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Saturday, July 13, 2024

Flip Flop Futures Thursday – What Next?

You got to be crazy, you gotta have a real need

You gotta sleep on your toes and when you’re on the street

You got to be able to pick out the easy meat with your eyes closed

And then moving in silently, down wind and out of sight

You gotta strike when the moment is right without thinking – Floyd

You have got to be crazy to play this market!  

Forget dogs – it was the early birds who made money this morning as I finally had a web connection at home and, as we expected due to the time changes, our usual 3am trade came late in the Futures as relentlessly bad news (see Member Chat for details) sank the indexes all the way back down to Tuesday’s close.  

We reviewed all the news, both good and bad and I decided it was worth taking a chance on some futures long plays at 3:48 in Member Chat, saying:

The RUT futures are holding 715 so I like a long there (/TF) with tight stops below. 

Nas Futures are holding 2,275 and I like a bullish play (/NQ) with tight stops on that line.  

Oil is at $91.37 and that may be the low but it’s gasoline we like to get bullish on into the weekend and gasoline (/RB) is down to $2.5999 so let’s go bullish there over $2.60 with tight stops.  

EU opens in 10 minutes and their futures are down 2.5% and I could be wrong but I think we’re being manipulated lower into the ECB meeting and the Merkozy statement on Greece. 

As you can see from the chart, that was pretty good timing and we stopped out 3 hours later, at 6:31 with the Russell at 733 (up $1,800 per contract), the Nasdaq at 2,330 (up $1,100 per contract) and Gasoline we set a stop on at $2.615 (up $630 per contract).  That was good enough to pay for our Egg McMuffins and we’re off to a fine start today but poor Europe had to watch that happen to their portfolios while most of you slept.  

The DAX, for example, gapped down about 150 points (2%) and is now up 100 points (1.5%) and we may whip back and forth another few times before the day is done as rumors fly around the ECB and EU meetings.   We have been moving back to cash in our White Christmas Portfolio (updated this morning with a 41% gain in our first two weeks!) as we’re almost at our $25,000 goal already and these markets are just TOO DAMNED CRAZY!  

SPY DAILYOur strategy of making a series of small, short-term plays that we take quickly off the table is just perfect for this market but our low-touch Income Portfolio is still looking good so I guess the best way to play this insanity is to either be super nimble and surf the daily ranges or just go play golf and ignore the whole thing – which is the strategy we play for our retirement portfolio.  That’s why the title of our last Income Portfolio review was "Don’t Just Do Something – Stand There!"  That was from October 15th and, as you can see from David Fry’s chart – our retired members didn’t miss anything by playing golf as we grind out more profits from the premiums we sold in our mellowest virtual portfolio.  

 With our September’s Dozen Portfolio winding down and the holidays fast approaching, I think it may be time for another round of Secret Santa’s Inflation Hedges.  I’ll work on that when I get back from my own vacation.  Last year’s batch is doing very well despite Dr. Bernanke’s claims that inflation is "under control."

XHB was our slow, 2013 play from that set and, as we expected, real estate isn’t recovering yet but there’s already a nice profit.  Our oil inflation hedge, XLE, is way in the money and looking good for a 733% gain on the year – keeping us nicely ahead of the Fed’s claim of 2.8% inflation!  Food is another form of inflation the Fed ignores and our DBA hedge was a simple short of the 2013 $25 puts at $1.90 and those are down to $1.15 already (up 39%) and right on track to pay for a year’s worth of groceries.  XLF, of course, has been a wild ride but looks good to make the full 150% potential this January, which soundly beats the interest they pay you for keeping it in the banks – congrats to all who played that one, as well as all of our bullish financial plays this year as I relentlessly pounded the table on that sector every time they got knocked back down to those lows. 

Even yesterday, while Bernanke was doing his Q&A session after the lame Fed Statement and even lamer statement by Uncle Ben – we went long on Financials again when Benny said the magic words

"We are prepared to do more and we have the tools to do more."

It was exactly what we hoped Ben would say and, at 2:50 in yesterday’s Member Chat, I said: "That should be enough for the bulls."  Our trade ideas to play off that statement at 2:52 were:

  • IWM weekly $73 puts can be sold for $1.35 with a stop at $1.50. 
  • IWM Nov $72/73 bull call spread is .60 and can be a 2:1 spread or nice 66% gain potential on it’s own.
  •  FAS Nov $12 puts can be sold for .75, Nov $12/14 bull call spread is $1.15 for net .40 on $2 spread.  

We were worried about them at 3am but fortunately, you can’t trade options at 3am (and, just as fortunately – you CAN trade Futures!) so it was a good exercise in "don’t just do something, stand there" and now the Futures are up 1% and all is well (8 am time-stamp in case we’re down 2% at 9 am).  As I said to Members yesterday – BALANCE is the key to trading this market.  You HAVE to have trades on both sides and you have to have enough faith in your ranges to take profits off the table on both sides – another point we hammer home in our White Christmas Portfolio, as we did with the $25,000 Portfolio before it.  

Bernanke’s comments “left little doubt that the Fed is still not satisfied with growth, not satisfied with its growth projections and included towards providing additional stimulus over the next several months,” said Ward McCarthy, chief financial economist at Jefferies & Co.

Bernanke indicated that the Fed was prepared to ease again if the economy was falling “sufficiently short of our objectives.”  “Unless the economy surprises us all and springs to life, further quantitative easing seems inevitable,” said Greg McBride, senior financial analyst at Bankrate.com.  Bernanke also called for assistance from Congress in helping boost job growth, stressing that the Fed has said in intends to hold rates close to zero until “at least” mid-2013.  In its policy statement, the Fed said that growth had strengthened somewhat in the third quarter but that “significant downside risks” remain.

8:30 Update:  Let’s keep those "significant downside risks" in mind today but, at the moment, the Futures are flying as the ECB cuts rates (as expected by us but, apparently, not by others, who are freaking out) while our Jobless Claims came in-line at 397,000 lay-offs for the week.  

That’s not particularly good news for the markets as it strengthens the Dollar but, as I always tell you, a terrified worker is a productive worker and US wage slaves cranked productivity up ANOTHER 3.1% in Q3 while taking a 2.4% pay cut and THAT is something for the Capitalists to celebrate as we get ready to crack the whip in Q4!

As we learned by watching Gone With The Wind and the Ten Commandments, nothing makes the people at the top richer than not paying the people at the bottom.  That’s how we manage to get the Global economy to the point where 29.7M people (0.5% of the population) have 38.5% of the World’s Wealth ($89.1Tn) while the next 8.2% (369M people) have another 43.6% of it ($100.6Tn) leaving just $41.1Bn for the other 4.1Bn adults and even they can’t divide it equitably as the bottom 3Bn get just 3.3% of the wealth while the 1Bn people above them take 14.5% (4x).  

As I said on BNN last week, we are the 99.9% and even within the top 0.5% (see last week’s chart) there is great disparity but the bottom line is we draw a cut-off on this chart at over $1M and if we were to take just 10% of that $1M+ from the top 29M people, we could DOUBLE the lifestyle of the bottom 3,000,000,000, who have less than $10,000.  

That means, in simple terms, that we can HALVE their starvation, HALVE their infant death rate, DOUBLE their EDUCATION, DOUBLE their health care, DOUBLE the amount of clothing and shelter they can afford. And versus what? We have to make due with just the one vacation home? We suffer with imitation leather couches or (gasp!) fabric. We buy a $95 bottle of wine instead of a $100 bottle?  

As Bill Gates said in his own interview last week: "Once you get beyond a Million Dollars, it’s still the same hamburger."  Gates is one of the many top 1%’ers that is answering our call to support raising taxes on incomes over $1M per year.  In fact, a new survey from Spectrem Group found that 68% of millionaires (those with investments of $1 million or more) support raising taxes on those with $1 million or more in income. Fully 61% of those with net worths of $5 million or more support the tax on million-plus earners.   

You wouldn’t know it from CNBC, who had Sam Zell on as their "special guest" today and it was a full hour of how the Government sucks at everything and he should pay less taxes and poor people have their hands out – you know, the same crap we get on CNBC 24/7 as if it’s the majority opinion – because that’s what they are paid to tell you by the 32% of the top .05% who want to pretend they are in the majority.  The reason it’s funny when Zell says it is because he looks like he answered a casting call for Scrooge –  "a squeezing, wrenching, grasping, scraping, clutching, covetous old sinner."

We are the 99.9% and we’re not buying this BS anymore!  



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