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Final Friday of the First Half of 2017

Poof!

Just like that, half a year has gone by.  Who'd have thought, just 6 months ago, that the World would still be here with Donald Trump as President?  Given how bad we thought things were going to be, they are actually not so bad.  Yes, of course the President's Team is doing everything they can to bring about the Apocalypse but, so far, they've been generally ineffective at, well, everything: "Republicans frustrated as their to-do list grows."

So here we are, closing out the 2nd Quarter with the market near record-highs, despite yesterday's pullback, though we find it hard to trust anything that happens pre-market after yesterday's obviously fake prop-job.  It is the last day of the quarter and windows do need to be dressed but, as I predicted in Wednesday's Live Trading Webinar, the sellers took full advantage of the pumpers yesterday and sold into everything they had – giving us the biggest volume day of the month as declining shares and volume overwhelmed advancers 2:1.

The VIX briefly spiked up 50% as the market plunged and that sent SVXY (we're short on them) plunging back down but a long way to go to our $105 target in September so we're expecting to see a general up-trend in volatility over the summer – but let's not get ahead of ourselves and see how the quarter ends first. 

Though the Nasdaq is poised to finishe the month down about 1%, that's nothing compared to the amazing run it's had all year and, as evidenced by the chart below, literally nothing else seems to matter as EVERY OTHER INDICATOR has been falling while the Nasdaq has climbed 15% in the past 6 months.  We have been using the Nasdaq as one of our primary hedges (SQQQ) and they paid off in spades yesterday but that's nothing to get excited about as these dips don't tend to last long (so far).

More of a concern than macro indicators, however, is how much money it's been costing the G20 to prop up the markets for the past decade as Golbal Debt just hit $217 TRILLION – which is 327% of our $67Tn Planetary Output.  In fact, $70Tn has been added in 10 years for an average of $7Tn a year, which is 10% of the Planet Earth's GDP added in debt, each year.    

Now, I know you want to think this is normal but, if it were, then we'd be 1,000% of our GDP in debt every hundred years and the fact of the matter is that we somehow managed to go the last 2,000 years at 246%, or about 1% per decade.  100% per decade is much more than that.  See how easy it is to put things in perspective?   

Corportate and Personal Debt (Non-Financial) is responsible for the bulk of the gains.  The US "only" added $6Tn of Government debt and the Fed's $3.5Tn spending spree doesn't even count as debt nor do Europe and China's money-printing operations but Corporations have funded their growth by borrowing $5Tn per year (without paying it back) in this ultra low-rate environment.  

As you can see from the chart, the Fed never "fixed" anything, they merely transferred the burden of debt from the banks they protect to the non-banks they could care less about.  Now that the burden has been shifted, the Fed is ready to raise the interest on those outstanding balances and look how rapidly that is affecting the credit ratings of Emerging Market Countries, which will then force them to pay even higher borrowing costs down the road:

We talked about the transfer of wealth from the poor to the rich that is going on in yesterday's post and, later in the day, in our Live Member Chat Room, I dug up this great chart, saying: "Here's what's wrong with this country in one picture.  Remember, when I am talking about the Top 1%, I'm talking about our Corporate "Citizens" as well:" 

"The Fed is PLANNING to double that interest on debt figure – it could easily triple and THEN Trump is planning to pump it up 50% from there.  So let's see, that's $200Bn x 3 = $600Bn + 50% = $900Bn/year in interest.  I wonder what will get cut to pay for that (because raising taxes is out of the question)?"

The US Government isn't the only one that will suffer from rising rates, ALL of that $217Tn will have to be serviced at 3% ($6Tn/yr), 5% ($10Tn/yr) and maybe 7%($14Tn/yr) which is FANTASTIC for the Top 1% and the Banksters (same people, really) but does not bode well for the rest of the planet Earth when 20% of their annual GDP has to go towards servicing the debt.  

They set the trap, lured us into the trap and now they are springing the trap – game well played by the Global Banking Cartels known as "Central Banks".   And it doesn't matter if you, as an individual, live a debt-free life because your Government has been borrowing on your behalf and now, like Greece – where the garbage is piling up in mountains on the streets - YOU will be forced to live with austerity measures in order to insure the Banksters get their loans repaid – no matter what interest they choose to charge.  

