Allow me to introduce your new boss.
Dear Ms. Yellen:
Remember when Herman Edwards said: “You play, to Win – the Game”? As the economic data continues to weaken, can you win this game? After all, you’re currently sitting at ‘zero’ interest rates, and you’re already the world’s largest buyer and holder of bonds and mortgage back securities. With GDP coming in at a disappointing annual rate of 1.5% rate, I have to wonder, how long you will last in your present position under President Donald Trump?
When I first wrote about Donald Trump’s success, I received a lot of comments about him being a ‘novelty’ and a ‘flash in the pan’. But the voting public continues to think differently.
- They’re not buyin’ another 4 years of ‘same old – same old’.
- They like qualities such as: flamboyance, daring, wealthy and worldly.
- They know that ‘illegals’ are taking our jobs – both here and abroad.
- And that costs continue to rise, while wages continue to fall.
Donald Trump is the only candidate talking J.Q. Public’s thinking to heart. When John Harwood (of CNBC) dismissed Trump as a ‘comic book’ candidate – 75 million tweets went out defending ‘The Donald’. The great political machines are scared, as they never thought that Trump or Carson could hang in there. The fact that both have gained in market share have many running scared. Donald Trump’s message of: ‘Make America Great Again’ resonates with J.Q. Public. The public wishes for the ‘good old days’, and Trump promises that he’ll give them back.
But my question to you Ms. Yellen is: Can you win the game? Because if Donald Trump is elected, history shows that he surrounds himself with winners. And if you’re not winning the economic battle, you can expect to hear another ‘now famous’ quote: “You’re Fired.”
So the market is in melt up mode beyond any reason. I was reminded last night about the Greenspan quote: “The market can remain irrational – longer than you can remain solvent”. Meaning, you may have shorted this market 200 S&P points ago, knowing that it does not fundamentally belong this high. Meanwhile, you're going broke as it simply moves higher and higher.
We are looking at one of the best Octobers in HISTORY.
- Draghi of the ECB is printing $80 Billion a month.
- Chevron recently laid-off 7,000 people, and Husky laid-off another 1,400.
- The most recent PMI report showed employment falling back, and order backlogs contracting for the 8th straight month.
- Sweden, Denmark, Italy, Switzerland, Germany and others are selling notes with NEGATIVE interest rates. This has never happened in the history of mankind.
- The Wall Street Journal talked about how stocks are up on hopes of more stimulus.
- And this week September durable goods orders fell by 1.2%, and August was revised LOWER by 3%.
This October rally is all on the hopes of more FED stimulus. Whether it's Japan, Europe, China or the FED – it’s all about: “More Please!” It’s not earnings. It’s not employment. It’s not capital expenditures for equipment. It’s not durable goods orders. It’s not anything tied to fundamentals. It’s all about free money.
This is a very dangerous market. While everyone loves it when stocks are rising and their 401's are making money; when markets run higher on hopes of debasing the currency, or on hopes that the last standing savers will finally jump into a bloated market – you know that this bubble will find a sharp object. We saw this same movie in 1999. The market melted up into year-end, and then in March it started lower – ending with the NASDAQ 60% lower.
There's little question that the market is tired. It needs more than a pause – it needs a few big red days to work off some of the froth. Was Friday's 92-point drop the start of it? It could be. But Monday is the first trading day of a new month and more times than not, new months bring in some new pension money – so I wouldn't be surprised if we move up for a day or two and then roll over.
But that said, there was a development on Saturday morning that may prove to be disturbing. A Russian passenger jet with 223 people on board crashed, and all the passengers perished. While that is a huge tragedy on its own, ISIS has claimed responsibility. Normally that would just be propaganda, but video has surfaced showing an airliner flying alongside and then exploding. Whether or not that video is real or not, is certainly a question. However, if Russia decides that ISIS was responsible – it opens a new can of worms. Remember, our allies support these mutants with money and weapons, and many were trained within the U.S. This is a development that could move markets, so we will need to keep an eye on how Europe is trading early tomorrow morning.
If you're trading this market, keep your position size small and your time frames short. The last quarter of the year is usually the strongest, but I wonder if the insanity of October pulled forward a lot of the gains that would have normally come in November and December.
Just keep your fingers near the sell buttons. When this market runs out of steam, the rush for the exits is going to be epic.
INDU 17,664: There is resistance at 17,800 and support 17,200.
NDX 4,648: The tech heavy index is pushing up against resistance. Apple’s earnings were good but not great. Look for back-filling here.
SPX 2079: I would look at 2100 as resistance with 2040 as support.
RUT 1162: The Russell (the broadest market measure of order flow) is lagging the other indices. A close this week above 1180 could mean we are heading for a holiday Fed rally. On the other hand, a close below 1140 could find us heading back to 1120 or 1100 – as real fundamental concerns are starting to drown Fed’s easy money.
I’m looking for Friday’s Non-Farm Payrolls Report to force some consolidation around the 2061 level of the S&P, and then later down into the 2035 level.
- AG – BOUGHT Stock @ $3.58 / and Jan, 2018 $2 Calls @ $2.30
- AUY – BOUGHT Stock @ $2.50 / and Jan, 2017 $2 Calls @ $0.90
- EGO – BOUGHT Stock @ $4.00 / and Jan, 2017 $3.50 Calls @ $1.10
- GFI – BOUGHT Stock @ $2.80 / and Jan, 2017 $2.50 Calls @ $0.90
- IAG – BOUGHT Stock @ $2 / and Jan, 2017 $1.50 Calls @ $0.85
- FFMGF – BOUGHT Stock @ $0.33
o SOLD – Iron Condor – Nov1 @ 1850 / 1855 to 2085 / 2090.
To follow me on Twitter.com and on StockTwits.com to get my daily thoughts and trades – my handle is: taylorpamm.
Please be safe out there!
Expressed thoughts proffered within the BARRONS REPORT, a Private and free weekly economic newsletter, are those of noted entrepreneur, professor and author, R.F. Culbertson, contributing sources and those he interviews. You can learn more and get your free subscription by visiting: <http://rfcfinancialnews.blogspot.com> .
Please write to Mr. Culbertson at: <firstname.lastname@example.org> to inform him of any reproductions, including when and where copy will be reproduced. You may use in complete form or, if quoting in brief, reference <>.
If you'd like to view RF's actual stock trades - and see more of his thoughts - please feel free to sign up as a Twitter follower - "taylorpamm" is the handle.
If you'd like to see RF in action - teaching people about investing - please feel free to view the TED talk that he gave on Fearless Investing:
To unsubscribe please refer to the bottom of the email.
Remember the Blog: <http://>
Until next week – be safe.