by phil - October 23rd, 2015 8:32 am
Now China has lowered their lending rates – again!
That's right, first thing this morning, the PBOC announced another 0.25% rate cut at 7:30 this morning along with a 50 basis point reduction in reserve requirements AND completely removed the bank deposit rate ceiling. That, of course, sent our Futures flying and, as I noted yesterday, is surely more proof that China's 6.9% GDP growth numbers are legitimate – Central Banks always panic with massive quantitative easing when their economy is growing 6.9% per year, right?
Fortunately, we had flipped long on the Russell (/TF) futures into yesterday's close at 1,155 and those punched up $1,000 per contract gains but, unfortunately, we were short on the S&P (/ES) futures at 2,050 and those are down $1,000 per contract at 2,070. So, what do we do? We take the profits from /TF and buy more /ES shorts at 2,070, of course! By the way, the replay of Tuesday's Live Futures Trading Webinar is HERE.
Our weekly live trading webinars are occasionally fee (Tuesday's was) but are part of the service provided to followers of our Options Opportunity Portfolio over at Seeking Alpha. Even though we got this week "wrong" by working our way into neutral (down $300 since last weekend's review) it's because we are protecting what are now $18,645 in gains (18.6%) on closed positions since our August 8th inception date:
Many of these may seem familiar to readers of our morning posts, as we often discuss similar position in our morning reports but it's inside the Member Site where we mark the actual trades, live, while the markets are open and then track them in virtual portfolios like this one. Oddly enough, the ultra-short Nasdaq ETF (SQQQ) has been one of our biggest winners but it's also our biggest current loser on the open side. We'll be repositioning those this morning on the super-spike back to 5,000 (about 4,625 on /NQ).
by phil - October 22nd, 2015 8:22 am
I've got Draghi fever, she's got Draghi fever
We've got Draghi fever, we're in debt
She's gone Dollar crazy, I've gone Euro hazy
Ain't no thinking maybe, we're in Debt
Are we still taking this GS puppet seriously?
Well, someone is as the Global Markets are anxiously waiting to hang on every word Draghi says in his speech following the ECB rate non-decision (you heard it here first) at 8:30. The truth is that the Central Banksters are running out of ammunition and have now begun to ask the Governments to reverse the austerity programs they demanded to now stimulate the economies before deflation begins to erode the value of the Bankster's assets, which would collapse their loan to value ratios and lead to BIG TROUBLE in very short order.
The ECB is already running a $1.2 TRILLION bond-buying program, providing up to $70Bn in MONTLY artificial support for Sovereign Debts. Without this backstop – one has to wonder what the real interest rates in Europe would be. All that this form of QE actually accomplishes is allowing countries with very risky credit to borrow more and more money while the population of savers is underpaid on their retirement accounts.
Did I say underpaid? That's an understatement as rates have now gone NEGATIVE as some banks are now charging fees to depositors and paying no interest at all! The official rates in Switzerland, Sweden and Denmark have already gone negative as Governments are pulling out all the stops to get their people to throw their retirement accounts into the stock market or, in the very least – to go spend it on something.
by phil - October 21st, 2015 8:12 am
What an insane market!
At 4 am, just after Europe opened, the Futures blasted off for no particular reason. It wasn't too surprising as they were the same long lines we played in yesterday's Live Futures Trading Webinar – so great money to be made by the early risers but now we're back to the lines we shorted earlier yesterday, at 11:10, when I said to our Members:
Lines of the moment are /YM 17,200 (below), /ES 2,035 (below), /NQ 4,450 (below) and /TF 1,165 (below) with /ES at 2,028.5 playable short with a stop over 2,030 (or any of the others going over) and then short the laggard if we're back at 2,035.
This morning we're right back at 17,200, 2,030, 4,445 and 1,165 so of course we're back in the saddle again – taking our short entry on the Russell as we follow our shorting rules, which are:
I do like shorting our majors this morning at 17,200, 2,035, 4,450 and 1,165 – ONLY ON CROSSES BELOW by the 3rd of 4 and out if ANY of the 3 cross back over and needing to quickly see the 4th index confirm the drop.
