by phil - October 25th, 2014 7:34 am
It seems we weathered that storm very well!
As noted in our the last review of our virtual portfolios, BALANCE is the key to riding the market waves and we not only survived recent the 10% drop and 7% pop but we have thrived – with our Short-Term Porfolio holding onto a $94.2% gain (as of yesterday's close) and the Long-Term Portfolio back to 19.2% for the year, for a combined $790,353 off our $600,000 start – a combined 31.7% gain for the year!
I would say it's time to cash out but we've already cashed out with the Short-Term Portfolio now sitting on $179,243 in cash (92%) and the LTP has $637,800 in cash, which is 107% of the portfolio's value. That's because we've sold so much premium to others (our "Be the House" strategy) that it dwarfs the net value of our positions.
Nonetheless, we're only using 34% of our $1M margin as these are, generally, conservative long-term positions. We went into the weekend leaning very bearish in the STP, protecting our long gains in the LTP and Income Portfolios.
- CAKE – Was a disappointment as they lowered guidance on earnings on 6.3% more revenues and they lowered guidance to $2.07 from $2.25 – flat to last year. Our mistake here was looking at the costs of food products like corn, wheat, etc for basic foodmaking but it was the cost of cream cheese that killed them on the food side. Last year they topped out in the high $40s and now we are in the low $40s and I'm willing to go long on them but not appropriate for the STP – we'll look to cut this one loose next week.
- GMCR – Getting to be a white whale for us, the damned thing never goes down. Earnings are 11/19 – I certainly want to see those.
- FAS – Part of the other FAS Money Spread below (there's a limit of 4 legs to one spread). While this spread can be very stressful to manage, it's responsible for 10% of our profits this year.
- SQQQ – Our primary hedge, though taking a huge hit
by phil - October 24th, 2014 7:58 am
Already the monsters are coming out with two of NY's three papers already maxing out their headline fonts to scream EBOLA!!! to people on their way to work. As I noted to our Member in this morning's Alert (tweeted out too!) that made for easy shorts on the Futures:
Based on Ebola and the upcoming stress tests, I'd have to guess a sell-off is coming today. Shorting /ES at 1,940 (tight stops, of course) and the Dow (/YM) at 16,600 are a lot safer than shorting /TF at 1,100 but all good lines to use and watch. /NQ already failed 4,000.
It's 7:54 and already the Egg McMuffins are paid for on nice drops off those levels and we'll take quick profits and run and hopefully get a chance to re-enter as I don't see this day going well.
We're back to short in our Short-Term Porfolio but less aggressively so than last weekend as we can't ignore the underlying 3.5% gains our indexes have put up this week.
As usual, the Dollar is being knocked down to support the Futures but it's not helping oil much ($81.24) so far. Gold, however, bounced back to $1,233 and silver (/SI) went over our long line at $17.25 (very tight stops below). Gasoline (/RB) was rejected at $2.20 – another sign that the underlying economy is much weaker than these indexes would have you believe.
In fact, GS reports today that China has shut 20% of it's Iron Ore production in the face of an inventory glus and prices dropping 40% this year. The market is in the midst of a transition without precedent in recent commodity history as supply jumps and higher-cost mines shut, according to Macquarie Group Ltd. HSBC Holdings Plc, which cut its price forecasts this week, sees a 30 percent slump in Chinese output next year.
“The market currently looks like a game of chicken where no player has blinked,” HSBC said. “The major producers are likely to compete heavily on production and costs, with little regard for
by phil - October 23rd, 2014 7:56 am
We decided to give yesterday a pass.
Though the indexes failed to hold our strong bounce lines (well, 3 of 5 did), we can blame Canada for that one as a gunman shot up Parliament yesterday afternoon and the "terrorist attack" news sent our markets lower. Other than that (and these things are unavoidable when you sell 500M guns to 400M people in North America), it wasn't a bad day for the markets, so we're going to wait and see what actually sticks. Our watch levels remain:
So the Dow fell almost exactly from it's strong bounce to it's weak bounce yesterday. Aside from confirming the 5% Rule™ is firmly in charge, holding the weak bounce line is bullish – IF it holds. The S&P and Nasdaq held their strong bounce lines (thanks to AAPL) while the NYSE stayed in it's range but the Russell was a big disappointment and failed the weak bounce – a very bad sign if they can't take it back today.
by phil - October 22nd, 2014 8:07 am
What an amazing recovery!
