by phil - July 11th, 2016 7:58 am
Japan's Prime Minister Shinzo Abe was re-elected this weekend and his party was given a 2/3 majority in the Diet (Parliament) which paves the path to a Constitutional Amendment that will allow Japan, after a 72-year break, to re-arm their military and, of course, allows the Bank of Japan to keep printing Yen like Pokemon cards, which also exploded higher this weekend.
Of course, we told you this was going to happen in last Wednesday morning's post when I said:
In anticipation of BOJ action, we like /NKD long at 15,250 (tight stops below) and we'll be making an options play on the Japan ETF (EWJ) which is hopefully bottoming at $11.40.
Those /NKD Futures are now over 16,000 for a profit of $3,750 per contract in less than a week and EWJ should be heading to near $12 this morning so, even if you are only a stock player, that's +5% in less than a week – you're welcome! Remember, I can only tell you what's going to happen and how to make money trading it – the rest is up to you…
Sadly for the non-paying readers (I was told it's not nice to call them cheapskates), we don't give away free trade ideas during earnings months but I can tell you we're seeing some amazing shorting opportunities as certain stocks have gotten way ahead of themselves.
This week, we'll focus on the Financials but we'll have to be patient as the big boys don't weigh in until Thursday. Alcoa (AA) is splitting up the company so we're more interested in the conference call than the earnings report and Commerce Bank (CBSH) is one of those companies that may be ahead of themselves at $47.16 and Yum (YUM) is priced to perfection and CSX (CSX) may be too ambitious as well. It's too early to make bets, but the results will be telling.
There may be some serious surprises in store this quarter as the SEC has recently (May 17th) begun cracking down on the use of "non-GAAP" reporting so a big red flag for any companies that delay their reports and, of…
by phil - July 8th, 2016 8:17 am
Jobs, jobs, jobs.
Mostly they are crappy jobs and last month (38,000), we didn't even create enough jobs for the kids who graduated high school in my county and I hear there are other counties in America who also graduated kids who need jobs. So, when you hear about 150,000 jobs a month being created – you'd better hope a lot of people died because we're creating new workers a LOT faster than that!
As you can see from this Pew Research Chart, you do NOT want your kids to grow up Middle Class, where their share of US Income has dropped 30% (62 to 43) over the past 44 years and even the Lower Class (ouch on that term!) had to give up 10% of their income share (10 to 9) in order to allow the Upper Class to grow their share of the pie from 29 to 49 (up 69%).
Fortunately, we have the DUMBEST middle and low class citizens on the planet Earth and, even though there are 90 of them for each 10 of their upper classmates – they don't just bend over and take it but they go to rallies to put a stop to the people who feel that the vast wealth of this country should be distributed more evenly.
Even the slaves allowed the masters to house, feed and clothe them and provide basic medical care but NO – keep your dirty Government handouts to yourself and don't let the Government get between the patient and the doctor, who won't treat the patient because they don't have health care. Perhaps that's why we also rank 11th out of 11 nations in overall quality of health care.
Not for the rich, of course. Our healthcare system is the finest in the World, for those who can afford it. Our Top 10% citizens live to be 89.9 on average while our poorest 10% average 79.2 and it's a pretty direct relationship up the ladder so, as it turns out, getting richer is better for you than jogging!
by phil - July 7th, 2016 8:14 am
That's where "THEY" closed the S&P yesterday. Now, when I say "THEY", I'm not referring to any sort of shadowy market-manipulators who herd retail investors like sheep to the slaughter by triggering the technical breakouts they've trained them to obey by pushing TA like crack to traders who, frankly, are weak-willed and looking for an easy fix because they aren't willing to do the work it takes to understand the true complexities of the market.
No, I don't mean that at all – I'm not a conspiracy theorist. When I say "THEY" I mean the perfectly natural random action of millions of Traders making Billions of trades that just so happen to keep hitting the exact same spot – no matter what crisis took the markets down – for 2 full years in a row. Nothing at all to see here folks, move along…
We're fully trained at PSW to short the S&P at 2,100 (so now, in case you are one of those sheep who find my analogy too vague) as well as Dow 18,000, Nasdaq 5,000, NYSE 10,500 and Russell 1,200. At the moment, the Nasdaq Composite is at 4,859, so way short and the Russell is even shorter at 1,147 while the Dow is at 17,918 so the S&P is suspiciously high and makes a great short – with tight stops if it breaks over and then we'll see if the rest make their lines. See – now you know how to day-trade the tops.
