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 30th, 2014 8:09 am
First, the big news:
EBAY has finally agreed to spin off PayPal and that's going to give us a nice boost in our Income Portfolio (which we fortunately just adjusted more aggressive yesterday) and EBAY has been on our Buy List (Members Only) since 5/20, when they were testing $50 and, as I said to our Members when I predicted an earnings beat in July:
Paypal, Paypal and Paypal. They should beat the .68 expectations (.63 last year) and all of last year they traded in the $50s, so why should they be below it now when they are making $3 a year (p/e 16.7)? Compared to the rest of the market, this thing is a real bargain!
They beat by a penny and, as you can see from the chart, that was enough to kick them up 10% and we recently got a nice re-entry at $50, when we took advantage of the spike down to sell more 2016 $50 puts for $5.50 which were up 15% at $4.80 at yesterday's close – not bad for a month's work and they should be up 30% by the end of today!
Today we will see an all-out effort to keep the markets afloat so the books on Q3 can be spun positive by the Banksters, who have Trillions of Dollars riding on the outcome.
Of course, we KNOW that no Bankster would ever attempt to manipulate the Market, or LIBOR, or Currencies, or Ratings… Well, not if they knew for a fact they would get caught AND the punishment was more than a slap on the wrist, anyway. Thank goodness, that never happens.
As you can see from our Big Chart, the S&P came to a rest right on the 50 dma at 1,977 so that's the do or die line for the day while it's 4,495 on the Nasdaq. On the Dow we want to see 17,100 taken back and the NYSE needs to hold 10,750 while the poor, beleagured Russell just needs to hold that 1,110 line. Officially, our bounce lines remain:
by phil - September 29th, 2014 8:27 am
Wheeee, what a ride!
We're up, we're down and over and out – but That's Life in the markets, right? Life is being good to our Short-Term Portfolio, now up 59.2% for the year as we caught the bearish move very nicely. Because our STP was up, we have, so far, been able to ride out our long-term positions but we're certainly concerned about a major breakdown possibly in the works.
As noted by Dave Fry in his SPY chart, that 50 dma is a big point of contention now and of course we're going to get a bounce off a line like that. In fact, the new lows we hit at the end of the week led us to recalculate our bounce lines for this week and now we are looking for:
We weren't too convinced by Friday's low-volume rally and we aren't going to be convinced by anything that happens on the last two days of the month (window dressing) but clearly any failure of those weak bounce lines is going to have us racing back to some bearish bets into the start of October (and earnings season).
by phil - 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 - 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 - 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 - June 2nd, 2014 8:32 am
I know it sounds like a broken record (kids don't even know what that means) to say "record highs" over and over again, but that's what the Federally fueled rally has given us – over and over again.
Certainly the Fed remains EXTREMELY accomodative but they also stand to lose hundreds of Billions of Dollars on their current bond-holdings if rates ever do rise (because they hold Trillions of low-rate bonds, which lose value if higher-rate bonds become available) – so how long can this game last?
It's not just the Fed, of course – other people do buy our bonds (and hold our bonds) and, right now, the people holding high-interest bonds (5%+) are sitting on a gold mine as they are far more valuable than 2-3% bonds. What happens when that begins to unwind? Suddenly there will be a flood of bonds hitting the street at 5%+ that the Government, who still borrow $50Bn per month, will have to compete with to raise capital. Doing this at the same time as the Fed is withdrawing their stimulus can be a disaster.
We were talking about inflationay pressure in Member Chat this morning and anyone who has a stomach has some idea of what the real inflation rate is in this World. This chart is from India, where inflation has "slowed" to 8.64% but last year's 15% average led to the ousting of the old government in the recent election.
Revolution is a slow process, especially in democracies – where the population has the illusion of choice. We are always enticed by the chance to "throw the bums out" in a few years but then, inevitably, the new bums are just as bad and then we want to throw them out too.
