Trade Won Tuesday – China Gives Up, Trump Wins – America is Great!

What total insanity!  

Now China's Xi gave a speech last night promising foreign companies greater access to China’s financial and manufacturing sectors, pledging Beijing’s commitment to further economic liberalization.  In a speech that officials had billed as a major address, Mr. Xi said Tuesday that plans are under way to accelerate access to the insurance sector, expand the permitted business scope for foreign financial institutions and reduce tariffs on imported automobiles and ownership limits for foreign car companies.

Though these were vague statements, the markets instantly reacted as if the Trade War ended and we flew back to the highs that we lost yesterday afternoon (still not strong bounces).  There's nothing really to do but sit back and see what sticks but, far from a victory for Trump, Xi took the time to criticize the US President and his policies.  As noted in the Wall Street Journal:

“In a world aspiring for peace and development, the Cold War and zero-sum mentality look even more out of place.” Mr. Xi told the Boao Forum, a government-backed gathering of business and political leaders on the tropical island of Hainan.

“Putting oneself on a pedestal or trying to immunize oneself from adverse developments will get nowhere,” he said.

Many of the initiatives Mr. Xi offered up have been previously proposed. That, along with the lack of definite schedules for action, drew some skeptical reviews from foreign business executives and Chinese researchers alike.  “We have every intention to translate the measures into reality sooner rather than later,” Mr. Xi said, though he didn’t provide a clearer timetable for those or the other measures announced.

Image result for trump trade xi cartoonIf Trump is smart (debateable), he'll thank Xi and move on – WITHOUT declaring victory.  Only by stressing cooperation can we back off the cliff of this Trade War but, of course, the cooperation Xi envisions is essentially Globalization – the very thing the Trump Administration and their
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Monday Market Movement – Trade Wars and Earnings

Don't get fooled by a bounce.

Team Trump softened their tone over the weekend, leading Asian stocks to move back up and Europe opened up over half a percent and our Futures are up half a percent but now Trump has undone the weekend's diplomacy with this morning's tweet calling China "STUPID TRADE" that has been "going on for years."  Hey, maybe it is a brilliant negotiating strategy where the President ACTS like an out-of-control lunatic so the Chinese will submit to "reasonable" requests from his underlings.  Or maybe he's just insane or maybe he's a Russian agent working to undermine 50 years of relationship-building between the US and China?

Meanwhile, we'll be watching the S&P closely, especially around our 2,640 line to see if it holds tomorrow (today is meaningless) and we'll be looking for the same bounce lines we were looking for last week (and all of March), which are:

Dow 23,800 (weak) and 24,200 (strong)

 

 

 

IN PROGRESS

 

 

 

 

 

 

Trade War Friday – Game on Again as Trump Throws Speech Out

Holy cow!  

Things are just getting nuts now.  Trump declares unilateral trade war on China, China retaliates, White House says "just kidding" and then Trump says "not kidding" and TRIPLES the tariffs by adding $100Bn more and then he literally tosses out his prepared speech as it would be "too boring" and then began ranting about immigrants, claiming they illegally voted against him and that women are being raped by them "at levels that nobody has ever seen before – THEY don't want to mention that."

The only thing we can count on these days is chaos and God bless it because we're having THE best time trading it!  In our Live Chat Room yesterday, when the White House was busy walking back Trump's earlier comments on trade, I said to our Members:

Watch out for any of the levels that are now Green (or black) to turn red – that's a good sign to short the indexes.  6,650 on /NQ is a good line and it's lined up with 24,350, 2,660 and 1,540.

That was our only official play of the day but it was good for profits of $3,000 per contract so, no need for more, right?  We knew 6,650 was going to be resistance (between our weak and strong bounces) and, of course, we also knew Trump was going to continue to attack Amazon (AMZN) and that casts a shadow on the whole tech sector because – if the President of the US can harrass one tech company – what's to stop him from going after others and, with that precident set – what's to stop every World Leader from going after their political business enemies like Trump does?

America used to lead by example and God help us all if the rest of the World begins to follow our current example!

As noted by Joe Scarborough on MSNBC: "Lies about [Amazon], causes its stock to go down. I’ve watched enough episodes of Billions to know that if you’ve spread lies about a
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Retaliation Wednesday – The Empire Strikes Back!

Image result for us china tariffsTariffs! 

China hit back last night with $50Bn in tariffs against US exports like cars, chemicals and soy beans along with 106 categories of American goods that are exported into China and, more specifically, goods that are exported from Republican-dominated states, where lawmakers might be expected to have some influence with President Trump, presumably to get him to back down from the latest trade demands.

"China has never succumed to external pressure – external pressure will only make the Chinese people more focused on economic development.  China's attitude is clear, we don't want a trade war because a trade war would hurt the interests of both countries.  As the Chinese saying goes, it is only polite to reciprocate." – Trade Minister Zhu.  

