by phil - June 29th, 2015 7:38 am
I love a good distraction!
One of the great things about being good at forecasting the Futures is that we were not only 100% prepared for Greece to melt down (our Short-Term Portfolio was already up 152% as of Friday's close) but we're already done talking about it and looking ahead to the much bigger Financial crisis in CHINA!!!
If you are a typical short-term, short-sighted, impatient investor (they kind we make money off every day), now is a good time to click away and look for someone to explain to you what's going on in Greece. I liked Felix Salmon's "I Haven't Been Paying Attention. What's Going On In Greece?" enough to send it to the 1,000 people who asked me that this weekend. Greek markets are closed today (and will be all week along with the banks) but the Greek ETF (GREK) is trading and will open down 15-20% by my estimation.
As I said, I'm bored with Greece, we discussed it all weekend (and all year, and all month) in Member Chat, so you can catch up HERE, and we already played our strong bounce lines in the Futures and took our profits at:
- Dow (/YM) 17,670
- S&P (/ES) 2,075
- Nasdaq (/NQ) 4,430
- Russell (/TF) 1,264.20
Those are the strong bounce lines per our fabulous 5% Rule™ and we were able to predict them last night at 6pm, when the market opened and I tweeted out our long ideas as well as the exits and even used Seeking Alpha's Stock Talks to make sure all my readers got a chance to play. Now it's time to look at CHINA!!!, where the bi-weekly emergency measures to prop up their markets have already FAILED this morning. As I said on Friday in "Let’s Ignore China (again) and Terrorism Today!":
At $47.75, FXI should open lower this morning and we do expect China to step in with more stimulus but the Aug $45.50 puts at $1 are still a fun way to play if you don't like
by phil - June 27th, 2015 6:52 am
Things are getting crazy!
The markets have been zig-zagging all over the place but, fortunately, it's what we expected and our Long-Term Portfolio sits at $723,544, that's up 44.7% and down $23,859 (3.3%) from our last review but, fortunately, our paired Short-Term Portfolio did it's job and protected us, finishing the week up 152%, at $252,003 – just shy of a cool million from our $600,000 start on 11/26/13 (up 66% in 18 months).
Our dual portfolio system allows us to be smart "buy and hold" investors in our large Long-Term Portfolio while navigating the choppy market waters in our much smaller (1/5th) Short-Term Portfolio, which hedges the LTP and lets us take advantage of short-term opportunities when they present themselves – like shorting Netflix (NFLX) at $700 last week - that was EASY MONEY! Setting up BALANCED portfolios is the key to our success and a few useful articles on the subject are:
- Setting Up A Hedged Portfolio Part 1 – Financials
- Smart Portfolio Management – The $25,000 Virtual Portfolio
- Smart Virtual Portfolio Management II – The $100,000 Virtual Portfolio
- Smart Portfolio Management – Part III – $1,000,000
Although we've been running our current virtual portfolios since Thanksgiving of 2013, we are constantly adding new trades and the key for all of us is to find that balance and take the new trade ideas that work to give us even better balance and add those. That's why, although we have dozens of trade ideas each month and almost a dozen Top Trades each month, very few of those picks end up in one of our portfolios. You can't play every game – the important thing is to learn HOW to play, so you can win when you do!
Top Trades began last October and all 3 of our initial picks (GSK, MAT, RRD) are well on track. In the last two months, we've been on a major roll with 20 out of 25 of our trade ideas (80%) coming up winners already and only one (LL) really off track. We do these reviews on trades that are 2-3 months old (so we're doing May now) as there's no point in reviewing trades we just initiated. Keep…
by phil - June 26th, 2015 7:53 am
And how was your morning?
Probably better than it was for people in France, where an Air Products (APD) factory was attacked with a car bomb. Our markets have become so jaded to terrorism that they spiked HIGHER minutes after the attack (6:40). Meanwhile, in China, the Shanghai Composite continued to tumble, down a whopping 7.4% on the day, which is amazing since they halt stocks at 10% so only a few of them DIDN'T go limit down for the day.
We've been warning you about this (and shorting China with (FXI), (FXP) and (CHAU)) for over a month now but this time may be different as Morgan Stanley (MS) warned it's investors NOT to buy the F'ing dip in what is now China's $8.8Tn market (was over $10Tn when we started shorting).
