by phil - December 9th, 2013 8:14 am
That's what Richard Gere said to Lou Gosset in "An Officer and a Gentleman" and that's what the markets are saying to us as the Fed attempts to force them into a no-lose situation in which there is literally nowhere else to put your money other than equities. The bank won't pay you interest, inflation erodes your cash, bonds pay next to nothing and margin interest has never been lower – why not play equities – you can't lose?
Or can you? As Dave Fry notes in his Dow chart, it's a micro-managed environment for equities and everyone knows "you can't fight the Fed" and bears can certainly attest to that this year as we've had a pretty relentless 3,000-point climb in the Dow. We did run into a spot of trouble in the Summer, but that was fixed in October as GS, NKE and V were added to change the mix, which helped to goose the index another 1,000 points.
It doesn't matter how the Dow gained 23% this year, as long as they get to print that fact on the brochures, right? Just like it didn't matter how Bitcoin came to print such a bullish picture as it rocketed up from $500 to $1,200, rewarding all dip buyers along the way. These things always work out fantastically well – until they don't!
One of the hardest things to teach traders is the value of PRESEVING wealth, as opposed to just making more of it. If the market is going to go up and up and up in 2014, then we have hundreds of ways to make much, much more than 23%. I'm just putting together a list of those ideas for our Members and, just like the beginning of 2013, when I had 3 bullish picks on January 5th, we can start 2014 off with some bullish selections as well – especially since we have such lovely support levels (16,000 on the Dow, 1,800 on the S&P, 4,000 on the Nasdaq, 10,000 on the NYSE and 1,100 on the Russell) to let us know when it will be time to get out.
by phil - December 7th, 2013 8:23 am
Up and up the markets go, where they stop, no one knows!
Well, we do know where they SHOULD stop, and that's here. In fact, to be very clear – WE ARE SHORT THE MARKET HERE – many of our Members have gone to cash and our short-term trades are BEARISH, looking for a correction back to that 22-week moving average that you can see as a "gap too large" on Dave Fry's Nasdaq chart.
BUT (and it's a Big But) just like we hedge to the downside on the way up (in case we're wrong), we should hedge to the upside too – just in case that correction never comes. That's why we regularly run our series of "5 Trade Ideas that can Make 500% in a Rising Market" – those are the kind of high-leverage hedges every bear should have in their portfolio and, yesterday, in our Member Chat Room, I reviewed our most recent 5 trade ideas, from our pre-Thanksgiving post:
by phil - December 6th, 2013 8:37 am
The Futures are bouncing already (8am).
We'll see how this pans out but it's been a crappy week and we'll yet again be watching our strong and weak bounce lines on the Big Chart, which I laid out for our Members in Wednesday's Chat, which prevented us from falling for the weak bounce that day and yesterday's lame pump job at the open – both of which ended up failing.
Today, we're back to the weak bounce lines in the Futures, kicked off by a weak Dollar (80.35), which will go up fast (and take down the markets) if more than 250,000 jobs are added – so good news likely to be bad news again today. The bounce lines we're going to be watching are:
- Dow 15,910 (weak) and 15,970 (strong)
- S&P 1,794 (weak) and 1,800 (strong)
- Nas 4,030 (weak) and 4,040 (strong).
- NYSE 10,060 (weak) and 10,100 (strong).
- RUT 1,125 (weak) and 1,130 (strong).
As you can see from our Big Chart, we have some serious tests at 4,040 on the Nasdaq, 10,000 on the NYSE and 1,120 on the Russell – all of which we should be above this morning. Let's say that failing 2 of 3 of those lines would be a very bearish indicator and the quick money can be made by shorting the Nasdaq, who haven't come down much, at 3,490 in the Futures (/NQ) or below the $85.50 line on QQQ, where we should be able to buy the Dec $84 puts for .50 or less and a $1 move down in the Qs (1.2%) to approximately 3,990, should net us a quck 50% gain.
We had a lot of excitement in the oil pits yesterday with oil rising all the way to $98 at 10am but it was rejected there and back to as low as $97.20, before settling between $97.25 and $97.50, where we were able to play for nickels and dimes since.
As promised, I sent out a tweet letting our followers know that we were shoring oil at 1:42 at $97.76 and that price held through…
by phil - December 5th, 2013 8:11 am
Wheeeeee, what a ride!
We played oil short on the way up yesterda in our Member Chat and I know that sounds strange but oil was $97.50 in the morning, when we first shorted it and fluctuated around that line until the 10:30 inventories when, as expected, we got a nice $1 drop to $96.50, which was good for gains of $1,000 PER CONTRACT on the /CL Futures. My idea to put 10 of those contracts into the Long-Term Portfolio was good for $10,000 just 3 hours after I wrote the post – not bad for a day's work. Even better – this morning we're lined up to do it all again!
