by phil - April 18th, 2016 8:24 am
That's where we finally stopped out on our Nikkei (/NKD) shorts from Friday's morning post. The short at 16,830 made $2,150 PER CONTRACT for those of you smart enough to subscribe to the PSW Report or one of our higher-level memberships. We initiated that trade on Wednesday, during our weekly Live Trading Webinar (replay available here) where we first laid out our logic as to why the Nikkei would plunge over the weekend no matter what the Doha outcome was. As I said in Friday's post (and on Benzinga's Morning Show):
That's right, yesterday we told you that the Nikkei was facing the Kobayashi Maru and we picked a short on the Futures (/NKD) at 16,830 and m-m-m-my Kuroda literally went to war with us, calling the Yen's recent strength "excessive" and warning speculators(us) not to get on the wrong side (our side) of his trade.
…If we're right about the Nikkei dropping 700 points (4%) that would drop EWJ ($11.89) to $11.41 so 0.59 on the puts and let's say we look for 0.50 and a 0.15 (42%) profit by Tuesday – that's almost as much fun as playing the Futures!
We shorted oil futures (/CL) at the bell yesterday as it tested $42 based on the ridiculous amount of fake, Fake, FAKE!!! open front-month orders at the NYMEX and the FACT that the storage facilities at Cushing, OK (where the NYMEX oil is delivered), as well as everywhere else in the country are full, Full, FULL!!! It's a simple investing premise and one we make money on on a regular basis at PSW – simply because we pay attention to basic fundamentals like these.
Yes, there's a big OPEC meeting this Sunday (again, see yesterday's post) but they are talking about a production FREEZE, not cuts and a freeze won't do anything to burn of the massive global glut of oil that is sloshing around out there and oil had already run up from $32.50 to $42 (29%) in anticipation of this and we considered 30% a bridge too
by phil - April 16th, 2016 8:24 am
Yet another fantastic quarter for our Top Trade Ideas!
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!
38 of our first 57 (66%) Top Trade ideas were winners and 4 of our 15 losers were Lumber Liquidators (LL) trade ideas – all of which are now coming back as LL pops back towards $20! Getting two out of three 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 long-term objectives.
Without further ado, here's the next month of trades for review – some are still good for new entries:
by phil - April 15th, 2016 8:36 am
You are welcome!
That's right, yesterday we told you that the Nikkei was facing the Kobayashi Maru and we picked a short on the Futures (/NKD) at 16,830 and m-m-m-my Kuroda literally went to war with us, calling the Yen's recent strength "excessive" and warning speculators (us) not to get on the wrong side (our side) of his trade. Rather than getting out, we decided to press our bet as the Nikkei tested the 17,000 line (down $850 per contract) as I said to our Members in Live Chat at 11:43 pm (yes, we work that long and hard):
What complete and utter BS!
I'm still in and would like to add some more to bring the average up to 16,800 if possible – no change in premise – just more talk and no actual action. Hopefully, we'll be back to 16,800 by 3am (EU open).
That was a reference to our original sub-16,800 entry from Wednesday's Live Trading Webinar (replay available here) where we began the conviction short on /NKD, which was targeted for a weekend trade anyway as the no-win scenario plays out for Japan at Sunday's OPEC meeting. That's enabled us to cut back to 5 shorts on /NKD with an average entry at 16,838 and, so far, a net profit of $2,075 – not bad for a trade we initiated on Wednesday afternoon although it almost broke our streak of winning webinar trades as it got off to a bad stop.
As I write this (8:05) we're now down to 16,700 so 16,750 is now our stop to lock in a $2,000 gain on 5 contracts and each 100 points now is good for another $2,500 and our target is that 16,000 line but each 100 we drop, we lower the bar on 1 more contract to the last 100 line we pass. For the Futures challenged, in our Webinar, we discussed playing the Nikkei short…
by phil - April 14th, 2016 8:30 am
It's a race to the bottom.
Who will be the first country to begin printing 1M denominations? We've seen this play out before and it's only a matter of time before one of the Global currencies completely collapses. The Yen is halfway there with 10,000 Yen notes, just one more zero before they are in stage one of Zimbabwe's 2008 hyperinflation, where the country was forced to print Trillion Dollar notes before they finally gave up, defaulted and revalued their currency. The boy in the picture needed that money to buy a quart of milk!
Oddly enough, Japan WANTS more Yen devaluation ASAP and their Finance Minister said just yeasterday that 105 Yen to the Dollar is not enough and they will be forced to devalue if the Yen gets any stronger (and we discussed Yen dynamics in last week's post). In fact, since last Thursday, our Toyota (TM) trade has already gained $1,275, which is a 566% gain on our net $225 cash outlay in 7 days – the trade idea for our Long-Term Portfolio was:
- Sell 5 TM Jan $90 puts for $4.80 ($2,400)
- Buy 5 Jan $100 calls for $7.50 ($3,750)
- Sell 5 Jan $115 calls for $2.25 ($1,125)
We knew that the BOJ would intervene or at least say they would intervene last week simply because we pay attention to all these boring Fundamentals that most traders ignore (see Thursday's post for my rant on that). In fact, as I said in the last line of that post: "That's why an "ugly" chart like TM doesn't bother us – we KNOW what the company is worth, even if our fellow investors do not."
