by phil - May 27th, 2015 7:49 am
How many times have we seen this?
Low volume rallies followed by big volume sell-offs are the norm in an end-stage bubble as institutional investors do their best to reel in retailers to "hold their bags" for them as the institutions run for the exits.
Seeing how fast the market falls as soon as the volume picks up should be sobering but the music is still playing and we've trained those dip-buyers like Pavlov's dog and they can't resist a chance to throw their cash at anything that's cheaper than it was yesterday which, today, is 80% of NYSE, which had a very broad sell-off on double the volume of the previous two bullish sessions.
Remember how I was a stick in the mud all last week saying "don't buy, don't buy, don't buy"? This is the day I get to say "I told you so" but that's OK because we're going to bounce in the morning and all the bulls can make fun of me again but it's only the bounce we predicted in our Live Member Chat Room at 11:28 yesterday when I called the bottom and laid our our expected Futures bounce levels at:
- Dow (/YM) 18,050 (weak) and 18,100 (strong)
- S&P (/ES) 2,104 (weak) and 2,108 (strong)
- Nasdaq (/NQ) 4,473 (weak) and 4,481 (strong)
- Russell (/TF) 1,235 (weak) and 1,240 (strong)
There was great money to be made, of course, playing those bottoms and, in our Live Trading Webinar at 1pm, we found some laggards to play as well and we even added another bullish play to our Long-Term Portfolio because, even in a correcting market, there are still values to be had if you know where to look (and thanks to Jim for suggesting that one!).
We didn't need to find any short trades as we locked those in on the way up last week and our Member Portfolios are very well-balanced for this correction so far. We did lean a bit more bearish last week so we'll do better on a 5% move down than a move back up and, so far, after these bounces play out, that's still what we'll…
by phil - May 26th, 2015 7:31 am
Greece is back in the spotlight.
Talks broke down this morning and the Euro fell all the way to $1.088, a new low for the decade. The Dollar jumped to 97.235, up 4.5% in two weeks and back in the middle of its 6-month range. That, of course, is putting a bit of pressure on equities and commodities which are priced in Dollars and losing value relative to the currency they are priced in. In a low-volume, post-holiday week (London is still closed), we're not going to have much to go on, so this is more of a watch and wait kind of day.
Getting back to Greece, which is a very big deal that people have simply gotten tired of talking about. According to Greek Finance Minister, Varoufakis, there is a common fallacy pervades coverage by the world’s media of the negotiations between the Greek government and its creditors. The fallacy, exemplified in a recent commentary by Philip Stephens of the Financial Times, is that, “Athens is unable or unwilling – or both – to implement an economic reform program.” Once this fallacy is presented as fact, it is only natural that coverage highlights how our government is, in Stephens’s words, “squandering the trust and goodwill of its eurozone partners.”
The view that Greece has not achieved sufficient fiscal consolidation is not just false; it is patently absurd. The accompanying graph not only illustrates this; it also succinctly addresses the question of why Greece has not done as well as, say, Spain, Portugal, Ireland, or Cyprus in the years since the 2008 financial crisis. Relative to the rest of the countries on the eurozone periphery, Greece was subjected to at least twice the austerity. There is nothing more to it than that.
The problem, according to Varaufakis, is simple: Greece’s creditors insist on even greater austerity for this year and beyond – an approach that would impede recovery, obstruct growth, worsen the debt-deflationary cycle, and, in the end, erode Greeks’ willingness and ability to see through the reform agenda that the country so desperately needs. Our government cannot – and will not – accept a cure that has proven itself over five long years to be worse than the disease.
by phil - May 22nd, 2015 8:18 am
I told you so.
I told you so yesterday and, much more profitably, I told you so on the morning of May 11th, when FXI opened at $50.75 on news of more Chinese stimulus and we called for a short using the FXI June $50 puts, which were $1.20 at the time and are now $1.60 – up 33% in 12 days. We're already done with those and have moved on to new FXI short positions.
