by phil - March 14th, 2015 8:30 am
What an exciting start to the year this has been.
It's been a difficult trading environment, to say the least and this will be the first full year featuring our new Top Trade Alerts™ (Members Only) and I look forward to doing these educational review sessions at least each quarter (our last one was January) to review both our trade ideas and our use of options to make those trade ideas as profitable as possible.
Top Trade Alerts are sent out once or twice a week via EMail and Text Message from our Basic and Premium Live Member's Chat Room. These trades are just a very small portion of what we discuss during chat each day, but hopefully a good representative sample of the dozens of trade ideas we share with our Members each week in our Live Member Chat Room as well as our Weekly Live Webinars (replays can be seen here).
Keep in mind these are just snapshots of trades as of today – it's up to you to take good trades off the table and cut the losses (or make adjustments) on ones that go bad. We're always discussing adjustments in our Live Member Chat Room – join us there for follow-ups.
Our first top trade idea for 2015 was UCO on Jan 5th and UCO did have a nice pop and we cashed them out of the $25,000 Portfolio with a nice profit on February's pop to $9.50+.
UCO has since pulled back and the July $14s fell all the way to 0.15 but now the July $8s are just 0.95 and make a nice way to go long on oil or, you can be more conservative and buy the $6 calls for $1.85 and sell the $9s for 0.70 for net $1.15 on the $3 spread.
On Jan 8th we took a poke at RIG when they fell to $16.15, selling the 2017 $8 puts for $1.70 for a net $6.30 entry, paired with the 2017 $10/15 bull call spread at $2.50 for net 0.80 on the $5 spread. RIG has fallen off considerably since, to…
by phil - March 13th, 2015 8:27 am
What total BS.
The volume on the S&P to the upside has been pathetic and yesterday was no exception with just 92M shares trading on SPY. To put that into context (which we reviewed in yesterday's Live Member Chat Room) – we've had 4 up days and 5 down days in March and the SPY volume on the 5 down days has been 647M while the volume on the 4 up days has been 344M – just half of what the down volume has been.
Nonetheless, despite the massive outflow of funds, SPY is only 3 points below where it started the month, at 210. Even if we give the benefit of the doubt and pretend this isn't a blatant act of market manipulation designed to fool retail investors into buying the dips while Fund Managers and Banksters run for the exits – it's still an indication that this "rally" has a very weak base and could easily collapse in a dramatic fashion.
|Mar 12, 2015|
by phil - March 12th, 2015 8:29 am
The Dollar is down so the markets are up this morning.
This isn't complicated, folks, we've seen this dance before. The S&P almost hit our goaaaalllllll!!! of 2,035 at 2,039 yesterday and was saved by the bell and this morning we have a bit of a recovery – but only because the Dollar has fallen almost 1% to prop up the markets.
Whether Dollar-driven or not, our 5% Rule™ dictates we still need to see strong bounces before letting ourselves get more bullish. So far, we have just the Russell making a turn off their 50 dma line at 1,203 – if that line WASN'T bouncy, things would be very bad indeed. Keep in mind that domestic small caps are least affected by the strong Dolllar while big-cap exporters and commodity producers are most affected.
Likewise, as you can see from Dave Fry's SPY chart, we're testing the 200 dma on the S&P and that had better be bouncy or look out below. The bounces we'll be looking for are:
- Dow 18,200 to 17,600 is 600 points (3.3%) and we look for 120-point bounces to 17,720 (weak) and 17,840 (strong).
- S&P 2,120 to 2,040 is 80 points (3.7%) and we look for 16-point bounces to 2,056 (weak) and 2,071 (strong).
- Nasdaq 5,000 to 4,850 is 150 points (3%) and we look for 30-point bounces to 4,880 (weak) and 4,910 (strong)
- NYSE 11,100 to 10,650 is 450 points (4%) and we look for 90-point bounces but may as well round to 100 and call it 10,750 (weak) and 10,850 (strong).
- Russell 1,240 to 1,210 is 30 points and we already closed at 1,216 (weak bounce) and we'll expect to see 1,122 (strong) today in the very least and that's where we just jumped in short (1,224) on our Live Member Chat Room as Retail Sales were disappointing.
