by phil - May 6th, 2016 8:30 am
It's Non-Farm Payroll Day!
Much more exciting than Cinco de Mayo, which we properly celebrated with quesadillas and sangria last night. We celebrate Non-Farm Payroll Day by checking our Futures levels (we're short per our morning Alert to Members) and having some coffee – not as much fun but it can be more profitable. This is one of those days when it's great to have a Futures account as the markets don't open for a whole hour after this major market-moving report is released.
As you can see from the chart above, after fixing the disaster of the Bush collapse, Obama's job-creation record has been amazing – the best since Clinton (still the champ with 20M jobs created) and the monthly gyrations up and down are really not a big deal in the grand scheme of having now 6 years where we're averaging 200,000 jobs added per month (14.4M jobs).
UNFORTUNATELY, we still haven't done enough to reverse the downtrend in total compensation – a number which takes into account hours worked, salaries paid, etc. Total Annual Compensation has dropped by 15% of our GDP ($3Tn) since 1970 and workers of the World have failed to unite to reverse this trend in any meaningful way (raising minimum wages to $15 over 5 years is a small start).
As members of the investing class, we can take comfort in knowing that screwing over the workers is VERY profitable for the Corporate Masters who pushed this disparity into overdrive since 9/11, increasing Corporate Profits by 120% in the past 15 years. So hurray for us, I guess – unless of course you have someone you care about who has to work for a living – then it really sucks for them…
Of course, it's not all good news when you don't pay your workers enough to live on. For one thing, they can't afford to buy homes and home sales are a very important driver of our economy. Of course, as investors, we simply shift our money away from home builders and into REITs who own a lot of apartments and out of…
by phil - May 5th, 2016 8:33 am
Let's talk about the 5% Rule™.
For details, you can read this post, but today we're going to focus on the very simple concept of bounce lines. Under our 5% Rule™, we expect moves of 1.25%, 2.5% or 5% on major indexes to have 20% (of the move) corrections along the way, with a greater chance of a correction more likely as we cross each line of resistance.
It's the 5% Rule™ that led us to make a long call in yesterday's Live Trading Webinar, as we tested the -2.5% lines on our indexes EXACTLY WHERE WE PREDICTED THEY WOULD BE IN OUR MORNING POST (should be 2,047.50, not 1,947.50).
That's right, using our 5% Rule in the morning, I was able to say in our morning post at 8:33 am:
We have a PMI report at 9:45 and ISM Services at 10 along with Factory Orders and, at this point, expectations are low all around so we'll be looking for a bounce at Dow (/YM) 17,550, S&P (/ES) 2,040, Nasdaq 4,300 (/NQ) and Russell (/TF) 1,110 along with /NKD 15,900 but if any 2 are below (including whatever you are playing) – GET OUT!
The S&P bottomed for the day at 2,039 at 2:05 pm and is already back to 2,055 for a $750 per contract gain in the /ES Futures. In our Live Trading Webinar, we played the Nasdaq Futures (/NQ) over the 4,300 line and made a very quick $168.50 in 5 minutes and then we chose to play Gasoline Futures (/RB) and made a just as quick $580 after another 5 minutes of hard labor at our keyboards. Making $748.50 in 10 minutes is good money so we took it and ran and went on with our Webinar at that point but the lines, like the song, remains the same – ready to be played any time we get a good test.
This post isn't about showing you how to make money trading the Futures – we do that all the time in our Member Webinars (replays available here) and, of course, every day in our Live Member Chat Room. This…
by phil - May 4th, 2016 8:33 am
Just think about what that will mean for America. Then keep on thinking about it because we are only one Hillary scandal away from a Trump Presidency now that Ted Cruz has quit the race, leaving the GOP no choice but to rally behind The Donald at their conventon on July 18th. Then it's just 4 months until the November 8th election when we can look forward to Trumps agenda, which includes (out of 76 campaign promises so far):
- 1. Build a wall along the southern border that's taller than the arenas where Trump holds his rallies, taller than any ladder and one foot taller than the Great Wall of China. This "artistically beautiful" wall will be constructed out of hardened concrete, rebar and steel, and it will be "the greatest wall that you've ever seen" — so great that the nation will likely one day name it "The Trump Wall."
