by phil - June 14th, 2016 8:18 am
This is why we cashed out last week!
As you can see on the chart, the Euro Stoxx 50 is now down from 3,050 last week to 2,800, down 250 points (8%) since we took the money and ran in our Long-Term Portfolio at 1:31 pm in our Live Member Chat Room and, the next day, I reiterated our call for CASH!!! during our Live Trading Webinar (replay available here). It is so much easier to cash out while the markets are still going up – that's why we didn't want to wait for the news to catch up with what we thought was a very obvious market call. As I said in last Tuesday's morning post:
Meanwhile, while we wait, we continue to short the Index Futures when we get a good signal and we didn't get one yesterday but today we have 2,110 on the S&P (/ES), 17,950 on the Dow (/YM), 4,530 on the Nasdaq (/NQ), 1,175 on the Russell (/TF) and 16,850 on the Nikkei (/NKD) and we can short the laggards if 3 of 5 cross under AND the Dollar is over 94 – those are our marks for the day and VERY tight stops above.
Look, I don't want to be Mr. Doom and Gloom – as I have pointed out, we have TONS of long positions because the Fed(s) have TONS of money to prop up the markets with. I just think it's a good idea to protect them from a potential revisit to 1,850 (-12.5%) because, truth be told, we've made more money in our Short-Term Portfolio (400%) on our downside hedges than we have on our Long-Term positions (100%) so hedging is great fun when it pays off and merely an annoyance when it doesn't – kind of like making small bets on long-shots at the track except, in this case – we also have our money on the favorites!
That afternoon, we decided enough was enough and we cashed out about 1/2 of our LTP positions, which left us tilted much more bearish in our Member Portfolios. Meanwhile, our Futures shorts are paying off fantastically:
- Dow 17,600 is down 350 points at $5/point = $1,750 per contract profit
- S&P 2,063 is down 47 points at $50/point =
by phil - June 13th, 2016 8:22 am
Come on people, let's lobby our useless Congress to make all Monday's National Holidays. A 4-day work-week would also make sense. If we stopped people from using Social Media at work, they'd be able to accomplish everything in 2 days anyway. According to the chart on the right, 10% of our workforce spends more time on the web than they do working.
Only 60% admit they visit Social Media sites during work and sure, 30% of those people are old – so maybe they really didn't but it's not just Social Media, of course. Finding a place to eat counts too, or planning a trip or reading non-work stuff. Work is, on the whole, a strange thing because most people can take a vacation for a whole week and the company is just fine without them, right?
"Gig Economy" workers don't get paid when they take time off and that gives Gig Employers a 2% advantage over their rivals right out of the gate. A complete lack of benefit payments adds another 6% advantage and then there's the fact that the employees don't get paid at all for time they are not being productive – let's call that 22% to round it out to a 30% advantage Gig Employers have over traditional employers.
Over 6% of our labor force is now "Gig" or pretty much 100% of the "jobs" that have been created since the crash of 2008. These are not, generally, great jobs. They are certainly not the kind of jobs that let you dream of a sweet retirement and that is why you have a jobs recovery without a recovery in the underlying economy and without any real growth in Consumer Spending or Housing. If we had a booming slave economy, you wouldn't be surprised that the slaves aren't running out and buying new homes or couches and washing machines yet the idea of wage slavery is too abstract for most Americans to understand – especially us older ones, who used to be able to afford an apartment in college with our minimum wage jobs.
by phil - June 10th, 2016 8:26 am
You are welcome!
How many newsletters that you read give away free trading ideas that make $1,000 per contract in just 48 hours? I'd say none but this one because I read A LOT of newsletters and, frankly, they mostly suck. That's why I started Philstockworld in the first place – I subscribed to all these people who sucked and it occurred to me I could do a much better job – and here I am!
We even went over this trade (still playable) in our Live Trading Webinar on Wednesday afternoon – it was the only trade we made (see replay here) as it was, by far, the best trade idea we could find. In Monday's post we also gave away, for free, an SDS hedging idea that I'm sure will come in handy today. If you'd like to have the PSW Report delivered live, to your mailbox, each day before the market opens – it's just $3 per day - I'm sure you do much dumber things for $99/month than miss out on great trading ideas that could actually make you money, right?
