by Phil Davis - August 27th, 2014 8:09 am
2,000.02 – We did it!!!
Unfortunately, we can't afford to pop the champagne because the 0.03 we spend on it would put us back under – so we'll watch and we'll wait another day before celebrating a milestone we've been expecting since last week (see "Will Jackson Hole Give Us S&P 2,000?") and we went with that TNA trade we discussed in yesterday's post to cover the expected bull run.
We also picked up long plays on BAC and DBA in our Live Member Chat Room and BAC has already rocketed on the settlement news but DBA is only just making the turn and still makes an excellent play that we'll be adding to our Buy List (Members Only) along with 10 more picks we'll be making this week.
As you can see from Dave Fry's SPY chart, we have set a new record for this decade for low volume on a full market day. Last Christmas Eve was 43M on a half day, for example, but the Christmas Eve before that was 53M and those were the lowest two days I could find before I got bored looking (very scientific).
Anyway, the point is that 38.9M is VERY LOW VOLUME – so low that paying attention to a dot on a chart that is drawn in such a light touch is just silly. That makes yesterday's jaunt over 2,000 completely meaningless and more so with the additional evidence of the intraday action which, as Dave notes, could not have been more manipulated.
This is why we have been pressing our bear bets. Even though we have peace in Gaza and peace in Ukraine (for today) and even though we've forgotten about Europe's negative GDP and China's plunging property prices and Ebola – we still couldn't find more than 38.9M buyers for SPY – that's just sad!
Speaking of China, last Monday, for FREE, right in the morning post, we picked the following on FXI:
We shorted India last week (EPI) and now FXI has got my mouth
by Phil Davis - August 26th, 2014 8:05 am
S&P 2,000 – YAY!!!
We did it, congratulations, fantastic, go markets! OK, now what? Now we'll see if we can pop 17,160 on the Dow, which is 2.5% below the Must Hold Line on our Big Chart. We also need to firm up over 11,000 on the NYSE (another Must Hold Line) and then we'll be looking for 1,200 on the Russell and 17,600 on the Dow and THEN we are into the next leg of our rally.
Until then, we need to be just a little bit cautious. Fortunately, we already placed our hedges and now we're ready to BUYBUYBUY off our Buy List as well as 10 new bullish trade ideas we'll be discussing in today's Webcast (1pm, EST). This one is going to be Members only though, as we're picking new positions for our portfolios.
As you can see from our Big Chart, the Russell is our lagging index and has already been to the promised land over 1,200. That's why, last Thursday morning in our Live Member Chat Room, we added an aggressive long using TNA, the ultra-long Russell ETF:
With TNA at $73.30 today, the same logic applies and the Sept $72.50/76.50 bull call spread is $2 and the Sept $68 puts can be sold for $2 to offset or maybe the ABB March $24 puts at $2 instead. As with last month, this isn't a portfolio play for us as we're already very bullish in the portfolios – this is to cover yourself if you think you are too bearish and a pop over the highs will kill you.
It's only been 3 sessions but TNA has already popped to $75.10 and the Sept $68 puts have already fallen to $1.30 and the spread is now $2.40 for net $110 gained per contract – up infinity from the net zero cash basis! The ABB puts are a little slower moving at $1.50, but still very nice for a more conservative play.
by Phil Davis - August 25th, 2014 7:54 am
As usual on Friday, more volume = more selling.
Still, there's no reason to expect volume to come back and that means the markets can go back to drifting higher when the bars are lower and that can get us all the way to S&P 2,000, but over that line is going to be a tough trick.
Our weekend reading from our Member Chat Room produced the usual litany of woes with the usual suspects:
ISIS, Putin, China, Gaza, Ebola and Draghi causing the usual damage aided by newcomers like an earthquake in San Francisco, a volcano in Iceland, a nuclear scare in Belgium - but none are as scary as French President and Austerity Radical, Francois Holland, dissolving his Government because they disagreed with him.
