This week’s Saturday stock market prediction show focuses on China and the trade war, and how the mainstream financial media is really missing how serious this trade war could get.
Hello my fellow stock trading masters, this is Lance Jepsen with GuerillaStockTrading.com.
Alright guys, so this is awesome because yesterday I pushed out a trader alert video about getting out of the market because of the China trade war that’s going to hit markets April 6, 2018, big downward move. What ended up happening was exactly what I had talked about in the video. As premium members know, you got the text alert that, when I went long the TVIX trade. So here is the actual chart of the trade. That’s absolutely awesome folks, okay? Here’s TVIX, there’s my buy entry, and there’s my sell.
Now TVIX went on to go up even more, but I’m not trying to time a market top. I’m not trying to be Mr. Super Trader, right? Buy the absolute bottom and sell the absolute top, that’s not the goal here. The goal is to make money off that sweet zone somewhere in between a market bottom and a market top or a swing low, and a swing high. Just take that high probability trade right in the middle, between a bottom and a top. You’re just try to get that middle area there, alright? Your probability will go up on hitting the trade. If you’re trying to buy a bottom and sell a top, your gonna have a lot more losing trades.
Yesterday, I said I would not want to buy, I laid out the plan for the TVIX scalp, okay? You guys know this is one my favorite trades to go to. This should be in your toolbox premium members, right? Make sure this is in your toolbox. It’s the TVIX trade. When something happens in after-market hours, for the next morning, this is the trade: go long TVIX.
I said let’s don’t go long, what I would like to do is not go long TVIX at market open. Instead, I’d like to wait for a fill of the gap, or even a partial fill of the gap, and then when the market starts to rollover, go long. So I want to show this to you on TVIX, but also on the major indices that I was looking at, that way you’re just right over my shoulder. You’re looking at everything I was looking at, and you can add this to your toolbox of trades. So here was the gap up open in TVIX, right? Because the overnight futures, like I spoke about in yesterday’s video, overnight futures makes TVIX gap up open. Here’s the fill of the gap. Came all the way down almost completely filled the gap and then it turned hard-core, and when I got this big candle here, that’s when I bought TVIX and texted out an instant text alert to premium members that I just went long TVIX. Came back, started to come down. This, my stoploss was really awesome. It was the, this low right here, and that low held, and kept going up. And then I saw the TVIX Twiggs Money Flow just sitting there going up and up and up and up into this part in, into the sideways move of this trade. So that was really beautiful.
Now here is what I was actually tracking in the market. I was looking at the NASDAQ. I like to use Finviz, but sometimes I switch over to my online brokerage trading firm. Sometimes I use the E*TRADE platform software. It just kinda depends upon what I’m doing but in this time I was watching Finviz. And here is where the NASDAQ, and I mentioned in yesterday’s show that I would be watching the NASDAQ, the NASDAQ opened up right down here. There’s the gap down open on the NASDAQ and then boom it. There’s the big move up. There’s the partial fill of the gap down open that I was waiting for and then I was looking for the market, as I said in yesterday show, look for the market to start to roll over on a partial fill of the gap down, and then when the market is to rollover, then you go long TVIX. So there we have the gap down open, there’s the partial fill, the market started to rollover, and right here is when I went long TVIX.
It was the classic setup of exactly like I said in yesterday’s show. So that made back some of the losses that I made on Thursday because of the Amazon trade. So I actually ended the week up a pretty good amount. I had a winning trade in Facebook. Had a winning trade in TVIX. Had a losing trade in Amazon. Awesome stuff. Thank you God. That was absolutely awesome. I laid out the plan that I’d like to trade in yesterday’s show, and then the market did exactly, textbook, what I had said, what I was prepared for, what I was waiting for and boom, I executed the trade, cha-ching. Really awesome stuff guys. It’s a great feeling to make, you know $200, or something, in like two hours, and you’re just like yeah!
I really wanted to see how China was going to respond to what President Trump had said about putting on another $100 billion in tariffs. China came out and said that they have pulled out of the negotiations and they promised to retaliate if President Trump puts on $100 billion more in tariffs. Here is the exact words that our mainstream media is hiding. CNBC did not talk anything about this. Here’s the exact words of the Chinese Ministry of Commerce spokesman Gao Feng. He said “under these conditions, the two sides cannot conduct any negotiations”. So there you have it, right? China has pulled, China has ended any kind of negotiations after President Trump had announced that he’s looking to put on $100 billion more in tariffs against China. Feng went on to say, “China will retaliate immediately, intensively, without any hesitation. We Chinese won’t pick fights, but if someone picks a fight, will resolutely meet them head on. We Chinese always take things seriously. We will act as we say”. Now that’s really rich coming from China.