We still like TM for the long-term, the trade will pay $7,500 if TM finishes the year over $115 and we're confident so you can still make $6,000 (400%) if you take a net $1,500 today – it just sounds kind of lame compared to our $225 entry last week – but that's the difference between taking a fundamentally good entry and waiting for the trend to reverse before buying a stock.
by phil - April 13th, 2016 8:28 am
We get the Fed's Beige Book this afternoon.
That's good timing too as JPM just announced earnings that were 6.7% lower than last year but, of course, they beat expectations that were adjusted even lower than that and the stock is up 3% pre-market on top of yesterday's 2% move. I wouldn't say that's wrong as the company did make $1.35/share in a quarter that's essentially bad and the stock is priced at just $60 so we can extrapolate a reasonable p/e of 12 assuming they make $5+ for the year – nothing wrong with that – they were just underpriced to begin with but that doesn't mean everything is fine, does it?
JP Morgan was one of the founders of the Fed and is still one a major owner today (the Fed is a private, not Government, institution) and current JPM CEO, Jaimie Dimon, put a positive spin on things despite revenues being down 3% overall at the World's largest bank. That was offset by $1Bn of cost-cutting (7%) and $687M less legal fees as JPM was one of the first banks to settle with the Government for defrauding consumers and causing the melt-down of the US economy (they're really sorry, really).
Other than cost savings and lack of legal fees: Investment Banking Revenues were down 24%, Trading Revenues were down 11%, Fixed-Income Trading Revenues were down 13% and Equity Trading was down 5% from last year, so JPM is still not on our buy list. Still, if you must buy a bank, JPM is a lot stronger than most as overall Invesmtment Banking Revenues are down 36% from last year – the worst since Q1 of 2009 so let's not get all excited about banking until we see how JPM's peers are performing.
Of course, most traders don't wait for anything silly like confirmation in a sector so expect all 800 banks to take off today based on the earnings of just one but we're perilously close to the tippy top of the market range (2,100 on the S&P) and we've been taking the opportunity of this rally to lighten up on our longs in our 4 Member Portfolios (…
by phil - April 12th, 2016 8:29 am
A big nothing.
That's what came out of Obama's meeting with Yellen and company last night. The White House issued a very short, meaningless statement which seemed very odd following an "emergency meeting" with the Fed. Of course, as former Fed adviser, Andrew Levin, reminds us: "A lot of people would be stunned to know” the extent to which the Federal Reserve is privately owned… Currently, the leaders of the New York, Philadelphia, Dallas and Minneapolis Fed banks are helmed by men who formerly worked for or had close connections to investment bank Goldman Sachs." So, when the Fed has an emergency meeting with the White House – it's really our favorite Banksters making demands of the President.
Very likely the "emergency" is the horrific earnings we're expecting from the Financial sector and nothing gets bankers to take action faster than a threat to their bonuses – especially this close to the time of year when they have to come up with deposits on their Hampton beach houses. Goldman Sachs, who arguably steered the United States right into the subprime crisis with Trillions of Dollars in risky mortgages repackaged as AAA paper – finally paid a $5Bn fine yesterday (0.1%) – a very small consolation as the statute of limitations runs out on criminal prosecutions for those "shitty deals":
There's a great documentary called "The Men Who Crashed the World" that summarizes the events leading up to the crisis and the scary thing today is that NO ONE went to jail and most of the same people are in the same positions today, once again writing the same kinds of loans with new packaging – setting us up for the next financial crisis. Even worse, they have exported their expertise and now demand for World Bank loans is back at pre-crisis levels – and this isn't even a crisis – yet!
Chinese Banksters have really taken the US playbook and ran with it and China has produced 450 new Billionaires since the Financial crisis, now past the US with 568 Billionaires (1/3 of the World's total) vs. "just" 535 people with 10-figure bank accounts in…
by phil - April 11th, 2016 8:29 am
There's an emergency meeting of the Fed today.
This afternoon, the Fed will attempt to get their act together prior to a special meeting with both President Obama and Vice-President Biden to discuss ways in which the Government might be able to stop the horrific slide in the GDP forecast that's been going on for the past 30 days and is ACCELERATING to the downside at a rapid pace – as noted by the Atlanta Fed's updated GDP Now forecast, which has dropped all the way to 0.1% – almost as low as the interest rates meant to stimulate it.
That's down from 2.7% forecast just after Q4 earnings were announced because CEO after CEO said "Well, last year was tough, but things are looking better for 2016." Given the reality of the earnings reports, the market rightly corrected back to our 1,850 Must Hold Level (see our Big Chart) but then, a miracle occurred after the G7 meeting and all of our Central Banksters got EVEN MORE DOVEISH – to a level even doves who love to go to dove strip clubs for hot, dovish action thought was "a little bit extreme."
