by Phil Davis - April 16th, 2014 8:11 am
Wow, what a fun day yesterday was!
As you can see from Dave Fry's SPY chart, we went up in the Futures 30 S&P points and then we fell from the open 30 S&P points and then we recovered into the close 30 S&P points. This is what we call a "Bugs Bunny Market," where Bugs throws a switch and people stamped in and out of the theater (5:00 on this video) - and it's not usually a good thing.
In fact, that's the action we saw back on 2/28, when I was warning people to get to cash and, in fact, I tweeted out a similar comment (with the same video link) and our trade idea for playing the next 45 days was:
TZA/Craig – Well, the April $14/17 is still doable at $1.30 and you can sell the $15 puts for .88 for net .42 now.
Even with the Russell's bounce off our 1,100 goal yesterday, TZA is still at $17.65 and the April spread, which expires tomorrow, is net $1.90 – up a very nice 350% in 45 days (you can follow me on Twitter here, but I rarely tweet our Member Trade Ideas – for those, you have to sign up HERE).
We actually flipped long on the Russell during our Live Trading Webcast at 1pm yesterday, catching it pretty much on the button and I showed people, LIVE, how to make hundreds of dollars in just 15 minutes trading the Futures (replay available here).
In yesterday's post, I reminded you we were shorting oil at $104 and we caught a $500 per contract move back to $103.50 but then (also live in the Webcast), we decided to wait for $105ish to re-short today (/CL Futures). This morning, I posted early (6:22) to our Members that we had our shorting opportunity at $104.95 and already (8:06) we're back to $104.65 and that's good for $300 per contract after a hard morning's work – plenty of money for breakfast!
by Phil Davis - April 15th, 2014 8:20 am
But, fortunately, it's still not time to pay the piper for all that money we're borrowing to goose the economy. Well, goose may be too strong a term as 5 years and $5 Trillion Dollars into this mess, we're really only flatlined the GDP to where it was back in 2007.
Did you get your $5,000,000,000,000 worth? We know the top 0.01% sure did. We've made the World's Billionaires alone $1.4Tn richer than they were in 2009 – and it only cost 140M working Americans $37,714 each! That's how much $5Tn in additional debt has cost us – on top of the $2.5Tn we piled on fighting Iraq or Afghanistan for whatever reason it was we had to invade those guys.
Don't worry, it's all fair, each one of those Billionaires also owes the same $37,714 as you do – they feel your pain! Multiply that by 3.5 and that's your share of the National Debt, which is still growing by $500Bn a year, although that's 1/2 of how fast it was growing under Bush II. And, of course, we're not even counting the Fed's $4Tn of additional debt – because we still get to pretend that will all work itself out in the end.
Just like CHINA!!! China's Central Bank has been trying to drain a little liquidity out of the system and it looks like that's already dropped GDP growth for the quarter down to 1.5%, nowhere near the 7.5% annual levels the Government was hoping for. That led Chinese stocks to fall about 1.5% this morning, led down by Financial and Commodity stocks. That's the reaction to M2 (money supply) GROWING by 12.1% instead of the 13.3% it was growing a month earlier and despite $169Bn in loan growth.
“Investors are a bit worried because M2 is quite low,” Zhang Haidong, an analyst at Tebon Securities Co., said by phone in Shanghai. “New loans may be better than expected by a little, but it’s still not considered good data;
by Phil Davis - April 14th, 2014 8:34 am
After a very ugly week, what's in store next?
This is one very ugly chart with an almost 10% drop on the Nasdaq and the Russell but that's GOOD news as it's about where we expect the Central Banksters to step in and do something, before things turn more ugly.
That's why we weren't pressing our bearish bets last week and we took our very aggressive TZA and XRT bets off the table in our Short-Term Portfolio and our $25,000 Portfolio because, with the indexes down this far, we expect at least a weak bounce to start the week – the question is – what happens after that?