Image result for us china tariffsOnly polite to reciprocate” is unusually dark and direct. Unlike the U.S. president, who salts his speech with off-the-cuff remarks about foreign policy, Chinese officials don’t usually digress with clever comments.  Trump has undone years of hard-fought civility in discourse that was meant to avoid exactly the kind of economic catastrophe he is now causing.

Wei Jianguo, a former vice minister of commerce, said the key to understanding China’s response is “same proportion, same scale and same intensity.  That means we will retaliate with the same strength,” he said. “Whatever the total value of trade the United States targets, we will target the same amount. If it’s in the form of tariffs, we will do the same.”

The escalated Chinese response is exactly what we predicted for our Members.  In fact, last Tuesday (3/27), right in our Morning Report, I said:

The markets are back up to our weak bounce lines(see yesterday's reportthough I think we'll be using them as shorting lines this morning as the Dollar is recovering quickly, up 0.6% and that's bound to put a bit of pressure on the markets as they finally hit some resistance.  Dow (/YM) 24,350 is my favorite short at the moment, with tight stops


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Technical Tuesday – Testing the 200 DMA’s

chartWheee – what fun! 

Up 500, down 500 – what volatility?  Yesterday the Volatility Index (VIX) did hit 25 and that's great for us as we get good money for the options we like to sell.  We're generally just amused when the market collapses as we have great hedges, like the one we posted in Thursday morning's PSW Report:

As an additional hedge, at the moment, I like for the STP:

  • Sell 4 WHR 2020 $125 puts for $12.50 ($5,000)
  • Buy 50 SQQQ May $16 calls for $3.90 ($19,500) 
  • Sell 50 SQQQ May $20 calls for $2.20 ($11,000) 

That's net $3,500 on the $20,000 spread that's almost all in the money to start and the only way to lose is if the Nas goes up quite a bit from here which, with all these headwinds, doesn't seem too likely.

The WHR short puts are still $12.50 but the $1.70 spread hit $3 for a gain of $1.30 x 5,000 units for $6,500 (185%) gained in 2 trading days – you're welcome!  Remember, I can only tell you what is likely to happen and how to make money trading it – the rest is up to you.

In our Live Member Chat Room we already cashed in the long calls ($4.50) and left the short calls which are covered by another hedge we already had.  That pulled $22,500 off the table – more than the maximum we expected to make on the trade but now we have to deal with the short calls so we're hoping for a bounce in the Nasdaq as we test the 200-day moving averages.  

 

IN PROGRESS

 

 

 

 

 

Monday Market Mayhem – China Fires Back in Trade Wars, Trump Tells Dreamers to Stop Dreaming

Well, we survived the Space Debris at least.

Unfortunatley for 800,000 children who live in America, they are not surviving President Trump, who is calling for "Caravans" to come and take them away, without the due process or constitutional rights afforded to the other children in their classrooms.  John Oliver handled the sickness of this mess very well over the weekend so you'll either care about this or you won't but, even if you do - what can you do to stop this man?  

 

IN PROGRESS

 

 

 

 

 

 

 

 

 

Thursday Thud – First Quarter Ends With Dow Down 1,000 Points

Down 1,000 points isn't so bad.  

Well, it's bad if we consider that we were up 2,000 in January (26,600) so down 3,000 since then is 11.3% but let's say we claw back to 24,000 this morning – that would be down almost exactly 10% and you don't want the -10% line to act as resistance on the way back up – that gets very ugly, technically.  

Of course, nothing it technically uglier than failing the 200-day moving average and, so far, we have narrowly avoided that by bouncing off 23,500 but, if we call that a 2,000-point drop from the 50 dma, which was 25,500 when we were up there (since dragged lower), then we expect to see 400-point bounces to 23,900 (weak) and 24,300 (strong) – and we're a long, long way from 24,300 so it's a weak finish to Q1, at best. 

Today is the last day of the quarter because tomorrow is a holiday and Monday is spring break (I'll be in Florida) so the volume is very low and nothing the markets do today or even next week are going to matter much.  If we can't claw back over 24,300 by the end of next week – it's not going to happen.

Next week is still sleepy for earnings as well and April 13th is the official kick-off for earnings season, with CitiGroup (C), First Horizon (FHN), First Republic (FRC), JP Morgan (JPM), PNC (PNC) and Wells Fargo (boo!) all reporting that Friday the 13th morning – good luck to all of us!  We did very well shorting XLF into January earnings but, like the market, we're down 10% from there so it's a bit tricker to call now – I think we'll just wait and see if that $27 line holds but, if not, another 10% down should do the trick.

So, to decide whether or not we should be bullish, we look at our big banks and decide whether or not they are likely to rise or fall on earnings and that then will give us our premise for what is likely to happen as earnings season kicks off.  We will call that The Big Bank Theory! 