China doesn’t pick fights, huh?
You know, I mean look at the ties in the mainstream media. Look at how China’s just repeating, communist China, is repeating exactly what we’re reading in the mainstream liberal media. Exactly what’s being pushed out on NBC and CNBC, there it is. It’s kind of interesting that that’s the main line of China. I mean you can get all like what influences China have over are mainstream media groups, which I think is a valid question, but China doesn’t pick fights? I mean think about it.
China’s very symbol of their country is a red dragon with its mouth open, right? They, the Chinese but the red dragon on everything, right? So you know, and that it’s an angry red dragon with its mouth open. It’s either going to breathe fire on you, or eat you, right? I mean, and this is the country that says we don’t pick fights, really? That would be like us having a boxer on our flag. We don’t pick fights. Alright, so if China doesn’t pick fights then why are they continuing to attack my Guerrilla Stock Trading blog? Here is a screenshot of my firewall and the attacks against my site with more attacks coming from China than all countries combined. China doesn’t pick fights?
I think Tibet would disagree. Here was Tibet in April of 2016, okay? All these little homes here on the side of this mountain. Here is Tibet in April of 2017, when the Chinese moved in. They just demolished everything.
I think tank man would disagree that China doesn’t pick fights. Remember Tiananmen Square and the tank man? And China doesn’t start fights, huh?
So what does China call its recent move of attacking the value of the US dollar by going to countries that we put sanctions on like Russia and Iran and saying, hey, we’ll buy all the oil that you have to sell us but you have to buy it in yuans. The Chinese state media later came out a day or two later, came out and specifically said that the intent, one of the intents, of the, of establishing the petroyuan was to kick the world off the US dollar oil standard. China doesn’t pick fights, huh?
And then that’s not even talking about the, what China did when they were accepted into the WTO back in 2001, with dumping products on the market that were subsidized by their communist government, stealing jobs from the US and other of our allied countries.
I mean we made China what it is right now. The US and US corporations and businesses made China. The WTO made China what it is right now. It grew from the 80s to where it’s at right now. It’s incredible. A city the size of Las Vegas was going up every six months. That’s how much building and construction, and good things that came China’s way. Does China show any gratitude at all towards us? No, but China doesn’t pick fights.
I’m sure the trade imbalance crisis could be fixed, if only we’d all agree to be subjects of communist China, at least until their own trade surpluses burst.
Now folks on a more serious note, the start of trade wars between countries often is the precursor for military warfare between those countries. I think that starts in the South China Sea as China illegally builds islands in violation of international maritime law.
A trade war with a country the size of China has never been started in history. I think the mainstream media in this country and many commentators, they’re all misjudging what’s going on. CNBC kept saying, I just can’t believe the markets are going down this much, the trade war doesn’t represent that much, right? And, and then all of that you know the Cramer type guys that come out and say buy the dip. Buy the dip. I mean they’re all really misjudging what’s going on here.
So they like to go back and look at the Smoot-Hawley Tariff Act, right? The 1930s rising rates and the Smoot-Hawley Tariff Act, uh tariff act is what caused the market crash and the Great Depression. Well we have both of those things right now. Interest rates rising and now we have a trade war, but this trade war, are you kidding me? This thing is so much bigger than the Smoot-Hawley Tariff Act ever was. Ever was. It’s not even in the same ballpark.
That was back when countries were largely on farms, right? The whole GDP of the US was so low. It’s nothing like it is right now. Right now were talking about billions and billions of dollars at stake. This is so much bigger than the Smoot-Hawley Tariff Act ever was.
Think of this to. Four of the top 10 sovereign wealth funds in the world by size are owned by the Chinese government. Four of the top 10! The US, we didn’t even make it on there. Four! So that tells me that China has an incredible, probably trillions of dollars worth of money invested in the US markets by way of those sovereign wealth funds and their holdings. They hold stock in all of our big companies, in all of our Fortune 500 companies, in all of our S&P 500 companies. In, in our oil and energy sectors, in our technology sectors. What happens in, and, and nobody’s even talking about this, what happens if the Chinese get mad? Everyone wants to say well they hold a lot of our debt, our bonds, that’s nothing compared to what China could do to us via those sovereign wealth funds. What if China decides to start selling out of all US stocks? Now don’t get me wrong. That would hurt them to. But they could crash our stock markets, right? I mean that’s how much money we are talking about at stake here. The, this is why the stock market is selling off. The world has never seen a trade war between two countries, the size of the US and China.
