by phil - October 14th, 2016 8:00 am
Wow, what a market!
The Futures are up 10 points on the S&P, bringing us back to 2,142 at 7:30 (2,136 on the /ES futures) driven by nothing in particular other then Europe's relief that we rallied into the close so now they are rallying and our futures are rallying because Europe is rallying and if that sounds idiotic to you – welcome to trading! It kind of sucks if you are one of those stock-holding traders waiting for your equities to appreciate but it's unbelievably fun when you play inside the channels.
We started out the day short (and our Live Webinar's short on the Dow ended up making $1,000 per contract) but by 11:30 we were done with that trade as I said to our Members in the Live Chat Room:
Truth or dare time with the EU closing in 10 mins. They've recovered a bit into the close (down 1.25%) so no reason we should go lower now, especially with the Dollar at 97.63 but watch for the bounce off 97.50 as that could add more downward pressure.
As you can see from the chart, we nailed the turn perfectly and, of course, we did a little bottom-fishing but not much as we really don't trust this low-volume rally (and pre-market is very low volume too) and we already took a stab at shorting the Nasdaq this morning that failed (-$50 per contract) and we also are, of course, back in to short oil at $51, which is the gift that keeps on giving this week. Yesterday we hit $49.50 (up $1,000 per contract) before it turned back up!
We're anxiously waiting for Fed Governor Rosengren to speak at 8:30 and the title of the conference is "The Elusive 'Great' Recovery: Causes and Implications for Future Business Cycle Dynamics" and, as if that isn't enough insure an empty room – I hear the bagels are also terrible. Rosengren's boss is speaking at the same conference at 1:30 so it's unlikely he will make too strong a hawkish case ahead of Yellen's comments.…
by phil - October 13th, 2016 8:27 am
Sometimes things just go your way!
We had our usual Live Trading Webinar yesterday at 1pm and, when the replay is available, you can see our live analysis of the Fed Minutes as they were released which led us to conclude that the people rallying the Dow were idiots and that we should short the Dow Futures (/YM) at 18,100. As you can see on the chart, we blew tight though our primary target of 18,000 and almost hit 17,900 (a $1,000 gain) before bouncing back to 17,950 where we stopped out for a $750 per contract gain. Not bad for an overnight trade, right?
Of course, we already expected the Dow to fall hard and fast, which is why we featured the Ultra-Short Dow ETF (DXD) as a hedge in yesterday's morning post. We don't need to the Fed Minutes to tell us what the market is going to do but it was nice to have the confirmation so we could add some bonus money with our Futures trade. Now, the nice thing about the Futures is we can flip long on /YM at 17,500 (with tight stops below) and lock in the gains we made on DXD until the market opens. On the whole, however, we're expecting more downside than this but it will take a while for the dip buyers to realize they are tilting at windmills.
Speaking of Quixotic trades, those wacky oil bulls are at it again, driving oil back to $50.20 despite a build in the API report. They are all excited because we bombed Yemen this morning but all we did was knock out 3 rebel radar sites with a few dozen tomahawk missiles and the only person who'll make money on that is Lockheed Martin (LMT) who charges $2M for each one of those bad boys (long LMT!).
Still the very mention of anything even vaguely Arab-sounding and missiles is always good for a pop in oil and we're popping up to $50.40 per market on oil Futures (/CL), where we're happy to take the bulls' money and short them again with a stop at $50.55 ($150 per contract loss) and we'll do it again at $50.90 if…
by phil - October 12th, 2016 8:30 am
"When I get to the bottom I go back to the top of the slide
Where I stop and I turn and I go for a ride
Till I get to the bottom and I see you again" - Beatles
No, it's not a song about killing people (Manson), it's a song about a carnival slide in England.
As it says at the entrance: "Don't forget your mat" – just as we always remind our Members not to forget their hedges because, when we get to the top of the slide, we often go for a ride to the bottom, where we see bargains again and it's a damned shame if we're not ready to buy them, right?
Just as the path of the Helter Skelter is predictable, so is the eventual unwinding of a market rally and, no matter how much QE you pump into it, things do come down eventually. Only when you build on the base are you able to raise the bottom of the slide. Otherwise, no matter how high you climb – you will see that bottom again.
