Do or Don't trust first snap back after a big decline ?

There were a bunch of 5% up days in 2008 and way back in the 1930s.

A 5% up day also marked the bottom in 1970, 1987, 1997, 1998 and 2009.

I never trust first snap back after a big decline.

The American Dream

“In 1923, seven men who had made it to the top of the financial success pyramid met together at the Edgewater Hotel in Chicago. Collectively, they controlled more wealth than the entire United States Treasury, and for years the media had held them up as examples of success. The American Dream

Who were they? Charles M. Schwab, president of the world’s largest steel company; Arthur Cutten, the greatest wheat speculator of his day; Richard Whitney, president of the New York Stock Exchange; Albert Fall, a member of the President’s Cabinet; Jesse Livermore, the greatest bear on Wall Street; Leon Fraser, president of the International Bank of Settlement; and Ivar Kreuger, the head of the world’s largest monopoly.

What happened to them? Schwab and Cutten both died broke; Whitney spent years of his life in Sing Sing penitentiary; Fall also spent years in prison, but was released so he could die at home; and the others? Livermore, Fraser, and Kreuger, committed suicide.”

—Donald McCullogh, Waking From The American Dream

I received this passage from a friend as a friendly reminder that there is more to life than money. Always keep in mind that family, health, spirituality, and many other things should come first before wealth accumulation. Make sure to spend time with your family and loved ones during this holiday season because that is where true wealth and happiness exists.

An even greater happiness comes from giving. Think of something that you can do during the holidays to help others, such as charity or volunteer work, and then go out and do it! 

Wishing you all a Happy Holiday Season!

Enjoying the show from the sidelines !

Deutsche Bank, trading at all time low.

This correction is turning into a Bear Market and Bear Markets usually last anywhere from nine months to three years.

"Keep your powder dry" and be ready to pounce when the time comes.

Remember, secular bull market resets are a good thing.

Keep Your Powder Dry

"What makes a life worth living?"
click to listen

"How to get Wealthy"

Market’s repeated reversals show ‘neither bulls nor bears’ are in charge.

Play small or just enjoy the sideline and let them tire themselves out before joining.

Enjoy your weekend !

With distribution coming soon after a follow through day the possibility of a market bottom coming into question. We'll see, but one thing for sure, expect more volatility.

"1929-1937 period vs 2008-2018:"

   In both cases, the financial crisis caused interest rates to go to zero, forcing central banks to print money to buy financial assets. The resulting asset market rallies drastically increased wealth disparity between rich and poor. [My comment: The reaction by politicians triggered rate hikes, plus the wealth disparity is not an issue because a rising tide lifts all boats, thus people across the board are better off. Technology has made a massive impact over the last 50 years and continues to accelerate in terms of quality of life in the U.S.]

·       Political polarization between left and right occurred globally, and populist/progressive movements popped up everywhere. In the 1930s, populism led to nationalist dictatorships in Italy, Spain and Germany. [My comment: Populism by itself is not the issue but the leftist, progressive thinking which sounds great in theory but often leads to socialism, fascism, and a lower tide for all.]

·       Japan was the China of the 1930s, a rising global economic power. The global response were trade restrictions and eventually an oil embargo. [My comment: Trump is a businessman so does not want to create waves that cause a steep drop in the stock market. Of course, this situation remains in flux.]

·       In 1937, the Fed began tightening monetary policy – U.S. unemployment jumped from to 19 per cent and manufacturing fell by 37 per cent from peak. The Dow Jones Industrial Average cratered -50.2% per cent. [My comment: the situation today is different from 1937. 1937 did not have strong pro-business policies in place as we have today. Instead, we had a socialist government in place (New Deal, etc) which hamstrung many businesses.]

The US devalued the dollar by 41% in 1934 in the throes of the Great Depression. But today's situation is not the same. While Trump’s policies have greatly helped, they have also increased the deficit to more than $1 trillion this  year but a material part of this is Obamacare which has yet to be repealed. That said, are the existing bubbles broad enough to affect the stock market should any or all of these bubbles blow apart? It is claimed the current U.S. household wealth bubble will end the way the last several asset and wealth bubbles did- by The Fed ending loose monetary conditions that caused the bubble in the first place. But this is wrong. Utopian affirmative action with ninja type loans and the equivalent where most anyone would qualify for a home loan created a monstrous real estate bubble which blew apart in 2008. There is arguably no such bubble today, though there are many smaller bubbles, some which I will discuss in a future report, but none sufficiently endemic to cause a replay of 2008. 

Nevertheless, the perception is that the higher the Fed hikes rates, the closer we get to the end of the road. Dalio recently said the rate hikes are now hurting asset prices. Adding fuel to the fire is the quantitative tightening policy which shrinks the balance sheet by $40 billion a month. But the question remains how fast GDP can continue to grow to offset rising rates. If GDP can continue to grow, then this ageing bull market will head higher once again, especially given the still near-record levels of global QE still in place as global economies remain weak thus have no choice but to continue to print.

