by phil - April 14th, 2015 8:31 am
This could turn ugly.
As predicted yesterday, without an upside catalyst, the indexes drifted lower and, as you can see from our Big Chart, we are testing a lot of critical lines – lines we expect to fail as the earnings reports come in and disappoint the bulls:
Dow 18,020 is the 2.5% line, failing to get back over that and then failing the 50-day moving average at 17,915 can send us quickly back to the Must Hold line at 17,600.
- S&P 2,080 is the 12.5% line, so either the Dow is wrong and should easily plow higher or the S&P has a LONG way to fall. It's also the 50 dma, so a failure there would be TERRIBLE and the /ES Futures are already testing it (and that's a gain of $500 per contract from the short idea we gave you yesterday – you're welcome!).
- Nasdaq 4,988 is 30% over our Must Hold line in our own country's version of a bubble. We tested 5,000 yesterday and failed and it's all about AAPL's earnings on the 27th since it's 16% of the Nasdaq and 3.5% of the S&P and 5% of the Dow – so do or die on their earnings in two weeks. Meanwhile, I don't see many of the tech companies living up to the hype but NFLX has a chance to prove me wrong tomorrow (now $480) and INTC reports this evening.
- NYSE is the broadest measure of the markets and it's also barely above it's Must Hold line at 11,000 (11,057). That, of course, MUST HOLD or the other indices are very likely to go down with the big ship. The 50 dma is 10,946, so a bit below the line and that, of course, would be a very critical failure – hopefully that does not happen.
- Russell had been our upside leader but has run out of gas just 5% above our Must Hold line at 1,200. That makes 1,260 a very important line not to fail and the 50 dma is right at the 2.5% line at 1,232 and that's another one we'd hate to see tested.
by phil - April 13th, 2015 8:29 am
It's Monday and there are no major M&A deals and no QE announcements to goose the markets. China is still going like gangbusters as lots of bad economic data over there is getting traders expecting more stimulus announcements by the PBOC, so 100% is no longer a reason to pause after 6 months of gains, is it?
We picked up 40 of the FXI May $48 puts on Thursday and those should be down around 0.70 this morning. So far, so wrong on our entry though as FXI is up 5% since we went short just 2 sessions ago. At this rate, Chineese markets will be double again by the end of the month – no wonder traders are rushing to get in desptie the World Bank downgrading their growth projections this morning. After all, who needs economic growth when you have market growth, right?
China's March Exports were down 15% y/y but don't worry, Imports were down 12.7% to match, so even must be a good thing and that explains the rally.
Imports have now been in freefall for 5 consecutive months and that's a drag on the whole Asian economy and Exports were sucking too except for the Feb shipment of IPhones and IWatches to the US that bumped the numbers 50% from last year but back to our usual crap numbers already in March.
Isn't this the kind of data that makes you want to pay an average of 100% more for the companies that are participating in this economy? If you are a Chinese trader, the answer is – OF COURSE! Things are slowing down so fast in China that Feb Power Consumption was off 6.3% from last year, due exclusively to a 2.5% drop in consumption by Primary Industries, who are the primary users of power in China (remember when we used to manufacture stuff?).
BNPs Chief Economist, Richard Iley calls China a "self feeding frenzy of speculation" that is using margin debt to finance "speculative gains built on unsustainable increases in leverage." There's no hidden meaning here, folks – the man is telling you to GET THE F OUT of the Chinese market! Q1…
by phil - April 10th, 2015 8:11 am
Another day, another $50Bn.
That's how much of their own stock GE will be buying back (20% of the company) after selling most of their GE Capital Assets to Blackston (BX) and others. Keep in mind $50Bn is about what the big Central Banksters pour into the markets in a whole month and GE is now the 2nd public company to match them this week (RDS.A dropped $70Bn on the markets on Tuesday).
Though the markets are taking it as a positive (GE must be undervalued, right?), I take it as a sign that GE is worried about Commercial Real Estate again and they are cashing out while they can and, since there is nothing worth buying with $35Bn and since money is cheap, they are using the cash to fund a massive buyback to reduce the number of shares their shrinking earnings are divided by in order for the board of directors to keep their phony-baloney jobs.
