by phil - July 18th, 2014 8:15 am
Can we possibly be this jaded?
Even on Wall Street, where ruining the lives of the middle class is a sporting event, you would think that the tragic death of 298 people being shot down in an airplane would AT LEAST cause the markets to pause for more than a few hours. That's not what the Futures would have you believe – they are moving up this morning (7:30) as if shooting planes out of the sky isn't a reason not to trade stocks at their all-time highs.
While our long trade ideas from yesterday's morning post worked out fantastically, we were very fortunately NOT GREEDY at 10:03, when I said to our Members:
Philly Fed up huge (like NY), 23.9 vs 10 expected though 17.8 last month means they were just being too pessimistic. That should give us a nice pop but I'd take those Futures profits off this run!
As you can see from Dave Fry's SPY chart, our timing was near perfect as things turned sour very quickly. That then worked out well for our oil shorts, which went from the $103 conviction target I laid out in the morning post (subscribe here to get them pre-market every day) back below $102, where I said to our Members at 11:34:
There goes $102 on oil! Congrats to the players! That's the new stop line, of course.
That was a very quick $1,000 PER CONTRACT profit on /CL and, right after that, we got the plane crash news so we increased our hedges in our Short-Term Portfolio and we added BA July $128 puts at $1.25 (because it was a BA plane involved in the incident) and they finished the day at $2.18 (up 74%) as well as DAL Aug $37 puts at $1.50, which were already $1.92 by the day's end (up 28%). I don't like to take advantage of tragedies like that – but it was the fastest way to add good protection to our portfolios.
by phil - July 17th, 2014 8:29 am
You never know what you are going to wake up to in this market.
This morning, the market is depressed, giving up all of yesterday's gains in the Futures. So much so that we took a long poke on the Russell (/TF) Futures that we had been shorting from 1,160 – at the 1,135 line. That's down 3% since we began shorting them at 1,170 on Monday.
We're also taking a long poke on the Dow (/YM) off the 17,000 line and /NQ off the 3,900 line simply because they are good supports and offer good lines to stop out at with limited losses – certainly not because we think the equity indexes are cheap!
We're simply taking advantage of the wild gyrations in the market to make some short-term money, while we wait for our long-term premises to pay off.
Even if you missed my call in our Live Member Chat Room (which you can join by subscribing here) and waited until you can read this post for free later in the day, you can still join in the fun by picking up the Russell Futures (/TF) when they cross over 1,140 or 1,145 and you'll only miss $500 or $1,000 of the gains but you still might pick up $300-500 over 1,145 before it turns back around (and we'll likely short it again when it does).
Speaking of shorting – we haven't been playing oil lately as we lost interest in shorting it below $100 but this morning it's back to $102.50, so we're going to take a poke at shorting /CL again at what should be about $37.75 on USO.
Very simply, per our 5% Rule™, we have a drop from $107.50 (which we predicted) to $99 (8%) in the last 3 weeks but $100 was our support line ($37 on USO) so call it a $7.50 drop and we expect a 20% (of the drop) weak bounce of $1.50 to $101.50 and a 40% strong bounce of $3 to $103.
by phil - July 16th, 2014 7:21 am
Did you make your $1,000 yesterday?
You would have if you read yesterday's morning post (subscribe here), where we picked the Russell Futures (/TF) short at 1,160 saying: "If the Russell FAILS 1,160, we'll be happy to flip short for another ride down to 1,150." As you can see, we had plenty of time to get our planned entry at 1,160 and, as we expected, Yellen's speech disappointed and the markets sold off a bit – easy money!
We even flipped back to bullish in the afternoon and, at the beginning of our Live Webinar (1pm), we were able to demionstrate a very quick $250 profit taking the Russell Futures long off that same 1,150 line. In fact, you can see the big volume spike that came with our live call right on the chart!
This morning, news of a deal between AAPL and IBM has both companies showing 2% gains pre-market. For IBM, that's $5 and that's adding 40 points to the Dow Futures (/YM) pre-market and for AAPL, that's $2 and AAPL is 20% of the Nasdaq so 20% of 2% is 0.4% added to the Nasdaq from AAPL alone pre-market plus a nice effect on the S&P from both of those heavyweight stocks.
