by phil - September 4th, 2013 7:53 am
Here we go again.
Or, maybe not. As you can see from Dave Fry's (welcome back!) Dow chart, we're right back where we were at the June consolidation lows and maybe we'll panic down and test those spike lows but we're not as worried (yet) about a big drop as we were in June, when I sent "Hedging For Disaster – 3 More Option Plays that Make 300% if the Market Falls" to our Members.
We spiked to a low 3 weeks later, on the 24th and those trade ideas did a wonderful job of offsetting losses and putting cash in our pockets – which is exactly what insurance is supposed to do.
While others were panicking out of position on June 26th, I wrote "Wall of Worry Wednesday – Time to Climb Again?" and we took up the conrary position – especially on gold, which had fallen to $1,222.90 at the time and we decided we were ready to catch that falling knife. We were off the low by $50 but we've already exceeded our recovery goal of $1,350 and, of course, all of our miner plays are golden!
We're finished with Silver for now ($24.50) and that means we're also done with AGQ, which was $15.55 back on June 26th and now $25.50 for a very nice 64% gain in 3 months - who says I don't make straight stock picks?
Of course, the option trade idea was a bit more profitable as we went with shorting the 2015 $10 puts for $2 (now $1) top pay for the Jan $19 calls at $1.70 for a net .30 cash credit. The Jan $19 calls are now $7.70 and that puts the trade up an even $8 total of 2,667% on cash in 90 days. As I had noted in our August Trade Review – I rarely play silver, as it's so volatile – but that's no reason to not play it when it makes a clear bottom or top.
by phil - September 3rd, 2013 8:31 am
Come on people, chant with me – they're number 3! Still, for $7Bn, buying the #3 spot in the mobile phone market is a pretty big deal but investors are not liking it (nor should they) as it just sets MSFT up to get their asses kicked by AAPL in an even more embarrasing way than the ways they've already gotten their asses kicked over the years.
Even stranger, MSFT is only buying NOK's "devices and services" business for $7Bn. What exactly does NOK then, have left? The proposed price consists of 3.79Bn Euros ($5 Bn) for the Nokia unit that makes mobile phones, including its line of Lumia smartphones that run Windows Phone software. Another 1.65 Bn Euros ($2.2Bn) will be paid for a 10-year license to use Nokia's patents, with the option to extend it indefinitely.
Actually, the reason NOK popped 45% on the deal is that Mobile Phones are only 23.8% of the company's value with more of the company's worth (36.3%) coming from Nokia/Siemens Networks along with 11.1% from Navtech Digital Maps and the rest of the value is $5Bn of net cash, now $12Bn thanks to MSFT. That's good for us as we added 3,000 shares of NOK to our Income Portfolio as recently as 6/18 with my comment to Members at the time:
NOK/Kustomz – Interesting. They can still be played as an artificial buy/write with the 2015 $2.50/3.50 bull call spread at 0.60, selling the $3 puts for .48 and the worst-case there is owning them for net $3.12 (now $3.89). That's not a bad idea for the Income Portfolio as 3,000 of them makes a very quick $2,640 if they do get bought and, if not – we just have to hope they hold $3.50.
Yes, that's correct, we knew they were in play 2 months ago – didn't everybody? Our trade idea should go for about the full $2,640 profit (733% gain on cash) on this bump, 16 months ahead of shedule! Not bad for a trade idea that only required $360 of cash to initiate…
by phil - September 1st, 2013 5:58 pm
That about sums up our August as the indexes dropped all month long – down 800 points on the Dow (5%) and 80 points on the S&P (5%) and etc., etc… As long-term investors, we know we're going to get a little wet when the market turns down – the trick is to stay in the boat and be ready to ride the next profitable wave.
