The weekly Saturday night financial show attempts to predict market direction for the week ahead by looking at a variety of technical and fundamental indicators.
Last Monday, Janet Yellen said that she will leave the Federal Reserve after her successor Jerome Powell takes over in February of 2018. This will give President Trump four seats to fill on the Fed's board of governors.
Put on your macroeconomics hat and hold on for a wild, brain-stimulating ride as Lance dives into the GDP formula and explains the President’s monumental speech at the Asia Economic Summit in Vietnam last week.
This week's show features commentary on President Trump's monumental speech at the Asia Economic Summit in Vietnam last week.
Folks, this speech from the President was bigger than all other stories combined.
The S&P 500 did a breakout today but I'm thinking it will turn into a headfake as the market goes down the week of September 25 – 29th. Be careful buying the S&P 500 because it did a breakout today. I'm thinking we get a sideways chop out for the rest of the week and then next week we get a sell off.
The main reason I think this will happen is that September is the worst month of the year for the stock market. Specifically, it's the last week or so in September that gives the month its bad reputation. But it's more than seasonality.
Notice the big negative divergence on the CMF. We should have stronger buying pressure with the S&P 500 doing a breakout and hitting a record high. That's really pathetic buying pressure as evidenced by the CMF which means we have an elevated risk of a headfake move.
S&P 100 Index Put/Call Ratio
The S&P 100 Index looks like a possible exhaustion gap up. Notice how the Equity Put/Call ratio chart looks like a coiled spring ready to pop to the upside:
If the gap up on the S&P 500 is an exhaustion gap, then tomorrow we would expect the gap to fill. If it's a more bullish breakaway gap up, then tomorrow could gap up again as the S&P 500 hits new all-time highs.
The market exists to screw the greatest number of amateur traders at any given time. The S&P 500 hitting all-time highs during the weakest month of the year smells foul. What a great way for professional traders to really screw a lot of amateur traders! Buyer beware.
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.
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.
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.
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.”
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.
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).
Trumps Failed Talk Tough Policy
President Trump's policy of “talking tough” has clearly failed.
Right. Well it happened Mr. President. It happened.
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:
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.
MarketWatch is REALLY trying to push the stock market down and Google has given them a prominent position in their search engine results to do just that. Check out what the search “stock market news” outputs from Google search:
Whatever happened to the “fake news” filter Google was going to start using?
Google features this fake news story from MarketWatch at the top of their search results:
You can read the entire fake news story about the Hindenburg Omen here.
The Hidenburg Omen is one of the most inaccurate market timing tools to ever exist. Its track record of false signals should delegate it to your trash bin. But even if you ignore this fact and actually want to use the Hidenburg Omen indicator, it's not giving a signal right now.
This is a fake news story because the Hidenburg Omen is NOT back. The company that owns the WSJ and MarketWatch is trying to manipulate you into thinking we have a Hidenburg Omen signal because they know you're too stupid to fact check them IMO.
The Hidenburg Omen does not give a signal until the $NYLOW:$NYTOT crosses above the red line while the $NYHGH:$NYTOT is above its red line at the same time. As you can see, we are no where near a Hidenburg Omen signal.
Establish Mainstream Media Push To Destroy Trump
A picture is starting to emerge that the big gambit of the Establishment mainstream media is to push down the stock market and attack President Trump at the same time.
What those who control the content on MarketWatch and the WSJ fail to understand is that they only discredit themselves the more they try and manipulate public perception.
Google Has Hopelessly Lost Its Way
Google rose to power off the backs of hard working entrepreneurs seeking to advertise over the Internet to compete with the rich and powerful that have controlled TV and newspapers for generations.
The Internet has always been, and will always be, a way for ordinary people to communicate ideas with other ordinary people without the interference of rich and powerful corporations acting as the medium of exchange.
Years ago, Google ditched the entrepreneurs that helped it rise to power and instead has cast its lot with the Establishment mainstream media.
Google Has Fully Transitioned Into a News Aggregation Service For the Establishment Mainstream Media
As Google search updates continue to be released every couple of months, one thing is clear, Google continues to make it harder and harder for ordinary people with alternative views to get web traffic from their search engine.
As Stock Traders We Have To See the News Behind the News
The Establishment mainstream media propaganda blasted across the Internet by Google is detrimental to your stock trading efforts. These publications will publish fake news reports like the Hidenberg Omen story above. They have an alternative agenda. Sure they sprinkle in a few stories here and there that may help you make money off a trade but their overall agenda is to destroy Trump and you and I are just collateral damage. Don't be collateral damage from the false narratives in the mainstream media news. You have to question EVERYTHING and take nothing at face value because your trading profits depend on it.
In this week's stock market outlook for trading week of July 17, 2017, technology stocks and small caps did better this last week than what we've seen from previous weeks. I have to wonder though how much more Bulls can continue to dominate with the government only a few months away from running out of money unless the debt ceiling is raised.
The most surprising aspects of this stock market outlook is how how the NYSE percent of stocks trading above the 50 day moving average has exploded higher.
Bulls won the market action of last week and have strengthened their dominance over the Bears.
In this week's show I go over the major indices as well as various other charts.
A vigorous debate is going on between economists, stock traders, and investors on if computer A.I. and automation will take all our jobs and destroy the economy. I have been studying this issue for more than a year and I'm ready to give you my final opinion on the subject.