In interviews with the French press and speeches at a Socialist gathering Sunday, Economy Minister Arnaud Montebourg and Education Minister Benoît Hamon said forcibly reducing budget deficits as the economy wilts is driving up unemployment, fueling political extremism and risks tipping the economy into recession. "The priority must be exiting crisis and the dogmatic reduction of deficits should come second," Mr. Montebourg said in an interview with Le Monde.
The criticism came at a difficult moment for the French president, who said earlier this week he will push ahead with a three-year plan to cut public spending to fund tax cuts for business even as the economy stagnates – so he fired them all! As in the US, Businesses continued cutting investment in the second quarter despite receiving the first payouts from labor-tax reductions.
"Promising to get the economy going again, on the path to growth and full employment, hasn't worked. Honesty obliges us to acknowledge this," Mr. Montebourg said in a speech to supporters. "The role of the economy minister and any statesman in his place is to confront the truth—even it is cruel—and propose alternative solutions," he added.
by Phil Davis - August 22nd, 2014 7:44 am
Hang on to your hats!
Janet Yellen speaks at 10 am, EST and she's scheduled to discuss her "Labor Dashboard" and, from that, the pontiffs will then attempt to read the tea leaves of Future Fed action. She'll likely note that the Labor Market is generally improving but that there is no immediate reason to raise rates. The definition of immediate will be much debated.
If that does not confuse us enough, we will hear from 7 of the Fed Dwarves as well including Williams, Lockhart, Plosser and Bullard. Draghi takes the stage at 2pm, EST. In case Yellen's empty promises don't do the trick, Draghi is sure to have even emptier ones – whatever it takes to end the week on a positive note!
Still, we're playing the day bearish (we added bear plays in yesterday's Live Member Chat and we're short /YM below 17,000 along with other Futures) as it's hard to imagine what Yellen and company can possibly say that they haven't already said. Unlimited amounts of FREE MONEY forever is already priced into market expectations – anything less will be a severe disappointment. Any firm mention of ending QE in the next 12 months can send the markets down sharply. As "clarified" by Goldman Sachs:
With opinions mixed as to whether or not Jackson Hole will be the forum for Yellen to say something new, many are trying to figure out if it is a buy the rumor and then buy more after the fact event, a buy the rumor sell the fact event, or a do nothing with the rumors and then buy the fact if the USD is actually rallying after the fact event.
According to Zero Hedge, only "Full Doveish" statements are likely to lift the markets at this point. Those would be for Yellen to:
by Phil Davis - August 21st, 2014 6:01 am
I could take today off.
Why? Because I already wrote this article last month, on a Thursday, when the S&P was at 1,988 and topped out at 1,991, which was $199.06 on SPY and, as you can see from Dave Fry's chart, SPY topped out at $199.16 yesterday (before plunging back to $198.90 on strong volume into the close).
Will this time be different? I certainly hope so because last time, we plunged about 5%, back to 1,904 over the next 10 sessions and it's taken us another 10 to claw our way back for another attempt at an all-time high.
In our Live Member Chat this morning, we shorted the run-up in the Futures at Dow 16,990 (/YM), S&P 1,985 (/ES), Nasdaq 4,045 (/NQ) and Russell 1,155 (/TF) because, as I said to our Members:
I'm sorry but I simply can't reconcile this news with what's going on in the markets so I'm going to continue to lose money hedging to make sure we keep what we have. The alternative is going to cash but there is simply no way I can endorse getting more bullish on this market at this point.
One major difference this time is we DON'T have money flowing out of SPY (as much), as we did last month and we DO have the Fed's Jackson Hole conference tomorrow, which looks to Global Investors like a Santa Claus convention with Yellen, Draghi, Carney and Kuroda sitting under the spruce trees with gigantic bags of FREE MONEY – and that's why traders are as giddy as kids before Christmas this week.
But, Virginia, is there really a Santa Claus, or are the bulls hopes and dreams about to be crushed by cruel economic realities they have, so far, been avoiding like the plague (or Ebola)? Realities like China's horrific PMI this morning, that dropped from 51.7 to 50.3 (barely positive) and France's PMI, which is back in heavy contraction at 46.5 this morning. Retail Sales in the UK were up just 0.1% vs.…
by Phil Davis - August 20th, 2014 7:52 am
Fed Minutes Today (2pm).
