by phil - September 22nd, 2013 6:35 am
We completed part one of this review on September 1st.
Now it's the 22nd, 3 weeks later and we've given our late August picks enough time to mature (like fine wines) and now we'll uncork them and see how they came out! The last day we reviewed was August 9th and we had begun shorting Russell Futures (/TF) at 1,050 and they were up $2,800 at the time of the review (9/1) but, since then, the market has recovered – A LOT – and the Russell is back to 1,069.
Hence the transient nature of any trade reviews – they work until they don't and they don't work until they do. The real trick is learning to take a profit – when and if they come along. In the first 10 trading days of August, we had 50 trade ideas that were NOT part of one of our virtual portfolios and 42 (84%) of them were winners as of Sept 1st. As you can see from the IWM chart above, the end of August was a choppy mess. We'll see how we did on those picks but it's hard to imagine such a strong average in that kind of chop.
From a Fundamental perspective – our expectations are higher because the market is higher and we have to look at this incoming data while asking ourselves the question: "Is this data good enough to justify all-time market highs?" Of course we know the market is "juicing" on Economic Steriods – that's not the point because it's not "illegal" and they're not going to have to stop using stimulus - but all-time highs are the big leagues. They are the playoffs, in fact, and now they have to be turning in performances that are the best of the best or else the fans (investors) can turn on the markets very quickly!
by phil - September 21st, 2013 8:32 am
From the Education Archives at www.Philstockworld.com:
by phil - September 20th, 2013 8:24 am
Strap yourselves in folks, it's going to be a wild one!
As I told you on Wednedsday morning, we were getting way too overbought to keep going much higher. This stuff isn't complicated folks, it's just physics. When the Market did pop after the Fed at 2:30 on Wednesday, I said to our Members in Chat:
Gotta love IWM at $107 (RUT 1,070) for a short. Actually, TZA is more fun with the Oct $22/25 bull call spread at 0.96 so 20 of them in the STP to start and happy to DD if they get cheaper.
That was, so far, the bottom of TZA and that thing is going to fly if the Russell falls back below 1,070, so it's a fantastic hedge that pays $6,000 back on $1,920 if TZA gets back to that $25 line into October expirations. We also took the opportunity (4 minutes later) to sell FAS calls into the spike in XLF, with me saying to our Members:
FAS/STP – Let's sell 5 Oct $80 calls for $1.55 ($775) and we'll buy more longs if they hold $75 into Friday (also riding out the short $70 call, now $7).
Already yesterday, those FAS short calls closed at $1.30, which is up a quick $75 (10%) in just one day. These are action/reaction plays and we had a discussion in Chat, in fact, about how understanding implied volatility and the way it changes and affects option pricing helps you gain the confidence to make these day trades. Also, by the way, I'm not really an "I told you so" kind of guy but, if I don't point out that I told you so – then how will you know the next time we see a similar thing that maybe I know what I'm talking about?
by phil - September 19th, 2013 8:24 am
Holy cow, look at that Dow line:
We have gone from 14,700 to 15,700 (6.8%) in 3 weeks. At this pace, we'll be at 19,000 by December 31st and over 20,000 in January and 32,000 at the end of next year! Wow, that is so normal, right?
Of course, the Fed DID put $1Tn into the market yesterday. Actually it was more like $2Tn because they are continuing to put $85Bn PER MONTH ($1Tn per year) into the markets through QE but they also withdrew $1,000,000,000,000 – not just from your savings account – but from every single asset you have, when they devalued the Dollar by 1% yesterday.
That's right, the US Dollar responded to the Fed's complete lack of respect for the money supply by dropping a full point yesterday and now sits at 80.03, down 4% since the Dow began rising 6.8%. Since the Dow is priced in Dollars – doesn't that then mean that the Dow is really only up 2.8% in a steady currency? 14,700 + 2.8% is only 15,111, not 15,677 and 15,111 is STILL below the 5% line. If I'm right, then 15,200 is going to be serious resistance and we can expect the Dow to grind to a halt 89 points from now, at 15,766 so that will be our new shorting target (if they even make it there).
It is like pulling teeth getting TA people to understand that TA is USELESS if you don't take currency fluctuations into account. It's like looking at a temperature chart shooting up suddenly and then the guy drawing the chart says – yes, I used to measure in Fahrenheit but I switched to Kelvin last week and things really warmed up!
Sorry, but we were doing geek jokes yesterday and I'm still stuck in that mode…
Anyway, clearly any rational person understands that you can't have a chart where the units you are measuring in change while you are graphing your points. NORMALLY, we expect some currency fluctuation as it tends to even out over time but, looking back to 2003, when the Dollar was worth 107 against a global basket of currencies – we can see that the long-term…
by phil - September 18th, 2013 8:29 am
Here we go again!
