TGIF – Silly, Low-Volume, Pumped-Up Week Finally Ends

People tend to get a bit more real when talking to their hometown crowd.

What a week it has been!

The S&P 500 has blasted off our 20% line (that's 20% above fair value, by the way) to the 23.33% line at 2,728 and that's what we call a strong bounce from the fall we endured way back in late Jan/early Feb and doesn't actually mean a thing until we're over it. Otherwise, it's just a the top of the same trading range we've been in all year.

This morning we have the Fed's Bullard speaking at 8:30, who used to be reliably hawkish but turned doveish last year – so anything can happen when he gives a speech this morning at his local Business Development Corporation (Springfield, MO) on "US Monetary and Economic Policy." People tend to get a bit more real when talking to their hometown crowd – like the time Trump boasted that he "could stand in the middle of 5th Avenue and shoot somebody and I wouldn't lose votes" to illustrate how blindly loyal his base was.

In our Live Member Chat Room (my "hometown" audience), I called for shorting the S&P (/ES) at 2,725 this morning as well as the Nasdaq. Here it is in context.

Markets holding on to yesterday's gains so far. All about that strong bounce line.
Bullard speaking at 8:30 so we'll see what he has to say and then Consumer Sentiment probably decreasing a bit at 10, but nothing likely to move the market other than Trump's Drug speech later and that's bound to spook that sector so I'd short /ES here (2,725) as we know they have trouble at 2,728 so $150 loss limit but very likely to give us a little run lower (though maybe wait until Bullard to be sure).
2,725 on /ES is lined up with 24,750 on /YM, 6,975 on /NQ (still a shorting line with tight stops above) and 1,608 on /RTY and same there with a stop over 1,610.
Also, Dollar is back to 92.41 and may be bouncy here – so more ways to pressure the markets.
Oil $71.37 and /RB 2.19 is also a short with a stop over $2.20 but only for quick money.

If Bullard doesn't boost the markets, it should be smooth sailing for the shorts as we take a couple of data hits today and no major earnings likely to boost us. Congratulations to those who played along yesterday as our Oil (/CL) Futures short from the morning post did EXACTLY what we said it would do in our 8:33 am Report, starting about 30 minutes later with $900 per contract profits by 10 amyou're welcome!

Remember: I can only tell you what is likely to happen and how to make money trading it – the rest is up to you!

Speaking of things that are going to happen, Apple (AAPL) is bursting up to $190 this morning, just shy of our goaaallllllllll! at $195 but they don't hit $1 TRILLION actually until $205, so hang onto those party hats. We talked about AAPL in-depth in Monday Morning's Report, so I'm not going to re-hash it but, as I've noted, AAPL's $160 to $195 run this month is 21% or $200Bn of value added to a single stock in a market that, at best, gets $4Bn of inflows a week.

Not only does that mean that AAPL's valuation bump is purely speculative (in other words, there's no proof that the stock can be shared in large quantities at this price), but it also means that, as 4% of the S&P 500, AAPL is responsible for just under 1% of the gains this month and, as 17% of the Nasdaq, AAPL is responsible for 3% of the gains this month.

How much did the S&P gain this month? We started at 2,660 and we are now at 2,722 so 62 points is 2.3% so AAPL is about 1/2 of the S&Ps gains. The Nasdaq began the month at 6,600 and is now 6,962 (falling as we speak) and that's 5.5% so AAPL is again responsible for half the gains (more). Woe unto all of us if AAPL were to pull back!

Volume has been anemic this week too with, 55M SPY shares trading on Monday, 67M shares on Tuesday, 59M shares on Weds and 68M shares yesterday vs an average volume of 101M shares so about 35% below "normal" volume, which is already close to half of last year's volume. Why is volume drying up like this? Because stocks are more expensive so the same money buys less and less stock and, because the economy isn't really growing – there is no more money to pay for the stocks – just a lot of idiots SPECULATING that there will be money to pay these ridiculous prices one day, so it's not important to actually earn any money because the greater fool theory will fix everything.

The greatest fools, of course, are the last people to buy at the top – we call them bag-holders and I have been saying all week that this test of our Strong Bounce Lines is a good time to dump your stocks on the bagholders that are coming in and get back to CASH!!!. Again, I can only tell you what is likely to happen and how to make money trading it – the rest is up to you!

Have a great weekend,

  • Phil
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