Posts Tagged ‘RUT’

TGIF – Closing a 12% Down Quarter

SPY DAILY1,320 – That was the S&P close on June 30th.

1,160 – That was the S&P close after yesterday’s wild action.  A neat 160-point drop (12%) in 3 months for the World’s largest market kind of sucks, don’t you think?  My commentary in June 30th’s "It’s the End of the Quarter as We Know It" post was:

We feel fine because we cashed out on the long side (shorter-term, unhedged positions) and we really don’t care what the market does today or tomorrow but we are betting this rally reverses and we will be taking some (more) short hedges today – hopefully selling into the last legs of this fairly fake-looking rally.  

My top downside picks to play the sell-off were EDZ ($17.90 at the time, now $28, which is up 36% even without using options to make a spread) and TZA ($35.50 at the time, now $51.10 – up 44%).  As I said in that morning post: "I didn’t think they could take the Dollar below 75 but they hit 74.54 last night and it remains to be seen if they can hold it down in real trading, especially with the Pound weakness (see this morning’s Alert) and the Yen’s unwanted strength.  Something’s gotta give and we’re betting it’s this fake, Fake, FAKE rally…."

We were shorting oil futures (/CL) at $95 (now $80, up $15,000 per contract) as we thought the holiday weekend was the end of the run but we did keep heading up to $100 (down $5,000 per contract) before finally getting a drop to $75 (up $25,000 per contract) in early August.  

One funny play from that June 30th Member Chat was the VIX Aug $15/17 bull call spread at $1.20, selling the $16 puts for .50 for net .70 on the $2 spread.  That just seems so cute (and obvious) with the VIX at 38.84 now (it was 30 at the end of Aug for a full 185% gain on that hedge).  

Other hedges we liked in that post were the TZA Oct $31/42 bull call spread at $3, selling RUT Aug $710 puts for $2.90.  The RUT puts expired worthless so net .10 on the spread that is currently $20 in the money for pretty much the full
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Thrill-Ride Thursday – Finding Bottom

SPY 5 MINUTEMacDuff once said:  

I grant him bloody,

Luxurious, avaricious, false, deceitful,
Sudden, malicious, smacking of every sin
That has a name; but there’s no bottom, none.

That’s the way the markets feel this week as we, like Henry V – head once more into the breach (or close the wall up with our EU dead!).  I had said on Tuesday, that it was 1,200 or bust on the S&P (as usual) and we failed to hold 1,200 and we busted and then we failed to hold the bottom of the rising channel David Fry had drawn at the top of that post (117.5 on this chart) and so we tumble back down towards our much more reliable -5% line at 1,140, which I drew in red

While tricky, it is not impossible to trade this kind of action.  We are very fortunate to have been trading this exact range on our virtual $25,000 Portfolio and we just had our best 2 weeks of the year, despite the insanity, with a net $16,475 gain since 9/15.  That’s 66% of $25,000 right there and we’re now at $97,400 and on track to hit our $100K goal for the year on Friday as long as the Russell doesn’t fail 645.  If not, as with many trades this year – we’ll work it out!  

That’s the whole point of this portfolio exercise – to illustrate the idea of balance, even in aggressive short-term trading.  We are never all bullish or all bearish and sometimes we’re wrong but, generally, we simply do more shorting at the top of our range and more buying at the bottom of our range and then we simply sit back and wait for the winners to come in.  Of course for almost every winner there’s a loser but then, a week later, the losers are winners too!  

OK, so PATIENCE and BALANCE – that’s those are our two points!  And taking profits off the table.  Right, then our THREE points are patience and balance and taking profits off the table while not being greedy.  So that’s FOUR points.   Amongst our points are Patience and Balance, Taking Profits off the Table and Not Being Greedy.  

As I often say to Members, if you wake up in the morning and you’re not sure if you want the markets to…
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Will We Hold It Wednesday – Russell 700 Watch

700 has been a tough nut to crack in our small-cap index.  

Dollar weakness has hurt the companies that do most of their business in the US, collecting crappy dollars for their goods and services and having to pay through the nose for high-priced commodities and imported goods.  Small caps don't have the muscle to hold down wages in overseas factories while they boost productivity to the point of suicide like our beloved Apple can.  No, while our small caps may have a plentiful supply of US workers willing to work "cheap" – we're still not at the point where our Government forces students to work in the factories as "interns."  

So, while we wait for those IPhone 5's to roll off the assembly line, we'll be keeping an eye on the Russell, which should benefit from the recent strength in the Dollar, which is is up over 5% in September – although probably topping out at 78 – which is good, as it will give the markets a nice boost on the way back down.  

