by Phil Davis - July 12th, 2014 8:30 am
Our streak continues!
The first 3 weeks of the month (Part 1, Part 2, Part 3) saw 142 trade ideas (almost 50 per week) with just 17 misses for an 88% win rate. Of course – it's a bit like shooting fish in a barrel when we call a bottom correctly and, as you can tell from the large volume of picks, we put all that sidelined cash to good use.
Not every call is bullish, of course, as I was saying in Friday's post, BALANCE is the most important aspect for your portfolios if you intend to be a trader for more than just the short run. So, in theory, it shouldn't be possible for us to get to 100% and, actually, 88% probably means we were a little too bullish and just got lucky! We have to watch out for that – and that's why these reviews are so important.
Our Trade Reviews not only let us know if we're on or off track but, by putting the trades in context, hopefully we remind ourselves what works and what doesn't work in vartious situations so that, when we see a similar situation, we are ready, willing AND able to pull the trigger.
Able is a very important aspect of our trading strategies we tend to ignore. My call to go to cash in late March left us with empty portfolios we were able to fill up in May and THAT is why we have such a fantastic winning percentage for the month – we made our selves READY and our mindset was WILLING because we were ABLE to take advantage of the market dip by going to cash.
Just because we are long-term investors – it doesn't mean we can't time our entries and exits when we reach the tops and bottoms of our trading channels!
This is one of the most important articles I've written in a long time.
by Phil Davis - July 11th, 2014 8:31 am
Wow, that was a close one!
We ALMOST had a correction but, fortunately, dip buyers prevailed and we pulled a sharp reversal right after the bell yesterday and finished the day only down about 0.4% and about 2.5% down for the week (so far).
I do hate to be nit-picky about these things but – can we REALLY call it a reversal when, in fact, declining volume on the NYSE was 2,275,176,430 while advancing was only 834,544?
That's 3:1 declining! In fact, of the 3,241 shares on the NYSE, only 964 were positive yesterday – also 3:1 against. The same on the broader Nasdaq too.
In fact, yesterday was a complete catastrophe other than the low-volume "rally" from 10am to 2pm, with the other 75% of the day's volume being all downhill from 9:30 to 10:00 and again from 2pm to close (4pm EST).
Still, as the great President Bush once said: "fool me once, shame on — shame on you. Fool me — you can't get fooled again."
Of course, an even greater President, Lincoln (who had himself shot when he found out he was a Republican) actually said that you can, indeed fool some of the people all of the time and the stock market is certainly evidence of that, as dip buyers rush in on anything that even looks like it might be a rally – no matter how much of a charade it actually is.
You can see our predicted 1,150 line come into play on Dave Fry's Russell Chart but it doesn't show that the Russell Futures made it all the way down to 1,140 before being jammed back to 1,165 and, finally, settling the day at 1,160.
As Dave points out, we're still down 4% for the weak week and all yesterday's action really was was a WEAK bounce off a 5% dip (1,200 to 1,140), which is EXACTLY what our 5% Rule™ predicted would happen.
by Phil Davis - July 10th, 2014 8:31 am
That's how much money yesterday's Alert to Members made as of this morning as the Russell Futures crossed our goal line at 1,150. The alert went out at 9:52 am and we had all day to enter as the Russell drifted along that line until, finally, we got our big drop this morning.
My call in the morning was:
I still like the /TF play below the 1,170 line – that's got $2,000 written all over it (down to 1,150).
We actually oveshot that mark with the bottom coming at 1,140, which is our -5% line on the Big Chart, which uses our 5% Rule™ to make these amazingly profitable predictions. Those extra 10 points were ANOTHER $1,000 per contract for those who hung on past our goaaaaalllllll!!!
Even if you are a free reader, you got your money's worth – as we gave away, FOR FREE, our TZA Aug $14 calls at .91 on Tuesday's post. Sure it was 50% after our Members got the trade at .66 on July 3rd, but beggers can't be choosers, right? Still, even if you only began following our hedge at .91, those calls are now $1.50 in the money, so up another 50% this morning for a $1,180 profit on the 20 we suggested in just two days!
That's just one of the many ways we teach our Members to make money by hedging at PSW (you can subcribe here) we expected this sell-off (see last two week's worth of posts) and positioned for it with trades like:
- DXD Aug $25/27 bull call spread (6/27 in main post) at net 0.60, now $1.15 – up 91%
- TZA Aug $15s calls (6/27 at 11:26) at .70, selling Jan $12 puts for $1 for net .30 credit, now 0.45 – up .75 (250%)
- 40 SQQQ Aug $40/44 bull call spreads (1/3 at 11:29) at $1.15 ($4,600), now $2.15 – up $4,000 (86%)
- 20 QQQ July $97 puts (1/7 at 9:35) at $1.59 ($3,180), now $3 ($6,000) – up $2,820 (88%)
by Phil Davis - July 9th, 2014 8:29 am
Fed day (again).
