Wednesday Worries – Yentervention, Euro Style
by Phil - February 8th, 2012 5:16 am
78.50 on the Dollar!
The Yen finally got back to 77 and EUR/CHF back to 1.21 so my theory that the BOJ has given up on the Dollar and moved to boosting the Euro is playing out nicely.
This does not make me more bullish (expecting falling Dollar to boost the markets) because, in the grand scheme of things, this is kind of like now there are two kids building a sand wall on the beach instead of one – sure it will last longer than the wall just one kid was building but, eventually, the tide will get it anyway or, as Jimi Hendrix said more poetically: "Castles made of sand, fall in the sea, eventually."
Once you start messing around with Forex markets, you are messing with major macro forces that are hard to control. Japanese banks have $7.5Tn of Japanese bonds at 1% – what happens to the value of those bonds if the BOJ does push the Yen down 10%? Who takes that $750Bn hit? What if rates go up to 2% – what's the value of the bonds then? Who will bail out the Japanese Banks when they have a multi-Trillion Dollar (several hundred Trillion Yen) hole in their balance sheets? Do Japanese spreadsheets even have room for Quadrillions? They are going to need it!
Then there's this Bloomberg article on the Central Banks, who have doubled their balance sheets since 2006 to $13.2Tn but, magically, have caused no inflation (according to Ben Bernanke – not according to people who actually buy food and stuff). China is now sitting on $4.5Tn of other people's TBills (mostly ours) and that's up $1.5Tn in a year. The ECB is right behind them with $3.6Tn and another $1Tn supposedly coming in the next EFSF round and the Fed has $2.9Tn plus whatever nonsense they are running off book.
So, how is it that WE are the bad currency here? If the Dollar is a problem, then China, who's GDP is only about $8Tn (optimistically, possibly $5.5Tn depending on who's measuring) is almost as insane as Japanese bankers and maybe more so as they are betting on our country's ability to pay and maintain the value of the Dollar (already a fail, right?). I suppose no one can ever recognize losses and just carry more and more junk…
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DiggJust Another Cyber Monday (Manic Edition)
by Phil - November 28th, 2011 8:21 am
INSANITY!
That’s what we have today (and what we’ve been having all month) as the markets celebrate the fact that neither the US consumer or the Euro is dead – yet. Holiday sales are apparently up 16.4% from last year with 10% of those sales being IPhones and Ipads so we can thank the actually dead Steve Jobs for saving the markets from a total meltdown this month as we were on track for the worst November EVER until today.
The DOOM meter was certainly set to 100 and, in fact, 100 is about how low the McClellan Oscillator went on Friday – to a state of oversold not matched since August 8th, when the Dow bottomed out at 10,600 so holding 11,200 in this protracted sell-off was a victory, of sorts, for the bulls and certainly a victory for those of you following our Big Chart – which made us perhaps the ONLY newsletter that was bullish on Friday, when I laid out my bullish case and right in the main post – for free – suggested long ideas on:
- Oil Futures (/CL): Was $95, now $100 – up $5,000 per contract
- Gasoline Futures (/RB): Was $2.50, now $2.54 – up $1,680 per contract
And, in Member Chat – our Morning Alert had the following trade ideas:
- FAS Dec $48/55 bull call spread at $3, selling the $40 puts for $2.40 for net .60 on the $7 spread. 5 in the WCP on that one.
- FXE Dec $132/135 bull call spread at $1.20, selling the $129 puts for $1.10 for net .10 on the $3 spread.
- JPM Jan $25 puts can be sold for $1.20
- AA 2013 $7.50 puts can be sold for $1.28.
- VLO June $17 puts can be sold for $2.05
We also speculated on an aggressive AMZN long play with the Dec $200 calls at $2.50 but, overall, we take this 2% bounce after a 10% drop with a grain of salt. As I said to Members in the alert: Just like we watched with amusement while things fell earlier this week, we should take a move up just as lightly until we cross back over our Must Hold Lines – to some extent, we have selling fatigue driving this move – keep in mind my bullish discussion on hyperinflation is more…
Thursday Fix – Victory In Our Time!
by Phil - October 27th, 2011 8:24 am
You ask, What is our aim? I can answer with one word: Victory—victory at all costs, victory in spite of all terror, victory however long and hard the road may be; for without victory there is no survival. – Winston Churchill
I do HAVE to say "I told you so!"
When I was interviewed on Monday and they asked why I’m bullish, I replied that "stimulus trumps everything" and that’s what we’ve been playing for, especially in our new White Christmas Portfolio, which will be off to a rockin’ start with the aggressive upside trades that I not only mentioned in yesterday’s post - which made easy fills yesterday morning, as the markets shook out the last of the weak hands on yet another rumor-driven dip.
