by phil - January 9th, 2017 8:01 am
This is getting tedious, isn't it?
Now the MSM cheerleaders have taken to saying "if only this" and "if only that" to lament how close the Dow came to making that magical 20,000 mark – as if it means anything other than the markets are officially, ridiculously overbought.
Once again on Friday, down volume exceeded up volume by a wide margin on the NYSE and the number of shares that declined outpaced the number of shares that advanced – which was pretty much the story for the weak as the Nasdaq and the S&P both made all-time highs against a backdrop of this very weak action.
There's not likely to be much help today as 3 potential future Fed Chairmen speaking at this weekends American Economic Association meeting suggested that monetary policy would be tighter if they were in charge. Yellen, who still has a year left in her term, whill speak at 7pm on Thursday in a week with 6 other Fed speeches while the US looks to auction off another $100Bn worth of TBills in a fairly unfriendly environment.
More importantly, it's earnings season and earnings trump data – especially when expectations are for 15% earnings growth in 2017 to justify the insane valuations that are already being given to stocks.
Banking is the sector that is expected to carry most of the weight in earnings growth, followed by Energy and expectations for both seem overblown to me but we'll get a good clue as to the state of the Banking sector as Bank of America (BAC), JP Morgan (JPM), Wells Farg (WFC), PNC (PNC), First Republic (FRC), First Horizon (FHN) and Black Rock (BLK) all report on Friday morning (the morning after Yellen speaks with Harker speaking before the bell Thursday and Friday).
Sounds a bit like the Fed is anxious to put some spin on those earnings, doesn't it?
by phil - January 6th, 2017 8:13 am
Now we're 7 for 7 in 2017 Futures picks!
As I noted in yesterday morning's post, we were still waiting for Wednesday's Live Trading Webinar (replay here) pick, shorting the Russell (/TF) Futures at 1,385, to bear some fruit and we were well-rewarded with a $1,000 per contract drop that began about 10:30, leading us to a $9,290 winner on our 10 contract position, capping off a perfect week for our Futures Trade Ideas.
While it would be smart to quit while we're so far ahead, no one ever said we were smart and this morning we're back to shorting Oil (/CL) below the $54 line as It's up on a weak Dollar as well as general silliness after the Saudis announced that yes, they really have cut production, just like they said they would when oil was $40. We've already gotten a 40% bump out of this news – how many times can they say the same thing and get another bullish reaction?
OPEC won't actually publish production levels until mid-February and, even when they do, you can't trust them. OPEC data is not based on physical counts but on surveys and computer modeling based on numbers submitted by member states – who have been known to cheat and fudge their numbers for decades.
Speaking of decades, we're just one decade away from the US becoming a net exporter of energy in 2026, according to yesterday's EIA Report. In all but two of the seven cases modeled in the report, the EIA predicts that the US will become an energy exporter within the next decade, as natural gas production and exports rise and petroleum imports decrease.
One could argue that the US is practically a net exporter already as we exported 23.26M barrels of Petroleum Products last week and we STILL had a net build in inventories of another 6.1M barrels. So already, 29.36M (58%) of the 50.45M barrels we import from overseas in a week were not needed for US consumption – yet oil prices are $22 (68%) higher than they were last year – there is no logical reason for this! …
by phil - January 5th, 2017 8:24 am
We're 6 for 6 in the Futures this year!
Still waiting for our other Webinar call, shorting the Russell at 1,385 to pay off but we already had a nice win shorting the Nikkei, where we had two short contracts that paid $2,000 overnight. We have 10 short /TF contracts on the Russell and they pay $50 per point, per contract if we get them right and our live reading of the Fed Minutes led us to conclude we'd have a sell-off once the analysts were done sifting through the Fed notes.
If you missed our Live Trading Webinar yesterday, there will be a replay available on the www.PhilStockWorld.com main page later today. We also had some long trade ideas and a good general discussion on the economy and the markets to set us up for 2017. The Coffee (/KCN7) trade we discussed in yesterday's morning post is already up to $148, which is a gain of $750 per contract and our JO trade is on track, as is the SONC earnings play that looks like it will return the full 389% on cash we were looking for.
