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Wednesday, November 30, 2022


PhilStockWorld August Trade Review – Riding the Rapids (Part 2)

We completed part one of this review on September 1st.

Now it's the 22nd, 3 weeks later and we've given our late August picks enough time to mature (like fine wines) and now we'll uncork them and see how they came out!  The last day we reviewed was August 9th and we had begun shorting Russell Futures (/TF) at 1,050 and they were up $2,800 at the time of the review (9/1) but, since then, the market has recovered – A LOT – and the Russell is back to 1,069.

Hence the transient nature of any trade reviews – they work until they don't and they don't work until they do.  The real trick is learning to take a profit – when and if they come along.  In the first 10 trading days of August, we had 50 trade ideas that were NOT part of one of our virtual portfolios and 42 (84%) of them were winners as of Sept 1st.  As you can see from the IWM chart above, the end of August was a choppy mess.  We'll see how we did on those picks but it's hard to imagine such a strong average in that kind of chop.

Aug 12: Monday Momentum – Quadrillion Yen Stimulus Not Enough to Keep Japan Going

From a Fundamental perspective – our expectations are higher because the market is higher and we have to look at this incoming data while asking ourselves the question: "Is this data good enough to justify all-time market highs?"  Of course we know the market is "juicing" on Economic Steriods – that's not the point because it's not "illegal" and they're not going to have to stop using stimulus –  but all-time highs are the big leagues.  They are the playoffs, in fact, and now they have to be turning in performances that are the best of the best or else the fans (investors) can turn on the markets very quickly!  

As you can see from this chart by Bespoke Investments, investor sentiment has already detached from the painted performance of the S&P by  a wide margin.  Again, this is the annoying part about being a Fundamental Investor – what looks glaringly obvious to us isn't even being discussed in the MSM but you can SEE IT COMING – from a mile away.  

The whole trick is learning how to time your investments because, as Keynes learned from bitter experience (he almost went bankrupt betting on funamentals): "The market can remain irrational far longer than you or I can remain solvent."  It's easier to be bullish when the market is low, as you still OWN the stock – even if they drop by 50% or more and, all you have to do is wait for them to come back – no matter how long that takes.  

  • SBUX short at $74, now $76.12 – down 2.8%
  • Russell Futures (/TF) short at 1,050, out at 1,045 – up $500 per contract 
  • Dow Futures (/YM) long at 15,350, out at 15,400 – up $250 per contract 
  • JMBA Jan $15 puts sold for $2.50, now $2.25 – up 10%
  • TZA weekly $24 calls at $1.13, expired at $2.89 – up 155%
  • AAPL Oct $495 calls sold for $8.50, now $5 – up 41%

Aug 13: Testy Tuesday – Blurred Lines

Sadly, this is what passes for a rally these days, with our major indexes skipping along their 5% lines on our Big Chart like stones across a pond.  Of course, we know what usually happens to stones that skip across a pond after a bounce or two

We're PATIENTLY waiting for the big splash on oil, which gave us a small dip on Friday (0.50) down to the $104 line but then jammed way up to $106.50 and has been over $107 this morning.  This is why we keep VERY tight stops over our .50 lines and already this morning we got another ride down from $107 to $106.25, which makes up for a bunch of dime losses on the stop lines. 

  • USO Oct $37 puts at $1.10, out at $1.50 – up 36%
  • Oil Futures (/CL) short at $106.40, out at $105 – up $1,500 per contract
  • Dow Futures (/YM) short at 15,450, out at 15,350 – up $500 per contract 
  • AAPL Oct $500 calls sold for $9, now $4 – up 55%
  • CLF 2015 $23 puts sold for $5.60, now $6.60 – down 18%
  • Dow Futures (/YM) long at 15,350, out at 15,450 – up $500 per contract
  • AAPL 2015 $370/465 bull call spread at $57, selling $400 puts for $32.50 for net $24.50, now $14 – down 43%
  • SPG 2015 $130 puts sold for $9.75, still $9.75 – even
  • WYNN Jan $137.50/147.50 bull call spread at $4.30, selling Sept $140 calls for $4 for net .30 (expired worthless), now $7 – up 2,233%
  • NLY 2015 $13 puts sold for $3.50, now $3.25 – up 7%
  • Oil Futures (/CL) short at $107, out at $103 – up $4,000 per contract

If there is one thing I can teach people it's to SELL premium, never buy it.  The ability to sell premium is the biggest market advantage you will ever have.  Buying premium, on the other hand, is for suckers.  

