Price of Copper Retakes Key Level as Global Economy Improves

Doctor Copper is signaling an improved outlook for the global economy as the price of copper has retaken the key $2.86 level.

China is the world’s largest importer of copper using more than three million tonnes a year. In an attempt to improve the environment, China is proposing a copper import ban. China’s copper industry is accelerating copper imports to build stocks ahead of the 2018 deadline. You can read more about China’s proposed copper ban here.

September copper futures trading on the Comex market in New York moved higher as the likely impact of new regulations in China spark another round of heavy buying in the US and Shanghai. Last Thursday more than 3 billion pounds of copper changed hands and the price jumped to $3.048 a pound ($6,720 per tonne) which is the highest in nearly three years. December copper hit $3.07 a pound. Analysts at DoubleView think copper is in a long overdue bullish cyclical move which predicts the next boom for the global economy is underway.

Price of Copper

Price of copper

Whether its a global economy thing or a China thing or even both, one thing is clear: The price of copper has confirmed the break above the key $2.86 level this month.

Federal Reserve Will Push Price of Copper Back Down

The problem I have with the Doctor Copper is signaling a global bull market thesis is the Federal Reserve. The Federal Reserve is hiking rates and that ALWAYS slows down the economy and thus the demand for copper. I talked about this on the Saturday show back in June here. Please make sure you review my commentary on the Saturday show before going long copper. You may also want to use this stop limit order strategy to trade copper.

As for me, I’m not swing trading copper as its too dangerous and I see safer opportunities with higher yields elsewhere.

If you have any thoughts on Doctor Copper, leave your comment below.

High Yield Debt Surges Higher Which Favors the Bulls

Following high yield debt is an excellent way to time market swings. A high yield bond (non-investment-grade bond, speculative-grade bond, or junk bond) is a bond that is rated below investment grade. These bonds have a higher risk of default and so they pay a higher yield than better quality bonds. Bonds rated below BBB− are called speculative grade bonds, or “junk” bonds, and fall into the category of high yield debt.

Recessions increase the possibility of default in speculative-grade bonds.

The number of companies issuing high yield debt is abnormally high for August. What is happening is that investors are anticipating higher rates from the Federal Reserve and so the higher yields of safer investment grade bonds start to come into greater competition with junk bonds. It’s the crowding out effect.

Tesla and other debt heavy corporations are front-running the crowding out effect by issuing as much junk bonds as they can before more interest rate hikes occur. You can read about rising junk bond issuance here.

Recently we have seen some government bonds downgraded to junk bond status like what’s happened recently in Illinois.

You have to be careful not to equate junk bonds in foreign countries with those issued in the US. In emerging markets like China and Vietnam, bonds have become increasingly important as financing options because access to traditional bank credits is limited, especially if borrowers are non-state corporations.

High Yield Debt Chart

Junk bonds act as a barometer for risk on versus risk off. In a risk on environment, investors chase after maximum yield and so they buy high yield debt. Junk bond investors are not too worried about a recession or default on their junk bonds. In a risk off environment, investors sell out of high yield debt and move to safer, lower yielding assets.

When non-investment-grade bonds spike up or down, the S&P 500 has a tendency to follow within 3 to 5 days.

high yield debt

Last week the high yield debt chart (HYG) spiked higher which is a bullish signal for the S&P 500 over the next 3 to 5 day period.

Stock Market Correction and Waiting To Click The Buy Button

The stock market correction is likely going to push the S&P 500 to test its long-term rising trendline and support at 232.20. The bearish divergence on the Twiggs Money Flow likely signals that the pull back is not over yet.

Short-term stock market correction underway.

A few traders have asked me if now is the time to buy or if they should wait on the sidelines while the market pulls back. We all know that history does not predict future price direction nevertheless, it is useful to know what has and hasn’t happened in the past.

Looking at the last 110 years of stock market price action, the data reveals that waiting for a correction when the market was expensive would have reduced investor returns significantly. The reason is that the term “expensive” is a subjective term. Even if you use a more objective approach of looking at the P/E ratio, the data still shows that staying out of the market for months or even years waiting for a correction is a losing strategy.

Where long-term investors get themselves in trouble is that the correction they are waiting for may occur at a much higher market level than it is at today. Also, sitting on the sidelines for months or even years runs the risk of the investor losing patience and ultimately capitulating to the Bulls and buying back in to the market at a much higher level.

Few investors believe markets efficiently follow a random walk even though it’s a key component of market theory.

Short Term Stock Market Correction

Timing a stock market correction for profits is best done using a short-term swing trading strategy. The idea is that you don’t want to try and catch a falling knife.

Looking at QQQ, the Russell 2000, and the S&P 500, over the last week, you can see that the Russell 2000 and QQQ are leading the S&P 500 lower:

In stock market corrections, the Russell 2000 usually leads the other major indices lower.

