by phil - October 10th, 2014 8:35 am
Wheeeeeee – isn't this fun?
We're certainly having a good time and, if you've been following our posts and getting our trade ideas – you probably are too as yesterday's DXD trade idea, for example, made 100% in a day for the 2nd time this week!
Now let's say you put just 2% of your portfolio into a hedge like that against a worry that we'd have a 5% drop. Well, on Tuesday we collected 100% of that 2% on a 2.5% drop and yesterday we collected another 100% of 2% on another 2.5% drop – there's 4% back and we never even fell 5%. This is how you hedge and hedging is what we teach you to do at PSW (sorry, Memberships now full, try the wait list for next month).
Of course, if you find yourself on the wrong side of the market, the Futures also make excellent hedges and it just so happens that we teach that as well! We did a Futures Webinar just this Wednesday and you can watch us make money live on the replay.
Those are the hedging strategies that led us to call for shorts yesterday (right in the morning post) at 1,100 on /TF (Russell Futures), 4,040 on /NQ (Nasdaq Futures), 1,965 on /ES (S&P Futures) and 16,900 on /YM (Dow Futures). Aside from the Alert we sent to our Members, we also Tweeted out and Facebooked? the trade ideas – THAT'S HOW SURE WE WERE! If you followed those, we closed the day at:
- Dow (/YM) 16,550: down 350 points at $5 per point – Gain of $1,750 per contract
- S&P (/ES) 1,918: down 47 ponts at $50 per point – Gain of $2,350 per contract
- Nasdaq (/NQ) 3,950: down 90 points at $20 per point – Gain of $1,800 per contract
- Russell (/TF) 1,060: down 40 points at $100 per point – Gain of $4,000 per contract
by phil - October 2nd, 2014 8:14 am
Wheeeeeee - What a ride!
As with skiing, a nice drop can be lots of fun – if you are ready for it. If not, things can get broken… Supports were broken yesterday as we lost the 200-Day Moving Average on the NYSE (10,600) and the 50 dma on the Dow (16,930), Nasdaq (4,500) and the S&P (1,975).
We lost the Russell ages ago, when we made our Death Cross so "told you so" on that one. As I said at the time (9/16):
Of course, we've been telling you for weeks now that the markets were toppy but at least now it's getting obvious. The Fed may still pull a rabbit out of its ass and goose the markets once again but I very much doubt anything is going to stop the eventual correction now. Delay, maybe – stop, no.
Our trade idea that day in our morning post that day was:
If, however, you buy just $2,500 worth of the of the TZA Oct $13/16 bull call spread at $1 (25 contracts), they will pay you back $7,500 if TZA goes up about 15% (just a 5% move up in the RUT) AND they don't lose all their money until TZA is down 10% (a 3% move up in the RUT).
That trade is already 110% in the money and on it's way for a $5,000 per unit gain (200%) – a very nice way to hedge what is, so far, less than a 10% pullback in our indexes. What we do, once these hedges go in the money (if we're still bearish) is add another layer of hedges at higher strikes and we put a stop on our original hedges to lock in those gains. That's where we are now as we begain playing for a bounce yesterday in our Live Member Chat Room (you can join us HERE).
by phil - October 1st, 2014 8:25 am
This is not pretty.
As you can see on our Big Chart, we've failed the 50 dma on the S&P, Nasdaq, NYSE and Russell and the Russell failed its 200 dma long ago. We're still waiting for the Dow to cross below 16,940 and confirm the carnage but we made those bets long ago with our DXD Oct $24 calls, which are now 0.70 (up 55%) from our 0.45 entry back on 9/18.
In fact, we already took 1/2 of those calls off the table at 0.85 last week so, essentially, the remainder is a free put option on the Dow for the next three weeks – with DXD at $24.45, so we gain every penny from here on up as the Dow falls.
That's what hedges are supposed to do, of course. We discussed that in yesterday's Live Trading Webinar, where we also demonstrated a live Futures trade on the Russell (/TF Futures) that made $500 on the 2:30 bounce. That bounce was very easy to predict because THE MARKET IS MANIPULATED and all we had to do was wait for the same fake spike that we get at the end of every quarter, courtesy of the Fed and their fellow Banksters:
What's scary about yesterday's flood of money ($230Bn in two days) wasn't just the size of the pump job, but the ineffectiveness of it. The volume was still anemic and declining shares outpaced advancing shares by almost 2:1 in yesterday's "mixed" trading.
In reality, it wasn't mixed at all as big traders took advantage of every penny that moved into the market as they told their brokers to sell, SELL!!!
Still, it's not the end of the World just yet – only close to it, and we can still turn this puppy around by holding the line on the Dow as well as Russell 1,100 and Nasdaq 4,500. This market has been amazingly resiliant in 2014 so we're not going to be complacently bearish the same way we (thank goodness) did not let ourselves get complacently bullish this summer.
by phil - 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 - 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 - 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 - 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 - 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 - 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 - 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…