by phil - February 18th, 2014 8:19 am
Happy $62.1 Trillion!
That was the market capitalization of Global Equities at Friday's close. That's up $3.1Tn since February 4th as $11Bn flowed back into Equity Funds last week. Sure, $3.1Tn is 281 TIMES $11Bn but NFLX trades at 235 times earnings and TSLA will be lucky to have earned 63 cents per $198 shares this year and that's 314 times earnings so what's the big deal if Global Equities move a mere 281 times faster than actual inflows? What could possibly go wrong with the implied assumption that $11Bn will continue to flow in for 281 more consecutive sessions?
Notice, in the Money Flow chart above, that we're repeating a pattern we made back in September, when the S&P ran up 100 points, back to 1,750, just before giving it all back again into early October. It's simple physics – until as much money flows back in as flowed out, you're not going to have a sustainable recovery!
How many times over the years have I warned you about chasing low-volume rallies? The average volume on SPY was 98.5M/day last week, vs 174M/day the week before and 162M the week before that – WHEN WE WERE SELLING OFF. Can that really all be reversed by 7 sessions of light buying? It certainly didn't work out in late December and early January, when light volume led us up to a cliff.
I guess we're going to see this week, with options expiring on Friday and oil contracts rolling over on Thursday (/CLJ4 will be the new front-month and we're already using it for our oil trading – currently short at $100.90 with a stop at $101.01).
We'll also get a bit of data this week with the Empire State (NY) Manufacturing Survey this morning along with Housing data that we expect to be disappointing and E-Commerce Retail Sales that will probably be excused by the weather – even though that would make no sense at all. Tomorrow we get the FOMC Minutes and Bullard (hawk) and Williams (dove) speak on each side of it. Also more housing data and the PPI.
by phil - February 17th, 2014 8:32 am
US Markets are closed today.
Asia was mixed and the UK is up 1% but the rest of Europe is flat but our Futures are up about 0.25% – all on very weak volume, rendering the whole exercise meaningless. All of last week's rally came on extremely low volumes but it accomplished the mission of taking us back to new highs – reeling in the retail suckers so the big boys can begin another round of selling into expirations this Friday.
Still, we're not going to start shorting until we see some levels breaking down. When we adjusted our Short-Term Portfolio last Wednesday, we rolled back our TZA hedge to buy more time but also balanced a bit by adding a bullish play on silver:
- Buying 10 SLW Jan $20/25 bull call spreads at $2.60 ($2,600)
- Selling 5 CI 2016 $60 puts for $4.60 ($2,300)
CI popped up nicely for us and the 2016 $60 puts already dropped to $4.40 but SLW really took off and, as of Friday's close, that spread hit $3 and that means it's now $3,000 – $2,200 which is net $800 from a net $300 start – up $500 in 2 days (166%) and "on track" towards our hopefully $5,000 total if SLW holds $25 (now $25.38) and CI stays over $60 (now $77.71).
What we are teaching our Members with these Trade Ideas is that it is NOT necessary to make short-term trades to make very nice short-term returns. You could kill this trade now and pocket a very quick 166% but we sincerely like this trade for the long-term and, even though it's net $800 now, we still like it as it pays $5,000 if all goes well – another 525% of upside remains.
Back on 1/22, we added a similar combo to our Long-Term Portfolio, which…
by phil - February 14th, 2014 8:45 am
Dip? What dip? I don't see no dip.
Look, I'm from Jersey – I can appreciate the idea that, if you pretend something never happened (and there's no evidence), then everyone can just "fuggedaboutit" and move on with their lives (except, of course, the "evidence").
The Nasdaq is already heading back to record highs (fuggedding about 1999, of course!) led by our Stock of the Year pick, AAPL, as it climbs back to $550, fuggeding about their brief dip below $500 just two short weeks ago.