- 4. Get rid of Common Core because it's "a disaster" and a "very bad thing." Trump says he wants to give local school districts more control and might even eliminate the Department of Education.
- 6. Get rid of Obamacare and replace it with something "terrific" that is "so much better, so much better, so much better."
- 10. Defund Planned Parenthood.
- 18. Prosecute Hillary Clinton for her use of a private e-mail server while serving as secretary of state.
- 23. Strengthen the military so that it's "so big and so strong and so great" that "nobody's going to mess with us."
- 27. Target and kill the relatives of terrorists.
- 46. Put billionaire hedge fund manager Carl Icahn in charge of trade negotiations with China and Japan, and pick an ambassador to Japan who is "a killer," unlike the current ambassador, Caroline Kennedy.
- 54. Simplify the U.S. tax code and reduce the number of tax brackets from seven to four. The highest earners would pay a 25-percent tax. The corporate tax rate would fall to 15 percent. Eliminate the "marriage penalty" for taxpayers and get rid of the alternate minimum tax.54. Simplify the U.S. tax code and reduce the number of tax brackets from seven to four. The highest earners would pay a 25-percent tax. The corporate tax rate would fall to 15 percent.
by phil - May 3rd, 2016 8:32 am
What a silly market!
I warned our Members in the afternoon to be wary of the low-volume rally and, of course, we stayed the course on our bearish hedges (see last week's posts), which kept us from enjoying yesterday's move up but will serve us well this morning as we're right back to Friday's lows. Today's excuse for the sell-off is more bad data from China (what other kind is there) with yet another negative (below 50) PMI reading.
Even worse, China's financial regulator is clamping down on shadow banking. China’s banking regulator is cracking down on financial engineering that Chinese banks have used to disguise Trillions of dollars in risky loans as investment products. The clampdown, which will force banks to make provisions they previously avoided by disguising loans as investments, is designed to deflate one of the fastest-growing areas of the vast shadow banking apparatus, where bad debts are increasing.
Of course, let he who is without debt cast the first bond – the US has run up 160% of our GDP in debt since 2000, while China has 200% of their GDP into debt. At least they got 7% GDP growth for 17 years (119%) out of all that spending while our GDP has grown less than 50% over the same period. Still, since the GDP is growing then every year China is adding on even more stunning amounts of it as they continue to spend, spend, spend to paper over a weak economy (and again, so are we).
What worries me most of all is the acceptance of the idea that China only has $1Tn worth of bad loans, which would be 3% of $35Tn. Anyone paying attention to the China property bubble or Chinese earnings can see the number is easily 3-5x that amount and, in China's smaller economy ($8Tn) – that's a lot of money!
It's certainly not a good idea to rely on Chinese analysts to tell you what's going on – over the course of the past year, their targets for the Shanghai and Hang Seng markets have…
by phil - May 2nd, 2016 8:23 am
One again the BOJ does nothing over the weekend.
That's put many, many traders on the wrong side of the strong Dollar/weak Yen bet and it's also pushed the Nikkei back to our long line at 16,000, which is where we expect support from the BOJ – whether overt or covert. As I said in a Bloomberg interview last week:
I think 105 is a line that will be defended by the BOJ in whatever way they can, for as long as they can and the 16,000 line is also being defended at the moment so it's great fun to play in the Futures but as soon as we get to around 18,000 or 116 on the Yen, we flip to shorting the Nikkei and long on the Yen (short USD/JPY) because both those levels are unrealistic, no matter how hard the BOJ tries to push us over those lines.
The BOJ's problem is they can't fight the constant flow of money coming into Japan from Asian investors looking for safe-havens to park their cash. What are the alternatives? As bad as Japan is, it's less scary than their home countries so investors tend to buy Euros (Francs, etc.), Dollars and Yen but, as a reserve currency, the Yen is just 2.5% of the Global Float (Dollar 63%, Euro 24%) yes, when people are allocating cash – they tend to put a disproportionately high percentage into Yen (vis a vis allocating by reserve status) and that is what causes the Yen to be too strong, no matter how much the BOJ tries to weaken it.