If you are a more serious trader, you might like our Top Trade Alerts – which we reviewed last weekend with 16 winners out of 18 trade ideas in March and April – and that brought DOWN our perfect score from January and February (sorry).
Usually our morning posts are simply a macro overview of the markets, focusing on whatever I feel is important to talk about that day. Recently, it's been all about the Brexit along with all the other Global nonsense that finally drove us to cash out many of our winners from our Long-Term Portfolio on Tuesday. Since we did not reduce our hedges in the Short-Term Portfolio (or the Option Opportunity Portfolio) – that left us fairly bearish heading into the UK's June 23rd vote and we sure haven't seen many things we've wanted to add this week while we wait – so we amuse ourselves with some fun Futures trades.
by phil - June 9th, 2016 8:29 am
Things are turning ugly again.
We are now officially short on the market and just in time, it seems as the EuroStoxx index is down 0.666% for the day and 3.33% from the top and it's another 145-point drop to our next support at 2,850 but call it the 5% Rule™ from 3,000, of course.
Speaking of the 5% Rule™, we nailed it with our oil prediction yesterday as Oil Futures (/CL) topped out right at $51.67 and, as I said in yesterday's morning post: "Our plan is to short 1x here ($51.15) and go to 2x at $52.25 to average $51.70, then half out at $51.70 and we'll see how far it falls." We didn't go quite as high as we'd hoped but our oil shorts already paid off nicely this morning as we fell back to $50.80 and we stopped out at $50.85 and now we're back short again below the $50.80 line, hopefully for a ride back to $50 but a tight stop still at $50.85, which risks a $50 per contract loss against possible $800 per contract gains, again:
We knew it would be something – that's why we called for CASH!!! on Tuesday, while everyone else was in a greed-buying frenzy. Today we can blame Mario Draghi, who spoke at the ECB's Economic Forum this morning and sent the markets into a dive (down 1%ish in Europe) by saying the truth – that monetary policy alone could not fix Europe's problems and that "if other policies are not aligned with monetary policy, inflation risks returning to our objective at a slower pace."
This marks a big shift from Draghi subtly hinting that the ECB needs to provide its own stimulus programs (preferably infrastructure spending) to outright begging as it's becoming clear that QE is losing it's effectiveness in the stalling economies of Europe and, as Draghi notes, it's not enough:
Bank balance sheets have not yet been fully repaired, as illustrated by the high stock of non-performing loans in some parts of the euro area. So more work-out of these non-performing assets will have to take place, and the
by phil - June 8th, 2016 8:37 am
"Don't worry about a thing,
'Cause every little thing gonna be all right.
Singin': "Don't worry about a thing,
'Cause every little thing gonna be all right!" – Bob Marley
We're not worried because we cashed out yesterday.
That's right, the Dow hit 18,000 and we took the money and ran, closing out over half of our uncovered Long-Term Portfolio positions, pretty much everything that was up 40% or more, getting our CASH!!! off the table just in time to take a 2-week trading vacation ahead of the June 23rd Brexit vote. It's so much easier to take your money off the table while things are still going up – you get much better prices from all the suckers who are still buying (they are called "bagholders" by market professionals).
The last time we did such a big cash out was last August and our timing was perfect then as we cashed out and went short and, by September, as the markets collapsed, our paired Long and Short-Term Portfolios hit $1M for the first time (up 66%) and we went shopping with our CASH!!! in late September (see "Back to Cash, Back to Basics – Buying Stocks for a Discount") caught the rally into January, cashed out again, went shopping in February and now we're out again at $1.5M – up another 50%, or 80% of our starting basis, in just over 6 months so of course we should be cashing in our gains, right?
Maybe our timing is wrong this time but that's why that indicator at the top of the page says "EXTREME GREED" that's where the market is and excuse us if we don't have the stomach to ride it up to 100. When you have profits, you NEED to learn to lock them in and protect them – otherwise, what's the point of making them?
by phil - June 7th, 2016 8:18 am
Janet Yellen told us yesterday not to overreact to the Friday's AWFUL Jobs Report while she herself overreacted and took the June rate hike off the table, blaming the Brexit vote – as if she only just yesterday found out about it. That sent our markets flying higher and, this morning, Asia followed us higher and Europe followed Asia and the US higher and now our markets are following Europe higher and the tiger will continue to chase it's own tail for a while and we'll see where we end up but then what?