Very simply, per our 5% Rule™, when the market drops 5%, we expect a 1% retrace and, in the case of the Nasdaq and the Russell, we expect a 2% retrace for a "weak bounce." Also, as you can see on our Big Chart, we have some serious support on the Dow at our "Must Hold" lijne at 16,000. There's pretty much no way it can fail that without a bounce.
The Dow fell from 16,600 to 16,000 and that's only 3.6% but it's a strong support line but, as noted by Dave Fry in his Dow Chart, the real support comes at the 200 dma, at 15,750, and that's 5.1% today but that 200 dma will rise while it waits for the Dow so we can still expect a test at 15,800, which should be 5% by that time, assuming our weak bounce fails this week.
On our other indexes, we'll be looking for:
- Dow 16,600 to 16,000 is 600 points (3.6%) and we're looking for a 120-point weak bounce to 16,120 and a 240-point strong bounce to 16,240 before we believe any sort of "rally."
- S&P 1,900 to 1,815 is 85 points down (4.5%) so 17 points to 1,832 is weak and 17 more to 1,849 is strong but let's call it 1,850 before we're impressed.
- Nasdaq failed 4,375 and down to 4,000 (8.5%), also a strong technical support line that held up in late Jan/early Feb as well. Keep in mind, when an index is going to fall 10%,
by Phil Davis - April 11th, 2014 8:49 am
Wheeeeee – down we go again!
I hate to say I told you so but — no, actually I'm loving this one… In fact, JPM specifically was our earnings short of the week – from our Live Chat Room on Monday morning, I said to our Members:
Earnings/QC – I think I like a bearish play on JPM best. STZ also tempting for a short but, with JPM, we already liked them short on the Dow list. With JPM at $59.60, I like selling the May $57.50 calls for $2.90 and buying the Jan $57.50/62.50 bull call spread at $2.40 to cover for a net .50 credit. If all goes well, JPM goes down and the short May calls expire worthless and whatever is left on the spread is bonus money (plus the credit).
This isn't that complicated folks, we just read the news and make a play. The rest is just picking the right option strategy and allocating appropriate amounts of cash – this is what we teach people how to do every day at PSW (you can join us HERE). That trade will be up more than 100% for the week this morning as JPM plunges to about $55. Yet another example of all the fun things we can do with our CASH!!!
And you KNOW we shorted Oil Futures (/CL) at $103.50 – I told you that in yesterday morning's post. We already hit $103 overnight (up $500 per contract) and we re-loaded this morning at $103.40 and now we're heading back to $103 yet again. Hopefully this is the big one and we get a ride back to $102 – which would be up $1,500 per contract.
I mentioned we were back to bearish in the morning post yesterday and, at 11:14, we added an aggressive SDS (ultra-short S&P) May $27/30 bull call spread at $1.15, buying 20 of those for $2,300, offset with the sale of a single ISRG 2016 $350 put at $31 ($3,100) for a net $800 credit. In yesterday's sell-off alone, the bull call spread finished at $1.65 ($3,300)…
by Phil Davis - April 10th, 2014 8:30 am
Wow, what a recovery!
I mean we expected a bounce yesterday on Monday, when we pointed out that there were 3 Fed Doves in a row speaking after the release of the minutes but – WOW! – that was pretty extreme. Still, it only got us right to the 1,160 weak bounce we were looking for on Monday. That's right, 1,160 on the dot was predicted Monday Morning, before the market opened, as the bounce line for the Russell.
As I often remind our Members, I can only tell you what's going to happen and suggest ways to profit from it – what you do with that information is entirely up to you!
What we did with that information on Monday, at 3pm in our Live Member Chat Room, was the following:
That's why I still like buying the f'ing dips on the Futures – worth losing a few while hoping to catch a nice bounce. Now our lines are 16,200 (/YM), 1,835 (/ES), 3,500 (/NQ) and 1,130 (/TF) – any of which can be played bullish if 2 are over the lines.
Needless to say, those lines worked out very well as we're now at 16,330, 1,861, 3,583 and 1,152 and Tuesday Morning's Alert to Members gave us an even better re-entries on the Dow (16,100) and a 230-point bump in the Dow is good for $1,150 per contract!
