by phil - February 12th, 2016 7:30 am
Wheeeeeee – that was fun!
As the groundhog (who's name is Phil) predicted, we had 6 long weeks of selling to start off 2016 and, as of yesterday's close, we were teetering on the brink of a Global Bear Market after a 20% correction – as you can see from the Bloomberg chart on the right.
Things are so desperate out there that we find ourselves BEGGING for OPEC to cut production and raise oil prices – how crazy is that? It's crazy because it's idiotic an it's idiotic because we have become a nation… a planet of impatient idiots who can't bear to endure even a bit of discomfort – even if it's for our own good – if that good is delayed and the discomfort is immediate.
Sectors rotate, that's a fact. You can't have every part of an economy winning all of the time. It's OK for the banks to have a period of low earnings when the rates are low and they can't get a good spread lending to consumers. It's OK for oil companies to break-even selling $30 oil because the money the consumers would have spent on oil instead goes to the movies or the toy manufacturer or the hotel they can afford on their vacation.
Avoiding economic pain leads to economic stagnation and THAT is the lesson we should be taking away from Japan's 20-year failed experiment in economic tinkering. They propped up their economy by making their currency worthless and that may help the Zaibatsu (the Corporate Conglomerate the runs the country) but it's been a complete disaster for the people, who have seen the buying power of their life savings drop by 35% in the last 3 years!
This week, worries about China and other Asian economies sent investors flying back to the relative stability of the Yen, which seems to have bottomed at 120 to the Dollar or 80 on $XJY. The problem is (and this is likely to surprise you) that the Yen, though a reserve currency, is less than 4% of the money in the World while Dollars are 63% and Euros are 22%. That means that when investors diversify more than 4% of their…
by phil - February 11th, 2016 8:31 am
Well, it's just an excuse to sell off on a 30-year auction day (happens almost every one) because it panics people into TBills at ridiculously low rates and makes it look like the Fed is doing its job and people really do want to lend the Government money for 30 years at 2.5% rather than do something productive with the money. Why? Because if people don't want to by 30-year Treasury Notes at 2.5% then one would have to question our Government's $19,000,000,000,000 debt load which, at 2.5%, costs $475Bn in interest payments alone to sustain and if we were to assume rates climb to 5%, then another $475Bn per year would have to be figured into the budget (without asking the Top 1% or Corporations to contribute, of course!).
On the other hand, with Sweden now CHARGING 0.5% to put money in the Riksbank, 2.5% on US debt looks like a pretty good deal, doesn't it? I already sent out an Alert this morning (tweeted too, with the hashtag #CurrencyWars) on what happened and how we're playing the Futures, so I won't rehash all that boring stuff here.
Oil, meanwhile, is down another 4% this morning ($26.25) and that's on me as I told Canada that oil was not going to make a comeback on Money Talk last night – and it was not a happy conversation. We would like to play the $25 line for a bounce on /CL but we're EXTREMELY concerned about the MASSIVE overhang of FAKE!!! contracts (see Monday's post and here is a good place to say "I told you so!") with 324,000 open orders still remaining in the March contracts (but they did cancel 191,000 fake orders in 3 days, so catching up).
In fact, since I get a lot of mail from people who can't believe the NYMEX is a complete and utter scam used only to defraud the American people by creating a false demand for oil and driving up prices, let's compare the "open order "demand"" (had to double quote demand as it's such BS) from Monday morning to yesterday's close. Here's Monday's NYMEX contract strip:
by phil - February 10th, 2016 7:57 am
"The Future is ours so let's plan it
If there's one fool for you then I am it
I've one thing to say, and that's
Dammit Janet, I love you!"
Will Janet Yellen love us back today? We'll find out if she still has the touch when she gives her semi-annual address to Congress at 10am but already the markets are up 1% in antici—--pation in Futures trading.
