Top Weekend News Stories November 11 – 12, 2017

The top news stories this weekend from stocks on the GuerillaStockTrading watch list.
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Top News Stories November 9 2017

The day’s top news stories from stocks on the GuerillaStockTrading watch list.
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Veeva Systems Rising Large Players Volume On Earnings Beat Hopes

Traders are positioning in Veeva Systems now in anticipation of earnings and revenue beats when the company reports on November 28, 2017.

Veeva Systems stock has rising large players volume as traders position for earnings and revenue beats when the company reports on Tuesday, November 28, 2017.

Veeva Systems has an awesome earnings surprise history. The company has delivered positive earnings surprises for the last four quarters.
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Disney Considering Buying Most of 21st Century Fox

Rumors are flying today that Disney is looking to purchase most of 21st Century Fox’s assets, giving it a competitive advantage in content production.

According to rumors, Walt Disney Company has been holding high level talks with 21st Century Fox to buy most of its assets. The rumor comes from this article on CNBC.
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Live Nation Entertainment Gets JP Morgan Buy Rating Reaffirmed

JP Morgan reaffirmed their Buy rating on Live Nation Entertainment today. JP Morgan is one of the best analyst firms on Wall Street as evidenced by their often accurate stock ratings. All traders should take note of JP Morgan’s ratings on various stocks. I’m not a high enough net-worth individual and so I don’t have access to the actual JP Morgan research report but it’s not hard to guess what they like about Live Nation Entertainment.
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Warren Buffett Let Cat Out of Bag On Why Rich Are Not Selling Stocks

Warren Buffett let the cat out of the bag today on why the rich and powerful are not selling stocks. Warren Buffett told CNBC today that he’s not selling and booking profits in his positions until he finds out what the capital gains tax rate will be under a Trump tax cut. Think about it. The difference could be millions of dollars in lost profit if stocks are sold before the end of the year and before Trump’s tax cut hits in 2018.
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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.

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.