by Phil Davis - July 21st, 2014 8:31 am
We all go down for a piece of the moment
Watch another burn to the death to the core
And the roadshow thrills pack the freaks and the phonies
Sing: now is now, yeah! – Rob Zombie
There is just no way to win betting against this market!
Well, actually, there is one way and that's betting that each pop is nonsense and tends to have a subsequent pullback intra-day but, long-term, the cumulative effect of all that low-volume pumping has been a rousing success, to say the least.
As you can see from Andy Thrasher's S&P chart, there has been some amazing underlying deterioration since the July 4th weekend with the Advance/Decline line falling back to trend and stocks above their 200-Day Moving Average dropping 15% in 3 weeks. Stocks above the 200 DMA is a fantastic leading indicator for downside move – ignore it at your own risk.
People are panicking into bonds, dropping the 10-Year Yield 20%, from 3.1% to 2.45% this year but it doesn't matter because Central Banksters are pumping SO MUCH MONEY into the Global Markets that there's enough to buy all asset classes simultaneously – something that is unprecedented in Financial History – what could go wrong?
Well, one thing that could go wrong is you putting your money into Mutual Funds. As it turns out, in an S&P study of actively managed Mutual Funds, only 2 (two) out of 2,862 actually beat the S&P over ANY of the fund's lifetimes (limited to 12 months or longer).
That's even worse than the average performace of hedge funds, which only averaged a 0.59% annual loss when compared to just putting your money directly into the S&P.
This dovetails with a conversation we were having this weekend in our Member Chat Room, where I identified 4 trade ideas for a $50,000 Portfolio that only used 1/4 of the buying power to generate $365,512 in projected profits over the next 15 years using CONSERVATIVE options strategies designed to MATCH the S&P, not beat it.…
by Phil Davis - June 18th, 2014 8:36 am
It's a Fed day today!
That, of course, means MORE FREE MONEY and the markets are giddy with anticipation ahead of the meeting – especially since we had more poor housing data yesterday and that's exactly the kind of bad news that is good news as it keeps the Fed in easy-money mode a little longer.
As you may have guessed, we shorted oil this morning. The July contract (/CLN4) expires on Friday and, as you can see from the chart, we continue to find great profits in the sell-off that we predicted would come last week. We went over some Futures Trading Tips in yesterday's live Webinar as well as the new, bullish positions we've added to our Long-Term Portfolio. Much as we rail against what we firmly believe will ultimately be a disastrous policy – you simply can't fight the Fed and we're not trying to – it's much more profitable to go with the flow.
Going with the flow is exactly what we're doing with our oil trades as they STILL have 103M barrels worth of FAKE orders open for July delivery (actually, about 20M will actually be delivered so "only" 80M are fake at the moment) and that is down from the 172M FAKE orders that were open on Friday morning (see chart on Friday's post).
|Current Session||Prior Day||Opt's|
by Phil Davis - June 10th, 2014 8:34 am
Here we go again!
As you can see from Dave Fry's S&P chart, we're back in the top of the channel on a Tuesday and I will refer you to April 1st's "Triple Top Tuesday" and December 31st's "Terminal Tuesday" – both of which were points we thought the market was topping out before.
Actually, in both cases, we did have a mild pullback, but nothing that broke the trend – so far.
Back in that December post, we were playing gold (/YG) bullish at $1,185 to finish the year, based on our premise of MORE FREE MONEY in 2014 keeping the markets afloat. We also went bullish on SHLD at $40, which is like $30 post-spit.
In the April post, it was our 3rd try at 1,880 on the S&P and we had just cashed out our Income Portfolio and I we lost $10 betting the Nasdaq would be above 4,200 at April expirations on a TQQQ spread (now 4,350 – so bad timing) but our support held and kept the damage to a minimum. We also (in the morning post) called for selling the AAPL Jan $450 puts for $5.90 to pay for those spreads and AAPL just split 7:1 so those are now the $64.29 puts at .25. 7 x .25 = $1.75 so up $4.15 (70%) already on that play.