We had a little scare yesterday but not too much damage done, so far and, hopefully, you are well-hedged, like our Member Craigs, who said last night:
Phil I must say that it was really nice to have a portfolio that was looking very stable in the face of a rough day for the markets. I ended the day up 0.3% which includes another successful day of futures trading. So with a portfolio of mostly cash, a few of our faves like Apple and LL, JO, TOL, DIS, etc., along with a couple of hedges that paid off nicely today, and my futures trades, I never had to break a sweat during that madhouse today. Yes, by George (or Phil), I may be learning this system.
by phil - October 11th, 2016 8:20 am
I may have mentioned AAPL a couple of times, after all, it was our 2013, 2014 and 2015 Stock of the Year but not this year, as we were at $120 last Thanksgiving, when I make my picks for the following year, and we saw a rough year ahead so our Trade of the Year for 2016 was the Natural Gas ETF (UNG), which is right on track. Anyway, I laid out my logic for the AAPL trade on TV (as I always do with our trades of the year) and this graphic they used lays out the idea we had to take advantage of AAPL.
The target price was $120 and the target time was Jan of 2017 and we've been in and out of AAPL along the way, buying whenever it's below $100 and selling when it went over $120 because, as I noted yesterday, we are FUNDAMENTAL investors and we KNOW what our stocks are worth so we buy them when they are cheap and we sell them when they are expensive. I know that's a strange concept to most investors but trust me – it's a profitable one!
Notice we don't NEED a stock to go up for our Trade of the Year to make money – that's not how we play the market. At Philstockworld, we use the simple options strategies we teach our Members to construct plays that give us tremendous upside leverage. Using the above bull call spread and put combination, we netted into the AAPL trade for just $8,000 in cash and, if AAPL manages to hold $120 into January, the bull call spread will be worth $60,000 for a $52,000 profit (650%). This is good money for two years' "work", right?
Every year, in an attempt not to be boring, I struggle to find a Top Trade Idea that's better than Apple but that doesn't mean we aren't afraid to go back to the well, over and over and over again – when the opportunity presents itself. As recently as August, when Apple dipped back to $108.36, we made AAPL our Top Trade Idea for the Week on 8/22 and I…
by phil - October 10th, 2016 8:29 am
We had a great weekend, how was yours?
There's nothing like making $1,000 per contract trading Futures to get a weekend off to a good start so forgive us if we're still in vacation mode. As you can see on the chart, the trade we went over Friday morning, in the morning post (which you can't possibly afford to have sent to you every day pre-market but can often be seen for free once the market opens), made a very quick $1,000 on each short contract and went on to add another $300 after hours for those who stuck with it.
We also called for shorts on the Indexes, saying:
The initial move by the market was a quick pop but it's a shortable pop at Dow 18,200 (/YM), S&P 2,155 (/ES), Nasdaq 4,875 (/NQ), Russell 1,250 (/TF) and Nikkei 16,900 (/NKD) which are the same lines we've been shorting all week because this is the kind of bad news that really is bad news as our economy is stalling while the Fed has their foot firmly on the gas and they've already warned us they are going to have to hit the brakes because the road (and yields) are about to curve ahead.
The Dow fell to 18,100 for gains of $500 per contract, the S&P hit 2,140 for gains of $750 per contract, the Nasdaq hit 4,840 for gains of $700 per contract, the Russell hit 1,230 for gains of $2,000 per contract and the Nikkei dropped to 16,800 for gains of $500 per contract and that is why we LOVE playing the Russell – so much more exciting!
All told, the 6 Futures trades we specified FOR FREE in last Friday's morning post, if you played just one contract each, made $5,450 and THAT is how we get our weekend off to a good start. As I'm sure you've noticed, both oil and the indexes are in the process of resetting themselves this morning and we are salivating over the chance to dive in and short them again because nothing has changed over the weekend – the market manipulators are just taking advantage of the slow Columbus Day trading – a bank holiday in the US.
by phil - October 7th, 2016 7:48 am
One Billion Barrels of oil – fulfill one contract for 1,000 barrels… 999,999,000 barrels of oil on the wall! 999,999,000 barrels of oil on the wall… Well, you get the idea. One BILLION is a lot of oil to have put out orders for – especially for a country that imports only 7M barrels a day. That would be a 142-day supply of oil if it were delivered. It would be even stranger if that oil were actually delivered to Cushing, Oklahoma, a facility that can only handle about 50M barrels of oil PER MONTH and just so happens to be full at the moment – so maybe 20M max.