Under the agreement, IBM's employees will provide on-site support and service of Apple products inside companies, similar to the AppleCare service that Apple sells to consumers. IBM said it planned to make more than 100,000 employees available to the Apple initiative. It is a rare partnership for Apple, which historically has avoided such alliances.
"This is just the beginning," said Ms. Rometty, citing a statistic that most smartphones inside companies are used only for email and calendar. She said the companies hope to create new, serious business applications.
The companies said Apple and IBM engineers are together developing more than 100 new apps for various industries. The first batch of apps is expected to be available in the fall when Apple releases the next version of its mobile software, iOS 8. "Apple is not an…
by phil - July 15th, 2014 8:28 am
$9 Billion Dollars!
That's how much Goldman Sachs (GS) took in in revenues in the second quarter. They then used $1.25Bn of it (14%) to buy back their own stock at an average cost of $161 per share and reduced the total number of shares by 17% which allowed them to "beat" estimates by earning $4.10 per share vs $3.70 last year (10.8% more).
That's right – it's a scam! The same scam GS advises it's client companies to do with their own stocks to APPARENTLY inflate their earnings while, in reality, earnings are fairly flat. The same scam, incidentally, GS had the entire country of Greece do – before that whole thing collapsed and took the Global economy with it a few years ago!
By trading heavily from inside this fishbowl, GS was able to bump up their Investment and Lending Revenues by 46%, to $2.07Bn and all those little moves allowed GS employees to take 46% of the profits in compensation – up 6% from last year at $3.92Bn, which is really cool as GS only has 32,600 employees – so that's $1.2M per employee but, somehow, I think the top 326 (0.1%) get a bit more than the other 32,274, don't you?
You would think GS shareholders would be angry that 50% of their revenues go to compensation. After all, a hedge fund only takes 20% of the profits as salary (and that plus 2% of AUM also covers the cost of all operations) but GS, after taking $3.92Bn, drops just $2Bn to the bottom line for their investors or, in other words, GS is like a hedge fund that takes 66% of the profits!
Still, with a p/e of 10, that 33% bone they throw investors is enough to keep them happy but, as with everything else, consider the conditions under which GS is able to make $6Bn in salaries and profits on $9Bn in revenues – Endless Free Money from the Fed, a stock market fueled by Mergers and Buybacks using the same Free Money, massive market manipulation by Central Banks around the World – many of whom are run by former GS employees and most…
by phil - July 14th, 2014 8:25 am
We're got our strong bounces on Friday – now we'll see if they hold up! .
As you can see from our big chart, we still have Spitting Cobra patterns forming on all but the Russell, which has turned into a Vomiting Cobra, spilling all the way down to the 50 dma at 1,150. We're still below the Weak Bounce Line on the NYSE – so we'll watch that closely and the Russell needs to get over their Strong Bounce at 1,170 to confirm:
- Dow 17,050 to 16,800 is 250 in 3 days so you need to make a strong bounce in 1.5 days in order to have a chance at a V recovery. Bounces would be 50 points so 16,850 and 16,900 are what we'll watch.
- S&P 1,985 to 1,955 is 30 points so 6-point bounces to 1,961 and 1,967 will be our targets.
- Nasdaq 4,485 to 4,360 (now I'm rounding) is 125 so 25-point bounces to 4,385 and 4,410.
- NYSE 11,100 to 10,900 is 200 points so 40-point bounces to 10,940 and 10,980.
- Russell 1,208 to 1,140 is 68 points and we'll call that 14-point bounces for 1,155 (rounding) and 1,170.
Also key, of course, is the 3 of 5 red signals on our Must Hold line on our Big Chart™ - only the NYSE is likely to make it over today, with a 64-point move (0.5%) taking it back to 11,000 – certainly that's not asking too much before we flip to some more bullish betting, is it?
We still have 29 stocks on our Buy List (Members Only) and, since they dynamically update, it's very easy to see that about 1/2 of them haven't gotten away yet and are still playable for dip buying. We also have 29 more stocks from our old Long-Term Portfolio, which we liquidated on May 29th – and that is full of great trade ideas as well.