We also had bullish trade ideas for HOV, CHL, FCX, ABX and RIG – right in the morning post! Our best play, however, was shorting the Russell Futures (/TF) at 1,180 in Member Chat at 10:53 – as that was the beginning of an $9,000 per contract pullback on that index – all the way back to 1,090 (where we went long).
As you can see from Dave's Russell chart, we're just playing a channel with our trades – it's really not that complicated. Yesterday the Russell hit 1,180 and – guess what – we shorted it again! Now you are catching on to our "secret" strategy!
by Phil Davis - June 7th, 2014 8:24 am
What a rally!
While stocks certainly aren't "cheap" by any measure, we've been able to identify 20 that are still good values. We've been compiling this list and going over trade ideas for playing them in our Tuesday Webinars since May 13th and, of course, we've been posting them in our Live Member Chat rooms, so this is just a review to consolidate our trade ideas.
We cashed in our Long-Term Portfolio last week at what we thought was a top but so far – so wrong on that call! Since it's up 19% in just 6 months, we're not going to cry about missing the last 400-point move on the Dow (2.5%) – we'll just have to look ahead to deploying our cash again, following the same strategy that was so successful in the first half of the year, which was, essetially, our "7 Steps to Consistently Making 20-40% Annual Returns" system:
As we did in building our Long-Term Portfolio, we're not going to rush in and buy everything. We will do exactly what we did in January where, following our Fall Buy List, we simply added stocks from our list whenever they became cheap. While our Members are able to pick up our trade ideas as they are released, we don't always add them to our virtual portfolios right away. As with the first half's Long-Term Portfolio, we will track every entry and exit in both our Live Weekly Webcasts, as well as in our Live Member Chat Room and alerts will be sent to our subscribers (you can join here, Basic and Premium Members get full access).
Our picks were originally grouped by industry sectors but, for reference purposes, I'm going to list them alphabetically below – these are the original trade ideas (the Webinar dates where we discussed our picks are next to the symbol), most are still playable but some have already taken off :
by Phil Davis - June 3rd, 2014 8:25 am
That's 2 closes over 1,920.
It's almost enough to make us regret cashing out our Long-Term Portfolio last week. We didn't expect to call a perfect top, when you have a large portfolio it can take days to unwind your positions and, despite the very low volume – we'd like to thank all the retail bagholders who bought our shares at top dollar in the last few days.
Thanks Dave and Bill and Jack and Joe and – well, that's about it as volume is so low, there can't be more then 3 or 4 guys trading in this market!
Last June started off with low volume too – as well as record highs – and then we dropped 5% into July. We're simply taking our 119% cash and waiting for the dip – is that so bad?
Yesterday was only the 3rd lowest volume day of the year and the action was wonderfully fake around a PMI report that was released, revised and then revised again – all in the same morning!
In the end, they decided on 56.4, which was in-line with consensus but not before giving us a glimpse on how quickly this market can fail on bad news.
In our Live Member Chat Room, we took full advantage of the over-reaction on the bad news to go against the panicking sheeple and buy TNA (3x bullish ETF on the Russell) in a 9:57 Alert I sent out to our Members.
That trade was so obvious I tweeted it out as well (you can follow me here) saying:
Those calls came in cheaper (because our timing was perfect) at $1.50-$1.40 and they topped out at $1.70 and finished the day at $1.61 but should be cheap again this morning, which is why I'm mentioning them now as they make an excellent upside hedge – in case the market does better than we think.
by Phil Davis - May 27th, 2014 8:34 am
Not just from your holiday weekend but welcome back to the top of the S&P as we attempt our 7th breakout of the year. That's right, a month never goes by when we don't have a new rally that takes us back to the top of the channel, nor does a month go by when we don't re-test the bottom of the channel either – but let's ignore that as it's unpleasant.