After all, you don't need to pay out tens of Millions in salaries, bonuses, stock options, etc. to have Immelt and his Board preside over a liquidation sale – do you? That's why it can't LOOK like a liquidation sale – it needs to look like restructuring for the 21st Century or some such nonsense you can expect to read about in the annual report.
Don't get me wrong, I love GE. We were buying it hand over fist when it was under $10 back in the crisis but, at $25+, we liquidated our positions because we (like GE, apparently) couldn't see how they could generate good returns off the current conglomerate mix they cem into 2014 with. So a radical restructuring is a good idea if they ever want to see $50 again but this isn't a restructuring, this is a retreat.
Selling $35Bn worth of assets it took decades to accumulate and borrowing another $15Bn to buy back your own stock is NOT about building for the Future – it's about propping up the present!
by phil - April 9th, 2015 8:02 am
That's what the Shanghai blasted up to at the open, though we pulled back to 3,957 by the close as some people decided that a 100% run in 6 months called for a little profit-taking. Don't worry, it's all part of the "new normal" for equities and nothing bad can possibly happen – it's just that, 6 months ago, traders didn't know value when they saw it but NOW we are much smarter and these prices are here to stay, right? According to UBS:
With no significant change in China's macro or corporate fundamentals, the visible rebound in China's A-share market since November appears to have been largely liquidity driven. We think this, in turn, may have been fuelled by a number of factors including:
- New funds flowing into the stock market from household saving, real estate, commodities and trust markets;
- Banks' bridge loans provided to investors who lost access to other high-yield shadow banking products as the result of tighter regulation;
- The PBC's easing of liquidity conditions via a variety of "targeted easing" tools (e.g. MSL, PSL, etc.);
- The official launch of Mutual Market Access (MMA) between the Hong Kong and Shanghai exchanges;
- Long-term expectations for SOE reform and A-shares entering the MSCI index next June;
- Increased use of leverage by retail investors via margin trading; and
- Market sentiment being boosted by expectations for further policy easing.
This has been a "New Deal" for Chinese stocks as the Government attempts to paper over a slowing economy by giving the people record market highs to "prove" how well things are going. Now, BNP is out with a note calling China’s equity bubble “a microcosm for the overall economy: unsustainable growth in leverage masking ever-deteriorating fundamentals and increasing future downside risks.”
We mentioned shorting FXI (China ETF) in yesterday's post but we couldn't give a specific option play because we were waiting for that 4,000 mark in Shanghai. It turns out $50 is the magic number on FXI and we like that line for a short and we like the May…
by phil - April 8th, 2015 7:44 am
And the wild ride continues.
As you can see from our Big Chart, we're testing the 50-Day Moving Averages on the Dow (17,870), S&P (2,074) and Nasdaq (4,877) while, as usual, the Russell and NYSE are leading us higher. The NYSE has finally popped back over it's Must Hold line at 11,000 and that MUST HOLD for us to get bullish but we already added a bank play in yesterday's Live Member Chat Room (also sent out as a Top Trade Alert) as we have plenty of sidelined cash to deploy.
We're certainly not ready to throw in the towel on our bearish bets yet (and you can still pick up those TZA plays super-cheap from Thursday's post if you want some great hedges) – all the problems we've been discussing are still out there but we have certainly learned that you can't fight the Fed(s) and the Feds are not done pushing us higher – not by a long-shot.
Yesterday morning, we got a goose from Minneapolis Fed President Kocherlakota who said: "In light of the outlook for unduly low employment and unduly low inflation, the [Fed] can be both late and slow in reducing the level of monetary accommodation," which was enough to push the markets higher but, as you can see from Dave Fry's SPY chart – the rest of the day was all downhill from there.
And that was despite the fact that Kocherlakota also said: "There is even a theoretical argument to be made for making asset purchases now if the economy faltered.” That would be, if you are keeping track, QE4 – or QE Infinity + 1, since the last program still hasn't even begun to unwind and continues to pump $80Bn a month into the US economy as the Fed rolls over their $4.5Bn balance sheet.
