Monday Market Movement – Trade Wars and Earnings


Don't get fooled by a bounce.

Team Trump softened their tone over the weekend, leading Asian stocks to move back up and Europe opened up over half a percent and our Futures are up half a percent but now Trump has undone the weekend's diplomacy with this morning's tweet calling China "***STUPID TRADE*" that has been "*going on for years*." Hey, maybe it is a brilliant negotiating strategy where the President ACTS like an out-of-control lunatic so the Chinese will submit to "reasonable" requests from his underlings. Or maybe he's just insane or maybe he's a Russian agent working to undermine 50 years of relationship-building between the US and China?**

Meanwhile, we'll be watching the S&P closely, especially around our 2,640 line to see if it holds tomorrow (today is meaningless) and we'll be looking for the same bounce lines we were looking for last week (and all of March), which are:

  • Dow 23,800 (weak) and 24,200 (strong)
  • S&P 2,640 (weak) and 2,684 (strong)
  • Nasdaq 6,500 (weak) and 6,700 (strong)
  • NYSE12,450(weak) and 12,600 (strong)
  • Russell 1,520 (weak) and1,540(strong)

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And those bounce lines are being generous with the greens as we're including this morning's BS Futures run-up already. The reasons the bounce lines matter is that you are bringing down the 50-day moving average and the longer you are below the bounce lines, the faster the 50 dma falls and, eventually, it crosses below the 200 dma and that, my friends, makes a very serious technical selling signal known as a DEATH CROSS, when the 50 dma crosses under the 200 dma.

That's what the 5% Rule™ does. It tells us, ages before the TA people will see it on their charts, what those charts are going to look like in the Future and doens't knowing the future give you an advantage in playing the market? Sure it does…

And I wouldn't worry about the 200-day moving average, I'd worry about the 50 MONTH moving average, which, for the S&P 500, is all the way down at 2,200! Keep in mind, that is the indication of the fair value of the S&P 500 companies as considered by the cash trading habits of millions of investors over the past 4 YEARS. Sure, you can think those guys were all idiots and only you have the market figured out – best of luck with that:

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Last year, we did a great deal of math and decided the Trump tax cuts were good for a 10% boost and, since our Must Hold level on the Big Chart, pre tax-cut, was 2,200, 110% of that is 2,420 and that's why we've been using the 2,400 line for our buy point on the Watch List. So far, we've come very close to 2,500 but no 2,400 and we're still patiently waiting for some other economic shoes to drop before we begin deploying more of that CASH (80%) we're still holding on the sidelines in our Member Portfolios.

Today's action is meaningless for two reasons: A) It's Monday – Monday's are BS (I don't even work Mondays, I'm not even here) and B) The Dollar is down from 90.3 on Friday morning to 89.6 today so 0.7% is more than the market, which is priced in Dollars, is gaining this morning. So it's all complete and utter BS – don't be sucked in by the move up and certainly not if we're not even hitting our strong bounce lines and, if the weak bounce lines turn red – look out below!

We expect good earnings from the banks on Friday so the indexes are not dead yet, I'll be a lot more interested in what Bed Bath and Beyond (BBBY) have to say on Wednesday and then, next week, we begin to get some real numbers and we will adjust our portfolios accordingly:

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Until then, it's more "watch and wait" which I'm sorry is boring but you can see from the past few week's gyrations why I haven't been too keen on either adding or changing positions – we still don't have any real indication of which way things are heading so why make plays when we're not sure. Even when we are sure we're only about 70-80% effective so trading when we're not sure is silly, right?

We have the Fed Minutes on Wednesday afternoon and Kashkari speaks that evening with Kaplan Tomorrow morning and 3 Fed Speakers on Friday – presumably to prevent a complete melt-down if the Bank Earnings are sour:

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It looks like we're be opening at 24,100 on the Dow (/YM), 2,620 on the S&P (/ES), 6,500 on the Nasdaq (/NQ) and 1,525 on the Russell (/RTY) and I'm inclined to go short, especially on the Nasdaq below 6,500 but out if any of them cross back over and then we just wait to see how the bounce lines play out.

Be careful out there,

  • Phil