These free trade samples only last until earnings season begins next week and, after that, you will have to become a paying Member to enjoy these picks every day. The trade ideas in the morning post are only a fraction of what goes on inside our Live Member Chat Room every day, as we take full advantage of these wild market swings.
This morning, as noted, we're shorting the Russell ahead of the 9:45 Bloomberg Consumer Comfort Report. Both Macy's (M) and Kohl's (KSS) gave terrible Q4 sales reports last night and Buckle (BKE) is reporting a 15% drop in sales in December – where is that Consumer Spending strength that's supposed to be driving the market?
M is an interesting one, we bought them for our Options Opportunity Portfolio in late October with the following trade:
by phil - January 4th, 2017 8:35 am
A profit of $9,360 on 4 trades.
That's our record to start off 2017 for our Members, who got our PSW Report ahead of the open with the following 4 Futures Trade Ideas:
- Short Russell (/TF) Futures at 1,375 – fell to 1,355 for a $1,000 per contract gain
- Long Silver (/SI) at $16 – ran up to $16.50 for a $2,500 per contract gain
- Short Oil (/CL) at $55 – fell to $52.50 for a $2,500 per contract gain
- Short Gasoline (/RB) at $1.70 – fell to $1.62 for a $3,360 per contract gain.
As you can see from the video above, I reiterated our oil short and our silver long live at the Nasdaq, at the market open, getting America off to a great investing start for 2017. In the morning post, we also had a shorting idea for the Financials, using SKF and that's a longer-term trade idea using options but has the potential to return 4,100% on your cash outlay.
We will try to find some more fun Futures trade ideas in today's Live Trading Webinar, which we'll make the first free one of 2017 this afternoon at 1pm (EST) so come join us if you are interested in learning more about Futures, Options or just finding out which stocks we like for 2017.
In last week's Webinar (replay here) we also discussed silver (our Trade of the Year is Silver Wheaton (/SLW)) as well as Coffee (/KC) using the (JO) ETF, which already jumped 4% this week and we were worried it was only up because we called it but it's been able to sustain the gain and we're looking forward to some bullish action in 2017 that takes us all the way back to $25. The June options are still relatively cheap on JO and the set-up we like is:
- Sell 5 SBUX 2019 $45 puts for $3.70 ($1,850)
- Buy 20 JO June $18 calls for $2.50 ($5,000)
- Sell 20 JO
by phil - January 3rd, 2017 7:44 am
The Futures are flying!
What couldn't be accomplished in 3 weeks of trying is almost accomplished while the markets were closed this morning as the Dow gains over 150 points in pre-market, low-volume trading. Asia was up on positive Chinese data while Europe had some good PMI numbers and oil is up 2.5%, at $55, as OPEC officially began their production cuts on Sunday and so far, so good.
Fundamentally, nothing has changed. Last I heard, high oil prices were bad for consumers and impacted profits in the Transports but no one actually cares about the Fundamentals – least of all the TradeBots that run the markets these days.
Anyway, I resolved to be more Republican in 2017 so we're going to accentuate the positives in the markets and ignore the negatives so we can BUYBUYBUY without all that needless worrying that comes with being a Liberal. Earnings season kicks off next week and we'll be able to see if our Corporate Masters are able to justify a 10% rise in their stock prices. Certainly the energy sector should be improving.
We did have a 3.2% improvement in Q3 earnings over the prior year but that was the first time we had a positive quarter since Q1 '15 so 1 out of 6 is not a trend yet. Of course the comps are easy to beat so we should get SOMETHING out of Q4 but keep in mind we're already up 10% from 2015 – on, so far, less than 2% more earnings.
Half the Q3 earnings came from the Financials and Financials should do well in the age of Trump but, like the broader market, they have already jumped close to 20% since the election in anticipation of a lot more than the 8% gains they've posted so far.
If you think the Financials have gotten ahead of themselves, I like the Ultra-Short Financial ETF (SKF) which has been slammed down 33% since the Summer but seems to be holding up at $30 as the Financial ETF (XLF) runs out of gas at $24. A pullback on XLF to $21 would be 10% down and that should give SKF a 20% pop to $36. If we assume that happens after January earnings, we can…
by phil - January 1st, 2017 7:32 am
Happy New Year!