That's because you can't fix a broken system when everyone is playing just a slight variation on the same news. The way our own Government measures inflation is a joke, because 57% of the measured inflation rate is Owner's Equivalent Rent, which means, even if you are not buying a house, when your house gets more affordable (lower price, cheaper mortgage), that's considered to detract from the total rate of inflation of everything else with…
by Option Review - August 4th, 2011 2:43 pm
Today’s tickers: DNDN, GOLD & RYL
DNDN - Dendreon Corp. – Investors stormed Dendreon Corp. options this morning with shares hemorrhaging uncontrollably during the first 90 minutes of trade. The stock dropped as much as 68.0% to land an intraday low of $11.34. Shares in the maker of prostate-cancer drug Provenge currently trade at $11.97, a 66.6% discount to Wednesday’s closing value of $35.84, as of 11:40 am ET. Traders purged their portfolios of Dendreon after the Seattle, WA-based company withdrew its 2011 sales estimate and said revenues for Provenge failed to meet forecasts. The nosedive in the price of the underlying drove options implied volatility on the stock up 128.2% to 122.01% during the first half of the session. Strategists populating DNDN options are taking varied stances on the company, and have exchange more than 63,000 contracts so far today. It looks like some players are raking in hefty profits on previously established bearish bets, while others are snapping up calls in the hopes that selling is overdone. Traders eyeing a near-term rebound in the price of the underlying purchased more than 600 calls at the August $17.5 strike for an average premium of $0.25 apiece. Longer-term optimists initiated the Jan. 2012 $15/$22.5 bull call spread roughly 1,000-times at an average net cost of $1.21 each. Call-spreaders may profit if Dendreon’s shares surge 56.3% over the current price of $11.97 to surpass the average breakeven point at $18.71 by January expiration. Plain vanilla call-buying at the November $18 and $19 strikes indicates like-minded strategists are hoping a comeback story is in the works for the stock. Meanwhile, open interest in the August $36 strike put suggests traders purchased around 1,350 contracts at that strike for an average premium of $1.62 each this week. Buyers of these puts now hold options trading at a premium of $23.75 a-pop. Finally, outright bears expecting shares to slide lower ahead of August expiration paid an average premium of $0.27 per contract for around 600 of the…
by ilene - March 1st, 2011 5:52 pm
Courtesy of Mish
A number of sites are commenting on a Bloomberg video in which El-Erian, PIMCO Co-CEO says "Dollar could lose its reserve currency status".
Bloomberg: "Mohammad what does a weak dollar signal to you, a dollar that can’t jump up here on a day like we’ve seen today?"
El-Erian: "It is a warning shot to America that we cannot simply assume flight to quality, flight to safety. That people are starting to worry about the fiscal situation in the U.S. They are starting to worry about the level of debt. They are starting to worry about what they hear about states and municipalities. So, I would take this as a warning shot that we cannot assume that we will maintain the standing of the reserve currency as we have in the past."
Reserve Currency Definition
Before we can debate whether or not the US will lose reserve currency standing, we must first define what it means.
Investopedia defines Reserve Currency as follows.
"A foreign currency held by central banks and other major financial institutions as a means to pay off international debt obligations, or to influence their domestic exchange rate."
I accept that definition. Unfortunately Investopedia rambles on with nonsense about the implications: "A large percentage of commodities, such as gold and oil, are usually priced in the reserve currency,causing other countries to hold this currency to pay for these goods."
That sentence is a widely believed fallacy. The reality is no country is obligated to hold dollars to buy goods denominated in dollars.
Currencies are Fungible
Currencies other that illiquid currencies with low or no trading volume (think of Yap Island stones or the Cuban Peso) are fungible. It is a trivial process to switch from one currency to another.
You can buy gold or silver in any country, and I assure you those transactions do not all take place in dollars. Thus, just because a commodity is widely priced in dollars does not mean it only trades in dollars.
That holds true for oil as well.
I keep pointing this out, unfortunately to no avail, that oil trades in Euros right now. There is no selling of Euros to buy dollars on the front causing the oil producers to trade dollars for euros on the back end. The oil states simply sell oil for a price in Euros and then hold Euros in their…
by ilene - February 16th, 2011 7:29 pm
Courtesy of SurlyTrader
In the future they might coin this the “Bernanke Effect” or maybe the great commodity bubble of 2011. The truth is that commodity prices are rising…dramatically. You might have started to notice this disconnect in your grocery store shopping or in gasoline prices, but if you were to ask our government they would tell you that a basket of goods consumed (CPI) is rising modestly. How modest do these numbers appear to you?
Sugar and Corn? Those are luxury goods.
If the basic ingredients to food are skyrocketing, then prices of food will eventually have to keep pace which will directly hurt consumers.
Of the 853 ETF’s that I looked at, which unleveraged funds do you think had the greatest return over that same time period? It is not a trick question:
Are you noticing a theme?
My conclusion is simple: this time is NOT different. Commodity prices cannot go up forever and China will not continue to support the market regardless of prices. What is this “Bernanke Effect” doing to farmland prices? Well, according to a survey by Farmer’s National Company:
“non-irrigated crop land in central Kansas averaged $3,000 an acre, up 50 percent since June…
Crop prices have seen an extraordinary run since early July. A bushel of wheat priced about $4 a bushel on July 4 is now more than $8.50. Other crops have experienced similar increases.
As the land generates more income, it puts more cash in the pockets of the most likely buyers, nearby farmers. It also provides an attractive return for investors who then rent it out to farmers.
The result: Auctions are drawing twice the number of bidders as before, said area agents.”
As with all hot speculation, the commodity run will surely come to an end and will probably have repercussions for all financial markets. We should have learned by now that large financial dislocations tend to not occur in isolation.