Follow those simple rules and, as we demonstrated in yesterday's webinar, you can limit your losses while waiting for that big victory when things break your way. We made about $200 live for our Webinar participants – who else gives a webinar where the attendees come out ahead?
As you can see from Declan's S&P 500 chart from PSW's Chart School, 2,050 is a major line of resistance but 2,035 (see yesterday's post) is the 5% line on our Big Chart and that has been unbreakable during the live sessions so the market manipulators are now pulling out all the stops to push us over the line in the thinly traded futures to keep the retailers thinking Everything is AWESOME – even when the data shows that it clearly is not.
by phil - October 20th, 2015 8:25 am
Wheeeeee, what fun!
As noted in our Weekend Portfolio Review, we are in CASH!!! so we really don't give a crap which way the market goes. Despite having plenty of long positions (short puts in our Long-Term Portfolio), we'd be thrilled to actually get to buy the stocks cheaply and we'd also be thrilled to do a bit of bargain-hunting if we get another nice dip – so that's what we're rooting for.
As you can see from Dave Fry's SPY chart, yesterday's move was, as we predicted in the morning post, complete and utter BS and, in fact, declining volume outpaced advancing volume on the NYSE by 50% in an "up" day. This is classic end-stage manipulation – try not to fall for it!
2,035 on the S&P is, of course, the 10% line on our Big Chart. That means it's no surprise that we're getting rejected here and the run-up was from 1,850 so that's just under 200 points so we'll look for a 40ish-point pullback to 2,000 and holding that would be bullish but a fall to 1,950 would be bearish again and anything below that signals we're probably going to be seeing 1,850 again:
It's useful to have a magical chart that tells us what's going to happen before it does. Thanks to our fabulous 5% Rule™, we're usually able to stay well ahead of the markets and we're also going be watching 4,925 on the Nasdaq, 10,450 on the NYSE and 1,180 on the Russell as potential rejection points and the Dow is already in a dead zone at 17,200 so that's the bull/bear indicator of the moment (whichever side it's on).
While we are waiting for market clarity, we've been cashing in on our Futures trades. In last week's Live Trading Webinar, we went long on Natural Gas (UNG) Futures (/NG) and this morning we closed out our /NGX5 (Nov) contracts at goal and let our Dec contracts ride. As you can see, we did quite well with the trade but we're expecting to do even better on the December contracts – now trading at $2.68…
by phil - October 19th, 2015 8:34 am
China claims their GDP is growing at 6.9%.
This is, of course, complete and utter BS but even if you accept this BS, it's still unsettling how fast the GDP growth has contracted over the last 18 months. Still, this is just silly because China is claiming 6.9% GROWTH when dozens of other economic indicators out of China are showing CONTRACTION.
You won't get any serious analysis of China's economy from the US Media, who are so beholden to China and Chinese companies that you may be completely unaware that the Chinese Government has recently "unleashed an extraordinary assault on basic human rights and their defenders with a ferocity unseen in recent years — issuing directives insisting on “correct” ideology among party members, university lecturers, students, researchers, and journalists." In fact, according to Human Rights Watch's 2015 Report:
China remains an authoritarian state, one that systematically curbs fundamental rights, including freedom of expression, association, assembly, and religion, when their exercise is perceived to threaten one-party rule.
Yet China's leaders were just greeted with open arms in the US and now the IPhone makers are heading off to England where, Liu Xiaoming, China’s ambassador to the UK, said British people “know how to behave” and the topic of human rights would not be raised at the dinner on Tuesday. As a Jersey boy, I also "know" mafia-style intimidation tactics when I hear them!
Meanwhile, let's not get off the topic of fake, Fake, FAKE GDP numbers since we follow the market and the underlying assumption that China is growing at 6.9% is being used to justify a lot of insane corporate valuations – especially in China.
Capital Economics has a thing called the China Activity Proxy which is considered a much more realistic view of China's GDP and, as of Q1 – it was at 5%, which is it's lowest level since 2003 and much worse than the recent collapse in 2008, which helped trigger a global recession.
by phil - October 18th, 2015 10:04 pm
We discussed our strategies in Part 1.