We just did Week 4 for our our May Trade Review over the weekend and we slipped to 73% that week (ending 5/23) which brought us down to 84% for the month with 158 out of 197 trade ideas on the winning side. Still, going from 125-17 to 158-29 was an early indicator that we were losing…
by phil - July 12th, 2014 8:30 am
Our streak continues!
The first 3 weeks of the month (Part 1, Part 2, Part 3) saw 142 trade ideas (almost 50 per week) with just 17 misses for an 88% win rate. Of course – it's a bit like shooting fish in a barrel when we call a bottom correctly and, as you can tell from the large volume of picks, we put all that sidelined cash to good use.
Not every call is bullish, of course, as I was saying in Friday's post, BALANCE is the most important aspect for your portfolios if you intend to be a trader for more than just the short run. So, in theory, it shouldn't be possible for us to get to 100% and, actually, 88% probably means we were a little too bullish and just got lucky! We have to watch out for that – and that's why these reviews are so important.
Our Trade Reviews not only let us know if we're on or off track but, by putting the trades in context, hopefully we remind ourselves what works and what doesn't work in vartious situations so that, when we see a similar situation, we are ready, willing AND able to pull the trigger.
Able is a very important aspect of our trading strategies we tend to ignore. My call to go to cash in late March left us with empty portfolios we were able to fill up in May and THAT is why we have such a fantastic winning percentage for the month – we made our selves READY and our mindset was WILLING because we were ABLE to take advantage of the market dip by going to cash.
Just because we are long-term investors – it doesn't mean we can't time our entries and exits when we reach the tops and bottoms of our trading channels!
This is one of the most important articles I've written in a long time.
by phil - July 11th, 2014 8:31 am
Wow, that was a close one!
We ALMOST had a correction but, fortunately, dip buyers prevailed and we pulled a sharp reversal right after the bell yesterday and finished the day only down about 0.4% and about 2.5% down for the week (so far).
I do hate to be nit-picky about these things but – can we REALLY call it a reversal when, in fact, declining volume on the NYSE was 2,275,176,430 while advancing was only 834,544?
That's 3:1 declining! In fact, of the 3,241 shares on the NYSE, only 964 were positive yesterday – also 3:1 against. The same on the broader Nasdaq too.
In fact, yesterday was a complete catastrophe other than the low-volume "rally" from 10am to 2pm, with the other 75% of the day's volume being all downhill from 9:30 to 10:00 and again from 2pm to close (4pm EST).
Still, as the great President Bush once said: "fool me once, shame on — shame on you. Fool me — you can't get fooled again."
Of course, an even greater President, Lincoln (who had himself shot when he found out he was a Republican) actually said that you can, indeed fool some of the people all of the time and the stock market is certainly evidence of that, as dip buyers rush in on anything that even looks like it might be a rally – no matter how much of a charade it actually is.
You can see our predicted 1,150 line come into play on Dave Fry's Russell Chart but it doesn't show that the Russell Futures made it all the way down to 1,140 before being jammed back to 1,165 and, finally, settling the day at 1,160.
As Dave points out, we're still down 4% for the weak week and all yesterday's action really was was a WEAK bounce off a 5% dip (1,200 to 1,140), which is EXACTLY what our 5% Rule™ predicted would happen.
by phil - July 10th, 2014 8:31 am
That's how much money yesterday's Alert to Members made as of this morning as the Russell Futures crossed our goal line at 1,150. The alert went out at 9:52 am and we had all day to enter as the Russell drifted along that line until, finally, we got our big drop this morning.
My call in the morning was:
I still like the /TF play below the 1,170 line – that's got $2,000 written all over it (down to 1,150).
We actually oveshot that mark with the bottom coming at 1,140, which is our -5% line on the Big Chart, which uses our 5% Rule™ to make these amazingly profitable predictions. Those extra 10 points were ANOTHER $1,000 per contract for those who hung on past our goaaaaalllllll!!!
Even if you are a free reader, you got your money's worth – as we gave away, FOR FREE, our TZA Aug $14 calls at .91 on Tuesday's post. Sure it was 50% after our Members got the trade at .66 on July 3rd, but beggers can't be choosers, right? Still, even if you only began following our hedge at .91, those calls are now $1.50 in the money, so up another 50% this morning for a $1,180 profit on the 20 we suggested in just two days!