This is why we LIKE having CASH!!! on the sidelines: We catch a nice down move, cash back out – catch a nice up move, cash back out, etc. and, every night, we go to sleep not at all worried about what's happening. It's not only relaxing, and profitable – it's FUN!
I put out a News Alert this morning (and you can now read those if you follow our Facebook Page, which is also where Members should go if the site ever crashes, so make sure you "Like" it) where we called for a "conviction short" on oil at $103.50…
by Phil Davis - April 9th, 2014 8:50 am
Wheeee – what a ride!
As nasty as our Big Chart looks at the moment, we only have two Vomiting Cobra Patterns (Nasdaq and Russell) while the other three indexes are still forming Spitting Cobras, which are only LIKELY to head lower.
Today we run right into an inflection point as the Federal Reserve releases the Minutes of their last meeting at 2pm, followed by Evans (dove) speaking at 3:30 and Tarullu (dove) speaking at 7pm, in case the Asian markets don't get the message about how doveish we intend to be the first time.
Forget the Ukraine, there's an all-out Global currency war being waged even as we speak and yesterday the Dollar was the clear winner by losing 1% of its value in a single day. With over 250 days left until the end of the year, that extrapolates out to -150% by Christmas, which means you'd better start shopping now, before your next IPhone costs $1,000 (if you can even afford the gas to get to the store, that is).
While a weak currency may not be good for those of you with JOBS, who get paid in Dollars or those of you with small businesses, who buy more and more expensive raw materials and then have to accept Dollars from your customers – for our Corporate Citizens, it could not be better – as they sell 50% of their goods overseas so a weak Dollar is great for sales and it lowers the relative wages they pay US workers and, of course, it makes Dollar debt so much cheaper to pay back.
That is how the Interests of our Corporate Citizens and the Government align. Our Government also has a lot of debt to pay back, but they have to pay it back in Dollars and, the less the Dollar is worth, the cheaper it is for them to pay it back. USUALLY, when your currency is weak, interest rates rise to compensate – so there's a check and balance to the system but the Fed has destroyed those checks and balances, allowing us to devalue our currency with NO CONSEQUENCES – EVER!!!
by Phil Davis - April 8th, 2014 8:13 am
Wheeeeee – down we go!
We couldn't be happier, of course – as we were feeling a little silly having cashed out a month ago, with the market making new highs on us. Still, we stuck to our Fundamental guns and now we are outperforming the market by a mile this year and, even better, we have some exciting opportunities to use our sideline cash to do a little shopping – but not yet.
There's no hurry. Those XRT May $84 puts I mentioned in yesterday's post that went from 0.85 last Thursday to $1.42 yesterday morning hit $2.35 into yesterday's close. That's up another 65% in a day and that's money that's compounding for us on the way down, up 176% in 3 days now. This is what we do with our sideline cash – so it's not like we sit around twiddling our thumbs…
I sent out an Alert to our Members yesterday to sell the T July $35 calls for $1.10 to cover a long position we have on T. Pre-market they are down 1% and those short calls are up 10% on day one already – but there's 100 more days to go. Again, this is what we can do with our sideline cash. We also shorted JPM in an earnings spread – that trade is here from our Live Daily Chat Room.
We had lots of fun in our Futures trading, flip-flopping our bets for the bounces and catching nice moves in both directions – but mostly down. We even made some quick money with long plays on the Momo stocks – also playing for bounces. Our last trade idea of the day was shorting /NKD as it failed the 14,800 mark into the close (coupled with a falling Dollar and rising Yen) and that index fell straight down to 14,450, good for $1,750 per contract. We were already longer-term short position on the Nikkei through our EWJ puts in the Short-Term Portfolio, this was just a bonus bet. We also added JNJ May $95 puts at .80, those could be fun if the weakness continues.
by Phil Davis - April 7th, 2014 8:34 am
It's earnings season again!
Guidance has gotten uglier, as evidenced by this FactSet chart. These are those annoying Fundamentals I keep whining about while everyone else is trying to have a good time betting on the bull market lasting forever.
