Wheeeeeee – what fun!
I know, you thought I was going to be wrong, didn't you? Yesterday morning we said: "we're expecting to see 0.5 to 1% bounce before we head lower again" and, in our Live Member Chat Room (because we ran out of free picks for the week) we set our official strong bounce targets at:
- Dow – 17,659
- S&P – 2,044
- Nasdaq – 4,730
- NYSE – 10,735
- Russell – 1,174
It seemed like we were going to break higher as the Dow topped out at 17,758 heading into noon with the S&P 2,055, Nasdaq 4,759, NYSE 10,786 and Russell 1,180 but, fortunately, we were keeping our eye on the volume and, at 9:54, while the S&P was rocketing higher, I commented to our Members:
So, as usual, the RUT is in the lead with the Nas right behind and those are our manipulated indexes so we want to see volume to confirm the move. Yesterday, we had strong down volume (152M on SPY) with decliners outpacing advancers by about 5:1. Today, so far, just 12M on this "rally" – which is just nonsense that can be erased in minutes by a single fund hitting the sell button (average share is $50 so $600M selling would wipe this gain out).
We don't just make picks at PSW, we teach our Members HOW the markets work so they can better understand the intra-day as well as the long-term moves which then helps them to make much better trading decisions. Fortunately, our trading decision, at 11:54, was to stick to our guns and short the Futures across the board:
At this moment, in the Futures, I'm watching 17,750, 2,055, 4,300 and 1,180 and playing short the laggard. RUT bounced me out but up $370 was worth doing and I really like /NQ not to make 4,300 as a bet at the moment (4,293.50) and, of course /YM 17,750 as my key shorts (unless /TF tests 1,180 again).
As I've noted this week, if you don't like learning how to make $2,000 a day (per contract!) trading futures and options – DO NOT JOIN US HERE – we certainly don't want you if you don't like to make money. If you do like to have fun during your trading day and make a little money too, then please, step inside – Winter is the best time for new people to join as it's our slowest time of year, so I don't mind going over the basics with new Members. That's why we're pushing this month – by Spring, we'll be closed to new Members again.
Of course, it wasn't just the Russell bet that paid off, that sell-off took the Dow Futures (/YM) down to 17,500 for a $1,250 per contract gain (and now we're now long at 17,400), S&P Futures (/ES) dropped to 2,020 for a $1,750 per contract gain (and we're long at 2,010), Nasdaq Futures (/NQ) dropped to 4,225 for a $1,500 per contract gain (and we're long at 4,200) and we're long on the Russell Futures (/TF) at 1,148.50.
We're just playing for the small bounces this morning and we still have our index hedges (and you had a great chance to re-enter our TZA spread back at 0.25 on yesterday's pop!) as we expect a good Consumer Confidence (9:55) reading due to lower fuel prices but, if we don't get that – look out below!
Already today we saw China's Industrial Output drop from 7.7% to 7.2% and money is simply pouring out of Junk Bonds at a dangerous pace. Down $1.9Bn last week is the most since Oct 1st, when the Dow fell 300 points in a day and 2,200 points over the next two weeks.
This time is different, ie. WORSE, because this time we KNOW why people are bailing on junk – it's the energy patch. With oil at $59 this morning, there's a lot of junk in the bond market at risk of default as those who borrowed hundreds of Billions of Dollars at usurious interest rates are now unable to service their debt with the price of their output commodity cut by 40% this year.
This isn't going to go away tomorrow and it took a whole week to dump $1.9Bn of these bonds and Corporate Bond Borrowing set an all-time high this year, beating last year's all-time high by a wide margin. It was right for Corporation to take advantage of low interest rates and borrow cash but, unfortunately, the biggest single sector of our economy, Energy, has gambled and lost big. The energy sector is 14% ($182Bn) of all Junk bonds. All that cheap and easy money led to too much production, too quickly so, inevitably, we have a glut and prices fall.
It's not too hard to figure these things out in advance. We did way back in June, when we called out the FAKERY that was driving oil up to $107. Following our advice to short all 314,447 NYMEX contracts at $106.05 would have netted you a profit of $14,794,731,350 with oil at $59 this morning. Not all of our Members had Billions to commit on the short bet, but we did very well making smaller bets along the way. 
This is what happens when Central Banksters meddle in the markets – they cause distortions, or what Hayek called "malinvestment" and those market distortions end up coming back to bite us in the end. There's also a Student Loan Bubble and an Auto Loan Bubble as we've just shoved the Housing Bubble money into different bubbles.
Economic growth comes from investing in infrastructure, education and training – not from giving free money to the top 1% – that NEVER works!
So enjoy what little bounces we do get off the Consumer Comfort report but I'm much more comfortable with CASH!!! into the weekend. Abe gets his referendum over the weekend and maybe the Nikkei pops back up (now 17,400) but, after that, I think that balloon begins to deflate as well.
Have a great weekend,
– Phil