8:30 Update: As I just noted, Retail Sales have come in disappointing at -0.6% in February, miles below the +0.3% expected but in-line with -0.8% in January. They are, of course, blaming the weather because who would have thought it would…
by phil - March 11th, 2015 8:27 am
That's what Europe is doing this morning as the Euro plunges to $1.06, down just under 25% from $1.40 last May so the DAX BETTER be up 25% just to keep up with the deflating currency. DAX was 10,000 last May and is now 11,500 – oops, that's only up 15%, not 25%, more hidden deflation I suppose…
That's why, as you can see on Dave Fry's IEV chart, when priced in Dollars (as this ETF is), Europe's markets are DOWN 15% since last May – not up at all. These Dollar-adjusted Fundamentals are, unfortunately, so complex that most investors just ignore them and, therefore, if the DAX, FTSE and CAC go up – our markets follow, without taking the currency effects into account at all.
That's what's happening this morning as the Euro is down another 1% and down 4.2% since Friday, which is driving the EU markets back to new highs DESPITE the fact that everything is falling apart.
As you can see on the chart, the London FTSE 100 is still down 2.69% because they are priced in Pounds, not Euros and Spain is its own special disaster but DAX, CAC and Italy's FTSE are flying as the currency they are priced in is doing a Thelma and Louise off the economic cliff. The FREE MONEY is flowing in Europe on day 3 of their QE program and that's $3Bn per day being pumped into the economy by the ECB, so why shouldn't they be excited – we sure were when it was our turn (remember S&P 1,400 – that was only 2 years ago!).
So, priced in Euros, we have a 2% rally in Euro stocks but, priced in Dollars, IEV, the ETF that contains those same stocks, is crashing. The US indexes are priced in Dolars and, this morning, we are following Europe higher. Is that smart? Probably not and that's keeping us cautious and VERY SKEPTICAL until we see some longer-term pattens forming.
by phil - March 10th, 2015 8:33 am
And down we go again!
Futures have already given up all of yesterday's ill-gotten, low-volume, gains and now we will be testing the 50-day moving average on the Dow at 17,800 and the S&P at 2,060 while the NYSE has already failed 10,850 but it never got back over our Must Hold line at 11,000, so we never thought it was strong in the first place.
As I noted for our Members in our Live Chat Room yesterday morning, the weak bounce for the NYSE was 10,900 and failing that kept us bearish, despite the "rally" we had for the day. The Dow finished between weak (17,950) and strong (18,050) but S&P failed weak (2,080) while the Nasdaq and Russell were both looking strong. Still, 3 of 5 fails and we stay bearish – that's sensible, right?
We stayed bearish on the Nikkei (see yesterday's post for why) and this morning we got a huge drop back to our goal at 18,500. As I said way back on Feb 26th (as well as in our Live Webinars since then) our bet on /NKD was that 19,000 would fail and it's happened several times since but this is the first day we got the full drop from 19,000 to our goal all in one session.
That's a good sign that 18,500 is not the bottom and is likely to fail eventually, which is fabulous for the EWJ puts we have in both our Short-Term Portfolio and our $25,000 Portfolio (see this weekend's Portfolio Review). Even worse for the Nikkei is that this drop is coming DESPITE the Yen weakening to 122 to the Dollar overnight – that's the lowest it's been in 13 years and USUALLY that makes the Japanese exporters very happy. Maybe they read my post yesterday and got worried it will all end in tears?
Speaking of collapsing currencies, the Euro is down to $1.0746 this morning as ECB bond-buying (see Thursday's post) runs right into hawkish commentary by the Fed's Fisher, who says the Fed should "promptly" end it's easy monetary policy and…
by phil - March 9th, 2015 8:15 am
Strap yourselves in folks.
It's going to be a wild ride today and probably all week as the ECB begins it's $1.2Tn QE program that is scheduled to pump roughly $70Bn a month (it keeps going lower as the Euro keeps dropping!) into the wallets of rich people across the EU. Just to illustrate how insane they can be, they began buying German Bunds this morning – giving the most to the country that needs it the least.
