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Thursday, September 29, 2022

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What Trade War Tuesday – Markets Fuggedaboutit Already

MAD About the Trump EraWhat, us worry?  

1, 2, 3, 4 Trump declared a trade war and then announced he's going to have fun in the sun at the G20 with his pal Putin but also plans to see China's President Xi in late June and force him to accept US terms of face SEVERE CONSEQUENCES.  This is the mindset of a 75 year-old racist schmuck who has a 1950s view of China and thinks we just won WWII and get to dictate terms to all the inferior races – not the rational strategy of a United States President!  

Nonetheless, the markets love it when Trump lies to them and we're up almost 200 points pre-market after being down 600 points yesterday so YAY!!!, I guess…

If you remember, way back on Friday morning, in our PSW Report, I told you "it's more likely we're consolidating for a move down" and we put up our anticipated levels, which all failed yesterday but we don't count Mondays (and the volume wasn't very strong either) so TODAY is the day that matters and I'm going to highlight the pre-market (7:30) positions so we can see where we are:

  • Dow 25,200 is the 5% line and the bounce lines are 25,450 (weak) and 25,700 (strong) 

 

  • S&P 2,860 is the 5% line and the bounce lines are 2,875 (weak) and 2,890 (strong)

  • Nasdaq 7,475 is the 5% line and the bounce lines are 7,540 (weak) and 7,605 (strong) 

  • Russell 1,550 is the 5% line and the bounce lines are 1,565 (weak) and 1,580 (strong)

Well that's not very good, is it?  That's why we use this system – it keeps us from getting irrationally exuberant when all the market is doing is weakly bouncing.   The only green box we have is the -5% line on the Dow – that's nothing to celebrate, is it?  The other indexes haven't even taken back their -5% lines and, if they can't take them back today AND make the weak bounces – we are likely to be looking at another 5% drop before the next support levels.  

Meanwhile, we did play the Dow and the S&P for a bounce yesterday but now we're back to neutral and just waiting to see if we can change any levels to green this morning but, as far as I can tell, the trade war is still on and there's no hint of a deal through the end of June – so what is there to get excited about?

You're welcome on Soybeans (/ZSU19), also from the Friday morning PSW Report (subscribe here) as they blasted back to $830 this morning for a $250 per contract gain and the SOYB ETF bottomed out at $14.20 and the Nov $14 calls were even lower than our $1.10 buy line and the Nov $15 puts hit $1 so our aggressive trade idea is a go and now we'll see how high SOYB can bounce, though our expectations are lower as there is no trade deal and China has specifically threatened not to buy our beans anymore.

Today we're excited about Gasoline (/RB) still cheap at $1.95 with the holiday looming and the July contract (/RBN19) is just $1.94 so a discount for an extra few months (and two holiday weekends) is an offer we simply cannot refuse.  I already sent out an Alert to our Members this morning about /RB, as well as a nice TLT trade idea (short) that we'll be playing in the Short-Term Portfolio.

As annoying as all this Trade War nonsense is, it's hard to get bearish when earnings were much better than expected in Q1 and, just this morning, Small Business Optimism jumped back to 103.5, with 8 out of 10 components increasing, led by earnings trends.  Anything over 100 is good and we've clearly reversed a downtrend that started in Q4 DESPITE all the nonsense that's going on.     

 

So we're going to watch our levels and see what else the market is willing to ignore but I'm not going to be enthusiastic until I see those Strong Bounce lines retaken and that's simply not going to happen today but we can't take the day off as a failure at the weak bounce lines will mean it's time to double up on our hedges and play for the next 5% correction.

Speaking of things we are ignoring – I'll leave you with a wake up call from Bill Nye, the Science Guy:

Whatever it takes – thanks Bill!  

 

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I just don't know that we should be surprised – these guys all took victory laps with Trump after the tax cut was signed, talking about all the new jobs they would create. But the opposite happened:

https://arstechnica.com/tech-policy/2019/05/att-promised-7000-new-jobs-to-get-tax-break-it-cut-23000-jobs-instead/

AT&T has cut more than 23,000 jobs since receiving a big tax cut at the end of 2017, despite lobbying heavily for the tax cut by claiming that it would create thousands of jobs.

AT&T in November 2017 pushed for the corporate tax cut by promising to invest an additional $1 billion in 2018, with CEO Randall Stephenson saying that "every billion dollars AT&T invests is 7,000 hard-hat jobs. These are not entry-level jobs. These are 7,000 jobs of people putting fiber in ground, hard-hat jobs that make $70,000 to $80,000 per year."

The corporate tax cut was subsequently passed by Congress and signed into law by President Trump on December 22, 2017. The tax cut reportedly gave AT&T an extra $3 billion in cash in 2018.

But AT&T cut capital spending and kept laying people off after the tax cut. A union analysis of AT&T's publicly available financial statements "shows the telecom company eliminated 23,328 jobs since the Tax Cut and Jobs Act passed in late 2017, including nearly 6,000 in the first quarter of 2019," the Communications Workers of America (CWA) said yesterday.

PHIL

 Do you know anything about this fund

 Renaissance Technologies' hedge funds,

 My IT brother-in-law asked about it

Renaissance Technologies LLC is an American hedge fund firm based in East Setauket, New York,[5] on Long Island, which specializes in systematic trading using quantitative models derived from mathematical and statistical analyses. The company was founded in 1982 by James Simons, an award-winning mathematician and former Cold War code breaker.

 

 Simons' Renaissance Technologies' hedge funds,

Nasdaq Composite is almost 300 points higher than /NQ. Not sure why the spread but the actual index is over 7700. /ES and /YM are trading relatively close to the actual index. 

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