by Phil Davis - September 4th, 2012 8:26 am
If it's Tuesday, we must be at the week's highs.
Obviously, we're still bearish and the news we've been discussing this morning in Member Chat certainly hasn't changed my opinion on that. Back on August 7th (first Tuesday of last month), I said we were about $700Bn in stimulus short of what we need to support S&P 1,400 and we knew we would have to wait a month to see how much we got from Draghi and Bernanke but, so far, and with Ben already out of the way, we have zero.
At $10Bn per S&P point that puts our fair value all the way down to 1,330 but keep in mind that the $500Bn we did get only lasts for 6 months so more like 1,310 at this point without a proper commitment by the ECB or Fed this week. Even 1,310 would be up 50 from the June lows and it would represent a neat 2/3 retracement of the rally since then. Our $25,000 Portfolio has, if anything, gotten more bearish as we dragged along the top but another thing we've done each Tuesday has been to take aggressive bullish positions to cover ourselves IN CASE someone actually does put up the cash needed to goose the markets over our breakout levels (see Friday's post for current positions in the virtual Portfolio and our levels).
On Tuesday, August 14th, our trade ideas were as follows:
by Phil Davis - August 21st, 2012 6:58 am
Here we go again (again)!
Yep, that's what I said last Tuesday and the Tuesday before that because Tuesday is a day they push the Futures higher and ditch the Dollar and tell you that this time it's different because of the same rumors they had the Tuesday before only this week – the data is getting worse and worse, as we know is better, right?
Last Tuesday we set levels to capitulate and go fully bullish at Dow 13,464, S&P 1,428, Nasdaq 3,060, NYSE 8,160 and Russell 816 and, as of yesterday's close we had the Nasdaq and the Russell over their marks needing just one confirmation to make it 3 of 5 and begin to flip our short-term portfolios (the $25KPs) bullish. We are soooo close but, so far – no cigar.
While we waited, we looked at some upside hedges that would do well if the market continued higher. Just as we get downside protection when we're bullish – we use upside protection when we're bearish and I suggested taking 5% or 10% positions in aggressive upside plays to help balance a bearish portfolio against – well against exactly what happened in the past 7 days. Our trade ideas were:
- 2 FAS Oct $105/115 bull call spread at $2, selling 1 BBY 2014 $18 puts for $3.25 for net .75, now $1.15 – up 53%
- 2014 SHLD $32.50 puts sold for $7.50, now $6.40 – up 15%
- 6 EWJ Jan $9 calls at .53, selling 1 BBY 2014 $18 put at $3.25 for a net .07 credit, still net .07 credit – even
- TNA Oct $55/61 bull call spread at $2.50, selling Oct $42 puts for $1.90 for net .60, now $1.80 – up 200%
The BBY puts jumped over 20% yesterday, from below $3 to $3.75 and that killed two of our trades (and worse today after earnings!), that were up significantly in Friday's update (which is why we take quick gains like that off the table). The good news is the EWJ play gives us a nice, new entry at the same net price so that one is still good and, of course, we are done with TNA after making 200% in a week and we'll find a fresh horse for that money.
by Phil Davis - August 17th, 2012 8:28 am
That's how much money yesterday's rally cost. Spain got the green-light on $123Bn from the ECB, most of which goes to just ONE bank (Bankia Group). This news sent Bankia shares up 15% and did wonders for their creditors' stocks as well because, as we know, the best way to get money from a Central Banks is to owe a lot of money to other banks so – borrow, borrow, borrow if you want to survive the Financial Crisis. Spain led Europe higher with a 4% gain on the day and hit another 1.75% early this morning before pulling back.
Also in the Free Money train yesterday was Brazil, who initiated a $65.6Bn stimulus package aimed at much-needed infrastructure ahead of the 2016 Olympics. This is a "just in time" thing for Brazil as 32 of 58 reporting companies in the Bovespa Index missed sales projections this quarter – the worst performance since Q1 2009.
The Olympics have also greatly aided the UK's economy and July Retail Sales were the stars of Europe at +0.3% and August should be good too – it's September, October and November we're worried about. The entire Euro Zone is clearly in a Recession, but it could be argued that it's the same one that started 4 years ago, which some would call a Depression – but not if they want the MSM to listen to them or to keep their Government positions.
Even China is seeing declining exports, with August projected to come in at less than 1% according to ForexLive, who says "China's Government has underestimated the impact of the European debt crisis on trade flows." As you can see from the chart on the right for California, China's export woes are hitting us on this side of the Pacific as well as total state revenues are 10% below projections with HUGE misses in Sales Tax – indicating an extremely beaten-down West Coast consumer.