Some days we have very few trade ideas – some days we have a lot.  I've found the most important thing is never to force them.  A lot of times our Members ask me about a stock and I'll say "not now."  While that answer may be disappointing, I think we are so much better off waiting for compelling reasons to go long or short – either due to news, macros or simple mispricing of the stock.  Certainly not just because it appears on some screener or, even worse, because the chart happens to paint a pretty picture at the moment!  

Aug 14: Wednesday: Rampant Manipulation In the Markets – S&P 1,688 Edition

1,688 on the S&P is a 1.25% retrace off the top and, failing to hold that, we're looking at another 1.25% drop to 1,667 and below that, we're back at 1,645, 1,622 and back to 1,600, which is our Must Hold line for this bull run to sustain itself.  

This is, of course, our 5% Rule™ and it's nice to be able to see, in retrospect, how well it works.   As noted, we were at 1,694 that Wednesday morning and we expected a pullback to 1,688 (from 1,710 on Monday) and then to 1,667 and then 1,645 and 1,622 and here it is, right on the chart from the future, where we bottomed at 1,627 on the 28th, where I do believe we turned bullish again – but we'll have to wait for our next trade review to see how that turned out!

  • Oil Futures (/CL) short at $107, out at $106.50 – up $500 per contract 
  • Cashed out most of our AAPL position in the LTP at $504 on Icahn's Tweek (worth noting) as an interim top call. 
  • NAK at $2.19, now $1.38 – down 37%
  • HMY at $4.03, selling Jan $4 puts and calls for $1.35 for net $2.65/3.33 buy/write, now $3.57 – on track 
  • Oil Futures (/CL) short at $107, out at $107.10 – down $100 per contract.  
  • CREE 2015 $40 puts sold for $3.70, now $3.65 – up 1%

It's not our job to gamble – it's our JOB to SELL premium, whenever we feel we have a good opportunity.  Do it consistently, and money will flow to you on a regular basis and yes, sometimes there will be a big rally and you won't do well but, over the LONG run – you have a 30% advantage over any down or flat market. 

Aug 15: Falling Thursday – WMT Gives the Market a Cold Slap in the Face

I know I'm doing my job correctly when we have down days and nobody is panicking.  Frankly, the only panic we have this week is from people who got nervous and covered AAPL too soon.  In fact, we just cashed out most of our AAPL long posiiton in our Long-Term Portfolio and flipped it to a higher-leverage, smaller and more speculative play inyesterday's morning Alert to Members (also tweeted).  

Learning to take profits off the table is the 3rd hardest trading lesson we try to teach our Members.  The first two are PATIENCE and learning not to chase.  This AAPL trade is a great example of all 3 as we PATIENTLY scaled into a very large position as AAPL went down from our initial entry and now, still almost 20% below our initial entry ($585), we're taking profits off the table.  

  • Oil Futures short at $107.50, out at 107 – up $500 per contract
  • AAPL Jan $465/515 bull call spread at $25.40, now $22 – down 13%
  • Oil Futures short (/CLU3 – Sept) at $108, out at $107 – up $1,000 per contract 
  • Oil Futures short at $108 (/CLV3 – Oct as a long-term hold), expired at $104.67 – up $3,333 per contract
  • IRBT at $32, now $37 – up 15%
  • TASR at $10, now $14.79 – up 48%
  • TASR March $10 puts sold for $1.35, now .40 – up 70%

If you're not 100% POSITIVE that you will HAPPILY double down on a position when it's down 50%, then you should ABSOLUTELY be stopping out of it when it drops 20%.  You can't make a move without having a plan for your next move! 