I do not like what I am seeing coming around the corner at us and yesterday's anemic 1.4% GDP and the 2.3% drop in Corporate Profits certainly didn't help.  We are still very well-hedged going into the holiday weekend and very much in CASH!!!  I'm very concerned about what happens in July.

Have a great weekend, 

- Phil

 


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  1. Good Morning.


  2. Good morning!  

    I don't have much confidence in the open but we'll see.  Going to go grab some breakfast as I haven't eaten yet and it's 3:30 here already (I'm the only one who's awake, so I'll be tired when everyone else wants to go out later.  

    It's a terrible day to try to guess the markets.  End of quarter, pre-holiday weekend – anything can happen.  On the Big Chart – it would be very, VERY bad if any of the other indexes confirm the Nasdaq's break below the 50 dma – watch out for that.

    It looks like we're opening up a bit, so not too much danger so far but don't be sucked in by anything less than a strong bounce (and I'll work out those lines later).


  3. Sold the last of the TOO.


  4. DRYS… Been watching this train wreck for a while, morbidly fascinating. Stay away, I know, but any comments? Ideas? Any value at all, and why? Just wondering what others think


  5. Bought some APRN at $9.52 for a scalp.  IPO yesterday at $10.  Was marked down from expected $15-$17 range.  Banking on Goldman getting it back to IPO price.  Risking about .30.


  6. Phil,

    When you have a chance, regarding CBI (infrastructure), given the present gridlock in Congress on healthcare, if the Repubs aren't able to cut $800 bn, where are the funds coming from to fund a significant infrastructure spending bill? Surely Trump & Co won't put forth a plan to privatize the nation's highways and bridges. If Congress is deadlocked over healthcare, it would appear that meaningful infrastructure spending is not realistic; where will the money come from to increase CBI's revenues? Where are the catalysts that will boost CBIs numbers?  Other than possible favorable changes on the litigation front, what bullish developments loom on the horizon?

    Thanks as always 


  7. Hope you enjoy your trip


  8. Phil – I saw your comments about the mall being not that busy in France. You have to have different expectations there, you might not see crowds shopping there like you see here especially in NJ. Paris is a bit different of course, but still…


  9. And speaking of trainwrecks – Trump is going after Morning Joe again this morning. And if the allegations that Joe mentioned are true, Trump is really, really mentally sick:

    http://talkingpointsmemo.com/livewire/morning-joe-hits-back-trump-tweets

    “This year, top White House staff members warned that the National Enquirer was planning to publish a negative article about us unless we begged the president to have the story spiked. We ignored their desperate pleas,” the co-hosts wrote.

    It's amazing that Trump can't even be trusted to tell the truth about small things like that. And yet Hillary was the liar… In Trump's case it's pathological.


  10. STJ – Just hoping that Robert Mueller can find some incriminating evidence so that we can get him outta there !


  11. Looks like I didn't miss much. 

    Not only is the mall filling up in the afternoon but it's way bigger than I thought.  The part by the hotel is just the annex and then there's a bridge to the main 5-story mall.  Food is very expensive though it includes tax and tip but what ever happened to bread and butter – no one sells that anymore?  That was all I ate when I was a kid staying here. 

    Lots of private security, that's got to be an employment-booster.  The mall has them at every entrance and some roamers and the bigger stores have their own at the entrances.  Profiling seems to be OK here because they rarely stop people with bags and backpacks. 

    As I thought, the early enthusiasm ran into selling pretty quickly, we'll check the levels next.  DAX and EuroStoxx had bad finishes:

    CBI/8800 – They do fine without the bill, they were getting killed on the Westinghouse dispute and, ironically, now that Westinghouse won't be getting CBI's money, they may get a Government bailout (even though Toshiba owns them now) and that would allow them to move forward on more contracts where CBI would be the logical contractor!  CBI doesn't have to "boost" their number when their number is $4 per $20 share, do they? 

    Mall/StJ – As noted above, was a poor sample.  I have the right expectations, Jackie and I were discussing the relative demographics of NY and Paris on the ride over (I'm such a fun Dad!) as I'm training her to be a good consultant.  

