This post is for live trades and daily comments. PLease click on "comments" below to follow our live discussion. All of our current trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).
We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options.
Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.
To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here
This cartoon caught my eye last week. If you stare at the driver real hard, you can probably picture your favorite banker friend or Wall Street lawyer friend.
Whatevs, we knew that no matter how much outrage there was, the world would pretty much revert back to the natural order of things eventually. The Financial Reform Bill is a speeding ticket, the reckless driver is still pushing a luxury sexwagon.
Here’s an interesting article in the NY Times that has been making the internet rounds. David Stockman writes about how the Republican party destroyed the American economy. – Ilene
Barry Ritholtz made this comment in summarizing the article:
In short, the party became more focused on Politics than Policy.
I bring this up as an intro to David Stockman’s brutal critique of Republican fiscal policy. Stockman was the director of the Office of Management and Budget under President Ronald Reagan. His NYT OpEd — subhed: How the GOP Destroyed the US economy — perfectly summarizes the most legitimate critiques of decades of GOP economic policy.
I can sum it up thusly: Whereas the Democrats have no economic policy, the Republicans have a very bad one.
This approach has not simply made a mockery of traditional party ideals. It has also led to the serial financial bubbles and Wall Street depredations that have crippled our economy. More specifically, the new policy doctrines have caused four great deformations of the national economy, and modern Republicans have turned a blind eye to each one.
The first of these started when the Nixon administration defaulted on American obligations under the 1944 Bretton Woods agreement to balance our accounts with the world. Now, since we have lived beyond our means as a nation for nearly 40 years, our cumulative current-account deficit — the combined shortfall on our trade in goods, services and income — has reached nearly $8 trillion. That’s borrowed prosperity on an epic scale.
[...]
The second unhappy change in the American economy has been the extraordinary growth of our public debt.
[...]
The third ominous change in the American economy has been the vast, unproductive expansion of our financial sector. Here, Republicans have been oblivious to the grave danger of flooding financial markets with freely printed money and, at the same time, removing traditional restrictions on leverage and speculation. As a result, the combined assets of conventional banks and the so-called shadow banking system (including investment banks and finance companies) grew from a mere $500 billion in 1970 to $30 trillion by September 2008.
But the trillion-dollar conglomerates that inhabit this new financial world are not free enterprises. They are rather wards of the state, extracting billions from the economy with a lot of pointless speculation in stocks, bonds, commodities and derivatives. They could…
The last 2 months have been very good for our virtual portfolio! In June and July we were up 60.61% for a 3% risk per trade, and 40.41% for a 2% risk.
Year-to-date, the virtual portfolio is now up 130% for 3% risk, and 86% for 2% risk! More if you compound results. Last month we had 20 profitable trades, and 10 losers. And we managed to keep all our losers within control, while we let a couple winners run for a while.
We kept all losers below a 2R loss.
On the other side, we had 6 winners at more than 2R, with the AKAM trade at more than 5R profit!
Some of those trades (AKAM for example) were even bigger if you were trading options, but we also had a couple ones (like IMAX) where trading the stock was much better. We will try to focus on the most liquid instruments in the future.
And we still have not booked our ARNA trade, which is turning to just be the biggest winner of the year!
Thank you everyone for all the great comments, and let’s keep it rolling in August.
To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here
The losses from the mortgage securities frauds and the subsequent bubble collapse continue to debilitate the US financial system, particularly the regional banks, in a slow bleed costing the US government additional millions each week. The public relations campaign promoting the idea that the bank bailouts are done and successful, and that the US made money on this egregious abuse of public monies is patently false, and probably can be described as corporatist propaganda.
The banks continue to mount a campaign to resist reform and regulation. They are taking advantage of the weakness of the Obama administration in failing to reform the banking system through liquidations and managed bankruptcies, including indictments and investigations as was seen in the Savings and Loan scandal.
It is difficult to continue to assume good intentions in this administration, or even mere incompetence. The objections put up by Geithner and Summers to the appointment of Elizabeth Warren as the head of the new consumer protection agency shows how reactionary they continue to be, and resistant to fundamental reforms.
Five bank closures in four states Friday cost the federal government an additional $334 million in losses.
Regulators shuttered the $373 million-asset Coastal Community Bank in Panama City Beach, Fla., the $66 million-asset Bayside Savings Bank in Port Saint Joe, Fla., the $168 million-asset NorthWest Bank and Trust in Acworth, Ga., the $529 million-asset The Cowlitz Bank in Longview, Wash., and the $768-asset LibertyBank in Eugene, Ore. The failures brought the year’s total to 108.