As you can see from JackDamn's Dow chart, we really peak out at 18,200 but we don't always make it there and we hate to miss a reliable short so here is where we like to start positioning for another sell-off. Though we've had an incredible recovery (as in NOT credible) since June 27th's Brexit panic – that was only our first fear of summer (see other posts as I'm in too good a mood to go over it again) and there's still 60 days to go (my kids keep me informed of the count).
by phil - July 6th, 2016 8:31 am
Wheeeeee – what a ride!
Looking at the Euro Stoxx 50 index, you can understand why the UK got off this sinking ship. 2,800 WAS the -20% line from 3,500 and that just failed so we're way past a bear market in EU stocks and it has little to do with the aftermath of Brexit and everything to do with what led up to Brexit in the first place.
The EU destroyed Greece and now (as I predicted 2 years ago), Italy is next in the crosshairs and though Portugal and Spain are way ahead of the UK in line, what can you do to stop the ECB and their nightmarish policies if you remain tied to them through the EU?
The EU is killing Italy – it's killing all of them. While Italy is a taker state and benefits from the relationship, they have now hit the cut-off point (like Greece) and suddenly Big Daddy EU starts slapping them around and taking disciplinary actions and it's no fun anymore.
- ECB asks Italy's Monte dei Paschi to slash bad loans
- Italian banks under pressure as political crisis looms
BMPS (Monte Paschi) is down 75% to 0.37 and it's the 3rd largest bank in Italy. Rather than realize the systemic importance of the bank (it is to Italy but to the ECBs board, it's competition), they are demanding BMPS cut $11Bn in bad loans which is another way to say – book the losses. Obviously, that will crush the bank and the ECB has generously given them until Friday. UCG (UniCredit) is the largest bank and they are down 63% and 2nd largest, ISP (Intesa Sanpaolo) are testing the -50% line.
Italian banks have $400Bn in non-performing loans, which is 20% of their GDP, that would be like our banks having $4Tn worth of bad debt that needs to be bailed out (been there, done that). Negative rates (set…
by phil - July 5th, 2016 8:26 am
It is so funny to see all the chickens we've been warning about come home to roost – especially when it happens WHEN we thought it would. As noted in our July Portfolio Review, we are well-positioned for a downturn, having just boosted our hedges during last week's "rally" and already this morning we're glad we did as the Dow is looking at a 100-point drop at the open which is NOTHING compared to Europe's 1.5% decline into lunch.
As you can see from the chart (despite it's awful choices of key colors), the Brexit dominoes are lining up already and the worst thing that can happen to the EU is for the UK to emerge from their exit with their economy intact. Fortunately for them, that doesn't seem to be a problem at the moment as economic confidence in the UK has fallen off a cliff as the Top 10%'ers who were betting a Brexit would never happen are now scrambling to cover their mistaken bets.
And I don't mean at the bookmakers, I mean the bets they made with their company's futures, hiring plans, capital allocation strategies, loan and investment portfolios – these idiots have been living in a bubble and that bubble has just popped all around them and now the Top 10% all over Europe have to wake up to the reality that the Proletariat still have a bit of power and are willing to use it – no matter how much you try to cower them into submission.
Nigel Farage has now joined Boris Johnson in stepping down now that they've won the UK vote and we had a discussion in our weekend chat as to whether it's a noble thing that shows they weren't in it for political gain or whether they just grabbed the wheel on the Titanic, steered it into an iceberg and are now grabbing the first lifeboat off the ship.
Morgan Stanley is assuring us that "Brexit is not a systemic risk" and the fact that they have to say that should terrify you. As I pointed out to our Members, people don't say "Remain calm, all is well" when things are…
by phil - July 4th, 2016 7:49 am
$1,519,454 – that's up 153% from our $600,000 start on our paired portfolios and, more importantly, up $69,064 since our April 24th review (11.5% in 5 weeks).