Dave Fry drew the line and all we have to do is break over it today and we're at new all-time highs on the S&P 500. It is widely expected that the Fed will begin to "taper" today, cutting their $85Bn monthly injections of cash into the markets down to about $70Bn – so they'll "only" be pushing $940Bn a year into the system – not over $1Tn anymore.
Even the thought of this small change has sent commdoities lower – notably gold, which has fallen back to the $1,300 line with silver at $21.62 and copper at $3.25, which is down 13% from $3.75 at the beginning of this year and indicates that this market rally (up over 20% for the year) has nothing at all to do with demand and everything to do with supply – of money!!!
MORE FREE MONEY is chasing the same amount of stocks and bonds (consumer and corporate spending are flat so it's not going into goods and services) and that's depressing the rates bonds need to pay to attract the deluge of cash while pumping stock prices to the moon and beyond. So much so that the McClellen Oscillator is now pegging the most overbought it's been since mid July, the last time the S&P topped out (1,709 was the 8/2 high).
We went over the ramifications of this our Member Chat Room this morning so I won't re-hash it here but it's something we're going to be paying very careful attention to today. We remain bullish for the moment (see last Tuesday's post) but also skeptical that we'll be making those new highs – or keeping them, at any rate…
No, this is not a chart of One Direction fans vs how much skin Miley Cyrus keeps covered, this is a chart of the Monetary Base of US Dollars ($2.7Tn, up from $800Bn in 2009) vs the CPI (lower) over time. As I pointed out at our Atlantic City Investing Conference in April – it doesn't matter how much SUPPLY of money you have if the VELOCITY is low – you still won't boost prices.…
by phil - September 17th, 2013 8:31 am
That was disappointing!
Things started out very exciting as we opened the S&P at 1,704 and ran all the way to 1,705 for a second there, just after noon but then reality stepped in and ruined the mood. The Dollar had bottomed out at 81.13 but bounced back 0.5% to 81.55 and that, of course, took the S&P down 0.5% (because they have that kind of relationship) and we had a sad little close.
On Dave Fry's SPY chart, it's 170 but, on the Index itself, we're testing 1,690 in the Futures this morning, down from 1,703.75 at yesterday's highs – pretty much the same thing but our goal for the index is 1,709.67 – that's the August 2nd high and that's what needs to be cracked on this run or the next time we test our +5% line at 1,680, it may not hold.
Speaking of lines, it's no surprise, looking at our Big Chart, that the Nasdaq pulled back hard yesterday, dropping about 40 points (1%) from it's silly open to the more realistic close at 3,718. As you can see from our spreadsheet (which is the real Big Chart, the rest is just illustration) the invisible string between the Nasdaq, the NYSE and the NYSE (both still below the Must Hold lines) was stretched more than 10% and either they had to go up or the Nasdaq had to come down.
Of course AAPL tends to warp the Nasdaq but AAPL is DOWN $50 since the August highs and that's 10% so it SHOULD have a 1.4% drag (now 14% of the Nasdaq) on the Nasdaq but the Nasdaq is HIGHER than it was in August, when it was just below 3,700. So, if AAPL is dragging the Nasdaq 1.4% lower but the Nasdaq is, in fact, 2% higher – then QCOM (7%), MSFT (5.5%), ORCL (4%) GOOG (4%), INTC (3%), RIMM (3%), CSCO (2.5%), AMZN (2.5%) as well as ATVI, EBAY, BIDU, COST, FSLR, NWSA, SBUX, PCLN, etc (1%ish) must be MORE than pulling their weight.
by phil - September 16th, 2013 8:30 am
Everything we were worried about is "fixed" and most of the Global markets are snapping higher this morning. That suits us just fine as we got much more aggressively bullish at our Strong Bounce lines on Tuesday (see "5 More Trade Ideas that Make 500% in an Up Market") and, even better, we nailed it again on oil, which is DOWN to $106.50 again this morning (/CL) for $2,000 PER CONTRACT gains!
As I said on Tuesday: "I can only tell you what is going to happen and how I think you can make money trading it – the rest is up to you!" On Thursday morning I said trading the Nikkei to fall on a rising Yen was the second easiest trade on the planet (it dropped 150 points that day), with the first being shorting oil (/CL Futures) at $108.50 that morning. If you are one of our Members (and if not, why not?) or if you read our posts regularly, you know WHY we were shorting oil last week, so I won't rehash it here.