The rest of the contracts, the other 940,000,000 are fake, Fake, FAKE orders that will all be either cancelled or rolled over to another month (causing more fake demand) by expiration day on the 20th, just 10 trading days from today. This is how the criminal US Energy Cartel keeps the price of oil up – even when there is no actual demand. It happens all the time, we point it out all the time – yet there are never any investigations as to why there are orders for 480M barrels of oil to be delivered to Cushing, OK, in November when it's not even remotely possible for 90% of those barrels to be delivered.
All these trading costs are passed down to you, the consumer. You pay them at the pump every time you fill up as the price of gasoline is set by the oil and gas trading that goes on at the NYMEX. “We get multiple complaints about spoofing every week,” said Aitan Goelman, director of enforcement for the U.S. Commodity Futures Trading Commission, CME’s main regulator. “It’s not a vanishingly small or infrequent practice.”
The CFTC said in a 2014 report that 10 spoofing probes had been initiated from July 2012 to July 2013 at Nymex and Comex, two of the derivatives markets owned by CME Group Inc. The regulator recommended the exchanges “continue to develop strategies” to detect the banned behavior. Clearly it's not working (if they did anything at all). The problem is, if the CME ever…
by phil - October 6th, 2016 8:27 am
$2 Billion Dollars.
Not much in the grand scheme of things but that's the probably cost of Hurricane Matthew along it's projected path that takes it up the Florida coast and all the way to North Carolina before turning back to sea. iShares US Insurance (IAK) is the insurance ETF and it's weighted to American International Group (AIG), Chubb (CB), MetLife (MET), Prudential (PRU), Travelers (TRV), Aflac (AFL) Allstate (ALL) and Progressive (PGR) – a good mix of companies likely to take a hit in a storm.
Ordinarily, we have no interest on betting on storms but the insurance sector (IAK) is particularly complacent this year after 3 straight years of low-damage storms and, of course, a lot of the insurance stocks are dividend-payers and dividend-payers have been in high demand this year as investors have been chasing yield. We've already seen a pullback in Utilities (XLU) which have been down 9 straight days, so Insurance is due for a drop anyway - and we still have another 3-4 weeks of hurricane season to go.
Florida has already declared a state of emergency in 26 counties and has asked President Obama to call out the National Guard, with all their men and equipment – so we can ring the register already. Home Depot (HD) and Lowe's (LOW) tend to benefit from storms as people prepare and then repair their homes but for most businesses, it's a lost weekend of commerce and that's where the real costs come in – as well as disruptions in travel. While oil bulls may be excited about supply being shut in – so is demand!
This is not a good way to start off the 4th Quarter as Corporate Profits continue to plunge, even as changes in Minimum Wage Laws are pushing Compensation higher and that, my friends, is how we end up having a margin squeeze. Overall, as I noted over the Nasdaq on Monday, rising wages are a net positive for the economy but first the wages have to go to the people and THEN they start buying more stuff and THEN the companies grow their revenues and…
by phil - October 5th, 2016 8:19 am
So, what next?
Yesterday we had a bit of a dip, but nothing tragic and this morning Europe is down half a point (China closed all week and Japan is just silly) on TERRIBLE PMI reports across the board and the PMI for the EuroZone hit 20-month lows indicating growth has slowed to its weakest levels since before the ECB unleashed its stimulus program in March of last year.
Now we know how long massive stimulus can prop up the markets – 20 months – then the clear failure resumes. Once again it is obvious that the UK's Brexit was merely the first rat with the good sense to get off a sinking ship.
We all know about Deutsche Bank's (DB) horrific troubles but Credit Suisse (CS) are down from $27.50 a share last summer to $13.39 at yesterday's close and while we may have some faith that Germany will ride in and save the day for DB, who is going to bail out CS if they run into trouble? The entire GDP of Switzerland is $685Bn, not even enough to cover CS's derivative exposure – even if the Swiss were inclined to bail out what is essentially a European Bank that grew out of their small country (8M people).
