This is not what the bulls wanted to see.
In yesterday's PSW Report "Weak Bounce Wednesday – B-B-B-Brexit Baby!," we called for shorts below 20,600 on the Dow Futures (/YM), 2,350 on the S&P Futures (/ES), 5,406 on the Nasdaq (/NQ) and 1,360 on the Russell (/TF) but we had a pop in the morning and only the Dow went below our line but, in our Live Trading Webinar, we decided to short /TF anyway with 4 short at an average of 1,371 and, now that we're below that line, we can take 2 contract off at 1,369 for a $400 profit and put a stop on the last two at 1,370 to lock in at least $500.
We're also excited about an opportunity to short oil again as it tests the $50 line this morning (/CL). Brent crude (/BZ) is also at resistance at $52.50 and we won't short /CL with much enthusiasm (so very tight stops) if Brent is over but $50 is a tough line for /CL to cross – so it's well worth a short as we get over $49.85 with tight stops over the $50 line, which limits our losses to $150 per contract.
Over at the NYMEX, there's more than 3 weeks left to FAKE!!! demand but they are already faking demand for over One BILLION barrels of oil for delivery between now and July 20th. That's only 113 days away so the open contracts on the NYMEX are PRETENDING that they are going to order 9.5 MILLION barrels a day to be delivered to Cushing, OK, a facility that can only handle 90M barrels TOTAL, IF it were not full – which it is.
Of course, it's not a great day to short anything as we're into the normal end-of-month window-dressing so we can expect everything to be propped up a bit. Even the Dollar is back over 100 (good for $500 per contract on /DX, you are welcome!) and Apple (AAPL) is testing $145, which is now over $1,000 per share pre-split (7:1), up from $85 (pre-split) when I used to foam at the mouth pounding the table on them almost daily (AAPL was our Trade of the Year in 2013,2014 and 2015). We still have a large position, of course, but here we expect a pullback.
In the same way that AAPL drives the Dow, S&P and Nasdaq higher when it goes up (it's a major component of all 3 and it's up 45% since the election) – it can also devastate them when it goes down. We're certainly not expecting to see $105 again (we'd sell the kids to buy more) but a 10% pullback to $130 would be logical here and that would put a 1.5% drag on the Nasdaq all by itself.
I don't have a more up-to-date chart but AAPL up 45% makes it 15% weight now and Google (GOOGL) is closer to 10% at $850 and Amazon (AMZN) is $850 too, making Jeff Bezos the 2nd richest man in the World – on paper. Microsoft (MSFT) is up 15% since last summer and Facebook (FB) too, Texas Instruments (TXN) is up 20%, Priceline (PCLN) is now $1,785 (32%), Broadcom (AVGO) is up 35%, Adobe (ADBE) is up 33% and PayPal (PYPL) is up 20%.
The rest are pretty flat and who cares what the other 75 are doing as they only USED to make up 28% of the index, now closer to 20%. So, in the Nasdaq (our leading index) we have just 10 out of 100 stocks moving up over 25% on average times 80% weighting is 20% and last August the Nasdaq Composite was at 5,340 and now 5,890 so up 550 is just over 10% higher.
In short, it is ALL BS manipulation of a select few stocks which force index funds and ETFs (the dumb money) to buy all the rest of the index stocks – dogs and all and THAT is how we get record market highs on low volumes. The dirty secret of trading algorithms is that they have nothing to do with finding good stocks and everything to do with manipulating the market. THAT you can predict with incredible accuracy because you are manipulating the large mass of market participants rather than trying to figure out whether or not the new IPhone will sell in China.
While it may be illegal for Goldman Sachs (GS) to put an analyst on TV telling you to buy the stocks they already hold positions on, it's not illegal at all for them to have an analyst go on TV and tell you to buy AAPL or MSFT or GOOGL or AMZN, no matter how silly the valuation, knowing that your lemming-like purchase of the leaders will drag all the smaller stocks they hold along with them. When they want the markets to go down, they simply do the opposite and the lemmings dump the big stocks and GS, et al get to go bargain-hunting once again.
Last year, we had a bit of a sell-off in early April after a sudden run-up to close March but it didn't last but last October, when the September prop job ended, we dropped 10% into early November before being "saved" by Trump's election. Now our concern is that Trump's agenda – the one we rallied on, may begin to be discounted somewhat and we're still at those highs – up 20% since election day (and so, 10% higher than last August).
Despite the Atlanta Fed's GDPNow downgrades for Q1 to 0.9%, Q4 GDP was revised up from 1.9% to 2.1% this morning, which is just what the bulls need to finish the quarter off with a bang so we'll take the money and run on the shorts and wait for better entries (oil is still good, just not the indexes until they fail our lines again). Until then – it's going to be "watching and waiting."