As I reminded readers on Friday, I never thought the summer would be worth playing in the first place – calling for our Members to cash out and taking a nice summer vacation way back in May. Many people took my advice and we've had a pretty quiet summer in chat but now it's time to go back to work – hopefully at the bottom of a bigger sell-off than the 5% we've had so far. The short story of the Summer is that we fell 5% into the end of June, gained 5% in July and fell 5% in August so here we are, back where we ended May.
That then, had barely any net effect on our long-term positions and, short-term, we were 97 right, 20 wrong and 3 even on our July Trade Ideas (see July Trade Review Part One and Part Two) but we've had little luck with the trade ideas we put in the Short-Term Portfolio, which is currently down a virtual $25,942 but, of course, our Long-Term Portfolio gained back $150,000 over the same time period – so, as a pair, they're actually doing exactly what they are supposed to do (offset each other).
We don't track our virtual portfolio trades in these reviews – this is for all the trades we don't track – which is most of them, of course. Of coruse, this is an arbitrary point in time and some trades could have had better (or worse) exits in between – we're not doing this to keep score, just to get an idea of what worked and what didn't in the past month so, hopefully, we can make better decisions this month.
by phil - August 30th, 2013 8:32 am
What a crazy month!
Here we are back where we finished May, when I wrote on May 31st's "Friday Finale – Final Chance to Go Away in May":
What a great rally it's been.
Thank you all for playing – have a nice Summer, be sure to come back for our Santa Claus Classic run in November…
Big Chart – I don't like that pattern one bit. That's a spitting cobra pattern and usually they strike to the downside (and, before you ask, yes – I made that up). Still, very logical for the M to form down to the 50 dmas – especially as those 50s are right on major lines for the S&P, NYSE and the RUT and we know the Dow is too silly to worry about and the Nas is ruled by 10 stocks and 5 of them are AAPL so they also give funny readings but the 3 that are broad and hard to control are all lining up perfectly for a 2.5% drop.
We fell 2.5%, bounced back and then fell 6.5% over the next month into June 21st when the chart looked like this after the Fed and I said:
The total drop is right about 4% and 4% is the line at which a 5% move should bounce back to (about 1,584 on the S&P from 1,650) and that was right at the low of the day, just before the close. That's what caused us, at 3:05 pm in our Member Chat, to
by phil - August 29th, 2013 8:27 am
It's GDP Day!
Actually, it's just the 2nd estimate of Q2. The last estimate was 1.7% back on July 31st. That bad news was not good news in retrospect but the Dow jumped from 15,500 to 1,650 over the next two sessions on the usual logic that a worse economy means MORE FREE MONEY from the Fed. At the time I warned that it wasn't anything to get excited about (and don't forget we changed the way it was calculated, or it would have been much worse) - but I was wrong for two days before becoming very, very riight. So right, in fact, that A MONTH AGO I said:
In the bigger picture, we ran up from 1,350 on the S&P in November to 1,700 (just shy) last week and that's 25% and again, a 20% overshoot is predictable in our 5% Rule™ so we expect a pullback to 120% of 1,350 to 1,620. We did get that already from the initial run to 1,687 in May so we could call that the correction we needed and, if so, then this is not exhaustion but healthy consolidation for a breakout.
Again kids, this is not hard and we don't need the silly, squiggly lines – it's just math! There are charts back on the 7/31 post to illustrate the math for those who need visual stimulus and you can see the updated long-term SPY chart here (Dave's on vacation!). Keep in mind – I can only tell you what's going to happen and suggest a few trade ideas - that's the limit of my powers...
Early this morning I sent out a Morning Alert to our Members (also Tweeted) to short the Dow Futures (/YM) at 14,850 and we got some Egg McMuffin money ($250 per contract) on the 50-point dip. Now we're coming into the GDP Report and we're back to 14,850 but very, VERY dangerous to play into the report – as it could go either way.
by phil - August 28th, 2013 8:34 am
That's a lot of money for oil. That would put gasoline up around $5 per gallon so the easy trade here is to grab some /RB Futures contracts ($3.07) and, at $420 per penny, per contract, a single contract would pay us $81,060 if gasoline hits $5 – that's enough money to buy a Tesla, and then we never have to buy gas again!