Now Japan has been placed on on official US Government watch list for currency manipulation and that's forcing the BOJ to tread cautiously before making any additional currency moves and, as I said in another interview last week (hasn't aired yet), we're not expecting any real action from the BOJ until after the upcoming G7 meeting.
by phil - April 29th, 2016 8:45 am
Wow, what a day!
Now aren't you glad we added those hedges on Tuesday? Keep in mind that I can only tell you what the market is going to do and how to profit from it – the rest is up to you… Our trade idea from Tuesday morning's post was:
The idea is we REALLY want to own 500 shares of AAPL at $85, so the $3,500 we collected for selling the puts is free money and AAPL only fell to $95 anyway, so we're feeling very good about our 2018 obligation. Meanwhile, the Nasdaq Ultra-Short (SQQQ) June $17 calls are already $3.10 ($12,400) while the short June $21 calls are $1.15 ($4,600) so we could close that spread now for $7,800 off our $700 cash outlay on Monday and that's a gain of $7,100 (1,014%) in 4 days – you are very welcome indeed and THAT is how we hedge!
That then leaves us with just the obligation to buy 500 shares of AAPL at $85 in Jan, 2018 if it is below $85. The current ordinary margin on 5 short puts is $4,225 according to Think or Swim or we could buy them back for $9.80 ($4,900) and then we'd be cleanly out of the entire trade with a $2,200 gain (314%) in 5 days.
by phil - April 28th, 2016 8:27 am
I told you so!
Yes, I say that a lot these days and that's because I regret not being more emphatic with my cash calls in 2007 and 2008 when I was a less-experienced writer and felt "silly" being the only analyst who was worried about the irrational exuberance of the time. A good example is our November Wrap-Up from 2007 and, specifically, November 6th, when I said:
I don't like to play the role of Chicken Little but I feel like the casting is forced on me because almost everyone else I talk to is a bull. I said my piece about the housing disaster on Monday and that's only ONE of the things I think are really terrible in the economy!
This is the problem with the markets, we are rallying on leaders and, in the case of oil companies, the worst kind of leaders, while the rest of the market; retail, regional manufacturing, services, dining, discretionary… is in the doldrums. Rallying the market based on the energy sector is like a group of hemophiliacs electing a vampire as their leader, it's a recipe for disaster. And who are our other "leaders"? Commodities stoking inflation! Holy cow people, does anyone actually live on the planet we're investing in?
Back in August I told readers about the dirty little secret of the financial press, they are ratings whores just like every other aspect of the media, and that means they will tell you whatever you want to hear! Newsletters (like this one) are no different because we rely on subscribers to pay the bills and subscribers don't like to hear bad news any more than the average person who
by phil - April 27th, 2016 8:32 am
I told you so!
Aside from saying CASH!!! 9 times in the morning post (and 3 more in our Live Member Chat Room during the day), we laid out a perfect hedge on the Nasdaq using the Ultra-Short (SQQQ) that will now be over $8,000 in the money off our $1,100 outlay with another $8,000 to gain if the Nasdaq gets any worse – not bad for a day's work, right? Actually, the real money was made in the evening, as my last trade idea for our Members in Live Chat (3:19 pm) was:
Into the close I kind of like shorting Nikkei Futures (/NKD) at 17,530 as long as it stays below 17,550. If we go down – they'll go down but if we go up, they are already up and I doubt the pop so fast as you can't stop out. Obviously, if AAPL earnings are good – get out.
As you can see on the /NKD chart, we nailed the move and caught a 230-point drop to the 17,300 line for a $1,150 per contract gain. We'll be doing one of our World famous Live Trading Webinars this afternoon (1pm, EST) where, among other things, we teach the fine points of Futures trading.
