by phil - April 1st, 2015 8:02 am
Wow, what a ride!
I told you yesterday morning we would be looking to test our strong bounce lines intra-day and our targets were:
Dow 17,850, S&P 2,060, Nasdaq 4,905, NYSE 10,910 and Russell 1,245
While the S&P and Russell did manage to hold our lines, once again our 5% Rule™ managed to nail the action despite the wild swings with a total miss of 105 points out of 36,970 index points – off by just 0.28%. We made a similar prediction last Thursday and missed by 0.17% – so it's not a fluke. This indicates to us the TradeBots are firmly in command and we'll be able to use that to our advantage to make some aggressive Futures calls in our Live Member Chat Room.
Yesterday morning we called /RB (Gasoline Futures) long at $1.75 and caught a ride up to $1.77 for an $840 per contract gain. We have inventories today and, if we get back around $1.75, we'll be liking that trade again for another bounce. That's right cheapskate readers – it's April 1st and that means it's time for your quarterly free picks!
At the beginning of each quarter, we like to share a few of our picks with the free readers so they can earn enough money to pay for a Membership. Last quarter, we reviewed 11 FREE trade ideas from the previous year that made turned $110,000 (ish, at $10,000 per trade) into $221,392 – up 101% in less than 13 months with only one loser out of 11 (9%).
Our first free trade idea for 2015 was a long play on /NG (natural gas Futures) on Jan 5th at $3 with a target of $3.25-$3.50 and we hit $3.35 on the 14th, which may not sound like much but /NG contracts pay $100 per penny, per contract for a $3,500 per contract gain. We were also in and out of oil and called the up move on /CL (oil Futures) from $50, which topped out at $54 in Feb for a $4,000 per contract gain.
by phil - March 31st, 2015 8:27 am
What an amazing recovery!
Sure there was no volume and sure almost all the gains came at the open and sure there was a high-volume wave of last minute selling but – WOW!!! – what a rally! With the month ending today we're not expecting much of a sell-off and we'll be looking to see if our strong bounce lines hold intra-day (they should) at:
Dow 17,850, S&P 2,060, Nasdaq 4,905, NYSE 10,910 and Russell 1,245
After barely making our weak bounce lines on Thursday (see Friday's post for details) we were still short of strong bounces on 4 of our 5 indexes at Friday's close (3 of 5 over is a bullish signal) but yesterday, as you can see from Dave Fry's SPY chart, we just popped right over at the open and never looked back.
We'd really like to see the NYSE confirm a bullish move by finally getting over the Must Hold line at 11,000 – that's been a constant sign of weakness that has kept us cautious all year (and last year as well). We had a move all the way to 11,100 in late Feb, but it quickly reversed and we fell 300 points to start March off on a sour note but now, as you can see – we've had 5 up days this month that have accounted for all of the gains to take us back to the promised land.
Nothing really matters until we see the Non-Farm Payroll Report on Friday but we have an interesting situation where the US Markets (and many EU Markets) are closed for Good Friday so, whatever the number is – there won't be a reaction to it until next Monday, when many EU markets are still closed.
So we're very happy to be mainly in CASH!!! in our largest portfolio and, even so, yesterday's rally brought us up $4,000 as our mainly Materials stocks gained a little ground. That did not make up for the $15,000 LOSS experience in our Short-Term Portfolio which, as I had said…
by phil - March 30th, 2015 8:02 am
MORE FREE MONEY!!!
This time it's China's turn (again) as PBOC Governor Zhou Xiaochuan said "the authorities need to be vigilant for deflationary risks in the economy and have injected liquidity into the financial system." That was all it took to add 2.5% to the Shanghai Composite, which is now up 100% since last April. At the same time, Finance Minister Lou Jiwei said China will likely expand the recently announced local government debt relief program.
Adding to the optimism, Chinese officials fleshed out some details for plans to better connect the economy with the rest of Asia, Africa, the Middle East and Europe with more roads, railways, ports and other related projects. Meanwhile, flows into Hong Kong via the Stock Connect trading link were approaching a record high after Chinese mutual funds gained approval from the China Securities Regulatory Commission to start making use of the new channel, which has seen disappointing volumes so far.