We had another nice drop from our $97.50 shorting line back to $97 for another $500 PER CONTRACT gain (x 10 = $5,000) and this morning we once again can do the same at $97.50 so please, don't say I didn't tell you so – because this is me telling your so! Of course, if you want to make REAL money, you've gotta be a Bankstser like Blackstone (BX), who made AT LEAST $15.6M by buying a Credit Default Swap against a loan made by GSO Capital Partners to Codere SA in Spain (a transaction BX had no interest in).
BX then arranged a $130M loan to Codere ON THE CONDITION THAT THEY DEFAULT ON THE GSO LOAN, which triggered the swaps and made BX instant profts of about 10% of their loan as a bonus. I know it sounds like insurance fraud but it's actually legal (maybe not moral, but who cares if it makes money, right?) and BX was not the only Codere lender to benefit. The company is complete junk (rated) and the more they borrow, the more the CDS's pay off!
So no reason to feel guilty about paricipating in the NYMEX scam – we're saints compared to the Big Boys! Don't forget, just like running up the price of oil and gasoline on weekends to screw US consumers out of…
by phil - December 4th, 2013 8:12 am
It's happening again.
Futures pump-jobs, big volume sell-offs at the open, low volume recoveries into the close and then a massive volume sell-off right at the bell to stick all the 401K and IRA suckers with all the crap stocks that are indexed under headliners like AAPL that the Banksters keep pumped up to cover their tracks while they head for the doors in the Christmas edition of Grand Theft – Stock Market.
Speaking of Grand Theft, the EU fined C, DB, RBS, JPM and SCGLF $2.3Bn for rate rigging on Libor but only gave wrist-slaps to UBS, BCS and C for being good little whistle-blowers, which is funny because UBS and BCS were essentially the ring-leaders.
HSBC, CRARF and JPM are still on the hot-seat for rigging Euribor and Tibor rates but the real news is that we may, in fact, have a free market going forward (yeah, right). Still, being forced to play on a level playing field gave GS and excuse to slap a 2-notch downgrade on rival C and, of course, this and many, many, many more fines and regulations to come are why we aggressively shorted XLF on Monday with our FAZ spread.
We were "only" up 233% at yesterday's close after our first two days and that's merely "on track" for what we hope will be a 3,900% gain on the .15 cash we used to fund the FAZ April $24/30 bull call spread at $1.20, offset with the short April $20 puts at $1.05. Also doing well today should be Monday's FXI short 2016 $33 puts ($3.20), which more than paid for the 2015 $40/48 bull call spread ($2.20) for a net $1 credit – but that's a longer-term play with "only" 900% upside potential – hardly worth mentioning…
This morning, I already put out an early Alert to our Members, noting all the rotten economic news. You can read all about it on my Twitter account, which you should really follow if you want to find out cool things earlier than everyone else. Since then, we saw a 12.8% drop in Mortgage Applications and it seems that the …
by phil - December 3rd, 2013 7:58 am
To shop or not to shop, that is the question?
Today the question is also whether or not we should do a little bottom-fishing on this very minor pullback in the markets. To date, bottom fishers have been continuously rewarded (while our short positions have been pounded) but, on the whole, this is nothing more than the sell-off we expected – and just the start of it at that.
Our premise is that the Fed is already well baked into these index levels and now we need to see improving economic numbers to back up the exhuberance, which has taken us up about 15% since early October (1/2 the gains for the year).
Does 15% in 2 months seem like a lot to you? If we keep going at this pace, we'll be up 90% in 12 months and, while that may seem extreme, the S&P was at 666 in March of 2009 and now, just 4.5 years later, it's at 1,800 – up and AVERAGE of 37.5% per year since the Fed started meddling in the markets.
The Fed is not likely to stop meddling and, if we assume they meddle perfectly and there is no blowback ever, then we can look forward to another 37.5% next year and the Fed seems to have "learned their lesson" from the end of previous QE programs and is running QE3 without an end date, as the ends of QE1, QE2 and Twist all lead to decent pullbacks:
As we have demonstrated 3 times this year with our series of "5 Trade Ideas that can Make 500% in a Rising Market," as long as we can count on the Fed to keep things going, we will have endless opportunities to increase our wealth. I just finished writing up the first two weeks of our October Trade Review and a ridiculous 51 out of 59 trade ideas are already winners – and that includes the hedges! I'd say it's like shooting fish in a barrel but good luck shooting 86% of the fish…
by phil - December 3rd, 2013 2:22 am
And the madness continues!