So, for anyone who believes the idiocy being spun by Societe Generale or their other Bankster buddies as they bang the fear drum, accompanied by their MSM puppets – just buy a single, long gasoline Futures contract and you'll find yourself rooting for death and destruction in the middle east.
As you can see from the chart of oil Futures above – there's still plenty of money to be made on the short side as we only play the crosses BELOW the .50 lines and, even though oil went over $110 and fooled us once for a quick stop – it went all the way up to $112 without a retrace, then fell all the way to $111 for a $1,000 per contract gain and then fell through $111 to $110 for another $1,000 gain and then through $110 to $109.50, for another $500 gain. Our job is just to stay in position, ahead of "The Big One" – like we had in the Summer of 1987:
Unfortunately, we slept through the big one but we caught the $110 to $109.50 leg this morning in Member Chat and now oil (/CL) is back at $110.50 and we'll risk another dime ($100 per contract) shorting them again. If we cover ourselves with the gasoline long, we risk $840 with a stop at $3.05 but we're very well covered for any pops in the oil Futures and (see yesterday's post) we really don't think any spike in oil will last very long.
If you don't like to risk unlimited losses on oil Futures, you can short oil using /LOX3 (on Think or Swim – you can access by simply looking up /CL in the option chains) and the November $110 puts (which expire at the October NYMEX rollover on the 20th) are…
by phil - August 27th, 2013 8:10 am
Now, where were we?
Oh yes, right back where we were last Wednesday, when I said we had to hold that 1,650 line to avoid BIG TROUBLE. We did manage to spike it into the close and finished at 1,651 and now we'll be back at 1,645ish this morning and looking to do it again.
We already failed to hold 15,000 on the Dow and 9,400 will fail this morning on the NYSE so those need to be taken back and we KNEW this would happen because we failed to take back our bounce levels (see last Wednesday's post) and that's why we watch them in the first place, isn't it?
Also the same as it ever was is oil spiking back over $108 (/CL), where we're looking to short it again in Member Chat either below the $108.50 line or below the $108 line if it crosses back with VERY tight stops as they are pumping the Hell out of this thing on war talk – even though Syria has very little to do with oil as it only exports 263,000 barrels of oil a day and does not have access to any critical ports of pipelines. Fear-mongering is good for short boosts, but they tend not to last.
Of course the real fear-mongering is coming from within as the GOP gears up for yet another debt-ceiling battle and, as much as they try to spin this market pullback as being about Syria (a country that is surrounded by our allies and bases), what's really spooking the markets is the very real fear of another massive collapse – like we had in August 2011, when the S&P fell almost 20% while the Republicans held the nation hostage.
Gold is a good bet (we're long miners) on both war talk and fiscal terrorism and, back in 2011, GLD flew from $150 to $180 (20%) during that crisis, This morning gold is already $1,417 and GLD is off the lows at $115 and is already up to $135 but I think we can get to $150 (about $1,500 on /YG) and I like the GLD October $140/145 bull…
by phil - August 26th, 2013 8:32 am
I love good bounce, don't you?
But just how good have our index bounces really been so far. While we had a pretty exciting session on Friday the voulum on a 0.34% up day on the SPY (see Dave Fry's chart) was only 1/2 what it was on the 0.64% drop on Wednesday. As Dave notes: "They don't put volume on your brokerage statement, but…." As to our bounce lines - not too impressive:
The NYSE is barely over the line so we keep that black until it proves it and, so far, we only have weak bounces taken from the Nas (right on the strong bounce line) and the always-leading Russell, which makes a fantastic short in the Futures (/TF) below the 1,040 line (with very tight stops above). We were looking to at least make our strong bounce lines by Friday
The Dow couldn't even put a good day together on Friday and finished off it's third down week in a row failing to take back the 200 dma at 15,100 while the S&P tested theirs at 1,635 with AAPL and MSFT giving the S&P and Nasdaq most of their lift as well as TLSA, which flew up to the $160 level, putting the short-sellers into a bunker mentality.
by phil - August 23rd, 2013 8:15 am
And Jackson Hole is open for business!