Do you have your watch list up to date ?

We got a broad market volume trust accomplished by a follow through day both on NYSE and NASDAQ . Bottom is likely in place.

If the Fed were to stop or slow rate hikes and the trade war was resolved along with what the market perceives to be healthy GDP growth, this could help prop markets once again as QE capital which continues to flow strongly finds its way into U.S. markets. But until then, bearish fear, uncertainty, and doubt has taken hold.

You don't have to be a US citizen to practice Thanksgiving tomorrow, you just need to be able to assume an attitude of gratitude. I've found gratitude and thankfulness are useful for most aspects of life...including trading.

While the major indexes will likely back and fill or maybe even undercut the recent lows, the better names have likely made their lows as leading stocks tend to bottom ahead of the general market. Almost all of stock leaders emerge from market corrections.

History says now is a great time to buy commodities ?

History told us we could get a retest and that's what we got. ( check last Wednesday blog ) Now we need to see if selling starts to slow down before doing any buying.

It's very important that we don't get a bad close on an elevated volume.

Does that make war with the US inevitable?

Thucydides (thu-cid-did-dees) was an Athenian general. While he was born in Athens,
his family was from a town in northern Greece called Thrace. There, Thucydides owned
gold mines. And those mines provided him with the money that gave him time to pursue
his real passion: history. Thucydides lived from 400 to 460 BC. In 424 BC, he was given
command of an Athenian fleet, but his command was short-lived. Because of a strategic
failure, Thucydides was exiled from Athens for more than 20 years. It was during that
time, and after, that he chronicled almost 30 years of the famous conflict between
Athens and Sparta in a manuscript titled History of the Peloponnesian War. Because of
that book, Thucydides became known as the “father of scientific history.” Thucydides
knew that the war between Athens and Sparta would be more than a simple skirmish, so
he started writing about it almost as soon as it broke out. Indeed, the war lasted a
staggering 27 years. As you may know, Sparta won the war, thanks in part to the
financing it received from Persia.
Thucydides and the Peloponnesian War are fascinating subjects. But what’s even more
interesting is the larger picture. Before the Peloponnesian War, Athens was a
superpower of sorts, and, it quickly regained that status about 30 years after the end of
the war. But the point is not who won the war. What’s important to understand
is that Sparta was a rising power on an unavoidable collision course with Athens. And
the Peloponnesian War is just one example of these types of rising power/super
power conflicts. As Harvard scholar Graham Allison points out in his excellent book
Destined for War, this kind of conflict has happened many times over the last 500
years – sixteen times, to be exact. Among those conflicts are World War I
and World War II, of course. But there were 10 others. Twelve of those 16 conflicts 
ended in catastrophic wars. Allison says that in many cases those wars were 
unavoidable. They are inherent whenever a rising power threatens to surpass an 
existing superpower. He calls it the Thucydides Trap. And now, Allison believes the US
and China may well be caught in Thucydides’ Trap, too. They may be destined for a war
that neither wants but neither can avoid. Eventually all it takes is a spark to set off the
war. Often the spark comes from a completely separate third party.
In World War I, that spark was the assassination of the archduke of the 
Austro-Hungarian Empire. What will the spark between the US and China be? 
It could be Taiwan or Hong Kong. Or even the escalating trade war.
But is there really that much tension between the US and China? Consider that the 
20th century was known as the Golden Century for the US. Yet it was known as the
Century of Humiliation for China. Allison also reminds us that the Chinese ruled Asia for
4,000 years, so they are used to being #1. In fact, the Mandarin word for China means
“center of the universe.” And yet, don’t most people in the US believe the US is #1?
There simply can’t be two #1s. While Trump has vowed to make America great again,
Chinese President Xi Jinping vowed to make China great again long before Trump was
in office. Part of President Xi’s strategy is complete, authoritarian control. We know that
didn’t work so well for Russia, and we believe that market economies work better than 
centralised control. But China has some things going for it that Russia never had. China
is a big enough market that American companies are clamoring to do business there.
Yet even as they do business, China steals their intellectual property. The Chinese don’t
have to innovate when they can replicate. Plus, China can make things happen fast, 
because it plays by its own rules. The president is like a corporate CEO. A democracy
may trip over itself trying to get things done, but Jinping’s agenda gets implemented
quickly because there is no one to stand in its way. While it might take five years to
build a railroad in the US, a similar project gets built in five months in China. That’s why,
according to Allison, 40% of the world’s total growth since 2008 has come from China.
Yes, China is moving full steam ahead. What do you think, does that make war with the US inevitable?

History in the making; Marijuana is officially legal in Canada !