This is Part 2 and it's a Member's only view of the 4 virtual portfolios we track for our Members. We already did these reviews Live in our Member Chat Room – this is just a consolidation of the updates for reference purposes. Our Member Portfolios are:
- Option Opportunities Portfolio – OOP ($100,000 base): This is a self-contained portfolio that is also published at Seeking Alpha and looks for short-term opportunities to make money off of news or events using various option strategies. Our goal here is to teach how to trade with options as well as how to identify events that cause price mismatches we are able to take advantag of.
- Butterfly Portfolio – ($100,000 base): Our most stable portfolio, using what are really mainly double-diagonal calendar spreads to create low-risk, self-hedging positons that emphasize our "Be the House – NOT the Gambler" strategy for premium selling. It's a low-touch portfolio, requiring monthly maintennance.
- Short-Term Portfolio – STP ($100,000 base): The first part of our main paired portfolios. The STP's primary purpose is to protect the bullish LTP but, since that's not a full-time job, we also make opportunity-type plays when they present themselves. As there is usually plenty of margin laying around, we also make fairly complex earnings plays that would not be appropriate for stand-along $100K portfolios.
- Long-Term Portfolio – LTP ($500,000 base): This is our main strategy for long-term investing which follows our "Planting Trees" model. We INTEND to build long-term positions with very low bais BUT in a very bullish market, we end up cashing out when our positions trend far above our expectations. This portfolio, by itself is very volatile, as the hedges are in the STP while the vast majority of our LTP positions are bullish and also a low-touch portfolio.
Short-Term Portfolio (STP) still isn't bearish enough as it's only down $8,000 while the LTP is up $15,000 for the week so let's see how we can tilt a bit more bearish into the weekend!
by phil - October 17th, 2015 8:29 am
One Million Dollars!
That seemed like a lot just two weeks ago, when we did our September Portfolio Review but, as I said at the time, though mainly in cash, we had kept a very bullish set of "losing" position in the Long-Term Portfolio (LTP) as we expected the next stage of the up cycle to include our beaten down oil and materials stocks.
Boy did we nail that one! In just two weeks, our paired Short-Term Portfolio (STP) and LTP combo have gained $91,154 to bring our combined total to $1,112,035.60 – a new high and up 85% since our Thanksgiving, 2013 start date. Much more impressive though, than making 85% in two years, is making another 9.1% in two weeks!
We didn't do anything fancy, these are essentially the same positions we featured in our last Portfolio Review – we simply left them alone to do their thing – as we should be doing with our long-term plays. The key to our success was sticking with our strategy and our strategy included:
- Taking our winners off the table when we felt the market was getting toppy
- Evaluating all of our remaining positions
- Cutting the positions we no longer had faith in
- Adding to or adjusting the positions that remained to maximize their profit potential
Our paired portfolio strategy essentially forces us to buy low and sell high. By scaling into a diversified group of positions, including a healthy amount of market shorts at any given time – it's virtually impossible for at least some of our positions not to be winning in almost any market conditions. Then we simply cash in our winner and use that money to scale into our "losers" – if we believe they are only victims of a cycle moving against them – as opposed to having fundamentally lost something since our original investment.
Usually, we don't run our virtual portfolios for more than a year because people like to feel they are starting fresh but, two years ago, I decided we need to make a point about our Long-Term Investing Strategy (see "The Man Who Planted Trees" for details). We discussed our…
by phil - October 16th, 2015 8:11 am
Brazil's economy is the 7th largest in the world at $2.4Tn – that's above Italy, India, Russia, Canada, Australia and just under France ($2.8Tn) and the UK ($2.9Tn), yet Americans know very little about Brazil, who had their credit rating dropped to BBB- by S&P last month as well. Having one credit agency mark you down is a warning, having two mark you down triggers massive cash outflows (tune in next week!).
Obviously, things are pretty grim in Brazil, who's economy is close to 60% of South America's output. Is this just another thing the markets will choose to ignore as they rally back to new highs? Frankly, I don't know as this week's move is already insane – so we don't bet on irrational markets to suddenly behave rationally but TG we're in CASH!!!
