by phil - November 3rd, 2015 7:47 am
Here we go again!
Yet another low-volume, BS rally takes us back to the "breakout" level of S&P 2,100 and we get moves like this because TA sheeple are so easy to fool that fooling them has essentially turned into a profit center at many iBanks and Hedge Funds.
After all, what is the value of a stock if not whatever the last idiot paid for it? Since that actually sounds like a puzzle to most of the people reading it – we Fundamental investors will always have a tremendous advantage in almost any kind of market – EXCEPT THIS ONE!
This market, like any bubble market, is a fool's paradise that rewards the rats for hitting the BUYBUYBUY button – over and over again. Train them well enough and, long after the cheese stops coming, the rat will still keep hitting that button, over and over again – until they have no money left to buy with – and then they seem downright surprised when they get dissected at the end of the experiment!
Look who "won" the most recent round of S&P madness. All the most shorted stocks led the rally – almost as if SOMEONE were purposely squeezing the stocks to force people to capitulate and buy some of the worst stocks in the index – just to provide enough energy to get us back over that 2,100 mark one more time. How manipulated was the action? So much so that, at 10:35 am, I was able to say to our Members:
As the moment we have Dow (/YM) 17,684 (85 off the recent high), S&P (/ES) 2,085 (9 short), Nasdaq (/NQ) 4,669 (21 shy) and Russell (/TF) 1,166 (down 10). Figure they make an effort to get those back and a failure at 17,750 or 2,100 or 4,700 or 1,175 are all good potential short entries.
We hit our targets right on the button so, at 3:05 pm in our Live Chat Room, I said:
by phil - November 2nd, 2015 8:27 am
I'm not talking about China.
We did that already in our Live Member Chat Room and you can follow this link to find out all about what's going on over there. China is still conducting their Plenary Meeting this week and we'll get the details of their next 5-year plan by the week's end – no point in speculating but, on the whole, we're expecting disappointment as the reality hits investors that you can't fix a $10Tn economy while simultaneously pretending it doesn't need fixing.
You'll hear a lot of people telling you how much Europe's PMI has improved (Asia's was terrible!) in October but, in reality, it still sucks compared to 2011 and, keep in mind, this is the Global Economy WITH over $3Tn in stimulus from China, Europe, the US and Asia – what would it look like without these massive inflows of FREE MONEY?
There are a lot of moving parts to the Global economy and it's easy to forget the context, especially when we're in year 6 of QE programs, which means there are hundreds of thousands of traders who began their careers post-crash who have never known any other kind of economy. Sure, 5% of the Global GDP is always used to prop up the equity markets and force down bond rates each year. It's bound to continue another 5 years. After all, what can possibly go wrong?
We get our own PMI report this morning at 9:45 followed by ISM at 10. Tomorrow we'll have Economic Confidence (8:30) and Factory Orders (10:00) and then, on Wednesday, Fed speak begins with Brainard at 5:30, Harker (8:45), Yellen (9:45), Dudley (2:30) and hawkish Fisher (6pm) gets the last word of the day. Seems like they are afraid of something on Wednesday – probably it's Mortgage Applications at 7am or maybe they are trying to get ahead of Thursday's Productivity Report (8:30) or Friday's Non-Farm Payrolls (8:30).
Whatever it is, it's something as we have Harker again on Thurs (8:30) and Dudley again (8:30), Fisher again (9:10), Evans (10:40), Tarullo (12:45) and Lockhart (1:30) plus Bullard (7:30) and Brainard (4:15) on Friday. That is, by far, the most…
by phil - October 30th, 2015 8:30 am
There's still plenty to worry about.
Despite one of the best months ever for stock market bulls, these stimulus-driven rallies do not tend to have a lot of staying power and now that the Fed has once again not raised rates (and neither has the BOJ this morning) - where is the next catalyst going to be coming from. What is going to drive us over the Summer highs of 2,132 on the S&P, 18,137 on the Dow, 5,232 on the Nasdaq, 11,032 on the NYSE and 1,296 on the Russell?