$106.50 was our primary target for oil to drop, but we do expect to test $105 between now and Friday - perhaps much lower if we are lucky. We moved our USO puts to October, just in case oil took longer to fall than we thought but our very aggressive SCO (ultra-short oil) position stayed open over the weekend and would pay off VERY nicely at $105 or lower.
Europe is still a mess, Asia is a boarderline disaster and the bottom 80% of our country can barely bring themselves to get out of bed in the morning but – So What? – MORE FREE MONEY!!!! That's the deal from the Fed this week (or so the bullish traders believe) and we should be able to peg those highs again, at least until Wednesday's FOMC Statement (2pm) or Bernake's 2:30 press conference after the meeting.
Friday is a regular Fed-A-Palooza, with George (hawk) speaking at 12:30, Tarullo (dove) at 12:40, Bullard (hawk) at 12:55 and Kocherlakota (hawk) at 1:45 to close out the quarter on a Quad Witching Options Expiration Day. I am declaring Friday an UN-Vacation. You CANNOT be away that day –…
by phil - September 13th, 2013 9:47 am
My apologies to all.
My flight was delayed until after 1am and I didn't finally get to Florida until after 5 and then, in a comedy of errors, I passed out without setting an alarm AND my Mom isn't here so no one woke me up! So, a bit behind is an understatement but let's use this spot while I find out how to get here wifi working (oh yes, and ANOTHER thing that's going wrong this morning – I'm typing this on a PC that I think runs on coal!
by phil - September 12th, 2013 8:21 am
What an exciting index!
On Tuesday, as one of our "5 More Trade Ideas that make 500% in an Up Market", we went long on 16 QQQ Jan $75/80 bull call spreads at $3 ($4,800) and paid for them by selling 2 ISRG 2015 $300 puts for $23.50 ($4,700) for net $100 on the $8,000 spread in our virtual Short-Term Portfolio.
Yesterday morning, however, AAPL decided to take a nose-dive pre-market and, because we were stuck in the spread (as well as long AAPL spreads), I sent out an alert to our Members early in the morning (7:22) to cover with short Nasdaq Futures:
So shorting /NQ at 3,175 is a good way to protect the AAPL longs in the STP. The Nasdaq Futures pay $20 per point so 10 contracts pays $2,000 on a 10-point drop and a tight stop over 3,175 limits the losses.
We hit our $2,000 goal (3,165) at 9:35, just minutes after the market opened, so my first comment to our Members for the morning was:
That's the $2,000 goal on the short /NQ futures and the weekly $495 calls can be bought back for $.40 so done with those in the STP and the $490 calls are $.72 and we'll keep our fingers crossed that we get more of our $2.50 back.
That's how easy it is to use the Futures for quick hedges on your positions when you have market-moving news outside of trading hourse. While we discuss many things at our upcoming Las Vegas seminar, nothing is more important for active traders than learning how to use this valuable tool – the same one that lets us use the energy markets like an ATM!
by phil - September 11th, 2013 8:35 am
Are we overbought yet?
Not so much according to Dave Fry's NYMO chart, where it looks like we can get away with another few days before gravity takes its toll on our indexes and that will take us right into next week's Fed meeting and… uh oh…
Darn, we were so worried about International terror with Syria and China that we forgot about the Domestic Bankster Terrorists, who are celebrating 40 years of destroying the working class (since Nixon took us off the gold standard and allowed workers to be paid in scrip).
Since that time, the scam has been refined and now, as you can tell from this chart, we have lost the majority of the "feedback" we used to get from Domestic Manufacturing jobs and have, instead, substituted the supply of fresh money by having the Fed simply print it, hand it to the banks, who drive the consumers into debt to keep things going for another cycle.
But the banks aren't even lending to bottom 90% consumers anymore, they are lending to the manufacturers and retailers who are busy buying each other with all the free money (artificially inflating their stock prices) or buying back their own stock (artificially inflating their stock prices) or investing in automation that enables them to lay even more people off (naturally inflating their stock prices).
The question is, are ther manufacturers laying off workers fast enough and saving enough money to justify the artificially inflated prices (from M&A) that were based on their POTENTIAL to do the same. You may have noticed that I didn't mention expanding sales. That's because our global GDP is up 2% and our stock market is up 20% so this is not real expansion of commerce, sales gained by one seller are lost by another for the most part.
There's nothing wrong with this plan, from the view of the top 1%. We can, in theory, keep expanding our profits for quite a long time as Corporate Profits (the ones we report, wink wink) are only 10.3% of the GDP after taxes but…