Of course that means that, if you followed yesterday's morning post (subscribe here for pre-market Emailings and LIVE intra-day commentary) you are already making a fortune as our bounce targets were set at:
- Dow Futures (/YM) long at 15,840, now 16,090 – up $1,250 per contract
- S&P Futures (/YM) long at 1,850, now 1,870 – up $1,000 per contract
- Nasdaq Futures (/NQ) long at 3,900, now 4,000 – up $2,000 per contract
- Russell Futures (/TF) long at 950, now 972 – up $2,200 per contract
- Nikkei Futures (/NKD) long at 15,900, now 16,050 – up $750 per contract
We took the money and ran early this morning in our Live Member Chat Room as I was worried Europe was topping on a 2.5% move up at their open and now we're watching 16,100, 1,870, 4,000, 970 and 16,000 for signs to go back long (just grab the slowest mover when 3 break higher) and we will be keeping very tight stops if any of them fall below.
While we fully expected an up day today we're not going to be impressed if all we do is manage our weak bounce targets at 16,150, 1,887, 4,050, 1,000 and all the way to 16,640 on /NKD. Of course that means /NKD is our highest beta mover – risky but fun!
by phil - February 9th, 2016 8:19 am
Down and down we go – where we stop, who the Hell knows?
As you can see from Dave Fry's chart on the right, the Nasdaq is heading to the 20% correction line at 3,760 – back to the lows we tested in August's flash crash and, before that, back in October of 2014. Both times we quickly recovered and maybe this time is different but, for now, we're expecting a move back up (see yesterday's post) as we bounce off these technical levels. Of course, expecting a move back up doesn't make us bullish – just bounceish.
The problem the markets are having at the moment is we're not getting a proper sell-off because, pretty much every day, the HFT algorithms kick in and prop up the markets into the close. This prevents an all-out panic from sending the market even lower but it also prevents us having one of those big capitulation days where we finally find a floor.
It's loads of fun if you play the Futures for the quick in and out moves. Yesterday pre-market, for example, we picked a few longs that worked out into the open, then quickly stopped out at the markets turned lower but, on the EU close, we were able to come back in and again for the usual 2:30 pump job. As I often say:
We don't care IF the markets are manipulated as long as we understand HOW they are manipulated and are able to place our bets accordingly.
Oil had a nice $500 per contract run, back to $30.50, twice yesterday and this morning we like the Nikkei (/NKD Futures) at the 16,000 line to play for a bounce back to 16,300, which would pay $1,500 per contract if all goes well. If we keep tight stops below the 16,000 line – we risk very little against a nice, potential reward. Other bounce levels we are looking were detailed for our Members in yesterday's Live Chat Room as we called the usual "rally" at 3pm:
by phil - February 8th, 2016 8:23 am
That's the word from CitiBank, which is SUPPOSED to be the voice of reason in these markets. When Banksters tell us to get out of something – it's usually time to get in and, this morning, I put out a Trade Alert to our Members (and tweeted here) to take a long on Oil Futures (/CL) at the $30 line (with tight stops below) as well as lines on various indexes I detailed in the Alert.
Of course, we warned you last week that the market would likely turn back down and I detailed our hedges on the Ultra-Short S&P ETF (SDS) at $22.50 and mentioned we were long on Gold (/YG Futures) at $1,155 and Silver (/SI Futures) at $14.90 and Natural Gas (/NGK6 May Futures) at $2.15 on Thursday. This morning they are at:
- SDS $23.70 – up 5.3%
- Gold $1,180 – up $8,000 per contract
- Silver $15 – up $1,250 per contract
- Natural Gas $2.27 - up $1,200 per contract
Our one loser (so far) was Copper (/HG Futures), which dropped from $2.12 to $2.075 for a loss of $1,125 per contract. Of course stopping out your losers is important with Futures and we'd be happy to get back in either over $2.10 or off the $2.05 line (with tight stops below).
In Friday morning's post we detailed two major hedges for the S&P (SDS) and the Nasdaq (SQQQ) using the Ultra-Shorts and, of course, those are both paying off like gangbusters as Friday was already a bad day and the markets are following through this morning. We also detailed a trade idea for Barrick Gold (ABX) to leverage the run in gold – also doing fantastically, thank you! We're hoping for a bounce but really we're using our bullish future bets, pre-market to lock in the tremendous gains of our index hedges at what we THINK might be the bottom again at 1,850 on the S&P.
