Free

Some attributed Monday's stock-market volatility to nervousness over trade talks, but if China had anything to do with the day's moderate losses, the more likely cause was a report that economic growth there is running at the slowest pace in three decades. This could conceivably be bullish for NYSE stocks, since, with Europe's economy also swirling down the dumper,  the U.S. is the only game in town. Whatever the case, I would not suggest loading up on call options ahead of the "big" news still to come on tariffs.

Monday's vicious shakedown was poetry in motion. An hour into the session, stocks were falling so hard that you might have thought the world was about to end. Far from it, as suckers who sold into the avalanche were soon to discover. DaBoyz had laid the groundwork for Monday morning's crime spree by goosing shorts the night before. This caused the E-Minis to gap 13 points above last week's highs, putting bears back on their heels. The perps then spent the next 16 hours distributing stock at prices above the highs before pulling the plug.  Had they been child molesters -- and I mean no insult to pederasts in comparing them to traders -- they could not have had more fun if they'd had free run at an orphanage. Buyers Couldn't Wait The purpose of the distribution was to get the pros sufficiently short to provide some buying power when stocks fell. But they evidently couldn't wait until Tuesday, let alone until later in the week, since urgent short-covering commenced a little more than halfway into the session. You can see the results in the chart (inset). The squeeze recouped nearly half of the day's losses, presumably leaving bears sufficiently anxious to keep stocks buoyant on Tuesday even if a few real sellers show up. We'll be neutral at the bell, since the futures even at their lows failed to exceed the two prior lows we require to generate an impulse leg. A weak one is all we got, suggesting that another round of punitive selling is no more likely than a rally toward new all-time highs.

The new week has begun with a bold short squeeze Sunday night that looks capable of reaching the 2833.25 target sent out earlier for the E-mini S&Ps.  It is nearly identical to last Sunday night's short squeeze, but somewhat stronger than the one the Sunday before that. (Do you see a pattern here?)  Last week's goosing petered out shortly before noon on Monday, so we should be especially careful about getting sucked in if the futures seem impressive two-and-a-half hours into the day. If they are able to close above the target, take it as a sign that the 2851.75 target of a larger pattern noted in the latest ES tout is well in play.

Elon Musk is a much-bigger-than-life kinda guy, but in his knock-down, drag-out battle with the SEC's Goliath he is still just David. Last week he slung a rock at the giant's face with a tweet implying Tesla would make half-a-million cars this year. What he'd meant to say was that current production was running at that pace. Although Musk tweeted a correction a few hours later, the regulators were already so incensed that they threatened action that could remove him as CEO. Musk has been on a short leash, having agreed not to tweet anything before clearing it with his board. He didn't, and that's what has riled up his "probation officers" at the SEC. They've asked the court to punish him, but they had better be careful what they wish for. Although the SEC cannot appear to be doing nothing about Musk's flouting the terms of his court agreement, neither can they afford to hobble Tesla so badly that shareholders suffer grievous losses. All of them undoubtedly are aware of TSLA's extraordinary risks, and they would not have flinched at Musk's recent, innocuous tweets. The SEC knows this, and so their eagerness to knee-cap Musk just to save face smacks of overkill. Eliminating Dealers Rogue tweets aside, the real news concerning Tesla is that it is seeking to bypass dealers by selling all of its cars online. The auto manufacturer will offer a seven-day return policy, and the sales process supposedly will take just minutes to complete. Will customers be willing to shell out $35,000 for a Model 3 without a test drive or the helpful guidance of a salesperson? Musk evidently thinks so, but in any event, eliminating the dealer network will allow Tesla to sell Model 3 for $35,000 as promised while still having a shot at

(I wrote here earlier that a public-pension bust is coming that will usher in the Second Great Depression. Could California, Illinois, Connecticut, New Jersey et al. avoid disaster by raising taxes? That's what John Jay, a regular contributor to the Rick's Picks forum, thinks they will do. I strongly doubt it, however, since there is no way the revenuers will be able to squeeze blood from a stone. It is therefore predictable that the workers will ultimately get stiffed on their pensions because there won't be sufficient funds to honor their contractual claims. A catastrophic deflation is coming because it is the only way our massive, manifestly unpayable debts can ever be settled. Hyperinflation could do the job in theory, but I've written extensively on why this "option" is extremely unlikely, especially during the initial stages of a global economic collapse. Following are John's comments, which are interesting regardless of how one believes the endgame will play out. RA) As far as public pensions go, the states you mentioned already have a solution: Just raise taxes to the point of confiscation. Illinois is planning to give state assets to the pensions, California is working on killing Prop 13 so they can make $20k a year in property taxes on a 60-year-old, termite-infested shack a reality. None of them are backing down on taxes. Good luck finding a judge anywhere who will rule that pensions must be cut to balance the state budget. Drifting into Feudalism The population of Connecticut has remained more or less stable for decades, but the size of government budgets has tripled. In California, 13 million people are on the Medi-Cal state health care program. Anyone with an interest in history can see the accelerating drift into Feudalism. Twenty-two million government workers who produce nothing of value