The only thing not on China's list is building more empty cities, as they are still bailing out builders and Governments from that disaster. Still, China is on pace to have 82 empty airports by the end of 2015, which will bring them to 230 airports, most of which are extremely underutilized.
Academically, this is a very interesting excercise as we'll get to see how long Fundamental laws of Economics can be ignored before a country collapses. China is doing through uneccessary infrastructure and Japan is doing it through immense amounts of debt that they use to paper over their own stumbling economy and aging work-force. The airport math for China is simple, the per capita GDP in China is $6,807 vs $41,787 in the UK and $53,042 in the US yet airfare is roughly the same in all countries. In what possible way can the Chinese people afford to use these airports?
Supply with no demand. That's why China has dozens of entire cities with no people in them. They've been "building" their economy this way for years and that has created false demand for commodities (as they were using them to build things no one wanted or needed) and now they have a surplus that…
by phil - March 30th, 2015 7:38 am
And we're out!
After making a ridiculous 40.8% in 15 months, we decided on Tuesday morning to get back to cash in our Long-Term Portfolio. We still have 13 positions left, mostly in the materials space but, as you can see, our cash now exceeds our portfolio's total value ($703,885.23) because the positions we did keep were our "losers" (so far) that are down, as a group, by $73,780.
There is almost not a single position we sold that I wouldn't be happy to buy back if they get cheap again but we didn't make 40% in just over a year by chasing winners. The way we built this portfolio was first creating a Buy List (Members, see our Virtual Portfolio Section for our last list) and then choosing a bargain every few weeks to add to our Long-Term Portfolio. As we move through Q1 earnings, we'll be making a new Buy List for 2015 and, now that we're back in cash, we'll begin making new picks for our Long-Term Portfolio.
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!
In our last review (just 3 weeks ago) we were at $640,797 in the LTP so we gained 10% in 3 weeks on our positions – that's ridiculous. Never confuse being lucky with being good – gaining 10% in a month is lucky becuase, if we were that good, we'd be averaging 100% a year, right? Since we KNOW we're not that good, we need to take advantage of our luck – especially when we are worried about what lies ahead for the market.
by phil - March 27th, 2015 8:31 am
Will bad news be good news?
We're waiting on the revised Q4 GDP Report and the data we've been seeing does not bode well for the revision we'll get at 8:30 this morning and, currently, the expectations are for 2.4% growth – less than that will signal a weaker economy but that then may give investors the impression the Fed will maintain an easy monetary stance later into the year.
Meanwhile, as you can see from Dave Fry's SPY chart, we've already completed the first part of the "Golden Arches" pattern that we predicted back on the 19th (while everyone else was in bull mode) and it would be a good bullish sign still (now that everyone is bearish) if SPY manages to hold the 200 dma at 204.50 – so there's going to be a lot riding on the GDP report AND people's reaction to it this morning.
Yesterday we charted out the 5% Rule™ for our Members (and we reviewed the charts in yesterday's Live Trading Webinar) and our bounce lines were at:
- Dow 17,720 (weak) and 17,850 (strong)
- S&P 2,055 (weak) and 2,060 (strong)
- Nasdaq 4,865 (weak) and 4,905 (strong)
- NYSE 10,880 (weak) and 10,910 (strong)
- Russell 1,235 (weak) and 1,245 (strong)
We made that call at 10:19, when the Dow was at 17,612, S&P 2,048, Nasdaq 4,828, NYSE 10,854 and Russell 1,226 and, in the end, we were off by a grand total of 63 points on 5 indexes that total 36,694 points so we missed it by 0.17% – not bad! Even better if you were a Member (sign up here) who got our Morning Report delivered to your In Box pre-markets, as we said right at the bottom of the post:
We have already hit our primary goal at 2,035 (the 10% line on our Big Chart) on the S&P Futures (/ES) and we flipped long there in our Live Member Chat as well as long on /TF (Russell Futures) at 1,220 and short on oil at $52 (/CL) to lock in our bonus gains for the morning and take advantage of the bounce (probably weak).
by phil - March 26th, 2015 8:29 am
We had our best day of the year yesterday!
