by Tom Gentile
Turn on CNBC, Fox Business Network, or any other financial news channel before the markets open, and you'll get a slew of people predicting what the markets will do that day.
But they'll never tell you how or why they said what they do.
That's why today, our Tom Gentile's going to give you a set of "secret weapons" the cable crowd can only dream of.
There's a lot to like about this market…
It's technically strong, and leadership among the sectors hasn't changed. This is good.
The Nasdaq Composite and Russell 2000 indexes are out above their 200-day moving averages as of Friday; all four of the major indexes are back above this key trend line. The CBOE Volatility Index (VIX) has settled below the critical 15-point level and was last seen headed south. I'm lovin' it.
And of course, more than 80% of the S&P 500 has reported earnings. Seventy percent of 'em beat earnings expectations, and 60% trounced revenue expectations. Phenomenal.
Finally, a raft of weak-ish economic data had traders taking some profit off the table last week, which, in conjunction with a sagging VIX, suggests we're done with the selling for the time being.
The trend is your friend, I always like to say, and the trend is "up."
But we still have to make it past the China trade deal – or lack thereof.
After nearly a decade-long bull run – the longest bull market ever – the recent stock market turbulence has investors preparing for the worst.
But some moves they're making right now could backfire in a big way...
by Lee Adler
The market-reversing "Magic Hand" appeared again Monday, just when it looked as though all was lost. Is this the bottom?
One thing is certain: There is a crucial support area from 2,590 to 2,630 on the S&P 500. On Monday it was stretched beyond the limit, when suddenly, out of nowhere came the Magic Hand.
In this instance, the bulls can thank the shorts again, because with liquidity tight and getting tighter, there's not enough intrinsic demand for stocks to mount a massive, lasting rally. But in a market that has become thin because prices have crossed the same range over and over, short covering can drive a fast rally – but only until the short covering exhausts itself. And those times are getting shorter.
Nevertheless, when the earth is in its final hours, with the core about to explode and obliterate the last remaining vestiges of life, there is one thing that you can count on.
The shorts will cover.
I remember the old saw of the ancient, white-haired, wise-men traders I sat with in customers' galleries at Walston & Company back in the late 1960s and early 1970s, when bear markets were the rule: "He who sells what isn't his'n, must buy it back or go to prison."
And short sellers have hair triggers. Once they see that support isn't breaking down, they pile in all at once to cover their positions. That also tends to pull in a few long-side buyers who have cash. They're in short supply now, however.
Ultimately, each of these short-covering rallies weakens the market because they deplete the demand that is coming from short covering. So, what about short interest today? Will it continue to drive rallies every time support is threatened?
Examining Primary Dealer and customer shorts gives us some obvious answers...
by Lee Adler
Withholding tax collections soared in the second half of November after a very weak start. Is the surge an anomaly, or is it a sign of a final explosive blowoff in the U.S. economy? Maybe it's both. We'll need to watch the data in the next few weeks to see how quickly this surge dissipates. They always do.
Over the years I've been tracking withholding tax collections, I have noticed that just as J.P. Morgan said about stock prices, "tax collections will fluctuate." There's a regular cycle of increases and decreases that typically runs two to four months. The surge that we just had is much larger than normal, but typical time wise. The next pullback is due to start any day now.
Now, you may be wondering what these withholding taxes tell us about today's employment report, coming soon to a TV screen or web browser near you. Unfortunately, there are too many conflicting signals in the data to draw conclusions about the November jobs report.
With apologies to Hall and Oates, it doesn't really matter anyway. You can rely on the Fed's less money, you can rely on the less Fed's money.
by Tom Gentile
Massive Monday movements in stocks are a big clue that we're in for another week of – you guessed it – volatility.
It might cost some folks sleep, but I really like these big swings. It's tough to make money if stocks aren't moving either way.
Yesterday, I told you all about Bollinger bands – a simple statistical tool that can tell you when stocks are about to snap back to higher highs or lower lows.
Today, we're going to apply those tools – kind of like a filter – to a list of stocks to find exactly which ones are poised to move up and down.
Picking a winner from these lists is like shooting fish in a barrel...
So we returned from Thanksgiving break expecting some more selling and found stocks… going up.
Yep. The S&P 500 managed to grind out about 0.88% in gains. That's hardly a raging bull, but at least it means the selling's over with… right?
Not hardly, although Monday and Tuesday, traders were undeniably looking at the sunny side of life.
But on Monday, fully 19 of 20 "Turbo Stocks" I track for my paid-up subscribers returned short-side gains, meaning they went down.
Just one bull against 19 bears? Hamburger's on the menu, folks.
Still, these small gains on the S&P 500 can tell us something valuable...
by Lee Adler
Stock prices and leaves aren't the only things falling right now.
Tax collections fell again in September, but the Congressional "Budget Busting Agreement" has spending soaring right into the face of plunging federal revenue.
And I'm here to tell you this: The fall in tax collections is a big factor driving shares and bond prices down.
by Lee Adler
The Fed has fallen behind schedule. The schedule called for a total of $30 billion in reductions in Q4 of 2017, $60 billion in Q1 of this year, $90 billion in Q2, and $120 billion in Q3, which is now complete. So the total scheduled through the end of September was $300 billion.
Here we are at the end of Q3, and the Fed has only shrunken its balance sheet by $276 billion since last October, when it started the "normalization" program.
Here's a look at how things have been unfolding throughout the past ten years...
by Lee Adler
The Daily Treasury Statement data for the end of August showed some improvement in total tax collections, including a slight uptick in withholding taxes and an even bigger increase in excise taxes.
The numbers suggest that an early summer slowdown has ended. After the expected downward revisions in June and July jobs data, the August uptick in jobs was not a fluke. And the excise tax data suggests strong retail sales.
So, not an altogether bad summer – if you happen to be a politician or government taxman. But what about for investors?
Well surprise, surprise, surprise! Good news is bad news, which is what we've been talking about here all along.
Good economic news, as presaged by the uptick in tax receipts, will encourage the Fed to keep tightening.
And tighten it shall, in two ways: Most importantly (and most destructively), it will drain more money from the banking system. Secondarily, it will continue to rubber-stamp tightening money markets by raising the federal-funds rate.
And that, as I have been shaking my fist at the sky about for months, is really bearish.
The stuff has not hit the fan yet, but it is coming...