The state has avoided default by temporarily borrowing from state trust funds, but those accounts will soon need their cash back to continue operating. Today California quickly began trying to sell $10 billion in municipal bonds to fund the record $28 billion they need to keep the lights on. With tax revenue plummeting and the state already the second
by Phil Davis - August 7th, 2012 8:30 am
GRANDPA JOE: But this roof is made of glass. It’ll shatter into a thousand pieces. We’ll be cut to ribbons!
WILLY WONKA: Probably.
Is today going to be the day? After pressing against our breakout levels on and off since failing them in May, today do we should finally have the gas to get over the top or will our Must Hold levels keep acting like a solid barrier? Our goals on the Big Chart have been Dow 13,200, S&P 1,400, Nas 3,000, NYSE 8,000 and Russell 800 and we came right up against them yesterday but failed to punch through.
It is certainly no surprise, in this BS manipulated market, that the levels they failed to take out yesterday in regular trading are all being crossed in ultra-light pre-market trading because, as we know, investors are complete idiots who use squiggly lines on a chart to make all of their major financial decisions. Essentially, when you follow TA – you are saying to hedge fund managers – "If you can get your stock to cross this line, I will buy it." That's very much like me saying to my youngest daughter that if she can get her older sister to say "quit it," I will give her $20. Once she decides I'm serious – I'd be hearing "quit it" all day long.
We were, at the time, at the top of a very bogus-looking, low-volume rally (again) that had taken us up 7.5% from 12,100 in early June to 13,187 at yesterday's high. The S&P has been our leader but the Russell keeps flashing warning signs as it failed to hold it's -2.5% line (780) at the beginning of the month and looking very similar to the pre-disaster pattern we had in April, ahead of the May collapse – which we also tried to warn you about while it was on the way up on QE rumors (see "Federally Fueled Thursday – QE Maybe?" or "Thank GDP it's Friday – Reality Check?". Despite being dead right to call a top at the time – it took the market another week to drop but we fell off a cliff on Friday, May 4th and we were down 1,000 points by the 18th so better a week early than a week late with these calls.
Willy Wonka understood stock market physics, there…
by Phil Davis - June 21st, 2012 8:18 am
And we're out!
It might be a little early because we did get another $267Bn from the Fed yesterday but that plus $125Bn given to Spain and $100Bn to the IMF this month is "just" $492Bn and that, according to our calculations, should be good for 1,350 on the S&P, tops. If they want to get to 1,400 – they'll need another $500Bn from Europe and, while it is widely expected to come – the Fed came up short and if the EU comes up short as well, we could be talking flash crash so we took advantage of the pre-Fed run-up (as planned in yesterday's post) to get back to cash.
My morning Alert to Members was short and sweet:
I don't know if you guys usually click on my little links but this one was the most important of the day – Don't be white people – GET OUT!!!!
This one was so important that I tweeted it (you can follow me here) and Facebooked it (you can follow us here) and I even put it out on Seeking Alpha's Stock Talks (you can follow me here) so don't say I didn't warn you. Sure the market may go up as funds dress windows into the end of the Quarter/Half next week but we caught the run off the bottom this month so why push it when the upside looks limited and the downside does not?
Other than 2014 spreads in our new Income Portfolio – all of our virtual portfolios went to cash rather than risking very nice first half gains. As of yesterday morning they were:
Much thanks to StJ for keeping these tracking portfolios – all back to cash now and hopefully we can match that performance in the second half of the year although I think we're going to ditch the very boring $5,000 Portfolio in favor of a $25,000 Portfolio…
by Phil Davis - April 28th, 2012 6:57 am
Have you seen this?
Frontline did this very good documentary and I'd file it under "those who forget the past are CONDEMNED to repeat it" – let's all TRY not to repeat the mistakes of 2008… "Wall Street got bailed out and Main Street didn't" is the quote that neatly sums up the present situation. Wall Street and the top 10% of this country – of this World – are partying like it's 1999 while the bottom 90% continue to languish in the worst Recession since the Great Depression.
Despite a myriad of worrying data, the Corporate Media is in full-blown promotional mode – pushing stocks as if it were modern snake oil – the panacea that will cure all your ills. We often forget that essentially ALL of our news sources are publicly traded companies and have a vested interest in the stock market going higher. Hell, we have an interest in that too, as our longer-term virtual porfolios are entirely bullish - but that shouldn't preclude us from making a realistic assessment of the CURRENT situation, should it?