The market is telling us that what happens in the FANG stocks and QQQ will likely dictate market direction on the S&P 500.

business QQQ chart 1100x953 - Stock Market Correction and Waiting To Click The Buy Button

With the Twiggs Money Flow breaking below zero for the first time in 2017, I think a retest of the $136 support level is likely.

Right now being in cash is an excellent move. Continue to stalk your favorite stocks for a swing long entry. I wouldn’t be too quick to jump back into this market yet. Consider using stop limit orders as taught in the lesson here.

The main thing to watch out for is the Establishment ‘Defeat Trump’ propaganda in the WSJ, CNBC, CNN, and elsewhere. These media groups are so dishonest that some were even claiming that the stock market went up because Steve Bannon left the White House. That was the propaganda narrative with CNBC claiming that traders on the NYSE floor cheered as proof. First of all, those old left-leaning talking heads in stock exchange clothing walking around looking stupid on the NYSE floor are not representative of the stock market as a whole.

Just as the Establishment media was advancing the false narrative that markets were up because of Steve Bannon being out at the White House, markets turned back down and so they quickly killed that false narrative. Another example is CNN’s propaganda that the entire market is worried because of Trump.

For the first time in our life-times, we have a President who is exposing the Establishment propaganda media in this country. There is a major information war going on right now.

As a trader, you can’t get caught up in the propaganda and the power struggle going on for control of public perception. You have to check yourself every day and make sure you aren’t making trading decisions based on propaganda. If you think the mainstream media is getting into your head too much, cancel your subscriptions like I did with CNBC Pro last week, and the WSJ and Barron’s the month before. Just turn it off because these propaganda machines are not going to help you make more money at stock trading.

Remember folks, markets mostly do random walks, especially during intra-day trading. No left-leaning propaganda media outlet can peer into the minds of millions of traders around the world and claim to know what they are thinking. These propaganda publications believe that perception is reality so if they can control the public’s perception, they can control reality.

The U.S. stock market is overbought, and the weak seasonal period is upon us. May through October marks the weakest 6 months of the year.

I don’t want to beat up on the mainstream media too bad so I’m not going to mention where I read the following bogus analysis:

Overbought markets look for excuses to sell off. Will Trump’s lack of leadership become an excuse for a big selloff in stocks?

The mainstream media is actually talking about a stock market correction as if it is some type of external beast that thinks for itself and makes up excuses. Reality check: you and I are the markets. People that work at institutional trading firms and hedge funds are the markets. Are you looking for an excuse for the market to sell off? I’m not either. Nobody is. We’re just reading the charts, analyzing the fundamentals, weighing external news events, and making our decisions. Nobody is searching under desks and looking everywhere for excuses to sell out of their positions. Especially not some make-believe entity called Overbought Markets.

Did you notice the Establishment propaganda “Trump’s lack of leadership…”? You can criticize the President on a lot of things but one thing you can’t criticize him on is a “lack of leadership”. President Trump is a strong leader with strong ideas and a vision on which he is moving to execute those ideas. Get in his way and “you’re fired”. Trump demonstrated his very strong leadership skills for over a decade on the hit-show The Apprentice. President Obama isn’t even in the same ballpark as President Trump when it comes to having strong leadership skills.

Mainstream media propaganda about stock market corrections.The main factors influencing a short-term stock market correction right now are: the speed of Fed rate hikes and balance sheet reduction, North Korea, the debt-ceiling, the economy, and the speed at which the Trump America First agenda is moving forward. Anything outside these main themes is likely Establishment propaganda by powerful groups battling to control public perception and thus reality.

Destroy Trump Establishment Media Continues Propaganda

The ‘Destroy Trump’ establishment media propaganda machine continues to attack President Trump while quietly not reporting on how the left is destroying America’s heritage and history.

In an unprecedented push to change the history of America, left-leaning groups and Democrat politicians are literally destroying statues of American history across this country. Reality check: the civil war was not JUST fought over slavery. I have studied under some of the most famous historians in this country such as Bill Coates and I can tell you that an in-depth study of history reveals that the Civil War was fought over many things and the knot that ties all these things together was a federal government in the North telling people in the South how to live.

Whether Lee, Jackson, and Davis were racists is not the point. They are, whether you like it or not, part of American history. Ripping down historic statues isn’t going to change that fact. George Washington had slaves. Let’s pull down all Washington statues. Where does it end?

This is clearly the destruction of American history and instead of reporting on the power movement behind destroying American history, here’s what CNBC is doing:

business cnbc - Destroy Trump Establishment Media Continues Propaganda

One story sort of defends trump (green), while 5 stories (red) are grotesque propaganda pieces that are part of the ‘Destroy Trump’ establishment media.