All this dovey action could even be forgivable – if it were having any sort of effect on the economy – but it's not. It is so not that, since the start of the year, earnings estimates for the S&P 500 have fallen 10% – even as the market has staged a 10% recovery off the lows.
Does the market know something we don't know? No, the market is an idiot – why would you listen to the market when it's been wrong so many times before? The market is nothing more than a tale, told by and idiot, full of sound and fury, signifying nothing. Shakespeare knew that 500 years ago – when will you catch on? No one knows what's going to happen (just ask Hugh Hendry, who manage(d) $1.5Bn) but that doesn't stop them from telling you what's going to happen – especially if you are willing to pay a fee for their no-better-than-a-coin-flip knowlege of the Future. Here's a chart of how many funds out of 2,862 beat the market average over the course…
by phil - April 8th, 2016 8:22 am
Come on kids, let me tell you a story!
It's the same story we tell you every time the market goes dark and you are worried about the economic monsters in your closet but it sure works to calm the investors down – EVERY TIME! Yesterday the kids were really scared so they brought out all 4 of the Fed's master story-tellers to literally speak to kids at the New York Economic Club and boy, did that do the trick!
See, everything is great – no monsters under your bed or in the closet, now go back to the store or the market and BUYBUYBUY! And BUYBUYBUY investors did, reversing half of yesterday's losses overnight – EXACTLY what we predicted would happen yesterday morning and, how did we know? Because we've heard this story 100 times at this point! As I said to our Members:
I am simply in awe of the effort that is being put in by the G20
by phil - April 7th, 2016 8:31 am
Get ready for a quote-fest.
All 4 living Fed Chairs will be speaking tonight in New York, ostensibly "for the kids" but really to have an excuse to spin the Hell out of yesterday's Fed Minutes, which had a nice, fake rally into the close but it's already reversed in the Futures as we're down about 0.5%. For reference, here's each Chairperson organized by the value of the Dollar under their tenure – note the significant shrinkage which leads us to predict Peter Dinklage will die this season in Game of Thrones so he can be tapped to be the next Fed Chairman – you heard it here first!
We reviewed the Fed Minutes live during yesterday's Trading Webinar and we used the volatility to make a quick $480 for our Members trading Oil (/CL) and the Russell (/TF) Futures (replay available here) and, into the close, at 3:31, my note to our Members in our Live Chat Room was:
Dow stopping at 17,600 again. Lined up with 2,055, 4,525 and 1,105 so those are the current shorting lines (same rules but bear now). /NKD at 15,730 so already on the weak side. Dollar 94.45, as expected. Oil $37.68 – as expected. Gold $1,223, silver $15.05 – as usual!
Although the minutes were "doveish", the FUNDAMENTAL reason they were doveish is what concerned us as the economic situation has deteriorated considerably in the 3 weeks since the Fed meeting. This was, of course, a reversal from our morning call to go long but we were already out of the longs ahead of the Fed and looking to short as the minutes only confirmed what we expected to happen.
That's the nice thing about playing the Futures, you can take advantage of the market gyrations without having to get in and out of your long-term positions. The Russell Futures (/TF) that we focused on yesterday opened below our 1,190 line and topped out at 1,105 for a $1,500 per contract gain, even better than Silver (/SI), which jumped $1,000 per contract or Gold, which is up $350 per contract at the moment. …
by phil - April 6th, 2016 8:06 am
Wheeee, this is fun!
We nailed the top and, unfortunately, that means we're stuck in this nasty downtrend since last Summer with lower lows and lower highs on the bounces. This leg desperately needs to break that pattern or by May it may be far too late to sell as everyone will have gone away already. As noted by Dave Fry this morning – there are plenty of things worrying traders this week:
- A severely overbought market correcting
- Worries about a weak earnings
- Greece crawling its way back to the forefront as the IMF and EU duke it out over another rescue
- The Panama Papers revelations
- Ongoing global economic weakness
- Tuesday’s Trade Deficit indicated a downgrade to GDP ahead (the Atlanta Fed downgraded U.S. growth to only 0.4%)
- Oil prices declined sharply for re-linking previous correlations to stock market declines
- Dip-buying wasn’t seen for the first time in weeks
In fact, yesterday's pop in oil prices was the only bright spot that stopped things from getting worse overnight in the global markets and, fortunately, that was our long bet in yesterday's morning post, leading to a very nice $1,500 per contract gain on the /CL futures we picked long at $35.50 – not bad for a day's work!
Our Silver (/SI) trade was also a home run, going from $15.05 to $15.20, which doesn't sound like much but silver pays $50 per penny for $750 per contract and Gold (/YG) popped off our $1,230 line to just $1,237 but still good for $225 per contract ($33.20 per $1 move). The nice thing about playing Gold Futures is the relatively low margin requirement of just $2,000 per contract vs $5,720 per contract playing /SI Futures.
And, of course, all of our index lines came up winners and we can play them again today, following the same rules and, at the moment, the Russell is lagging the rest, just under 1,095 (our entry was 1,090 and you can see our buys triggering yesterday afternoon on the chart) and…