Considering the Russell 2,000 is actually DOWN 35 points for the year at 1,165 and still 10% off it's June highs – one has to wonder what the Hell is wrong with America's small-cap index or, perhaps more correctly, what the Hell is wrong with the Dow, Nasdaq and S&P? As you can see on this chart, the Russell stocks have not benefitted from the massive QE boost the way the Big Boys in the Big Indexes have – and neither has the broad-based NYSE, which is 6.7% off it's May high and down 2.7% for the year.
In truth, in much the same way as the 0.01% are making Billions while the bottom 99% are struggling to make ends meet – the Top 1% of our Corporate Citizens are becomming astoundingly wealthy – getting ever-larger slices of the pie while the bottom 9 out of 10 of our Business brothers struggle to survive. If the US GDP is growing 1.5% and AAPL, MSFT and GOOG grow 20% – where does the other 18.5% come from?
There is a myth of an ever-expanding pie which is used by Conservative pundits to make excuses for people who have half the pie already to take another big, fat slice but the pie is not growing folks – not that fast anyway and, when they take themselves a bigger slice, that simply leaves less for you. Well, maybe not YOU – you are reading a stock market report in the morning, so you are a reasonably successful person – much more so than than the bottom 51% of this country, who make less than $30,000 per year. …
by phil - October 29th, 2015 6:25 am
Wheeeeeee, what a ride!
We were doing a Live Webinar for our Members during the Fed excitement yesterday and our short positions into the Fed paid off HUGE – and then they reversed but now our new shorts are paying off HUGE this morning – and who knows what will happen after today's GDP Report (8:30)?
We took advantage of the silly move up into the close to press our index hedges on SQQQ and SDS in both our Short-Term Portfolio and our Option Opportunity Portfolio which is still drifting around the +15% level as we near the end of our 3rd month. Our best-timed call of the afternoon came at 3:25, when I said to Members in our Live Chat Room:
19,200 is a bridge too far for /NKD – good short as long as the Dollar is under 98.
See – Futures trading is FUN! Early this morning (4:03 am, EST) in our Live Chat, I put up a note for the morning shorting lines on our indexes:
We just lost 2,080 on /ES and 1,175 on /TF, so those are fresh bearish horses (tight stops above) and we're lined up with /YM 16,650 and /NQ 4,665 so make sure all are below if you are shorting.
Already this morning the S&P is back to 2,075 so our stop is 2,075 for a nice $250 per contract gain that pays for our Egg McMuffins – a nice way to start the day. They Russell is testing the 1,170 line and that one is good for $500 per contract – maybe croissants this morning!
It's wonderful to be able to take advantage of silly market moves after hours. Have you ever read something in the paper and wished you could place a trade but the markets are closed? Futures trading fixes that problem. Speaking of trading problems, Jim Edwards at Business Insider just published a list from Credit Suisse of "13 psychological biases that explain why we make terrible financial decisions even though they…
by phil - October 28th, 2015 8:23 am
I'm still the only one expecting this.
The markets are near record highs, China has a 6.9% GDP (our less than exciting GDP report comes out tomorrow), Europe has settled down, the currency markets are calm and investors are back to being complacent. What better time than today for the Fed to raise rates?
Remember, the Fed was going to raise rates in July, but they put it off to September and, in that meeting, they said:
After assessing the outlook for economic activity, the labor market, and inflation and weighing the uncertainties associated with the outlook, all but one member concluded that, although the U.S. economy had strengthened and labor underutilization had diminished, economic conditions did not warrant an increase in the target range for the federal funds rate at this meeting. They agreed that developments over the intermeeting period had not materially altered the Committee's economic outlook. Nevertheless, in part because of the risks to the outlook for economic activity and inflation, the Committee decided that it was prudent to wait for additional information confirming that the economic outlook had not deteriorated and bolstering members' confidence that inflation would gradually move up toward 2 percent over the medium term.
That meeting was held on September 17th and the S&P 500 was at 1,950, having just recovered from the August crash. The Fed's non-move did not have the desired effect and the market dropped right back to the lows after their announcement that the economy wasn't quite strong enough to handle a rate hike.
Now we're 5% higher than we were and the Fed is essentially damned if they do or damned if they don't hike rates (which is why we're short the indexes up here) and they do NEED to hike rates – that's very clear from reading the minutes. So why wouldn't they hike rates today, when the conditions are favorable and the markets can stand a small hit? Who knows where we'll be on Dec 16th (next meeting) or Jan 27th?
by phil - October 27th, 2015 8:30 am
Oh this is so ridiculous!
After opening down 200 points (1%) the PBOC boosted the Chinese markets with yet another announcement of easing monetary policy. This time the PBOC cut borrowing cost on reverse REPOs:
CLEARLY the PBOC is terrified of another market correction and will do ANYTHING to support it – even look like idiots as they add more stimulus measures the next market day after they announced another fresh batch. This is not economic policy – this is micro-managing the markets and you don't micro-manage things you aren't very concerned about, do you?
Keep in mind, in the big picture, the Shanghai is still down 35% from 5,200 just a few months ago, so whether it goes up or down 1% in a single session should not be something China's Central Bank should be fussing with, yet they are TERRIFIED of any sign of weakness. And well they should be – 40% off or more from the highs is NOT where you want to finish your year and China certainly doesn't want the market collapse to mar their 13th Plenary Session this week.
Indeed, just like in the US, everything is AWESOME in China – at least according to the state-controlled media (theirs, not ours – well, ours too). In fact,…
by phil - October 26th, 2015 8:20 am
Not much reaction to China's rate cut on Friday:
Up 0.5% after a surprise rate cut on Friday when we're still 35% off the highs is NOT what you want to see in an "improving market" – especially one that is "growing at a 6.9% annual pace." Oh sorry – I had to take a break to fall off my chair laughing… That's right – there are STILL people out there who believe China's GDP numbers are real. Personally, I'm bored discussing them so let's leave them to their delusions and take advantage of our chance to short China's ETF (FXI) as it retests $40.
Our own markets have been much more exciting anyway, with the S&P blasting up 200 points (10.6%) in just 4 days last week. This is, of course, perfectly normal in an $18.5Tn index. After all, according to the Money Flow index, a whole net $73Bn flowed into the S&P last week, so doesn't it make perfect sense for the index to gain $1,800Bn in value?
ALL it's going to take is another 24 weeks like that and the flow of money in will catch up to the implied gain in value – that should be no problem, right? I know I have at least $10Bn laying around somewhere to throw into the pot, chasing after all these overpriced stocks – how about you?
As I noted on Friday, Google (GOOG), Microsoft (MSFT) and Amazon (AMZN) alone added $100Bn (5%) of the S&P's market cap gains and the rest was pretty much other stocks following their lead. As you can see from the performance chart, Healthcare and Basic Materials got left behind but it was a huge week for Industrials and Technology and even Consumer Goods, Financials and Services joined the party.
The ECB is rumored, due to little bond supply to buy stocks with their QE program. Doing so
by phil - October 23rd, 2015 8:32 am
Now China has lowered their lending rates – again!
That's right, first thing this morning, the PBOC announced another 0.25% rate cut at 7:30 this morning along with a 50 basis point reduction in reserve requirements AND completely removed the bank deposit rate ceiling. That, of course, sent our Futures flying and, as I noted yesterday, is surely more proof that China's 6.9% GDP growth numbers are legitimate – Central Banks always panic with massive quantitative easing when their economy is growing 6.9% per year, right?
Fortunately, we had flipped long on the Russell (/TF) futures into yesterday's close at 1,155 and those punched up $1,000 per contract gains but, unfortunately, we were short on the S&P (/ES) futures at 2,050 and those are down $1,000 per contract at 2,070. So, what do we do? We take the profits from /TF and buy more /ES shorts at 2,070, of course! By the way, the replay of Tuesday's Live Futures Trading Webinar is HERE.
