by phil - October 3rd, 2015 12:45 pm
It's actually only been 56 days but close enough.
So far, we've only had to close 10 positions (average of about one per week) for a $13,255 gain, which is 13.25% of the portfolio's $100,000 base. Our original goal was to try to make $5,000 a month, so we're well on track so far. It's been a choppy, nasty market and we've spent the last two weeks protecting our long positions more so than trying to add new ones.
The goal of our Options Opportunity Portfolio, is to take advantage of short-term OPPORTUNITIES in the market using options for both hedging and leverage. Overall our goal remains closing about $5,000 a month in profits, some of which we roll over into longer-term positions that will being paying us steady incomes as they mature.
The only new positions we added this week were Micron (MU), which had a wonderful day on Friday after earnings and finished at $15.91, well over the $15.50 target we need to make 72% on that trade. To protect our very quick gains, we also added a Jan $25/30 bull call spread on the ultra-short Nasdaq ETF (SQQQ) at $1,600, which pays $5,000 should the Nasdaq slips – so that's $3,400 of downside added against our open positions. Once you have profits, you also have a responsibility to protect them!
Before we Review our open positions, here's a quick look at the ones we've closed:
Our biggest loser, BID, is still a working, open position. We have 20 of the April $32s still open at $4.30 and we're down $2,600 so that's $1.30 per contract which means we neet to be $5.60 above our $32 strike by April option expirations (15th). The purpose of these reviews (and it's a habit you should have for all your positions) is to decide whether we are on or off track on our open items and to make adjustments were we're not on track.
by phil - October 2nd, 2015 8:25 am
What are these people so terrified of?
Clearly the markets are not allowed to have even a normal correction before the Central Banksters leap in with more stimulus. This morning, China stepped up their game by directing their banks to "support" infrastructure projects (more empty cities and airports will fix everything!) with a new round of bond issues. The China Development Bank and Export-Import Bank of China have received additional funding from the State Administration for Foreign Exchange (SAFE) for the same purpose.
The Chinese Government is even showering love on the casino operators in Macau pledging to introduce more policies this year to support the city. Government support could include allowing more mainland Chinese cities to offer individual visas, and introducing multi-entry permits to make it easier for people to gamble.
To support firms, the government will expand tax breaks and tax advantages now granted small firms to larger firms as well. In addition, incentives to engage in R&D activity will be increased and broadened. The government also hopes to increase foreign trade through cuts in certain import and export duties. Unfortunately, all this is just putting a band-aid on a severed limb as the Corporate Debt situation in China is in a full-fledged melt-down:
This week, Macquarie released a must-read report titled "Further deterioration in China’s corporate debt coverage", in which the Australian bank looks at the Chinese corporate debt bubble, not in terms of net leverage, or debt/free cash flow, but bottom-up, in terms of corporate interest coverage, or rather the inverse: the ratio of interest expense to operating profit. With good reason, Macquarie focuses on the number of companies with "uncovered debt", or those which can't even cover a full year of interest expense with profit.
As noted by Zero Hedge: It looks at the bond prospectuses of 780 companies and finds that there is about CNY5 trillion in total debt, mostly spread among Mining, Smelting & Material and Infrastructure companies, which belongs to companies that have a Interest/EBIT ratio > 100%, or as western credit analysts would…
by phil - October 1st, 2015 8:31 am
We drew the S&P bounce chart for you yesterday and we said we expected a run to our strong bounce line at 1,910 from 1,877,75 at the time. The long play paid off at $50 per point, per contract for a lovely $1,612.50 per contract gain (you're welcome) and this morning, in our Live Member Chat Room as well as the Chat in our Options Opportunity Portfolio, we took advantage of the overshoot to 1,924 (also noted on yesterday's chart) to short the S&P again and, as you can see, that's paying off nicely already.
We don't officially trade Futures in the OOP but, once in a while, I'll throw a pick out there along with our usual options trading. MU was our most recent long position and they release earnings after the close so I can't tell you what our play was because it's still gettable for our Members but tomorrow I'll tell you how well it went.