Dow futures are already up over 200 points since 3am (when they were down 100) and, when our 3am trade is working, the bots are usually taking the markets higher.  Nothing has changed in the news – Moody's went ahead and downgraded Credit Agricole and Societe General but maintained an Aa2 rating on BNP – the source of yesterday's big drop in France on the silly rumor that I told you in yesterday's post was nothing but blatant market manipulation by our favorite media mogul.  

Don't worry, no one will be arresting Rupert Murdoch because – well, he's rich.  Rich fixes everything, doesn't it?  Rupert's pal, Chinese Premier Wen Jiabao (What?  You didn't think he only buys Western politicians, did you?), says no one should rely on China to bail out the world economy. "Countries must first put their own houses in order," Wen said today. Asian stocks dropped following his comments, but European markets and futures have shaken the news off after the bank downgrades in a classic example of selling the rumor and buying the news.  

Today the big rumor is bullish on news that Geithner is going to Europe to spread the religion of Easy Money in what will…
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Thursday Thrust – Just Buy the F’ing Dips!

It's very sad when you can get your best financial advice from cartoon characters.

I apologize for the language but  this video pretty much says it all.  As the man in green says:  "Buy the f'ing dip, you f'ing idiot."  That's the entirety of the market strategy we are being trained like Pavlov's dogs to follow.  Also as the man says "Now, don't forget this only works if you go out and tell all your friends and family to do the same.  That way, when they are buying more expensively than you, you can sell back to them and collect your money."  

Of course it's a Ponzi scheme but it's a gigantic, legal one and the best thing about it is that the Government FORCES everyone to play so you never run out of suckers.  When there is a lack of actual new sucker/investors to put money in, the Government steps in with stimulus or buys equities (QE1) or buy Treasuries from the banks so they can have free capital to buy equities with (QE2).  They debase the currency and drive inflation higher while talking it up even more so and virtually penalizing people for saving money and not shopping.  In this way, the US Government places a tax on every single citizen through a systemic devaluation of their lifetime accumulation of wealth as well as unfavorable savings and inflation conditions that are aimed to force money into equities and commodities.  

What is the logic to this?  Well, none if you are a government that actually cares about the long-term benefit of 310M people but we haven't had a government that was "for the people" since they put two in the back of Kennedy's neck so why complain about it now? What we should be doing is celebrating the sheer stupidity of the situation and enjoying the ride as this stock market roller coaster clacks up the tracks – towards a drop that is certain to have investors screaming all the way down but, for now, let's listen to what the Bernanke Bears have to say in their latest cartoon about the Bank America crisis with WikiLeaks as well as their advice on NFLX and CRM:

Now, what could be more simple than that?  Just take all…
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Wrong Way Weekly Wrap-Up

This whole week did not feel right to me.

We were too bearish as I had expected a bogus commodity rally in last weekend's wrap-up but I didn't expect it to persist for a week, even as the dollar held it's ground above 80, a 10% pullback off the top, when oil was $40, copper was $1.50 and gold was $850.  Now oil is $80 (up 100%), copper is $3.35 (up 123%) and gold is $1,135 (up 33%).  Let's say gold is a true indicator of dollar weakness – that means that only 33% of oil and copper's move up can be attributed to the 10% drop in the dollar (not that even that makes sense but we'll give it to them).  Can the rest be attributed to demand?

Certainly not with copper.  Global copper consumption was down 1.9% in 2009 and Q1 2010 is lower than any quarter since Q1 2009 and even Barclays' very aggressive targets for China growth only bring global demand up 2.5% this year – whch would just about bring us back to 2007 levels of consumption.  That, of course, also assumes a rebound in housing construction – something we are not seeing at the moment.   Also, China spent $700Bn last year stimulating their economy and one of the ways they did this was to stockpile copper.  As you can see from the chart – that too appears to be winding down and even Goldman Sachs has abandoned the bullish side of copper at this point.

 

Oil is just as silly.  According to the EIA, global oil consumption is not expected to return to 2007 levels until late 2011 – and that is with some very rosey estimates of a global econonomic recovery – exactly the type of thing that can be derailed by high oil prices!  Mighty China's consumption is projected to go from 8.66Mbd this year to 9.13Mbd in 2011, a 500,000 barrel increase.  Last week, the US had a build in inventories of 4Mb – we just send those over to China and everyone is happy!  I've already had my say on oil demand this this weekend, so let's just move on…

Let's just say I'm a little skeptical about any market moves that are
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Peter D – Confessions of the PSW Strangler

Peter D has a long-running and very successful system of selling premiums on a regular basis that's well worth learning.