The conference officially kicks off this morning but, usually, we get early pronouncements – there were none yesterday. Possibly because Bernanke is NOT attending the Federal Reserve's Annual Meeting (draw your own conclusions) – it's been pretty quiet so far. Tonight's dinner is hosted by KC Fed President, Esther George and will focus on the impact of the Fed’s unconventional policies, according to the WSJ.
The papers and discussion on Friday will center on the situation the Fed has grappled with since the 2008 financial crisis: short-term interest rates close to zero but the economy still flailing, prompting experimentation with new policy tools and how those tools work.
On Saturday, the scope of the conference widens to the global impact of the Fed’s policies, though a panel discussion Friday featuring the head of Bank of MexicoGov. Augustin Carstens, a Chinese academic and a European Central Bankofficial is also likely to touch on that theme. Janet Yellen is not giving a speech, but is the emcee for Saturday’s events. Larry Summers won't be there (thank God!), which leads me to think no one will say anything of note at this conference.
Highlights for the Conference, which kicks off at 8am PST with "The Natural Rate of Interest, Financial Crises and the Zero Lower Bound" (bring coffee!) should be the 10:25 Panel on Monetary Policy Options,
Christine Lagarde makes a 12:15 lunch speech (and then they call it a day after a rough 4 hours work) and then tomorrow, after discussing Global Liquidity and Cross-Border Capital Flows, there's a 10:25 panel with BOJ's Kuroda and BOE's Mr. Bean (Deputy Governor).
That's it, two days of almost 4 hours each day is a grueling week for Central Banksters so, if you see one at the airports on Sunday – be sure to give them a pat on the back for a job well done! If you haven't done so, I urge you to read "The Creature from Jekyll Island" to learn more about what the Fed really is or, in the very least, watch the video (cheater!). These people (as noted in the above…
by phil - August 22nd, 2013 8:18 am
Really people? Really?
How many times can you read the Fed Minutes and FREAK OUT? And then jump for joy? And then freak out again? Really??? Don't you look at this chart and wonder what kind of idiots your fellow invesors are?
It's scary out there, that's for sure. StJeanLuc pointed out in Member Chat last night that 29% of Louisiana Republicans still blame Obama for the Federal Government's botched response to Hurricane Katrina. Another 44% aren't sure whether it was Obama or Bush (the guy who was actually President at the time).
That leaves just 27% of Republicans in the great state of Louisiana who, given the clear choice of two people who could be at fault (otherwise many would have chosen Carter), were able to correctly name the person who was actually in charge.
These are the people (well, the top 10% of them) that you are trading with! They're not just irrational, they actually BELIEVE things that simply are not true. It doesn't matter what Paul Krugman says or how well he says it – 73% of those people won't believe it anyway.
As I said in the morning regarding the sell-off ahead of the Fed Minutes at 2pm: "This can be quickly reversed by the Fed or, more accurately, by Hilsenrath's interpretation of the Fed Minutes in the WSJ, minutes after they are released."
We had that little rally from 2:00 to 2:50 (see Dave Fry charts) but, at 2:50 I warned our Members that it was "All Hilsenrath on this rally," referring to the WSJ's Jonn Hilsenrath's doveish spin on the Fed Minutes. Rather than let him force us out of our short positions, we covered with FXI And EWJ longs but we quickly took losses on those and got bearish again, once the "rally" subsided. By 2:59 I was already warning our Members:
No real volume to this move – now 59M on the Dow at 3. That means this whole "rally" could reverse really quickly into the