Our spread on AAPL, which is in our Long-Term Portfolio and our Income Portfolio was selling the 2016 $450 put for $46.40 and buying the 2016 $450/650 bull call spread for net $44.60 for a net $2 credit ($200 per spread) and already that combo is worth $40.70 ($4,070 per contract) - up 1,935% from when we featured it on December 30th (and it was adjusted to be more aggressive on the dip, because we had CONVICTION and because we managed our portions to take advantage of the dip!). In fact, on 1/28, when AAPL was falling below $500, I said in Member Chat at 4:15 am:
Amazingly, AAPL has pretty much announced they'll be moving into the mobile payment space with their 400M ITunes users (Visa has 50M users) and no one seems to be doing the math on that! Of course, it's hard to get traction when CNBC runs headlines like this:
In the article, they are talking about a 40% drop ($350) due to these "horrific" earnings, especially guidance, where AAPL "only" forecasts $43Bn in sales with the usual 37% margins. This Q they made $13Bn per $550 share (now $505). At $505, that's about $14.50 per share or a current p/e of 8.7 (assuming 3 more "terrible" quarters like
by phil - February 13th, 2014 8:29 am
We got our shorts in – how about you?
As promised yesterday, we took advantage of the Yellen rally to add more short positions to our Short-Term Portfolio and I sent out an Alert to all of our Members at 10:45, which gave us just enough time to take advantage of what Dave Fry called "sloppy and indecisive trading" on the S&P.
We pressed our short bet on WYNN ($224), FAS ($85) and long on SCO (ultra-short oil) at $29.77 and long on TZA (ultra-short Russell) at $17.90. We also added the SLW/CI bullish spread we discussed in the morning post, as we really didn't have any confidence in the indexes holding those levels. Silver is holding steady this morning while the indexes are plunging – so it looks like we made a good choice.
We have been bothered by the light volume all the way up as it's an indicator of a fake, Fake, FAKE market rally that can be quickly undone once real sellers show up again. That worked just great for us because, in the morning post, I said we were shorting the Dow Futures (/YM) at 15,950 and Oil Futures (/CL) at $100.66.
There was a bit of volatility in between but oil is at $99.66 this morning for a $1,000 per contract gain and the Dow is at 1,850 for a $500 per contract gain. We also liked a gold short (/YG) at $1,290 and we did dip to $1,286 but now back to $1,293 on a much weaker Dollar (80.35) and I also told you not to short gold unless the Dollar is over 80.85.
As usual, I can only tell you what's going to happen and how to play it – the rest is up to you.
by phil - February 12th, 2014 4:25 am
The river was deep but I swam it, Janet
The future is ours so let's plan it, Janet
If there's one fool for you then I am it, Janet
Now I've one thing to say and that's
Dammit, Janet, I love you…
The markets are loving our fiesty new Fed Chairwoman!
And why shouldn't they? Like the Joker in that first Batman movie - she's giving away free money – what could possibly go wrong? For almost 6 hours yesterday, Janet yellen testified before Congress and essentially said it would take an EXTREME change is circumstances for her Fed to take the foot off the economic gas pedal:
"Let me emphasize," she said, "I expect a great deal of continuity in the [Fed's] approach to monetary policy. I served on the committee as we formulated our current policy strategy and I strongly support that strategy."
Ms. Yellen was the Fed's Vice Chairwoman for more than three years before being sworn in last week as its new leader. From the #2 spot she pushed aggressively for the Fed to adopt easy-money policies, including the third round of bond buying launched at the end of 2012, to encourage borrowing, spending, investment and hiring. Her comments left little doubt that her plan - as was Bernanke's – is to tiptoe away from those policies only gradually as the economy improves.
As noted in Dave Fry's charts, we've made a very impressive rebound but, so far, it's been a low-volume affair with narrow participation and there is a danger that we're simply forming the right shoulder of the dreaded "head and shoulders" pattern that will take us back to 1,650 on the S&P.
by phil - February 11th, 2014 8:09 am
More free money?