Greece, meanwhile, the country that needs it the most is not getting any and Greece has already burned through the last of their $260Bn bailout, driving their 3-year yeild to 15.21%, roughly 50 times higher than Germany's borrowing rate. Now, bear with me here but, in order to get the same return on their bond buying from Germany as they would from Greece, the ECB would have to lend Germany $13 TRILLION that Germany doesn't need rather than lending Greece the $260Bn it does need AND THAT'S EXACTLY WHAT THIER PLAN IS!
By putting more money into "safer" countries the ECB is making things worse for the riskier countries, which aren't benefitting from this misguided QE missile. But don't worry about things getting out of countrol, Draghi says the ECB will not pay more than 0.2% for the privilige of lending out money!
That's right, the ECB will PAY YOU 0.2% to borrow their money for up to 30 years. It doesn't sound like much but, if you borrow $1Bn, you get $60M in interest over 30 years for holding onto the ECB's money. Again – they won't do this for Greece or anyone else who needs it but, if you don't need money – it's nice to know more money is available if you are willing to be paid to hold it, right?
This is all, of course, completely insane and our reaction to an insane policy environment has been to remain "Cashy and Cautious" while these radical policies play themselves out. The markets got a little scare on Friday but it was a very minor sell-off and already this weekend, China claims exports rose 48.3% in a month and, whether or not you…
by phil - March 8th, 2015 8:30 am
No rest for the wicked this weekend as we have big news from China.
Just a week after downgrading their GDP projections to as low as 6.5% (a 13% reduction from 7.5%), China now CLAIMS Exports in February jumped 48.3% while Imports fell 20.5%. The change isn't reflected on this chart, which shows the 3.3% fall in January exports but it looks like we're back to the days of Fake Chinese Data Reports – not that those days were ever really gone in the first place.
Amazingly, this incredible turnaroun in imports comes just one day after Commerce Minister Gao Hucheng said:
"The domestic and foreign trade environments this year have not improved markedly. To fulfill the foreign trade growth target, efforts should be made to implement existing policies. To achieve this goal will be an uphill battle and great efforts must be made.""
So gold stars to his entire staff for completely fixing the problem within 24 hours of his speech! Gao had stressed that a multi-pronged strategy must be adopted: the country should strengthen support for businesses in the process of industrial upgrading, produce higher-value products, focus on innovation-driven competitiveness and encourage the development of new export models like e-commerce. And then they did it all in just one day!
Meanwhile, imports slumped 20.5% from a year earlier in February, surpassing the 19.9% fall in January and exceeding market expectations of a 10% decrease. The February slide was the fourth consecutive month of lower year-over-year imports. The import decline was partly due to the sharp fall in prices for key commodities such as oil and metals. Crude-oil imports fell 46% in value but were up 11% in volume. Iron-ore imports showed a similar trend, losing 39% in value but gaining 11% in volume. That's key for our CLF investment as iron-ore volume is picking up – a hopeful sign (if we can believe the numbers).
In other unbelievable number news – it turns out Japan overestimated their GDP growth…
by phil - March 7th, 2015 7:51 am
What a fantastic first quarter we had!
Despite being cautious into the end of last year (see our December Review) our paired Long-Term and Short-Term Portfolios have gained $68,000 (9%) in the last 90 days. Our Long-Term Portfolio has gone from $608,375 on 12/6 to $640,797 as of yesterday – a gain of $32,422, which is 5.3% and perfectly on track for our planned 20% annual gains.
Oddly enough, it was our usually bearish Short-Term Portfolio that made the big gains over the past Quarter, mostly because we weren't actully that bearish and made some aggressive bullish bets as oil collapsed that have already paid off. The Short-Term Portfolio was up "only" 65% for the year as of our December review at $165,136 and, because we turned bearish into the recent dip – we've popped to $201,495 on yesterday's close – up $36,359 or 22% in 3 months.
