North Korea Nuclear Test and the Stock Market

The North Korea nuclear test over the long labor day weekend in the U.S. is exactly why we try and close out of all long positions over the weekend news cycle. Sunday’s nuclear test by North Korea had an estimated strength of 50 kilotons which is 3x larger than the nuclear bomb that destroyed Hiroshima in 1945.

The stock market had a big run-up over the last week and so the news of North Korea’s nuclear test could be a catalyst for profit taking and a market pullback; however, this is not the first time North Korea has conducted a nuclear test. North Korea has conducted six nuclear tests, in 2006, 2009, 2013, twice in 2016, and 2017.

2006 North Korea Nuclear Test

The 2006 North Korean nuclear test was on October 9, 2006. On October 20, 2006, Kim Jong-il allegedly said that he was “sorry” over his country’s nuclear test, and wished to return to talk with the United Nations. On October 31, 2006, North Korea agreed to rejoin six-nation disarmament talks.

At a meeting with President Vladimir Putin, Russian Defense Minister Sergei Ivanov stated that the power of the tests carried out was between 5 and 15 kilotons.

North Korea nuclear test site in 2006.

2009 North Korean Nuclear Test

The 2009 North Korean nuclear test was an underground detonation of a nuclear device on Monday, May 25, 2009. The estimated yield was 2.35 kilotons.

The 2009 North Korea nuclear test came against a backdrop of uncertainty about North Korea’s leader Kim Jong-il and who might succeed him. Mr. Kim suffered a stroke in August 2008 which prompted him to step up preparations to transfer power to one of his three known sons. Analysts believe the favorite son is his youngest, Kim Jong-un, who was in his mid-20s at the time.

North Korea 2009 nuclear test site.

2013 North Korea Nuclear Test

North Korea’s 2013 nuclear test occurred on February 12, 2013. It was an underground test. The USGS detected a 5.1 nuclear tremor. The nuclear blast had an estimated yield of 14 kilotons.

2013 Nuclear test site in North Korea.

2016 North Korea Nuclear Test

North Korea conducted two tests in 2016. The first test was done on January 6, 2016 and the second on September 9, 2016.

The earthquake caused by the January 2016 nuclear test was 5.1 magnitude and was estimated to have a yield of 6 to 9 kilotons. North Korea declared that the 2016 test was a “successful” demonstration of a hydrogen bomb. Many expressed skepticism because the explosion was too small. Bruce W. Bennett, senior defense analyst of the RAND Corporation told BBC News that “the bang they should have gotten would have been 10 times greater… So Kim Jong-un is either lying, saying they did a hydrogen test when they didn’t, they just used a little bit more efficient fission weapon – or the hydrogen part of the test really didn’t work very well or the fission part didn’t work very well.”

January 2016 North Korea nuclear test site.

The September 9, 2016 nuclear test occurred on the 68th anniversary of the founding of North Korea. The estimated yield was between 10 and 20 kilotons.

The UN Security Council finally figured out that China was supporting North Korea’s nuclear program. US Secretary of Defense Ash Carter stated in a press conference that “China has and shares an important responsibility for this development and has an important responsibility to reverse it”. China did not confirm its support for tougher sanctions against North Korea.

September 2016 North Korea nuclear test site.

2017 North Korea Nuclear Test

North Korea conducted a nuclear test on September 3, 2017. The USGS reported a 6.3 magnitude earthquare near North Korea’s Punggye-ri nuclear test site. This was the largest nuclear weapon test to date with a nuclear yield of between 50 to 100 kilotons. North Korea claimed that they detonated a hydrogen bomb that can be loaded onto an intercontinental ballistic missile (ICBM).

September 3, 2017, North Korea nuclear test site.

Trumps Failed Talk Tough Policy

President Trump’s policy of “talking tough” has clearly failed.

business trump1 - North Korea Nuclear Test and the Stock Market

Right. Well it happened Mr. President. It happened.


Source: BBC YouTube

business north korea tweet - North Korea Nuclear Test and the Stock Market

Ok so Kim Jong Un made a wise decision to not fire missiles at Guam. If that was wise, what do you call detonating a hydrogen bomb and threatening to put it on an ICBM and fire it at the United States? Perhaps unwise? Talk about straining out a gnat yet swallowing a camel!