That's the hope on which the markets are pinning this little rally as we bounce quickly off S&P support at 1,750 and already back to 1,800 – halfway back to 1,850 – making this little pullback the smallest of blips in the great bull rally of 2009 (now up 177% in 5 years).
What inflation? There's no inflation – unless you are buying stocks – then there has bee lots of inflation! The Fed has put $4 TRILLION into the markets through various operations and Global equities have gone up from about $30Tn to $80Tn. Don't worry though, if you add in what the BOJ, ECB and PBOC put into their ends of the markets, we're only about $40Tn shy – how could that possibly be a problem?
It's only a problem if people try to sell. Then, like 2008, they suddenly find out there's no actual buyers and prices plunge. As long as people keep believing that the market will always go up – everything will be fine – just like it was in 2007 (and 1999). So – NO SELLING PEOPLE!!!
Actually we did sell TSLA as they tested $200 and SCTY at $75 (see Member Chat for spread ideas) but we're also looking to add our bullish hedges (see yesterday's post) assuming the Futures rally holds up and we hit our tartget levels of Dow 15,900, S&P 1,806, Nasdaq 4,135, NYSE 10,100 and Russell 1,126. As I noted yesterday, we'll be happy to see just 2 of those levels and we're willing to go bullish but a rejection here today indicates we're simply forming that shoulder pattern ahead of the next leg down.
Look how quickly we flew from oversold back towards overbought on Dave Fry's McClellan Oscillator. Think about it, we "only" bounced back half but we're 2/3 of the way back to being very overbought – even though yesterday was generally flat we still bumped the oscillator up 38% – that's not really a good sign for the bulls.
by phil - February 10th, 2014 8:08 am
Wheeeee, what a ride!
As noted by Dave Fry, Friday's jobs report was bad – and that's good, isn't it? We need bad news to put an end to all this taper talk so the Dollar can continue to devalue almost as quickly as the Yen and Emerging Market currencies can stop collapsing and control their skyrocketing inflation caused by high commodities prices due to the Fed's easy-money policies. Get it?
It's one of those serpents eating its own tail kind of things that you know so well, we don't even need a picture, do we?
What we do need pictures of is the S&P and we had a huge volume spike into the close but, strangely, it did not move the market higher – that's not really a good sign – it just means all the people who pretended to be interested in buying the S&P up from 1,178 to 1,180 took the money and ran from the ETFs that were forced to buy at at market on close prices.
That is how they screw all the suckers who put their money into IRAs and ETFs, who are forced to buy on close at the end of each day, usually at whatever prices the Banksters want to dump the shares at (hence all those big rallies in the last 15 minutes) – that's why Banksters spend so much time and effort convincing you to buy IRAs, 401Ks, ETFs – anything that does the buying for you (on their schedule)!
As you can see from Dave's 3 S&P studies – it's all a matter of perspective. Our Members have been singing "Head and Shoulders" for over a week now, though, as this pattern was pre-ordained by our 5% Rule™ long before it showed up on the charts.
As I said back on January 28th:
This does not change our 5% Rule's™ ranges at all – these are just the very short-term moves we need to see in order to start pulling back our bearish bets (long in place) and begin to consider
by phil - February 9th, 2014 6:41 am
Finally we get to January!
Of course, it's silly to review trades less than two weeks after we initiate them. which is why these reviews are perpetually behind. In fact, we still have the last two days of December to get to but now we'll finally, actually get to January in Part 3. We left off in Part 2 with 13 of our 14 (92%) trade ideas for the holiday weeks coming up winners and Part 1 had just two trades – also winners (ABX and SSO) – back from Dec 7th, when we were still bullish.
Without any further ado (than the first two parts, of course), let's get into the first week of January and see how we did:
I was still feeling like Chicken Little because my warnings to get to cash into the Holidays still seemed to be baseless but I pointed out how FAKE I thought the rally was and how FAKE all the media cheerleading about strong holiday sales was – using this fantastic example of Corporate Contralled Media Manipulation from Conan. As I noted:
The news is nothing more than a script written by the powers that be as we prepare to celebrate New Year's Eve of 1984+30 and, of course, the so-called "Financial Media" is nothing more than a propaganda machine aimed at whipping viewers into a buying frenzy that retailers can only wish for.