Investors selling a short strangle are expecting the underlying stock to not move much in either direction. The strategy is accomplished by selling a call option at a higher price than the current stock or ETF price and by selling a put option at a lower price than the current stock or ETF price. Both of the options will have the same expiration month. The investor in a short strangle benefits from the underlying moving within the spread between the call strike and the put strike.

There are two reasons we like this strategy a lot at PSW:

1) It's boring!  Unless the market is MUCH more volatile than normal, taking sensible, NON-GREEDY, out-of-the-money short option positions is a fairly market-neutral way to place our bets.  While the risk/reward ratio may seem inverted, statistically it's a winning play over time.

2)  It's perfect for our "be the house, not the sucker" philosophy of trading.  We are always looking to SELL volatility. The idea behind this trade is that front-month volatility is relatively expensive compared to historical long-term volatility and we take advantage of selling a very high cumulative volatility over the course of the year.  

We recently ran a collection of comments following through on some trades over time and quite a while ago Sage wrote an article relating about using short strangles on longer-term stock plays, which provides some additional ideas on how to apply this strategy.  Peter has been kind enough to provide us with a definitive guide to help set you on the road to a successful career as a strangler.  The following is a collection of posts (make sure you use the links) on Short Strangles and the Crazy plays on the indices (SPX, RUT, NDX, etc.):
 
1- The Crazy play consists of a Short Strangle and a protective long put vertical. These plays are mainly for Virtual Portfolio Margin accounts, with balance greater than $125,000, preferably over $200k as the margin can swing wildly.  

2- Very rough comparison among Short Strangle, Iron Condor, Buy/Write and straight stock purchase. Note the rolling tips in the second to last paragraph.
 
3- VIX, the effects of.
 
4- Possible
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Trading the Russell 2000

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Trading the Russell 2000

Courtesy of Allan

I keep a notebook (actually several) of all of my trading ideas including results from back testing from all of the various stocks, indexes, etf’s, futures, market statistics and yes, even planetary alignments, tides and lunar cycles. While reviewing all of my Blue Wave test results today, I stumbled upon a consistency heretofore completely unnoticed yet intriguing in it’s premise and applicability to trading, especially trend trading.

It appears from my testing that one particular trading vehicle consistently generated better results, sometimes much better results, then any other. What I found was that the Russell 2000 index (RUT) did better in my myriad of testing then any other index, including SPX, OEX, QQQQ, SPY and DIA.

Naturally, I Goggled this phenomenon and found a number of similar observations, best summed up here:

The Russell 2000, while not as popular as the S&P 500 or the Nasdaq, is actually much easier to trade. The broadness of the Russell’s index causes it to trend better than the Nasdaq and the S&P. The breadth of the 2000-stock-index tends to filter out the noise in the market, which makes it a more efficient market to trade. The brokerage houses tend to tout the S&P and Nasdaq markets because they are best know to the public. The Russell 2000, however, is utilized a great deal by institutional players because it trends so well.

And then this:

However, there is another market also catching the eye of many day traders — E-mini Russell futures. A quick glance at the top trading systems we ranked across seven different statistical measures at the end of 2004 showed something extraordinary — several E-mini Russell trading systems occupying spots at the top of the list.

So let’s take a look at the RUT, which coincidentally is the base index for four of the highest leveraged ETF’s: TNA, TZA, BGU and BGZ.

Above is our big picture Weekly chart of the Russell 2000 index. A week ago it flipped from LONG


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Zero Hedge

It's Official: Verizon To Acquire Yahoo Core Assets For $4.8 Billion

Courtesy of ZeroHedge. View original post here.

Almost a decade after Microsoft made an unsolicited bid to acquire Yahoo for $50 billion, moments ago Verizon confirmed recent rumors that it would acquire Yahoo operating business for approximately $4.83 billion in cash, far below initial estimates floated several months ago that the segment could sell for as much as $10 billion.

So how much does Marissa Meyer - who is about to be unemployed - collect for "creating value" at the company during her 5 year tenure?...



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Phil's Favorites

Job Openings vs. Number of Unemployed; Is Being Unemployed Just "Bad Luck"?

Courtesy of Mish.

Washington Post writer Matt O’Brien proposes Getting Stuck Without a Job is Mostly a Matter of Bad Luck.

That notion is ridiculous.

While there may be instances of “bad luck”, in general, the employees with the weakest skills were the first to be let go and the last to be rehired.

O’Brien did post some interesting charts about the length and strengths of recessions vs. long term unemployment.

That chart is interesting, but all it really does is quantify what shou...



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Market News

News You Can Use From Phil's Stock World

 

Financial Markets and Economy

Buying the Deepest Stock Dips in 2016 Returned Three Times S&P 500 (Bloomberg)

It’s been a great year for catching falling knives.