The hammered Southeast bore the brunt of the failure activity, as it has for so many Fridays since the financial crisis began. Twenty banks have been seized in Florida in 2010, while 11 have failed in Georgia so far this year.
The two Florida institutions that failed Friday went to one buyer: Centennial Bank in Conway, Ark. The acquirer agreed to take over Coastal Community’s $363 million in deposits, Bayside Savings’ $52 million in deposits and roughly all of the assets of both institutions.
The Federal Deposit Insurance Corp. agreed to share losses with Centennial on $303 million of Coastal Community’s assets, and $48
In the article he presents pretty compelling visual evidence of “quote stuffing” by HFT trading bots. This quote stuffing can end up “pushing the bid/offer range up to 10% higher without even one trade ever having occurred.” It is illegal to indicate a quote without the intent to complete the quoted transaction.
But in my mind what is most significant is to whom this quote stuffing is directed. It’s not directed at “head faking” analog Hedge Funds, or that rare bird “Real Money Investors,” it’s clearly directed at other HFT trading bots. Yes, we’ve entered the era of Bot-versus-Bot in our stock market. And to the new retiree that got pumped on that latest E-trade advert that’s in heavy rotation on CNBC and is ready to tiptoe in, I can only give the best wishes that everybody gave to my grand-pappy: “Good luck, shooter….. Coming Out!”
HFT began with the observation that there is “structure” to the tick-by-tick movement of the markets, that as market participants – analog Hedge Funds, Real Money Investors, Brokerage Houses – made their trades, there were patterns to the price movements that could be predicted, and therefore profited from. From this position, it is a natural next step that as HFT trading bots become a large part of the transaction volume of the stock market (they are) that the algorithms that power these HFT trading bots should look to exploit the “structure” provided by other HFT trading bots.
A logical next step, no doubt, but we are really at what I call “the end of the rationale road” of this stock market thing. My prior post about the topic:
We created this stock market thing so Montgomery Burns with capital, could get that capital to Transatlantic Zeppelin, which needed capital, in an efficient manner. Now, who knows why it exists.
And concomitant with the rise HFT trading bots is an increasing correlation between the individual components of indexes[
To say now that ‘No one knew’ or ‘I was mistaken’ or ‘I was just doing as I was told’ is another in a series of lies and deceptions that have supported one of the greatest frauds in the history of the world.
But this is not history. This episode of fraud is still playing itself out now. And to fail to understand the depth and breadth of this madness is to place oneself in peril, and in the power of those who are twisting the Western economic and political system even now to satisfy their lust for wealth and power. You are only successful if you can keep what you kill.
Glass-Steagall fell after a decade long campaign involving hundreds of millions in lobbyist money spread lavishly around the Congress, led by Sanford Weil of Citibank, supported by key banking and political figures in the Congress and at the Fed. It involved Senator Phil Gramm, who helped to put a stake in the heart of the financial regulatory process under the Reagan free markets banner, and who recently said the problem is that the middle class were a bunch of whiners. As did his wife Wendy, who as the chairperson of the CFTC had exempted Enron from regulatory oversight, and then left to take a position there on its board of directors.
Like the Mortgage Backed Securities scandal it involved surprisingly few principal players, like Alan Greenspan and Robert Rubin, who used their power and influence to silence and ostracize critics, and promote a climate of reckless disregard for the public trust under the meme of ‘efficient markets’ and deregulation. This might have been an innocent policy error if it did not involve premeditated theft on a massive scale, followed by cover ups, denials, and a control fraud that exists even today.
But it also involved literally thousands of collaborators and enablers, from mainstream media people, economists, analysts, and other thought leaders to politicians and regulators who saw that it was to their advantage to at least passively support this scheme which they knew very well was a fairy tale, a fraud, class warfare by a new name, but were able to hide their own guilty consciences behind self-serving rationalization and the shield of plausible deniability.
History, and hopefully the justice system, will sort this all out.…
Submitted by Chris Vermeulen of The Gold and Oil Guy
How to Find Low Risk SP500, Gold & Oil ETF Setups
As we all know there is an unlimited amount of ways to trade the financial markets. Each person sees the market in a different way, has different skill sets, trading experience and risk tolerance levels. While some individuals create and use complete systems to make money there are some very basic trading strategies which still work well and require nothing more than basic charting, patience and a little money management.