Then tomorrow we get the oil inventories at 10:30 and $50 oil is one of the big drivers of this week's rally as the Energy Sector and the Financials who lent them money are much relieved. If you actually read Yellen's speech – it's kind of all over the place and she says "Unfortunately" 3 times and essentially says the Fed does not have a clue as to what's going on or what to do about it. Isn't that AWESOME???
She says weak 10 times: GDP growth, economic activity, business investment (3 times), productivity (3 time), US growth and International growth. The only "strongs" she mentions are goals for the future so yes, we are weak (10x) and we HOPE to be strong (4x) and the market reaction is to get back to all-time highs – as if we're already strong and getting stronger – AWESOME!!!
As I mentioned in yesterday's post, we're not trying to fight the Fed(s) here – as long as they are going to keep pumping up the markets, we will go along for the ride – but we will keep one hand on the exit door at all times because this crazy train may come to a screeching halt at any time but, for now, we seem to coast right past crisis after crises as they all pile up in our rear-view mirrors – still there but forgotten by our short-sighted investors.
In fact, our Long-Term Portfolio, which is generally bullish, topped +100% for the first time on yesterday's rally and our Options Opportunity Portfolio (available as a…
by phil - June 6th, 2016 8:03 am
It's always fun on days when Janet speaks.
Our FOMC chairwoman speaks TWICE today in Philadelphia (again at 2pm), so all sorts of fun this afternoon. You know our game plan – we're short the S&P Futures (/ES) below the 2,100 line. They are now 2,101.50 after hitting 2,082.50 on Friday, before the spectacular recovery and it's yet another example of why you need to have Futures Trading as part of your market tool-belt as we had a FANTASTIC time collecting money on our shorts off the Non-Farm Payroll disaster but only the very, very quick were able to profit from the action once the market opened.
There was certainly nothing in Friday's data that made me change my mind about 2,100 being a top, along with 17,850 on the Dow (/YM), 4,525 on the Nasdaq (/NQ), 1,160 on the Russell (/TF) and 17,200 on the Nikkei (/NKD) and we're over a couple and under a couple and we use a 3 of 5 rule to set direction and the direction should be down this morning and I don't see how Yellen is going to reverse that since she either stays the course, which is tightening by summer or she flip-flops based on a single jobs report and appears weak in her convictions – it's a lose-lose.
By the way, I don't want to come across as a perma-bear – we're just being cautious into the summer, where we expect a correction but then we'll be happy to buy again. In fact, we just reviewed our Top Trade Alerts for the months of March and April and only one trade idea was bearish (CVX) and it turned out to be one of our only two misses for the period against 16 winning trades. That would be impressive but it actually bought our average down as we were 16 for 16 in January and February!
As I noted to our Top Trade Members at the end of the review:
Bear in mind we are NOT encouraging holding a lot of open trades at the moment as we expect a sell-off in the summer. If you take anything away from these reviews it should be that you should
by phil - June 5th, 2016 7:31 am
Yet another fantastic two months for our Top Trade Ideas! Not only did we start the year with 15 of 16 winners (see April's Review), but our only losing trade idea at the time was UNG, which just turned around last week – making us PERFECT for 2016 in our first 16 picks.
Of course, it's been like shooting fish in a barrel since the February dip on the bull side but the really cool thing is we also called the drop on Jan 8th with SDS and SQQQ hedges that paid off huge as we bottomed out the next month. We only started doing Top Trades last August and what we do is simply select one or two trades a week from our Live Member Chat Room at Philstockworld that we feel have a very high probability of success. That then sends out Text and EMail Alerts to our Members, so it's perfect for people who don't have time to be on-line during the day. All PSW Basic and Premium Members have Top Trade Access (just make sure your smart phone number is in the box here).
We don't have a portfolio for our Top Trades as it would be redundant to our 4 Member Tracking Portfolios but many Top Trade Ideas are from trades we do officially add to our portfolios. That's why we do these reviews once in a while – to check in and see if our logic is on or off track. You can't make good future decisions without learning from your past ones – something we emphasize at PSW!