We had our fabulous Las Vegas Conference last weekend so we're a bit behind this month and we ended the week at record highs. Our September Trade Review (Part 2) wasn't done until 11/2 anyway and Part 1 of September was completed on Oct 13th, when the market was just beginning to fly. (Chart by Dave Fry) We called the September action almost perfectly and, out of 112 trade ideas for the month, 96 (85%) were winners – an incredible percentage that actually improved upon August's 81%!
For some reason, people think I'm too bearish but that's because our SHORT-TERM Portfolio is full of bearish offsets to the bulk of our positions, which are NOT tracked until the reviews, because they are longer-term trades or day trades. Also, if we tried to track 112 additional trade ideas per month, we'd be just about getting to February now!
Options are not like stocks, we don't want 1,000 people all following the same trade (as I noted last month as well). That's why PSW is an educational site where our goal is to teach you to identify your own opportunities to BE THE HOUSE, Not the Gambler. By putting up an average of 5 trade ideas every trading day – we give our Members a huge variety of trade ideas that can fill in any portfolio. These trade ideas are highlighted daily in our Member Chat Room at PSW! Keep in mind that this is an arbitrary point in time and some trades could have had better (or worse) exits in between – we're not doing this to keep score, just to get an idea of what worked and what didn't in the past month so, hopefully, we can make better decisions this month.
by phil - December 2nd, 2013 6:22 am
And, there are 6 less days between Thanksgiving and Christmas than we had last year! That's the bad news, the good news is E-Commerce sales are up 17.3% as it's Brick and Mortar that's dying, not Retail on the whole. We'll see how XRT performs, we're short the ETF but it's not a good picture of retail because it includes RAD, SWY, AMZN and EXPE among it's top holdings – not a pure play on brick and mortar operators...
AMZN, in fact, will be flirting with $400 this week (where we will short), especailly after Jeff Bezos threatened to unleash his drone army upon America in last night's 60 Minutes interview.
Sure, it's a great idea to give an egomaniacal Billionaire permission to privately operate thousands of army-quality drones across the country – what could possibly go wrong (and now I have an idea for the next James Bond film!).
Actually, the business I'll be going into is selliing EMP guns to people who want to see free goodies drop from the sky!
We're also waiting for our equity markets to drop from the sky but no luck there as we continue to defy gravity and, according to Nobel Prize-Winner, Robert Shiller, logic!
"I am not yet sounding the alarm. But in many countries stock exchanges are at a high level and prices have risen sharply in some property markets," Shiller told Sunday's Der Spiegel magazine. "That could end badly," he said.
"I am most worried about the boom in the U.S. stock market. Also because our economy is still weak and vulnerable," he said, describing the financial and technology sectors as overvalued.
"Bubbles look like this. And the world is still very vulnerable to a bubble," he said.
by phil - November 30th, 2013 9:06 am
Last year we were able to accurately predict improving retail sales from our observations – we have a lot of very sharp people with a wealth of experience to draw on and I urge you to read last year’s post and comments to get an idea of what we’re looking for.
Disclosure: We will probably buy something AAPL is selling this season!
by phil - November 29th, 2013 8:24 am
I hope everyone is having a nice holiday.
The US Markets were closed yesterday and today we close at 1pm and then Christmas Eve we're closing early again and closed XMas day (Weds), of course, but not New Year's Eve so just two more humbug interruptions of our bull Market before 2014 and so far, it looks like we're rolling right into our Santa Rally with the US Futures up another 0.25-0.5% this morning.
Today is "Black Friday", so named because it's traditionally when retailers finally get into profits for the year and whatever they can make over the next 30 days are going to be it for their 2013 profits. Due to an unfortunate turn of the calendar, there are only 3 weekends (after this one) until Christmas – that places more than the usual importance on this weekend's retail sales.
The National Retail Federation has forecast that up to 140M consumers will go shopping over the long weekend, up a bit from 139.4M last year. IBISWorld has projected that total sales through Cyber Monday will rise 2.2% to $40.5Bn. Mobile traffic increased over 31% yesterday as smartphones accounted for more than 23% of all Internet traffic. By 6 pm, online sales were up 10% over last year.
Germany, surprisingly, had a 0.8% slump in Retail Sales for October, following through on a 0.2% drop in September and missing the predictions of leading economorons of 0.5% growth by a mile (or 1.6 kilometers). That's pegging their year/year sales at -0.2% vs the +0.3% consensus in the World's 4th largest economy.
Now, I'm not going to ruin the holiday spirit by pointing out that this is troubling. Let's just do what the rest of the market is doing and completely ignore the bad data! As you can see from Dave Fry's NYMO chart, we're not very overbought, even at these levels, so we'll add a few more 500% plays for additional upside moves and see what happens. We've placed plenty of bearish bets and we'll adjust those to keep them active but it's bullish bets we need for balance now.