Nattering Naybob had a very good summary of the weeks events, reminding our Members yesterday afternoon of my Wednesday warning that we were simply in a "dead cat bounce" and likely to fall…
by phil - February 5th, 2016 8:13 am
What a crazy start to 2016!
Of course, it is no crazier than the 3rd quarter of 2015 so far, when we had our August crash followed by a slow September bounce that led into a mega-rally that closed our year off back at the highs. At the moment, we are playing with the premise that it's the highs that were wrong – NOT our current 1,900 level on the S&P. We're not expecting any big rally here – just consolidation.
This is nothing new, of course. Back on December, 2nd, in: "Which Way Wednesday – S&P 2,100 Yet Again," I noted:
The S&P gets to 2,100 and we short /ES Futures at 2,100 (with tight stops above the line) and Russell (/TF) Futures below the 1,200 line and Nikkei (/NKD) Futures below the 20,000 line and then, tomorrow or Friday, I'll tell you how much money we made shorting and you'll say "why do I never catch these great trade ideas" and I'll say it's because you're not patient enough to wait for the pattern to reset itself and just make the obvious play.
This is the 11th time the S&P has been over 2,100 since May and, so far, it's been like a little money machine for us all year long on the short side. I know this time may be different and the last 10 times may have been different too, which is why we stop out if we don't get confirmation from the other indexes that things are toppy but, when it works – it's good for $250, $500, $1,000+ PER CONTRACT in the Futures at $50 per point to the downside.
By the way, I know we've been talking a lot about the Futures lately and that's because our portfolios are mainly in CASH!!! That means we have plenty on the sidelines to play with and the quick in and out…
by phil - February 4th, 2016 8:12 am
That's right, we did it again!
Yesterday's Live Trading Webinar was open to the public (see yesterday's post) and, during the session, we found a trade on the Russell 2000 that made $500 per contract and, into the close of the Webinar, we decided to go long on the Nikkei (/NKD) at 16,985, looking to get back to 17,200 and we NAILED IT into the close for a $1,075 per contract win in just hours! Futures trading is fun – don't be afraid – check out our Options Opportunity Portfolio and get access to all of our Live Trading Webinars.
Also in yesterday's morning post (and on our Twitter feed) I mentioned the Alert we sent out to our Members in the morning, noting the following long plays in the Futures:
- 1,900 on the S&P (/ES), closed 1,907 – up $350 per contract
- 16,100 on the Dow (/YM), closed at 16,320 – up $1,100 per contract
- 0.975 on Gasoline (/RB), closed at $1.045 – up $2,940 per contract
- $30 on Oil (/CL), closed at $32.50 – up $2,500 per contract
Yes the futures are risky (and we were down before we were up in the Webinar) but they give you a tremendous advantage in volatile markets as you can use them to better balance your portfolio before the market opens or after it closes – rather than sitting and sweating while you wait for the opening bell to trade. Since we practice a generally Balanced Portfolio Approach at Philstockworld, we mostly play the Futures for fun but the experience we get while having fun really comes in handy when there is an after-hours surprise in the market. You've probably seen this commercial recently:
And no, it doesn't matter who your broker is (most of us use TD's Think or Swim) but this commercial hits it right on the head – being able to trade the Futures gives you a tremendous edge on the market. Let's say you only used one of our trade ideas and made just $1,000 yesterday on a single contract. What percentage of your portfolio is that? How…
by phil - February 3rd, 2016 8:13 am
I was almost going to just put up my Jan 13th post again.
That one was titled "Weak Bounce Wednesday" and we opened that day at S&P 1,923 after bouncing almost exactly as high as we had predicted in Monday's (Jan 11) "Meaningless Monday Market Movement." This is why "Groundhog Day" is one of my favorite movies of all time. In that movie, Bill Murray plays Phil (great name), a weatherman, who gets trapped living the same day over and over again – yet he's the only one who is aware of it – for everyone else, they've never seen that day before.
That sums up my job very nicely. All day long I talk to people and reporters who are constantly surprised by things I have seen happen over and over and over again. Each time, they have no idea what will happen next and, while there certainly are variations from time to time – I'm able to predict the outcomes with a pretty good degree of accuracy, not because I'm smart – but simply because I'm paying attention. And I'm not the only one – this is from Dave Fry this morning:
Like Bill Murray it feels like a bad Groundhog’s Day again as markets moved right back down in volatile, what I believe, is a descending spiral.