Buying and using recreational cannabis is legal as of today, October 17, 2018, and Canadians are already making purchases online and in retail stores across the country.

SPX - As we rally into the 50% retracement area caution should prevail as our February recovery rally failed at that point and after we stalled the market fell to lower lows.

                                      Storm is not going away yet !

Don't feel bad when "stopped-out", it simply means begin again at one level higher.

Talking heads are talking about sector rotations, sure there is a rotation, but into cash.

'Your current limitations or failures are the building blocks from which to create greatness. You can go where you want to go. You can do what you want to do. You can become what you want to become. You can do it all, starting now, right where you are.'

If you can't make money trading, all you have to do is change the rules.

Some of the best stock traders in the world are now over 90 % in cash. What are you doing?

'When in doubt; THINK.'

'The best way to predict the future is to create it yourself.'

Most people don't design their lives and the results are clear for everyone to see--most people are merely average. You don't need to settle for average. You don't need to accept your life for what it is. Because the choice to change is up to you.

As rates continue to rise, it is no surprise, a number of financial stocks are going higher. Higher Treasury yields can give a boost to bank earnings, because that can increase the spread between what the banks make on longer-term assets and what they pay for shorter-term liabilities. With rates continuing to rise, banks could further benefit.

"Find something you would die for and live for it."

'Wall of worry is the financial markets’ periodic tendency to surmount a host of negative factors and keep ascending. Wall of worry is generally used in connection with the stock markets, referring to their resilience when running into a temporary stumbling block, rather than a permanent impediment to a market advance.'

Enjoy your wins while they last as always nothing remains too good for too long !

Have a great weekend!

The U.S. Department of Justice said it would discuss concerns that social media platforms are "intentionally stifling the free exchange of ideas".

https://www.tradingview.com/x/fNBBX48t/

Last week was tough for leading momentum stocks with most selling down as money rotated from growth stocks into more defensive names as well as stocks in the Dow Jones Industrials. Last week could be just the start of more volatility to come for the next few weeks.

Stocks traded sideways on this last day of August, wrapping up the week modestly in the green and leaving the S&P 500 higher by 8.5% year-to-date.

https://www.tradingview.com/x/XXZebHdj/

'It’s official. By one widely accepted definition, we’re now living through the longest bull market in US history. The S&P 500 marches on, now having gone a record 3,452 consecutive days without declining 20%. That beats the old record-holding bull market that ran from 1990–2000'

The S&P celebrated last week by touching all-time highs for the first time since late 

January. Nothing can stop US equities lately: In the last few months they’ve 

shrugged off news of trade wars, the Trump investigation, emerging markets 

contagion, and a 20% plunge in Facebook (FB).

It’s not just American stocks flexing their muscles. The US dollar is also ripping to

2018 highs, driven by the Federal Reserve’s monetary tightening. The Fed

continues to raise interest rates, while most other central banks around the world

are either standing pat or easing.

As Real Vision subscribers know, the dollar is the “key to everything.” Dollars

grease the wheels of global finance. When they are cheap and plentiful, markets

tend to be calm and happy.

But a rapidly rising dollar can cause a lot of pain, as any investor holding emerging

market assets will tell you. Many EM currencies, like the Turkish lira and Brazilian

real, are getting annihilated. EM stocks have been tough to own as well. The

popular ETF VWO has tanked about 20% since January, putting it in official bear

market territory.

The S&P celebrated last week by touching all-time highs for the first time since late 

January. Nothing can stop US equities lately: In the last few months they’ve 

shrugged off news of trade wars, the Trump investigation, emerging markets 

contagion, and a 20% plunge in Facebook (FB).

It’s not just American stocks flexing their muscles. The US dollar is also ripping to

2018 highs, driven by the Federal Reserve’s monetary tightening. The Fed

continues to raise interest rates, while most other central banks around the world

are either standing pat or easing.

As Real Vision subscribers know, the dollar is the “key to everything.” Dollars

grease the wheels of global finance. When they are cheap and plentiful, markets

tend to be calm and happy.

But a rapidly rising dollar can cause a lot of pain, as any investor holding emerging

market assets will tell you. Many EM currencies, like the Turkish lira and Brazilian

real, are getting annihilated. EM stocks have been tough to own as well. The

popular ETF VWO has tanked about 20% since January, putting it in official bear

market territory.

The S&P celebrated last week by touching all-time highs for the first time since late 

January. Nothing can stop US equities lately: In the last few months they’ve 

shrugged off news of trade wars, the Trump investigation, emerging markets 

contagion, and a 20% plunge in Facebook (FB).

It’s not just American stocks flexing their muscles. The US dollar is also ripping to

2018 highs, driven by the Federal Reserve’s monetary tightening. The Fed

continues to raise interest rates, while most other central banks around the world

are either standing pat or easing.