Just one week ago the World was coming to and end and now everyone has their rally caps back on. Investors really are sheep – except I think sheep have better memories… We're still right on plan of dropping 10% and then bouncing 4% (strong bounces) by Wednesday (today) that was initiated on October 6th by our friends at the Fed (see yesterday's post for the summary). For those of you keeping score, our strong bounce predictions for today were:
The Dow is just 17 points away from our goal and we'll just need the NYSE and the Russell to confirm their bounce lines and THEN we can get bullish again. Meanwhile, we actually got a bit more bearish in our Short-Term Portfolio (also in yesterday's post) as our Long-Term Portfolio popped right back to up 18.1% for the year so we wanted to lock those gains in with the STP, which finished the day up 81.8%, down from 92% in the morning as the markets rocketed.
by phil - October 21st, 2014 8:23 am
It LOOKS impressive, doesn't it?
As I said to our Members this morning in our Live Chat Room, all is going according to plan, as we expected to see strong bounces in our indexes by Wednesday – no matter what news or earnings turned out to be. If the powers that be want the market to bounce – it bounces.
Our general rule of thumb is that dip buyers only learn their lesson after they have been burned 3 times and, so far, only the August dip buyers are being relly burned but a failure to retake that line and a move lower – that might get them to think twice about mounting another rescue effort next time we test 1,050 on the Russell.
On this next chart, you can see how the various Fed speakers were used at key inflection points to guide the markets exactly where they wanted them to go.
As you can see from this S&P chart with Fed notes attached, the manipulation we told you about on 10/6 (see: "Market Mayhem – 12 Fed Speeches in 5 Days Causes Chaos") is merely playing out according to plan and this is why we were able to take full advantage of both the dip (see: "Money-Making Monday: How to Profit from a Market Correction") and the bounce (see: "Wednesday Market Weakness – Oil Collapses to $80, Good or Bad?").
In fact, the TNA Oct $58/60.50 bull call spread that we pointed out last Wednesday at $1.12 closed on Friday morning at $2.40 – up a very nice 114% in 48 hours for those of you who get our morning newsletter (which you can subscribe to here). Our suggested roll to the Nov $56/63 bull call spread at $3 still has to play out but, so far, we're at $4, so up 33% in 4 trading days is "on track" towards our planned 133% gain in 30 more days.
by phil - October 20th, 2014 8:03 am
IBM spooked the markets this morning.
The Dow component missed on earnings and revenues by wide margins, reporting the worst quarter since Q1 of 2009, when the stock was under $100 so no surprise they dropped $14 (7.5%) from $182 to below $170. That gave us a great opportunity to short the Dow at 16,250 in our Live Member Chat Room and we caught a quick 50-point drop already (7:48) for a $250 per contract gain to start our week off right.
Fortunately, we followed through with our plan on Friday (see morning post) and flipped bearish again into Friday's close – the Futures trade was simply a way to take advantage of an obvious and immediate catalyst pre-market. We'll hear from two Fed doves this morning – Powell speaks at 10 but not much expected from him and Tarullo goes at noon and is bound to say something doveish if the market is read into lunch.
As to IBM – it's not as bad as it seems as IBM took a $4.7Bn one-time charge as they PAID GlobalFoundries $1.5Bn to take their money-losing semiconductor unit off their hands. I wish IBM had called me, I would have been happy to take their semiconductor unit for just $1.3Bn…
Still, we had IBM on our Buy List and were hoping they would come down so we could add them to one of our Porfolios but I don't like their "idea" of repositioning to more cloud computing, as I think that's really a commodity play with lower margins though I still believe in Watson and if you consider that IBM wrote off nearly $5 per share – the earnings weren't so terrible. So it's going to be watch and wait on IBM at $170 – hopefully they go lower and get irresistable but we're not going to run in and catch a falling knife on this one.
We'll also be keeping a very close eye on our levels this week and, as you can see from the Big Chart, we've found a bit of support (finally) but only at the weak bounce lines we were watching…
by phil - October 17th, 2014 8:26 am
Nothing came of yesterday's Ebola hearings.
Here's a picture of President Obama hugging it out with one of the nurses that treated one of the Ebola patients – a strong image for the people as calmer voices begin to prevail – on that front at least.
Markets were also boosted by dovish talk from the usually hawkish Jimmy Bullard, of the St. Louis Fed, who said the Fed should consider delaying plans to end its bond-buying program at the end of this month to halt a decline in expected inflation. This is what it sounds like when Doves cry at the Fed and, like Prince's mother, the markets are never satisfied but, for this morning at least – we're taking back those weak bounce levels that we told you we'd take back by Friday.
“The recovery from the lows after Bullard spoke yesterday is another reminder how addicted markets still are to liquidity,” said Deutsche Bank strategist Jim Reid. “The Fed can certainly help markets but perhaps we really need the ECB to step up a gear for a true recovery,” he added.
Still, manipulated or not, this gives us two nice reversal days on strong volume and we couldn't be happier as we flipped very bullish in our Short-Term Portfolio and should be able to take full advantage of this rapid recovery.
Whether or not we maintain that bullish stance into the weekend depends on how our bounce levels hold up today (see Tuesday morning's post for our amazingly accurate predictions of the week's action).
