by phil - November 10th, 2014 8:19 am
What a fun weekend we've been having in Vegas!
We had a great dinner at Nobu on Saturday night (co-sponsored by TradeStation), followed by some poker and yesterday we had our first seminar day where we looked at the Global Macros, discussed trading techniques and made a few new picks for 2015. That was followed by another great dinner at Rao's last night and this morning we are getting started at 6am Vegas time and will be doing live trading all day long. We will be simulcasting in our Live Chat Room via WebEx – Greg will post a link when it's ready.
Meanwhile, all quiet on the Global front over the weekend or, at least, just the normal nonsense so the markets continue to drift along at the highs but it's a very busy week and we'll have to wait PATIENTLY to see how things play out. We have 4 Fed Speakers this week but not too much data, which will keep the focus on the tail end of earnings. So far, so blah on that front:
As noted by the WSJ: "While profit gains have generally been solid, many blue-chip companies are posting weak sales growth or outright year-over-year revenue declines, causing worries about their long-term growth prospects. Others are reporting earnings increases driven by factors that don’t reflect sustainable improvements in their business, such as share buybacks and cost-cutting efforts."
Amplifying those concerns is a softening global economic outlook. U.S. multinational firms are now contending with slowing economic growth in key markets like Europe and China, and a strengthening dollar that threatens to further damp revenue by reducing the value of payments collected in foreign currencies when converted into dollars.
Few investors expect a sustained stock decline. But many traders and analysts say they fear future growth at U.S. companies won’t be robust enough to meet the high expectations currently implied by the above-average valuations on blue-chip shares. Friday’s employment report for October, which showed another month of modest job gains tempered by only slight increases in wages, underscored those concerns.
by phil - November 7th, 2014 8:29 am
Productivity was down and costs were up.
That's the news we got yesterday as we say a 30% drop in productivity, from 2.9% to 2% along with a drastic increase in unit quarterly labor costs – from -0.5% to 0.3%, which bumped the annual labor costs up by 60%, from 1.5% to 2.4%. Not surprisingly, this led to employers cutting the number of hours worked by 0.2% to save some of the rising costs that they have been unable to pass on to consumers.
These are, of course, not great numbers but that didn't stop the market from flowing higher – kind of like that lava in Hawaii that can't be stopped. Also like the lava – it's a fairly low-volume flow but, if you are bearish – it's very destructive!
Keep in mind that we're hitting these highs only after a TREMENDOUS amount of stimulus from Japan and Europe on top of very doveish outlook from our own Fed (even though they have stopped increasing QE – it's not over by a mile).
As tempting as it is for us to cut our bearish positions and join the party, here we face another weekend full of Global uncertainty, so we're going to stay covered and watch to see if the S&P can hit our 2,035 goal (see Wednesday's predictions) and actually hold it.
Now that we're here, we'll be looking for the following retracements next week:
- S&P 2,035 is our 10% line and we'll be looking for a pullback to 2,018 (weak) and 2,000 (strong).
- Dow 17,600 is our Must Hold and that makes a weak pullback 17,250 and 16,900 would be a strong retrace.
- Nasdaq 4,600 is our 15% line and we're over that without a retrace (so far) to 4,480 (weak) or 4,360 (strong).
- NYSE Must Hold 11,000 (it's been there before) and below that we look for 10,760 (weak) and 10,520 (strong) for pullbacks. The fact that the NYSE is in a range such that even our strong pullback isn't 5% is a bullish indicator for the rest over the long-term and our long-term
by phil - November 6th, 2014 7:49 am
It was another low-volume "rally" yesterday.
Hard to call it a rally when we spike off on no volume in pre-market and then spend the rest of the day selling off. The much less-reliable Dow, on the other hand, put up a record high – all the way to 17,485 and now we're less than 1% shy of our Must Hold target – only two years after we set it and right on schedule for the end of 2014.