For bulls, just when you think markets are ready for a big time rally, (nearly 400 points higher just last Friday), bears moved back in taking charge once again. I further projected on just last week Thursday we could expect a countertrend rally in the S&P from 1902 to 1956. We hit 1940 on Friday and have fallen once again to close at 1904.
Paying attention to repeating patterns does more than make our Members look smart – it makes them lots of MONEY because we're able to place our bets accordingly.
by phil - February 2nd, 2016 8:33 am
Ted Cruz won Iowa.
That is the scariest thing I have to say this morning. The Koch-powered Conservative is the GOP's leading Climate denier and, if he becomes President of the United States, you can pretty much guarantee he'll put a stop to the agreements we made in Paris last year to work with the rest of the World to help stop Global Warming – especially as it's projected to be a $12Tn effort over 25 years on our part.
Of course, many (almost all) scientists would argue that a failure to do this will lead to the extinction of the Human Race but that's considered a win for Cruz's Father's ministry "Purifying Fire International" who are anxious to finally get to the end of days they've all been praying for. Don't take my word for it – listen to his Dad.
Anyway, enough about Cruz, hopefully this is a one-off and the World will not end because Americans make the worst possible choice come November. Meanwhile, it may in fact be the end of days for oil, as it's back to $30 after an aborted (sorry Ted) run at $35 just last week. Low oil prices hit BP so hard that profits are down 90% from last year and, unadjusted, BP is taking a $6.5Bn loss but officially a 2015 net profit of $196M, down from $2.2Bn last year. In good news for oil prices, however, the World's 4th largest oil company is cutting production in 2016.
So, despite oil being down 2.5%, we think $30 will hold and you can refer back to our UCO/USO bullish spread (see last week's post) and we're also liking Natural Gas (/NG Futures) again as we dip back to $2.00. We are not, however, playing the front-month March contract (/NGH6) but the /NGK6 May contract, which is trading a bit higher at $2.10 this morning.
Our logic on Natural Gas (and UNG is the ETF you can play at $7.50, which is our Trade of the Year for 2016 - beating IBM at the last minute!). In our Live Trading Webinar on 12/16, we had called a play on the April Natural Gas…
by phil - February 1st, 2016 8:08 am
Oh no, there goes China again!
This weekend it was more horrific PMI numbers out of China as January manufacturing activity contracted at its fastest pace in 3 years, suggesting the world's second largest economy is off to a weak start in 2016 (and adding to the case for near-term stimulus). The official Purchasing Managers' Index stood at 49.4 in January, compared with the previous month's reading of 49.7, below the 50-point mark that separates growth from contraction on a monthly basis. It is the weakest index reading since Aug, 2012 and below the median 49.6 forecast from a Reuters poll of leading economorons.
The PMI marks the sixth consecutive month of factory activity contraction, highlighting a manufacturing complex under severe pressure from falling prices and overcapacity in key sectors including steel and energy. "The electricity production remained sluggish and the crude steel output continued the weak trend in January, reflecting an ongoing deleveraging process in the industrial sectors," said Zhou Hao, an economist at Commerzbank. "In the meantime, China has started an aggressive capacity reduction in many sectors, which could add downward pressure on the bulk commodity prices over time."
China's slowdown has sent Korea's eports plunging at the fastest rate since Aug, 2009, down 18.5% in January and now the 13th month in a row of declining exports. Imports fell 20.1% – spreading the contagion further to other trading partners. South Korean data are viewed as a proxy for the global trade picturebecause of the Asian nation’s heavy dependence on imports of raw materials and exports of goods such as cars and phones. The Korean data also give a reading of the health of the Chinese economy because around a quarter of South Korea’s exports are sent to China.
All this bad news out of Asia (Japan's PMI also negative) has sent oil crashing back to Earth, back to $32.23 this morning after topping out at $34.50 on Friday. As I said to our Members in Friday's Live Chat Room (2:44):
I think oil is still up in hopes that the false rumor re. a production cut is going to be somehow supported over the weekend and,