“This is probably not a dip to buy,” wrote Jonathan Garner, the head of Asia and emerging-market strategy at Morgan Stanley in Hong Kong. “In fact, we think the balance of probabilities is that the top for the cycle on Shanghai, Shenzhen and the ChiNext has now taken place.”
Chinese markets peaked out on Friday, June 12th and I called the top on Monday, June 15th, with "Monday Meltdown – Greece and China Race to Default" in which I said:
China is only better off than Greece in that they get to print their own money and make up their own economic statistics without the fear of being audited (it was an audit of Goldman Sach's cooked books that began the Greek crisis). That means China has less chance of having their backs placed against the wall than Greece but that doesn't mean that, like fellow BRIC nations Brazil and Russia, investors won't simply lose confidence in what is more and more obviously an unsustainable system.
Since last June, the Chinese markets have gained $6Tn (150%) in PRICE (not value!) as margin debt climbed from $100Bn to $358Bn (250%). Meanwhile, net inflows of cash into the Chinese markets were just $200Bn. $200Bn + $358Bn is not $6,000Bn is it?
by phil - June 25th, 2015 8:13 am
Stick to that and everything else don't mean s**t, as old Curly would say. What that one thing is, we have to figure out! This week, our one thing is not Greece but the Nasdaq, which needs to hold that 5,200 line (on the /NQ Futures, about 4,550 on the index) if we are to believe that other things, like Greece, can be ignored as our own markets move on to new highs.
We're still watching 2,120 on the S&P, of course and 1,300 on the Russell would be nice to make but it's the Nasdaq, where all the hot stocks are, that should be leading us higher in a real rally that's not going to get dragged down by the Fed, or Greece, or China, or Russia, or our Negative GDP or anything that investors used to worry about in the times before things were different – like they are supposed to be now.
You know I DETEST low-volume rallies and here we are in another one and I've certainly given up hope that the S&P will lead us into the promised land. That means the torch has been passed to tech (and we have SQQQ as a hedge in our Short-Term Portfolio) and that means we should take a look at the only tech company that matters, Netflix (NFLX).
No, I'm just messing with you! We shorted the crap out of them yesterday on that ridiculous pop over $700 and we already made a ton of money on the Icahan-inspired pullback. Obviously I'm talking about Apple (AAPL), which is almost 20% of the Nasdaq in weighting and, if you add in all the Apple suppliers, probably about 25% of the Nasdaq's moves depend on what AAPL does on any particular day. Overall, the Nasdaq won't make new highs if AAPL doesn't make new highs.
Does AAPL deserve to be at new highs? Well, as a disclosure, it was our Stock of the Year selection for 2015 and 2014 and 2013 before that so it's safe to say we like AAPL and we are not debating the merits of the company but we did cash out of the trade as AAPL…
by phil - June 24th, 2015 7:39 am
Greek Prime Minister Tsipras claims that the creditors have rejected his deal while they are claiming he has walked back on proposals that were put forward on Monday. That's the latest news as the meeting in Brussels fell apart into lunch (but will resume later). Apparently, the Commission stressed Athens still had to show willingness to carry out "prior actions," spending cuts that had already been agreed to before they'd be getting close to a deal and Greece is now complaining (though I'd say realizing) that EU President Junker is an unfair arbiter in talks with Germany and the IMF.
Greek stocks are plunging again, led lower by the banks as Greece is on day to day life support and this is all it takes to get us back in panic mode and S&P just released a warning that isn't helping to calm things down:
In our baseline scenario, we continue to think that Greece will remain a eurozone member. But the limited progress in talks to date between Greece and its creditors suggests that a Greek exit is possible. We consider that Greece's exit--coupled with the loss of emergency European Central Bank (ECB) financing--would bankrupt Greece's financial system. This could in turn send negative ripples across Southeastern Europe's Greek-owned banks.
Amazingly (and dangerously) this is diplomacy by Twitter as Tsiparis tweeted out a message this morning saying that the IMF's rejection of the Greek proposal indicated that they were insincere about wanting a deal or slaves to "special interests" in Greece (ie., the Top 1% that don't want to be burdened by Greece's proposed bailout measures (see yesterday's post to understand why we shorted overnight in aniticipation of this happening).
This is only day one of the two day "emergency summit" that is supposed to fix Greece so it ain't over 'till it's over, as the great Yogi would say. Of course fat ladies are singing in opera houses all over Europe as this nonsense has been going on for 4 months (plus 6 years) so the chance of suddenly smoothing everything out by lunch wasn't very likely anyway.
by phil - June 23rd, 2015 9:01 am
Not the same as last Tuesday.