Let me explain:
SPY – SP500 Index Trading Fund
You can clearly see the longer term trend which is down (blue trendine). But from simply drawing a couple trendlines and looking at the MACD (momentum) indicator you can see there is a possible trend reversal taking place. So far the SPY has broken out of its down trendline with a 4 day pop, and it’s now pulled back down to test support. A close below the trend line or the 50MA would be the exit points if the market did start to go south.
The SP500 is still stuck under major resistance, its 200 day moving average. But is trading above key support levels (20MA, 50MA and Trendline). I can feel the tension in the market between traders and we are about to see a big move once a breakout to the upside or down side is established. At this time its best to be in cash or have a small position with a protective stop in place. Once a trend starts there should be some low risk entry points along the way. If we see a strong reversal to the upside On Monday or Tuesday I would expect big buyers would step in to catch this new trend up.
USO – Crude Oil Trading Fund
Oil has been trading in a large bearish pennant for the past 2 months and it is nearing the apex of this pattern. The longer term picture of oil is bearish but the most recent dotted trend line and the 20/50MA crossover is signaling some strength. Also the momentum for oil is positive and that helps support the price also. Again if this was to breakout to the upside I would wait for a low volume pullback to test the breakout level, then enter on a…
For the definitive confirmation that the Fed is and has always been very open to, at least philosophically, pushing the market higher no matter what the cost (if not in practice – they would never do that, oh no, Liberty 33 would never stoop so low), is this quote from former Fed chairman Alan Greenspan who was on Meet The Press earlier, where he said the following stunner: “if the stock market continues higher it will do more to stimulate the economy than any other measure we have discussed here.” In other words, the Fed’s dual mandate of maximizing employment and promoting a stable inflation rate have been brushed aside, and the one and only prerogative for Chairman Ben currently, and for the short and long-term future, is to keep the Dow Jones (because nobody in the administration, even the Fed, has heard about the S&P yet), above 10,000. Yet Greenspan, who now apparently is off the reservation concludes with this stunner: “There is no doubt that the federal funds rate can be fixed at what the Fed wants it to be but which the government has no control over is long-term interest rates and long-term interest rates are what make the economy move. And if this budget problem eventually merges to the point where it begins to become very toxic, it will be reflected in rising long-term interest rates, rising mortgage rates, lower housing. At the moment there is no sign of that because the financial system is broke and you can not have inflation if the financial system is not working.” In other words, we will be in deflation until the broke financial system becomes unbroke… and then we will have hyperinflation.
The economic and asset bubble in Japan burst in 1990, at roughly the same time as its demographic structure reached a tipping point. As UBS' George Magnus notes, the working age population began to fall, marking the start of a relentless rise in both the total and old age dependency ratios; and, he adds, a comparable phenomenon occurred in the US and Europe between 2005-2010. On current trends, Magnus warns, China will replicate at least the demographic part of this phenomenon between now and 2016, against a backdrop of rising concern about the structural nature of the slowdown in economic growth, along with rising credit intensity, indebtedness, and misallocation of resources.
No change to the statement as expected and Ben is speaking now. Basically he is dovish – one takeaway which I mentioned quite a few months ago but he reiterated today. The 6.5% unemployment rate is a threshold NOT a trigger. What that means is if inflation is benign when 6.5% unemployment returns, the Fed will be in no rush to raise interest rates. i.e. the goalposts are soft, nor hard. The market rallied on that… but it's not new news really.
Also the majority of members do not anticipate selling MBS off the balance sheet – this is part and parcel with the view that the balance sheet will not...
We no longer have a free market. The world’s financial asset prices have become a plaything of central banks and the sovereign wealth funds of a few emerging powers.
Julian Callow from Barclays says they are buying $1.8 trillion worth of AAA or safe-haven bonds each year from an available pool of $2 trillion. Nothing like this has been seen before in modern times, if ever.
The Fed, the ECB, the Bank of England, the Bank of Japan, et al, own $10 trillion in bonds. China, the petro-powers, et al, own another $10 trillion. Between them they have locked up $20 trillion, equal to roughly 2...
To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...
In advance of today's FOMC meeting outcome and Chairman Bernanke's press conference, let's take a quick look at a couple of items in the latest Wall Street Journal survey of economists -- this one conducted June 7-11. With the recent controversy over the direction of Treasury yields, a key issue addressed in the survey is where economists expect the 10-year yield to be across six timeframes: mid-year and year end 2013 through 2015.