We certainly need SOMETHING to goose this economy as Revolving Consumer Credit (charge cards) fell $3.7Bn for the 4th drop in 5 months while Auto Loans (mostly sub-prime) and Student Loans (see Monday's rant) move up to record levels.
by phil - April 7th, 2015 7:31 am
The problem is solved inside the Fed
She said to me
The answer is easy if you
Pour on the QE
I'd like to help improve your Economy
There must be fifty ways
To goose the markets – Paul Simon
- You drop all your rates, Jake
- Centrally plan, Stan
- Value destroy, Roy
- Make the money FREE
Well, you get the idea…
There are so many ways to manipulate the markets, I don't think 50 covers them. Yesterday morning, with our futures down about 1%, NY Fed President Bill Dudley felt it neccessary to save us by saying he felt the path of rate increases would be "shallow," once again pushing back expectations of Fed tightening and dropping the Dollar 1%, which lifeted the markets 1% back to even.
From there it didn't take much to puch the markets higher since all the players who went short on Friday in the Futures on the TERRIBLE jobs report (and huge downward revisions to previous reports) were forced to cover and, with Europe closed for Easter Monday and the bond markets closed – money LITERALLY had nowhere else to go but US Equities.
“If we raise interest rates and portfolios perform poorly, that’s likely to slow us down.” – Dudley
Wow, I did not know it was in the Federal Reserve's charter to make sure your portfolio is performing well, did you? Thank God we're in the top 1% investing class and not one of THEM or I'd be pretty pissed about all this meddling on our behalf. I must say it is very nice to have our own personal Central Bank looking out for our interests…
This is, of course, an indication of how endemic market manipulation has become that one of our own Central Banksters doesn't even feel the need to disguise his motives anymore. He's there to protect our investments – this has nothing…
by phil - April 6th, 2015 7:53 am
What a long, strange trip it's been.
As you can see from Finviz's S&P Futures Chart, we took a big dive on Friday as the Non-Farm Payroll Reports disapppointed. This news seemed to surprise everyone – except us, of course – as we've been telling you the macro situation is falling apart for ages and this is simply evidence of it.
That's why, in Thursday's post, since this is a Free Trade Idea week at PSW, we discussed how we cashed out most of our longs and got aggressively short in our Short-Term Portfolio and we came up with not one, not two but three aggressive ways for you to short the Russell by using TZA (ultra-short Russell ETF) as a proxy.
Obviously, that is EXACTLY what you want to see the Russell do when you have bought a bunch of ultra-short positions, so you are welcome and remember – PLEASE DO NOT SUBSCRIBE TO OUR NEWSLETTER! We much prefer that you wait until July, when we will give out some more free trade ideas. After all, you wouldn't want trade ideas like these delivered to you every morning, would you?
We spent all weekend going over news and statistics in our Live Member Chat Room (the one you don't subscribe to), so I'm not going to rehash that here – not when we have so much other stuff to hash this morning…
First of all, did you know that Japan FAKED their Wage Growth Data last year? Yes, it was fake, Fake, FAKE and 6 months of positive wage announcements have now been reversed, casting great doubt upon the last 6 months, which are subject to reveiw. Overall, per Goldman:
"For CY2014, total cash wage growth was lowered 0.4 pp to +0.4% yoy, from +0.8% pre-revision, while October and November 2014 total cash wages came in negative (at -0.1% and -0.2%, respectively;wages also shrank on a nominal basis). Basic wagesremained negative yoy through December 2014 even after last spring’s shunto wage hike,before finally moving into positive territory in January 2015 (+0.2%)."
by phil - April 2nd, 2015 8:31 am
"I've been up and down and over and out and I know one thing
Each time I find myself flat on my face
I pick myself up and get back in the race
That's life (that's life), I tell you I can't deny it
I thought of quitting, baby, but my heart just ain't gonna buy it" – Sinatra
What a crazy way to start the month!
As you can see from the S&P chart above, we went nowhere, despite Monday's massive 2% pop, which was quickly followed by Tuesday and Wednesday's 2% drop. So here we are again, testing the same strong bounce lines we were watching last week which, to summarize, were (as of yesterday's close):
- Dow 17,720 (weak) and 17,850 (strong)
- S&P 2,055 (weak) and 2,060 (strong)
- Nasdaq 4,865 (weak) and 4,905 (strong)
- NYSE 10,880 (weak) and 10,910 (strong)
- Russell 1,235 (weak) and 1,245 (strong)
As usual, the Russell is leading us up and the Dow is dragging behind – even with the addition of AAPL this week. When in doubt, we stick to the 5% Rule™ and just wait to see if 3 of 5 of our strong bounce lines turn green, THEN we can go long on the laggards. Otherwise, we're not going to be impressed – especially by low-volume, BS rallies like we had on Monday which, fortuntately, we stayed short on.