It's been a fantastic year for our primary, paired portflios with the Short-Term Portfolio finishing 2016 at $475,076 (up 375%) while our Long-Term Portfolio came in Friday at $1,179,723 (up 136%) for a grand total of $1,654,766, a gain of $1,154,766 (192%) from our $600,000 start back on 11/26/13. We're up $109,345 since our pre-election review on 11/6 - that's 10% in two months and, into December options expirations, we cashed in some more winners, bringing us to over $900,000 in cash (80%) into the holidays, a position we call "Cashy and Cautious".
On the whole, 2016 went about as well as expected. Last December, our paired portfolios stood at $1,004,162 so we've added 65% in 2016 and we were, fortunately, Cashy and Cautious into last January too because we were able to take full advantage of the Q1 correction in 2016. I strongly urge going over our early 2016 positions – most of them are still in our portfolios and the ones that changed make for an interesting watch list like ANTM, BHI, BID, BP, CHL, CIM, ECA, INTC, KORS, MYL, RIG, STWD, SWKS, TGT, WFM, WYNN – to name a few.
Our value-oriented strategies dictate we get out of even the best stocks when they become over-priced but that doesn't mean we don't want to get back into them when they calm down! Value investing is all about patience, even when we like a stock, we still prefer to scale into the position – just in case we're a bit early… They also dictate we regularly review and contemplate our positions and, when necessary, sit on the sidelines.
Our two smaller portfolios are self-hedging but also with a good deal of cash on the side in this very uncertain market. Our Options Opportunity Portfolio closed out the year at $237,225 (up 137%) and that's up $131,739 (132%) from $105,486 in our 12/7/15 review. That portfolio only began on August 8th of 2015 and we got off to a rough start but more than made up for it in 2016. Finally, our Butterfly Portfolio came in at $338,224 (up 238%) and that's a gain of $157,149…
by phil - December 30th, 2016 8:30 am
It's been a frustrating year overall, especially for us Bleeding Heart Liberals, who lost the Obamas and the Clintons this year. We also may be losing the 8-year bull market, which did jump off the table to give us a last-minute gain for the year but already the repercussions of the Trump Coup are already being felt as the US and Russia have now expelled 35 of each other's diplomats as Cold War II begins.
We talked about investing in our two favorite military contractors last week, so I won't get into that again. Security companies are interesting. In fact, PSW Investments has an early stage investment (10%) in Aerobyte, who provide edge to edge encryption security for IOT devices - something that is becoming a major concern in this age of Russian hacking. We're into early stage companies because, CLEARLY, the current offerings are not doing enough to secure their clients. Just this morning I got a note from Open Table, warning me that the Yahoo hack has likely compromised my password and suggesting I change it.
Having state of the art security solutions is one of the things that will set companies apart in the late part of this decade. All of this was predicted back in the 80s by William Gibson, who wrote some great novels about a World where the best Corporations had the best firewalls and those Corporations, of course, controlled the very wired World, where income disparity had run wild. Sound familiar?
“My first impulse, when presented with any spanking-new piece of computer hardware, is to imagine how it will look in ten years’ time, gathering dust under a card table in a thrift shop.” ? William Gibson,
We know that's true. I often tell the story of my first big hardware sale when I worked in computers, it was the late 80s and I sold a 300 megabyte (0.3Gb) hard drive to a doctor for $25,000. Just the drive, the server was a fortune too. And $25,000 was money back then! 30 years later, it doesn't even sound…
by phil - December 29th, 2016 8:16 am
I fixed my hat.
Now I have something to weak for New Year's Eve. As we have been expecting (and I know, even a broken clock…), there's mounting selling pressure on our indexes and we're certainly not going to get too excited about a minor pullback in a single day but it does make us feel better about getting a bit more bearish, even in the face of this run-up to 20,000.
The trading is very light-volume and meaningless and will only get more so into the holdiay weekend. US markets are closed on Monday, London closed Friday, Japan is Monday and Tuesday, etc – so not many people around to trade at all, which can lead to erratic (well, more than usual) trading all around.