The live feed from Hanoi has been riveting. Trump and Kim appear to be getting along well.  The President pats his counterpart on the back, the dictator smiles. They share a laugh as they walk through a garden. Kim's haircut looks oddly flattering. Everything seems to be going so nicely that one could almost forget that he has at times acted like a madman. As for Trump, he is his usual self, but with the abrasiveness held in check. Besides giving hope to the world that peace and prosperity could break out on the Korean Peninsula, Trump has effortlessly upstaged the Democrats during what was to have been their hour of redemption. They are tuned not to the summit, but to their own witch-hunt bent, obsessively bent on proving Trump colluded with Russia to steal the election. Not only did Thursday's grilling of former Trump lawyer Michael Cohen produce no evidence of this, it may have iced Mueller's probe. What We Know for Sure... One thing even Trump's detractors would have to concede is that whatever happens in Vietnam, and whatever the President says while he's there, it won't be scripted. We can be certain he will speak his mind, as he always does, and that he will not claim a deal has been made unless this is so. We also know that unlike his predecessors, Trump will not promise North Korea a wad of cash.  Another thing we know, something that no other U.S. President before him has been able to convey, is that Kim the Madman is in fact a rational actor. If it were otherwise, Trump would not be meeting with him. If a deal does result and North Korea agrees to de-nuclearize, we will see black smoke billowing from the ears of Congressional Democrats, the Norwegian

Rick's Picks avidly follows the stock market's ups and downs each day, as well as the way it is influenced by the Fed's silly obfuscations. On some days it feels as though the cheerleaders at The Wall Street Journal et al. are overdoing it, generating enough hubris to stand economic logic on its head. But let's not kid ourselves. Whether this rally has a week to go, a month, or even a year, the central bank's narrative of an economy so strong that it could overheat and produce inflation is a con-job. For in fact, every penny of debt we've accumulated over the last 40 years represents pent-up deflation waiting to implode in some unscripted moment-from-hell. Economists have made a fine science of explaining these boom times with data that ignore a darker reality.  Let me clarify just how grim our predicament is with a simple question:  Do you actually believe that millennials who can't find good jobs, who owe $55,000 on average and live with their parents will be able to foot the bills for the Baby Boomers' Medicare and Social Security?  Try and argue that monetization, or perhaps an explosion in household savings, will cover the shortfall and you'll only sound like an imbecile. Public Pension Sinkhole The public pension system is in equally bad shape, and although this tectonic sinkhole is at least talked about, no one has a clue about how Illinois, California, New York, New Jersey, Connecticut and a bunch of other profligate tax-and-spenders will be able to keep retirement checks flowing when their respective treasuries are empty. For now, though, nearly every dime that states can raise with new taxes or deliberately mischaracterized bonds is going toward pension liabilities. And while the pols would have us believe the added revenues will help keep the

The recent plunge in Heinz-Kraft shares reminds us that even Warren Buffett can make a mistake. A couple of years ago, it might have seemed as though the Sage's portfolio was impervious to downturns, given its heavy focus on the basics: food chain, railroads and insurance companies. As it happens, his bet on such time-tested brands as Oscar Mayer, Jell-o, Kraft Singles, Kool Whip and Cheez-Whiz has tanked, a victim of changing tastes. Even KHC's venerable Maxwell House label has fallen on hard times as consumers weaned on Starbucks have developed a jones for something more exotic than a cup of joe. No one is crying for Buffett, though, and he himself seems unconcerned. If you owned auto-insurance giant GEICO and Burlington Northern Santa Fe railway, which can carry a ton of freight 500 miles on a single gallon of diesel fuel, would you be worried?

I'd love to tell you that bulls have been sniffing glue and that they are long overdue for a brutal comeuppance. However, it turns out they are anything but wild-eyed, and their expectations are relatively subdued.  AIAA's most recent survey found that 35.3% of investors are 'neutral' right now -- the highest percentage in seven months.  As for bulls, they are at 39.3%, only slightly above the 38.5% historical average. This seems incredible, given that stocks have been in a vertical climb since January despite a pronounced slowdown in U.S. housing, autos and retail, and signs of distress from two of the world's biggest economies, China and Germany. Despite these considerable negatives, the Dow ended last week within striking distance of record highs. If the blue chip average were to exceed the peak shown in the chart this week, bears had better dive for cover. Going With the Flow Corporate buybacks and safe-haven money from just about everywhere else on the planet seem incapable of powering the rally indefinitely, especially if corporate earnings have peaked as seems likely. But for now we can only move with the herd and hope we are nimble enough to avoid getting trampled when it reverses.