Yesterday we talked about the sudden and still unexplained failures of Hanergy and Goldin and now, this morning, Ordos' (the ghost city) Huyan Investment Group is unable to pay the piper on $194M round of bonds as they have $1.1Bn in debt and just $3.5M in cash remaining.
Huyan is just a drop in the Ordos bucket, where $3-5BBn worth of bonds are likely to default every year for the next 12 years – so the hits just keep on coming in China. Ordos city bonds have climbed to 9.63% as the city's rating has been cut to A on negative watch. In the rating statement, Pengyuan described the Ordos property market as “extremely not optimistic” because of the slowing economy and pressure the coal industry is facing. Several other firms have also been downgraded and will be having trouble rolling their debt in the next round.
Meanwhile, Zhuhai Zhongfu Enterprise (a bottling company) is short $72M of the next $106M they owe on May 28th and they have just $10M left in the bank. This company employs 4,000 people and bottles for both KO and PEP in China. Meanwhile, shares of ZZ are up 126% this year but have been suspended since April 29th with a $10Bn market cap. This is the state of Chinese companies, folks – there are many more examples and here's even more. .
The above chart illustrates the game that is being played in China to keep things LOOKING good, even while they are falling apart. Then we have to take into account that 90% of the public companies in China are some form of quasi-state controlled entities. While a lot of "investors" take solace in that, believing the Government will back…
by phil - May 21st, 2015 8:28 am
This is just getting silly!
Look at the ridiculous and FAKE move up that began BEFORE the Fed announcement at 2pm that was completely reversed by 3pm with, as usual, twice as much down volume as up volume during the hour. There, in a nutshell, is what the entire market has been doing since we bailed on it in late March.
Don't get me wrong, we're having an absolute blast taking advantage of all this blatant market manipulation but, come on – can we ever get back to reality, where it matters how much money companies are making and what sort of return on investment they offer? While we're waiting for that to happen, at 2:11 pm I said to our Members in our Live Chat Room:
I'm back one short /TF at 1,257.50 but not a lot of conviction. Dollar at 95.72, so not seen as easy by the currency traders.
This morning we flipped long on /TF at 1,252.50, which was good for a $500 per contract gain from our short and now we're back to flat at 1,255, which was good for a $250 per contract gain from our long. Even better, the long trade idea we had on Gasoline Futures (/RB) in Tuesday's Live Trading Webinar (replay here) hit our goaaaaaaaaaaaaaaaaaaallllllllllllll at $2.06 this morning and that was good for $2,520 per contract – not bad for a free Webinar pick!
Don't worry, for those of you too cheap to subscribe to one of our Membership packages, our next Free Webinar is scheduled for June 24th – I'm sure we'll have another good pick for you then!
Speaking of economies that are burning, we'll be looking for a short entry on China (FXI) this morning as their PMI was negative for the 3rd consecutive month (and 5 out of 6) DESPITE massive stimulus. We got burned shorting FXI last month and we've been looking for another entry.
by phil - May 20th, 2015 8:26 am
Japan grew 0.6% in Q1.
That's a 2.4% annualized growth rate but, of course, that's priced in Yen, which are down 14.8% since last year so, in fact, Japan's economy, in Dollar terms, is losing 12.4% from last year. This is not the headline you'll hear in the MSM though, where the overwhelming message is "Don't Worry, Be Happy" and, in fact, Robert Shiller just wrote an article telling people to cheer the F'ck up to avoid a Depression.
As you can see from the chart above, adding 80Tn Yen worth of debt in the last 5 years has only added 25Tn Yen worth of GDP and the current 495Tn Yen GDP is still well below 2007's 505Tn Yen and, at the time 505Tn Yen was worth $5.5Tn but now, 495Tn Yen is only worth 41.25Tn so, in Dollar terms (or any steady currency), the GDP of Japan has actually DROPPED 25% since 2007 and this quarter's "boost" of 0.6% comes on the back of an additional 5% drop in they Yen since Q4 of last year.
Yet no one will mention this in the MSM. Why? Well first of all it's complicated and even NYTimes readers' eyes glaze over when you start doing math. Secondly, it doesn't fit the narrative that our Corporate Masters want you to swallow – that QE is working and more QE is better and all that matters is that the stock market goes up and everything else will be fine.