As we discussed in yesterday's post, "If it's a real rally, the Dow should have no trouble at all at 17,500 and should be able to get to 17,600 before there is any serious pullback and, if that doesn't happen – the rest of our lines will tell the tale." So Far, so good on the Dow as it gained 94 points yesterday (0.54%) but 17,484 is not 17,500 – hence today's headline, written long before the market opens (now 7:30).
What am I concerned about? Well, so far is been all stimulus and today Draghi holds a press conference an hour before our markets open and, unless he has more red flags to wave at the bulls – all this excitement may calm down a bit. Fed Gov Powell speaks at 1:30 and he's a bit bearish, followed by Mester this evening (7pm), who is more bearish.
Tomorrows retail sales report is likely to be bad and Non-Farm Payrolls are a wild-card but Yellen speaks at 10:15 tommorw, so she'll be able to keep any sell-off shallow into the weekend. We're not overly bearish – more like a "watch and wait" sort of thing at the moment as our Long-Term Portfolio is up 20.9% for the year and our Income Portfolio is up 18.1% for the year and the Short-Term Portfolio which hedges them is up a ridiculous 85.2% for the year.
All we are trying to do, at this point in the year, is to protect our gains into the holidays and tomorrow's NFP report is a major wild-card, as is Draghi's press conference this morning. Our long-term portfolios are 5x larger than the STP so we error…
by phil - November 5th, 2014 7:59 am
Democrats were decimated in the Senate, losing their majority, primarily as angry voters, who still face dire economic situations 6 years after electing Obama chose to CHANGE the last vestiges of his support:
The economy was voters’ most pressing concern as they cast their ballots in the midterm election, with seven of 10 rating conditions poor, preliminary exit polls showed.
More than five years after the recession ended, ordinary Americans still feel pinched. Wages and incomes haven’t recovered even as corporate profits hit records, stocks have almost tripled and the nation’s output of goods and services grew more than $1 trillion from its pre-recession peak.
Amazingly, after getting a clear referendum on how awful the economy still is for the average American, the markets are up over half a point in the Futures, with the Dow (/YM) testing 17,400, S&P (/ES) 2,020, Nasdaq (/NQ) 4,175 and Russell (/TF) 1,175.
Those will be our lines of capitulation if they break to the upside but, by the day's end, I expect cooler heads to prevail and they'll be our shorting lines too.
When there are no fundamental reasons to move up (and no, electing a different bunch of morons doesn't qualify as a fundamental) we look to our technicals and our 5% Rule™ to tell us what to expect. Last time we whipped out the Rule, we used it to chart the move off the bottom in October – now let's see what…
by phil - November 4th, 2014 7:53 am
"We the people, in order to form a more perfect union…"
"Representatives shall be determined by adding to the whole Number of free Persons, including those bound to Service for a Term of Years, and excluding Indians not taxed, three fifths of all other Persons… When the right to vote is denied to any of the male inhabitants of such State, being twenty-one years of age, and citizens of the United States, or in any way abridged, except for participation in rebellion, or other crime, the basis of representation therein shall be reduced in the proportion which the number of such male citizens shall bear to the whole number of male citizens twenty-one years of age in such State."
On that basis, it seems to me, that Texas should be losing about 10% of the Congresspeople next year – as they have seen fit to exclude close to 1M of their citizens from being eligible to vote.
Of course Texas is already being punished by plunging crude prices as oil hit $75.84 overnight and gasoline prices fell back to $2.06. Low prices at the pump are bound to put consumers in a better mood but, in Texas, a lot of those consumers are in the oil industry or in towns dominated by the oil industry and that industry is in BIG TROUBLE with oil below $80.
It's not just oil that's dropping, copper is off 4% this morning, barely holding $3.01 as there is NOTHING to indicate any rise in demand for materials in our weakening Global Economy.
Nonetheless, Corporate Profits in the US are up 10% this year and, whether it's the result of FREE MONEY pumped in by the Central Banks or spending cutbacks that ultimately damage the economy or finanical engineering like stock buybacks that artificially inflate apparent earnings by decreasing the number of shares or, even if it's just good old inflation creeping into the pricing – who cares as long as they are making money?
by phil - November 3rd, 2014 8:16 am
What an incredible finish!
