Finally we get to January!
Of course, it's silly to review trades less than two weeks after we initiate them. which is why these reviews are perpetually behind. In fact, we still have the last two days of December to get to but now we'll finally, actually get to January in Part 3. We left off in Part 2 with 13 of our 14 (92%) trade ideas for the holiday weeks coming up winners and Part 1 had just two trades – also winners (ABX and SSO) – back from Dec 7th, when we were still bullish.
Without any further ado (than the first two parts, of course), let's get into the first week of January and see how we did:
I was still feeling like Chicken Little because my warnings to get to cash into the Holidays still seemed to be baseless but I pointed out how FAKE I thought the rally was and how FAKE all the media cheerleading about strong holiday sales was – using this fantastic example of Corporate Contralled Media Manipulation from Conan. As I noted:
The news is nothing more than a script written by the powers that be as we prepare to celebrate New Year's Eve of 1984+30 and, of course, the so-called "Financial Media" is nothing more than a propaganda machine aimed at whipping viewers into a buying frenzy that retailers can only wish for.
From an index standpoint, we have easy warning lines to watch like Dow 16,000, S&P 1,800, Nasdaq 4,000, NYSE 10,000 and Russell 1,100 – all very much in the clear now and we'll put new, more aggressive levels on as they move up – so we'll always know when to pull the plug on our long plays.
- GOOG June $900 puts at $9, out at $11.50 - up 22%
- Oil (/CL) short at $100, out at $98.50 - up $1,500 per contract
- Gold (/YG) long at $1,205, out at $1,210 - up $166 per contract
- MSFT July $36/41 bull call spread at $1.75, selling $30 puts for $2.75 for net $1 credit, now $1.23 - up 223%
- LGF 2016 $28 puts, sold for $5.20, now $4.70 - up 9.6%
Overall, I doubt "THEY" are going to let the market fall when tomorrow is the day they print for the 2014 brochures – it just wouldn't make sense. So let's not expect any big sell-offs ahead of Thursday, at the earliest.
It was also our first Weekly Live Webcast and I'll try to catch those links so we can keep them in context for you.
Hard to imagine it being happier for the markets than 2013, with the indexes closing at record highs and investor optimism nearing 80% bullish – as good as it's been since October of 1929 – just day's before the crash. Earnings were also looking great in 1929 and the gap between the top 1% and the bottom 99% had never been greater – until now.
Ken Langone is one rich person that won't be pushed around by the poor, telling New York's Cardinal Timothy Dolan that he needs to shut the Pope's trap if he wants to see any more donations for a new cathedral from his crowd. "I've told the cardinal, 'Your Eminence, this is one more hurdle I hope we don't have to deal with. You want to be careful about generalities. Rich people in one country don't act the same as rich people in another country,' " Langone said. And of course, he's right – rich people in other countries wouldn't have the balls to strong-arm the Pope!
- Gold (/YG) long at $1,190, out at $1,210 - up $640 per contract
- SHLD 2016 $45/70 bull call spread at $8, selling $40 puts for $10.70 for net $2.70 credit, now -$12 – down 344%
- Gasoline (/RB) long at $2.78, out at $2.79 - up $420 per contract
Consumer Confidence/Scott – As noted yesterday, there's a massive brain-washing campaign pushing consumer and investor confidence. To some extent, that's a logical way to boost an economy because a Depression is literally caused by people being depressed and unwilling to participate in economic commerce so, of course, it's good to do a little cheer-leading. Still, like housing, we're talking about minor variations off a historically TERRIBLE number – so you shouldn't read too much into it:
Consumer confidence is so low that we forget that 200 is SUPER DUPER CONFIDENT and 0 is "not at all confident" with 100 being the middle or the range. What caused riding confidence in December? Well, we had more jobs, but that flattened out, and gasoline was down to $2.50 (wholesale) but it's back to $2.80 now and the Fed didn't taper and Congress didn't shut down the Government – Yay! Let's see how confident people are as 1.3M people stop getting unemployment this month…
If the markets are going to continue to go up, I humply submit that there MAY be just a little more inflation on scarce things that rich people like to buy. Stocks are one of those things, of course and art and, of course, GOLD! Between now and the time our 3D printers will be able to print gold from lead, gold is likely to go up in value as the rich get richer. So, if you are not able to go to Christies and bid $100M on a Warhol, I humbly suggest gold as a nice long-term investment for us little guys(those with under $50M liquid).
The ABX trade below was our "One Trade" to make for 2014 - a trade to put your money into and walk away for a year that should outperform the entire market. Not that we recommend anything that drastic – just an indication of how much we believe in it.