I've mentioned that our Short-Term Portfolio had been left very short, since we cashed in most of our Long-Term Portfolio last Tuesday (see also, "Why Worry Wednesday – We're in CASH Suckers!"). When we cashed out the LTP on Tuesday, the markets were peaking and the STP was down to $183,820.90 (up 83.8%) when we reviewed it Wednesday Morning (7:17 am in our Live Member Chat Room). Now, just a week later, with no changes, those same positions are up 107.3% at $207,325.90 – that's a gain of $23,505 (12.7%) in a week!
Whatever you do – DO NOT SUBSCRIBE TO OUR SERVICE – you might save a few dollars next week
by phil - April 1st, 2015 8:02 am
Wow, what a ride!
I told you yesterday morning we would be looking to test our strong bounce lines intra-day and our targets were:
Dow 17,850, S&P 2,060, Nasdaq 4,905, NYSE 10,910 and Russell 1,245
While the S&P and Russell did manage to hold our lines, once again our 5% Rule™ managed to nail the action despite the wild swings with a total miss of 105 points out of 36,970 index points – off by just 0.28%. We made a similar prediction last Thursday and missed by 0.17% – so it's not a fluke. This indicates to us the TradeBots are firmly in command and we'll be able to use that to our advantage to make some aggressive Futures calls in our Live Member Chat Room.
Yesterday morning we called /RB (Gasoline Futures) long at $1.75 and caught a ride up to $1.77 for an $840 per contract gain. We have inventories today and, if we get back around $1.75, we'll be liking that trade again for another bounce. That's right cheapskate readers – it's April 1st and that means it's time for your quarterly free picks!
At the beginning of each quarter, we like to share a few of our picks with the free readers so they can earn enough money to pay for a Membership. Last quarter, we reviewed 11 FREE trade ideas from the previous year that made turned $110,000 (ish, at $10,000 per trade) into $221,392 – up 101% in less than 13 months with only one loser out of 11 (9%).
Our first free trade idea for 2015 was a long play on /NG (natural gas Futures) on Jan 5th at $3 with a target of $3.25-$3.50 and we hit $3.35 on the 14th, which may not sound like much but /NG contracts pay $100 per penny, per contract for a $3,500 per contract gain. We were also in and out of oil and called the up move on /CL (oil Futures) from $50, which topped out at $54 in Feb for a $4,000 per contract gain.
by phil - March 31st, 2015 8:27 am
What an amazing recovery!
Sure there was no volume and sure almost all the gains came at the open and sure there was a high-volume wave of last minute selling but – WOW!!! – what a rally! With the month ending today we're not expecting much of a sell-off and we'll be looking to see if our strong bounce lines hold intra-day (they should) at:
Dow 17,850, S&P 2,060, Nasdaq 4,905, NYSE 10,910 and Russell 1,245
After barely making our weak bounce lines on Thursday (see Friday's post for details) we were still short of strong bounces on 4 of our 5 indexes at Friday's close (3 of 5 over is a bullish signal) but yesterday, as you can see from Dave Fry's SPY chart, we just popped right over at the open and never looked back.
We'd really like to see the NYSE confirm a bullish move by finally getting over the Must Hold line at 11,000 – that's been a constant sign of weakness that has kept us cautious all year (and last year as well). We had a move all the way to 11,100 in late Feb, but it quickly reversed and we fell 300 points to start March off on a sour note but now, as you can see – we've had 5 up days this month that have accounted for all of the gains to take us back to the promised land.
Nothing really matters until we see the Non-Farm Payroll Report on Friday but we have an interesting situation where the US Markets (and many EU Markets) are closed for Good Friday so, whatever the number is – there won't be a reaction to it until next Monday, when many EU markets are still closed.
So we're very happy to be mainly in CASH!!! in our largest portfolio and, even so, yesterday's rally brought us up $4,000 as our mainly Materials stocks gained a little ground. That did not make up for the $15,000 LOSS experience in our Short-Term Portfolio which, as I had said…