Keep in mind we are LUCKY when we happen to time a major market move correctly, like we have this quarter – you can't expect to make 10% every quarter, especially when our goal is to remain well-hedged to protect our assets over the long-term. What we are trying to do is grow our portfolios a combined 20% each year and, in fact, when we hit the 40% mark last month – I made the case for just cashing out – as we had already made our 2-year goal in 14 months.
When you make unrealistic amounts of money – CONVERT IT INTO CASH! We converted our Income Portfolio into cash last year and, what do you know, the cash has jumped another 20% in value. That's something we need to consider with our own equity positions, if we trade them in for strong Dollars, we can turn around and use those Dollars to buy equities backed by weaker currencies or commodities – something we have already begun to do in our Long-Term Portfolio.
As we've note for the past few weeks, we have been VERY SKEPTICAL of this recent market rally and we've stayed very CASHY and CAUTIOUS in our portfolios now, as the market turns down, you can really begin to appreciate the value of having…
by phil - March 6th, 2015 8:26 am
Can we be any more bullish?
Not really, according to this Investor's Intelligence chart, which indicates that MORE than 4 out of 5 people are bullish on the market – just about 9 out of 10. That means there are less people who are bearish on the market than there are dentists who recommend gum with sugar in it over Trident!
The last time sentiment was this exreme it was 90% bearish, back in the crash of 2009. Boy were those guys idiots, right? Not like us – WE'RE SMART! We would never mindlessly follow the crowd even though valuations were out of control and not at all supported by the Macro Economic Conditions that were readily observable – that would be crazy.
No, we'd never fall for that sort of nonsense because we are savvy investors, right?
Actually, as I pointed out to our Members in our Live Chat Room, this is very much like when you go to a Beanie Baby convention (don't ask how I ended up at one, long story) and suddenly you're in a room full of idiots paying $20, $50, $100 for a little bean-bag animal because they are "rare" and you start off thinking they are all crazy but, after a couple of hours, you see a cute one and it's only $5, so it seems like a bargain and, before you know it, you have a bag full of Beanie Babies.
As I've pointed out in previous posts, you (and your money) simply have nowhere else to go but Equities – the Central Banksters have seen to that by cutting off all other avenues of investment. So we're all here at our Equity convention and you see people buying TSLA for $220 and AMZN for $390 and NFLX for $470 and suddenly XOM at $86 seems like a good deal – even though the stuff they sell (oil) has dropped 50% in price since last year while XOM's stock is down less than 15%.
by phil - March 5th, 2015 8:20 am
MORE FREE MONEY!!!
Mario Draghi (a Goldman employee) will discuss his $75Bn/month QE program for the ECB this morning and the BOE (another Goldman employee) has already announced they will continue their $35Bn/month QE program while Japan continues their $80Bn/month QE program and our own Fed is still at $80Bn/month with China probably around the same.
That's $350Bn PER MONTH or $4.2Tn per year being pumped into the Global Economy by Central Banksters. AND IT'S NOT REALLY HELPING!!!
Well, it is helping the Top 1% as they get richer and richer and richer. It's easy to get richer when we can borrow money at 0.25% and then lend it to poor people (and we're justified because their credit simply isn't as good as ours) for 5%. That's a 20x return on our borrowing cost – don't you just love the Central Banksters?!?
Now, I know that there are those of you in America who are confused by these numbers because you think your economy is improving – and it is – but that's because you're not thinking the math through. 300M Americans, with an average income of $55,000 per family, are already in the top 10% of the Worlds 7Bn people. So the whole top 10% of America is already in the Global Top 1%, which is what is giving our economy such a boost – but it's at the expense of Billions of others.
A study by Fernholz in Econobrowser shows the very direct correlation between the gains of wealth held by the top 0.01% and 0.01-0.1% of households are increasing by 3% and 1% per year, respectively, while the share of wealth held by the bottom 90% of households is decreasing by 1.5% per year. 1.5% PER YEAR. When you graph it, it looks like this over time:
Not only is wealth being taken from the poor and given to the rich but the process is accelerating through QE policies. One of the ways the top 0.1% is reaping these rewards is through share buybacks – $2Tn worth of them since 2009, which is 6 times more money than the amount contributed by actual investors…