Aug 16: Flatline Friday – Options Expiration Day Gives Drop a Pause 

I love it when a plan comes together.  After many, many false starts and even falser head-fakes, we finally got the dip we've been playing for…  As I noted in Member Chat this morning, the NYSE is keeping us from getting much more bearsih as it finished 39 points (1.1%) over the line and it's right on our -5% support so we're keeping the faith that this is just a minor pullback and not the start of a major correction, though we won't know for sure until next week as today is options expiration day and you can't trust anything that happens today.

  • ABX Jan $19 calls short at $2.85, now $1.75 – up 38%
  • ABX 2015 $20 calls sold for $4.20, now $3.50 – up 16%
  • ABX 2015 $18 puts sold for $3.35, now $3.70 – down 10%
  • ABX 2015 $20/25 bull call spread at $1.50, now $1.40 – down 7%
  • DX at $8.32, selling March $7.50 puts and calls for $1.55 for net $6.77/7.14, now $8.72 – on target
  • Oil Futures (/CLV3) short at $107.95 – out at $106.60 – up $1,350 per contract 

We end up down a bit, not too much technical damage but that weak finish on volume shows what BS that low-volume move up was this afternoon.  

On the whole, I'm not thinking Monday will be good.  

.SPX WEEKLYAug 19:  Monday Morning – Damage Assessment 

Now that we've had a bit of a pullback, the question is – where should it end?  What's the "fair value" for our indexes?  It's kind of a tricky question as we have long maintained, since last year, that 1,450 on the S&P was our year-end target without stimulus.  But there is stimulus – $85Bn a month from the Fed and $75Bn a month from the BOJ and call it $25Bn a month from China and $15Bn a month from the ECB is $200Bn a month for a total of $2.2Tn a year pumped into the system by the G4.

Based on our patented stimulus to S&P conversion table, $1Bn per month = 1 S&P point over fair value so that gives a 1,650 target for the S&P WITH stimulus.  Without it – look out below!  Tapering. whatever it ends up being, will only withdraw SOME of the stimulus but we're also hitting the debt ceiling yet again – and that's a wildcard.

  • Oil Futures short at $107, out at $106.75 – up $250 per contract
  • Oil Futures short at $107.50, out at $106.50 – up $1,000 per contract
  • SQQQ Sept $23/24 bull call spread at .40, selling Sept $21 puts for .30 for net .10, out at .20 – down 100%

NYSIAug 20: Tricky Tuesday – When the World is Running Down

It's Dave Fry's McClellan Oscillator and -100 is very, very oversold so we can expect some kind of bounce for any silly reason and what we'll be watching closely is how fast a move up works off the oversold condition.  If, for example, we come back 13 points on the S&P (weak bounce) to 1,658 and the Ocillator moves all the way back to 0 (neutral) – then the market is likely due for much more pain ahead

It's not enough to just stare at the charts – you need to understand HOW they are constructed and what factors affect them.  On the left is the NYSE Summation Index, sort of a longer-term oscillator and it's showing we're not even oversold yet.  This makes it very likely that any bounce we get today will be short-lived and I've already sent out an Alert to our Members (and a tweet) to prepare for stormy weather ahead. 

26 SQQQ Oct $23/26 bull call spreads at $1, selling one AAPL 2015 $400 put for $26 for net $0, now net $3.180 – down $3,180

Aug 21: Will We Hold It Wednesday – Fed Edition

Keep in mind, the Central Banksters over there are INTERVENING and it's not helping much.  I know I'm starting to sound like a broken record but these are VERY DANGEROUS TIMES TO BE IN THE MARKET and we MIGHT (we might not) have a major correction if the Fed missteps this week (Jackson Hole) – so just make very sure you are CASHY or Covered.

No one's even talking about our own debt cieling nonsense, which kicks in again when Congress returns after the Holiday Weekend and, of course, Germany's election is looking tight, and there's nothing scarier than riled up Germans!