I quit subscribing to CNBC today. This is nothing more than political propaganda that has nothing to do with helping readers make money in the stock market.

Check out the stories that Google News is featuring prominent in their Google News section:

business google news 640x603 - Destroy Trump Establishment Media Continues Propaganda

In a good and just news industry, there should be lots of stories about the movement to destroy and re-write American history by left leaning groups. We actually have a power movement underway to destroy America’s historic statues and effectively strip history away from the people and yet no one is reporting on the left leaning groups behind this push and what their ultimate agenda really is.

Sean Hannity is the only journalist that got it right IMO:

Border Adjustment Tax DOA as Retailers and Traders Celebrate Victory

Republicans have officially given up on trying to pass a border adjustment tax to even the playing field with our trading partners. The Retail Industry Leaders Association celebrated the news and said they are now ready to get on-board with the President’s tax reform.

The retail sector, and stock traders, won a significant victory Thursday when the White House and Congressional leaders announced that they have set aside a border adjustment tax that could have raised the cost of imported products by up to 20 percent.

Republican leaders said on Thursday that the proposed border-adjusted tax won’t be part of negotiations on how best to overhaul the U.S. tax code, giving a victory to retailers’ and stock traders that had opposed the measure. Retailers said that a BAT would be passed on to consumers.

For stock traders, this is a big win because 75% of GDP comes from consumer spending at the retail level. A border adjustment tax basically would play out as a consumption tax which would reduce consumer spending. You raise taxes and can do things like a border adjustment tax in a strong economy with runaway inflation where you’re trying to cool off the economy and so fiscal and monetary policy support each other. In a weak economy with flat wages and struggling consumers, you lower taxes and do things that increase consumption. We are in a weak economy and so a border adjustment tax right now would have hurt the economy and thus job growth.

Border Adjustment Tax Impact On Consumers

Some traders told me that if costs of a BAT were passed on to consumers then that would be inflationary and help the Federal Reserve achieve their 2 percent target. The problem with that logic is that what if it didn’t work? I mean it’s only inflationary if someone is willing and able to pay the higher prices caused by a BAT. What if consumption instead contracts as a result of higher prices? If demand contracts then supply contracts and that would work against supply-side economics.

A statement Thursday from House Speaker Paul Ryan, Ways and Means Chairman Kevin Brady, White House economic advisor Gary Cohn, Treasury Secretary Steven Mnuchin, Senate Majority Leader Mitch McConnell and Senate Finance Committee Chairman Orrin Hatch said that due to the unknowns associated with the border adjustment tax, they had decided to set this policy aside to be able to advance tax reform.

For stock traders this is a big win as tax reform will lower our capital gains tax and allow us to invest and trade even more. Anything that advances tax reform is a win for traders. We are very close to going into a Bear market unless President Trump’s agenda moves forward IMO.

Larry Kudlow said on CNBC:

BAT was holding things up and we buried that several times and it kept coming back… Small businesses are going to get a tax cut, that was a very important part of the Trump plan. They talked about expensing and will have unprecedented write-offs, this is very important from a cost of capital viewpoint… Repatriation is going to be in here… Unlike health care, on taxes the Trump Administration had its act together and secondly, the Republican party basically agrees with itself.

Pitched as a major revenue source in a Republican-backed tax reform program, the border adjustment tax was touted as a key to returning manufacturing jobs to the U.S. by making imported products less competitive.

Ryan and Brady, who spent over a year championing the border adjustment tax, told Republicans prior to the statement’s release that the concept would no longer be part of tax-legislation negotiations.

Target called the leaders’ joint statement a step ahead for tax reform.

By eliminating the BAT, the way has been cleared for swift action on a middle-class tax cut which will put more money in the wallets of the American taxpayer.

BAT would shift the supply curve inward as demand would drop as prices rise. Supply-side economics seeks to do just the opposite, to push the supply curve outward, not inward. Republicans taking BAT out of the tax reform bill is a victory for retailers and the economy.

I’m so happy to hear that Speaker Paul Ryan and Ways and Means Committee chairman Kevin Brady have decided to set the border adjustment tax aside and not include the controversial tax in tax-legislation negotiations. I think we finally have a chance at the first comprehensive tax reform in more than 30 years. However it leaves a question as to how to pay for these tax cuts. The BAT would have raised more than $1 trillion over a decade, according to estimates. A BAT would have helped pay for tax cuts for everybody. The problem though is that with a BAT included in tax-legislation negotiations, there’s no way tax-legislation would have passed. It was a catch 22.

Without BAT revenue, it is going to be more difficult for Republicans to keep the tax cuts permanent and to produce the kind of tax cuts that President Donald Trump has promised. Under the budget rules that GOP leaders plan to use, any tax-legislation changes that increase the deficit can only be temporary.

