by Phil Davis - August 19th, 2014 8:06 am
You've gotta love those trend lines.
Chart people sure love them and we love chart peopel because they are SOOOOOOOO predictable and predictable behavior is behavior we can bet on and that makes us happy. Today we'll be seeing the 50-day moving averages on the Dow, the NYSE and the Russell all tested at the same time – what happens next will tell us a lot about this rally.
As I pointed out to our Members in our Live Chat Room this morning, though we may be past our bounce levels and though we are now challenging the 50 dmas, we still have 3 of 5 of our Must Hold levels red on the Big Chart – that's not too impressive. Consider what a 50-day moving average is. It means that, over the last 50 days, half the time the index has been above the line and half the time it's been below – so how impressive should it be to see the index back in the middle?
Nonetheless, Chart People believe it's some mystical symbol that gives them a rally signal and half the time they are right – so the religion of TA continues to prosper! As you can see from Dave Fry's SPY chart from yesterday, 75% of yesterday's gain came on no volume as we gapped up in the Futures and the rest of the day's trading was one of the lightest of the year.
The reason I like Dave is because he's one of the only TA people who actually pay attention to volume and this volume is total BS. Still, it's enough to stampede the retail suckers back in and God bless them because they throw money at us to sell them the things we liked when they were out of favor.
In May and June, for example, we compiled a Buy List for our Members, which had 29 trades we liked for the rest of 2014. Here's a few that we are done with already:
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 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 - May 14th, 2014 8:50 am
Three out of five indexes look very good!
The same can be said about a dog with three legs and no tail, I suppose. So, the question is, is the market a dog in a nice sweater or whatever the metaphor would be for something where 3 healthy guys drag two dead guys around and win the race.
Hmmm, I guess there is no metaphor for that – BECAUSE IT'S RIDICULOUS, isn't it? A healthy market looks like a healthy market and this does NOT look like a healthy market.
You can ignore Russia invading Ukraine, you can ignore China's exploding debt bubble, you can ignore collapsing German Investor Confidence, you can ignore Japanese Inflation, you can ignore all the stuff we already talked about in this morning's news alert – but that's not going to make it go away!
Yes, we made new highs yesterday but look at the crap volume. The volume on the Friday after Thanksgiving (half a day) was 55M on SPY, the volume on Dec 26th was 63M and New Year's Eve was 86M – that's how ridiculous yesterday's volume was.
We're still in the pattern of the market rising on low volumes and selling off on high volume, which is simply the way the Banksters pump up their holdings into the opens and then dump them on what few retail suckers are participating into the closes.
You can hear their media puppets ramping up the rhetoric at the same time, wagging their fingers at the retail investors and telling them they are "missing" the rally. Why weren't they saying that when the markets were 50% cheaper? Why not when they were 25% cheaper? No, only at a market top does the Corporate Media tell you to BUYBUYBUY because their masters already bought their fill and now they need someone to hold the bag. Same as it ever was.
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 Option Review - March 19th, 2013 12:35 pm
Today’s tickers: EBAY, HOV & ITB
by Phil Davis - November 16th, 2012 8:32 am
Falling, falling, falling.
That's all the markets have been doing lately. As you can see from our Big Chart – it's been a pretty orderly sell-off according to our 5% rule with roughly a 4-5% drop during October with some consolidation, followed by a much steeper 4-5% drop after the election.
We're back to the point where we expect resistance at an 8% total drop as well as some bounce action where once again we'll be measuring for strong or weak bounces to determine whether or not we can get a turn again (our indicators kept us bearish last time). Regarding the current action, I said to our Members yesterday in Chat:
I think there is a lot of selling as people take capital gains while they can. I think that it's very possible that it's going to be very difficult to get a proper rally into the end of the year because there are plenty of people waiting for a rally to take their gains, whether through timing or position. The problem with this state of not knowing is it becomes prudent for people to hedge for the worst and, if someone had a 20% gain for the year and now it's 15% and they can take it off now and keep 12.75% (after 15% tax) vs possibly hitting another 5% drop and running down to 8.5% this year or possibly 7% (at 30%) if they wait until next year and there's no recovery (and the more the cliff looms the less likely recovery seems) then it almost doesn't make sense not to take the 12.75% and run. So that's very possibly the selling pressure we see and it may continue to be relentless into the end of the year unless there is some sort of resolution or delay to the cliff.
While we don't think the Fiscal Cliff will end up being a big deal – that doesn't stop others from panicking. This week we've been scooping up positions they have been running away from but, if we're going to have another leg down – we'll be needing those disaster hedges (see Wednesday's post) to keep us out of trouble. It doesn't take much to profit from a downturn, fortunately, when we use good hedges. On Wednesday I suggested the TZA April $17/24 bull call spread for $1.40, selling the $14…
by Phil Davis - August 13th, 2012 8:29 am
Think Mcfly, THINK!
Forget the rhetoric, forget what Cramer says – or any of the other idiots on what used to be accurately called "the idiot box." Just look at this one, simple chart (thanks Doug Short) and tell me – why on earth would the Fed step in and take emergency action when the market is at a multi-year high?
Have they EVER done this before? EVER? Has ANY Central Bank EVER taken emergency liquidity measures when their stock market was at or near their all-time highs? And look at the interest rates (the red line) – there's nowhere to go folks – not unless the Fed is going to start PAYING US to borrow money. In which case – sign me up for $10Bn…
This is the point that was made this week on the cover of Stock World Weekly, and my comments in "The Week Ahead" section were:
by Phil Davis - June 19th, 2012 8:28 am
BIG day today!
As you can see from the Big Chart, we are testing the 50 day moving averages on the Dow (12,746), S&P (1,347), Nasdaq (2,920), NYSE (7,756) and the Russell (781) IF all goes well and we move up from here. The Dow is already over and the S&P and Russell are close so we'll be watching them closely this morning to see if we should stay bullish or cash out our winners while we wait for some actual bullish news – because the rumors that are driving us higher so far are running out of steam.
The G20 meeting drags on in day 2 and we await their announcement. China dropped $43Bn into the IMF last night and India, Russia, Brazil and Mexico will also commit $10Bn EACH for another $40Bn and that brings the IMF's war chest up to $456Bn. Even Turkey put up $5Bn – we're talking about an all-out Global effort here so we expect A LOT more from the big guns.
Let's not dwell on what it means that Turkey has to bail out Europe and instead focus on Christine Lagarde's statement that the commitments demonstrate "the broad commitment of the membership to ensure the IMF has access to adequate resources to carry out its mandate in the interests of global financial stability." So now it's up to the G20 and that means it's up to Merkel today and Bernanke tomorrow.
Merkel faces mounting pressure to make even greater concessions, by putting Germany's financial muscle behind an integrated banking and borrowing system to keep the euro intact. The question is whether, after two years of muddling through, Europe's pre- eminent power can act quickly and decisively. "I think she will remain an incrementalist: we have not yet reached the point where it is obvious that we are hanging over the precipice," said Paul de Grauwe, a professor at the London School of Economics. "It looks again that what is going to come out is going to temporarily pacify markets until it is clear that it is not going to be sufficient."
For those of you who don't speak Economics – "not going to be sufficient" = DOOM!!!