Our Long-Term Portfolio alone has climbed over the Million Dollar mark, up 100% from our $500,000 buy-in back in November, 2013. At this point, we're so far ahead of our target (20% per year) that we'll probably start a new portfolio in the fall. We already purged plenty of short puts from our LTP and we're certainly well-positioned to add new trades as we have plenty of cash on the side!
Meanwhile, the S&P was at 2,080 on April 24th and it's at 2,102 today so fairly flat after dipping to 1,991 and it's important to note that our hedges did exactly what they are supposed do do – they allowed us to ride out the dip without panicking and, because we are Being the House – NOT the Gambler, we continue to collect our sold premiums – even when the market is essentially flat. As I said in the last review:
To you day traders out there – I implore you - please read the December review and look over those positions and check out those same positions 3 months later and CONSIDER – please consider – that day-trading may not be the best way to play the market. Yes, the LTP goes up and down too but, when it's down, we have cash on the side to buy bigger positions (which is what we did last year) while they are cheap. Since those positions are INVESTMENTS, we end up with something of great value when the market comes back.
As you can see from the S&P chart, markets are volatile things and, if you want to be a long-term investor, you need to plan on that volatility – not be surprised by it! I could say the same thing about the S&P since last June as I'm saying about it since April 24th – the market has gone nowhere but has had extreme dips and the best way to play it is to BE THE HOUSE and let other people take the risks for us.
by phil - July 1st, 2016 8:32 am
(Shout) a little bit softer now
(Shout) a little bit louder now
Jump up and shout now
(Shout) a little bit softer now
(Shout) a little bit louder now
(Shout) a little bit softer now
(Shout) a little bit louder now
This is one crazy MoFo market – and so much fun to trade!
Just this morning we had some crazy Gasoline (/RB) Futures trades in our Live Member Chat Room as it plunged from our $1.50 long line (after hitting $1.51) all the way back to $1.47 where we doubled down and now we're out even at $1.485 and hoping for a return to $1.51 for a $1,050 per contract gain to take us into the holiday weekend. Of course the gain is better if you waited for $1.47 before starting – but we didn't.
Heading into the holiday (and bear with me as I like to pretend fundamentals still matter):
- Puerto Rico is missing their $2Bn bond payment today and will go into default, triggering payouts of similar Billions from the bond insurers like (AMBC) and (AGO), so we'll keep an eye on their stocks. There may be a last minute save but a tough thing to pull off on a Friday before a holiday – you know Congress is already gone…
- Gold flew back to $1,340 this morning so you know something is up. Silver (our old favorite metal) is now $19.30 and yes, we still have SLW in the LTP, so far in the money it's boring now and on track for the full $4,000 gain – up 800% on cash in the LTP and, for the low-margin crowd, the STP has a smaller trade we will cash out here at $26,000 against net $2,400 invested on 10/16 (983%). You know we love a trade when it's in our Long-Term and Short-Term Portfolio!
- Now Europe is having a temper tantrum because the UK won't leave. Yes, they voted to leave but they haven't
by phil - June 30th, 2016 8:20 am
Do I really have to pretend it's some kind of coincidence that we have raced back to close the quarter just above where we started it in order not to be perceived as a conspiracy theorist? It's not a theory when it happens all the time, is it?
And look at the volume, we gained 70 S&P points in two days on less than half the volume we had when we fell. How does the market go up that much with so much less money coming in? As I noted yesterday, it's a house of cards that can be easily toppled once today's window-dressing event is over. Also, bulls should be very concerned that 2,076.50 is the 50-day moving average on the S&P and, if we can't get over that today – it's a technical failure anyway.
This is not, by the way, sour grapes. Though we believe the market is heading lower (still looking for 1,850 on the S&P over the summer), we are very much in neutral with our paired long and short-term portfolios. On Tuesday we noted that our STP was up to $536,627 and our LTP was at $959,373 as of Mondays close at the lows (see post for strategy details). 70 S&P points later, our LTP has jumped to $1,004,321 and the STP as fallen to $510,062 and that's a combined $1,514,383 (up 152%) and that's UP $18,383 in two days (1.2%).
