by phil - October 15th, 2014 8:00 am
If what goes up, must come down – oil has a LONG way to fall:
As you can see, during the glorious Clinton era, oil prices generally stayed down in the $20s despite OPEC cutbacks (because Clinton counteracted them by releasing oil from the SPR), hurricanes, tornadoes, wars in the Middle East (we used to win them, you know), etc. Then, a real disaster struck and oil man GWB was elected to office.
Bush and his Enron buddies destablized the commodities markets (under looser regulations) and Bush started wars in Iraq and Afghanistan to catch Osama Bin Laden, who was in Pakistan and, while he had the US military destroying Iraq's 3Mbd production and burning up another 1 Million barrels of oil a day looking for Osama in all the wrong places, he was also BUYING an average of 500,000 barrels a day to stick in the ground – doubling the size and filling to the brim our strategic petroleum reserve.
That led to a "reserve oil gap" and, of course, other countries began building and filling their own SPRs as well so more oil was bought by more countries, only to be shoved into the ground and never used. This created a very false sense of demand for oil and, when the price of oil rose to the point where consumers could no longer afford to drive – President Bush gave every family $3,000 to spend on oil – and they did – and oil hit $140 a barrel. "Cha-ching" indeed!
But then the $3,000 was gone and so was the ridiculous spike in oil and it fell and fell and fell and fell and fell – all the way down to $35 before stabilizing for a few months around $40 and then heading back to $80 as the market doubled and then, since 2010, US production has jumped 50% and generally kept oil under $100, despite MASSIVE manipulation by the Banksters (see "Goldman's Global Oil Scam Passes the 50 Madoff Mark").
by phil - October 14th, 2014 8:13 am
How low can we go?
So far, the Russell is the only index that's gone through a full 10% correction – falling from 1,180 in early September to 1,050 yesterday – actually 11% – so far. According to our 5% Rule™, if the 10% line is going to hold over the long term, we should hold -12.5% on any additional move down – that would be 1,050 from the 1,200 line. Let's call that our line in the sand for now.
Meanwhile, as I noted in our Live Member Chat room – we're comfortable going long on the Russell Futures (/TF) over the 1,150 line, looking for a nice run back to 1,080 but THRILLED with 1,060 – as that's already +$1,000 per contract! Failing to get back over 1,060, however, will be a sign that there's likely more downside to come.
Of course, thanks to the 5% Rule™ and our Big Chart, we knew to get bearish as soon as 1,200 failed on the Russell, way back in July. In fact, on June 30th, I titled our morning post: "Monday Misgivings – CASH!!! Is King as we Begin Q3" saying:
I'm NOT going to depress you.
If you want to be depressed about the market, check out my Twitter Account, where I posted our Morning Alert to Philstockworld Members (and you can become one of those HERE) in which I aired my concerns with the Global Macros.
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 3rd, 2014 8:07 am
Ouch, that really stings!
They say you can't keep a good market down but it remains to be seen whether or not we have a good market with almost all of August and September's BS gains (see any of my posts for warnings and hedge ideas) erased just 3 days into October.
As you can see from our Big Chart, the Russell, in particular, completed it's 10% drop yesterday and, as I said to our Members in yesterday's live Chat Room as we neared the bottom:
/TF/Jasu – Just a bit oversold and, as noted yesterday (and above) it's completing a 10% drop from 1,200 at 1,080, so that's a very firm line for a bounce and that's 20% of a 120-point drop, so we're looking for 25-point bounces to 1,105 (weak) and 1,130 (strong) now. Anything less than 1,105 today is a failure and, if not tomorrow, then expect more downside next week.
/TF is the Futures on the Russell 2000 index and already this morning we're back to 1,097, which is up $1,700 per contract (see how easy this is?) from our 1,080 entry and just a little shy of our expected weak bounce.
We do expect resistance at 1,100 so this is a good time to take profits off the table and we can go long again over that line or flip to the S&P Futures (/ES) over 1,950 or Nasdaq (/NQ) over 4,000 or the Dow (/YM) over 16,800. As long as they are all performing, we can be confident on the long side.