Now after the winning trade in TVIX, I went long UGLD. This is the three times leveraged long gold ETN. It really didn’t move much on Friday, but it’s a way to preserve your wealth. It’s really holding up well. UGLD, or not UGLD but gold via GLD, is up something like 2.5% for the year, while the S&P 500 is down like 2.5% for the year. So gold continues to outperform the S&P 500 so far in 2018, and we’re already into month four.
Notice that, and this is true on GLD to, you don’t have to look at UGLD but notice the large players volume, and this is the main reason why I bought UGLD. There’s our positive divergence that I screen for. So you can see that the large players volume, which large players volume is measured by looking at the one minute tick timeframe, okay, looking at the buy orders versus the sell orders in the one minute timeframe. So you could see that. Look at this huge large players volume surge while UGLD was falling. The only way that this could happen is traders are buying on pullbacks, their accumulating on pullbacks. And if we come down to the Twiggs Money Flow, absolutely. That’s what they’ve been doing. The positive Twiggs Money Flow uptrending, looking very strong, confirmed what we’re seeing on the large players volume, that traders are accumulating gold at its current price level. Now I know guys. UGLD, UGLD, because some people just like to watch the world burn.
Institutional buying was detected on Monday, April 2. The institutional buying was broad-based across all sectors. So it favored the Bulls. It’s that kind of institutional buying last week, on Monday, and really into Tuesday, that led to my loss in Amazon. And that’s the problem with this market guys. That, that’s another reason why I really like gold. That’s why I’m all in gold in my 401(k). I’m probably not going to make too much money, but I want to just preserve the current money that I have. And so that’s what I, that, that’s the main reason why I like gold. This market, face it, you’re trading this market. What’s happening is that these exogenous events are hitting and there’s no way to predict when they’re going to hit. It’s just part of the Trump Administration. It’s what Trump likes to do. He’s a scraper. He’s a fighter. He likes to create chaos. Turn things upside down. Get people out of their comfort zones. Just create, just flip things around and upside down, before he makes up his mind on what he’s going to do. You see this in his foreign-policy. But you also see this in the way that he runs the White House. You know he’ll put in people on two different sides of the spectrum. Have them go at it back and forth and they fight and tumble, and, and it just creates chaos, but then out of that chaos, he makes up his own mind. He hears both sides, makes up his own mind, and then moves forward. So in an Trump Administration like that for stock trading, it’s going to be really difficult, okay? It’s going be really difficult because you’re constantly gonna have these exogenous events hitting, boom, boom! And you, you’ll, your long a stock and it’s gonna blow it up, boom! And then you’re going to go back down again. So it’s a very difficult market to trade if you’re a buy-and-hold guy. I think if you’re a swing trader, this volatility that has been created from all this, it’s gonna create the swings back and forth. The problem is, is that there, it’s unpredictable when these things are suddenly going to hit.
The New York Stock Exchange percent of stocks above the 200 day moving average is at 47.5%. Again, slight advantage to the Bears.
Transports, very weak, double pump possibly on the PPO to the downside. The AROON still has the red line on top. We’ve got this kind of chop out move, sideways move, here. This chart gives a slight advantage to the Bears.
The S&P 500 has fallen back to its 200 day moving average, and it’s currently testing that level. The CTM, very weak, did not break into the red zone and that was something that we were watching last week. Look at that triple test, but it did not break into the red zone. So that’s what we’re gonna watch next week. Again, just like last weekend, it’s what happens off the 200 day moving average. Until you know what’s gonna happen off the 200 day moving average, you can’t get too bullish, you can’t get to bearish, so you should be on the sidelines and in the safety of cash and watch the 200 day moving average. If we get a break of the 200 day moving average, it’s definitely going to favor the Bears. If the CTM breaks into the red zone, that would put the S&P 500 in an, in an official downtrend. Meanwhile, the 50 day moving average continues to fall and the Parabolic SAR sell signal holds.