Interestingly, as you can see from Dave Fry's S&P chart, there have only been 9 positive weeks out of 19 in 2014 but oh boy did they make them count – with almost every one of them setting a new record – before the selling resumed. Despite all these "records" being set, the average capital allocation strategy hasn't performed all that well in 2014, so far:
Thank goodness we're not pursuing any of those! Thank goodness also that we didn't give our money to any hedge fund managers, as hedge funds are off to their worst start of the year since the Financial Crisis. Not listed here is our "Be the House – Not the Gambler" strategy, which we will be reviewing live today at 12:15 EST in a Live Webinar (sign up here for free).
Selling risk to others in our Member Portfolios has given us 10%+ gains for year (so far). In fact, the only strategy we agreed with from the above chart was gold, which we bet heavily (along with DBA) at the beginning of the year. We were still knocking it out of the park in early May, with 40 of our 47 trade ideas in early may coming up winners already (see our May Trade Review).
Remember, this isn't about making good picks, per se – it's about having a good strategy that gives you a high probability of success – even when you are wrong about a trade. BEING THE HOUSE and selling risk (through options) to others is the closest thing we get to a "sure thing" in trading. It's not fast, it's not sexy - but it works!
by Phil Davis - May 13th, 2014 9:27 am
This is ridiculous.
As noted on Dave Fry's chart, the S&P made a new record high with narrow participation and essentially all of the gains were one big move in the Futures to reprice the index. I said yesterday we have been getting 50% of the day's volumes in the close and yesterday was no different and that closing volume is all dumping into the ETF, IRA and 401K suckers that are forced to buy.
We took a couple of big bats against the Dow's move up yesterday, adding a DIA put at $166.80 (see yesterday's Member Chat for details) as well as going long on DXD at $26.20 – both with leveraged options plays, of course.
We still have plenty of bullish trades to protect but, when we bein to cash out our winners and start buying short plays on the index – you can tell the winds are changing. Our 500% trade on DDM from Thanksgiving was scheduled to top out in April anyway – and we sold in May to go away.
That trade was one of our "10 Trade Ideas That Can Make (and some have already made) 500% in a Rising Market" and I had just as much trouble convincing people to go long in November as I'm having convincing people it's time to cash out in May.
Not all the trades are done, but a quick summary of those positions is:
by Phil Davis - May 9th, 2014 8:29 am
Look at the Russell!
Look at the Nasdaq! Are you seriously still holding onto your Dow, S&P and NYSE stocks? That's exactly what people did in 2008, when they were so used to the markets being saved whenever they dipped, that they ignored all the warning signs – until it was too late.
I know that I've been sounding like a broken record and you can call me Chicken Little but cut me a little slack as we are protecting profits here.
We have 5 virtual porfolios we track for our Members and the $100,000 Butterfly Portfolio is up 19.4% ($19,000), the $500,000 Long-Term Portfolio is up 9.6% ($48,000), the $100,000 Portfolio is down 5.8% ($5,800), the $500,000 Income Portfolio is up 6.4% ($32,000) and our $25,000 Portfolio is up 15.4% ($3,850). Overall, that's a gain of 8.8% on $1.225M deployed in 4 months.
The Short-Term Portfolio is a hedge to the Long-Term Portfolio, so we haven't cashed those in but the Income Portfolio doesn't have an external hedge, so we moved to cash on that one last month (BEFORE the Nas and Rut started crashing off decade highs) and the Butterfly Portfolio is self-hedging while the $25KP has just one position left.
Perhaps I'm wrong and the Nasdaq and the Russell will recover and the other indexes will all move up to new highs. Even if they do, our worst case is we miss a bit of a rally. If we're breaking out to new all-time highs from here – there will be plenty of money to be made. BUT – if I'm right and the market drops 5-10%, then our taking 110% off the table at the top means that when we buy stocks again at 90%, we are buying 120% of what we could have bought had we not wisely cashed out in the rally.