As we discussed with our Members earlier this morning, there's no particular reason to get bullish – this is just a technical bounce we expect off our 5% lines per our 5% Rule™ and, if they trun out to be weak bounces, then we can expect another 2.5-5% of downside next week. That means we can use those same index lines to go short if they fail as we would to go long if they succeed this morning – that will be all up…
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 25th, 2014 8:01 am
Wheeeee, what a ride!
This is why we use hedges – they kept us from stopping out of our long positions during the dip and, since our long positions pay off in a flat or up market, anything not down is VERY profitable for our Long-Term positions, which outnumber our bearish Short-Term hedges by 10:1 in our Income Portfolio and Long-Term Portfolio.
Markets do, indeed go up AND down on a pretty regular basis and we've made a lot of bottom calls this week, adding more long positions as we got a nice pullback. Now we have the bounces we predicted and we'll just have to wait and see if our strong bounce lines hold up for the week. Yesterday morning, before the Market, our 5% Rule™ predicted we'd see:
So we have 3 greens and two in-betweens and that's certainly enough to get us to stop being bearish but not quite enough to turn us bullish yet. If we are holding the Strong Bounce lines on the Dow, S&P and Nasdaq, however, we could go long on the Russell, with the …
by phil - September 17th, 2014 7:37 am
Wow, what a recovery!
And wow, what complete and utter BS it is. They NYSE is still below 11,000 (our Must Hold line) and the Russell is still below it's 50 dma and we up on less than 10% of the volume (total) that sold off for the last two weeks. But, who cares as long as it paints a pretty picture?
We can thank the Wall Street Journal's Fed Whisperer, John Hilsenrath with yesterday's rally as he wrote not one but TWO articles that whipped traders into a frenzy on his "insider view" that the Fed "may keep the words "considerable time" in its policy statement." Oh, be still my heart! More free money? Really? Will wonders never cease?
Needless to say we took the opportunity to re-short the Dow Futures (/YM) at 17,050 and the S&P Futures (/ES) at 1,993 and the Nasdaq Futures (/NQ) at 4,060 and the Nikkei Futures (/NKD) at 15,950 – all of which we discussed in yesterday's Live Trading Webinar that was, sadly, a Members only affair (but you can join us here).
We also got a chance to short oil at $95 again (a level I published in yesterday's post) and we're thrilled with that and already this morning, it's back at $94.50 for $500 per contract gains. For non-futures players we grabbed the SCO Sept $30s at .25 as a fun play that inventories at 10:30 won't support $95 oil in much the way Fed policies at 2pm won't support these market levels. In fact, here's CNBC's Art Cashin telling you yesterday at noon what I told you pre-market, yesterday morning – BRILLIANT!
Art's actually one of the very few Wall Street analysts I respect (and not just because he repeats what I say), I've followed him since I was a kid – he's a fantastic guy and a lot of what I share with you – I learned from him. As you can see on the Big Chart, the Russell is the laggard and, if the indexes break higher – it's the index we'll go long on but our short bets…
by phil - August 14th, 2014 8:05 am
Europe is not growing.
Italy, Romania and Cyprus are in Recession (2 consecutive negative quarters) and Belgium dropped 75%, Czech 100% (to zero), Germany down 130%, Latvia down 85%, Hungary down 30%, Poland down 45%… These are NOT GOOD numbers!
Yesterday we got a -1.7% reading on Japan, down over 200% from last quarter's +1.5%. Our own GDP grew at just 1% from last Q, which itself was down 0.5% from the quarter before it but, fortunately, last year's Q2 was so terrible that, by comparison to that – we improved by 2.4% – and that somehow made people happy.
The euro zone's three largest economies, which account for two-thirds of the region's €9.6T ($12.8T) GDP, all did not post any growth. German GDP shrank 0.2% from the first quarter and Italy's output fell at a similar pace. The French economy, the bloc's second largest behind Germany, stagnated for a second straight quarter. How, exactly, does this translate into a bullish signal for the markets?