The only option left for President Trump is to move forward with a massive bombing and invasion of North Korea. I think this is what the Generals that are advising President Trump are saying. I think John Bolton’s appearance yesterday on Fox News is exactly what the Generals that advise the President are saying:


Source: Fox YouTube

Stock Market Action Tuesday

With all the North Korea drama as well as the fact that September is the worst month of the year for the stock market, a VIX play like UVXY is the way to go IMO. Don’t place a market order to buy UVXY automatically at the open. UVXY could do an open gap up and then fade down or do an open gap down and then fade up. Instead, we want to see what institutional traders and hedge funds with their ALGOs are going to do first. Within 15 minutes of market open, we should have a good idea if we want to go for a quick scalp trade in UVXY.

I’m Not Buying: Shorting the Dead Cat Bounce

I’m not buying that the pull back in markets is over so I’m taking out some insurance by going long TWM in my personal trading account.

Looking at the chart of low volatility safe stocks versus risk-on high beta stocks really puts today’s price action into perspective IMO:

Chart of low volatility safe stocks versus high beta stocks

Today’s up day doesn’t even register on the TSI which continues to fall.

You would think that with markets up so much today that we would have institutional traders buying. Not so according to the TICK. The TICK chart below, while not EOD which is what counts, shows the absence of broad-based institutional traders buying this market:

No institutional buying indicated by the TICK chart

Proshares UltraShort Russell 2000 Chart

The up move today in markets looks like an opportunity to short the market. The gambit is that markets will experience a dead-cat bounce. TWM looks like a good way to play this market.

business twm chart 1100x953 - I'm Not Buying: Shorting the Dead Cat Bounce

The large players volume has been rising over the last couple of weeks and the Twiggs Money Flow confirms traders are shorting the market on rallies.

President Trump Sanctions China and Russia Over North Korea

President Trump made a big mistake today by putting sanctions against China and Russia over North Korea’s nuclear program. Trump’s actions don’t fix the problem, they just expand the conflict to include more countries who are pushed together in alliances against the U.S. You can read more about the new sanctions against China and Russia here.

What you don’t want to do is to end up being prey for larger predators that are shorting the market. I did a lesson on stock traders who are prey versus traders who are predators here that you should review.

If you have any insight or thoughts on trading this market leave your comment below.

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.

B2Gold Corp Testing Symmetrical Triangle Resistance

B2Gold Corp is testing Symmetrical Triangle resistance for a possible breakout on building tensions in North Korea and Syria, and the slowing U.S. economy.

B2Gold Corp Stock Chart

BTG looks like a good setup on a move higher in gold. Prices have been consolidating lately in a bullish flag pattern. There is a resistance zone just above the current price starting at 2.77. Right above this resistance zone may be a good entry point. We have also had a Pocket Pivot signal on June 16, 2017 which is another bullish sign.

The Twiggs Money Flow shows some accumulation taking place into the consolidation move.

On the Effective Volume indicator, we don’t have as many large buyers as I’d like to see but that could change quickly if a flight to safety into gold takes place and B2Gold Corp does a Symmetrical Triangle breakout.

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

Trump’s a Little Crazy… What Happens When He Sees Pics of Otto Warmbier

One thing that Syria has taught us, President Trump gets a little crazy when he sees pictures of horrible things on TV. The latest horrible thing is American Otto Warmbier died after being imprisoned by North Korea. CNN reports our favorite war-monger John McCain says North Korea murdered Otto Warmbier (link above).

I have to agree with John McCain that Warmbier was murdered by North Korea. Freaking horrible what happened, no doubt. I’m so sad for Otto Warmbier and his family and what North Korea did to him is beyond horrible.

Traders will be watching President Trump’s response because we know he’s a little crazy when it comes to striking out from pictures he sees on TV.

President Trump promised people for more than a year that we should not be meddling in Syria and in fact we should work with the Russians to defeat ISIS in that country. President Trump won on a platform of bashing Democrats and Republicans for spending trillions of tax dollars meddling in the middle-east and around the world. Then, that all changed when Trump saw pics of people that were gassed on TV. Trump launched some 60 Tomahawk Cruise Missiles into a sovereign country attacking the Syrian government who likely had nothing to do with the gas attack in the first place.

President Trump’s foreign policy has so far been a disaster and he’s broken his promises to voters to get us out of being the police force of the world.

I could so see Trump going off the deep-end again and launching some type of missile strike against North Korea once he sees pics of what happened to Otto Warmbier on TV. Remember, President Trump is that textbook Black Swan for the stock market so don’t get blindsided when he goes off-the-rails.

