Terrific Tuesday – Shutdown II Averted (through September)

Image result for trump baby wall55 Miles, $1.4Bn.

If that's what it costs to keep the Toddler-in-Chief from throwing another tantrum, Nancy Pelosi says she's willing to pay it as a bi-partisan group of Senators and Congresspeople have finally hashed out the details of a funding bill that will keep our Government open for 6 CONSECUTIVE MONTHS!  Imagine being able to go all the way until September before our next shutdown crisis – what an accomplishment!  

Well, the markets seem to think so as the Dow popped 200 points in pre-market trading, mostly last night, when news of the deal spread.  Unfortunately, Trump will likely "prove" that the 55 miles of new wall is effective – simply because there are still 1,500 miles with no wall people can go through, so they simply won't try where the wall is.  Will Trump ever get a greenlight to fund the rest of the 1,500 miles at $25.5M per mile ($38Bn)?  That does seem like madness but we've now taken the first tiny step towards it.

Despite all the progress we're making in keeping out the tired, the poor and the huddled masses yearning to breathe free, Small Business Optimism contines to decline, especially in Future Expectations, which are down 10% since the last reading.  That seems to be the general trend at the moment – people are content with the current conditions but they are worried that the country is going to Hell in a handbasket…

Europe is literally going to Hell in a handbasket and, when they get there, they'll meet China, who have already slowed down significantly in Q4 and Q1 is shaping up to be worse and it isn't all about trade, though that's a factor.  GM sold 25% less cars in Q4 in China than a year ago but they are not alone as the entire auto industry, including Chinese Auto Makers, sold 20% less cars in Q4 as the Government pulled back on incentives.  

Nonetheless, Chinese customers still bought $52Bn worth of iPhones in Q4, about 15% of Apple's total sales.  China is also very important to SBUX, UTX (60% of their Otis Elevator sales) and TIF, who saw a 9% increase in sales in China…
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Monday Market Momentum – Uptrend Continues with Trade Talk Hopes

Image result for lighthizer china cartoonSteve Mnuchin to the rescue?

Yes, I know it sounds ridiculous but that's why the market is up half a point this morning as our Treasury Secretary lands in Beijing this morning and maybe I'd be more optimistic if he wansn't accompanied by Trade Representative Robert Lighthizer, who lost the battle to keep China out of the WTO in 1997 and is now being given his chance at revenge by suggesting the US pursue WTO action against China and threatens to leave the WTO if China is not sanctioned – ie. bullying.

Politico describes Lightizer as "a decades-long skeptic of Beijing."  He has accused China of unfair trade practices and believes that China needs to make "substantive and structural changes to its trade policies, as opposed to only minor changes it has offered in the past".  He wrote: "The icon of modern conservatism, Ronald Reagan, imposed quotas on imported steel, protected Harley-Davidson from Japanese competition, restrained import of semiconductors and automobiles, and took myriad similar steps to keep American industry strong.  How does allowing China to constantly rig trade in its favor advance the core conservative goal of making markets more efficient?  Markets do not run better when manufacturing shifts to China largely because of the actions of its government."

Image result for china trade cartoonNow, there's nothing wrong with sending a tough negotiator to China but Lighthizer is more of an anti-China negotiator but even that may have a place if you have a highly skilled person keeping him in line but there's no indication that's the case with Mnuchin and, even if it were, it is complete folly for the markets to believe that this duo is going to be able to quickly resolve the many issues that the US and China are very far apart on in trade.

And when I say the US, unfortunately, I mean President Trump because the US and China were very much together for the past decade as both countries prospered and the trade deficit was widely considered to be "just a number" and China may have "stolen" factory jobs but no more so than Detroit stole them from New York in the early 20th Century.  Jobs move…
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Faltering Friday – Trouble at S&P 2,700 (again)

We're back at our favorite inflection point:

The 2,700 line on the S&P (/ES) has been the midpoint for all of 2018 and we don't have much reason to think that will change in 2019 as, in the bigger picture, we're only in the middle of what is likely to be couple of years of consolidation – even if you do believe the S&P deserves to move up to 3,000 just 10 years after crashing from 1,500 to 666.  Of course, 666 was silly – the result of a panic that took stocks far lower than they should have been (see "The Worst-Case Scenario: Getting Real With Global GDP!" which I wrote on June 6th, 2010).  

On our Big Chart, 2,420 is the 10% line and this chart adds to the argument that it should be moved up 10% to the Must Hold Line, meaning the point below which we feel the market has turned bearish.  Trump's tax breaks have pumped Corporate Profits up enough to call 2,420 the new bottom and that would make 2,700 the new 10% line(ish), where we would expect the index to consolidate before attempting a move to the 20% line, at 2,970.  

The market is down a bit this morning but nothing tragic and, if we can close above our 200-day moving averages on the Dow (25,100) and the S&P (2,697) – this will have been a constructive week, technically.  The 200 dma for the Nasdaq 100 is 7,041 and we're miles below that but miles above the 50 dma at 6,627 so nothing to see there and the NYSE is also drifting between 11,876 (50) and 12,502 (200) along with the Russell, where 1,438 (50) and 1,537 (200) are the lines to watch.  