Last Tuesday we were testing our lows and we were looking to see if the indexes could bounce back and bounce back they did, past all of our Strong Bounce Lines at Dow 18,000, S&P 2,100, Nasdaq 5,050, NYSE 11,050 and Russell 1,260. We were also very concerned about Germany's DAX retaking its 11,500 line and yesterday we finished at 11,460 and today we are back over – all the way to 11,600 as Greece remains fixed for the 2nd consecutive day!
None of our underlying concerns have changed – only the immediate potential downside catalyst of a Greek default has (seemingly) been removed for the moment. We're not going to race back into the market but, on the other hand, we did plenty of bottom-fishing last week and added plenty of long trades to our portfolios (see our June Trade Review for a look at our free picks). Now we're headed back into earnings season with plenty of cash in our wallets, looking for more stocks to go on sale.
The whole market doesn't have to down for there to be bargain stocks. While the Nasdaq made a new all-time high yesterday, 40 of it's component stocks made 52-week lows. 57 new lows were made on the NYSE as well, where 1/3 of the index is within 5% of their year's lows, despite the recent round of exuberance.
For an up 1% day, yesterday was a pathetically low-volume affair – as you can see from Dave Fry's S&P ETF (SPY) chart. The index fell from 213.34 on Thursday to 210.36 on Thursday on 195M shares but all the way back to just under 212 on 65M shares. Hey, it's more than a quarter (but less than a third) – so let's not quibble over whether it's meaningless or manipulated and just sit back and enjoy the show.
You need the same sort of suspension of disbelief watching the markets as you do watching Jurassic World. Not so much that people are living with dinosaurs but that Ingen is still in business after 3 previous park disasters and this time their idea is to put much bigger dinosaurs in a new…
by phil - June 22nd, 2015 8:25 am
Look at Europe go!
2.5% moves are HUGE for a single day on major indexes and we're already (7:30 EST) past that point for Germany (EWG), France (EWQ) and Spain (EWP) in anticipation of a last-second deal with Greece that will put off the next crisis for more than 30 days. Already this morning, the ECB has increased the amount of emergency loans available to Greek banks to offset the massive daily outflows of capital as depositors flee the banking system. See – all is well!
What they are really celebrating is that there is no problem the Central Banksters will not throw money at and that's very encouraging as everybody has problems to one degree or another in the Eurozone and, as long as no one wonders where all this free Central Bank money comes from, we can paper over these problems seemingly forever. That is the true glory of a monetary Union – you have a Central Bank that endlessly prints currency that is removed from your own country's bond market so, when you are Germany (for example) you get to act "holier than thou" even though you are just as irresponsible as everyone else.
Greece's markets (GREK) are up 10% this morning as Greece submitted a proposal that would increase pension contributions by wealthy employers (earning over 500,000 Euros) while phasing out some payments to it's poorest pensioners (the ones least likely to fight back) and eliminating early retirement options.
It's a good move by Socialist Tsipras, who is now forcing the ECB to be the bad guy if they turn down a plan that is solving their balance sheet problem by placing a burden on Greece's top 1% – the very people the ECB serves. This is a very dangerous precedent so the deal may still blow up (with other excuses, of course) before any other countries get an idea that this is a way to fix deficits.
Tsipars's move means that those other EU corporations who are licking their chops as the force Greece to privatize their vital services may be walking into a tax trap as they fall under the Greek Government's umbrella. It had been hoped, by the…
by phil - June 20th, 2015 8:19 am
After taking two years off from publishing our morning posts on Seeking Alpha, we've begun sharing our entry-level PSW Reports again. The PSW Report is the morning market overview for our Members at Philstockworld published pre-market each day. Though it is only a small portion of what we publish for our Members, we still have plenty of actionable trade ideas to share early each morning. Now that we have two month of posts under our belt – it's a good time to review our performance from Month 1 and discuss our trading techniques.
April 22nd was our first day back at Seeking Alpha with "Market Manipulation Takes Center Stage" in which I noted what BS the low-volume moves up in the market were. We also discussed how easy it had been to "spoof" trades during the Flash Crash and often in our weekly Webinars (and we had happened to discuss it the day before) we show people how this sort of manipulation happens every day and learning to spot it can make for very profitable counter-trades – especially in the Futures. Our strategy was summed up nicely as I said:
Still, the best way to make money in these crazy markets is the Warren Buffett way, which is also my way – keep your cash ready and buy good companies when they get cheap, don't be greedy and sell risk premium to others. It's not complicated – it just takes a bit of discipline.