Big Week Ahead Highlighted By Fed Meeting, Key Earnings, GDP Estimate (Forbes)

The recipe for this coming week? A stew of earnings, peppered with data and a Fed meeting. Also ahead: A first look at estimated Q2 gross domestic product.

...



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Chart School

NYSE Margin Debt and the Market

Courtesy of Doug Short's Advisor Perspectives.

Note: The NYSE has released new data for margin debt, now available through June. We've updated the charts in this commentary to include the latest numbers.

The New York Stock Exchange publishes end-of-month data for margin debt on the NYX data website, where we can also find historical data back to 1959. Let's examine the numbers and study the relationship between margin debt and the market, using the S&P 500 as the surrogate for the latter.

The first chart shows the two series in real terms — adjusted for inflation to today's dollar using the Consumer Price Inde...



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ValueWalk

Relypsa Inc (RLYP) Soars On Galenica Bid

By Jacob Wolinsky. Originally published at ValueWalk.

Relypsa Inc (NDAQ:RLYP) — to be acquired by Galenica AG (VTX:GALN) for $32 per share in cash is soaring this morning up about 58 percent at the time of this writing in early morning. On the other hand shares of Galenica are down on the announcement by about 8 percent. What are the details of the deal? Here is what the sell side analysts are saying about the pharma news.

Relypsa Inc (NDAQ:RLYP) bid – analysts react

Cantor Fitzgerald

Relypsa will be acquired by Galenica for $32 per share, a 59% premium over the last closing price. We have thought that Relypsa would likely be acquired at some point, given the opportunity to grow Veltassa to be a significant commercial brand, ...



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Kimble Charting Solutions

Doc Copper going to peak again at 200 Day moving ave?

Courtesy of Chris Kimble.

Doc Copper is often viewed as a leading indicator, for global growth or lack of.

The 200 day moving average is often viewed as the line in the sand to determine if an asset is in an up or down trend.

Is Doc Copper climbing above its 200 day moving average a good or bad sign?

Below looks at Doc Copper over the past decade with the 200 MA applied.

CLICK ON CHART TO ENLARGE

Copper peaked in 2011 and since, has continued to create a series of ...



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Digital Currencies

Demystifying the blockchain: a basic user guide

 

Demystifying the blockchain: a basic user guide

By Philippa Ryan, University of Technology Sydney

Companies around the world are exploring blockchain, the technology underpinning digital currency bitcoin. In this Blockchain unleashed series, we investigate the many possible use cases for the blockchain, from the novel to the transformative.

Most people agree we do not need to know how a television works to enjoy using one. This is true of many existing and emerging technologies. Most of us happily drive cars, use mobile phones and send emails without knowing how they work. With this in mind, here is a tech-free user guide to the blockchain - the technology infrastructure behind bitcoin...



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OpTrader

Swing trading portfolio - week of July 18th, 2016

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Mapping The Market

No wonder Saudis are selling as much as they can!

Courtesy of Jean-Luc

We are getting much more energy efficient – no wonder Saudis are selling as much as they can! Who wants to be the one with trillions of dollars of oil in the ground unwanted:

http://arstechnica.com/science/2016/07/the-amount-of-energy-needed-to-run-the-worlds-economy-is-decreasing-on-average/#p3

...

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All About Trends

Mid-Day Update

Reminder: Harlan is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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Biotech

This Is Why Biotech Stocks May Explode Again

Reminder: Pharmboy and Ilene are available to chat with Members.

Here's an interesting article from Investor's Business Daily arguing that biotech stocks are beginning to recover from their recent declines, notwithstanding current weakness.

This Is Why Biotech Stocks May Explode Again

By 

Excerpt:

After a three-year bull run that more than quadrupled its value by its peak last July, IBD’s Medical-Biomed/Biotech Industry Group plunged 50% by early February, hurt by backlashes against high drug prices and mergers that seek to lower corporate taxes.

...



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Promotions

PSW is more than just stock talk!

 

We know you love coming here for our Stocks & Options education, strategy and trade ideas, and for Phil's daily commentary which you can't live without, but there's more!

PhilStockWorld.com features the most important and most interesting news items from around the web, all day, every day!

News: If you missed it, you can probably find it in our Market News section. We sift through piles of news so you don't have to.   

If you are looking for non-mainstream, provocatively-narrated news and opinion pieces which promise to make you think -- we feature Zero Hedge, ...



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Help One Of Our Own PSW Members

"Hello PSW Members –

This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible.  Feel free to contact me directly at jennifersurovy@yahoo.com with any questions.

Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts.  After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.)  Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.

http://www.youcaring.com/medical-fundraiser/help-get-shadowfax-out-from-the-darkness-of-medical-bills-/126743

Thank you for you time!




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