That's just one of the many ways we teach our Members to make money by hedging at PSW (you can subcribe here) we expected this sell-off (see last two week's worth of posts) and positioned for it with trades like:
- DXD Aug $25/27 bull call spread (6/27 in main post) at net 0.60, now $1.15 – up 91%
- TZA Aug $15s calls (6/27 at 11:26) at .70, selling Jan $12 puts for $1 for net .30 credit, now 0.45 – up .75 (250%)
- 40 SQQQ Aug $40/44 bull call spreads (1/3 at 11:29) at $1.15 ($4,600), now $2.15 – up $4,000 (86%)
- 20 QQQ July $97 puts (1/7 at 9:35) at $1.59 ($3,180), now $3 ($6,000) – up $2,820 (88%)
by phil - July 9th, 2014 8:29 am
Fed day (again).
Yesterday was TERRIBLE, with volume finally coming back – and it was all downhill, with 3x more declining volume than advancing. Still, as you can see from Dave Fry's SPY chart, the fix was in and the failure to hold $196.50 during trading hours was corrected at the bell by the powers that be, forcing the Market-on-Close suckers (401K, IRA, ETFs) to pay an extra 0.2% for their fills.
There's something strangely comforting about playing a rigged game like this. I yesterday's live webcast, we were able to make a quick $150 per contract playing a very predictable bounce in the Russell Futures (you can see the Webinar Replay HERE).
Of course that was small potoatoes compared to the trade ideas we gave you in yesterday's morning post (which you can have delivered to you every day by subscribing here) as the TZA Aug $14 calls shot up from 0.91 to $1.20 - up 32% for the day.
The QQQ calls I mentioned were the July $97 puts and we closed those out at $2.30, up 47% in less than a full day.
With returns like that, we could compound $1,000 into $1M in no time at all!
Though they were, in fact, small positions, our entire Short-Term Portfolio jumped up 2% on the day – as it's positioned bearish to protect our much larger and still bullish ($500K) Long-Term Portfolio, which is weathering this little storm quite nicely as we wisely moved it to mainly cash when we thought the market was toppy.
Now we anxiously anticipate earnings and the potential to bargain-hunt some more.
As you can see from our Big Chart, the Nasdaq and Russell were saved by their 5% lines (2.5% on the RUT) but the NYSE failed their critical 11,000 line and now we are 3 of 5 bearish and that means we lean bearish until one of our 3 lagging indices gets back over their line.
by phil - July 8th, 2014 8:32 am
Russell 1,200 already failed.
That's strike one for the rally. Strike two would be the failure of Dow 17,000 and strike three would be the NYSE failing to hold 11,000. One day does not a correction make and yesterday was another very low-volume affair so we certainly aren't going to draw any conclusions until we see a proper trend.
What we do know for sure is that the ENTIRE move above 1,160 on the Russell, 11,000 on the NYSE, 16,850 on the Dow, 4,400 on the Nasdaq and 1,960 on the S&P was also low-volume BS and can't be trusted either.
With the Russell slipping 1.77% in a single day, you can see why we made TZA (ultra-short Russell) one of our primary hedges in the Short-Term Portfolio. In fact, we pressed that bet on Wednesday morning, while the index was popping in the morning as I said to our Members in the Live Chat Room:
In the STP we have 20 TZA Aug $15 calls at 0.70 and they are now .40 with TZA at $13.49. We can DD or we can spend 0.23 to roll them down to the $14s. Since TZA was $15 last week and since Aug is 43 days from expiration, I think it makes more sense to roll closer to the money than DD. Keep in mind that, if TZA goes $1 lower and we had doubled down, we will have spent .40 more to have 40 contracts that would be $2.50 out of the money but if we roll again for another .23, we would have 20 of the $13 calls for about the same price and our net $1.16 would still be back to even on less than a 10% move higher, vs 20% we'd need to get back to $15.55 (break-even on 2x).
So let's roll our 20 TZA Aug $15 calls (.43 now) to the $14 calls (.66) for 0.23 per contract. Our short puts are the $12s, so no worries