The S&P 100 index, with the equity put call ratio, look at how high the put call ratio is. Lots of put buying as hedges against a market pullback, and just staying up at this level, just kind of flatlining up here. That favors the Bears.
QQQ, holding up a little bit better than the S&P 500, but looks like it wants to go back and test the 200 day moving average. PPO, red histogram bars, Force Index negative. This chart gives a slight advantage to the Bears.
Russell 2000, force index negative, PPO negative. Russell 2000 came up, tested the 50 day moving average. 50 day moving average act as resistance as the Russell 2000 fell back down. Keep your eyes on the 200 day moving average, but also the Parabolic SAR resistance level. If we get a break of the Parabolic SAR resistance level, that would also be a break above the 50 day moving average and that would definitely turn things a bit more bullish. However, if we continue down, and break below the 200 day moving average, things would get bearish really quick. So right now, the Russell 2000, sidelines rating.
For the first time in a very long time, the red line is, has crossed above the blue line. Now you could say that they’re so close that their testing, but unbelievable folks. This gives a slight advantage to the Bears.
Home construction ETF, we had a Parabolic SAR buy signal last week. PPO, green histogram bars, favors the Bulls. This chart gives a slight advantage to the Bulls, provided that the 50 day moving average can hold. If ITB falls back below the 50 day moving average line, then all bets are off. This chart goes back into a sidelines rating. However, if Monday, next week, we get a bounce higher off that 50 day moving average line, that would clearly favor the Bulls.
The SOXX semiconductor ETF looks really bad. Tried to bounce. The 50 day moving average acted as resistance, fell back down. PPO, red histogram bars, looks like it may take a run at the 200 day moving average, this chart favors the Bears.
Dow Transports Volume Advance Decline Percent chart, market breadth is getting a little bit better. I mean we had a Parabolic SAR buy signal on Friday. However, we have to see what happens. This could’ve been clearing out this, this could’ve been playing stops, and clearing out stops, and then we get a countertrend as soon as the Parabolic SAR signal reverses. So I’d like to see some confirmation on Monday that market breath is rising. But this chart gives a slight advantage to the Bulls.
NASDAQ Advance Declines Issues could not do what the Dow did. Came up to test Parabolic SAR resistance, got rejected, and went down off of it, but it still was enough of a break to trigger a Parabolic SAR buy signal. So it’s like a head fake. It played the, that stop level, and as soon as the Parabolic SAR switches to the other signal, you get this countertrend rally. So this is going to be interesting to see if this countertrend rally goes all the way back down and then we get another Parabolic SAR sell signal because it breaks support. But this chart gives, this chart does not favor either the Bulls or the Bears.
S&P 500 Advance Decline Percent chart, it has come up to test Parabolic SAR resistance, and boom, we got a Parabolic SAR buy signal. So market breath, definitely looking a little bit stronger, but we have to see next week, what happens. Are we gonna get a bounce down now, and the market is gonna come all the way back down and test Parabolic SAR buy support? Or are we gonna get a breakthrough next week, on Monday, and then it’s off to the races. No signal until we see what happens with the Parabolic SAR.
Negative money flow. Negative PPO, chopping out sideways. No signal.
S&P retail ETF, it’s gone over to a Parabolic SAR buy signal. TSI, we have a nice bullish cross, but it got rejected at the 50 day moving average. So keep your eyes on the 50 day moving average. If 50 day moving average resistance is not broke early next week, this is likely going to go back down to test the 200 day moving average area. If we get a break above the 50 day moving average on the S&P retail ETF, it could be off to the races.
10 year Treasury note yields, chopping out, slowly fading downward. So because this is yields that we’re currently looking at, this means that money is slowly moving into bonds because the yields do the inverse of bonds. So the fact that we have this kind of slow fade downward, that really started about the middle to the end of February, this slow fade downward in yields means that you’ve got a slow upward trend in people moving money into the defensive 10 year Treasury bond. So this slight downward trend now, that we can pick up here, favors the Bears.
For the week, money came out of both stocks and bonds, that favors the Bears.
Looking at IBB in the biotech ETF, strong downtrend, money flow breaks negative, PPO negative, broken underneath the 200 day moving average, this chart favors the Bears. I mean, and that really shows you in the biotech ETF that were really in a risk off market.