54 of our first 73 (74%) Top Trade ideas were winners and 4 of our 11 losers were Lumber Liquidators (LL) trade ideas – still one of our favorite value plays! Getting 3 out of 4 trades right is plenty to move the investing ball towards the goal line.
Combine that with sensible portfolio management techniques (diversification, managing losses, hedging) and you'll beat the S&P by a mile with no sweat. Generally, with our Top Trades, we're simply picking stocks we feel are underpriced and we're using our various options techniques to give ourselves even better discounts and hedged entries but these are patience plays that can take time to get going, usually our Top Trade Ideas have…
by phil - June 3rd, 2016 8:34 am
I love the shorter work-week.
This is a great time to point out to your boss that you got just as much done this week as you do in a 5-day week so let's start a campaign to shorten the workweeks. We certainly need shorter workweeks as we're no longer creating jobs (just 38,0000) in May – even though unemployment is LOWER, at 4.7% because people are quitting the workforce.
So say goodbye to 2,100 on the S&P and this is a good time to say "I told you so" as my headlines for the morning posts in this short week have been:
- Tempting Tuesday – 2,100 and Bust Again?
- Weakening Wednesday – S&P 2,100 Too Much for the Market
- Fake Market Thursday – OPEC, ECB and the S&P 500
As I mentioned on Wednesday morning, we are already in a bearish stance in our portfolios and very much in CASH!!! and we are short the /ES Futures at 2,100 as well as long the S&P ultra-short ETF (SDS) which closed yesterday at $17.91. It didn't have to be the NFP Report but SOMETHING was going to take the markets down as the rally was totally fake – on ridiculously low volume since last week. The low-volume window-dressing began at 2,050 on the S&P, so that's our short-term target (-2.5%) and we'll see what kind of support we have down there.
Meanwhile, the Futures are far worse than they look (down 0.25% at the moment) because the Dollar plunged 1% on the release of the Payroll Report (less workers need less Dollars to pay them) and we're back down at 94.50 but we should bounce around there and that bounce will make it worse for the indexes as the Dollar recovers. It will also jam down commodities and less workers need less oil so Oil Futures (/CL) short at $49 are going to be a fun play this morning. So much for the Fed tightening in June – no way that will happen now (not that it was going to).
by phil - June 2nd, 2016 8:25 am
No one was trading yesterday.
The markets may as well have been closed based on the volume trading on the S&P's ETF (SPY) and, as you can see, the TradeBots that did show up for work dutifully brought us right back to $210 (2,100 on the index) – to preserve the illusion that all is well – even though it's clearly not.
Obama made a great speech yesterday laying out the good and bad of our current economy and setting the tone for the next 6 months of debate as we decide who will replace him next year. The things that make me nervous about the markets have nothing to do with our economy – which is slowly recovering – it's about the economies of Europe and China and Japan. Those are the economic nightmares that keep me up at night.
Just yesterday, Bloomberg reported that the PBOC is looking to crack down on China's $8.1Tn on-line financing market (ie. shadow banking), which is used to finance everything in China from diamond mines to weddings. $8Tn is 80% of China's entire economy in unregulated banking and the fear is that it's become a massive Ponzi scheme as more and more small investors get involved in lending schemes in search of higher interest rates than the banks give them.
"Risks have also emerged because of the relatively loose regulations," Yu Xiangrong, an economist at China International Capital Corp. in Hong Kong, wrote in a recent note, citing reports of Ponzi schemes and operators disappearing with investor money. "We expect China to step up its efforts to address the risks associated with internet finance and to tighten regulations on fundraising, loan-pricing, lending and risk controls."
Meanwhile, casino revenues in Macau fell 9.6% – another indication of Chinese belt-tightening and April was down 9.5%. The average visitor spent $220, down 30% from 2014 and Macau's economy is down 13.3% in Q1 – it's 7th consecutive decline. Wynn (WYNN) opens the Palace in July – it will be interesting to see how that goes. Then Sands (LVS) opens the Parisian in September. While we wait, Moody's has downgraded the city's…