From an index standpoint, we have easy warning lines to watch like Dow 16,000, S&P 1,800, Nasdaq 4,000, NYSE 10,000 and Russell 1,100 – all very much in the clear now and we'll put new, more aggressive levels on as they move up – so we'll always know when to pull the plug on our long plays.
- GOOG June $900 puts at $9, out at $11.50 - up 22%
- Oil (
by phil - February 9th, 2014 2:06 am
I was on BNN on Jan 15th, 2013 and my "One Trade" for 2012 had been BAC, which turned out to be the best performing stock in the S&P 500 for the year.
My "One Trade" for 2013 was this option spread on AAPL (graphic from BNN TV) and AAPL was well over $500 in January so the bull call spread returned $100 and the short puts are $2.40 turning $14,000 for 10 contracts into $97,600 in 12 months (up 597%).
The strategy we use here is called "Being the House – Not the Gambler," where we sell option premium to others, enabling us to take an inexpensive, leveraged position with limited downside. Using this system, we are able to buy almost any stock for a 15-20% discount, leaving our Members well-hedged while maintaining a significant upside position.
Our second trade idea for 2013 was TSLA, which was $34.50 on January 15th and closed Tuesday at $203.70 – up 490% for the year and the option spread we used hit our goal of turning $8,310 into $60,000 (up 622%), enough money to buy a Tesla with the winnings.
Our third big trade idea for 2013 was CIM at $2.84, where $19,600 invested in our long-term, hedged position (10,000 shares) is already worth $23,100 plus $5,600 in dividends for a net return of 46% so far (position expires in January of 2015).
On May 14th, I said in my BNN interview that "we could be in the beginning of an epic market rally," when the S&P was at 1,646 and now, 200 points later, we can talk about where I think the market is going for 2014.
After rallying 32% in 2013, the S&P is back at it's all-time high of 1,850 and the question is, are we breaking up and over or are we headed for a correction. We're leaning towards a correction here because, according to Citi Research, earnings expectations are deteriorating for Q1 – according to the S&P's own guidance.
by phil - February 7th, 2014 8:12 am
I try my best to make people aware of the ridiculous BS that goes on behind the scenes in the halls of power. I try to help people understand the way Big Business manipulates our Government, the same way the Banksters and Billionaires manipulate the markets. In short – we explore the dark side of Capitalism as having a realistic outlook helps us make better trading decisions.
But today, I give up! Why? Because the head of JP Morgan's Commodity Division has been INVITED by CTFC Chairman Mark Wetjen to join the Global Markets Committee that sets the rules for Futures trading. This is not letting the fox guard the hen-house – this is simply serving the fox all the hen he can eat! Didn't we just fine JPM $17Bn for manipulating the markets and screwing over investors?
Didn't Jamie Dimon just get a 75% raise because he got the Government to settle for ONLY $17Bn? Does anyone even remember these things? Thank God for Miss Lizzy:
Elizabeth Warren and Pope Francis are about the only things keeping me from giving up this year.
Well, that and this High School Football team, God bless them! Still, I feel like we're fighting a real uphill battle on the place Jon Stewart calls Bulls#%t Mountain (whole, great clip here):
Yesterday, Senate Republicans blocked a 3-month extension of Unemployment Insurance, leaving what is now 1.7M people without benefits (benefits we all paid the insurance for our whole working lives, don't forget!). To be fair, 4 Republicans did vote with 55 Democrats to not force fellow citizens into poverty and starve their families but it was one righteous person shy of the 60 needed to end the Republican filibuster and the legislation died on the floor of the Senate.
“We’ve given them everything they wanted. Paid for,” said Senator Harry Reid of Nevada, the majority leader, flashing his irritation at Republicans who blocked the bill.