Yesterday was TERRIBLE, with volume finally coming back – and it was all downhill, with 3x more declining volume than advancing. Still, as you can see from Dave Fry's SPY chart, the fix was in and the failure to hold $196.50 during trading hours was corrected at the bell by the powers that be, forcing the Market-on-Close suckers (401K, IRA, ETFs) to pay an extra 0.2% for their fills.
There's something strangely comforting about playing a rigged game like this. I yesterday's live webcast, we were able to make a quick $150 per contract playing a very predictable bounce in the Russell Futures (you can see the Webinar Replay HERE).
Of course that was small potoatoes compared to the trade ideas we gave you in yesterday's morning post (which you can have delivered to you every day by subscribing here) as the TZA Aug $14 calls shot up from 0.91 to $1.20 - up 32% for the day.
The QQQ calls I mentioned were the July $97 puts and we closed those out at $2.30, up 47% in less than a full day.
With returns like that, we could compound $1,000 into $1M in no time at all!
Though they were, in fact, small positions, our entire Short-Term Portfolio jumped up 2% on the day – as it's positioned bearish to protect our much larger and still bullish ($500K) Long-Term Portfolio, which is weathering this little storm quite nicely as we wisely moved it to mainly cash when we thought the market was toppy.
Now we anxiously anticipate earnings and the potential to bargain-hunt some more.
As you can see from our Big Chart, the Nasdaq and Russell were saved by their 5% lines (2.5% on the RUT) but the NYSE failed their critical 11,000 line and now we are 3 of 5 bearish and that means we lean bearish until one of our 3 lagging indices gets back over their line.
by Phil Davis - July 8th, 2014 8:32 am
Russell 1,200 already failed.
That's strike one for the rally. Strike two would be the failure of Dow 17,000 and strike three would be the NYSE failing to hold 11,000. One day does not a correction make and yesterday was another very low-volume affair so we certainly aren't going to draw any conclusions until we see a proper trend.
What we do know for sure is that the ENTIRE move above 1,160 on the Russell, 11,000 on the NYSE, 16,850 on the Dow, 4,400 on the Nasdaq and 1,960 on the S&P was also low-volume BS and can't be trusted either.
With the Russell slipping 1.77% in a single day, you can see why we made TZA (ultra-short Russell) one of our primary hedges in the Short-Term Portfolio. In fact, we pressed that bet on Wednesday morning, while the index was popping in the morning as I said to our Members in the Live Chat Room:
In the STP we have 20 TZA Aug $15 calls at 0.70 and they are now .40 with TZA at $13.49. We can DD or we can spend 0.23 to roll them down to the $14s. Since TZA was $15 last week and since Aug is 43 days from expiration, I think it makes more sense to roll closer to the money than DD. Keep in mind that, if TZA goes $1 lower and we had doubled down, we will have spent .40 more to have 40 contracts that would be $2.50 out of the money but if we roll again for another .23, we would have 20 of the $13 calls for about the same price and our net $1.16 would still be back to even on less than a 10% move higher, vs 20% we'd need to get back to $15.55 (break-even on 2x).
So let's roll our 20 TZA Aug $15 calls (.43 now) to the $14 calls (.66) for 0.23 per contract. Our short puts are the $12s, so no worries
by Phil Davis - July 7th, 2014 8:23 am
Operation "Penny Pincher" nabbed 22 penny stock pumpers.
As I often point out to our Members, a stock doesn't have to be a penny to be a penny stock – any stock with a market cap under $100M is generally what we're talking about – regardless of the share price.
That's because the stock can be easily influenced by exactly the kind of action the FBI proved is RAMPANT in this industry – a single trader can, for a fee, move money into the stock and send the prices skyrocketing – then press releases are put out to whip retail investors into a frenzy and they follow with their money and, usually, get burned.
Of course, the same thing happens with mid-cap stocks as well and even large-caps – it's just that the people manipulating those stocks are generally better at covering their tracks! 22 is the number of people the FBI caught in the short period of time an operation like this can run before word gets out that their cover people are conducting a sting. Imagine how many other must be out there!
Obviously the markets are manipulated. We know CEOs and their Boards worry about the stock price – the minute they begin to worry about the stock price, manipulation is sure to follow. That's the way the system is designed. We have a Fed who worries about the price of the market and they manipulate it too! It's our job simply to be aware of the manipulation and take it into account in our trading and investing decisions.
Back on June 12th, I began a series of articles pointing out that oil and gasoline prices were being manipulated into the holiday weekend. Oil shot up to $107.68 that day and stayed between $105 and $107.50 through June but the EXTREME lack of actual demand we warned you about. This morning, oil is below $104 and up $3,500 per contract from a short at $107.50 – a trade idea we highlighted for our readers Friday morning, June 13th.