In last week's Webinar (replay available here), we left off with 11 short oil contracts (/CL) at $43.54 and 3 short S&P (/ES) contracts at 2,101 and the S&P fell to 2,080 the next day (21st) for a $3,150 gain and oil hit our goal at $43 for a $5,940 gain. This morning, we shorted oil again at the $45 line, but with tight stops above as we're wary of the inventory report at 10:30.
Futures trading is how we amuse ourselves at Philstockworld, as we're not day traders and long-term trades – if done properly – are BORING! Our Long-Term Portfolio, however, is not boring at all – closing out yesterday up 94%, though we'll take a little hit on Apple (AAPL) this morning. Speaking of AAPL, the details are on our main page but…
by phil - April 26th, 2016 8:39 am
Here we go again!
Back in the summer, EVERYONE said we were going to break out to new highs and the analysts were tripping over themselves to predict a higher goal for the S&P and, after calling for caution since May, I virtually screamed for people to get to cash on July 20th in "Monday Market Manipulation – Everything is Awesome" in which I said:
CASH!!! People! Cash, cash, Cash and more CASH!!! I can only tell you and show you that the conditions we are seeing now – INCLUDING the market-boosting government bailouts – are VERY similar to what happened in 2007/8 leading up to the collapse. That is the limit of my ability. In 2007 and early 2008 I also was "wrong" and the markets went up and I said it was ridiculous and the markets went up and I warned people to go to cash and the markets went up and my only regret was that I didn't do MORE to warn people how dangerous the markets were at the time.
Fortunately, we followed our own advice and cashed in our Member portfolios – getting out at the red line on our Big Chart (+15%) and getting back in at the green line (Must Hold) and THAT is why we have AVERAGE gains of over 100% since last summer – especially as we did it all over again in November! Our timing could not have been better. PERHAPS this time is different but I have that same sense of foreboding I had in July but not so imminent that we've gone to all cash – but we do have $120,000 worth of downside hedges in our Short-Term Portfolio and we did tightly cover our Long-Term, Butterfly and Option Opportunity Portfolios (see weekend review).
In fact, we gained about $8,000 (1.3%) in our paired Long and Short-Term Portfolios on yesterday's little dip so I think we're bearish enough there but the OOP lose $2,000 (2%) and the Butterfly Portfolio, God bless it, was flat (it's supposed to be). Portfolio balance is a tricky thing and it's important, when you are worried about market direction – to have a very good idea of how a 1% rise or fall will affect your overall balance. …
by phil - April 25th, 2016 8:31 am
This is getting silly.
The Bank of Japan is already a top shareholder in 90% of the Nikkei's 225 companies so, on any given day, if you're selling shares in a Japanese company, chances are it's the BOJ that's taking it off your hands. 3,000,000,000,000 Yen is the current annual buy-in from the BOJ and the Central Bank is talking about doubling it – putting it on a pace for $1Bn/week of stock buying in an economy 1/4 the size of the US.
If the BOJ accelerates its ETF purchases this week to an annual rate of 7Tn Yen (the pace predicted by GS) the Central Bank could become the #1 shareholder in about 40 of the Nikkei’s companies by the end of 2017, according to Bloomberg calculations. It could hold the top ranking in about 90 firms using HSBC Holdings Plc’s estimate of 13Tn Yen.
This is a MASSIVE distortion of the markets and, to some extent, the same thing is beginning to happen in the US and Europe. As I was saying last week, this is the problem with TA as you can't discover value when there's an underlying buyer who will take shares at any price – regardless of the actual value of the company in question.
It's doubly bad because the BOJ is also buying 55% of the ETFs which, in turn, are indiscriminate buyers of stocks and, even worse, by inflating the price of the ETFs, the BOJ suckers the citizens of Japan into grossly overpaying for the ETFs and, as a throughput, for the underlying stocks. We're not dealing with reality here, folks and, to some extent and to some degree, this is being done by all of the World's Central Banksters in a desperate attempt to prop up the stock holdings of their Top 1% masters. As former Fed Chairman Alan Greenspan admitted last week in a CNBC interview: