Trump will cut taxes!
That's what took the Dow 200 points higher yesterday. Have we heard that before? Yes – for almost a year now, that's been driving the markets higher and any time the markets need a boost, they promise us tax cuts and, like well-trained dogs and, like I said in the title of yesterday's Morning Report: "Fools Rush Us Towards the Strong Bounce Lines."
As we expected, we did hit our strong bounce lines on on the Futures in yesterday's action at Dow 21,800 (21,850), S&P 2,442.50 (2,450), Nasdaq 5,850 (5,870) but missed Russell 1,377.50 (1,372.50) so we shorted the Russell at the 1,370 line and, this morning, we're already up $250 per contract at 1,365. That's exactly what we said we'd do – wait for the strong bounces and short them as they cross back under. Now we're waiting to see if the other indexes cross back under or if the RUT comes up to join them and confirms a more bullish rally. Dow (/YM) 21,850 is my next favorite short.
Our long position on the Nikkei (/NKD) was good for gains of $500 per contract on the way up and yes, we could have made more money on the Dow or the Nasdaq – but we weren't that confident in the morning that the indexes wouldn't head further down and /NKD seemed like the safer bet. We have a Live Trading Webinar at 1pm, EST and we'll look for some new opportunities this afternoon.
We are back long on Coffee, using the /KCH8 (March) contracts. I was encouraged by finding a bit of support at $130 ($133 in March), though below $130 we will stop out and wait for a better bottom. Our long premise on coffee is that Global Warming will disrupt production and, right now, Italy is having a terrible grape season due to a drought (go long Italian Wine). As noted by the Times:
The warming temperatures, shortening of the seasons and unseasonal storms brought on by global climate change are hastening