I ranted about this in yesterday's Live Trading Webinar and you can watch a replay of that HERE, so I won't get into it again. We also made $100/contract live trading the Russell Futures and our bullish trade on Gasoline Futures (/RB) that we played into the close is already up $1,000 per contract this morning as /RB is back over $2.02 already (you're welcome).
So, moving on from Japan (and I sent out an Member's Alert this morning with in-depth coverage and trade ideas), as you can see from Dave Fry's SPY chart, our record highs are still coming on record low volumes and that means that…
by phil - May 19th, 2015 8:22 am
Bad news is great news!
The Greek talks have stalled, England's CPI is deflating, German GDP slipped to 0.3% in Q1 and German Investor Sentiment (ZEW) dove to a 5-month low, dropping over 20% in one month to 41.9. That and collapsing bond prices were the last straw for the ECB, who announced this morning they would "front-load" their $75Bn monthly bond-buying into May and June, to avoid having to bother over the holidays.
Separately on Tuesday, Christian Noyer, the head of France’s central bank and a member of the ECB governing council, said the ECB was ready to go further if needed to meet its inflation target. “The purchase program will continue until the end of September 2016 and beyond if we do not see a sustained adjustment in the path of inflation,” he said.
Does anyone besides me think it's strange to announce more QE WHILE the markets are making record highs? Anyone???
We have indeed fully embraced the worst kind of Voodoo Economics, with the World's Central Banks creating endless supplies of money out of thin air by simply writing checks to buy bonds which enable the Sovereign nations to go endlessly into debt. There have been, so far, no consequences for this behavior and even countries like Greece, who have no possibility whatsoever of being able to pay off their debts, are lent more and more money.
by phil - May 18th, 2015 7:03 am
Active managers finally had a good quarter.
As you can see from the chart on the right, it was kind of a pathetic quarter with Actively Managed Funds (who research U.S. stocks before they buy or sell, as opposed to ETFs or other passive funds) outperforming by about 1%, but it's the first time stock pickers beat the benchmarks since 2013, so you're going to hear a lot of crowing about it this week.
And active managers can afford to crow, because they charge you massive fees for that 1% outperformance (once every few years and following last year's 7% underperformance), so they've got lots of money for PR and advertising and that's why, this week, you'll be hearing the words "Active Management" mentioned over and over again in the MSM, who are very happy to tout the benefits of anything that pays them money.
I'm not against Active Management per se – we teach our PSW Members to be active managers of their own portfolios. I'm not fan of ETFs either as you end up buying the bad with the good – I'm simply pointing out that this small, 1% outperformance in one Q of one year should not be used to convince you that Active Managers have a clue. NO ONE has a clue as to where to invest your money that's better than your own ideas (assuming you are educated enough to be reading and understanding this in the first place).
The TREMENDOUS advantage you have when you learn to invest your own money is that you're not charging yourself fees. It's not the performance of active management that kills you – IT'S THE FEES. Even at "just" 1%, over 50 years of investing your active manager is taking 50% of your total account! Unless his long-term outperformance is better than 1% per year, YOU WILL LOSE MONEY WITH ACTIVE MANAGERS.
YOU are the best person to invest your own money and our goal at PSW is to teach you that it's not hard to do that. At the base level, you should start by investing in things you know well. When I was 7 years old…
by phil - May 16th, 2015 7:50 am
The S&P has gone nowhere since our last review.
An neither have our portfolios! Actually, we did gain another $8,092 (1%) in our Long-Term Portfolio, which is very good for two weeks and exremely good considering we're over 100% in CASH!!!
How are we over 100% in cash? Because we are BEING THE HOUSE – Not the Gambler™ and we are operating our Stock Market Casino and selling risk premium to others. That is how we can reliably get these great returns. We are NOT gambling, we are running a statistically beneficial model that allows us to collect risk premiums from people who are gambling on the direction of the stocks we own.