How did you do? Hopefully very well if you are one of our Members or have been following us on Twitter, where I began warning people one week ago that this was about to happen. And I don't mean in that ridiculously vauge Jim Cramer weather-vane way that's subject to interpretation. Not at Philstockworld! On Wednesday March 18th, at 7:52 am, I tweeted:
It doesn't get much more specific than that, does it? That was our post BEFORE the Fed announcement on Wednesday and, in the morning post, we discussed the decaying macros – as I have been doing with our Members for most of this month. That morning, we also called a bottom on oil at $44 and I put up the following trade idea for our Members in our Live Chat Room (which you can join by subscribing here):
We topped out at $110 in Jan but already we can sell the April $110s for $10.50 so let's sell 3 of those in the STP for $3,150. We already sold 3 March $105s for $5.40 (now $4.50) and they are going to be cutting it close but, worst case, we'll just roll them to April $110s. We also already sold March $120s for $13 on the spike to $110 and those look good at $2.50 with 3 days to go.
Of course I also like the long on /CL off the $44 line – as I said earlier, I expect us to test $45 into the inventories but at least $44.50 should be hit.
by phil - March 25th, 2015 8:35 am
And we're OUT!
That's right, we took advantage of yesterday's BS rally to cash out our Long-Term Portfolio at the exact high of 34.8%, up $173,815.03 in 16 months. We keep several virtual portfolios for our Members (and you can join us here) and the generally bullish LTP is paired with our Short-Term Portfolio, which acts as a hedge to the LTP positions but also makes short-term bets when the opportunities arise.
The STP has also performed much better than expected and is up 83.8% over the same time-frame at $183,820 off our $100,000 start for a combined gain of $257,635, which is 42% of our initial investment and that was our goaaaaaaaaaaaallllllllllllll for two years (see "How to Get Rich Slowly") and it's only March – of course we deserve a rest!
Cashing out our largest portfolio, in addition to protecting our profits, also helps us re-focus on what positions we REALLY want to play for the rest of 2015. We'll be making a new Buy List for our Members and we'll also be double-dipping on some of our winners (AAPL comes to mind) as soon as we see a good re-entry. One of the trades we did keep will be featured tonight on my TV appearance on Business News Network's Money Talk and we found 11 other trades we liked enough to keep in play (mostly ones that were underperforming) through the upcoming correction.
Also, it's not too late to participate in our "Secret Santa's Inflation Hedges for 2015" as inflation has not officially been recognized yet (so our picks are still cheap) but, as currencies race each other towards the event horizon, we have faith that our infation hedges will begin to pick up the slack. In any case, the way we designed our hedges, we don't need a big move in the market to make big gains on our spreads.
For example, ABX has gone nowhere since our December entry and, at the time, we called for the ABX 2016 $10/15 bull call spread at $1.60 to be paid for by selling the 2016 $8 puts for 0.70 which was net $900 at the…
by phil - March 24th, 2015 8:16 am
Forget earnings, forget logic and LOOK AT THAT CHART! What a thing of beauty. We don't just hold the bottom of the rising channel but we LEAP away from it and make new highs, over and over again. This is, of course, what markets do all the time, which explains why everyone is a Trillionaire, right?
Oh, I'm sorry, I mean everyone's a Trillionaire AND there's no inflation. Because THAT is how things work in the economy, right? The market goes up 15% in a year but all other prices remain steady and, in fact, oil, gold, copper, iron ore – all drop precipitiously even though EVERYTHING IS AWESOME!
If anything in that chain of logic bothers you then you need to consider which one of these things does not belong. Since low inflation/deflation is very much in line with declining demand and prices for materials, the problem seems to be in the market somewhere. And what is distorting the market, you may wonder?
Well, the Central Banksters have poured aprroximately $15Tn of QE liquidity into the markets over the past 6 years. That's 20% of the Global GDP or about 3.5% of the Global GDP added each year.