So we made more money on the way down and we made more money on the way up. Is it alchemy? No, it's BALANCE! We balance our portfolios into uncertain events and, although we have an overall neutral stance, because we are "Being the House - NOT the Gambler", we are still collecting those premiums – no matter which way the market goes. I don't think you can have a better stress test of our system than we've had in the past few days!
Learning how to Be the House and how to balance our portfolios allows us to make money in any kind of market conditions and, more importantly, it allows us to TAKE A VACATION. I went to Florida last Thursday and came back on Tuesday
by phil - June 29th, 2016 8:25 am
Go kitty cat, go!
On the right is the S&P chart and you can see the huge volume levels as we sold off with 553M shares traded on the S&P ETF (SPY) in two down days as the S&P fell from 2,113 on Thursday to 1,991 on Monday (122 points, 5.7%). Yesterday, we popped back to 2,036, which is 45 points off the low but the volume on SPY was only 158M.
Let's say, for example, that you are re-building a 122-point wall that was knocked down and there were 550 bricks in the wall and you begin to re-build the wall and, as you are 45-points back up (37%), you realize you only used 158 bricks (29%). Is that wall going to be weaker or stronger than the one that got knocked down? Would you trust your family to be safe behind that wall? Would you trust your investments to be safe?
Yes, an 8% difference doesn't seem like a big deal but it's actually 158 out of 203 (37% of 550) that should have been used so we're 45 bricks short, so far, and that's 22.4% short. So, going back to the market, we are getting to the same overbought levels but now with 22.4% less cash supporting the run than we had before. That's really not good!
The market was already a house of cards (as evidenced by our rapid collapse over the UK's vote to leave the EU within the next 2 years – ridiculous!) and now we've removed 22% of the cards yet there are still strong winds blowing in from China, Japan, Brazil, Venezuela (still rioting) and don't even get me started on how we're up again today, rallying over the bodies of 36 dead and 147 injured at the Istanbul Airport. Is terrorism now a rally signal?
Turkey is on it's way into the EU as the UK is on the way out but, for now, we can ignore this terror attack, just like we ignored 35 dead and injured on Jan 12th, 49 on the 13th, 7 on the 18th, 4 on the 27th, 99 in February, 329 in March, 160 in April, 67 in May and 384…
by phil - June 28th, 2016 8:39 am
Watch out for dead cats!
I think we should at least get to our strong bounce lines (more on that later) but, for the moment, our 5% Rule™ warns us that, after a 5% drop, we EXPECT a 1% bounce (weak) and we're not impressed until we spend a full day above a 2% bounce (strong). In Europe, where they dropped 10% in two days, +2% is a weak bounce and +4% would be strong – we're only at our weak bounces folks – don't get excited…
Friday is the last trading day of the quarter so we can expect a lot of window-dressing and I would be much more concerned about a quick return to our highs – especially on low-volume, pre-market BS like we have today (see morning tweet) than if we grind along at the -5% line and form a serious base we can build off. On the whole, this wasn't much of a correction – it didn't even trigger our long-term hedges — yet.
Wednesday's Russell Ultra-Short ETF (TZA) hedge was only $1 yesterday morning but finished the day at $2.05 – up 105% for the day on the 3.3% drop in the Russell and THAT is how we hedge! 30 contracts purchased for $2,550 (0.85/option, $85 per contract) ended the day at $6,300 for a $3,750 (147%) gain but it will be easy come, easy go this morning as much of that is given back and we didn't take them off the table yet.
A hedge is there to prevent us from losing money on our long positions – it's insurance, not a bet – don't confuse the two! If the market went lower, the hedge could pay up to $12,450 to offset our losses but, as it was, we haven't really needed the offset so far and our portfolios have weathered the storm with hardly a scratch.
While our 100% bullish Long-Term Portfolio dropped back to $959,805 (up 92%) yesterday, our Short-Term Portfolio (where the hedges are) blasted up to $536,627 (up 436%) for $1.496M, up almost $900,000 (150%) from our $600,000 start for our paired portfolios.…