- Nasdaq (/NQ) short at 3,600, out at 3,510 - up $2,250 per contract
- Oil (/CL) short at $99, out at $95.50 - up $3,500 per contract
- 100 ABX $13/20 bull call spreads at $3, selling 100 ABX 2016 $13 puts for $1.80 for net $1.20 ($12,000), now $2.20 ($22,000) - up 83% ($10,000)
- 30 CLF 2016 $20/30 bull call spreads at $4.25 ($12,750), selling 20 2016 $20 puts for $4.20 ($8,400) for net $4,350, now -$2,240 - down 148% ($6,590)
- 10 Short Oil Feb 2014 (/CLG4) Contracts at $98.78, 10 Long Oil Dec 2019 (/CLZ19) Contracts at $79.80 – closed 1/21 at $94.88 (+3.90) and $76.76 (-3.04) for net 0.84 - up $8,400 on 10 contracts.
- TASR 2016 $13 puts sold for $2.80, now $2.45 - up 12.5%
Gold bug/Scott – I'm no gold bug but I can't see the Fed keeping a lid on inflation so many ways to win on gold off this price.
That's all this is – just a big game with many forces manipulatiing the market while the Financial "News" Networks pretend it's not a farce. While I do complain about the shenanigans and wish we had an honest system, I often say to our Members that:
"We don't care IF the markets are rigged as long as we are able to understand HOW they are rigged so we can place our bets accordingly."
- Oil (/CL) short at $94.50, out at $92.50 - up $2,000 per contract
- Nikkei (/NKD) short at 16,300, now 14,700 - up $8,000 per contract
- Russell (/TF) short at 1,160, now 1,113 - up $4,700 per contract
- Dow (/YM) short at 16,450, now 15,750 - up $3,500 per contract
Of course, as you can see from the JPM chart above, Japan is a bargain relative to US equities at the moment., with the US Markets a full 2 standard deviations above their average valuation – by far, the most expensive of all developed countries' stock markets. As I said last quarter, there simply isn't anywhere else for money to go compared to other asset classes but, to deny that US Equities are in a bubble is REALLY putting your head firmly in the sand….
It's only a little pullback – so far.
As you can see from Doug Short's S&P chart, we're having a modest pullback on increasing volume as things return to "normal" following the holidays. You can see why we elected to sit out the past two weeks – already the gains have reversed and we're right back to where we were just before Christmas, where we took the opportunity to get to CASH!!!
We've deployed that cash in a very profitable fashion with some great short-term plays, including last Thursday's short on oil.
It was a Webcast Day (Futures Trading Workshop!).
- Oil (/CL) long at $93.50, out at $94 - up $500 per contract
- Nikkei (/NKD) short at 16,000 – out at 15,500 - up $2,500 per contract
- TZA Jan $17 calls at .52, selling $17 puts for .47 for net .05, closed at .25 - up 400%
- Dow (/YM) short at 16,500, now 15,750 - up $3,750 per contract
- LLY 2016 $50/57.50 bull call spread for $2.75, selling July $45 calls for $6.70 for net $3.95 credit, now -$5.10 - down 29%
- LULU 2016 $50 puts sold for $7.75, now $11.25 - down 45%
Keep in mind, one of the reasons we do these reviews is to see if there are stocks we like that we can get a BETTER entry on than our original trade ideas. Pharmboy thought LLY was overpriced and, at $53, the short July $45 calls now $8.25 and, of course, the long spread is not fully valued yet – so the spread is a BETTER entry than it was at the time. In the case of LULU, we paid net $42.25 and they bottomed out at $44.32 and now back to $47.38 but NOW, you can net in for $38.75.
See – that's an OPPORTUNITY – AFTER we tested the bottom we only suspected on 1/7.
The Nikkei came back to 16,200 in the Futures but has already fallen back to 16,100, so I'm not sure we'll see 16,300 again – but you never know with BOJ intervention. The Hang Seng was up 1.25%, stopping right at the 23,000 line and very fake looking while the Shanghai sold off hard after an opening pop and then sold off hard again after a lunchtime pop to finish red for about the 15th time in a month.
On the whole, I like Nat gas (/NG) long here as the best bullish Futures play.
- Natural Gas (/NG) long at $4.27, out at $5.40 - up $11,300 per contract
- Dow (/YM) short at 16,450, now 15,750 - up $3,500 per contract
- SQQQ Jan $14 calls at .70, selling $15 puts for .60 for net .10, out at .30 - up 200%
- XLF short at $22, out at $20.75 - up 5.6%
- PLX Aug $4 puts sold for .50, now .40 - up 20%
- Russell (/TF) short at 1,150, now 1,113 - up $3,700 per contract
- TZA Jan $17 calls at .50, selling $17 puts for .45 for net .05, closed at .20 - up 300%
Keep in mind that CASH has gained 1.5% since we went to it over the holidays – that's something investors often lose sight of – cash is also an asset class that, sometimes, we want to get into when it's cheap. We had a situation where stocks were expensive-looking and cash was cheap, so we traded our stocks for cash – a very simple plan.