    Good for the Joe's:

    “The president’s unhealthy obsession with ‘Morning Joe’ does not serve the best interests of either his mental state or the country he runs. Despite his constant claims that he no longer watches the show, the president’s closest advisers tell us otherwise. That is unfortunate. We believe it would be better for America and the rest of the world if he would keep his 60-inch-plus flat-screen TV tuned to ‘Fox & Friends,'” they wrote.

    Résultat de recherche d'images pour "trump msnbc cartoon"


  12. Outta there/Albo – And then we're stuck with Pence and, if they get Pence – Paul Ryan!!!!  If they get Ryan, Rexx Tillerson would become the President of the United States.  There's simply no way we can win this one….


  13. Phil – Any of those would be a vast improvement over Trump.


  14. It would better to have a mulligan on the elections now that the people see what the real plans are as opposed to what they were sold last year!


  15. They got exactly what they voted for. Unfortunately.


  16. Coulda had Bernie, but noooo… I would have voted for him over Trump. He would have won too.


  17. GDPNow forecast for Q2 cut from 2.9% to 2.7%… I don't think this is the end of it. 


  18. So where are we on the indexes?

    We'll ignore 2,445 and focus on our 2,440 line, which is much stronger.  30 points down to 2,410 gives us 6-point bounces to 2,416 and 2,422 so below 22 is weak.

    On the Nas we know 5,000-6,000 is our range so 5,500 is big and this range is a failure at 6,000 (even though we never got there) so gives us 100-point bounces to 5,600 and 5,700  and we're between the two at the moment.  The logic is, if we are going to be making a bullish breakout, then the strong bounce line off the base shouldn't be a problem.  So far, 5,600 is holding and all is well as long as it does.

    1,200 is the Must Hold line and 20% above is 1,440 and we just failed there so clearly that's the top line we want to use but the bottom is a bit trickier.  1,380 is the 15% line and that was the low for the month so that's down 60 with 12-point bounces to 1,392 and 1,404 so anything above that is generally bullish.

    GDP/Learner – Wow, good thing the Quarter is ending or it could go much lower.


  19. Phil/EWJ

    Put getting more cheaper

    regards







  20. Well, it all seems very quiet around here so, if you don't mind – I'm going to go have dinner in Paris!  

    Monday is a travel day so there will be a post and then I'll try to be on by 11 but the market closes at 1 anyway.  Tuesday we're all off and Weds will be like Monday as I head to London, then Thurs and Friday kind of normal.

    EWJ/Pat – Not sure what you mean, EWJ has trended down all month.

    From the Webinar:

    • We were liking /NKD short at 20,240 with stops over 20,250
    • EWJ Sept $54 puts for $1.05 are also good hedges.

    Have a great weekend/Holiday everyone, 

    - Phil


  21. Phil,

    Thanks for the CBI thoughts. Hopefully will have some new roads/bridges in by the time you get back.

    Enjoy your vacation.


  22. APRN – Got a weak .20 bounce.  Stopped out at entry. 


  23. Muck – "morbidly fascinating."

    What Spock might say at the Paris cemetery and this…  Caixin PMI, Chinese private sector small and mid size, 7 month low in April, May below 50 for the first time in 11 months on increased unemployment. Confirming Standard Chartered's Chinese PMI hit a 16 month low. Yet, China RMB had best week vs the King since 2005. Japan IP tanked -3.3% lowest read since 2011. 

    King also at a 14 month low vs Euro. When your the go to for liquidity, you pay the price.  Despite Carney and Draghi's jaw boning, Europe is still sinking. Draghi: "We can be confident that our policy is working and its full effects on inflation will gradually materialize."  With Eurozone Real GDP growth having declined since 2000 and lower than 2011, is that gradually? Draghi better hope an economy materialize's out of thin air and soon. Not gonna happen and here's why….

    We have seen what is now claimed to be the longest economic expansion of its type, over FIVE years of "recovery". What you see on the balance sheet and statements is a product of financial engineering, viz. stock buybacks, etc. What makes the world go round?