That gives the bullish pundits another chance to read the tea leaves and promise MORE FREE MONEY to those who are silly enough not to be fully invested in stocks. As you can see from Dave Fry's SPY chart, only 56.7M shares were transacted yesterday and nearly half of those people were selling.
Perhaps 10% more buys than sells is 5.7M shares at $198.28 means it cost just $1.1Bn to move the $60Tn markets up 0.5% ($300Bn) – now that's leverage! With a lack of participation, those few buyers can really shove the markets around. Also, as Dave noted:
Hobson owned a livery stable and he rotated his horses to different stalls. He offered customers the choice of taking the horse in the first stable or none at all. Henry Ford also offered a variation of Hobson’s Choice since customers could buy a car in any color they liked, as long as it was black. The stock market offers many choices but only stocks are effective as bonds offer no yield while Fed policies have forced investors to stocks or nothing else.
This is basically the issue for investors in financial markets, buy stocks or nothing else. Farmland is admittedly in a bubble as Iowa farmland now goes for $8,500 per acre. If you can buy it right, some residential real estate offers a decent rental yield. Then there is the weird world of collectibles where you really need to know what you’re doing and have adequate cash.
So stock markets remain in play at least for most institutions. We’ve seen heavy volume sell-offs meaning most retail investors continue to loathe and leave markets. It remains a market for
by Phil Davis - August 19th, 2014 8:06 am
You've gotta love those trend lines.
Chart people sure love them and we love chart peopel because they are SOOOOOOOO predictable and predictable behavior is behavior we can bet on and that makes us happy. Today we'll be seeing the 50-day moving averages on the Dow, the NYSE and the Russell all tested at the same time – what happens next will tell us a lot about this rally.
As I pointed out to our Members in our Live Chat Room this morning, though we may be past our bounce levels and though we are now challenging the 50 dmas, we still have 3 of 5 of our Must Hold levels red on the Big Chart – that's not too impressive. Consider what a 50-day moving average is. It means that, over the last 50 days, half the time the index has been above the line and half the time it's been below – so how impressive should it be to see the index back in the middle?
Nonetheless, Chart People believe it's some mystical symbol that gives them a rally signal and half the time they are right – so the religion of TA continues to prosper! As you can see from Dave Fry's SPY chart from yesterday, 75% of yesterday's gain came on no volume as we gapped up in the Futures and the rest of the day's trading was one of the lightest of the year.
The reason I like Dave is because he's one of the only TA people who actually pay attention to volume and this volume is total BS. Still, it's enough to stampede the retail suckers back in and God bless them because they throw money at us to sell them the things we liked when they were out of favor.
In May and June, for example, we compiled a Buy List for our Members, which had 29 trades we liked for the rest of 2014. Here's a few that we are done with already:
by Phil Davis - August 18th, 2014 8:11 am
From Ferguson to Fallujah, America has spent the weekend kicking ass and taking names with the National Guard rushing in to put down the 99% in Missouri while in Mosul, we're bombing the Middle East's 99% off the dams and picking off the stragglers with high-tech drones – F*ck Yeah!
That, combined with what we can politely call a non-escalation of tensions in the Ukraine has sent the price of oil tumbling by 0.75 this morning, good for $750 per contract from our Friday short (and now we're long at $94 on /CLV4 for October) - F*ck Yeah! Index futures were up slightly in Asia but gathered steam in Europe and markets there are coming out of lunch up over 1% – even as the cease-fire in Gaza is about to end.
Meanwhile, over in Hong Kong, we got a powerful lesson in numbers as the 1.3Bn population of China is able to overwhelm that Island's 7M people (0.5% of China's population) at will and that will was exercised this weekend as China staged "Pro-Beijing" rallies that protested the "Occupy Central" rallies the bottom 99% of Hong Kong had been staging. Can anti-democracy rallies be far behind?