Caterpillar, 3M, United Technologies and ABB are among the manufacturers that have reported weak performances in China in the first quarter as economic growth has slowed nearly to a three-year low. Caterpillar’s sales in China fell between $250 million and $300 million in the first quarter, pushing the company, the world’s largest maker of earth-moving equipment, to export to other countries a large share of the equipment it made in China.
Concerns about China overshadowed better-than-expected earnings at the company, which is based in Peoria, Illinois, and led investors to push the stock down 5 percent Wednesday, which was great for us as CAT was on our Long Put List.
ABB, a maker of power equipment, reported profits in the past week that were below analysts’ expectations, caused by weak Chinese demand. “It was a very slow start to the year for China. China in January was extremely weak,” ABB’s chief financial officer, Michel Demaré, said Wednesday.
“Our business in China is off to a slow start,” said Gregory J. Hayes, the chief financial officer of United Technologies, whose Otis arm is the world’s biggest maker of elevators. The unit’s China sales dropped 9 percent in the first quarter. “The ongoing government…
by Phil Davis - April 27th, 2012 8:32 am
Will the GDP be bad enough to be good?
As I said yesterday, bad news is now good news as Bernanke promised to crank up the presses if the economy stumbles and yesterday we had terrible jobs numbers and an absolutely awful Kansas City Fed Manufacturing Survey and Eurozone Economic Confidence continued to decline and that was capped off with an S&P downgrade of Spain.
RALLY TIME – of course! The markets broke right over our 50% lines, forcing us to add a few bullish positions for purely technical reasons while we wait and see when or if the madness will end.
We've already had a few hours of extensive conversation about the economic situation in Member Chat so let's just focus on how we can play the next half of the retrace back to our highs at Dow 13,300, S&P 1,420, Nas 3,200, NYSE 8,300 and Russell 850. We'll still be watching those 50% lines (see yesterday's post for levels and chart) but it was easy money this morning grabbing Nikkei Futures (/NKD) off the 9,500 line in Member Chat and already (8:23) the index is back to 9,550 and, at $5 per point per contract – the Egg McMuffins are paid for.
The BOJ dropped 10,000,000,000,000 Yen on the economy this morning, expanding their asset purchase program to 40Tn Yen and it DISAPPOINTED the market and the Nikkei fell from 9,700 to 9,500 but we were up nice and early and, since the other Global Indexes seemed happy enough to ignore Spain's double downgrade (in fact, Spain is up 1% this morning on the bad news), we figured it would only be a matter of time before the Nikkei futures came off the floor to join them.
As you can see from David Fry's charts, the Nikkei has been tracking the S&P very closely and the divergence was a bit silly. What's actually silly is the way the S&P is going but we'll take the quick 50 points and run ahead of the GDP, where we HOPE the markets get a cold slap in the face from a GDP report that I predicted would be a miss from 2.9% expectations.
8:30 Update: 2.2%! That is TERRIBLE!!! Not just a little terrible but TERRIBLE!!! Business investment is crashing, structures are down 12%, Government spending down…
by Phil Davis - April 11th, 2012 8:01 am
Are you buying the dips?
We're not yet. Notice that we've now blown 4 of our 5 Must Hold lines (the Dow never did make theirs, which kept us bearish in the first place) and, technically, the S&P failed to hold 1,360 as well but close enough to avoid panic so far.
Falling from 1,420 to 1,360 is 60 points so we'll be looking for a weak bounce (20% retracement) to 1,372 and a strong bounce (40%) past 1,384 would get us back in a buying mood but let's not count those chickens before they're hatched.
France and Germany are bouncing 1.5% this morning as the Euro stages a recovery back to that critical $1.31 line and the UK is up 0.77% (7:40) with the Pound back at $1.59. We noted in Member Chat that this seems like SNB buying to support that 1.20 line on EUR/CHF as we;re certainly not getting a move back up in copper ($3.65), Natural gas ($2.04) or gasoline ($3.24) that we'd expect if we had any additional stimulus or some sort of positive economic data. Even gold is down this morning ($1,659) so I do not have a lot of faith in this early-morning market movement so far.
Clearly we're not going to get excited about anything until our indexes can at least take back those 50 dma's (red lines) and the Dollar holding it's line at 79.60 is also bad news for the bulls. To keep that 1.5% gain in perspective, it's 88 points – back to 6,695 and we're down from 7,150 so "only" 5 more 1.5% up days to go and Germany is back on top.