Cash has let us have a really fun week at PSW, playing the Futures in both directions while our portfolios were generally locked in neutral. We flipped a bit bearish overall but our Long-Term Portfolio (LTP) is still bullish (and 90% cash) and gained a whopping $3,400 this week while our paired Short-Term Portfolio (STP) lost $3,200 so, all in all – a week we could have just taken off.
But we didn't and, as I noted, we had a great time playing the Futures with all our sidelined cash and, as I detailed for you in yesterday morning's post, we shorted the Russell Futures at 1,150 (1,145 if you got started in the morning) and rode that down to 1,130 for a $1,500 per contract gain and we flipped long again at 1,130 in our Live Member Chat Room (as planned in the morning post) and caught the run all the way to 1,160 for a $3,000 per contract gain, where we're now short again.
You don't have to hold a lot of stocks to make really good money in your portfolio – just a couple of well-timed Futures contracts can make enough to satisfy all but the greediest investor. People think Futures trading is complicated but it's not – you are simply betting
by phil - October 15th, 2015 8:27 am
It's a significant portion of Uncle Rupert's $12.5Bn personal fortune but, like all the Billionaires who control everything you watch and read and listen to (while cutting your children's school budgets so they can't think for themselves) – it allows them to manipulate the markets and thus, their personal fortunes when the need arises.
In Murdoch's case, he has built up Jon Hilsenrath's reputation as "The Fed Whisperer," arguably making him the most powerful economic journalist on the planet as Hilsenrath supposedly has an inside track to whatever the Fed is doing. Forget the fact that Hilsenrath is wrong all the time – it's the reputation that counts and yesterday he used it masterfully to turn around the global markets (which Mr. Murdoch is heavily invested in) with a well-timed article ahead of Asia's open that sent the Futures soaring back to yesterday's phony highs – it was really a thing of beauty, in an evil, manipulative sort of way.
Of course, at PSW, I teach our Members that we don't really care IF the market is manipulated, as long as we can understand HOW it is manipulated and take advantage of it. In yesterday's morning post, for example, I mentioned that we went long on the Russell Futures in Tuesday's Live Trading Webinar at 1,140 and yesterday the Russell (/TF) topped out at 1,150, which was up $1,000 per contract and there we flipped short for the ride back to 1,130, which was up $2,000 per contract and now we're happy to short it again, though it's S&P 2,000 that has caught our eye this morning.
When you are playing the Futures, the key is to not lose a lot when you're wrong and we teach our Members to do this by picking entries that have strong back-stops – failure points that give them a good indication to get out of a trade before it goes too far the wrong way. S&P 2,000 is, obviously, a huge line to cross and that means it's not likely we get burned by a sudden move over (or under) the line…
by phil - October 14th, 2015 8:29 am
Well, we've seen this movie before.
I'd say "I told you so" but that's getting boring and, after all,t he headline for yesterday's post was "China’s 20.4% Import Collapse Has Us Testing S&P 2,000 Again" so it's not like it was a subtle prediction. Last Friday, despite the rally it was "Earnings Iceberg Dead Ahead" and, like the guy who said the same thing on the Titanic – nobody likes to listen to the guy with bad news, do you?
Ever Cramer has finally come out of his buying stupor and is telling his sheeple to cash out and get to the sidelines. Of course, if Cramer is on my side of the table, I have to question my premise as I called this top 2 months and 5% ago while he was still foaming at the mouth and telling people to BUYBUYBUY at 2,100+. I'm the guy that Cramer warned you was "spooking people out of stocks too soon" but it's a Hell of a lot easier get to cash while the market is going up than after it's already pulled back and your portfolio has taken damage.
It's also a lot easier to hedge when the market is high – as the hedges are a lot cheaper then. Cramer's newfound selling premise is based on the McClellan Oscillator, which I had pointed out last week was way overbought and remains so BUT it's significantly improved from last week on a fairly minor overall pullback and that's actually a bullish signal – if the indexes confirm by holding our bounce lines.
Back on 8/26, we predicted the indexes would bounce from their 2015 lows (8/24 was the big crash) to the following levels, based on our fabulous 5% Rule™: