by phil - October 24th, 2014 7:58 am
Already the monsters are coming out with two of NY's three papers already maxing out their headline fonts to scream EBOLA!!! to people on their way to work. As I noted to our Member in this morning's Alert (tweeted out too!) that made for easy shorts on the Futures:
Based on Ebola and the upcoming stress tests, I'd have to guess a sell-off is coming today. Shorting /ES at 1,940 (tight stops, of course) and the Dow (/YM) at 16,600 are a lot safer than shorting /TF at 1,100 but all good lines to use and watch. /NQ already failed 4,000.
It's 7:54 and already the Egg McMuffins are paid for on nice drops off those levels and we'll take quick profits and run and hopefully get a chance to re-enter as I don't see this day going well.
We're back to short in our Short-Term Porfolio but less aggressively so than last weekend as we can't ignore the underlying 3.5% gains our indexes have put up this week.
As usual, the Dollar is being knocked down to support the Futures but it's not helping oil much ($81.24) so far. Gold, however, bounced back to $1,233 and silver (/SI) went over our long line at $17.25 (very tight stops below). Gasoline (/RB) was rejected at $2.20 – another sign that the underlying economy is much weaker than these indexes would have you believe.
In fact, GS reports today that China has shut 20% of it's Iron Ore production in the face of an inventory glus and prices dropping 40% this year. The market is in the midst of a transition without precedent in recent commodity history as supply jumps and higher-cost mines shut, according to Macquarie Group Ltd. HSBC Holdings Plc, which cut its price forecasts this week, sees a 30 percent slump in Chinese output next year.
“The market currently looks like a game of chicken where no player has blinked,” HSBC said. “The major producers are likely to
by phil - October 17th, 2014 8:26 am
Nothing came of yesterday's Ebola hearings.
Here's a picture of President Obama hugging it out with one of the nurses that treated one of the Ebola patients – a strong image for the people as calmer voices begin to prevail – on that front at least.
Markets were also boosted by dovish talk from the usually hawkish Jimmy Bullard, of the St. Louis Fed, who said the Fed should consider delaying plans to end its bond-buying program at the end of this month to halt a decline in expected inflation. This is what it sounds like when Doves cry at the Fed and, like Prince's mother, the markets are never satisfied but, for this morning at least – we're taking back those weak bounce levels that we told you we'd take back by Friday.
“The recovery from the lows after Bullard spoke yesterday is another reminder how addicted markets still are to liquidity,” said Deutsche Bank strategist Jim Reid. “The Fed can certainly help markets but perhaps we really need the ECB to step up a gear for a true recovery,” he added.
Still, manipulated or not, this gives us two nice reversal days on strong volume and we couldn't be happier as we flipped very bullish in our Short-Term Portfolio and should be able to take full advantage of this rapid recovery.
Whether or not we maintain that bullish stance into the weekend depends on how our bounce levels hold up today (see Tuesday morning's post for our amazingly accurate predictions of the week's action).
Keep that in mind when I tell you there is nothing particularly bullish about hitting the weak bounce on the Friday of a drop week – it's merely better than the alternative of FAILING to make those weak bounce lines. That would have been BAD!!! Meanwhile, those of you who took our FREE Trade Idea from yesterday's morning post to go long the Russell at 1,050 (the same line we were watching on Tuesday) are now sitting on $4,000 PER CONTRACT gains and I do so hope you are not greedy and set your stops at the 1,090 line.
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 9th, 2014 8:30 am
Flip, flop & fly
I don't care if I die
Flip, flop & fly
I don't care if I die
Don't ever leave me, don't ever say goodbye – Joe Turner
It's deja vu all over again!
Please see Tuesday's "1,975 or BUST!" post and you will be all caught up on our battle plan for Thursday. Remember – I can only tell you what is going to happen and how to make money trading it – the rest it up to you…
Those DXD calls we disussed in Tuesday's post were cashed out ahead of the Fed with 100% gains in just two days. Today, we're right back to the extact $24.52 DXD was at Tuesday morning, and the calls are back to our 0.60 entry after topping out at $1.27 yesterday (up 111%).