Europe is actually in a great deal of turmoil with Germany, France and Spain all with pending elections while Italy is voting on a constitutional referendum in December, which would radically alter their Government and pave their own path to exit the EU. That's why we've seen the ECB capitulating a bit this week and saying perhaps it is time to "normalize" rates as EU savers, unlike US savers, are good at math and understand the damage that ZIRP is doing to their retirement accounts.
Spain doesn't even have a Government at the moment and hasn't had one all year, since the PM Rajoy miscalculated and called for an election, in which his party failed to gain a large enough majority to re-elect him. After two grueling national elections in six months, and with a third vote possible in December, no party has won enough seats or forged the coalition needed to form a government. But, after trudging…
by phil - October 4th, 2016 8:12 am
Well, something is going to happen.
As you can see from Afraid to Trade's S&P 500 (SPY) chart, we're clearly forming a Triangle Squeezy +Thingy Patten on the index and that's bound to lead to something dramatic in the pretty near future. How's that for technical analysis?
As noted yesterday morning, when I was interviewed over at the Nasdaq, we're still a bit skeptical of these low-volume moves up and, Fundamentally, we just don't see a good reason to go long here. In fact, just this morning, I put out an Alert to our Members saying:
On the indexes, the strong Dollar should knock us down a bat at 18,200 (/YM), 2,160 (/ES), 2,875 (/NQ) and 1,250 (/TF) so watch those lines and short the 4th if 3 go below with very tight stops if ANY go back over. Can't use /NKD (16,800) because they love a strong Dollar.
We're also loading up on Coffee (/KC) at $1.475 and Natural Gas (/NG) at $2.875 this morning – those are two longs we also have long-term plays on in the ETFs (JO), (UNG) in our Member Portfolios. See last week's Live Trading Webinar for commentary on both of those trades.
I also tweeted it out (you can follow me here) along with news and market comments so I'm not not going to repeat that stuff and we can move on and discuss some other things that matter, like this year's 20% melt-down in the British Pound which is now causing the FTSE to lead European markets higher which is, of course, ridiculous because the FTSE stocks are priced in Pounds so they are really only going higher because the currency is worth less (worthless?) than it was before.
Don't forget another Goldman Sachs (GS) stooge, Mark Carney, is running the Bank of England into the ground, which is extra interesting as he's Canadian. So, if you are British and you saved all your life and last year you had 1,550,000 Million Pounds in the bank – you've gotten 0% interest and now your remaining…
by phil - October 3rd, 2016 6:06 am
Oil spiked this morning.
Back to $48.87 (/CL) in part due to the supposed OPEC deal to make a deal in December and in part because Hurricane Matthew is flirting with category 5 and heading towards the Gulf of Mexico, where it threatens a lot of production and will disrupt imports heading that way. At the moment – it's projected to turn north and graze Florida's East Coast, where it would instead become an insurance nightmare.
We took the opportunity to double down on our oil Futures shorts (see last week's Live Trading Webinar) and we'll keep an eye on the Oil ETF (USO) for an opportunity to add more Nov $12 puts at $1 if we get a good spike up. Nothing Fundamental has changed in the oil market – just a lot of sound and fury giving the bulls a bit of hope this morning.
We already took the money and ran on our other Futures Webinar play on Coffee (/KC), picking up $600 per contract on the quick spike higher and we're still long on the ETF (JO), which we picked last month at $20 (now $22.20) when I was on at the Nasdaq and I'll be back there this morning for another interview with another pick.
Friday's rally was, as we expected way back last Monday, driven by Fed Speak and UNSUBSTANTIATED rumors that Deutsche Bank (DB) was settling with the DOJ for "just" $5Bn but German law is such that, if there were actually a settlement, they would have had to report it in 24 hours and they didn't so we'll have to see how much of Friday's 14% rally will unwind as we drift back to uncertainty and then we have to wonder how much of the Financial ETF (XLF)'s 1.5% rally will be given back and then we have to wonder how much of the S&P (SPY)'s 1% rally will be given back.
So that's on our plate for today and the Fed is still spinning plates this week with 9 speeches this week but 3 of them are super-hawk Jeff Lacker for some reason and he gets the first at-bat tomorrow (8am) and then 1pm and 5pm…