Please take a moment to watch this video of two of my economics teachers debating if machines will take all our jobs and thus destroy the economy. This will give you a good economics foundation on both positions so I can give you my opinion without rehashing the entire argument.
At first, most people will support Tyler Cowen's position that computer A.I. and automation is bad for the economy. But over time, I think you'll come to the decision that Alex Tabarrok's position is the right one.
Let's take Tyler Cowen's argument to the extreme. Let's say that computer automation continues to eliminate good paying jobs and that rich CEOs and business owners make crazy profits while the rest of us go broke without a job. In this scenario, millions of people will be without jobs.
The unemployment rate would rise about 10%, then 15%, then 20% and beyond. What would happened to consumer spending? It would drop as nobody would have any money to buy what these rich CEOs and business owners are producing.
For example, Amazon takes over Whole Foods, eliminates thousands of cashier jobs, and replaces those jobs with automated checkout stands. This lowers the price at which Amazon sells food because of lower labor costs. Now Albertson's and Walmart, they follow what Amazon does so they too can compete on price. Soon the entire grocery industry becomes mostly automated. Now imagine that this plays out across many sectors beyond just grocery as millions of jobs are replaced by computer automation. If that happens, who is buying what the computer automation is producing? Nobody.
The rich will stop getting richer and the entire economy will implode as the human race destroys civilization through expanded automation and the pursuit of greed at any cost.
Rich people are not stupid. They know that employees are also their customers. Rich corporations and CEOs are not going to advance an agenda that is ultimately going to result in their own destruction. But it's more than just that, it's economics.
If computer A.I. and automation caused massive unemployment and poverty, consumer demand would fall through the floor and there would be no demand for the products that computer A.I. and automation creates. Therefore, economics tells us that if there's no demand, these services and products would cease to exist. Corporations would have no need for automation and so they would stop investing in it and developing it.
Here's another example. Back in the early 80's, I was a computer programming prodigy. I learned programming on a Commodore 64 and did things that blew people away. I was going to be a computer programmer when I got out of high-school, or so I thought. By the time I graduated high-school, coders like me with mad skills were obsoleted by “canned software”. Was I out of a job opportunity? Not really. 3D video games used canned 3D engines which allowed games to be produced by a greater number of businesses. Because the engines driving the 3D games were “canned”, it brought down the cost of video games. More people could afford video games at $30 instead of at $90 or more back before canned software. An entire gaming industry rose up and is now a multi-billion dollar industry.
The Internet came soon after and so I started programming websites. I learned Java, HTML, SQL, and PHP. Just when I was getting really good at programming websites, along came the “canned” software again. AOL came out with Rainman in the early 90s and back then, AOL pretty much was the internet for most people. I still got a little bit of work from various businesses but then came out BBS's which allowed anybody to set up a message forum and put up a dial up website. In the early 2000s came WordPress, another “canned software” that greatly reduced the need for my programming skills. Every business on the planet began putting up a website and shopping cart and the ability to buy things online was born. People began making money selling things online. Was I out of a job? Not really. WordPress lead to millions of people putting up websites and so I finally got smart and realized the money was in content production and selling online and not in computer programming.
If computer automation was something that was so bad for the economy, then why has the internet and automation made the world better for so many people regardless of their income class? If automation (which is what “canned software” essentially is) was something that was bad, economics and the law of supply and demand tells us that its value would eventually go to zero and such automation would stop because their would be no demand for it. But that's not what has happened. Today, millions of Americans make money online with automated CMS platforms.
I could go on. What about stock trading? Back in the 70s and early 80s, you had to call a broker on the phone and pay $120 a trade or more if you wanted to invest in the stock market. When the internet came out and the discount broker industry sprang up, brokers said it was going to destroy their industry. Did it? Not really. With cheaper trading fees of $10 a trade and lower, millions of Americans began investing in the stock market. Brokers went to work for online discount brokerage firms as more people than ever started investing and stock trading. If the internet and automation was a bad thing, the value of online brokerage firms would eventually drop to zero as demand for their services would eventually come to an end. That's not what happened. In fact, entire new trading software companies sprang up and even stock trading blogs like GuerillaStockTrading came into being.
Computer automation has created new jobs that no one could even imagine 40 years ago. Automation has increased wealth across all income classes as prices are lowered so consumers are happier and can buy more with their hard earned dollars. The economy becomes deeper and more diverse as life becomes richer with greater opportunities for everyone, even someone who is disabled with Muscular Dystrophy (M.D.) like myself that can't do a more physically demanding job.
Computer automation has led to so many opportunities that years ago, a disease like Muscular Dystrophy (M.D.) would have doomed me to poverty because physically I'm unable to do a lot of jobs. Today, I can work a day job in an office as a bookkeeper and in IT support, and at night I can stock trade and produce value for others over the internet blogging about the stock market. I've never been on government assistance and a burden to tax payers even though I have M.D. thanks to computer automation creating a deep and diverse economy.
For every change there's always another opportunity of equal or greater value waiting.
Therefore, my final opinion on computer A.I. and automation is that it's a positive for the economy. I don't believe that computer A.I. and automation is going to take all of our jobs because of economics and the law of supply and demand. If it did take all of our jobs, it would cease to be. Our goal then is to find emerging opportunities in this space that we can invest in and make a fortune over the coming years.
You may be angry because you lost your job to automation and so you don't agree with me. That's fine. I understand this is a highly debated topic even among brilliant economists. This is only my personal opinion based on my own life experiences and observations that I wanted to share with you.