    MONEY as in Corporate Profits from Current Production and Corporate Net Cash Flow. Newsflash, there has been NO GROWTH in EITHER going all the way back to Q4 2011. Shrinking profits and cash flow, with all time high PE's?  That's not an expansion or recovery, its a contraction and far worse than a recession.

    So if you think those stocks are worth more than they were at end of 2011, bully for you and the sucker you might sell them to, as the numbers say otherwise. Like Draghi and the central bankers, better hope there's not a wake up call and out.


  24. /CL – After hitting a 10 month low, last six days, short covering in oil at the expense of tech stocks being sold to cover margins. Dollar dip means lower foreign prices in dollar terms.

    42.63 +7.5% = 45.82  chart says $45.50 is resistance on the last two bounces, it hit 45.80, $46 would be fib .381 or (1 – .618).  A lot of confluence so it might park until either impetus or gravity take over.  

    My spider sense says weaker shorts took profits, to flush the die hard shorts, a potential 50% retrace of the last dip to $47 or .618 = $48 and then it could turn nasty. Especially if what I think is going to happen on July 5th, covered here and here, happens.

    Unlike Burt, who got a piano lesson, keep your eyes peeled to the sky it could be a name brand and remember you really can't complain and Out.


  25. Phil – Cut loose and enjoy Paris, it's not a lonely town and Out.


  26. Scottmi/OMER  Established a long spread and also a separate short put position.  Also, bought back half the position I sold for $26.  Also added to REI based partly on the fact I agree with this: 

    As a reminder, Citi's head technician Tom Fitzpatrick, explained yesterday why oil is now due for a rebound, or as Citi puts it… 

    "Oil hits the floor and is now set to soar!"

    We believe that WTI Crude has posted a short term bottom. Previous short term bottoms have typically seen strong upside follow through with an average low to high rally of 22% over three weeks. 

    The present price action on WTI Crude is also very similar to that seen in October/November of last year and in that instance, we saw a rally of nearly 23% in the 3 weeks after the low was posted. 


  27. Enjoy your holiday in Paris with your family, Phil.  


  28. NKE – NIKE extends today's strength to +11% up to its year-to-date/March peak of $59.00.

    ~~(Also confirms during earnings conference call a new pilot program with Amazon (AMZN).

    AMZN is everywhere !


  29. Phil, enjoy your vacation.  Well deserved.

    Have a good weekend everybody.  Monday is going to be a very slow day.  But sometimes the bots can move things around quite a bit.  We'll see.


  30. CBI related, looks like the sale of the capital services business went through but with slightly lower price than expected.  $50 mln pretax charge this qtr.   Perhaps that's why it is down 7% today.

     

    THE WOODLANDS, Texas, June 30, 2017 /PRNewswire/ — CB&I (NYSE: CBI) today announced it has completed the sale of its Capital Services business to an affiliate of private equity firm Veritas Capital. CB&I and Veritas Capital agreed to amend the sales price to $700 million, with net proceeds of approximately $650 million after working capital adjustments and transaction costs. CB&I will record an additional non-cash pre-tax charge of approximately $50 million in the second quarter of 2017 to account for the change in sales price.

    "I would like to congratulate the Veritas Capital and CB&I teams on the successful and timely close of the transaction," said Patrick K. Mullen, who assumes the role of CB&I's Chief Executive Officer July 1. "Completing the sale of our Capital Services business is a significant milestone in CB&I's plan to delever our balance sheet, and we expect an additional positive impact on our overall business by recognizing related cost synergies."

    About CB&I

    CB&I (NYSE:CBI) is a leading provider of technology and infrastructure for the energy industry. With over 125 years of experience, CB&I provides reliable solutions to our customers around the world while maintaining a relentless focus on safety and an uncompromising standard of quality. For more information, visit http://www.CBI.com.

     


  31. Some selloff last few minutes… very interesting


  32. Today, /CL went from 44.94 to 46.30 SQUEEZE TOIT!!!!


  33. Muck – "Some selloff last few minutes… very interesting.

    Notice what oil did into and after close? Again, liquidating tech stocks to cover their oil shorts. Evidenced in this chart where they got furious from 3PM EST on.