Our weekly live trading webinars are occasionally fee (Tuesday's was) but are part of the service provided to followers of our Options Opportunity Portfolio over at Seeking Alpha. Even though we got this week "wrong" by working our way into neutral (down $300 since last weekend's review) it's because we are protecting what are now $18,645 in gains (18.6%) on closed positions since our August 8th inception date:
Many of these may seem familiar to readers of our morning posts, as we often discuss similar position in our morning reports but it's inside the Member Site where we mark the actual trades, live, while the markets are open and then track them in virtual portfolios like this one. Oddly enough, the ultra-short Nasdaq ETF (SQQQ) has been one of our biggest winners but it's also our biggest current loser on the open side. We'll be repositioning those this morning on the super-spike back to 5,000 (about 4,625 on /NQ).
by phil - October 22nd, 2015 8:22 am
I've got Draghi fever, she's got Draghi fever
We've got Draghi fever, we're in debt
She's gone Dollar crazy, I've gone Euro hazy
Ain't no thinking maybe, we're in Debt
Are we still taking this GS puppet seriously?
Well, someone is as the Global Markets are anxiously waiting to hang on every word Draghi says in his speech following the ECB rate non-decision (you heard it here first) at 8:30. The truth is that the Central Banksters are running out of ammunition and have now begun to ask the Governments to reverse the austerity programs they demanded to now stimulate the economies before deflation begins to erode the value of the Bankster's assets, which would collapse their loan to value ratios and lead to BIG TROUBLE in very short order.
The ECB is already running a $1.2 TRILLION bond-buying program, providing up to $70Bn in MONTLY artificial support for Sovereign Debts. Without this backstop – one has to wonder what the real interest rates in Europe would be. All that this form of QE actually accomplishes is allowing countries with very risky credit to borrow more and more money while the population of savers is underpaid on their retirement accounts.
Did I say underpaid? That's an understatement as rates have now gone NEGATIVE as some banks are now charging fees to depositors and paying no interest at all! The official rates in Switzerland, Sweden and Denmark have already gone negative as Governments are pulling out all the stops to get their people to throw their retirement accounts into the stock market or, in the very least – to go spend it on something.
by phil - October 21st, 2015 8:12 am
What an insane market!
At 4 am, just after Europe opened, the Futures blasted off for no particular reason. It wasn't too surprising as they were the same long lines we played in yesterday's Live Futures Trading Webinar – so great money to be made by the early risers but now we're back to the lines we shorted earlier yesterday, at 11:10, when I said to our Members:
Lines of the moment are /YM 17,200 (below), /ES 2,035 (below), /NQ 4,450 (below) and /TF 1,165 (below) with /ES at 2,028.5 playable short with a stop over 2,030 (or any of the others going over) and then short the laggard if we're back at 2,035.
This morning we're right back at 17,200, 2,030, 4,445 and 1,165 so of course we're back in the saddle again – taking our short entry on the Russell as we follow our shorting rules, which are:
I do like shorting our majors this morning at 17,200, 2,035, 4,450 and 1,165 – ONLY ON CROSSES BELOW by the 3rd of 4 and out if ANY of the 3 cross back over and needing to quickly see the 4th index confirm the drop.
Follow those simple rules and, as we demonstrated in yesterday's webinar, you can limit your losses while waiting for that big victory when things break your way. We made about $200 live for our Webinar participants – who else gives a webinar where the attendees come out ahead?
As you can see from Declan's S&P 500 chart from PSW's Chart School, 2,050 is a major line of resistance but 2,035 (see yesterday's post) is the 5% line on our Big Chart and that has been unbreakable during the live sessions so the market manipulators are now pulling out all the stops to push us over the line in the thinly traded futures to keep the retailers thinking Everything is AWESOME – even when the data shows that it clearly is not.