Wonderful Wednesday – Dow 23,000 or Bust!
Does anything matter?
On the right is the Daily Guidance Oscillator, which shows how forward guidance is fading fast, unraveling the enthusiasm of August with only 28% of companies reporting issuing positive guidance and a whopping 39.4% going negative and the chart you see is the net trend difference between postive and negative guidance.
The trend was this bad in July and the markets took a very small dip (2.5%) and in March it was worse and we dipped about 5% but we're up 10% from the March lows now and up 15% for the year so we'll stay on our toes and keep an eye on this indicator as more earnings reports come in. 80 of the S&P 500 report next week and another 240 next week so it's definitely crunch time.
Another indicator we're watching closely is the Advance/Decline lines as we're seeing the game we discussed yesterday playing out where major index weights, like Apple (AAPL) are being used to prop up the indexes while the Fund Managers and Banksters sell off the bulk of their holdings. The reason they do this is because holding up the index keeps the ETF money flowing in (from 401Ks, IRAs, etc.), which creates plenty of buyers for their small positions while they spend their money accumulating stocks they don't mind holding through a correction – like AAPL.
Notice that the number of stocks that were being sold and the volume of selling far outweighed the buying yesterday and also notice the most of our market gains come in the early morning Futures – where trading is very thin. That's another Fund Manager trick – jack up the futures and the retail suckers rush in to chase the move while you sell off your holdings into higher volume.
Jim Cramer had a nice video explaining how fund managers manipulate the market, noting it doesn't take much money to manipulate the markets using the Futures noting "*It's a fun game, and it's a lucrative game*" and "*I would encourage anyone who is in the hedge fund game to do it because it's legal and a quick way to make money – and very satisfying*."**
It is very satisfying to sucker in what Jim Cramer calls "the moron longs" and then pull the rug out from under them. Try not to be one of those morons and make sure you do have hedges – just in case the funds decide it's time to pull that rug out. Note how Cramer talks about how to spread rumors to knock down Apple ahead of earnings – that goes on all the time with many stocks this time of year – which is what makes it such fun for us!
For example, yesterday, in our Live Member Chat Room, we called for a newm aggressuve play on IBM ahead of last night's earnings:
I like IBM into earnings, by the way, you can sell the 2020 $130 puts for $12 to net in for $118 and leave it at that or you can add the 2020 $130 ($22)/$160 ($9.25) bull call spread at $12.75 to net 0.75 on the $30 spread with $29.25 (3,900%) upside potential if IBM gains 10% in two years and your worst case is owning IBM at net $130.75.
IBM did indeed do well last night and is already testing the $155 line pre-market so we're well on our way to our $160 goal and 3,900% returns on our $75/contract cash investments, which will turn into $3,000/contract if IBM can hold $160 into Jan, 2020. It's possible, if you get in early this morning, that you can still catch a nice portion of the trade our Members got yesterday – even if the returns are "only" 1,500% going forward – that's still pretty good, right?
We also sent out a Top Trade Alert for IBM and another stock I can't tell you about because it didn't play yet as well as our 6 favorite mining plays. As I noted last week, now that we have our hedges in place we are very happy to BUYBUYBUY as bargains present themselves during earnings season. We may not believe in the rally but, as long as the children keep on clapping – we're happy to make money betting things can fly.
You are welcome, by the way, cheapskate readers for our Russell Futures Shorts (/TF), which fell below 1,500 yesterday (back to 1,506 now) for a $750/per contract gain from our 1,515 short and also for those Oil (/CL) shorts, which gave us $500 per contract at $51.50 before jumping back to $52 overnight and we'll be looking to short them again if the cross below our line (or test $52.50 on an inventory spike). Last night's API Report showed a huge 7.13M draw in Oil but a 1.94Mb build in Gasoline (/RB) and a 1.64Mb build in Distillates. If all that only got them to peak at $52.10 – imagine what will happen if the EIA report at 10:30 is a disappointment (and now expectations are high).
Over at the NYMEX, there are still 120,000 open November contracts, which settle on Friday at 2:35pm so there's bound to be some selling pressure at some point as they have to roll 110Mb worth of oil (110,000 contracts) to longer months, which is how they maintain the illusion of a draw in Cushing (by simply not actually ordering any oil for delivery to the one place we measure it). That scam is even more fun that the Hedge Fund scam to play!
Speaking of scams: President Trump, last night, went through the charade of pitching his tax proposal to the Heritage Foundation, the people who wrote Trump's tax proposal! He asked for the group's help in getting the legislation passed before the end of the year (and before he has to pay taxes). "Let’s give our country the best Christmas present of all — massive tax relief,” Trump said. The left-leaning Center for American Progress announced plans for a news conference on how the plan “would give Trump’s cabinet a $3.5 billion tax cut” simply by repealing the estate tax. The tax applies a 40% rate to estates worth more than $5.49M for individuals or $10.98M for couples.
Critics of the president’s proposal have dismissed the White House’s claim of a $4,000 benefit for average households from the corporate tax cut as overly optimistic and based on incomplete information. In a blog post on Tuesday, economist Lawrence Summers of Harvard University wrote that “*the claim is absurd on its face*.” He also said that tax cuts would “*put upward pressure on interest rates*” and that ending the global approach to taxing multinational corporations — as Trump and congressional leaders propose to do — “*will encourage outsourcing*.”**
What I don't understand is why no one is asking the simple question of WHY, if the economy is as great as they say, with markets at record highs, do we need to CUT taxes and INCREASE our deficit and weaken our health care and retirement systems at a time we should be paying down debt and making social programs stronger? Even if you believe the poor can go to Hell, what about paying off our debts? Will we pay them off when the markets crash? We clearly didn't do that last time. How does this stuff not matter?
Sadly, these things do matter and pretending they don't is making America a joke in the eyes of the World. President Trump made 32 false claims last week, which was an improvement from 40 the week before – he lied 15 times in one interview with Sean Hannity on Fox yet we are supposed to believe his Tax Plan is going to benefit the little guy – despite overwhelming evidence to the contrary from pretty much every reputable anayst who doesn't work for the Heritage Foundation.
While Trump defunds and dismantles the EPA, 15M of his core constituents in farm country are now drinking nitrate-contaminated water – the kind they made a movie (Erin Brokovich) about 30 years ago. You can shut down the EPA but the National Cancer Institute is private and it found that more than 1,600 systems serving small towns had levels above 5 ppm, which studies have found to increase the risk of colon, kidney, ovarian and bladder cancers.
If you are an American, I suppose I will have to connect the dots for you (because clearly we don't get connections). No EPA oversight puts contaminants in the water which lead to a sharp increase in cancer cases in a defunded health care system – that is a complete and total disaster in progress folks – and we're letting it happen!
You WILL end up paying for this because those same farmers have no health insurance but, for the moment, they get to not have mandatory health care which would pay for them to be screened and catch the cancer the EPA is shoving down their throats (via big farm donors) before it becomes critical or, even worse, a pre-existing condition which will no longer be covered anyway. It's not a now problem, it's a 20-year problem so we can ignore it until we get the bill for Trillions of Dollars in health care costs we kicked down the road.
You can't run a country this way, folks – not if you want it to last!
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