We made the call to get out right at the beginning of our 1pm Live Trading Webinar (sorry, Members Only) but, FOR FREE – in yesterday's morning post – we also called a very wise exit to our TZA spread (up 190%) and flipped long on the /TF futures at 1,070 and those finished the day well past our 1,080 goal – all the way back to 1,100 for a $3,000 per contract gain. That's in a single day folks!
This morning, in our Live Member Chat Room (and you can join us here before the prices go up next week), we took short positions on the indexes with me saying to our Members in a 6:41 Alert that was sent out via Email as well and, for good measure, it was tweeted out (follow us here) and posted on our Facebook page (follow here):
Clearly we can short /TF at 1,100 with a stop above or /NQ 4,040 or /ES 1,965 or /YM 16,900 simply stopping out if any two of those go higher. On the other side, Oil can be played long at $87.25 (again) and gasoline at $2.30 since it's Thursday.
by phil - October 7th, 2014 8:28 am
Not that you can draw any conclusions from yesterday's low-volume action. The Fed doves have their say for the next two days and then we go into a hawkish nosedive on Thursday and Friday, so this little drama is just getting started. All went according to plan yesterday – per our set-up in the morning post:
As a hedge, for our Member Portfolios, we're favoring SQQQ (now $36.55) and DXD (now $24.52) to protect us from another slide but the real tilt to hawkish doesn't start until Thursday, after the Fed minutes, so we can assume they will be spun bearish from there into the weekend and we'll look to take nice, short positions against any run-up that comes from doveish Fed statements early in the week.
As you can see from yesterday's action, that was the perfect way to play it and our short positions on the Futures gave us several quick victories as it was all downhill from the open until 1pm. Even our oil short gave us a nice $600 win – the one that was right there in the morning post at $89.60 and oil was below $89 by 10:45, less than 3 hours for that trade idea to play out!
That's good because we REALLY needed the money because GTAT, one of our good-sized positions in two of our portfolios, declared a surprise bankruptcy yesterday. Bankruptcies are not supposed to be surprising but this one was and GTAT dropped 90%, essentially wiping out a $25,000 position and costing us 1/4 of our year's profits in the Long-Term Portfolio.
There's an excellent article in Bloomberg and another one from Seeking Alpha outlining what happened and where it stands so I'll spare you the gory details other than to say that this is why we stress diversification and portion control in investing. Even so, GTAT happened to be a stock that got weak and, because management promised a turn-around, we added to our losing position on the initial dip and maxed our allocation and then got burned so quickly that we had…
by phil - October 6th, 2014 8:03 am
Get ready for a wild week.
FOMC minutes are released on Wednesday at 2pm and there are a record 12 Fed speeches in the days that surround them. Expect the market to gyrate wildly with each tweetable quote and it all kicks off this afternoon with Treasury Secretary Jack Lew, followed by KC's Hawkish Esther George at 8:30.
Tuesday we have Kocherlakota (hawk) and Dudley (dove), Wednesday is Evans (dove) and the minutes. Thursday we have Bullard (hawk), Tarullo (dove), Lacker (uber hawk) and Williams (dove) ahead of the realease of the Fed's shocking balance sheet and a look at the ever-expanding US Money Supply.
Friday ends with a bang as we hear from Plosser (uber hawk), George again, Fisher (uber hawk) and then Lacker again – so the hawks very much have the last word into the weekend. It's not much of a data week (next week is a doozy, though) and, to summarize it's hawk, hawk, dove, dove, hawk, dove, HAWK, dove, HAWK, hawk, HAWK, HAWK - do you think, perhaps, the Fed is trying to tell us something?
The next Fed meeting is October 28th and we'll hear their decision on the 29th. If they don't begin to tighten at this meeting, there is no way they'll do it right before Christmas at their last meeting on the 16th. It seems to me, they are going to be setting expectations for some hawkish action this week and the reaction will give them time to contemplate it going into the next meeting.
What's keeping us from getting too hawkish (bearish) is this chart from Macrobond, which points out that, the last 3 times 10-year rates have been this low, the Fed has begun major rounds of EASING, not tightening policies. QE increases the money supply and that forces note rates up to compensate and Jack Lew is the guy who has to borrow the money at those rates – so you can see how this week will all tie together once the dust settles.
As a hedge, for our Member Portfolios, we're favoring SQQQ (now $36.55) and DXD (now $24.52) to protect us from another…
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 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).