China is an Enemy of the United States Dummies

How stupid do you have to be to think that China is a friend of the United States? South Korea and the U.S. were carrying out their usual joint military exercises in the region and so North Korea violated international law and launched four ballistic missiles on Monday in response.

North Korea just figured out how to launch a ballistic missile within the last year or so, something the US figured out how to do in May of 1957. North Korea thinks it’s a big tough guy on the block now and so they are going to launch ballistic missiles every chance they get.

Being the technologically superior country on the entire plant we have deployed the first elements of our advanced Terminal High Altitude Area Defense (THAAD) anti-missile system in South Korea. This missile defense system will protect both South Korea and Japan.

So what does China do? Chinese authorities have closed nearly two dozen retail stores of South Korea’s Lotte Group, which approved a land swap with the military last week to allow it to install the anti-missile system. The Chinese extort businesses inside China because that’s what communists do. If China doesn’t like something that your government does, China will close down all your businesses inside its country.

Why would any US business owner go to China to manufacture things? Are you stupid? China is going to steal your IP, tooling molds, designs, and they will produce your product themselves and sell it everywhere around the planet for cheaper than you do (using slave labor and government subsidies), and what are you going to do about it? Even if you have the money to file with the WTO, get in line buddy, it could be years before the WTO gets around to looking at your complaint and by then, you’ll be out of business and dirt broke.

But China didn’t stop there. China said the US and South Korea should stop doing military drills and stop installing the THAAD anti-missile system in South Korea. Stop doing military drills? Folks, China is no friend of the US and stupid business owners in this country that keep taking their manufacturing to China in the name of profits deserve to be ripped off.

China has risen to power off the backs of American workers, stealing tens-of-millions of our manufacturing jobs. Democrat and Republican establishment globalists said China was going to love us because we helped them out and have given them so much business. China doesn’t appreciate the US. China stole our jobs and manufacturing plants illegally and that’s given them a lot of money to build up their military and to challenge the US every chance they get. China has always been in an economic war with the US and much of the developed world. Want the proof? Check out the documentary by esteemed economist Peter Navarro, now President Trump economic advisor.

I heard Larry Kudlow call economist Peter Navarro a “nut job” on CNBC. This is the same Larry Kudlow who wrote so brilliantly in the National Review in 2007:

The recession debate is over. It’s not gonna happen. Time to move on…. The Bush boom is alive and well. It’s finishing up its sixth splendid year with many more years to come.

Or my personal favorite from February 2000 when Larry Kudlow, then CNBC host, said:

This correction will run its course until the middle of the year. Then things will pick up again, because not even Greenspan can stop the Internet economy.

Americans Are Waking Up But We Still Need To Educate

Americans are waking up to the real threat that China is and we know that because President Trump won the election. However, I talk to people who are so ignorant about China that they say things like, “We don’t need to have a trade war with China.” Reality check: China has been waging economic warfare against the United States since it was accepted into the WTO in 2001. “We” are not waging any war but are attempting to defend ourselves against China before our entire economy is destroyed forever. Wake up.

Folks, we have lost so many jobs to China and our trade deficit is so deep, as a country we may not come out of this. China’s money already influences how mainstream media groups in the US report the news as well as who gets elected.

China saw the weakness in capitalism which is the unbridled pursuit of money, and they manipulated the US Chamber of Commerce into actually pitching to business owners that outsourcing jobs to China was a good thing because it would save on labor costs and help them make even more money. China exploited capitalism to their own advantage. Now, after being in nearly a decade long slump in the economy, these same business owners are scratching their heads wondering where the US consumers are and why the economy is still in a slump. When you move 500,000 manufacturing plants to China along with millions of jobs over a 15 year period so that the US no longer has good paying manufacturing sector jobs, what do you think is ultimately going to happen? You have a lower labor participation rate and a consumer with less purchasing power. This isn’t rocket science folks and globalist sympathizers like Larry Kudlow and most of the guests on CNBC can go shove it where the sun doesn’t shine.

Alex Jones of InfoWars points out how China is buying up media groups in the US and is expanding their influence over how our news is reported and even our movies:

What China could be doing is promoting the anti-Russian rhetoric in the mainstream media so that it can forge a better relationship with Russia against the US. In reality, China is far more an enemy of the US than Russia.

What China has already done, and is currently doing, is bad for the US economy and stock market. China is forcing us to respond to the economic warfare they are waging against us as well as their attempts to influence the mainstream media in this country. Our response to the Chinese is going to create stock market volatility and perhaps even a large market crash as the President attempts to wrestle back control of our country from the Chinese.