As Real Vision subscribers know, the dollar is the “key to everything.” Dollars

grease the wheels of global finance. When they are cheap and plentiful, markets

tend to be calm and happy.

But a rapidly rising dollar can cause a lot of pain, as any investor holding emerging

market assets will tell you. Many EM currencies, like the Turkish lira and Brazilian

real, are getting annihilated. EM stocks have been tough to own as well. The

popular ETF VWO has tanked about 20% since January, putting it in official bear

market territory.

The S&P celebrated last week by touching all-time highs for the first time since late 

January. Nothing can stop US equities lately: In the last few months they’ve 

shrugged off news of trade wars, the Trump investigation, emerging markets 

contagion, and a 20% plunge in Facebook (FB).

It’s not just American stocks flexing their muscles. The US dollar is also ripping to

2018 highs, driven by the Federal Reserve’s monetary tightening. The Fed

continues to raise interest rates, while most other central banks around the world

are either standing pat or easing.

As Real Vision subscribers know, the dollar is the “key to everything.” Dollars

grease the wheels of global finance. When they are cheap and plentiful, markets

tend to be calm and happy.

But a rapidly rising dollar can cause a lot of pain, as any investor holding emerging

market assets will tell you. Many EM currencies, like the Turkish lira and Brazilian

real, are getting annihilated. EM stocks have been tough to own as well. The

popular ETF VWO has tanked about 20% since January, putting it in official bear

market territory.

'Over 60% of Top 100 Cryptocurrencies have no working product, study claims'

https://news.bitcoin.com/over-60-of-top-100-cryptocurrencies-have-no-working-product-study-claims/?utm_source=OneSignal%20Push&utm_medium=notification&utm_campaign=Push%20Notifications

'The interview has a good amount of solid professional information in it as it pertains to finding trading edges, successful system development, and proper money management, along with a number of pertinent topics that apply to all short-term traders.'

Even though Turkey is a small country, with global markets still on tenterhooks economically, could this provoke a domino effect?

With yet another country to face a currency crisis, this time in Turkey, the European Central Bank is getting increasingly concerned about the exposure of some banks in the region -- specifically from Spain, Italy and France. Meanwhile, Asian markets are selling off as the rout spreads. Perhaps Turkey will become another country to become bitcoinized, much as we have seen over in South America. 

Floored- Into The Pit HQ - Epic Market Trader Movie

"Last Friday, online reports indicated that gunfire had been heard for roughly 40 minutes in Beijing near the Second Ring Road."

The South China Morning Post (SCMP) recently shared the following (emphasis mine):

 

In an opinion piece published on Wednesday by People’s Court Daily, Du Wanhua, deputy director of an advisory committee to the Supreme People’s Court, said that courts needed to be aware of the potential harm the tariff row could cause.

 

“It’s hard to predict how this trade war will develop and to what extent,” he said. “But one thing is sure: if the US imposes tariffs on Chinese imports following an order of US$60 billion yuan, US$200 billion yuan, or even US$500 billion, many Chinese companies will go bankrupt.”

 

As Chinese courts have yet to have any involvement in the trade dispute, the fact that the newspaper of the nation’s top court, ran an opinion piece – for a judiciary-only readership – suggests concerns might be rising in Beijing about the possible socioeconomic implications of the row.

 

There’s also been a number of reports (so far, unverified) over the last few weeks of serious trouble brewing within the party. Geopolitical Futures recently shared this.

 

Last Friday, online reports indicated that gunfire had been heard for roughly 40 minutes in Beijing near the Second Ring Road. The reports claimed it was a violent spasm by groups that sought to overthrow Chinese President Xi Jinping. The following day, French public radio reported it had heard rumours that former Chinese leaders, including Jiang Zemin and Hu Jintao, had allied with other disgruntled Chinese officials in an attempt to force Xi to step down. A Hong Kong tabloid went so far as to suggest that Wang Yang, chairman of the Chinese People’s Political Consultative Conference, might be the compromise leader next in line.

 

It’s impossible for us to know if there’s any truth to these rumours (China keeps a tight lid on these types of things) but just the fact that they’re circulating are indication of growing unease with the state of the Chinese economy. And it may be why we’re seeing this policy 180 by the CCP.

 

We also don’t know if this easing will be enough to reverse the negative trends kicked into gear by the initial deleveraging nor do we know how long and aggressive the CCP will be in this round of easing. All we know for sure is that however they choose to carry out policy will continue to have an outsized impact on markets and the global economy.

 

For our part, we just have to keep a close eye on the data and change up our positioning to account for the new uncertainty created by this shift back to easing.

 

Two important data points we’ll want to watch in order to gauge the scale of the current easing response are fixed asset investment (ie, infrastructure spending) and China’s M1 money supply (which has a close leading correlation to changes in industrial metal pricing).