Overall, we are pretty sure this "rally" is fake, Fake, FAKE!!! and that's how we're playing it so expect us to be adjusting our hedges and cashing in some longs as we get ready for what could be a major leg down in the markets. For those of you who haven't been following along and aren't well-prepared for a market downturn, I refer you to my weekend post: "Hedging For Disaster – Now, Are You Ready To Listen? "
As you can see from Declan's SPX chart (full post at Chart School) the S&P needs to get back over 2,020 just to get back to where we bounced after the Aug 24 disaster and that was a VERY QUICK (2-day) recovery to 1,993. Today is day 2 of bounce 2 and are we at 1,993? No, we are not.
Therefore, this bounce is WEAKER than the last bounce and, much like a bouncing ball that's losing it's kinetic energy, the S&P 500 is losing it's energy as gravity begins to take it's toll (see the classic "Stock Market Physics" for more on how this works). For…
by phil - September 30th, 2015 8:41 am
So many things to talk about today.
None of it really matters as it's the last day of the month and windows have to be dressed and already yesterday's losses are more than reversed with 1% pre-market (low-volume) gains that are taking us back to our weak bounce lines, which remain:
All red is, obviously, not a good sign but we'll be bouncing up to test some of the weak bounces again so we'll reserve judgment until we see what sticks. I already warned our Members not to try to jump in bullish as it's not likely we go much higher than 1.25% and I think we'll be rejected around there (16,200, 1,900, 4,125 (on the 100), 10,100 and 1,090). Those are the bounce levels our 5% Rule™ tells us to expect intra-day. In the bigger picture, the S&P looks like this:
I did a full 2-part rundown on the S&P back on August 13th, so I won't rehash…
by phil - September 29th, 2015 8:13 am
This is not a pretty chart.
Especially when you have these big, long, red lines heading down that are getting longer every day, which indicates that panic is growing and sellers are no longer waiting for a bounce to dump what's left of their holdings. Nonetheless, we are playing for the bounce this morning (see our 7:29 Alert) as we tested some critical bounce lines in the Futures but we're not expecting much – just a bit of window-dressing in an attempt to save the quarter.
Should the window-dressers encounter heavy selling – it will be time for some new, aggressive downside plays (see yesterday's post for examples) because, as you can see from the Big Chart, the Russell and the NYSE have already broken below our August lows and the only reason the Dow seems to be holding up is that Nike (NKE) alone is responsible for 250 Dow points since the mini-crash.
Subtract NKE from the Dow and we're at 15,750, right in line with the other indexes which is why we focused our attention this morning on the Nasdaq, which is dominated by Apple (AAPL), which is 15% of the index and rose from $95 back to $115 for a nice 21% gain which we then multiply by 15% to get 3.15% times the Nasdaq 4,554 is 143 Nasdaq points which would bring it down to 4,411 – right back to where we were also.
Of course it's not fair to subtract ALL of NKE or AAPL but it gives you an idea of how distorted even our major indexes can be on the actions of a single stock, which tells you nothing about the overall health of the index. What we can see, though, is that 788 more NYSE stocks made new lows than new highs yesterday and that's certainly not a healthy sign by any measure. Keep in mind that 2,250 stocks made new lows on 8/14 so these 788 new lows are lower than that – now you get the picture, right?
by phil - September 28th, 2015 8:10 am
How is this a GDP that's growing by 7% a year?
That's the -10% line we're testing on China's Industrial Profits, which is the worst decline since the Government has been releasing the data (2011). “Companies are facing enormous operational pressures,” said Liu Xuezhi, a macroeconomic analyst at Bank of Communications Co. in Shanghai. “The momentum of growth is weak, and the downward pressure on the economy is relatively large.”
I know the conventional wisdom is that, if we pretend China is not having a crisis for long enough, the crisis will go away but this is rapidly spilling over to other Asian economies and is now affecting Europe too. This is like when everyone in your family but you catches the flu and you just KNOW you're going to get it – the only question is when. Coal mining profits in China, for example, are down 64.9% from last year so either they have converted 60% of their economy to renewables in 12 months or their economy is slowing considerably.