    Last two bounces were approx 12-14 trading day duration, we are at 7 in the current bounce. Nice place for it to fraction off or just continue on up. So from current confluence at 46.33 it could drop or… 

    If there is more squeeze on the shorts, a potential 50% retrace of the last dip (52.22 hit 42.05) to $47.13; or .618 = $48.26; or .763 (1 – .236) = $49.81.  FYI, .763 was the retrace on the last dip and Out.  


  34. Gin  - "The present price action on WTI Crude is also very similar to that seen in October/November of last year and in that instance, we saw a rally of nearly 23% in the 3 weeks after the low was posted. "

    Word of caution, that was during the Trump rally, not so much in "effect" right now.


  35. Guys – looks high to me:

    http://www.multpl.com/shiller-pe/


  36. waiting for tsla news….


  37. Nat – that last chart you posted about oil squeeze had no info as to what each line was and didn't make sense without know what the different color lines meant or what the scale is that is being measured? Can you enlighten us with what we are seeing on that particular chart?


  38. NVDA and XLNX- both stocks over priced, especially NVDA. I am sure we have some techies here who are qualified to ruminate on each company's technology, i.e. , are they in the right business for near term and beyond? I confess to ignorance when it comes to tech so looking for some professional opinions. 

    Thx.


  39. still no tsla news…

     

    hmmm….


  40. @pstas – NVDA – definitely overpriced but in the sweet spot right now as its GPUs are being used for everything AI, autonomous cars etc.  Discussed this with Phil in a previous webinar, too expensive to go long and dangerous to short – stock is volatile.   I have sold some Dec $95 puts when the stock was in $110 range, but need a tech sell off for the stock to go below $100 when we can perhaps discuss with Phil again. 


  41. craigs, come on you can figure this one out.  whatis SOXX, BATS, NDX, TVC?

    @arthurhobson


  42. Learner- thx for the info.

    Know anything about the other one? XLNX?


  43. XLNX – makes FPGAs (field programmable gate arrays) used in every end market.  Steady eddy – Drops $2+ in eps to the bottom line annually and clocks $500-$600 mln in sales every qtr.  Currently @$60+ share price is sitting at the expensive end of its PE range.  Intel bought the other size competitor ALTERA and so XLNX is competing against Intel which is not easy.  Future growth in 5G backhaul, and cloud servers (against Intel) and every other hype market – autonomous cars etc.  More mature company and products compared to NVDA and typically grows at the rate of the semi industry and the economy.  If it gets cheap in a tech sell off, Phil might like this boring semiconductor company.  



  44. Michael Cohen Goes From Trump’s Inner Circle to Scrutiny in Russia Investigation


  45. With Beaches Empty, Christie Wages One More Fight


  46. India could become the first digital, cashless society





  47. Chinese Companies Can Stand Sunlight





  48. Auto sales like to continue falling


  49. Good morning!

    It's 7:42 in Paris so markets here aren't open yet but I'm switching hotels today – we're heading to Disney for July 4th, then on to London.  

    Overall, Paris is very nice, streets still safe, nothing at all like you see on Fox (not even close).  We walked the Seine from below the Eiffel Tower to Notre Dame and it was so nice both my girls want to take a year in Paris now.  People of all races and religions dancing and singing together in the Latin Quarter – it's a Conservative's nightmare!  

    The city is generally clean, roads are in good repair (unlike NY), plenty of construction and plenty of shopping going on – and not just tourists, the Parisiens seem to be out in full force.  Very poor quality Uber drivers – we switched to taxis, which are no more expensive but generally well-trained with a good knowledge of the city. 

    One of the things I love most about Paris is how well-trained the average cooks are.  We have been getting the best street food, consistently and sidewalk cafes serve up great meals.  I decided to teach the kids how to travel cheaply, since the next time they're here, they're likely to be on their own.  

    Now comes the luxury part of the trip as we head to the Disneyland Hotel and then the Four Seasons in London – hopefully I walked enough the last few days to pay for the meals ahead!  


  50. Oh, by the way – unlike NY and many US cities, there is almost no empty retail space here.  Every nook and cranny if filled with commerce and most places are closed Sundays and the kids simply couldn't believe that restaurants here close between lunch and dinner – an alien concept in the US…