Nonetheless, Global GDP still isn't even adding up to 3.5%, which means we're actually in a 6-year Depression with negative GDP that we've papered over with endless amounts of free money. Now, I'm not saying this is a bad thing – an actual Depression would really suck (just ask your grandparents) and it's worth running up $15Tn in debt to avoid one, BUT (and it's a big but) there still needs to be a plan for dealing with the debt and the bublles it's caused. Just yesterday, the Fed's own Jim Bullard said:
The US risks inflating asset price bubbles with “devastating consequences” if it leaves interest rates at zero. “When asset bubbles start, they keep going until they blow up out of control with devastating consequences. Low inflation doesn’t rationalize policy rates of zero; it rationalises a policy rate below normal, but not zero.”
by phil - March 23rd, 2015 8:04 am
Dove, dove, dove.
Dove, dove, dove – now that Fisher is gone, that's all we have at the Fed these days. This week we hear from Mester, Williams, Bullard, Evans and Lockhart – all doves on the Fed and, of course Super Mario speaks at 10am (EST) to get our markets off to a good start for the week with his own special brand of doveishness.
While our Fed, the ECB and the BOJ are doing all they can to talk the markets higher, China is warning its investors that the run that has pushed their market 75% in less than a year is unsustainable. A spokesman for the China Securities Regulatory Commission said on Friday:
“Investors should be cautious about market risks. We shouldn’t be thinking if we don’t buy now, we will miss it.”
A previous warning from the CSRC was ignored. The Shanghai Composite jumped 2.8% to surpass 3,000 on Dec 8th, the first trading day after the securities body on Dec 5th cautioned investors about growing market risks. The valuations of some listed companies are “relatively high,” the CSRC spokesman said in Friday’s statement. “There are about 700 companies in the Shanghai and Shenzhen stock exchanges with a price-earnings ratio of above 100,” the spokesman said.
Stocks continue to rise in China on speculation that the Government will do whatever it takes to sustain a 7% growth rate, which means lots of FREE MONEY will have to be printed. I think that's a fabulous idea – all Governments should print unlimited supplies of free money until all of our economies are growning at 7% and then everything will be AWESOME and nothing can possibly go wrong with that plan, can it?
I certainly hope not, because that's the plan we're pursuing at the moment! Meanwhile, Japan is starting to look like Zimbabwe and the 22% drop in the Euro in 2014 sent 124.4Bn Euros ($150Bn) out of the Union in the kind of negative cash-flows you expect to see in countries that are on…
by phil - March 20th, 2015 8:23 am
Up up and away!
Not only is the Nasdaq popping back over 5,000 today but the Dow is back over 18,000 in the Futures and the Russell is already flying over 1,250 – well past the previous all-time high of 1,243 that was set on the first day of March.
As we've noted earlier in the week, a rising market tide has NOT lifted all ships with 30% of the Dow and 1/4 of the Nasdaq at 52-week LOWS (mostly materials), which is why they had to stuff AAPL into the Dow – so it could at least keep pace with the Nasdaq going forward.
Hey, who are we to complain? This week's rally gave us a nice $4,300 gain on Wednesday's Top Trade Alert and a 5% comeback on our Long-Term Portfolio, which is closing back in on a 30% gain, albeit at the expense of our more bearish Short-Term Portfolio, which has fallen back to up just 77.6% but it's 1/5th the size of the LTP, so GO BULLS – I guess…
Despite our success, I'm not happy with this rally but I wasn't happy in 1999 or 2007 either and that made me miss out on some nice gains so we're keeping our LTP open (though, as you can see, over 50% in cash) so we don't "miss out" on the madness.
And it is madness – there's no connection between valuations and earnings and, as you can see from this chart, the Macro Outlook is deteriorating rapidly, even in the US. In fact – THE FED JUST SAID SO!!! Unfortunately (for us "rational" investors) bad news is still good news to the markets as it only brings wave after wave of MORE FREE MONEY – so much free money that we are drowning in it.
What does "drowning in money" mean? Here's some jokes for you -
- Money doesn't get no respect. Why, there's so much money in the World these days that you've gotta pay the banks to hold it for you!
- There's so much money in