We got our daily double on the AGQ calls, as expected and SSO fell all the way to $44.20 (150% profit on that trade if they finish Friday above $45) while FAS dropped $13.35 and that spread will be good for a 2,100% gain if FAS can get back to and hold $14 – which should be a snap thanks to our friends at the EU.
In the morning Alert to Members, I put up this cute little Gif to illustrate the day’s action and it was a real roller-coaster day but we stayed generally bullish, taking quick profits off our morning bear plays on DIA and USO. We added a bullish trade ideas for AMZN (complex spread), TNA (short Nov $40 puts at $3.60) but that was it for the day because my comment to Members at 11:01 was: "Dollar rejected at 76.80 – still hope for the bulls!"
Well, those bulls were us and we already had our bets in place from last week, when things were cheaper so there was nothing to do but watch as the markets took off like a rocket from that point forward. Heck, we were so bullish we even sold NFLX puts (Nov $67.50 puts for $3) as a bullish offset to a DXD hedge (which we’ll pull the bottom of today). On Monday we had picked up bullish trades on AAPL and GLW and I mentioned EWG in Friday’s post (those should be looking good this morning!) as well as our plays to go long in the Russell Futures at…
All Eyes On IMAX Corp. Calls As Shares Soar
by Option Review - August 29th, 2011 2:30 pm
Today’s tickers: IMAX, AMZN, HAL & MU
IMAX - IMAX Corp. – Call options on the entertainment technology company are in demand this morning after shares in IMAX jumped 9.1% roughly 40 minutes into the trading session to an intraday high of $17.63. The sizable move in the price of the underlying coupled with increased trading in IMAX options lifted the stock’s reading of implied volatility 10.3% to 82.95% by 11:05 am ET. The sharp rise in shares and volatility are a boon to investors who appear to have purchased September contract calls on the stock on Friday. Open interest in the Sept. $20 strike call suggest some 1,400 contracts were picked up at an average premium of $0.25 apiece during the final trading session last week. Investors long the calls at $0.25 per contract now hold contracts that have more than doubled in value over the weekend. Traders eyeing the Sept. $20 strike calls this morning exchanged more than 3,800 of the options, exceeding the 2,116 previously existing positions at that strike. It looks like investors purchased around 2,700 of the calls this morning for an average premium of $0.40 each. Call buyers profit if shares in IMAX Corp. jump 15.7% over today’s high of $17.63 to surpass the average breakeven price of $20.40 at expiration in a couple of weeks. The September $20 strike call currently commands an asking price of $0.75 per contract as of 11:15 am in New York.
AMZN - Amazon.com, Inc. – Shares in online retail giant Amazon.com gained 2.8% to $204.76 this morning, but call buyers in the front month are positioning for far more substantial gains in the price of the underlying come September expiration. Call options on AMZN are trading roughly 1.7 times for each single put option in action today, with…
$25,000 Virtual Portfolio – Week 21 – Goaaaaaaaaaaaaaal!!!
by Phil - July 2nd, 2011 6:39 am
We are over our $50,000 mark and right on schedule at the halfway mark! Not bad considering we began with our aggressive $10,000 virtual portfolio last year, which we ran up to $36,630 – put that $11,630 back in the virtual bank and began this year in February with a $25,000 Virtual Portfolio.
The last major update to our virtual portfolio was back on May 21st. We do send out Alert updates on a regular basis and discuss the trade ideas daily in Member Chat. Now we can start July off with a clean $50,000 Virtual Portfolio with the same goal – to double up in 6 months but sticking to the same small allocation hit and run trade ideas that we used (mostly) in the first half. I urge you to read the original post and the update if you haven’t already to get an idea of what we are trying to learn by following this "hyper-aggressive" virtual portfolio model.
As promised, it has certainly been a wild ride and our last Alert Update from June 23rd left us off with $95,072 worth of closed transaction and a virtual net balance of $45,972, with about $49,000 worth of unrealized losses in our still-open positions.
Getting that close to goal with a week to go put us in shut-down mode and we didn’t do too much trading last week but we did close the following transactions, which amounted to mainly closing out all of our losing trades for the year, charging them off against our $95,072 worth of winners that we already cashed out. Our goal was to get those losses under $45,000, so that we’d be left with $50,000 cash: …
Wishful Wednesday – If Only We Could Hold It
by Phil - May 11th, 2011 7:58 am
That didn’t take long did it?