  • Oil Futures (/CL) long at $104.50, out at $105 – up $500 per contract 
  • Gasoline Futures (/RB) long at $2.93, out at $2.95 – up $840 per contract
  • NLY 2015 $10 puts sold for $1.80, now $1.35 – up 25%
  • Oil Futures (/CL) short at $105, out at $104 – up $1,000 per contract 
  • JNJ Nov $85 puts at $1.35, now .55 – down 59%
  • JNJ Jan $92.50/97 bull call spread at $1.60, selling Oct $90 calls for $1.45 for net .15, now -.20 – down 133%
  • Nikkei Futures (/NKD) long at 13,400, out at 13,700 – up $1,500 per contract 
  • FXI Sept $34 calls at $1.70, expired at $4.43 – up 160%
  • EWJ Sept $10 calls at $1.20, expired at $1.90 – up 58%
  • DIS 2015 $50/60 bull call spread at $6.40, selling $55 puts sold for $4.75 for net $1.65, now $3.50 – up 112%

The general who wins the battle makes many calculations in his temple before the battle is fought. The general who loses makes but few calculations beforehand. – Sun Tzu  

INDU WEEKLYAug 22 – Fed Up Thursday – More of the Same

How many times can you read the Fed Minutesand FREAK OUT?  And then jump for joy?  And then freak out again?  Really???  Don't you look at this chart and wonder what kind of idiots your fellow invesors are?  

As I said in the morning regarding the sell-off ahead of the Fed Minutes at 2pm: "This can be quickly reversed by the Fed or, more accurately, by Hilsenrath's interpretation of the Fed Minutes in the WSJ, minutes after they are released."

This week we aready went long in Member Chat on RIGNLY and DIS for long-term longs – so it's not like we can't find ANYTHING we like – just that it's slim pickings and we prefer to be cautious at this market inflection point.  If the news-flow changes (and it hasn't as of our morning review), we'll be thrilled to get more bullish but, at the moment – I'm sorry to have to keep being negative.

  • Nikkei Futures (/NKD) long at 13,450, out at 13,700 – up $1,250 per contract
  • Oil Futures (/CL) short at $104.50, out at $104.60 – down $100 per contract
  • FXI Sept $34 calls at $2.06, expired at $4.43 – up 115%
  • EWJ Sept $10 calls at $1.20, expired at $1.90 – up 58%
  • DRYS at $2.18, now $3.49 – up 60%

25M on the Dow at 10:15.  14,943 is still 17 points shy.  If this were a proper rally – that should pop very easily as we never even completed the fall on the Dow – that line is based on our PROJECTION that the Dow WILL fall to 14,800 and THEN the 160-point weak bounce at 14,960 becomes resistance.  If it's resistance now and we haven't even fallen yet – what do you think is likely to happen?  

(this was the day the Nasdaq crashed so we threw on a lot of protective shorts into the close and cancelled them shortly after when Icahan tweeted about AAPL meeting and sent the stock flying up, reversing the indexe losses with 30 minutes to the close

After reading that mid-day news, I can't in good concsience go long at the moment – despite this miraculous re-opening rally.  I guess they let people cancel orders and, with Icahn pushing AAPL, most people who were shoring the Nas might have cancelled while the longs would stay in but still we're not doing much damage to weak bounce levels other than RUT, who are over the strong bounce at 1,030.  

All we can do is watch for strong bounce lines tomorrow to see if people are this brave into the weekend

Aug 23: Friday at the Fed Fantasy Camp

Funny how I barely had to change a word or number from Tuesday's predictions.  When the 5% Rule rules, then you know you're watching Bots in action and the trading has very little to do with real changes in sentiment.  However, it's a technical World out there and we have to respect our lines.  Fundamentally, I don't think they can hold them – even with Fed help but we'll keep an open mind through the weekend

  • USO Oct $38 puts at $1.30, now .98 – down 24%

Keep in mind we were gun-shy on that last day because of the way the Nasdaq had been shut down the day before.  On the whole, our goal was simply to surivive the weekend.  It had been a hectic two weeks and that's where we officially end our months (after expiration and before the new month) and I count 56 total trade ideas with 44 winners and 12 losers (79%), bringing our August total non-portfolio trade ideas to 106 with a record of 86 and 20 – a winning percentage of 81% – a lot better than I thought we'd do in such a choppy mess.  

In our next review, we'll see how well we handled the turn as we bottomed out in August and came roaring back in September.  It was clearly a period that was not kind to our aggressive Short-Term Portfolio, with several short trade ideas that went very much against us.  


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