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by Phil Davis - July 3rd, 2014 7:36 am
Happy Birthday America!
The markets are closed tomorrow and today is a half day but the trend is certainly our friend on the S&P as we haven't been below the 200 day moving average since December of 2011 (except a couple of very brief dips). Though the average volume is about 30% lower than it was back then – it's still an impressive feat.
Of course, if 10% of the market was manipulated before and the manipulators haven't left (they certainly haven't) – even if the level of manipulation remained the same, 30% of the 90% that wasn't manipulated (retail investors) did leave (possibly BECAUSE of the manipulation) and that means now manipulators control 10% of the remaining 70%, a 42% increase in manipulation! Of course we know it's much worse than that because now the Central Banksters perform their own brand of market manipulation. As noted by Salient Partners in a great article about PBOC Manipulation:
The explicit purpose of recent monetary policy is: to paper over anemic real economic growth with financial asset inflation. It’s a brilliant political solution to the political problem of low growth in the West, because our political stability does not depend on robust real economic growth. So long as we avoid outright negative growth (and even that’s okay so long as it can be explained away by “the weather” or some such rationale) and prop up the financial asset values that in turn support a levered system, we can very slowly grow or inflate our way out of debt. Or not. The debt can hang out there … forever, essentially … so long as there’s no exogenous shock. A low-growth zombie financial system where credit is treated as a government utility is a perfectly stable outcome in the West.
So China has indeed learned the most valuable lesson of Capitalism – that money is a meaningless contstruct that can be freely manipulated to fit whatever narrative the Government wishes to spin and that debt is not to be feared, but embraced, especially by our Corporate Masters – because our National Debt becomes their Private Profits!
by Phil Davis - July 2nd, 2014 8:25 am
Wheeeeeee – a new record!
Actually, we shouldn't get too excited as it's a new record every day but it's still fun to celebrate while the all-time highs are lasting. The Dow fell just 2 points shy of 17,000 but ended up 44 points short – that's one we'll watch closely today, along with NYSE 11,000 – a level I have long stated will force us to turn more bullish if it holds.
Unfortunately, with the low-volume holiday trading, we won't be able to confirm these moves until next week but that doesn't bother TA people, who ignore everything but the squiggly lines on the charts and they say RALLY!!! I imagaine this weekend we'll see "Dow 20,000" on a magazine or two but that's still a far cry short of the 36,000 we were promised on the cover of the Atlantic back in January of 2000.
The Dow topped out that month at just under 12,000 so 17,000 is, in fact, good progress but still over 50% short of the level we were supposed to hit 10 years ago and let's not forget that we visited 6,600 first! So, maybe not the right time-frame and maybe not a smoothe ride – but we're heading in the right direction – now.
Not wanted to fight the mega-trends, we went wtih the flow and added Dow laggard IBM on Monday at noon in our Live Member Chat Room with the following trade idea:
IBM is on our Buy List but not in our Portfolio yet as I was hoping they'd have a weak Q2 and go down a bit but I'm nervous my theory on Watson will gain traction and send IBM back up so let's add 5 short 2016 $160 puts at $9.40 to the LTP and, if IBM goes lower, we'll be happy to sell 10 more and add a bull call spread.
by Phil Davis - July 1st, 2014 7:50 am
And, by another, I mean another $340Bn that the Fed paid out to their Bankster buddies in "Reverse Repo" purchases at the end of the month. That's right, the Fed essentially bought THE ENTIRE STOCK MARKET (in terms of transaction value) from the banks over the last few days of June and THAT injection of cash is how they kept the rally going into the end of the quarter.
As you can see from the NY Fed's own chart (via Dave Fry and Zero Hedge), this kind of charity buying isn't unusual for the Fed – more like Standard Operating Procedure to inflate equity prices into the end of each quarter. Does it work? Sure, look at the results:
As you can see - as the market gets more and more expensive, it takes more and more money to push it higher. Also note the Fed tweaked (hopefully not twerked – there's an image of Yellen I don't want burned in my mind!) their timing to move it close and closer to the very last day, to maximize their bang for the buck.
UNFORTUNATELY, as you can see from the S&P chart above, these effects are short-term and demand a correction in the not too distant future.
What's very interesting is that our stimulus theory is still holding up. We developed this back in 2012, through observation of the effect of Central Banksters market meddling on Global Equities and it turns out that $10Bn per quarter buys 1 S&P point. Look how perfectly that aligns on the chart!
Bill Dudley, New York Fed president, warned last month that if use of the repo facility were to grow too quickly it might “result in a large amount of disintermediation out of banks through money market funds and other financial intermediaries into the facility. This could encourage further enlargement of the shadow banking system.”
by Phil Davis - July 1st, 2014 7:10 am
By Fabian T. Pfeffer, Sheldon Danziger and Robert F. Schoeni