This is always the tricky part about retracements – it's not so much what you get on the bounce (not even 20% on the DAX), but is the bounce going to be sustainable to get you to 6,850, which is the 20 dma (3% higher than we are now) and then to 7,000, which is the falling 50 dma – 5% over the current mark?
Keep in mind that the longer it takes to retake the 50 dma, the more it curves down and then you are running into a declining 50 dma, which has a much better chance of rejecting you – especially as you are running out of gas after having to climb 5% just to get there.…
by Phil Davis - March 8th, 2012 8:12 am
The Dollar is down 1%.
That makes the markets go up 1%. Mostly, the Dollar is down based on a FABRICATION in Uncle Rupert's Wall Street Journal – the most widely read financial publication in the World (next to Philstockworld, of course!). Although Jon Hilsenrath, the WSJ chief economist who started this nonsense made it VERY CLEAR that the story was predicated on IF they decide to do more "capital I, capital F," Jon says – THEN this is the kind of bond buying that might happen.
That's all it took yesterday to send the S&P up 1% but, if there were a volume measure, you'd see that, on the Dow, 25M shares were traded before 11, and just 35M shares between 11 and 3:30 and then 50M shares were traded between 3:30 and 4pm, almost 100% down volume. The only people that are fooled by these word games are the beautiful sheeple who are so well-trained to buy the F'ing dips that even a misstatement like this sends them into a buying frenzy.
Ah, fresh meat – we love it! Oil (/CL) was back at $107 this morning and we already caught a nice dip off our favorite sell spot in Member Chat and gold is giving us a good short entry at $1,700 (/YG) as well. All we have to do is watch the Dollar and see if it can hold 79.40 once real trading begins. The Euro is up at $1.324, off the $1.31 line yesterday so up 1% and the Pound is up from $1.57 yesterday to $1.58 this morning and the Yen is loving it at 81.71 (weaker) as they've been solidly backing the Euro over at the BOJ this month and the Nikkei futures (/NKD) shot up from 9,500 yesterday to 9,835 this morning (3.5%) on a 1% drop in their currency so this would be a great spot (below 9.850) to short the Nikkei.
For the Futures impaired, the EWJ April $10 puts at .20 should be a fun way to play the Nikkei reversing, assuming reality sets in at some point. It's 8:25 now and oil just hit $106.50 and that's our take the money and run spot in the futures as we pick up $500 per contract off my 4:56 comment in Member Chat this morning:
by Phil Davis - August 3rd, 2011 8:29 am
I love the smell of capitulation in the morning (illustrated nicely by David Fry). It smells like — opportunity. We haven’t had a good bottom-fishing expedition in ages and it’s amazing to think that less than two weeks ago I was having to tell our Members NOT to BUYBUYBUY at the top. On Friday, July 22nd, when Jimmy Cramer was crowing Thursday night over "29 of 30 Dow Stocks" closing higher as if that meant you should buy everything that wasn’t nailed down, I was warning that the new EU rescue fund only indicated things were worse than they seemed. My comment that morning (7/22) was:
I like shorting the Futures here: S&P (/ES) at 1,346, Nas (/NQ) 2,415, Dow (/YM) 12,720 and Rut (/TF) 842.6 – as long as 74.20 hold on the Dollar, we should get a bit of a sell off so these are levels to look for as the Dollar heads back over that line but we can scale into position between 75.20 and 75.10 but, below that, too dangerous! Oil is good too below $99.50 with tight stops (now $99.66 so a patience game) – couldn’t quite get back to $100 ahead of the EU open.
I was wrong (so far) on shorting gold as our GLL Aug $22 calls have fallen from .50 to .10 (we rolled down to the $20s but those are not faring much better at the moment) but that was much more than made up for with the MASSIVE gains on the short futures as well as huge winning spreads like that morning’s Alert to Members, where my trade idea was to buy the SQQQ Aug $21/24 bull call spread for .90 and sell the AAPL weekly $375 puts for .80 for net .10 on the $3 spread. Of course the AAPL puts expired worthless and SQQQ is now at $25.29 and the spread is $1.85 so up 1,750% so far (and half off the table with stops on the rest at this point, of course).
THAT’s why we love our disaster hedges – they really help balance out your virtual portfolio in the event of an actual disaster with every $1,000 hedged paying $17,500 on that play. We then turn around (like today) and cash out that money and use it to buy more longs or roll our existing long positions.…