I think that the Federal Reserve should sell-off its balance sheet and use that money to send to the Treasury to pay for tax cuts. Have the Federal Reserve do something that’s good for the American people and main-street instead of always focusing on what’s good for Wall Street. We could corner the debt on the balance sheet of the Federal Reserve instead of the Federal Reserve spending our tax dollars and then leaving the debt cornered with the public. I’m just throwing that idea out there. That’s what we have to do. We need to come up with creative and alternative ways of paying for big permanent tax cuts.

Congressional tax writers will need to consider multiple ways of raising revenue to pay for tax cuts from various businesses by closing loopholes.

Here’s an idea. Let’s push NASA to advance the space-mining industry and then any proceeds gained from NASA mining an asteroid would go to pay for tax cuts. Just one asteroid mined could be worth trillions of dollars in tax cuts.

If you have any creative ideas for how to pay for a big permanent tax cut, leave your comments below.

Amazon Stock Price At $3000 In 10 Years Says Wedbush

Michael Pachter of Wedbush thinks Amazon stock price will go up 200% within 10 years and hit $3,000 according to a report by CNBC. Amazon has been making all the right moves and we are about to see how Amazon prime day works out today too.

Pachter said that Amazon stock price at $2,000 – $3,000 will give the company a $1 trillion market cap. Pachter also says the company will do $1 trillion in revenue too.

AMZN shows a strong growth in Earnings Per Share. In the last year, the EPS has been growing by 118.93%, which is quite impressive. Measured over the past 5 years, AMZN shows a very strong growth in Earnings Per Share. The EPS has been growing by 53.13% on average per year.

Amazon Stock Price

AMZN is a decent long setup right now. We see reduced volatility while prices have been consolidating in the most recent period which has triggered a momentum squeeze. The Effective Volume shows large players have not been selling AMZN into the most recent pullback; however, the Twiggs Money Flow has been falling which suggests the stock is under distribution right now.

The True Strength Index is very close to giving a buy signal.

There is a resistance zone just above the current Amazon stock price starting at 998.85. Right above this resistance zone may be a good entry point. There is a support zone below the current price at 982.32, a stop order could be placed below this zone.

GO HERE TO CHART LARGE PLAYERS AND THE TWIGGS MONEY FLOW LIKE THE CHART ABOVE… AWESOME TOOL

CNN Admits Trump Russia Stories Are Fake News, All About Ratings

A CNN producer is caught on hidden camera admitting that so called “news” about Russia ties to the Trump Administration are fake news and are really all about ratings.

I said months ago on a Saturday show that the whole Russia thing was fake news. Either a real stupid YouTuber or a democrat operative posted below the show that I was way off about Russia and that I should stick with talking about the stock market.

So Bloomberg, CNBC, the Wall Street Journal, they can talk politics and publish fake news stories about Trump and Russia but little old nobody me, I’m the one that can’t talk about Russia? Talk about straining out a gnat yet swallowing a camel. It was a lame post and read more like a manipulative psy-ops and so I banned the YouTuber from commenting on my videos.

Here is the hidden video of a CNN producer talking about why the network keeps running Russia stories:

Why Tony Dwyer Is Wrong That Stocks Are a Terrific Buy

Tony Dwyer of Canaccord Genuity says that there’s this narrative out there that the yield curve flattening is telling you that the economy is closer to recession and the stock market is in trouble. Tony Dwyer disagrees and thinks the yield curve shows that now is a terrific time to buy stocks (link to CNBC article above).

Tony Dwyer says that the U.S. Treasury yield curve as measured by the six month to 10-year spread has historically signaled at least two more years until a bull market peaks and then goes into a recession.

The yield curve could continue to flatten for another two years before going flat or inverted and then once it does, it takes another 3 to 6 months for a recession to hit so Tony Dwyer could be right about the 2 year time-line but his logic is wrong.

The problem with Dwyer’s logic is that you can’t just look at the spread. You have to consider that the current rate hike cycle is different than any other cycle Dwyer uses on his chart. Never before has the Fed hiked rates in an economy this weak with inflation so low.

To accept Dwyer’s argument, you’d need to really embrace tunnel vision and losing sight of the forest for the trees.

Jeff Gundlach DoubleLine Predicts Summer Drop In Markets

Jeff Gundlach of DoubleLine is predicting a summer drop in markets and I agree. The CEO told CNBC (link above) that if you are an active trader you should be taking profits in longs and moving to cash today, literally today.

Jeff Gundlach DoubleLine Prediction

It’s hardly surprising that a bond trader like Jeff Gundlach DoubleLine would make such a prediction. I agree with the prediction and think it’s time to not only go to cash, but to add some gold to your holdings.

I think the Federal Reserve is hiking rates too fast and that there’s no way they should hike rates in June. The big miss today on the contracting CPI really underscores how the Fed is raising rates too fast.