Looking at the largest economy’s currencies over the last week, the winner in the currency wars last week, that is who can devalue their currency the most to gain the most competitive advantage, goes to China. Can see that the red line here is China, for the week China’s devalued their currency the most.
We got margin, new margin debt levels, a couple weeks ago for the month of February. Got a slight tick down for the month of February and that makes sense because oil had also ticked down during that time. Keep in mind that the sovereign wealth funds hold a lot of oil, and they turn around and they use the margin extended to them for their oil holdings, to buy all sorts of different equities and assets in countries around the world. When the price of oil drops, it’s like a global margin call goes out. Margin levels are reduced and the sovereign wealth funds have to either put in new money to meet the margin call, or sell their existing assets to reduce their margin level to an acceptable level. So the fact that oil ticked down here and we have a slight tick down in margin, makes a lot of sense. However, margin’s above the 10 month moving average gold line, so that favors the Bulls.
The Russell 2000 closed below its pivot level for the week. Came up, tested its pivot level, boom. The pivot level turned into resistance and on Friday, the market bounced down off that pivot level. This favors the Bears.
S&P High-Low Index, blue, rising, favors the Bulls.
S&P 500 Percent of Stocks Above the 50 Day Moving Average with our EMA envelope lines, cut through the EMA envelope lines like a hot knife through butter. This chart favors the Bears.
So with the earnings season about to get underway, I’d like to take a quick look at S&P 500 earnings versus the S&P 500 P/E ratio. And the forecasted earnings, you can see there’s, there’s the bump up, okay, which is not bad. It almost breaks the trend of rising interest rates slowing down the growth, as you can see by the difference in these big moves, right, and as, as, as interest rates have risen each time, earnings are slowing. Well if earnings holds up to what estimates are, that’s not going to happen this time, and that’s because this earnings season is going to be the first earnings season where the Trump taxes are actually going to be figured in, the Trump tax cut. So that’s really helped this upward forecast here and that’s why you don’t see the bump getting smaller. The recent selloff in the stock market has really pushed the P/E ratio down. It’s now at 24.04, which is the lowest P/E ratio reading going all the way back to June of 2017.
Looking at our sector rotation chart index that was down the least is actually the Russell 2000 which is this gray line here. That’s shocking folks. You would expect the Russell 2000, to be leading the market lower on a genuine, bona fide selloff. So this is actually quite bullish for the market, the fact that the Russell 2000 has sold off the least. QQQ in tech is leading the market lower. That’s another offensive sector, so you don’t like to see that but small caps are holding up amazingly well. I think you have to say, for now, that this chart gives just a slight advantage to the Bulls.
Looking at the sectors for the last week. The sector that sold off the most was technology, followed by the financial sector, and the S&P 500, and then consumer discretionaries, the blue line, consumer staples, the gray line, and utilities sold off the least, the white line. So the fact that utilities sold off the least, technology sold off the most, and financial stocks sold off the most, this gives a slight advantage to the Bears.
The S&P 500 to the high-yield debt. High-yield debt is holding up extremely well, much better than you would expect. That gives a slight advantage to the Bulls.
This is the S&P 500 high beta stocks to low volatility stocks ratio chart. When this goes up, high beta stocks are outperforming lower volatility stocks, when it drops lower volatility stocks are outperforming high beta stocks. So it’s, it’s a measure of a risk on, versus risk off market. The fact that we’re currently in this downward swing, means that low volatility stocks are outperforming high beta stocks. That’s a risk off environment that began on this chart back in mid-March. That favors the Bears.
The PPO on SPY, too close to zero to say which way this is leaning and which way this favors so no signal.
The VIX short-term futures, amazingly, you would think that it would’ve spiked up a lot higher on these trade wars and you just don’t have it folks. It’s chopping out sideways, even though we’re still operating underneath the Parabolic SAR buy signal. We’ve got the sideways move over the last week. No big pick up in volume. No signal.
VIX mid-term futures. Same thing. Underneath the Parabolic SAR buy signal, but it’s just chopping out sideways over the last week. No big volume spike, so no signal.
Folks, my rating for trading next week is sidelines. Until we see what happens with the S&P 500 off that 200 day moving average, we can’t say that this market favors either, either the Bulls or the Bears. So that’s what you need to do next week. Make sure you’re watching the S&P 500 in real time, watch that 200 day moving average and that’ll give us our clues on how to trade the markets next week. Thanks for listening. Love you, and talk with you soon.