Of course, we know how to make money off this news – just last Thursday I sent out an alert to our Members at 9:39 am, after we discussed "positive" retail sales data and I put it in context in Member Chat, saying:
Retail sales – That data is very misleading because they were slashing prices to clear inventory. I wouldn't bet a penny based on Retail Sales numbers in Europe until we see the earnings reports. I expect margins will be squeezed hard.
Speaking of which, our buddies at XRT are back where we love to short them so let's add 5 May $84 puts at 0.85 in the $25KP and 10 in the STP.
As you can see from the chart, we timed it just right and those puts are already $1.42 as of Friday's close, up 67% per contract in 48 hours. That's $1,420 back off an $850 investment (10 contracts) in just two days. We can make plays like this because we have cash on the sidelines, since we took our money and ran at the top of the market. Perhaps I was too cautious – as we haven't had much of a pullback yet – but who cares when we can make quick profits like these?
Also in Friday morning's post (Report Members get them delivered, in progress at 8:35 and final copies before the market opens each day), I called for shorting the S&P Futures (/ES) at 1,890 (and we just held a Live Trading Futures Workshop on Tuesday)…
by Phil Davis - April 4th, 2014 8:26 am
Sorry, but this "rally" is just too much BS for me.
As you can see from Dave Fry's SPY chart, we're running up on ZERO volume in the Futures and then we sell off all day on very low volume (because there are no buyers and the Funds are exiting slowly) and then we have dip at the finish as the ETFs that HAVE to buy at MOC (Market on Close)pricing get shares jammed down their throats by the pumpers.
It's a complete and utter farce and completely ignored by the MSM, especially the Financial Media, who just play along as if none of this matters. While you may consider the manipulation of currency and metals markets to be news (both are under international investigation at the moment) – it doesn't rate a mention in the Financial Media, who's advertising revenue comes mainly from the companies that are being investigated for fraud and manipulation.
April Fools! The above is what I wrote along with the chart on March 7th in "Non-Farm Friday – America Still Not Working." That was 30 days ago, we've come a long way since then because, THIS TIME, we have SPY at 188.63 coming into Non-Farm Payrolls, so take THAT 188.10 – IN YOUR FACE!
Despite the month-long flatline, the bullish trade idea we had back on 3/7 was a big winner. Our trade idea in that mornings post (which you can get delivered to your mailbox, pre-market by subscribing here) was:
by Phil Davis - April 3rd, 2014 8:20 am
MORE FREE MONEY!!!
China gave the markets a big boost this morning by announcing an immediate $25Bn program for railway construction and another $50Bn a year for "more stuff." That sent the Nikkei flying to 15,150 but then Chinese Non-Manufacturing PMI fell to 54.5 for March and the Nikkei gave back 75 points while the Hang Seng closed just 0.2% over flat and the Shanghai fell 0.75%, back to 2,043, just 5% over the lows they've been testing all year at that critical 2,000 line.
Now to some extent we could say "what's the difference where the money comes from, as long as they keep giving it to us?" and that would be the correct attitude, if we were 8 years-old and had no concept of consequences! As adults, we should wonder – WTF are all these Governments so afraid of that they can't even allow a small correction before jumping back in with "emergency measures"?
The simple answer is that IT'S A GIGANTIC CON, like the time they built a fake town in Blazing Saddles - it looked good, as long as you didn't look behind the facades. If you actually tried to touch it, it would fall over like a house of cards. That's what happens when you prop up an economy with stimulus – you haven't built a foundation – it's all a facade, so the Central Banks that built it are terrified to see it tested….
The con depends very much on people BELIEVING that the house of cards is a real house. Without a constant inflow of investment Dollars, the slightest breeze can knock the whole thing over and we'd be right back to the wreck we had before. And, of course, it's not just China that's built a house of cards. The US, Europe, Japan – pretty much all the Central Banksters are participating because, rather than let the banks fail in 2009, they pretended everything was OK and went about trying to back-fill the $15Tn Global hole in their balance sheets by printing money and, not so subtly, handing it out to them.