The REWARD for being cautious is owning 20% more shares if we're right, owning maybe 2.5% less shares if we're wrong or owning the same amount if the market stays flat. It doesn't take a degree in statistical analysis to see why I…
by Option Review - November 20th, 2012 2:10 pm
Today’s tickers: HPQ, KKD & ABX
HPQ - Hewlett-Packard Co. – Shares in HPQ fell to their lowest level in a decade on Tuesday after the company announced fourth-quarter results that missed analyst expectations for sales and included an $8.8 billion impairment charge related to its Autonomy business. Options on the PC maker are seeing heavy volume amid an ugly selloff in the price of the underlying, currently trading down 11% at $11.84 as of 12:35 p.m. ET. Nearly 250,000 call and put options have changed hands on the stock versus the average daily options volume of 47,726 contracts. Calls are slightly more active than puts, with the call-to-put ratio hovering around 1.1 in early-afternoon trading. Weekly calls, specifically the Nov. 23 ’12 $12 strike contracts, attracted particularly heavy trading traffic today. It looks like some strategists are betting the stock could rebound somewhat off its post-earnings report lows by the end of the week. Upwards of 23,000 of the $12 strike weekly calls traded in the first half of the session today against open interest of just 696 contracts. It appears most of these contracts were purchased for an average premium of $0.10 apiece, and may mean some options market participants are placing cheap near-term bullish bets on the computer maker. Traders long the weekly contracts make money as long as shares in HPQ increase 2.2% over the current price of $11.84 to settle above the average breakeven price of $12.10 at expiration.
KKD - Krispy Kreme Doughnuts, Inc. – It’s a sweet day for investors in Krispy Kreme Doughnuts, Inc., with shares in the name soaring 22.5% on the back of better-than-expected third-quarter earnings to the highest level in more than a year. Shares in the doughnut maker are off earlier highs, but continue to trade up approximately 20% on the session at $9.04 as of 11:50 a.m. ET. Buyers of bullish options on Krispy Kreme yesterday prior to the earnings report are enjoying sizable overnight…
by Option Review - November 1st, 2012 1:53 pm
Today’s tickers: RIMM, VRTX & ABX
RIMM - Research In Motion Ltd. – Upside call buying in Blackberry maker, Research In Motion, could result in quick overnight profits for some traders as long as shares in the name extend gains through the end of the trading week. Shares in RIMM are up 9% this morning to stand at $8.65 as of 11:55 a.m. in New York, adding to Wednesday’s more than 4.5% gain in the stock, sparked by reports that wireless carriers have started lab-testing the company’s Blackberry 10 phones. Options traders who purchased weekly calls on Research In Motion yesterday have in some cases seen the value of bullish positions rise markedly since the prior session. For example, buyers of around 1,600 Nov. 02 ’12 $8.5 strike calls on Wednesday for roughly $0.01 per contract now find these options changing hands at $0.18 apiece. Traders appear to be bulking up on the $8.5 strike weekly calls, purchasing another 2,300 contracts in morning trading on Thursday. Bulls also snapped up 2,300 calls at the higher Nov. 02 ’12 $9.0 strike for an average premium of $0.02 each. Continued gains in shares of the wireless company ahead of the weekend may result in substantial gains on positions established today. Not all trading traffic in weekly options with one full trading session remaining to expiration is bullish. Buyers of around 2,400 puts at the Nov. 02 ’12 $8.5 strike for an average premium of $0.13 apiece, and some 4,000 of the Nov. 02 ’12 $8.0 strike put options at $0.05 each, may profit at expiration if RIMM’s shares return some of the week’s gains tomorrow.
VRTX - Vertex Pharmaceuticals, Inc. – Shares in drug maker, Vertex Pharmaceuticals, Inc., are soaring today, up better than 7% at $51.72 in early-afternoon trade, on news the biotechnology company agreed to test one of its experimental hepatitis C drugs with therapies from Johnson & Johnson and GlaxoSmithKline. Cambridge, Mass.-based Vertex is…