Keep in mind this is AFTER 5 interest rate cuts in the past year along with reduced reserve-requirements for the banks AND currency devaluations. As noted by Asia Analytics:
"The Chinese central bank can drop the price of money all it wants and shovel ever more cash into the banking system, but the problems facing the Chinese corporate world are more about the lack of customers than the lack of credit, more about insolvency than illiquidity."
This is happening on our planet folks – not off in some distant galaxy! It amazes me how little concern people seem to have about what's going on in China – as if we learned nothing at all 7 years ago – not even to be a little bit cautious. Well, I'm not going to try to convince you – I put up "Hedging for Disaster – NOW Are You Ready to Listen?" and the rest is up to you. I can only tell you what's going to happen in the markets and how to profit from it – that's the extent of my powers. …
by phil - September 27th, 2015 9:58 am
21 days is not a lot of time to test and investing premise but it's good to take a look at our progress on this relatively small market dip (that we accurately predicted) so perhaps you'll take the necessary precautions to avoid taking losses in the next leg of our downturn. My biggest regret in 2008 was "trying not to be so gloomy" so now I'm going to keep reminding you to hedge (or better yet, get to CASH!!!) – all the way down to the bottom.
As you can see from Dave Fry's S&P 500 chart, we're barely down on the S&P from where we were on September 4th, so you'd think our bearish hedges wouldn't pay off – BUT YOU'D BE WRONG! Why? Because, like our long market conditions, our bearish hedges follow our Be the House – NOT the Gambler™ strategy, which allows you to make money in relatively flat markets too. Let's take a look at the hedges we showed you that day (Sept 4th) from our Short-Term Portfolio:
These are simple option trades called "bull call spreads" – something our PSW Members learn in their first week of trading stock options. This isn't an educational post so we'll go right on to the results portion of the discussion:
- The ultra-short S&P (SDS) Sept $21/24 bull call spread expired on 9/18 at $2.48 – up 50% from the $1.23 net we showed you on 9/4 (5th column from the right was that day's prices). With 50 contracts, the position we showed you made $6,150 in 3 weeks.
- The ultra-short Nasdaq (SQQQ) Sept $21/24 bull call spread expired on 9/18 at $1.48 – up 169% from the 0.65 net we showed you on 9/4. With 50 contracts, the position we showed you made $4,150 in 3 weeks.
- The ultra-short Nasdaq (SQQQ) Jan $18/30 bull call spread closed Friday at $4.50 – up 45% from the $3.10 net we showed you on 9/4. With 50 contracts, the position we showed you made $7,000 in 3 weeks.
- The ultra-short Russell (TZA) Oct $11/14 bull
by phil - September 25th, 2015 8:28 am
And up we go again!
After failing the 16,000 line early yesterday, the Dow has now come back 450 points (2.8%) thanks to Janet Yellen's bullish outlook in yesterday's "do-over" speech at Amherst. “The message from Yellen yesterday was that it’s not that bad, and we’re still going to hike,” said Allan von Mehren, chief analyst at Danske Bank A/S in Copenhagen. “That was what the market needed to hear.”
Of course, this was no surprise at PSW as I had already said to our Members Tuesday Morning (7:56) in our Live Chat Room: "Interesting timing (Yellen's 5pm Thurs speech) knowing Durable Goods are out that day. She's scheduled for 5pm, so maybe a market-booster into the week's end. "
In fact, in our Options Opportunities Portfolio, we called the top in gold as it topped $1,155 and cashed out the trade we discussed in yesterday morning's post, getting $6.95 for our long Gold ETF (GLD) Oct $104 calls and buying back the short $108 calls for $3.40 for net $3.55 ($3,550), which was up a very nice 62% ($1,360) in just two weeks. That's why we call it the OPPORTUNITY portfolio!
By the way, this is the last 5 days to sign up at our introductory rate. As of October 1st, rates go back to the normal $199 a months but you can still lock in the very low annual introductory rate of $792 between now and then – we just made almost double that on a single trade!