We’re right back to our 5% lines, which I predicted yesterday would be tested (and failed) so today we find out if I am half right or all right – hopefully it’s all right because we pushed our short plays to the lines and added a short on oil with USO May $41 puts, which we added yesterday afternoon for .95 at 2:30 and finished the day up a nickel. We are expecting the oil inventories to show some demand destruction at 10:30 – analysts are predicting a net 1Mb build, with a 1.6Mb increase in oil and a 300,000 barrel decrease in gasoline and distillates. A build in either gasoline or distillates will indicate pricing is hurting demand, despite whatever oil number comes up so that’s what we’ll be watching.
Yesterday, in the morning post (never miss one with a $1.90 per day Annual Report Membership!), I mentioned the TBT weekly $33 calls at $1.55 would make a good long and those finished the day at $1.87 (up 20%) but they looked good enough to keep into the close and we expect trouble in today’s 10-year auction so we’re being greedy and going for $2.15+, which will make a nice 40% gain in 2 days.
To make sure you don’t miss our next trade idea – today I will give you a trade idea that can knock 20% to 69% off the $695 Annual PSW Report Membership: You can buy 10 QQQ May $60 puts for $1 and sell 10 QQQ May $59 puts for .48 for net .52 ($520) on the $1 ($1,000) spread (it’s the net that matters, not the price of each leg). The maximum gain on this trade is $480 if the Qs finish below $59 next Friday and, if you stop your loss at net $400 (.40 per contract) that limits you to $120 lost and, if this trade loses money, let me know and I’ll give you 50% off an annual PSW Report Membership, which will save you $347.50 so net $127.50 (20%) saved on a Membership – even if the trade doesn’t work. If it does work – you are honor-bound to subscribe, of course!
What we are expecting, between now and Friday, is for the chart above to form a pattern that will look like the "M" in the McDonald’s arches,
…
Technical Tuesday – Charting our Future
by Phil - February 1st, 2011 6:58 am
Fundamentals don’t matter so let’s look at the technicals.
As you can see from David Fry’s chart, there’s a good reason that XLF was my Trade of the Year in December 25th’s "Secret Santa’s Inflation Hedges." The full force of the US Government is backstopping this play, in which we took the Jan $12/13 bull call spread at .80 and sold the Jan $11 puts for .40 for net .40 on the $1 spread. I said, just 37 days ago, that this could be the easiest 150% you ever make.
Just 5 weeks later, the bull call spread is .90 and the short puts are .30 for a net .60 – up 50% in 5 weeks. That SHOULD help keep us ahead of inflation, right? Keep in mind this was a trade, among others, that I published for free to the General Public on both our subscription site as well as Seeking Alpha and then it was syndicated on Yahoo Finance, Google Finance, MarketWatch, AOL, etc. I’m told that about 250,000 people read my free public posts when I make them available, so it’s not like these trades were so secret.
Yet, however many people decided these were good trade ideas and followed them – it didn’t matter because our counter-party wants to lose! Yes, that’s right, we are riding on the coat-tails of the Banksters, who are taking our future tax dollars from the Federal Reserve and betting them on rising commodity prices and monetary inflation. In order for us to bet on that, we need some idiotic counter-party to take the other side of that bet – one that assumes falling commodity prices and no inflation.
Even in under-educated America, who would be foolish enough to take such a bet? Why it’s us, of course! Well, it’s the Federal Reserve Bank of the United States of America who are spending $100Bn a month buying Treasury Bills at the lowest rates every (assuming no inflation) while trying to justify their misuse of our money with BS statistics that we’ve stripped away in "How the US Government Manipulates Inflation Data" along with this helpful video:
The Fed is using YOUR money, through debt, taxation and devaluation, to buy notes that a rational investor wouldn’t touch with a 10-foot pole and the ONLY way you can prevent yourself from getting screwed…
Monday Market Movement – Do or Dive!
by Phil - January 24th, 2011 8:14 am
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Big week ahead!
$30Bn in POMO from the Fed runs headlong into earnings reports from 15 of the 30 Dow components along with MoMo darlings like VMW (tonight), BLK (tomorrow morning), POT (Thursday morning) and AMZN (Thursday night). I already sent out an Alert to Members this morning outlining our strategy and Stock World Weekly did it’s usual amazing job of wrapping up last week’s action and laying out the week ahead so I won’t be too redundant here. The key driver for the markets continues to be the dollar, which is making more sense now as it saved the Dow and the S&P last week (50% of revenues come from overseas) but not the Russell (only 10% of revs from overseas) or the Nasdaq (30%).
The Dollar was relentlessly driven down last week, bottoming out at 78 on Friday evening, back to November lows, where they ditched the Dollar all the way down to 75.63 in early November before it broke back up and ran to 81.44 on the last day of the month. Now we’re back down 4.2% from the Thanksgiving highs for the Dollar and the Dow and S&P are up 8%, which is our usual 2:1 correlation yet Uncle Rupert’s Journal would have you believe that the Dollar no longer matters and that this rally is about (please sit down, PSW cannot be responsible for any beverages you are about to spit on your keyboad) – wait for it – Fundamentals!