There's nothing wrong with a little heathly consolidation in the markets – other than the fact that it's kind of boring…

Have a great weekend,

- Phil

 

Faltering Thursday – S&P 500 Fails to Clear Lowered Earnings Expectations

Low expectations.  

It's what we have for both the President and the Stock Market so anything they do that isn't a complete screw-up gets celebrated but that's no way to run an country – or an economy.  Powell spoke yesterday but provided no catalyst, choosing to speak about the LIMITS of Fed policy in boosting growth – a speech aimed squarely at the President in which the Fed Chair also stressed the importance of a fully independent Federal Reserve.

 

IN PROGRESS

 

 

Will We Hold It Wednesday – Russell 1,525 Edition

Woah-oh, we're halfway there….

The Russelll 2000 Index is halfway back to 1,750 after falling from there to 1,300 (25.7%) since the August highs.  Yesterday I expressed my misgivings about the recent low-volume rally and it's easy enough to manipulate the Dow, with just 30 stocks, the Nasdaq, with just 100 stocks and even the S&P 500 has half it's market cap in the top 30 stocks so it only takes a bit of firepower aimed at the leaders to prop up the markets so unscrupulous people can pretend things are better than they are

Not so much the Russell, with it's 2,000 small-cap stocks, which are more evenly distributed throughout the index or even the NYSE, with it's 2,800 companies that trade 1.8Bn times a day – those are VERY EXPENSIVE to manipulate but, the good news is that they generally follow the other 3 so manipulating the Big 3 usually leads to the NYSE and Russell following suit.  

Still, when we get to major inflection points, it's often the NYSE or the Russell that warn us that things may not be quite as they seem.  The NYSE topped out at 13,600 last January but then plunged 10% in two days and never regained its highs in the Summer, which is one of the things that kept us cautious while the rest of the indexes were making records.  In December, the low for the NYSE was 10,723 but we'll call the support line 11,000 and that's a 2,600-point fall (19%) and now we're back to test the 50 dma at 12,500 after a 13.5% rally, 2/3 of the way back to the top.

 

IN PROGRESS

 

 

SOTU Tuesday – Trumped-Up Rally Continues

Everything is Awesome!

Well, that's what they want us to believe this evening as Trump gives his State of the Union message.  One year ago, Trump taled about the $8Tn the stock market gained during his first year in office and the S&P had run all the way up to 2,872 into his Jan 30th speech but then we collapsed back to 2,532 just a week later (2/9) and it took us until September to get back to where the BS pre-SOTU rally had taken us.  

Now we're at 2,724 so the market is down a couple of Trillion Dollars but has also ralled back 16% off the 2,346 low just 6 weeks ago in December and thank Trump it did or he'd have to be explaing how the State of the Stock Market was WORSE than when he took office.  But thanks to the Fed reversing course and the Administration telling us how AWESOME their trade talks with China are going and thanks to the economic data the Administration has released showing the Government Shutdown was GOOD for the economy – EVERYTHING IS AWSOME!

Of course, having actually seen the Lego Movie, I know that things were not, in fact Awesome but a brain-washed society that had fallen under an oppressive regime run by a TV-obsessed, orange-haired psychopath (relax, it was 2014 – no one was picking on Trump – it's just a very strange coincidence) and had to be saved by a girl who looked a lot like Alexandria Ocasio-Cortez who did all the work while some nobody got all the credit.  Again, coincidences…

Image result for hedgingStill, I would not go into today's end without hedges – just in case we have a repeat of last year and the great efforts to prop up the market end as soon as the President is done telling you how great things are.  Trump also bitched about Government Regulations and said it was ridiculous that we were once able to build the Empire State Building in one year and now it takes 10 years to get a road built but 5 people died
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Monday Market Movement – Dow 25,000, S&P 2,700, Nasdaq 7,000 and Russell 1,500 Must Hold!

Well, we've made a bit of progress.

Unfortunately, it was almost entirely due to Wednesday's Fed Meeting and Powell's doveish statements after but what worried me that night (as I said on TV) and what worries me still – is what is the Fed so afraid of that they feel they have to prop up the markets at levels that are 300% HIGHER than when they began to intervene back in 1999?

Intervention is expensive and intervention is destabilizing and usually used as a last resort and it's not just the 666 lows on the S&P that we're miles above but the pre-crash highs of not even 1,600 that we're beating by 1,100 – that's 68.75% higher than we were than the levels the Fed was supposed to be getting us back to and NOW they think falling back to not quite 100% higher is some kind of crisis?  

S&P 500 MAs

What I worry about is that the Emperor has no clothes and thank goodness I'm not taking about The Donald but the markets in General, which have been pumped up on artificially low rates, monetary stimulus, lower taxes, repatriation of overseas funds (also at low tax rates) and, of course, Corporate Buybacks.  None of those things are supposed to be permanent and, USUALLY, a government will do one thing or the other – not all of the above!  