Brokers don't like you to be in cash because cash is the gateway drug to savings and brokers and financial advisers don't have any incentives for you to get passive with your money. They want your money in play, because that creates a need for their services and more fees for them.
PLUG/BDC – That was way back at .60! As a rule of thumb, I'd take 1/2 off at this point ($4.50) and stop the rest at $3.50 but at $2 I'd be looking to get back in as I do like them long-term, even up 650% (not counting the short put). With the short put, it's exactly the 10-bagger we were shooting for – and a lot faster than expected! Great call by you as you were the one that brought them up at the time!
That's it, I'm officially the last bear in America.
Well, according to the AAII Bull-Bear Sentiment Survey, anyway. In the entire 23-year history of this survey, there have never been more bulls or less bears and, as you can see from the ratio, it won't be long now before they track me down and shoot me – well, that's what it feels like to be bearish in this market.
I guess the people at Macy's are crazy too,they are closing 5 stores and laying off 2,500 people in the middle of the greatest bull market (sentiment-wise) in history. It won't hurt their stock, of course, which is up 30% from last year (along with the rest of the market) and, in fact, BMO Capital just gave them an upgrade because firing people is what American Corporations are all about these days.
- Natural Gas (/NG) long at $4.16 – out at $5.40 - up $12,400 per contract
- Oil (/CL) long at $92.50, out at $93 - up $500 per contract
- S&P (/ES) short at 1,840, now 1,793 - up $2,350 per contract
- Russell (/TF) short at 1,160, now 1,113 - up $4,700 per contract
- Dow (/YM) short at 16,450, now 15.750 - up $3500 per contract
- Nasdaq (/NQ) short at 3,575, now 3,560 - up $300 per contract
- 50 TZA Jan $17 calls at .50, selling 50 Jan $17 puts for .40 for net .10 ($500), out at .45 ($2,250) - up 350%
- FNSR 2015 $22/30 bull call spread at $4.20, selling $20 puts for $3.80 for net .40, now -.40 - down 200%
- AAPL 2016 $500/650 bull call spread at $52.25, selling $450 puts for $47 for net $5.25, now -$1.85 - down 135%
- UNG Jan 2014 $15/20 bull call spread at $3, selling 2016 $17 puts for $2 for net $1, out at $3.50 - up 250%
- T 2016 $30/35 bull call spread at $2.30, selling $28 puts for $2.20 for net .10, now -.65 - down 750%
Gasoline taking off ($2.677), Nat gas just $4.166 (/NG) with inventories at 10:30 makes a fantastic long in the Futures. Nat gas inventories are not stuffed like oil – I can't see how the cold doesn't draw it below the line.
hourly earnings for ALL the people who are employed dropped 50%, to an annualized 1.2% gain over last year from the previous 2.4% as more and more people are forced to take lower and lower wage jobs as Congress cuts their unemployment insurance (by the way, it's called insurance because you PAY for it while you are working).
Although this is great news for Corporate America, I already put out a note to our Members to short the Russell at 1,160 because the ADP report showed strong jobs and the market went up. Clearly, it went up under false pretenses, so we can expect at least a little bit of a re-adjustment.
- Russell (/TF) short at 1,160 – now 1,113 - up $4,700 per contract
- 10 SSO March $92/97 bull call spreads at $3.20 ($3,200) selling 5 ISRG April $300 puts for $5 ($2,500) for net $700, now $2,650 - up 278%
- LULU 2016 $50 puts sold for $10, now $11.25 - down 11.25%
Another tap at 1,160 on /TF. If they are going to keep pouring, we'll keep drinking!
Finally we made a dent in January. I'll take a break here and, in the comments section, we'll go over our Portfolio moves (not included here). As I noted that day, we love to keep going back to the well on those Futures trades and, of course, it's arbitrary to say NOW this price but it's a fair way to get an idea as some it favors and some it doesn't. The Russell bottomed at at 1,100 – a $6,000 gain from our entry and, of course we went long there for the bounce – but it's easier to just figure the prices to the current day – unless we called out a specific exit on the positions.
We made a lot more calls in the first two weeks of the month and it looks like we had 37 winners and 7 losers (82.5%), which drags us down to 51 and 8 (87.6%) in our January reviews (so far). Of course, we try to balance with trades on both sides so, if we aren't losing at least some of our picks – then we're not hedging properly.