The actual net value of the positions we hold is -$26,825, because we kept our losers back on March 24th, when we went to mainly cash ahead of this choppy earnings period – but our CASH!!! pile has greatly increased. The S&P was at 2,104 then, it's at 2,122 now but our Long-Term Portfolio is up 12.1% since then and, depsite going to mainly cash, we have added 12 new positions in two months.
The key is that we have much less at risk now and we're simply grinding out those montly gains that we can count on by SELLING risk to others, not gambling ourselves on which way the market might go. Meanwhile, just yesterday we found two new trade ideas for the LTP – even in a rally, there are bargains to be had if you are PATIENT! As I said back in March:
While it is our INTENTION in the LTP to hold our positions over time, when we get a ridiculous run in the market like the one we've had for the past year, it is simply foolish not to take advantage of it. The stocks we bought were targeted to make 40% in two years, not 15 months and, when you are that far ahead of the curve – it's wise to turn those unrealized gains into realized ones before they disappear on you!
As we move through Q1 earnings, we'll be making a new Buy List for 2015 and, now
by phil - May 15th, 2015 8:18 am
You know pot must be legal these days.
How else do you explain these non-stop, non-pause moves up in the market on no particular volume? Can everything really be that awesome and what, exactly is it that is awesome in the first place?
Yesterday we saw Avon (AVP) jump 20% after a FAKE takeover rumor on an SEC-maintained web site from a FAKE company calling itself PTG Capital Partners who filed a document stating they would pay $8Bn for AVP, which has generally been in free-fall for two years as their business model collapses.
Despite the TERRIBLE fundamentals of this company, within two minutes of this fake filing being posted by a fake company (11:34), the stock began climbing from $6.50, all the way up to $8 by 11:45 before the 23% gain triggered a halt in the system.
That 7-minute break gave AVP time to deny that they had received an offer and the stock re-opened at 11:52 and dropped 10% that same minute, triggering another halt. Another 7-minute break and another 7-minute break and another drop of just under 10% let the stock sell off for the rest of the day. All in all it was total idiocy, but idiocy with a $3Bn company on a major exchange – not a penny stock!
"The SEC has so many forms being filed, I don't think it can check every one," former SEC lawyer, Robert Heim said. "But I think they could do a better job acting as a gatekeeper."
The filing contained many red flags raising questions about its authenticity, including numerous typographical errors and two different spellings of the company's own name. That would be highly unusual in an authentic regulatory filing, which would receive close scrutiny from companies before being posted. But robot traders and the sheeple that follow them don't read the reports, they just look for the keyword "buyout" and the frenzy begins!
That's the kind of market we're in now – it's a madhouse and it's fine if you want to play along but try…
by phil - May 14th, 2015 7:48 am
For those of you lucky enough to read our morning post (and you can have yours delivered pre-market, daily by subscribing HERE), we had re-picked a short position on S&P Futures (/ES) at 2,105 and, as you can see from Dave Fry's chart, we got a lovely drop down to 2,092, which was good for a gain of $650 per contract in the first 90 minutes of trading.
We also caught the incredibly obvious oil moves where our $61.50 entry gave us a ride all the way to $60 (up $1,500 per contract) by the day's end, though most of us were in and out during the day, profiting from the bounces as well as the drops. Like our Member, Craigsa620, who said:
Phil- I want to let you know that you really helped me make some money this morning when I probably would have lost on my own. I was stuck in doctors waiting rooms most of the morning starting at 8AM. By following the game plan you laid out and using my smartphone, I went short on oil whenever we got to 61.50 and long at 61 waiting for the spikes ahead of inventory. When 10:30 rolled around I was out after selling longs at 61.60 a few minutes earlier. I went short at 61.75-61.80 and voila, rode it down to 60.60 or so. Thank you.
All in all, it's the same general thing we did last Wednesday and we can do this on a regular basis because the oil market is MANIPULATED on a regular basis. Maybe the regulators can't see the blatant pattern of manipulation going on at the NYMEX but we sure can – so we may as well bet on it while it's going on.
Perhaps the reason no one is willing to call shenanigans on the NYMEX traders is because the biggest market manipulators of them all are our own Central Banks. In the last 3 weeks,…