The survey was sent to 52 economists, 46 of whom responded, and of the 46, some skipped individual survey questions. Here is a table showing the major response statistics: Low, Median (middle), Average (aka Mean), Mode (most frequent) and High.
As we readily see from the table, the responses for ...
On the heels of the American Medical Association's decision to officially recognize obesity as a disease, Sens. Tom Carper (D-Del.) and Lisa Murkowski (R-Alaska) and Reps. Bill Cassidy, M.D. (R-La.) and Ron Kind (D-Wis.) introduced legislation today to help lower health care costs and prevent chronic diseases by addressing America's growing obesity crisis. The Treat and Reduce Obesity Act gives Medicare beneficiaries and their health care providers additional tools to reduce obesity by improving access to weight-loss counseling and new prescription drugs for chronic weight management, among other provisions.
Health care costs related to obesity total nearly $200 billion each year. Furthermore, nearly 70 percent of Americans are overweight or obese, and 42 percent of Americans are projected to become obese by 2030. Obesity increases the risk for chronic diseases ...
LZB - La-Z-Boy, Inc. – Shares in furniture producer, La-Z-Boy, Inc., increased as much as 3.9% to $19.80 at the start of the session, the highest level since 2004, ahead of the company’s fourth-quarter earnings report after the closing bell today. Options volume is up ahead of the report, with roughly 400 contracts in play this afternoon versus average daily volume of around 80 contracts. Trading in La-Z-Boy call options is outpacing puts, with the call/put ratio up above 4.3 as of the time of this writing. Some traders appear to be p...
The market responded well today to good economic news and to the positive and somewhat surprising response to the election of a moderate Iranian President. Some moderation in Turkey didn’t hurt either, and overnight positive markets in Asia and Europe gave bullish investors enough encouragement to buy equities broadly.
This drove all three major domestic indices up about 1% before a late small selloff left the S&P 500 Index up nearly 1% and the Nasdaq and Dow Jones Industrial Average both up well over 0.5%. We think it likely this week that the market will challenge highs set in late May.
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Click here for the latest Stock World Weekly. Sign in with your PSW user name and password, or sign up for a free trial. There's an interesting option trade on LULU presented in the newsletter this week.
Trivia on lululemon via Paul Price, article found in NYTimes.
Reminder: OpTrader is available to chat with Members, comments are found below each post.
This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).
We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options.
Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.
To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here
Reminder: Craigzooka is available to chat with Members regarding his virtual portfolio performance, comments are found below each post.
By Craigzooka
I am going to share with you how I manage my IRA and the power of reducing your cost basis. My goal each year is a 20% return in my IRA. Sometimes I make it and sometimes I don't, but I believe that all of my success is due to reducing my cost basis. To illustrate the power of reducing your cost basis here are some trades we did last year. These trades are taken from an educational portfolio we ran in a paper-trading account for a little more than a year.
We bought RIG on 5/15/2012 for $44.13, sold it on 1/18/2013 for $46 but booked a profit of $1,154.
We bought MT on 1/4/2012 for $19.24, sold it on 12/21/2012 for $15 but booked a profit of $454.
We bought CHK on 1/27/2012 for $21.93, sold it on 10/19/2012 for $18 b...
Stock market posts another record setting week, but the big news came after Friday’s close.
Courtesy of NASA
The stock market put on another record setting show with the Dow Jones Industrial Average (NYSEARCA:DIA) closing at a record high 15,118 and the S&P 500 (NYSEARCA:SPY) closing at 1633.70, another all time closing high.
For the week, the Dow Jones Industrial Average (NYSEARCA:DIA) gained 1%, the S&P 500 (NYSEARCA:SPY) climbed 1.2%, the Nasdaq Composite (NYSEARCA:...
Reminder: Pharmboy is available to chat with Members, comments are found below each post.
Well, well, well....it is good to know that there are others in the scientific arena who believed that YMI Bioscience's data (cough - Gilead) is a better drug than Incyte's Jakafi. Now, the definitive data are still unknown, but there was enough evidence from a Phase 2 trial to take a small risk for a huge reward. So, let's forget about Apple (AAPL), and do nothing but biotechs from now until Congress passes universal health care coverage for prescriptions....and drive the prices down so that research and development is no longer feasible to conduct in the US. Even Seattle Genetics (SGEN) has been on a tear as of late...
Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
(