The answer is: It doesn't. The bullishness is nothing more than anticipation of MORE FREE MONEY over longer periods of time and that is, indeed good for our Corporate Citizens and the top 1% Human Citizens lucky enough to own them (we own lots in our Long-Term Portfolios!) as they are able to refinance debt at record lows and buy back their own stock with free money and buy whole other companies with free money – all supplied their friendly Central Banksters as well as the suckers who put their hard-earned cash into banks and bonds at 1% interest.
That's right, the yeild on the German 10-Year Bund has dropped to 1% today. Auntie Angela will hold $1M of your money for 10 years and give you back $1,100,000 when she's done – isn't that FANTASTIC! It sure is for those of us who get to borrow that money – not so much for people trying to save.
by phil - July 29th, 2014 8:28 am
Some of the people all of the time.
That's the basis for this rally – or what's left of it – as we see this pattern almost daily: A big(comparatively) volume sell-off followed by a "rally" on 1/3 to 1/4 of the volume that sold and then, once we hit a pre-programmed peak (about where we got to in the no-volume Futures), we have a bit of volume selling into the close.
This is how you can see those charts that show all the "smart money" running out of the market, even as the market goes higher. Why would they leave? Why would anyone leave this exciting market? The answer is, because those fund managers are well aware that, at some point, the music will stop and there will be no buyers to save them then. Best to get out now and avoid the rush.
That time was also "different," wasn't it? We had invented the Internet (well, Al Gore did) and easy monetary policy led to bank mergers and NAFTA ushered in an era of free trade that send tens of millions of jobs overseas, causing profits for US Corporations to soar and those good times were never going to end – until they did.
It's very hard to say when a rally like this will finally run out of gas but, when we stop making new highs and we have these BS daily, manipulative run-ups to cover the selling – that's probably a good time to get more cautious.
As noted on Dave Fry's S&P chart, it's ALL about the Fed and how much FREE MONEY the Fed will pump in and how long they will keep pumping it in, etc. You would think we'd be tired of the same old song and dance but why should we, when we GET PAID to join in?
Yesterday, for example, in our Live Member Chat Room, I called for a bottom on the Russell Futures (/TF), saying:
/TF below 1,130! One would hope that's it. Playable for a bounce over
by phil - July 22nd, 2014 8:13 am
How would you like to make $10,000?
If the Russell can finish this option period (24 days) 2.5% higher, at 1,178 or higher, we can turn net $1,000 or less cash into $10,000 for you. After all, if the Fed is going to give away money – why shouldn't we get our share?
I'll preface this by saying that our Members are already long on Russell Futures at the 1,150 line, as we made that call in our live Member Chat Room (become a Member here) earlier this morning.
If the market is going to remain bullet-proof (and missile-proof too, it seems) then the RUT is now the lagging index and we can construct a play to take advantage of it breaking back up by making a play on TNA, the 3x Ultra-Long Russell ETF.
Very simply, if we buy the August $72.50 calls for $3.45 and we sell the Aug $76.50 calls for $1.70, we have a net cost of $1.75 on the $4 spread that's $4.64 out of the money (at goal) and that's 6.4% out of the money so, to be safe, we'll need a 2.5% gain on the Russell, from 1,150 to 1,178.75 to make the full $4. 25 contracts at $4 = $10,000 so we can work with that.
But what about the cost of the 25 contracts (at $1.70 x 2,500, that's $4,250)? Well, there's a couple of ways to offset that. One way is to sell 25 TNA Aug $65 puts for $1.70 to offset the cost. The danger there is, if the Russell goes down 2.5% (to 1,121) or lower, we'll be assigned 2,500 shares of TNA for $65 ($162,500) – that could be unpleasant.
Instead, we can commit to being long TNA at $45 in 2016 by selling just 5 2016 $45 puts for $8, and that raises $4,000 and commits us to owning "just" 500 shares of TNA at $45 per share ($22,500).
Now, if you don't want to be bullish on the Russell when TNA is down 37% (Russell 1,006), then why are you long on it at 1,150?