) is also a good line and 2,740 on the S&P (/ES) makes a good stop line with shorting below as we're at 2,738 this morning and it's my contention that 20 points of that is due to the Dollar so we'll look for at least a 10-point drop, to test the strong bounce line at 2,728 again – and that's up $500 per contract against the $100 risk at this level.

This morning, we're way down at 2,708 and that's a 30-point drop on the S&P at $50 per point, per contract so $1,500 gains if you stuck with that hedge overnight.  In addition to those pre-market plays, we also picked up shorts on the Russell (/TF) and we double-dipped on Oil (/CL) later in the session.  All in all, it was a…
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Technical Tuesday – Dollar Down, Markets Up – Duh!

So what?

The Dollar plunged from 93.95 to 93.25, which is 7.5% and the S&P 500 went up from 2,713 to 2,733, which is 7.5% – that is not a rally, that is the repricing of mechandise against a falling currency!  If you don't keep an eye on the Dollar, you are missing half the story on any market and also missing valuable trading signals that can make you lots of money!

In last Thursday's Report, we noted that the 5% Line™ on the Dollar was at 93.45 and you can see that line acting like a magnet, pulling the index back down for consolidation before going any higher.  While day to day news may pop the Dollar up or down, over the longer-term, it pretty reliably reacts to longer-term macros as the Dollar is the blood that flows through the global economy – it generally stays in a temperate and reliable band as the Global Economy breathes in and out over time.

Meanwhile, WTF is with Donald Trump?  Oh wait, I guess I should specify – WTF is with Donald Trump and this completely crap deal he made with China?  The trade deal he's walking away with is SO TERRIBLE for the US that even the Wall Street Journal has titled their front-page article:  "Beijing Outplays the U.S. in Trade War".  That's right, we got played as China gets everything they wanted in exchange for….  wait for it…  Cutting Import Tariffs on Cars from 25% to 15%.  Ta f'ing da!  

Aside from the fact that this "negotiating point" is one President Xi already said he was cutting way back in April, when it was noted in the WSJ: "Even so, people in the industry said the reshaping of China’s auto industry wouldn’t necessarily hand an advantage to entrenched foreign players that have come to rely on their Chinese partners, many of which are influential state-owned enterprises. Although overseas car companies entered the joint ventures reluctantly, some say they have come to accept them as a fact of life in a country where foreign businesses can struggle without local allies." 

In other words, after a month of tense negotiations by our Business Genius President, we got ZERO
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