In fact, just yesterday morning, when I was telling you how great that trade was, it was only at $3,000, so we added another $550 (18.3%) in a single session! Options are certainly a tool you want to have in your trading tool belt. Sure, anyone could have seen that GLD would bounce off $105 and go back to test $110 and you could have made 5% playing the stock. But you would have had to have bought 710 shares of stock for $74,550 to make the same $3,550 we made by investing just $2,190 in…
by phil - September 24th, 2015 8:31 am
Shall we keep pretending?
Clearly that's the plan of the MSM, where you'd think we were in some kind of rally while critical index levels are falling by the wayside right and left on a daily basis. This is very much like 2008, when the Global Economy was collapsing and an endless stream of a-holes came on TV to tell you not to worry – and they kept people from worrying – until it was too late.
Amazingly, after looking at that clip, CNBC is still on the air but Jon Stewart is not. Now we face another serious crisis and we have 3 financial networks: Fox, CNBC and Bloomberg and none of them can seem to find any guests who don't think we shouldn't be worried about:
- Chinese Factory Gauge Drops to Lowest Level Since March 2009
- China Heads to Japan-Like Slowdown as Debt Swells, Chanos Says
- China’s Economic Growth Not at Rate GDP Suggests
- INSIGHT-China consumers tighten belts, a red flag for the global economy
- Hank Paulson: China economy has 'run out of steam'
- Japanese Stocks Tumble After Holiday, China Default Risk Hits 2 Year Highs As Yuan Weakens For 4th Day
- Volkswagen-Induced Pain in Auto Stocks Seen Deepening by Options
- Volkswagen Emissions Scandal Takes Toll in Corporate Bond Market
- Is The Bank Of Spain Quietly Pulling Its Gold From Catalonia Ahead Of This Weekend's Vote
- Brazil gov't sees deeper economic recession in 2015
- Brazil Real Drops to Record Low
- Brazil real tumbles despite central bank support of currency
- Petrobras Default Looms Under $90B Dollar-Denominated Debt
- After Commodity Meltdown, Citi Warns to Brace for More Losses
- Harvard endowment warns of market ‘froth’
- The Colossal Failure Of Central Bank 'Trickledown'
- Fuel fraud: Stealing millions from taxpayers at the pump
- Bears Are Back in Charge as Charts Flash Danger
And I don't want you to think I spend hours digging up bad stories – those are just today's headlines! If it were not for the DESPERATE attempts of the G8 Central Banksters to prop up the markets, I'd be gung-ho bearish but,…
by phil - September 23rd, 2015 8:27 am
Up and down we go.
Where we stop, no one seems to know. Mario Draghi is speaking at 9 am this morning and, now that the Fed has put off their rate increase, the ball is in his court to do SOMETHING to stop the collapse of the European markets. Not only have the indexes fallen 5% this week (and today bouncing the obligatory weak 1% ahead of Draghi's speech – as we predicted yesterday in "Back to Bouncing"), but the Euro has fallen 2.5% – leaving no escape for any asset class in Europe.
Former Goldman Sachs Managing Director Draghi is already in the process of giving $1,300,000,000,000 to EU Banksters (including his alumni, of course) and, like Janet, they want more, More, MORE! It's very possible yesterday's horrific 3% drop in the EU markets was nothing more than an engineered cry for help by the Banksters, giving Draghi the excuse he needs to enrich his friends further without too much public outcry.
There's really nothing left to do but cry for European Citizens, who have seen Draghi devalue their life's savings by 25% since he took power in November of 2011. And yet they are "puzzled" as to why there's no inflation when the buying power of every European has been reduced by an average of 6% a year for the last 4 years. Hey, I know, let's give more money to rich people – that will fix everything! <end sarcasm font>
Somebody actually said to me on Seeking Alpha yesterday: "Trickle down works like this: the rich buy large houses, this puts carpenters to work, then they buy appliances/furniture, which helped to create Home Depot and Lowe's, they have landscapers, house cleaners, nannies, etc. – all created from their wealth."
After I stopped laughing, I did try to point out that a lot more people are employed building 300 $330,000 homes than a single $100M home but our problem isn't the lone commenter on SA – it's the fact that ALL of our Governments are following this horribly flawed plan to "fix" the Global economy when all they are actually doing is upwardly distributing wealth…