The anti-Occupy Central campaign's focus on the impact of civil disobedience has appealed to the pragmatism of many Hong Kong people. While many support democracy, they also just want to live their lives and go to work unimpeded. "We can't be optimistic at all—the pro-Beijing camp will control the entire list of candidates," said Joseph Cheng, a political-science professor and convener of the Alliance for True Democracy, a coalition of democratic parties supporting Occupy Central.
In short, while China did promise to give Hong Kong the right to vote – they never said they wouldn't stuff the ballot boxes or put up candidates that were nothing more than two different flavors of the same puppets. "If we are buying fruit, don't give us three rotten oranges to choose from," one of the activists said. Oh wait, that might have been our own election coverage – it's so hard to keep these totalitarian regimes straight…
by Phil Davis - August 15th, 2014 8:15 am
At least we can count on one thing:
The markets are fixed, rigged, gamed, manipulated AND propped up by the Banksters and their pet Government - what can possibly go wrong? Nothing if you know how to play the game (and, sorry bottom 90%, but this game can only be played by people with margin accounts to keep out the riff-raff). That's why, last Thursday in our Live Member Chat Room, I was able to say:
S&P better have support at 1,905 on /ES, which is 1,910 on the index, which is $110 on SSO and you can buy SSO Aug (next week) $109/111.50 bull call spreads for $1.45 with 72% upside potential on a very small recovery next week. A good upside play if you are too bearish or want to lock in bearish gains.
For those of you not lucky enough to be a PSW Member (and you can join here before the September rate increase), I even mentioned the trade in the next morning's post and SSO was still under $110 that morning. Today is August expiration day and that contract should pay the full $2.50 for a nice 72% gain in 8 days – nice work if you can get it.
More importantly, we reviewed our Member Portfolios yesterday and our Short-Term Portfolio is still at $129,916 while our Long-Term Portfolio is at $598,115 for a total of $728,031, which is up $8,000 (1.1%) since last Friday and up a combined 21% for the year off our virtual $600,000 base for our main Member Portfolios.
As I mentioned last week (and the week before and the week before) – it's all about BALANCE. Balance and following our strategy of BEING THE HOUSE – Not the Gambler. Selling premium and staying balanced allows us to grind out a steady profit in most market conditions. We don't HAVE to guess which way the markets are going – plays like SSO are just a bonus, nice though they may be.
by Phil Davis - August 14th, 2014 8:05 am
Europe is not growing.
Italy, Romania and Cyprus are in Recession (2 consecutive negative quarters) and Belgium dropped 75%, Czech 100% (to zero), Germany down 130%, Latvia down 85%, Hungary down 30%, Poland down 45%… These are NOT GOOD numbers!
Yesterday we got a -1.7% reading on Japan, down over 200% from last quarter's +1.5%. Our own GDP grew at just 1% from last Q, which itself was down 0.5% from the quarter before it but, fortunately, last year's Q2 was so terrible that, by comparison to that – we improved by 2.4% – and that somehow made people happy.
The euro zone's three largest economies, which account for two-thirds of the region's €9.6T ($12.8T) GDP, all did not post any growth. German GDP shrank 0.2% from the first quarter and Italy's output fell at a similar pace. The French economy, the bloc's second largest behind Germany, stagnated for a second straight quarter. How, exactly, does this translate into a bullish signal for the markets?
The answer is: It doesn't. The bullishness is nothing more than anticipation of MORE FREE MONEY over longer periods of time and that is, indeed good for our Corporate Citizens and the top 1% Human Citizens lucky enough to own them (we own lots in our Long-Term Portfolios!) as they are able to refinance debt at record lows and buy back their own stock with free money and buy whole other companies with free money – all supplied their friendly Central Banksters as well as the suckers who put their hard-earned cash into banks and bonds at 1% interest.
That's right, the yeild on the German 10-Year Bund has dropped to 1% today. Auntie Angela will hold $1M of your money for 10 years and give you back $1,100,000 when she's done – isn't that FANTASTIC! It sure is for those of us who get to borrow that money – not so much for people trying to save.