  • It's early in our data-gathering


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What Next Wednesday – Markets Go Crazy to End the Quarter

Wheeeeeee, this is fun!  

Aside from our $2,750 winner on the Dow (/YM) Futures shorts from yesterday morning's Report, we also had a $7,000 per contract gain on the Nasdaq, which fell an amazing 350 points, from 6,850 to 6,500, paying $20 per point, per contract for our Members.  

Playing the Futures is not hard, you can join us today at 1pm (EST) for our weekly Live Trading Webinar and we'll be happy to show you how it's done.  It's really no different than any long or short position other than it's highly leveraged and it's playable almost 24 hours a day – so we can react to news any time it hits the wires. 

These were not particularly difficult calls to make (or to follow) as Monday Morning, in our Pre-Market Report, we predicted the market would bounce to the following lines:

  • Dow 24,350 (weak) and 24,550 (strong)
  • S&P 2,666 (weak and satanic) and 2,688 (strong) 
  • Nasdaq 6,850 (weak) and 6,950 (strong) 
  • Russell 1,565 (weak) and 1,580 (strong)

And then, on Tuesday morning, I said:

The markets are back up to our weak bounce lines(see yesterday's reportthough I think we'll be using them as shorting lines this morning as the Dollar is recovering quickly, up 0.6% and that's bound to put a bit of pressure on the markets as they finally hit some resistance.  Dow (/YM) 24,350 is my favorite short at the moment, with tight stops over the line and 6,850 on the Nasdaq (/NQ)


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Terrific Tuesday – Everything is Awesome, Again

Everything is Awesome!  

The markets are back up to our weak bounce lines (see yesterday's report) though I think we'll be using them as shorting lines this morning as the Dollar is recovering quickly, up 0.6% and that's bound to put a bit of pressure on the markets as they finally hit some resistance.  Dow (/YM) 24,350 is my favorite short at the moment, with tight stops over the line and 6,850 on the Nasdaq (/NQ) will make a fun shorting line as well.    

Why short?  Well, nothing at all has changed other than it's POSSIBLE that China and the US will have a trade agreement instead of a trade war but, other than that – all the other stuff that caused the market to fall off it's highs all month haven't gone away – Thursday's trade talk just made them worse and now they are not worse – they are the same – not better either.  

The President is still being indicted, the Government is still in turmoil, Russian "diplomats" were just expelled from pretty much every NATO country (even ours, surprisingly) so we may have just started the next cold war only this one is being fought with a guy who already has your browser history and all of your passwords.  

Image result for khrushchev shoe animated gif

Of course Khrushchev was very much cut from the same cloth as our President, as noted by this summary of the "shoe-banging incident" at the UN:

On 12 October, head of the Filipino delegation Lorenzo Sumulong referred to "the peoples of Eastern Europe and elsewhere which have been deprived of the free exercise of their civil and political rights and which have been swallowed up, so to speak, by the Soviet Union".[12] Upon hearing this, Khrushchev quickly came to the rostrum, being recognized on a Point of Order. There he demonstratively, in a theatrical manner, brushed Sumulong aside, with an upward motion of his right arm—without physically touching him—and began a lengthy


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Miraculous Monday – Trade War Ends A Day After It Starts

Image result for trump trade war china cartoonIt''s a miracle!

Or so they will have you believe.  Just one market day after Trump declares a Trade War on China, team Trump is claiming victory in that Trade War with Treasury Secretary Steve Mnuchin saying that "the U.S. can reach an agreement with China that will avert the need for President Donald Trump to impose tariffs on at least $50 billion of goods from the country."  “We’re having very productive conversations with them,” Mnuchin said on “Fox News Sunday,” when discussing talks with China. “I’m cautiously hopeful we reach an agreement.”

An optimist would say Trump's threats worked and China backed down but a realist might say China's threat to retaliate worked and Trump backed down because the net effect here is there will be no sanctions placed against China and Wilbur Ross is already running around claiming it will be a victory if China promises to buy some LNG (liquefied natural gas) from the US to help balance the trade deficit.  

China, of course, doesn't care who they buy LNG from and, like oil, it's fungible – so it doesn't matter who we sell it to, there's a GLOBAL supply and demand picture that sets prices so if we sell more to China, we will sell less to someone else and not one job will be gained and not one net import/export Dollar will have shifted other than on the balance sheet with China.  

Speaking of oil, that's been holding up over $70 on Brent (/BZ) and $65.85 at the moment on WTIC (/CL) with Gasoline at $2.0325 heading into Easter Weekend.  It's going to be a nice short next week but this week there will still be a huge effort to keep the prices high into the holiday and the Saudis are pitching in by talking about extending their production cuts at the June OPEC meeting.  

Image result for saudi prince confiscatedWe'll see what sticks into the weekend but patience is the key on that trade as the Saudis are pulling out all the stops to keep the price of oil high as they continue to
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