We have retaken most of our September highs after dropping about 10% in the first two weeks of October. Technically, it LOOKS like a strong market but Fundamentally, we know that the boost is the result of Trillions of additional stimulus from Japan and Europe and, as I mentioned on Thursday, it's not that the US has STOPPED stimuluating the economy – we've simply stopped INCREASING the amount of stimulus – hardly a "taper."
So we're watching and waiting this week, especially ahead of the elecion. We did a Portfolio Review over the weekend and all 5 of our Member Portfolios are looking very good into the end of the year so we don't want to rock the boat and we angled more bearish into the weekend, just in case but, on the whole BALANCE is our goal.
As we expected, weak Chinese data (see morning notes to Members) is putting a damper of Friday's rally already and, as you can see from our Big Chart, we're back at levels that have proven to be harsh overhead resistance for our indices.
We're still waiting for the Russell and the NYSE to confirm by making their own new highs and Russell's pop to 1,174 on Friday was so fake that we did decide to short /TF (Russell Futures) below the 1,170 line this morning – we'll see how that goes as a fun bearish play.
On the whole, last week's action had the Fundamentalists throwing up their hands and simply screaming. Soc Gen's Albert Edwars summed it up nicely, saying:
“The amazing thing is how little interest there is with western investors about Japan and how it effects US or European portfolios
Notwithstanding the fact that it is the 3rd biggest economy in the world by a long way (the same size as Germany and France
by phil - November 1st, 2014 7:26 am
And we're back!
Quite the recovery since last week so I figured we'd better take another look and go over our positions to make sure we're well-balanced. We're UNbalanced in our recovery, with less volume and more height than we've had before. Technically, we're looking bullish but, Fundamentally – there are still a lot of questions.
We'll discuss outlook and such in the Member Chat Room over the weekend, this article is just to check our balances, not an extensive review like we had last week. I'm on the way to Vegas today ahead of our Live Seminar next weekend (last chance to sign up), so I'm just going to note the items I think need adjusting this morning.
As an overview, last week our LTP was up 19.2% for the year at $596,170 and our STP was up 94% at $194,183 for a total of $790,353 (up 31.7% overall) following our aggressive strategy. As of Friday's close, the LTP had climbed to 21.5% ($607,710 and the STP fell to 82.5% at $182,498 for a total of $790,208, essentially flat at 31.7%. We turned more bearish on Wednesday and it may have cost us some gains but our aim into the end of the year is to lock in these profits, not "go for it."
The more conservative Income Portfolio was up 2.4% last week and finished yesterday up 8.5% at $542,304. Combined with the hedges in the Income Portfolio, that pairing is at $734,538, up 22.4% for the year and miles ahead of our 10% goal.
Our Butterfly Portfolio was as boring as its supposed to be, up 18.7% last week ($118,740) and up 18.1% today. The $25,000 Portfolio slipped from $30,745 to $28,802 as we added two bearish plays that, so far, have not worked out.
The reason we flipped more bearish this week was because we are back in the tops of our channels now AND we're heading into an election where, no matter who wins, half the people will be disappointed – that could lead to a small sell-off at least, along with a dozen other bad things that are going on in the world that we've decided to ignore again while the market engages in…
by phil - October 31st, 2014 7:49 am
She knows how hard her heart grows under the nuclear shadows
She can't just escape the feeling repeating in her head
When after all the urges some kind of truth emerges
We felt the deadly surges discovering Japan – Graham Parker
The shorts are certainly getting a scare this morning as the BOJ hands out another $124Bn (yes, we did the relative math in this morning's Alert to our Members) and that was more than enough to pop the Nikkei 5% in 90 minutes, with the /NKD Futures now testing 16,850 – almost catching up to the Dow for the 3rd time in 2 years.