As examples I pointed out several stocks we liked that were already in our portfolios (IBM, LL, RIG, LQMT, ABX, CLF, USO, UCO, BHI, HOV, CIM, MAT, LULU). We use option spreads to give ourselves 15-20% discounts on our entries (see "How to Buy a Stock for a 15-20% Discount") and, as a new trade idea that morning, I suggested:
- Ultra-Long Oil ETF (UCO) July $5/9 bull call spread at $2.80, selling the July $5 puts for 0.14 for net $2.66, now $3.95 - up 48% (UCO reverse-split but the old options are still there)
The next day, in "Bad News Is Still Good News In China As Poor PMI Boosts Market" we also discussed the Financial Engineering that…
by phil - June 19th, 2015 8:42 am
Here come those tears again
Just when I was getting over you
Just when I was going to make it through
Another night without missing you
Baby here we stand again
Like we've been so many times before
S&P 2,120! Again…
It must be the 3rd week of the month because that's the week the S&P gets to 2,120. It's happened every month since February and the reason it happens is because it gives fund managers the chance to sell call options to suckers who bet the market will break out and go higher while they continue to lighten up on their holdings. For instance, the S&P ETF (SPY) is at $212 this morning and the July $212 calls can be sold for $2.75. Sell those calls to suckers 5 months in a row and you boost your returns by 5% even though the index itself goes nowhere!
The same goes for when the index is low in it's very tight channel. For instance, on Monday, when the S&P fell back to test 2,070 at the open, I said to our Members:
Let's lock in some gains by selling 100 SDS June $20.50 calls at 0.42 ($4,200) in the STP. We have the July $20 calls (and other long-term hedges) and we can always roll the short $20.50s to the July $22s (0.33).
I meant gains because we had gone into last weekend short so the move down in the morning was a win in our Short-Term Portfolio. We've already taken 1/2 off the table at 0.21 (up 50%) and today the rest will expire worthless for a 100% gain and net $3,150 gain for the week. We then use that money to press our longer SDS bet, so we'll be even more bearish going into this weekend than we were last weekend. This helps lock in the bullish gains in our Long-Term Portfolio without pulling money out of our own pockets.
As I mentioned yesterday, our bullish bet on the Gold ETF (GLD) will expire in the money today for the full 100% gain. We also mentioned yesterday, a bear play on China…
by phil - June 18th, 2015 8:20 am
Dive, dive, dive!
That's what the Dollar is doing this morning as Yellen once again stepped in to save the markets by saying the high Dollar has been a drag on US Exports, giving the impression the Fed does not want the Dollar so strong – even though the Dollar was already at 95, down 5% from it's April highs, when the S&P was at 2,050.
Now the Dollar is at 94, which is 6% lower and the S&P has managed to claw back to 2,100, which is 2.4% higher. When you consider the fact that the S&P 500's value is calculated from a formula that is based in Dollars, we've actually lose 3.6% in real value since the April lows but shhhhhhhhhhhhhhhhh – don't tell that to the bulls!
The good news is that the Gold ETF (GLD) trade idea we had for you, FOR FREE, right in our morning post on June 4th (and you can have them delivered to you pre-market right HERE to make sure you don't miss another one) is right on track with just one day to expiration. At the time, we said:
Today, for example, there's a nice opportunity to go long on gold at $1,175 (/YG Futures) and that should be good for a $5-10 move up at $32.20 per $1, per contract. If we're still low at the open, the Gold Trust ETF (GLD) June $112/113 bull call spread at 0.50 will pay back 100% if GLD holds $13.50 into expirations on the 19th. So, if we want to make $2,500 in two weeks, we add 50 of those contracts for $2,500 to our Short-Term Portfolio (and 10 to our $25,000 Portfolio for $500) and then sit back and watch the fun.
Not only are those 50 contracts going to make the full 100% ($2,500) just two weeks later but the /YG futures just hit our $1,200 goaaaaaaaaaaalllllllllllllll!!! and that's good for a gain of $805 PER CONTRACT! We also gave away 6 other stock picks in that morning's post, 5 of which are already winners. GLD was, of course, one of our Top Trade Alerts for June (5 so far) and we have consistently been…