Oil Futures (/CL) have clawed back to where we liked them short yesterday ($54) with inventories coming in at 11 am this morning – this will be fun. Obviously, our Silver (/SI) longs are off to a good start and our Trade of the Year idea for Silver Wheaton (SLW) is already off to the races (see yesterday's morning post).
Our best call of the day was a short play on the Nikkei (/NKD), which I've mentioned before and was our first morning trade yesterday with a short at 19,500, one I reiterated to begin our afternoon's Live Trading Webinar, when the Nikkei was still up at 19,400.
At the close of the Webinar, we took a long position on the Russell Futures (/TF), playing for a bounce at $50 per point per contract from the 1,360 line (2 contracts). So that's where we are this morning, done with /NKD, back in /CL shorts and playing for a bounce off yesterday's 20-point drop in the Russell to 1,364 (weak) or 1,368 (strong), where it might be tempting to short it again if that fails.
Something's gotta give as the market is priced to perfection for 2017 already. As noted by Paul Brodsky: "US investors are anticipating a cyclical shift towards economic expansion via new tax incentives, business de-regulation and Keynesian government spending that promise to increase output, demand and asset…
by phil - December 28th, 2016 8:28 am
Come on Dow, we already bought the hats. It's going to be tough going higher this morning unless the Dollar calms down – it's already up half a point at 103.45 but it is possible they are ramming the Dollar higher, pre-market, so they can take it back down later, when they need that final push to get the Dow over the hump. As I said yesterday, it does not look good for the bulls if we can't wear our Dow 20,000 hats on New Year's eve and the Banksters want to close out the year with that nice headline print so expect all sorts of shenanigans over the next 3 days.
At this point, we have stupid gains from our Nov 30th bullish hedge on the Dow and, since we don't really believe in this rally, I'd say it's time to get it off the table while there are still
suckers buyers left to take them off our hands. Our trade idea was:
HOWEVER, we could be (and have been) very wrong about the Russell and, if so and it heads higher still, then it's the other indexes that should be catching up so we can hedge our hedges with long positions on the Dow, S&P and Nasdaq. For example, the Dow ETF (DIA) is at $190 so a 5% move in the Dow would be $199.50 and we can make the following play to gain leverage:
by phil - December 27th, 2016 5:28 am
Only 4 trading days left to 2016.
But it's been 16 days since Barron's put Dow 20,000 on the cover (12/10) and that nut is looking harder and harder to crack as days keep passing without making the mark. Undaunted by the first week of failure, Barron's doubled down the next weekend by rounding up 10 analysts who think 20,000 is just the start (even tough we're not there yet). Here are their S&P targets:
Now, to be fair, this group (mostly the same) pretty much nailed it for 2016 and I guess we'd have to say they were right, despite the fact that they were wrong until November 7th. Not Stephen Auth, he predicted 2,500 – I'm surprised they asked him back. The rest of the group averaged 2,200 in their predictions and essentially nailed it for the year. They also predicted a 10-year note yield of 2.5% and we're at 2.543% – that's really impressive given how unpredictable the Fed is.
For 2017, the average prediction is only 2.8%, which seems very unlikely given that we're at 2.5% now. GDP growth forecasts average 2.4% and earnings estimate for the S&P 500 range from $116 to $135 and that's really enthusiastic since S&P companies are still not back to 2013 earnings levels – a lot of this enthusiasm is based on a reviving energy sector.
My "confusion" as to all this bullishness, is that I'm not sure that rising gas prices, removal of Obamacare, cuts to Social Security and Medicaid, etc are going to be good for corporate sales? Of course, you don't need to make more sales as long as you make more profits and less corporate taxes = more profits and less outstanding stock (buyback) means more earnings per remaining share.
Also, there is a lot of anticipation that US companies will be granted another repatriation tax-holiday, as the $2.5Tn they have stashed overseas to avoid taxes under Obama can finally come home without penalty under Trump – well worth the wait when you can avoid $1Tn in taxes, right? And please, it's not like the Government needs the money – $1Tn…