Unfortunately, each time the Nikkei has matched up with the Dow's gains, it's marked and overbought top and led to a sell-off so we were forced to officially reverse our long call on Russell Futures (/TF) from yesterday morning's post and flip short at 1,169 (with tight stops over 1,170). That's OK though because a move from 1,132.50 to 1,169 on /TF is a profit of $3,650 per contract – not bad for a day's work, right?
See, I told you we could pay for your trip to our Las Vegas Live Seminar next week with a Futures trade!
Not that we advocate holding Futures positions overnight – it could just have easily gone the other way. That's what Wednesday's TNA spread was for – the longer-term long position on the Russell, which will pop TNA well over our $80 goal this morning – that trade has a 316% profit potential in less than a month!
by phil - October 30th, 2014 7:54 am
It doesn't matter what the Fed did yesterday.
Let's make that clear at the start. The Fed has been tapering all year but what they have been tapering is their INCREASE in bond buying and thank God they have because the Fed balance sheet is now over $4,000,000,000,000.00 – that's a lot of money!
As noted in the chart above, $4Tn is the entire GDP of Germany or Japan, the level of stimulus has added up to 22% of our GDP since 2009 or about 4% a year. Our GDP is only 2.5% WITH the 4% added stimulus – what will it be without it? Fortunately, we don't actually have to worry about that because the Fed will be rolling that $4Tn over, at a rate of roughly $800Bn a year to keep the party going forevermore.
This is what is misunderstood by – well pretty much everybody. The Fed is not cutting us off, they are just not adding to the already biblical levels of stimulus we've grown accustomed to.
As each Fed bond or other asset is redeemed, the Fed will still buy a new one to replace it. And, since our Nation's NEED for money has decreased by 2/3 – it means they are now buying a SURPLUS $300Bn or more of assets each year. Hmmmm, now who will that be bailing out I wonder?
That's right, the Fed will continue to pump $300Bn or more each year into the coiffers of our beloved Banksters for many years to come. The more Obama reduces the deficit, the more money (our money) the Fed can funnel to their Bankster buddies – what a fantastic system – don't forget to vote for more of the same on Tuesday! .
On the whole, we don't really give a crap. We pretty much cashed out our Member Portfolios with huge profits for the year and that leaves us free to have fun day-trading and playing the futures while we get ready to enjoy our holidays.
by phil - October 29th, 2014 7:24 am
Check out this chart:
That's the NYSE McClellen Oscillator, which hasn't been this high (overbought) since July of 2011, when the S&P plunged from 1,345 to 1,123 (16.5%) in 4 terrifying weeks. Yesteday's rally was a very low-volume affair 101.3M on SPY (about 60% of normal) and we were goosed by Peter Schiff on CNBC at 1:10 pm, claiming QE4 was right around the corner:
Ahead of tomorrow's decision by the FOMC, Peter Schiff ventured on to CNBC to discuss the economy, the fed, and gold… among other things. Schiff rightly fears that while the Fed may well stop QE3 tomorrow, QE4 will not be too long behind it as he notes, rather eloquently, that "an economy that lives by QE, will die by QE" as the Fed's total lack of willingness to allow stocks to fall (see Bullard 2 weeks ago) or a 'cleansing' recession leaves the nation's economy in far worse shape than it was before the Fed's intervention. Schiff calmly replies to the anchor's questions (as she proclaims "I am not on the side of the Fed but…"), gently explains his view on gold when challenged about his 'wrongness', but when a guest starts hounding him for being dangerous to CNBC viewers wealth… Schiff (rightly) loses it – must watch!
It seems bulls are confident the Fed will end QE on schedule and at the same time give bulls dovish comments about conditions (“don’t mess with us”!) going forward. Many pundits are discussing interest rates remaining unchanged for several years and longer.
That means companies like IBM can continue (another $5 billion share buyback announced today) their financial engineering to lessen float making it easy to report better earnings at the price of future innovation and company growth. But bulls don’t care about future growth, only what takes place now. Besides, this is the