Keep that in mind when I tell you there is nothing particularly bullish about hitting the weak bounce on the Friday of a drop week – it's merely better than the alternative of FAILING to make those weak bounce lines. That would have been BAD!!! Meanwhile, those of you who took our FREE Trade Idea from yesterday's morning post to go long the Russell at 1,050 (the same line we were watching on Tuesday) are now sitting on $4,000 PER CONTRACT gains and I do so hope you are not greedy and set your stops at the 1,090 line.
by phil - October 16th, 2014 7:32 am
It's going to be another wild one!
As you can see from Dave Fry's S&P chart, we dropped all the way to 1,820 on the S&P yesterday, before recovering just after 1pm on an report from Bloomberg that indicated:
Federal Reserve Chair Janet Yellen voiced confidence in the durability of the U.S. economic expansion in the face of slowing global growth and turbulent financial markets at a closed-door meeting in Washington last weekend, according to two people familiar with her comments.
That's TWO people who were familiar with her comments from LAST WEEKEND – that's certainly worth 40 points (2%) on the S&P isn't it? The people, who asked not to be named because the meeting was private, said Yellen told the Group of 30 that the economy looked to be on track to achieve growth of around 3 percent going forward. She also saw inflation eventually rising back up to the Fed’s 2 percent target as unemployment falls further, according to the people.
Well, as long as the people say so, that's good enough for us, right? It seemed good enough that we began to cash out out short positions in our aggressively bearish Short-Term Portfolio but this morning it seems we may have gotten a bit ahead of ourselves as the Futures are right back to yesterday's lows, dragged down by another massive sell-off in Europe.
As we caught a great bounce from 1,040 on /TF (Russell Futures) back to 1,070 (+$3,000 per contract) on yesterday's rally we've been going back to that well at 1,050 this morning but, so far, only picking up $200-400 as /TF bounces between 1,050 and 1,054. Still, as long as that line holds – I like it for bounces and, if that fails, we tightly stop out and go back to 1,040 BUT, if that fails – RUN AWAY!!!
by phil - October 15th, 2014 8:00 am
If what goes up, must come down – oil has a LONG way to fall:
As you can see, during the glorious Clinton era, oil prices generally stayed down in the $20s despite OPEC cutbacks (because Clinton counteracted them by releasing oil from the SPR), hurricanes, tornadoes, wars in the Middle East (we used to win them, you know), etc. Then, a real disaster struck and oil man GWB was elected to office.
Bush and his Enron buddies destablized the commodities markets (under looser regulations) and Bush started wars in Iraq and Afghanistan to catch Osama Bin Laden, who was in Pakistan and, while he had the US military destroying Iraq's 3Mbd production and burning up another 1 Million barrels of oil a day looking for Osama in all the wrong places, he was also BUYING an average of 500,000 barrels a day to stick in the ground – doubling the size and filling to the brim our strategic petroleum reserve.
That led to a "reserve oil gap" and, of course, other countries began building and filling their own SPRs as well so more oil was bought by more countries, only to be shoved into the ground and never used. This created a very false sense of demand for oil and, when the price of oil rose to the point where consumers could no longer afford to drive – President Bush gave every family $3,000 to spend on oil – and they did – and oil hit $140 a barrel. "Cha-ching" indeed!
But then the $3,000 was gone and so was the ridiculous spike in oil and it fell and fell and fell and fell and fell – all the way down to $35 before stabilizing for a few months around $40 and then heading back to $80 as the market doubled and then, since 2010, US production has jumped 50% and generally kept oil under $100, despite MASSIVE manipulation by the Banksters (see "Goldman's Global Oil Scam Passes the 50 Madoff Mark").
by phil - October 14th, 2014 8:13 am
How low can we go?
So far, the Russell is the only index that's gone through a full 10% correction – falling from 1,180 in early September to 1,050 yesterday – actually 11% – so far. According to our 5% Rule™, if the 10% line is going to hold over the long term, we should hold -12.5% on any additional move down – that would be 1,050 from the 1,200 line. Let's call that our line in the sand for now.
Meanwhile, as I noted in our Live Member Chat room – we're comfortable going long on the Russell Futures (/TF) over the 1,150 line, looking for a nice run back to 1,080 but THRILLED with 1,060 – as that's already +$1,000 per contract! Failing to get back over 1,060, however, will be a sign that there's likely more downside to come.
Of course, thanks to the 5% Rule™ and our Big Chart, we knew to get bearish as soon as 1,200 failed on the Russell, way back in July. In fact, on June 30th, I titled our morning post: "Monday Misgivings – CASH!!! Is King as we Begin Q3" saying:
I'm NOT going to depress you.
If you want to be depressed about the market, check out my Twitter Account, where I posted our Morning Alert to Philstockworld Members (and you can become one of those HERE) in which I aired my concerns with the Global Macros.