According to the Journal: In recent weeks, for example, moves in stocks and the U.S. dollar have had little connection—a breakdown of the trend during much of 2010, when they were virtual mirror images of each other. Stocks were considered risky and would rise when investors were feeling confident, while the dollar was a haven, benefiting when investors were worried. Commodities, too, have broken away from rising and falling with risk perceptions. Now more old-fashioned concerns, like the weather, are having an impact. Corn, soybean and wheat prices jumped this month after supply estimates were cut due to dry weather in South America and floods in Australia.
Really? So the run in DBA from 22.85 in June of last year to 31.65 (38.5%) in early November was speculation but the run from 31.65 to 33.50 (6%) since then has been based on solid fundamentals. ROFL!!! That…
Which Way Wednesday – Topping or Popping?
by Phil - January 19th, 2011 8:30 am
When we first began following the Alpha 2 TradeBot pattern on Jan 3rd (see Stock World Weekly for current chart) back on Jan 3rd, I said: "Let’s assume we get that extra 2.5% between Friday’s close and expiration day – that’s going to take us to Dow 11,850 and S&P 1,285." Yesterday the Dow hit our 11,850 mark, 2 days ahead of schedule! If we break higher here (and the S&P is already at 1,295 – see David Fry’s chart) then we are "off the charts" and possibly running a whole new series – which is very possible as last year the IBanks didn’t have $25Bn worth of POMO a week to feed into their machines – that has to be worth something right? At least 10 S&P points…
If, on the other hand, S&P 1,300 becomes a hard stop and the Dow can’t hold 11,850, let alone break up over 12,000 – then the second part of my prediction was that we would pull back to Dow 10,900 and S&P 1,188 – a test of the 200 day moving averages. If we get that pullback and those levels hold, THEN we will be happy to get on the bullish bandwagon – we just want a test!
Not, of course, that we are waiting around doing nothing. We already had our "Secret Santa Inflation Hedges" and, at this point, you either have them or you shouldn’t even look as they are up well over 200% already and the market is "only" up 2.5% since then. We were waiting patiently for Russell 800 to confirm our Breakout 2 levels and we not only got that but we got several nice tests since then so we’ll have to put that one in the "win" column as well for the bulls.
While I don’t like chasing the MoMo stocks higher, AAPL and IBM show us that there are some solid fundamentals underlying the big boys and I mentioned in the Morning Post of the 6th that I did like CSCO ($20.77 at the time) and GLW ($18.98 that day) as solid, go-forward positions. Even without our option plays, they are both up nicely in less than two weeks – certainly a higher percentage (5% for GLW, 2.5% for CSCO) than AMZN, which is up $3.50 (1.8%) or NFLX, which is up $6 (3.2%), who I cautioned…
13% Thursday – When Will You Capitulate?
by Phil - January 13th, 2011 8:16 am
It’s starting!
The last of the bears are now capitulating. We’re hearing it in Member Chat and we’re reading it in analyst reports and we’re seeing the fund managers on TV – it is very out vogue to be a bear.
Just a few weeks ago, I pointed out to Members how few bears remained by saying "Look to your left, look to your right, look in front of you and look behind you – you would be the only bear." That was way back when "only" 20% of investors were bearish – as of yesterday, we lost 1/3 of those poor creatures and now only 13% of the market is bearish. Now you can look diagonally as well and you’ll STILL be the only bear!
Certainly the market seems to be proving the primary axiom of "You can’t fight the Fed." Pretty much no matter what happens, the market goes up. Bryan Leighton from Traddr! Makes a good point saying: "It’s a neutral to positive market and the only thing that can change that is some sort of surprise event out of Europe or out of Asia or something major out of the US that the Fed is not ready for or prepared for. If they are prepared for it – it will not happen – it will not have a major effect on the markets."
That’s the reality we’re dealing with out there. As long as the Fed and their pet IBanks are running the markets and as long as volume is at 3-year lows, allowing the TradeBots to control each move – then it is wrong to be a bear. But, is it 87% wrong? 87% bullish sentiment isn’t just "very" bullish – it’s a new, historic high. It’s like going to a fight where the entire crowd only cheers for one guy which, like professional wrestling, would be an automatic indication that the game must be fake, Fake, FAKE!
As you can see from this longer-term chart, we are as extremely bullish now as we were extremely bearish in the two worst market events of the past quarter-century. Much the way that Black Monday of 1987 and the Crashes of 2008/9 were unique buying opportunities at 15% bullish, this may be a unique shorting opportunity at 15% bearish that you are not likely to see again for…
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
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