It costs real money to do these stiulus packages and it's money we're borrowing from the Future in order to what? in the present?  Again, where's the beef in this economy that it can't stand even a little bit of price correction?  Consumer Confidence has rarely been higher though it's significantly off the December highs – before the Government shutdown.

It's not the present situation that's going down – if you ask people how they are doing, economically, they will generally tell you they are feeling good because 96% of the people are employed and we're all fairly surprised to be alive in year two of the Trump Presidency.  However, if you has people about their forward economic expectaitons – they are plunging, down below 100 from a high of…
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Non-Farm Friday – Is America Working? The Liar-In-Chief Says Yes!

Image result for trump china tariffsAmerica is barely working. 

Our Government is barely functioning and the President spent yesterday afternoon lying to the "failing" NYTimes – in an interview with a paper that employs fact-checkers.  Trump talked about repealing Obamacare, Building a Wall to stop the flow of drugs, funding the military, appointing Secretaries, China's Trade Deficit and his poll numbers and NOT ONE thing the President said was actually true – NOT ONE THING!!!  Not only that but the Trump Administration has backed themselves into a corner with China and, with one month to go – Trump will have to accept an even weaker deal than new Nafta simply in order to avoid looking like he was completely defeated in "The Art of the Deal."  

As noted by the "failing" NY Times, Trump's whole take on the Trade War is complete and utter BS as the tarriffs he is "imposing on China" are nothing more than a tax on the American people and, if Trump expands the tarrifs, as he is threatening to do – it will be nothing more than a $125Bn tax increase on US Consumers in order to pay for the Billionaire Tax Breaks he has given out to his friends and family.  One has to wonder wheter Trump WANTS a deal with China – I think he wants the tax money more:

WHAT TRUMP SAID

“We have 25 percent now on $50 billion. And by the way, Peter, that’s a lot of money


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Thrilling Thursday – Dow 25,000, Russell 1,500 – What Could Go Wrong?

Wheee, what a ride!  

We came all the way back to Dow 25,000 yesterday as Apple and Boeing (BA) accounted for 2/3 of the gains on the day, both with strong earnings reports that beat expectations.  Both are also major S&P components and Apple (AAPL) is over 15% of the Nasdaq's weighting as well so all the indexes flew higher but we shorted the Dow (/YM) Futures at the 25,000 line, expecting at least some pullback off the run from 24,300 on Monday.

25,000 is up 2.88% from 24,300 and the 2.5% line is 24,907.50 though really the main support line for the Dow is 24,000 (8,000, 16,000, 24,000…) so it's more like a 1,000-point rally since mid-Jan and that means we can expect to see a 200-point pullback (weak) to 23,800 and, at $5 per point per contract – that's a $1,000 per contract upside potential vs losing maybe $50 if /YM pops over 25,010 and stops you out so I certainly like the risk/reward on the play – which is how we like to play the Futures.  

We are, of course, very pleased with AAPL, which I STRONGLY recommended buying back on Dec 20th in "Market Panic Gives Us An Opportunity To Load Up On Apple (AAPL)" – nothing ambiguous about that one!  My trade idea at the time was:

While other retailers are struggling, Apple has been setting new records year after year for retail sales with the average Apple Store generating $5,546 per square foot in revenues. Tiffany is #2 at $2,951 and they sell diamonds! Unlike diamonds, no one has been successful so far in making artificial iPhones that pass for the real thing so it's amazing to me that AAPL's stock is back at $160, $70 (30%) off it's peak.

We are long APPL in our portfolios and we just made an even more bullish call to buy back all our short calls and wait for the bounce. However, as a new play on AAPL, I like the following and we're going


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The PhilStockWorld.com Money Talk Portfolio Review – Jan 30, 2019

I'll be on BNN's Money Talk tonight at 7pm

For the past year, we've been keeping a Money Talk Portfolio, which we only adjust live on their show, once per quarter so we have to keep it well-balanced and self-hedging.  We rode out the recent downturn with style as our last review, on Oct 24th (the last time I was on the show) we were at $95,645, up $45,645 (91.3%) from our $50,000 start and we projected that our remaining positions would gain $70,015 by Jan, 2021 (the time-frame for our spreads). 

Not content with that, we added two new trades (MU and MJ) and one hedge (TZA and CAT), adding another $50,000 of upside potential over the same time-frame.  So, with $120,000 of upside potential over the next 24 months, we expect to make about $5,000 per month but the market took a nasty downturn and we're only just recovering so I'm sorry to report that we're only up to $105,845, which is up $55,845 (111.7%) and "only" up $10,200 (20.4%) in the past 3 months.  

We were unable to make adjustments during the downturn, which we did call very well in our Live Member Portfolios (see our Jan 21st Portfolio Review), so the performance is not quite as good as our Live Trading Portfolios but it's the perfect portfolio for less active traders, who just like to check on their progress every few months.  

 

IN PROGRESS